DOE Finalizes New LNG Export Procedures

The U. S. Department of Energy (DOE) published its final procedures for the export of liquefied natural gas (LNG) to non-free trade agreement nations in the Federal Register on Friday, Aug. 15, making almost no changes to the draft procedures published on June 4. The essential takeaways:

  • Conditional Approvals Eliminated. The practice of granting “conditional” approvals for exports to non-free trade agreement (non-FTA) nations is suspended and the previous “order of preference” (aka “the queue”) voided. Instead, DOE will make final “public interest” determinations only after a project is “ready for final action.”
  • “Ready for Final Action.” According to the new rules, an application is “ready for final action” when DOE “has sufficient information on which to base a public interest determination” and the National Environmental Policy Act (NEPA) review process is complete. The NEPA review is deemed complete when: (1) for projects requiring an Environmental Impact Statement (EIS), 30 days after publication of a final EIS; (2) for projects for which an Environmental Assessment (EA) has been prepared, upon publication by DOE of a Finding of No Significant Impact; or (3) upon a determination by DOE that an application is eligible for a categorical exclusion pursuant to 10 CFR 1021.410.
  • Projects with Conditional Approvals. For projects that have already received “conditional” approval to export LNG to non-FTA nations, DOE will proceed as explained in the conditional orders: When the NEPA review process is complete, DOE will reconsider the conditional authorization in light of the information gathered in the environmental review and take appropriate final action.

Quick Bottom Line (Our Analysis). The new procedures do little to alter a decision-making process that has been criticized as slow, costly, and opaque. What DOE has done is to shift the department’s “public interest” review from the front-end to the back-end of the multi-agency federal review process.

When the new procedures were proposed, Christopher A. Smith, DOE’s principal deputy assistant secretary for fossil energy, offered this justification: “[C]hanges to the manner in which LNG applications are ordered and processed will ensure our [review] process is efficient by prioritizing resources on the more commercially advanced projects, while also providing the department with more complete information when applications are considered and public interest determinations are made.” Numerous organizations submitted comments on the proposed rules arguing that Smith’s stated objective would not be achieved unless DOE were to set a firm decision deadline. However, DOE did not find those arguments persuasive, and no such deadline was included in the final procedures.

Given that it’s mid-August, reaction is only now starting to trickle in. Perhaps the most telling remarks (so far) have been made by NAM vice president Ross Eisenberg:

While we are glad that the DOE has responded to criticisms [of the prior process] proactively […] only time will tell whether any of these procedural changes will actually work. We are disappointed that several of NAM’s proposed changes, which we believe would have strengthened the rule, were not accepted […] The bottom line for manufacturers is that this permitting process for energy exports should operate in a way that permits the market to function. If the DOE’s new procedures get us there, great. If not, then DOE should plan to hear a lot more from us.”

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