House and Senate LNG Provisions Go to Conference

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On April 20, the Senate passed a broad-based energy bill, the Energy Policy Modernization Act (S. 2012), and set the stage for a conference between House and Senate leaders to compromise on the policy differences between their respective bills. It could result in the passage of the first comprehensive energy bill in nine years, but it will not be easy.

House and Senate leaders are in the process of choosing conferees, and the conference could start as early as this week. Senate Energy and Natural Resources Committee Chairman Lisa Murkowski (R-AK) will chair the conference committee. While Chairman Murkowski worked closely with Committee Ranking Member Maria Cantwell (D-WA) to craft a bipartisan bill, the negotiations between House Energy and Commerce Committee Chairman Fred Upton (R-MI) and Ranking Member Frank Pallone (D-NJ) were highly partisan, and the result was a polarizing bill with little Democratic support. The North American Energy Security and Infrastructure Act (H.R. 8) passed the House at the end of 2015 with only nine Democrats voting in favor. Although Chairman Upton (R-MI) has conceded that the bill is too partisan, he has said that he remains “confident…that we can a get a bill that is in fact bipartisan that the president can sign.”

President Obama has signaled that he would sign the Senate bill and would veto the legislation passed by the House.

Finding sustainable compromises for the provisions addressing natural gas and liquefied natural gas (LNG) exports may be the most difficult to accomplish. Key provisions of the two bills include:

  • Both bills attempt to expedite the approval process for LNG export terminals. Currently, the Department of Energy (DOE) does not have any time restrictions for permitting LNG export terminals that would send natural gas to countries that do not have free trade agreements with the United States. The Senate bill limits DOE reviews of applications to export natural gas to 45 days, once an environmental review is completed, while the House bill directs DOE to make the decision on permits within 30 days.
  • In both the House and the Senate bills, the applicant would be required to report to DOE the names of countries to which the LNG is being exported, and that information will be made available to the public.
  • The Senate bill includes a number of energy efficiency measures, including replacing regulations that banned fossil fuel use in renovated and new federal buildings with new regulations that promote energy efficiency and reduce energy costs in those buildings.
  • The Senate bill grants DOE wider discretion to sell crude oil from the Strategic Petroleum Reserve. The bill requires DOE to conduct a study within one year after enactment of the state, regional, and national implications of exporting LNG with respect to consumers and the economy.
  • The Senate bill mandates that the Federal Energy Regulatory Commission (FERC) shall act as the lead agency for coordinating all federal authorizations for gas transmission facilities subject to FERC’s Natural Gas Act jurisdiction and for compliance with NEPA.
  • The Senate bill instructs the Secretary of the Interior and the Bureau of Land Management to conduct a pilot program to identify and implement ways to streamline the review and approval of permits to drill for oil and gas.
  • The Senate bill directs the Government Accountability Office (GAO) to, within one year of enactment, conduct a review of domestic energy production and the effects, if any, of crude oil exports from the United States on consumers, independent refiners, and shipbuilding and ship repair yards.
  • Both bills address the need for streamlining the permitting process for the transmission, storage, and distribution of natural gas in a similar way. Reaching a compromise agreement on this issue should not be difficult.

This week, Republican House members are preparing an amendment to their bill in anticipation of the conference. The proposal includes portions of 36 other bills already passed by the House, including provisions that remove research programs for fossil, renewable, and nuclear energy, a bill that passed by a partisan vote.

There is no timeline for negotiations between the House and Senate committee members and staff. Conferees may be announced this week. However, both Chairman Murkowski and Chairman Upton have said that they hope to produce a compromise bill before the August recess. The biggest hurdle to passage of a bill may not be the issues, but the congressional calendar. Congress will be in session for approximately eight weeks before the August recess and is scheduled to be in session for only a few more weeks in September before recessing again for the Fall elections.

Michael A. Andrews, James F. Bowe, and Lauren M. Donoghue

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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