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DOE Taps Lake Charles for Worldwide LNG Exports

Lake Charles Exports LLC is conditionally authorized to export at a rate of up to 2 Bcf/d, bringing the potential total U.S. LNG exports to 5.6 Bcf/d.

Lake Charles Exports LLC (Lake Charles) Wednesday became the third prospective liquefied natural gas (LNG) terminal tapped by the U.S. Department of Energy (DOE) to export domestic natural gas worldwide, bringing authorized export volumes to 5.6 Bcf/d.

Exports to countries that do not have a free trade agreement with the United States are to take place from the Trunkline LNG Co. LLC terminal in Lake Charles, LA. Lake Charles, a jointly owned unit of BG Group plc and Southern Union Co., previously received approval for more limited exports to FTA countries on July 22, 2011 (see Daily GPIAug. 8, 2011).

"Subject to environmental review and final regulatory approval, the facility is conditionally authorized to export at a rate of up to 2 Bcf/d for a period of 20 years," DOE said.

BG's BG LNG Services LLC (BGLS) and Trunkline plan to modify existing LNG importation and regasification facilities at Lake Charles to permit LNG to be unloaded from the terminal's existing storage tanks onto vessels berthed at existing marine facilities. Gas liquefaction facilities also would be added to receive and liquefy pipeline gas.

With the proposed modifications, the Lake Charles terminal would be bidirectional, with the ability to receive and regasify LNG and liquefy domestic gas for export. The project still must receive authorization for construction from the FERC, and DOE's approval is conditioned upon the Federal Energy Regulatory Commission's.

Gas to be exported would be sourced primarily from Louisiana and Texas as well as the offshore, but it could come from anywhere in the Lower 48 states, the project backers said.

The proposed liquefaction and export facilities would be the subject of a long-term service agreement between BGLS and Trunkline. Lake Charles plans to enter into a long-term LNG export contract with BGLS "on a date closer to the date of first export," DOE's order said.

DOE granted the first authorization to export LNG to non-FTA countries in May 2011 from the Sabine Pass LNG Terminal in Cameron Parish, LA, at a rate of up to 2.2 Bcf/d (see Daily GPIMay 23, 2011), and the second authorization in May 2013 from the Freeport LNG Terminal in Quintana Island, TX, at a rate of up to 1.4 Bcf/d (see Daily GPIMay 20).

"The development of U.S. natural gas resources is having a transformative impact on the U.S. energy landscape, helping to improve our energy security while spurring economic development and job creation around the country," DOE said. "This increase in domestic natural gas production is expected to continue, with the Energy Information Administration forecasting a record production rate of 69.96 Bcf/d in 2013."

Federal law generally requires approval of natural gas exports to countries that have an FTA with the United States. For countries that do not have an FTA with the United States, the Natural Gas Act directs DOE to grant export authorizations unless the Department finds that the proposed exports "will not be consistent with the public interest."

In evaluating the Lake Charles non-FTA application, DOE considered the economic, energy security and environmental impacts, as well as public comments for and against the application and nearly 200,000 public comments related to the associated analysis of the cumulative impacts of increased LNG exports.

Early this year, DOE provided an order of precedence for processing pending applications to export LNG to non-FTA countries:

  • All pending DOE applications where the applicant has received approval (either on or before Dec. 5, 2012) from FERC to use the FERC pre-filing process, in the order the DOE application was received.
  • Pending DOE applications in which the applicant did not receive approval (either on or before Dec. 5, 2012) from FERC to use the FERC pre-filing process, in the order the DOE application was received.
  • Future DOE applications, in the order the DOE applications are received.

 

However, since that time the new Energy Secretary Ernest Moniz has said differences in processing may dictate some differences in that schedule.

In a summary and analysis of the latest approval, analysts at ClearView Energy Partners in Washington, DC, said it appears the next projects in line for approval by DOE are Dominion's Cove Point (see Daily GPIJuly 12), a Freeport LNG expansion known as FLEX, and Sempra Energy's Cameron LNG (see Daily GPIMay 17).

"We have no reason to believe that DOE will deviate from expectations for sequential approvals at six to eight week intervals -- but we would humbly submit that the timing has been erratic to date and could speed up or slow down in defiance of those expectations," ClearView said. "At FERC, Cameron remains first in line with FLEX behind it, and no other projects have received a Schedule of Environmental Review."

There are 19 non-FTA export applications pending at DOE, according to the agency's most recent summary.

Pro-LNG export group Center for Liquefied Natural Gas President Bill Cooper said the latest approval is welcome news but DOE needs to work faster on approvals.

"...[T]his is one approval, and there are 19 more applications awaiting DOE action," he said. "For 16 of the 19 pending applications, the comment periods have closed. Consequently, there should be no new information to consider. The facts are clear: Increased LNG exports will unlock significant benefits to our economy, workforce and trade partnerships. It is time for DOE to follow its rules and act quickly on the pending applications. This opportunity to grow American exports will not last forever."

America's Natural Gas Alliance chief economist Erica Bowman had a similar response. "A range of experts have concluded that selling some of our nation's abundant supplies of natural gas overseas will improve the U.S. trade balance and deliver jobs and economic benefits here at home," she said. "It also will help the president achieve his goal of doubling all exports."

However, Paul Cicio, president of the Industrial Energy Consumers of America, criticized the approval and said DOE is ignoring numerous projections of robust domestic demand growth for natural gas to occur by 2020.

"This means that when the three approved LNG export terminals come online, it will be at the same time as the booming domestic demand by the industrial and power sectors and pipeline exports to Mexico," he said. "[The approval] also fails to consider the upcoming impacts of [the Environmental Protection Agency's] regulation of [greenhouse gas] emissions by the power sector. DOE is failing to consider the cumulative demand in their public interest determination.

"Evaluation of [export] applications on a case-by-case basis which include a fresh economic analysis that considers the cumulative impact using up-to-date domestic demand is required to serve the public interest determination."

U.S. Sen Ron Wyden (D-OR), an LNG export skeptic, said the volume of LNG exports now authorized of 5.6 Bcf/d "...is just below the 6-8 Bcf/d that numerous reports and analysts have projected as the likely range for U.S. LNG exports without impacts on domestic [natural gas] prices."

 Wyden praised DOE's case-by-case approach to export approvals and said, "I will continue to closely monitor DOE's process going forward."

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