Backers of liquefied natural gas (LNG) export projects have been clamoring for permits at the U.S. Department of Energy (DOE), but they and export opponents have also been begging for clarity on the approval process. They should have it, said the Brookings Institution.

“Both parties are looking for more certainty in particular about what constitutes the public interest,” Brookings said in a new paper, “Revising the LNG Export Process: Policy Recommendations to Reduce Uncertainty.”

DOE has said it will consider projects in the order the applications were received and whether the projects have received FERC approval to use the Federal Energy Regulatory Commission’s (FERC) pre-filing process. In May DOE Deputy Assistant Secretary Christopher Smith said the agency would focus on the “cumulative impact” of additional export approvals, Brookings noted.

“There is a need to reform the existing rules pertaining to exporting LNG to non-FTA [free trade agreement] countries in order to reduce the risk and uncertainty that is hurting both producers and consumers,” Brookings said.

Two ideas, both extremes, that have been bandied about will not work, the think tank said. One is placing a volumetric cap on the ultimate amount of LNG to be exported, for instance, 6-8 Bcf/d, which would be 10-15% of domestic gas production. The other is to approve all of the export applications with no limit on the amount of LNG to be exported.

“Both of these approaches are treacherous to implement and may increase, rather than decrease, uncertainty,” Brookings said. “For instance, a cap is economically inefficient and legally difficult to implement (How will projects be prioritized to fit into the cap? Will it be on a first-come-first-served basis? Or by which project is farthest along in contracting?).”

While approving all projects might avoid playing favorites among competitors, it doesn’t address the concerns of domestic consumers that exports will drive up the prices they pay for gas, said Brookings, which called for “a balanced approach” that reflects the cost of building an export facility at the beginning of the process.

“To be approved for exports to non-FTA countries, a prospective exporter should have gone successfully through FERC’s pre-filing process and have a portion of its supply contracts signed before being eligible to be considered by DOE…” Brookings said. “Both requirements are costly and will encourage only serious projects to move forward.”

Further, members of the Brookings natural gas task force said, the “public interest” standard that DOE applies to export decisions needs to be clarified as it is “too vague” and creates uncertainty among investors. Brookings suggested that “public interest” could be predicated upon a project meeting the pre-filing and supply contract stipulations it proposes.

Brookings also found fault with the intention of DOE to assess the cumulative impact on the gas market and prices of each LNG approval. “Given the dynamics of the gas market and its competitive importance with other fuels, we do not believe these assessments would be made on a timely basis,” it said.

And Brookings called for an audit of DOE’s export policy every five years. “Such an audit would identify what happened to domestic natural gas supply, demand, prices, and international markets during each five-year period.”

Earlier this month, Lake Charles Exports LLC became the third terminal approved by DOE for non-FTA exports (see Daily GPI, Aug. 8a). Meanwhile, DOE has been routinely criticized by LNG export backers for moving too slowly on approvals (see Daily GPI, Aug. 8b; July 29).

In May 2012 Brookings released its first report on LNG exports, which said the domestic market impact of exports would likely be modest (see Daily GPI, May 7, 2012). In its latest notes Brookings said it would release periodic “issues briefs for policymakers” on the subject.