Senators Introduce Competing Proposals Relating to Natural Gas Exports

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On March 6, 2014, Sen. Mark Begich (D-Alaska) proposed amendments to Section 3 the Natural Gas Act (NGA) to expand the list of export destinations that are eligible for an expedited permitting process at the Department of Energy (DOE).  The same day, Sen. Edward J. Markey (D-Massachusetts), Chairman of the Foreign Relations Subcommittee with jurisdiction over international energy security, introduced legislation that would delay the approval of additional exports to some destinations for up to two years – or longer.1  The competing bills highlight the controversy surrounding natural gas exports, particularly in light of recent calls to expedite exports of natural gas to the Ukraine to ease that country’s dependence on Russia to meet its energy needs.

Senator Begich Proposes To Expedite Natural Gas Exports

Senator Begich’s bill, S-2096 , would expand the list of export destinations that are eligible for an expedited permitting process at the DOE.  Under Section 3(c) of the NGA,  the exportation of natural gas to a nation with which there is in effect a free trade agreement requiring national treatment for trade in natural gas “shall be deemed to be consistent with the public interest,” and applications for such exports “shall be granted without modification or delay.”  In practice, DOE processes applications to export natural gas to countries that have a free trade agreement with the U.S. in a matter of weeks.  Senator Begich would expand the list of export destinations eligible for such expedited treatment to include: 

  • A member country of the North Atlantic Treaty Organization;
  • Japan, so long as the Treaty of Mutual Cooperation and Security between the U.S. and Japan remains in effect; and
  • Any other foreign country if the Secretary of State, in consultation with the Secretary of Defense, determines that exportation of natural gas to that foreign country would promote the national security interest of the United States.

Senator Markey Proposes To Halt New Exports to Countries that do Not Have a Free Trade Agreement with the U.S. for up to Two years – Or Longer

Senator Markey issued a press release indicating that he opposes efforts to expedite new natural gas exports.  Senator Markey believes that the U.S. should put diplomatic pressure on Russia, but not at the expense of America’s manufacturers and consumers.  Senator Markey is concerned that additional exports could result in spikes in natural gas prices which could cost American consumers and businesses $62 billion per year.

Senator Markey’s bill, S. 2088 , called the “American Natural Gas Security and Consumer Protection Act,” would amend the NGA to require that before any additional exports of gas may be authorized to countries that do not have a free trade agreement with the U.S., the Secretary of Energy must issue new regulations for determining whether an export of natural gas is in the public interest.  The bill would require the Secretary to issue final regulations within two years of enactment of the proposed legislation.

The new regulations would require the Secretary to make a determination as to whether each proposed export is in the public interest through:

  • Use of the latest available data on current and projected U.S. gas demand, production, and price;
  • Consideration of the effects of the proposed export on:  household and business energy expenditures; the U.S. economy, jobs, and manufacturing; the energy security of the U.S.; the conservation of domestic natural gas supplies to meet future energy needs of the U.S.; the potential for natural gas use in transportation, industrial, and electricity sectors of the U.S.; the ability of the U.S. to reduce greenhouse gas emissions; the national security and foreign policy of the U.S.; domestic natural gas supply and availability; the balance of trade; other issues determined to be relevant; and
  • Consideration of a detailed statement, to be issued by the Secretary under the National Environmental Policy Act of 1969, of the environmental impact of the issuance of exportation orders, which must include an analysis of the impacts of gas production on the environment in communities where the gas to be exported is produced.

Impact of the Proposed Legislation

Neither bill would change the approval process for exports destined for countries with which the U.S. has a free trade agreement requiring national treatment for trade in natural gas.  Such exports still would be deemed to be consistent with the public interest, and granted without modification or delay.  However, both bills would dramatically change the current method of evaluating exports to non-free trade countries.  Currently, the NGA requires approval of such proposed exports unless the Secretary finds the exportation is not in the national interest.  Under Senator Markey’s proposal, this presumption in favor of exports is would be removed.  Instead, the Secretary would have to make an affirmative finding that an export to a non-free trade country is in the national interest before the export application could be approved.  The new regulations would require the Secretary to undertake a detailed analysis of each export application, based on consideration of a number of economic, environmental, and national security factors.  At best, this would mean significant delays in obtaining future export authorizations to non-free trade nations.  Senator Begich’s proposal, on the other hand, would preserve the presumption in favor of exports, and it would expedite the approval process for some countries that do not have a free-trade agreement with the U.S.


1 Gas that is exported solely to meet a requirement imposed under certain legislation dealing with emergency situations would be exempted from the requirements of Senator Markey’s bill.

 

Topics:  Exports, Natural Gas, Oil & Gas, Pipelines

Published In: Energy & Utilities Updates, International Trade Updates

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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