As discussed in Latham’s Client Alert dated December 10, 2012, the US Department of Energy (DOE) announced the issuance of the second and final economic study to be used in its evaluation of applications to export LNG to countries that do not have free trade agreements (so-called “non- FTA countries”) that cover natural gas trade with the US. DOE also stated that 15 applications are currently awaiting its review and that it would give priority consideration to applications that were linked to facilities for which the environmental review process had begun at the Federal Energy Regulatory Commission (FERC). DOE recently released a list (excerpted below) providing the order of precedence by which it will begin processing pending long-term applications to export LNG to non-FTA countries.
As discussed in the prior Client Alert, FERC must review and approve plans for the construction and operation of LNG export facilities and the modification of LNG import facilities to become export terminals. Because of the potentially long lead times involved in FERC’s environmental review process, FERC begins this process even before formal applications for construction and operation of proposed facilities are filed with FERC, in what is known as FERC’s “pre-filing process.” In a December 5, 2012 posting on its website, DOE stated:
[DOE] will begin to act on the 15 applications on a case-by-case basis. [DOE] expects to act first upon applications for which the applicants have commenced the pre-filing process at [FERC] as of December 5, 2012, in the general order in which [DOE] received them. Following disposition of those applications that have pre-filed with FERC, [DOE] expects to act upon the rest of the pending applications — and any others submitted — in the order received by [DOE].
The following is the order of precedence issued by DOE as of December 7, 2012.
Click here to view table.
This list clarifies that the relevant date for a project to have “commenced the prefiling process” at FERC is the date that FERC approves the start of the pre-filing process, not the date that a request to begin the pre-filing process was made. Along with this list of projects, the Order of Precedence clarified the criteria for determining precedence, as follows:
DOE will begin processing all long-term applications to export LNG to non-FTA countries in the following order:
- All pending DOE applications where the applicant has received approval (either on or before December 5, 2012) from the Federal Energy Regulatory Commission (FERC) to use the FERC pre-filing process, in the order the DOE application was received.
- Pending DOE applications in which the applicant did not receive approval (either on or before December 5, 2012) from FERC to use the FERC pre-filing process, in the order the DOE application was received.
- Future DOE applications, in the order the DOE applications are received.
DOE has only stated that it will begin its review of the applications in the order listed above — not that it will issue decisions on the applications in that order. Additionally, consideration of an application is not an assurance that he application will be approved. DOE is required under the Natural Gas Act to approve only those exports that it finds not to be inconsistent with the public interest. There are many factors that DOE is likely consider in its public interest assessment of individual applications, including economic impacts, environmental effects, security interests and the feasibility of a project, among other considerations.