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Jan 01, 2016

Additional LNG/CNG Export Projects Get the Green Light

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In 2015, the United States Department of Energy’s Office of Fossil Energy (DOE/FE) authorized the long term, large scale export of US produced liquefied natural gas (LNG) for four export projects with a cumulative volume of exports totaling some 4.26 billion cubic feet per day (Bcf/d) of natural gas.  DOE/FE issued the export authorizations after the Federal Energy Regulatory Commission (FERC) had authorized the construction of facilities to be used for the export of LNG.  These approved LNG export projects are Dominion Cove Point LNG, LP (0.77 Bcf/d),1  Cheniere Marketing, LLC and Corpus Christi Liquefaction, LLC (2.1 Bcf/d),2 Sabine Pass Liquefaction, LLC Expansion Project (1.38 Bcf/d),3 and American LNG Marketing LLC (0.008 Bcf/d).4

In 2012 and 2014, FERC authorized the construction of LNG export facilities and DOE/FE authorized the long term, large scale export of LNG for four LNG export projects with a cumulative volume of exports totaling 5.74 Bcf/d of natural gas.  These projects are Sabine Pass Liquefaction, LLC (2.2 Bcf/d),5  Carib Energy (USA) LLC (0.04 Bcf/d),6  Cameron LNG, LLC (1.7 Bcf/d),7  Freeport LNG Expansion, L.P. (1.4 Bcf/d),8  and Freeport LNG Expansion L.P. (0.4 Bcf/d).9 

Also, in October, DOE/FE authorized Emera CNG, LLC to export compressed natural gas (CNG) by waterborne vessels to non FTA countries up to the equivalent of 0.008 Bcf/d of natural gas for a 20 year term.10  FERC had determined in 2014 that Emera’s proposed facilities and operations would not be subject to FERC’s jurisdiction under the Natural Gas Act (NGA).11  This approval raised the total volume of authorized long term, large scale LNG and CNG exports to just over 10 Bcf/d.

Section 3 of the NGA gives FERC exclusive jurisdiction to approve the construction and operation of LNG Terminals, which include natural gas facilities located onshore or in state waters used to receive, unload, load, store, transport, gasify, liquefy or process natural gas that is exported to a foreign country from the US.  FERC approves the siting, construction and operation of LNG terminals upon a finding that such activities are not inconsistent with the public interest.  

Section 3 of the NGA also gives DOE/FE authority over exports of natural gas.  Under Section 3(c) of the NGA, LNG exports to countries with which the US has free trade agreements that require “national treatment” for trade in natural gas are automatically consid¬ered in the public interest.  Requiring “national treatment” means treating an imported good the same as a locally produced good once it enters a market.  Applications to export gas to such countries must be approved without modification or delay.  The US currently has such free trade agreements with Australia, Bahrain, Canada, Chile, Colombia, Dominican Republic, El Salvador, Guatemala, Honduras, Jordan, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, Republic of Korea and Singapore.  

Authorization to export LNG to countries without such free trade agreements requires DOE/FE to find that the proposed exports are not inconsistent with the public interest.  In making this determination, DOE considers the domestic need for the natural gas proposed to be exported, whether the proposed exports pose a threat to the security of domestic natural gas supplies and other factors bearing on the public interest.  DOE also must review the potential environmental effects of the proposed export under the National Environmental Policy Act.

In 2011, DOE/FE engaged the US Energy Information Administration (EIA) and NERA Economic Consulting (NERA) to conduct a two part study of the economic impacts of LNG exports.  The two studies were published in 2012.12   EIA examined the impact of two DOE/FE prescribed levels of assumed natural gas exports (at 6 Bcf/d and 12 Bcf/d) under numerous scenarios which included a variety of supply, demand and price outlooks.  EIA generally found that LNG exports will lead to higher domestic natural gas prices, increased domestic natural gas production, reduced domestic natural gas consumption and increased natural gas imports from Canada via pipeline.  The NERA study analyzed the potential macroeconomic impacts of LNG exports under a range of global natural gas supply and demand scenarios, including scenarios with unlimited LNG exports.  For every market scenario examined, NERA found that net economic benefits to the US increased as the level of LNG exports increased.

According to DOE/FE, the total approved export volume of 10.01 Bcf/d of natural gas for the 10 final export authorizations issued from 2012 through 2015 is within the range of scenarios analyzed in the EIA and NERA studies, in which NERA found that in all such scenarios—assuming either 6 Bcf/d or 12 Bcf/d of export volumes—the US would experience net economic benefits.

It is expected that during the first quarter of 2016, FERC and DOE will issue final authorizations for the construction of LNG export facilities and long term, large scale exports of LNG for Jordan Cove Energy Project LP (2.0 Bcf/d)13  and Magnolia LNG, LLC (1.08 Bcf/d).14   FERC issued final Environmental Impact Statements for both projects in the third quarter of 2015, and DOE/FE had granted Jordan Cove conditional authorization to export LNG to non FTA countries in 2014.


Dominion Cove Point LNG, LP, DOE/FE Order No. 3331‑A, Final Opinion and Order Granting Long‑Term, Multi‑Contract Authorization to Export Liquefied Natural Gas from the Cove Point LNG Terminal in Calvert County, Maryland, to Non‑Free Trade Agreement Nations (May 7, 2015), reh’g pending; and Dominion Cove Point LNG, LP, Order Granting Section 3 and Section 7 Authorizations, 148 FERC ¶ 61,244 (Sept. 29, 2014), reh’g denied, 151 FERC ¶ 61,095 (May 4, 2015), petition for review pending.

