The DOE Continues to Approve the Expansion of U.S. Exports of Liquefied Natural Gas (LNG) to Non-FTA Countries

by Moore & Van Allen PLLC

This year we have seen the U.S. Department of Energy (“DOE”) move relatively quickly to approve applications for authorization to export liquefied natural gas (“LNG”) to countries that do not have a free trade agreement with the U.S. (“non-FTA countries”).  The first DOE authorization for LNG export to non-FTA countries was granted in May 2011 to the Sabine Pass LNG Terminal in Cameron Parish, Louisiana.  It was not until May 2013 that the DOE granted authorization for additional U.S. exports of LNG to non-FTA countries, giving Freeport LNG Expansion, L.P. and FLNG Liquefaction, LLC (“Freeport”) conditional approval to export up to 1.4 billion cubic feet (Bcf/d) of LNG per day from its terminal on Quintana Island, Texas for a period of 20 years.  You can read our previous post for information regarding the May 2013 Freeport authorization and background on the approval process.  On November 15, 2013, the DOE approved the expansion of Freeport’s LNG export volume, issuing Order No. 3357 authorizing up to an additional 0.4 Bcf/d of LNG to be exported from Freeport’s Quintana Island, Texas terminal.  Keeping in stride with the DOE’s new pace for processing pending applications, this Freeport expansion authorization comes just two months after the last DOE approval and is the fourth LNG export application that the agency has approved since May 2013.  The DOE’s Announcement explains that Freeport’s application to expand its LNG export volume was “next in the order of precedence” after the September 2013 approval of the Dominion Cove Point facility application. A DOE Summary of LNG Applications reflects that twenty-one additional applications are currently under review, as of November 15, 2013.

            The DOE’s continued expansion of authorized LNG export volume continues to raise dueling concerns regarding the potential impact of increased exports on natural gas prices and American businesses and families, on the one hand, and the danger that the U.S. will miss the opportunity to be a major player in the global energy market if the government does not move more quickly to authorize additional energy exports.  U.S. Senate Energy and Natural Resources Committee Chairman Ron Wyden expressed concern during a November 14th hearing with Chris Smith, the nominee for assistant secretary of Energy for the DOE’s Office of Fossil Energy, that the DOE must take into account “updated data that includes regional factors and domestic costs” in determining whether to approve additional applications for LNG exports.  Chairman Wyden questioned whether the DOE would, and should, slow down its efforts to authorize additional exports, stating:

I think there’s an opportunity here for us to find the sweet spot, where we can give a big lift to American industries where we have a pricing advantage, help our consumers, help renewables and be able to export.  Number one, we’re going to have to have good data, good and current data, and second, on matters like whether or not there’s going to be a pause and under what circumstance, we’re going to need some more clarity on that.

You can read more on Chairman Wyden’s hearing comments and access video of his discussion with Chris Smith.

         In response to the November 15th Freeport expansion authorization, Chairman Wyden cautioned against moving too quickly to approve additional LNG exports: “DOE has now conditionally approved liquefied natural gas exports that are far above what was considered possible just a few years ago. The agency must clearly demonstrate with each approval that it is using the most recent data about U.S. natural gas demand and production. It is imperative these potential exports not have a significant impact on domestic prices for families and manufacturers, and in turn harm America’s energy security, growth and employment.”  See Chairman Wyden’s Statement.  By contrast, Senator Lisa Murkowski, Ranking Member of the U.S. Senate Energy and Natural Resources Committee, continued to stress the need for the DOE to move more expeditiously to process pending LNG export applications:

I hope today’s approval represents a willingness by DOE to continue to process export applications in a timely fashion. Our nation has an historic opportunity to join a developing global gas trade, but we face a narrowing window. There are LNG export projects under construction around the world that are competing for market share with American gas supplies. The administration cannot drag its feet on export decisions or we may miss this opportunity for America’s natural gas to play a major role in the growing global market.

Senator Murkowski pointed out that Freeport’s first LNG authorization in May 2013 was based on an application filed in December 2010, and the Freeport expansion application that was approved on November 15th was filed in December 2011.  See Senator Murkowski’s Statement.

            The DOE announced that it will continue to process pending applications “on a case-by-case basis, in the order of precedence previously detailed,” and will “monitor any market developments and assess their impact in subsequent public interest determinations as further information becomes available, including the EIA’s Annual Energy Outlook Report at the end of 2013.”  For additional information regarding U.S. LNG exports, see our LNG post archives.

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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