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Energy Department seeks to change natural gas export permitting

Steven Mufson
(c) 2014, The Washington Post.
WASHINGTON — The Energy Department proposed Thursday to overhaul its process for issuing permits for the export of liquefied natural gas and said it would also commission a new study of the effect additional exports might have on domestic gas prices.

The Energy Department said it would no longer issue conditional approvals for proposed LNG export terminals and would make final decisions only after companies complete the extensive — and costly — environmental reviews required by the National Environmental Policy Act (NEPA).

Fueled by the surge in domestic shale gas production, more than 30 companies have asked the Energy Department for permits, and about two dozen are still waiting. Though the department has not turned down any project, many oil and gas industry officials have been pressing for faster approvals.

Industry officials were unsure whether the change would speed decisions or heighten risks for applicants. The NEPA reviews are part of a separate application process that gas exporters must complete at the Federal Energy Regulatory Commission; that process costs about $100 million, industry officials said. Filing for conditional approval at the Energy Department is much less expensive, and obtaining it before going to FERC can reassure financiers.

Christopher Smith, principal deputy assistant secretary for fossil energy at the Energy Department, said on the department's website that the change would "ensure our process is efficient by prioritizing resources on the more commercially advanced projects."

Jason Bordoff, director of the Columbia University Center on Global Energy Policy, said most of the long line of projects awaiting conditional approvals may never be built because of market conditions or financing obstacles. He said the department was seeking to "focus scarce time and resources on applications that have a real chance of being viable."

But Bill Cooper, president of the Center for Liquefied Natural Gas, a trade association, said that "my initial reaction is that it's probably not good. What DOE is doing is moving the goal posts."

He said that although the FERC process is expensive, companies feel it is predictable — whereas the Energy Department authorization is less certain and therefore it's good to have a preliminary decision at the outset of the FERC process.

The Energy Department's approval is required for exports to countries that do not have free-trade agreements with the United States. Those countries include China and Japan, major customers for LNG. The department so far has given preliminary approval to seven projects and has not rejected any. One project, Cheniere Energy's Sabine Pass terminal, has also received final approval after going through the FERC process.

The Energy Department also said it would ask the Energy Information Administration and an outside consultant to study the economic impact of exporting between 12 billion and 20 billion cubic feet of LNG a day. An earlier study by NERA looked at how the export of 6 billion to 12 billion cubic feet of gas a day might increase domestic gas prices.

The projects approved so far would send 9.27 billion cubic feet of gas abroad, which some consumer groups and domestic manufacturers — notably petrochemical firms like Dow Chemical — say would drive up U.S. prices and undermine the international competitive advantage that U.S. shale gas drilling has created.

The department said it would continue to act on applications while awaiting the studies, though Cooper said he worried that the approvals would be delayed while awaiting the study's conclusions.

Separately, the White House on Thursday issued a report on the transformation of the energy sector over the past decade and its beneficial effect on energy security, job creation and reduction in carbon emissions. It credited the domestic oil and gas boom, the sharp rise in renewable energy output, and energy efficiency.

"Some of these trends predate the administration," said Jason Furman, chairman of the Council of Economic Advisers, "but the president's strategy aims to support and accelerate these trends in an environmentally responsible manner."

The report comes out four days before the Environmental Protection Agency issues proposed limits on carbon-dioxide emissions from existing coal plants. The mere prospect of the EPA-proposed regulations has already drawn heavy criticism from the coal industry and its allies.

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