Restrictive regulations and permitting processes that operate at glacial speed (as opposed to market speed) pose the primary hurdles to greater U.S. exports of liquefied natural gas (LNG). In response to a chorus of complaints from industry, Senators John A. Barrasso (R-WY) and Martin Heinrich (D-NM) recently introduced the “LNG Permitting Certainty and Transparency Act,” the 114th Congress’s first legislation aimed at increasing U.S. exports of LNG. Along with Barrasso and Heinrich, Senators Cory Gardner (R-CO), Heidi Heitkamp (D-ND), John Hoeven (R-ND), Tim Kaine (D-VA), Shelley Moore Capito (R-WV), and Michael Bennet (D-CO) also served as original cosponsors of the Act.
Rep. Bill Johnson (R-OH) subsequently introduced H.R. 351, an identically named bill with virtually identical legislative language, in the House on January 14, 2015. Both bills aim to create an anvil upon which prospective LNG exporters can use the courts to hammer the Department of Energy (DOE) into making faster decisions on project approvals.
At present, U.S. federal regulators have given full and final approval to four LNG projects with a combined export capacity of approximately 7 billion cubic feet per day (BCF/d)—Cheniere Energy’s Sabine Pass facility, Freeport LNG, Cameron LNG, and Carib Energy. Several other projects appear sufficiently advanced that passage of the LNG Permitting Certainty and Transparency Act would accelerate their ability to get shale gas-based LNG into the global marketplace.
The Bill’s Core Provisions
The latest version of the proposed Act would force the Secretary of Energy to make a final decision on any application for authorization to export natural gas under Section 3(a) of the Natural Gas Act within 30 days (versus 45 days for the earlier Barrasso/Heinrich version) of:
- the conclusion of the review to site, construct, expand, or operate the liquefied natural gas export facilities required by the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.);
- or the date of enactment of this Act, if the NEPA review for a proposed export project has already concluded.
The bill would consider NEPA review “concluded” when the lead agency (typically the Federal Energy Regulatory Commission or FERC):
- Publishes a Final Environmental Impact Statement (EIS);
- Publishes a Finding of No Significant Impact; or
- Determines that an application is eligible for a categorical exclusion pursuant to National Environmental Policy Act of 1969 (42 U.S.C. 4321 et. seq.) implementing regulations.
In a civil suit brought under the Act, if the court found that the Secretary of Energy failed to issue a decision on the application as required under subsection (a), the Court would be required to order the secretary “to issue the decision not later than 30 days after the Court’s order.” Additionally, courts would be required to set civil actions brought under the Act for expedited consideration and would have to set the matter on the docket “as soon as practical after the filing date of the initial pleading.”
The Act’s Practical Impacts
Despite the robust enforcement levers the Act proposes, it would not address a major obstacle to expanding U.S. LNG exports: the ponderous environmental review process for export projects, which can take between 18 and 30 months and cost $100 million for proposals to export LNG to countries with which the U.S. does not have free trade agreements (FTAs).
However, it would force the DOE to make much faster decisions on whether to grant commercially advanced facilities permits allowing them to export gas to countries that do not have free trade agreements with the U.S., a cohort that includes Japan, Ukraine, and other large potential customers for U.S. LNG.
At present, the DOE takes much longer than 30 days to issue final approvals. For instance, Cheniere’s Corpus Christi export facility—which will have the ability to ship 2.1 BCF/d of gas—received its final environmental approval from FERC nearly four months ago but the DOE has still not granted it final approval to export gas to countries that do not have FTAs with the U.S.
Bottom Line: The Act Is a Positive First Step Toward Reducing Regulatory Impediments to Greater U.S. LNG Exports
Industry players recognize that U.S. LNG exporters can capitalize on abundant domestic gas supplies and a large base of pre-existing pipeline and terminal infrastructure to become highly competitive, low-cost global suppliers. Key members of Congress, meanwhile, increasingly view U.S. LNG exports as a form of geopolitical leverage that can help a number of European countries potentially reduce dependence on gas supplies from Russia.
Hammering this point home, Russia is again using natural gas supplies to manipulate Europe. On January 15, 2015, Gazprom announced it plans to shift all Russian gas that currently transits Ukraine to a pipeline through Turkey. If carried through, this will isolate Ukraine and force EU consumer countries to build costly new pipelines connecting Turkey to the EU gas distribution network.
World-class U.S. geology and infrastructure, geopolitical events, and two powerful industry and political interest constituencies are creating a more permissive environment for LNG exports from the U.S. The House and Senate already display healthy bipartisan support for LNG exports, and it is likely that a reasonably strong form of these bills—or at least the objectives they seek to attain—will survive the legislative process and pass in the next few months.