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The U.S. Department of Energy's (DOE) proposal to consider liquefied natural gas (LNG) export applications only for projects that have been approved by FERC means a developer could spend tens of millions of dollars winning over the Commission only to get a "no" later from a "politicized" DOE, said Excelerate Energy CEO Rob Bryngelson.
The Federal Energy Regulatory Commission (FERC) "...process [is] designed to produce a 'yes' in the end. You may have to tweak your project; you may have to do a lot of work. It's designed to get a 'yes,'" he said at the World LNG Series Americas Summit in San Antonio Tuesday.
"The DOE process is highly politicized and subjective, so to put that $20,000 [DOE] permit at the end of a $50 million or $100 million [FERC] process is ludicrous."
Excelerate is developing a floating liquefaction and export facility at Port Lavaca in Texas between Galveston and Corpus Christi. The company began FERC's pre-filing process for the project in October 2012, which is also when it applied at DOE for a permit to export to non-free trade agreement countries.
"We've spent the money to move forward at FERC based on the rules we were given," Bryngelson said. "DOE's changing the rules is ridiculous and it's patently unfair." According to Bryngelson, DOE is saying to developers such as Excelerate, "'...[W]ait till after FERC and maybe we'll decide the NEPA [National Environmental Policy Act] process was done right and maybe we won't.' It makes no sense whatsoever. There's no reason to change the process now. All it is is a way to politicize the process and further delay things and stop projects."
Bryngelson was reacting to comments made earlier at the conference by Galway Group LP Managing Director Gauthier van Marcke, who said he only had a mild reaction when he read about the export license review changes proposed by DOE last week (see Daily GPI,May 29).
"When I saw the announcement, I took it as, well, you needed both [DOE and FERC approval] anyways," he said. However, he added that the change does create a hurdle for developers, and doing so forces them to prove that they are serious about and committed to their projects. "Is it a fair hurdle? I'm not going to get into that, but it does create a hurdle."
If the changes go through as DOE proposes, it won't be possible for a would-be developer to spend $25,000-30,000 to get the permitting process moving at DOE without first having gone through the rigors of FERC review, a much more costly proposition.
Marcke told Bryngelson he wasn't disagreeing with the assertion that the midstream change by DOE is unfair, but he added that the proposed change would help to separate the wheat from the chaff in a field crowded with LNG export proposals. The change would help bring some insight into the prospects of various projects for those who might contract with the developers, Marcke said. "At some level -- I'm putting myself in the shoes of a would-be buyer -- if I'm new to this market, how do I know who's really serious?"
But the proposed changes only bring more uncertainty, not less, Bryngelson said. "We're progressing a project with some uncertain regulatory hurdles that have now been placed toward the end of it, and the ability to clear those becomes more and more challenging..." he said. "The one question I get asked by every single one of the customers that we've signed heads of agreement with on Lavaca Bay is, 'what is going to happen with the DOE non-free trade export authorization…?' That is the one question we get. So for us that is the thing that's hurting us most, and I think this new uncertainty is really going to impact the ability of U.S. LNG to compete in the market because now it's turned into a crapshoot for everybody."
DOE is responsible for regulating export of natural gas under the Natural Gas Act, which creates a rebuttable presumption that an application to export is in the public interest unless the presumption can be overcome by other participants in the process, Center for Liquefied Natural Gas President Bill Cooper said at the conference.
"That's separate and distinct from DOE's role as a cooperating agency in the NEPA process in the FERC process," Cooper said. "It appears to me that what has happened -- that's troubling me -- is that there seems to be a...fusion or blurring of those two distinct responsibilities of the Department of Energy. And secondly, it is a unilateral rule change [proposed by DOE] in violation of the administrative procedures act creating uncertainty in the regulatory process, which in turn creates uncertainty in the marketplace.
"There may be applicants in the process that think this is good. There will be others that think they have tremendously aggrieved by the process. My cautionary statement would be: what makes you think it won't change again..."
Cheniere Energy Inc., with the Lower 48's first fully permitted and under construction export facility (Sabine Pass in Louisiana), is sitting in the LNG catbird seat, even though it still awaits DOE and FERC action on its Corpus Christi Liquefaction project in Texas. Cheniere Energy's Mark Stubbe, senior vice president for marketing and trading, was at the LNG conference but wasn't getting excited about the changes proposed by DOE. Maybe they'll happen, maybe they won't, he said.
"I know from the perspective of Cheniere, it's just been 'let's just keep our head down and work under the rules that are in place. If the rules change, let's work under the rules that change...'" he said. "You've got to keep to your knitting, meaning get your EPC [engineering, procurement, construction] in place because it's critical for the FEED [front end engineering design] and for your FERC filing; get your contracts in place; get your investors in place; and continue to move forward that way...We can't change the government. We can have an election but that's about it."