US LNG Exports: US DOE Must Weigh Number of Competing Interests

The public comment period for the US DOE’s “2012 LNG Export Study” recently closed leaving the DOE with the task of reviewing thousands of initial comments and reply comments.

Under existing US law, the DOE must now decide whether approving additional LNG export projects is in the “public’s interest” based on the application of Policy Guidelines issued in 1984 as well as any other factors to the extent they are shown to be relevant to the public interest determination. These other factors might include the impact of exports on U.S. energy security, the impact of exports on the U.S. economy, consumers, industry, and jobs creation, the impact on the U.S. balance of trade, international and geopolitical considerations, environmental considerations, and consistency with DOE’s long-standing policy of promoting competition in the marketplace through free negotiation of trade agreements.

According to a Reply Comment (#168) submitted by Susan L. Sakmar, a Visiting Law Professor at the University of Houston School of Law and also the author of the forthcoming book, ENERGY FOR THE 21ST CENTURY: OPPORTUNITIES AND CHALLENGES FOR LNG, the public is divided as to whether or not these factors favor LNG exports with three main positions emerging from a review of the initial comments submitted:

1. LNG exporters and energy companies support unlimited LNG exports on the basis that the 2012 LNG Export Study found that under all scenarios considered, the United States will benefit economically from the international sale of LNG;
2. environmental groups such as the Sierra Club and some members of the general public oppose LNG exports since it will lead to more shale gas development and “fracking”; and
3. industrial users of natural gas, such as Alcoa, Dow Chemical, and the Industrial Energy Consumers of America (IECA) argue against allowing “unfettered” LNG exports which might lead to large price spikes or shocks.

After reviewing the totality of the arguments raised in the comments, and after noting that just one project, Cheniere Energy’s Sabine Pass Liquefaction project has received DOE approval to export LNG to non-FTA countries, while a number of other export projects have had their applications effectively on hold for years, Professor Sakmar offers the following recommendations to advance the export approval process while ensuring that the DOE fulfills its mandate to protect the “public’s interest”:

1. Immediately re-start the approval process by approving a limited number of export applications in an amount not likely to have a significant impact on the domestic price of natural gas or the “public’s interest.” In this regard, there are numerous studies that are publicly available, including a pricing study done by the DOE that may provide some guidance as to what “the sweet spot” might be in terms of the number of projects or the volume of LNG.
2. Immediately develop a fair and transparent process and procedure that details how the DOE will fulfill its stated obligation to “monitor the cumulative impacts” of approving additional export applications. This process should be as detailed as possible and also have some sort of set timeframe for action so that companies can plan accordingly.
3. In line with the above recommendation, the DOE might also consider phasing in the approval of projects over a certain period of time so as to minimize the potential impacts on price and/or as more information becomes known about natural gas supply, demand and the potential environmental impacts of hydraulic fracturing and shale gas development.

This article first appeared on LNG World News