DOE Proposes Changing Process for Non-FTA LNG Exports

In a recent notice of proposed procedures issued by DOE, the agency proposes to act on applications to export LNG to countries without a free trade agreement with the U.S. only after any review required by the National Environmental Policy Act (NEPA) is completed.  DOE says that this change would mean that projects that are otherwise ready to proceed would not be held back from consideration by the current first-in-time order of precedence for applications pending at DOE.  In most cases, the NEPA review would be made by the FERC.

The Natural Gas Act (NGA) requires all natural gas exports to be approved by DOE. Exports to countries with which the United States has a free trade agreement (FTA) are deemed in the public interest by the NGA and must be authorized “without modification or delay.”   However, for exports to countries without an FTA (non-FTA countries), DOE must conduct an informal adjudication and authorize the proposed export unless it will not be consistent with the public interest.

Natural gas exports to non-FTA countries also require review under NEPA, as do LNG terminals located onshore or in state waters, which require FERC authorization.  Thus, LNG applications to both DOE and FERC must satisfy NEPA requirements, which typically result in an Environmental Impact Statement (EIS) or Environmental Assessment (EA).  Accordingly, DOE depends on FERC’s NEPA review.  FERC serves as the lead agency for preparing  environmental review documents and DOE serves as a cooperating agency.[1]

DOE’s current procedure is to consider all public interest factors other than environmental and to issue authorizations for non-FTA exports conditioned on the applicant completing the NEPA review.  For non-FTA export applications made after December 5, 2012, under existing procedures DOE prioritizes its order of review based on the order in which they were received.  According to DOE, one potential consequence of this current prioritization is that LNG terminal projects that satisfactorily complete FERC’s lengthy NEPA review, often taking two years or more, and are ready to proceed may need to wait for applicants ahead of them in the DOE authorization queue to complete the FERC review.

In the past three years, DOE has issued seven conditional authorizations and currently is reviewing 25 requests for non-FTA exports.  FERC has approved one LNG export terminal and  has received proposals for an additional fourteen projects.

Under the proposed procedures, DOE will suspend its practice of issuing conditional authorizations and no longer proceed according to the current priority scheme.  Instead, DOE will act on applications in the order in which they complete the NEPA review process and are ready for final action.[2]  DOE says the new procedures will:

• Ensure that applications that are otherwise ready to proceed will not be held back by their position in the current priority order.
• Inform decision making with better and more complete information: (1) economic issues will be considered with more current data; (2) the cumulative market impacts of authorizations will be better known because only applications that have completed the NEPA review and are more likely to proceed than those that have not will be considered; and (3) all public interest factors can be considered in a single order.
• Better allocate agency resources because DOE can avoid reviewing applications that have little prospect of proceeding.

Comments on the proposed procedures must be filed with DOE by July 24, 2014.

DOE also announced plans to do an economic study on the impact of potential LNG exports between 12 and 20 billion cubic feet per day (Bcf/d).  DOE has already approved more than 9 Bcf/d of non-FTA exports.  EIA will update its 2012 LNG Export Study, which only looked at export cases of 6 and 12 Bcf/d.  DOE will then  contract for an  analysis of the economic and other impacts of this increased range of LNG exports.  DOE says it will continue to act on applications while the studies are conducted.