On May 2, 2014, a coalition of U.S. Senators sent a letter to the White House urging quick review and action on a series of pending permits for liquefied natural gas (LNG) export facilities. The letter comes on the heels of action this week by the House Energy and Commerce Committee to advance legislation to speed approval of LNG export permits to countries that do not have a Free Trade Agreement (FTA) with the United States. The committee’s 33-18 vote sets the stage for action by the House of Representatives as early as the end of May.

The bill, H.R. 6, the “Domestic Prosperity and Global Freedom Act”, was authored by Rep. Cory Gardner (R-CO-4); a companion measure has been introduced in the Senate by Sen. Mark Udall (D-CO), one of the signers of today’s letter to the White House. Gardner’s bill, as approved by the committee, would limit review of LNG export permits by the U.S. Department of Energy (DOE) to 90 days following the close of an application’s public comment period for countries with which the United States does not have a Free Trade Agreement. The bills were introduced as a response to the crisis in Ukraine, although certain natural gas industry interests have been calling for expedited review of LNG export permits for some time.

Bill gives DOE 90 days to review pending applications

LNG export applicants currently receive automatic approval from the DOE for permits to export LNG to countries with which the United States has a qualifying Free Trade Agreement. By law, these applications are deemed consistent with the public interest and must be granted without modification or delay. Applicants seeking permits to export LNG to non-FTA countries, however, are subject to a more robust review and comment process, and the DOE must make a finding that the application is not inconsistent with the U.S. public interest.

Gardner’s legislation passed on a bipartisan basis after agreement was reached with Rep. Gene Green (D-TX-29) to limit DOE’s review to 90 days after the close of the public comment period, or within 90 days after enactment of the legislation for those applications for which the public comment period has been closed for more than 90 days. Gardner’s original proposal would have deemed export of LNG to any of the more than 150 members of the World Trade Organization (WTO) as being in the public interest. Leading up to passage, efforts to win bipartisan support of the bill appear to have triggered the compromise to remove the WTO language.

Future debate will be robust

Opponents of the legislation charge that the 90-day window for DOE’s permit review is insufficient to satisfy the public interest determination. Committee Ranking Member Henry Waxman (D-CA-33) argued that the bill would lead to “meaningless and inadequate public review.” Critics also charge that if the bill is enacted, DOE could choose to deny all LNG export applications to non-FTA countries. However, supporters counter that DOE does not need long to complete the analysis of the currently pending applications, many of which have been through an extensive public comment and study process, and some of which have been pending for approaching two years now. 

The legislation is opposed by the American Public Gas Association, America’s Energy Advantage (a group representing Dow Chemical, Alcoa, and a number of other energy intensive manufacturers), the United Steelworkers, and certain environmental organizations. The bill is supported by a number of natural gas industry trade groups, GE, the National Association of Manufacturers, and the U.S. Chamber of Commerce.

Implications

The prospects of passage by the full House are good, while the fate of the bill in the Senate is uncertain. The prospects of passage in the Senate continue to improve due to activities in Ukraine and increasing requests for alternative natural gas supply from countries in Eastern Europe and Asia.

Even if the legislation becomes law, LNG export applicants will still need to receive approval from the Federal Energy Regulatory Commission (FERC) to construct and operate the liquefaction and other facilities necessary to export LNG, a lengthy process that can take two years or more. As the companion bills move through Congress, amendments are also possible to address the statutory prohibition on FERC regulating the commercial arrangements for service at LNG terminals, which expires in 2015, or other aspects of the DOE or FERC approval process.