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US push for LNG exports

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LNG Industry,

Sempra Energy was issued a conditional authorisation by the Department of Energy (DOE) to export liquefied natural gas (LNG) from its proposed liquefaction operations at Cameron LNG in Hackberry, Louisiana. As a result of the current Administration’s energy strategy and policy push to become a net-exporter of energy, these application approvals are ever-increasing. The topic of exporting domestically produced natural gas has become a subject of growing significance in the US, mainly as a result of the success of domestic shale gas exploration and production alongside decreased demand for LNG imports. A current issue is the transition of LNG import terminals to obtain necessary licensing from the DOE and the Federal Energy Regulatory Commission (FERC) to make necessary investments and alterations for transitioning to an LNG export facility.      

As of February 2014, there are 13 export terminal proposals to FERC; with site locations in Texas, Louisiana, Oregon, Maryland, and Georgia. Concurrently, as of 22 January 2014, there are 36 applications that have been received by DOE to export domestically produced LNG. Of the 36 applications, 32 have been approved to export to free trade agreement (FTA) countries, with 5 (now 6 with Cameron LNG) having obtained approval to export to non-FTA countries. Pursuant to requirements included under Section 3 of the Natural Gas Act (NGA), both the export of LNG and the construction or expansion of LNG terminals necessitate approval from FERC and the DOE’s Office of Fossil Energy.

LNG terminal conversion

Adding liquefaction capacity requires new infrastructure to be added to existing import terminals, as seen with the Cameron LNG terminal. According to Sempra LNG: “The completed liquefaction facility [scheduled to achieve commercial operation by 2018] will be comprised of three liquefaction trains capable of exporting up to 12 million tpy […] of liquefied natural gas.”

FERC authorisation is required for modifications and expansions of existing facilities, such as those proposed for the Cameron LNG terminal. Prior to certifying the project, an environmental assessment and impact statement must be completed under the National Environmental Policy Act (NEPA). To prepare necessary NEPA documentation for LNG export authorisation, the FERC or DOE is required to identify compliance requirements applicable to LNG terminal certification. Many federal statutes are involved in this process, including but not limited to, the Clean Air Act, Clean Water Act, Rivers and Harbors Act, and the Endangered Species Act. Additionally, approved projects may require compliance with various agency requirements, including pipeline safety, fire protection and emergency management.

Certification issues arise not only from environmental assessments and impact statements, but also depending on where the LNG export terminal plans on shipping its product. Most companies pursuing LNG export permits have applied to export LNG to countries with which the US does and does not have a FTA. According to the Office of the United States Trade Representative, the US has FTA’s with 20 countries. The proposed liquefaction operations at Cameron LNG in Louisiana received conditional authorisation to export to countries that do not have a FTA with the US, allowing LNG exports to be received by countries such as India and Japan. If the US has an FTA in force with the country where the LNG is to be exported, that application will be considered consistent with the “public interest”.  Conversely, authorisation for LNG exports will be denied to non-FTA countries if it is found that it is not consistent with the public interest.

Recently, Russia liberalised LNG exports, opening the door to capture a larger market share in the Asia-Pacific marketplace; however, Russia will be in competition with the US, as shale gas exploration and production increase, in addition to LNG export terminal application authorisations.

Written by Bennett Resnik. Mr Resnik is a law student at Vermont Law School and has worked in both public and private arenas, focusing on government relations, domestic public policy issues, as well as federal and state energy and environmental regulation.

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