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Cheniere Energy’s Sabine Pass liquefaction facility has the distinction of holding the only recent permit granted by the U.S. government that allows the export of natural gas.
More than a dozen other projects have applied for permits, but the U.S. Department of Energy has imposed a de-facto moratorium, said Bill Cooper, president of the Center for LNG. Cooper spoke at Oil and Gas Investor’s Energy Capital Conference in Houston in early June.
The Center for LNG is a lobbying group, composed of energy providers and trade associations. It seeks to engage policy makers and the public, and educate these groups about liquefied natural gas (LNG). Of course, with the huge glut of North American gas now available at low prices, the idea of exporting LNG to eager overseas buyers has gained attention.
“The biggest fear that most people express is the regulatory risk,” said Cooper. “There’s also legislative risk.” Those concerns are valid—the regulatory picture is not yet clear.
The regulatory authority to allow the export of LNG from the U.S. comes from the Natural Gas Act, said Cooper. DOE regulates the commodity and the Federal Energy Regulatory Commission regulates the design, construction and operation of the facility and its impact on the environment.
Under the legislation, a proposed export of natural gas is assumed to be in the public interest. Those opposing the application have to make a case of inconsistency with the public interest. For export to counties with which the U.S. has a free-trade agreement, the permitting process is expedited. Currently the U.S. has free-trade agreements with 18 different counties—notably including Singapore and South Korea. Applications to export to those countries can be granted without delay.
For export licenses to non-free trade agreement countries, there’s not really a timeline. Factors the DOE considers when reviewing export proposals include the impact of each application on the domestic need for the gas, on energy security, on its impact on the U.S. gross domestic product and on the U.S. balance of trade.
The DOE took nine months to grant Sabine Pass Liquefaction LLC its export license, which conditionally authorized exports of LNG to non-free trade countries. The permit allows for export of 2.2 billion cubic feet (Bcf) of gas per day.
Sabine Pass has also received its construction license from the FERC, a process that usually takes 15 to 24 months to work through. “Sabine Pass is the only one to have achieved that, and it is supposed to be ready to ship in 2014.”
But subsequent applications have ground to a halt. “That’s because politics trumps process in an election year,” said Cooper.
DOE asked for a cost impact study from the Energy Information Administration to feed into a larger macroeconomic study. The EIA study is complete, but the macroeconomic study is still in progress. “DOE has suspended its decision-making process until the macroeconomic study is released,” he said. It will probably be finished after the election, although permits won’t be issued immediately, because once the study is released, there will be a public comment period.
And after that, perhaps the permits will begin to flow.
The combined capacity of proposed projects, including Sabine Pass, totals 18.7 Bcf per day. While that is a massive volume of gas, actual exports will be far less. “All those applied for will not be permitted, and all those permitted will not be built,” said Cooper.
Contact the author, Peggy Williams, at firstname.lastname@example.org.