2 Cheniere Marketing, LLC and Corpus Christi Liquefaction, LLC, DOE/FE Order No. 3638, Final Order and Opinion Granting Long‑Term, Multi‑Contract Authorization to Export Liquefied Natural Gas by Vessel from the Proposed Corpus Christi Liquefaction Project to Be Located in Corpus Christi, Texas, to Non‑Free Trade Agreement Nations (May 12, 2015), reh’g pending; and Corpus Christi Liquefaction, LLC, et al., Order Granting Authorization Under Section 3 of the Natural Gas Act and Issuing Certificates, 149 FERC ¶ 61,283 (Dec. 30, 2014), reh’g denied, 151 FERC ¶ 61,098 (May 6, 2015), petition for review pending.

3 Sabine Pass Liquefaction, LLC, DOE/FE Order No. 3669, Final Opinion and Order Granting Long‑Term, Multi‑Contract Authorization to Export Liquefied Natural Gas by Vessel from the Sabine Pass LNG Terminal Located in Cameron Parish, Louisiana, to Free Trade Agreement Nations (June 26, 2015); and Sabine Pass Liquefaction Expansion, LLC, et al., Order Granting Authorization Under Section 3 of the Natural Gas Act and Issuing Certificates, 151 FERC ¶ 61,012 (Apr. 6, 2015), reh’g denied, 151 FERC ¶ 61,253 (June 23, 2015).

American LNG Marketing LLC, DOE/FE Order No. 3690, Final Opinion and Order Granting Long‑Term, Multi‑Contract Authorization to Export Liquefied Natural Gas in ISO Containers Loaded at the proposed Hialeah Facility near Medley, Florida, and Exported by Vessel to Non‑Free Trade Agreement Nations (Aug. 7, 2015).  FERC did not authorize the construction of the Hialeah Facility.

5 Sabine Pass Liquefaction, LLC and Sabine Pass LNG, L.P., Order Granting Section 3 Authorization, 139 FERC ¶ 61,039 (2012), reh’g denied, 140 FERC ¶ 61,076 (2012); and Sabine Pass Liquefaction, LLC, DOE/FE Order No. 2961‑A, Final Opinion and Order Granting Long‑Term Authorization to Export Liquefied Natural Gas From Sabine Pass LNG Terminal to Non‑Free Trade Agreement Nations (Aug. 7, 2012), reh’g dismissed.

Floridian Natural Gas Storage Company, LLC, Order Amending Certificate, 140 FERC ¶ 61,167 (2012); and Carib Energy (USA) LLC, DOE/FE Order No. 3487, Final Order Granting Long‑Term, Multi‑Contract Authorization to Export Liquefied Natural gas in ISO Containers by Vessel to Non‑Free Trade Agreement Nations in Central America, South America or the Caribbean (Sept. 10, 2014).

7 Cameron LNG, LLC, et al., Order Granting Authorization Under Section 3 of the Natural Gas Act and Issuing Certificates, 147 FERC ¶ 61,230 (June 19, 2014), Cameron LNG, LLC, et al., 148 FERC ¶ 61,073 (July 29, 2014) (Notice Rejecting Request for Rehearing and Dismissing Request for Stay); and Cameron LNG, LLC, DOE/FE Order No. 3391‑A, Final Opinion and Order Granting Long‑Term Multi‑Contract Authorization to Export Liquefied Natural Gas by Vessel from the Cameron LNG Terminal in Cameron Parish, Louisiana, to Non‑Free Trade Agreement Nations (Sept. 10, 2014), reh’g denied.

Freeport LNG Development, L.P., et al., Order Granting Authorizations Under Section 3 of the Natural Gas Act, 148 FERC ¶ 61,076 (July 30, 2014); reh’g denied, 149 FERC ¶ 61,119 (Nov. 13, 2014), petition for review pending, and Freeport LNG Expansion, L.P., et al., DOE/FE Order No. 3282‑C, Final Opinion and Order Granting Long‑Term Multi‑Contract Authorization to Export Liquefied Natural Gas by Vessel from the Freeport LNG Terminal on Quintana Island, Texas, to Non‑Free Trade Agreement Nations (Nov. 14, 2014).

9 Freeport LNG Expansion, L.P., et al., DOE/FE Order No. 3357‑B, Final Opinion and Order Granting Long‑Term Multi‑Contract Authorization to Export Liquefied Natural Gas by Vessel from the Freeport LNG Terminal on Quintana Island, Texas, to Non‑Free Trade Agreement Nations (Nov. 14, 2014).

10 Emera CNG, LLC, DOE/FE Order No. 3727, Final Opinion and Order Granting Long‑Term, Multi‑Contract Authorization to Export Compressed Natural Gas by Vessel From a Proposed CNG Compression and Loading Facility at the Port of Palm Beach, Florida, to Non‑Free Trade Agreement Nations (Oct. 19, 2015).

11 Emera CNG, LLC, Order on Petition for Declaratory Order, FERC Docket No. CP14‑114‑000, 148 FERC ¶ 61,219 (Sept. 19, 2014).

12 EIA published its study, Effect of Increased Natural Gas Exports on Domestic Energy Markets, in January 2012.  DOE published the NERA Study, Macroeconomic Impacts of LNG Exports from the United States, in December 2012.

13 See FERC Docket No. CP13‑483‑000 and FE Docket No. 12‑32‑LNG

14 See FERC Docket No. CP14‑347‑000 and FE Docket No. 13‑132‑LNG.

Authors and Contributors

Donna J. Bobbish

Counsel

Project Development & Finance

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+1 202 508 8089

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