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Lawmakers Urge DOE to Expedite LNG Export Approvals

August 13, 2012
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A bipartisan group of 44 U.S. representatives from Texas, Oklahoma, Louisiana and Arkansas wants the Department of Energy (DOE) to expedite approval of applications to export liquefied natural gas (LNG), according to a letter sent to U.S. Energy Secretary Steven Chu last Tuesday.

Burgeoning production from the nation's shale plays has made it vital that the country find an outlet for surplus natural gas, the lawmakers said in their letter. "Building the energy infrastructure necessary to allow market-based exports of liquefied natural gas will not only add stability to the energy production cycle in our region, it will allow our area to quickly adapt to the new dynamics of gas production and marketing."

While they are aware that DOE has begun reviewing and issuing LNG export licenses and is studying the potential impacts of LNG exports, "the process does not seem to have a set timeline for decisions or a sense of urgency," said the letter. "In our collective view, it is time to bring a renewed sense of urgency to the approval process...We strongly support your department taking coherent and timely action to move this process forward."

The letter was signed by 34 Republicans and 10 Democrats with a majority of them (28) representing districts in Texas.

"The promise and challenge of this surplus of natural gas is that it has resulted in extremely low prices for natural gas in our country," said Rep. Gene Green (D-TX). "While this is great for our manufacturing sector, the price has dropped so low that many producers no longer find it economically viable to produce the resource, which could eventually raise the price of natural gas for our manufacturing sector. The approval of strategically located LNG facilities would provide the market opportunities to reincentivize this production while ensuring a stable price and supply for feedstock."

The current federal permitting process "stands in the way of energy companies distributing their products in a timely manner," said Rep. James Lankford (R-OK). "Without the ability to market to international customers, this could have a severe impact on production in our region."

An Obama administration official recently said the export of LNG to other nations "makes sense" and strongly hinted that additional export permits would eventually be issued by DOE. Heather Zichal, deputy assistant to the president for energy and climate change, told attendees at the American Gas Association's Natural Gas Roundtable in June that the impact study would be completed this summer "and will pave the way for future decisions [on LNG exports] from the administration. I think some amount of LNG exports certainly makes sense from our perspective, and I think you will see policies to follow that."

Zichal later clarified that she didn't know which of the six to eight LNG export applications pending before DOE would be approved, but believes some of them will be granted.

Last April DOE approved the first application for LNG exports to countries that are not parties to a free trade agreement (FTA) with the United States (see NGI, April 23). Cheniere Energy Inc. units Sabine Pass LNG and Sabine Pass Liquefaction have been approved to export LNG produced in the Lower 48 to non-FTA countries from Sabine Pass' existing LNG import terminal in Cameron Parish, LA. DOE has since put the non-FTA permitting process on hold while it assesses the impact of LNG exports on domestic gas markets.

The lawmaker's letter last week follows an earlier effort by another bipartisan group of House lawmakers who called on Chu to expedite the approval of U.S. company applications to export LNG to foreign countries. The lawmakers, who were from shale states, called on Chu in July to allow producers to capture a greater share of the growing global LNG market. "The United States has the supply, the technological capability, and the work force to accomplish this. There is, in fact, a global race already underway. Governments in Australia and Canada, for example, are rushing to support their producers' and LNG terminal developers' efforts to lock in customers and get facilities built that will allow them to sell gas overseas," wrote Republican Rep. Bill Johnson and Democratic Rep. Tim Ryan, both from Ohio.

Political and regulatory indicators point to DOE giving the green light to pending applications to export LNG to non-free trade agreement (FTA) nations by no later than early next year, according to Sempra Energy CEO Debra Reed.

San Diego-based Sempra is one of a number of companies with applications to export LNG to non-FTA nations pending at DOE, and it has accumulated Japanese and French partners to both help build the $6 billion facilities and contract for long-term supplies that would be exported from its existing LNG import facility at Cameron, LA (see NGI, May 7).

Sempra has heard from "many parties in Washington, DC," that the Obama administration supports LNG exports, and that a federal report examining the impact of proposed exports on the U.S. domestic gas market will be released by late summer, Reed said during a conference call with analysts.

"We already have two reports that pretty much say the same thing: namely that there is no negative impact from U.S. exports," Reed said. "Given that, it is pretty hard to believe that a third report would be substantially different from that."

After the latest report is released, Reed said the common assumption is that DOE will issue its decisions on the export applications, which she thinks will provide the approvals that Sempra and others need to move forward. Her confidence is buoyed by the language DOE uses in its export permit applications.

"The DOE language presumes approval, and it puts the burden of proof to show that there would be an adverse effect [from LNG exports]," Reed said. "The language is presumptive, assuming that exports are good and that we are going to have an open market for gas, and they (export opponents) actually have to prove why it shouldn't be that.

"So I think with what we are hearing leads us to believe that this is going to be moving forward at the end of this year or the first part of next year."

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