Proposed LNG Export Policy Changes and H.R. 6

July 2014

Under a new proposal, the Department of Energy (DOE) would discontinue granting conditional approvals until the Federal Energy Regulatory Commission (or other agency) issued a final environmental review.

Background

  • The DOE has been under pressure from backers of LNG exports and lawmakers to streamline the approval process for LNG projects
  • The DOE has jurisdiction over all LNG export approvals, but before final approval those applications requesting permission to non-free trade agreement (FTA) countries are subject to more intense scrutiny: an environmental, FERC-led review of the natural gas liquefaction and export facilities per the National Environmental Policy Act (NEPA)
    • The proposed process would require applicants to first complete a FERC environmental review before receiving a decision from the DOE
    • Previously, companies could submit an application for approval to export LNG with very little financial investment, which encouraged less serious investors
    • The proposed process significantly increases the financial burden to applicants by subjecting them to a more thorough review (Reuters estimates as much as $100 million to complete the FERC review process)
    • The proposed process would make the rankings for approval less based on submission dates and other factors and more based on viability and preparedness
  • The belief is that the more stringent evaluation criteria and increased investment (to accommodate the environmental study) will eliminate less serious applicants as well as those who do not have the resources to construct a potentially multibillion-dollar export facility

Key Developments

  • On June 25, the House of Representatives voted to pass H.R. 6, a bill requiring the DOE to render a decision on pending applications no more than 30 days after the environmental review is complete; the bill also provides expedited judicial review by the local court of appeals (based on proposed facility location) if the 30-day deadline is missed
    • Public disclosure of export destinations is also required under H.R. 6
  • H.R. 6 is supported by the U.S. Chamber of Commerce, the Bipartisan Policy Center, the National Association of Manufacturers, and the Natural Gas Supply Association
  • The Senate introduced its own bill (The Natural Gas Export Promotion Act) similar to H.R. 6, providing 45 days for the DOE’s decision after completion of the environmental review and a disclosure requirement; while it is more robust than H.R. 6 (specifically the disclosure requirement), it is in line with the current DOE process
    • At least two additional senate bills were introduced addressing the same 45-day decision requirement for LNG exports and also covered domestic gas policy

Implications

The DOE’s proposal to update its LNG review/approval process comes only months after defending the old process to mixed reviews by experts. The gas industry and investors alike are focusing significant attention on the DOE, seeking to understand the impact (if any) of proposed changes to the current approval process. The introduction of new legislation adds additional strain on the DOE to expedite decision making and introduce certainty to the permitting process. However, the applications they have to make decisions on should be fewer in number and more viable.

More Information

SNL: House Passes Bill to Expedite US LNG Export Application Process

SNL: How Long Export Projects Could Slot Into DOE’s Reshuffled Queue

SNL: US LNG Export Project Gets Lift from House Bill’s Passage

Reuters: US Energy Dept. Shakes up Natural Gas Export Review Process

The Hill: S.2592 – North Atlantic Energy Security Act

The Hill: S.2638 – LNG Certainty Act

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Contributing Authors

Jason Payton Manager

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