A proposed change in way the US Department of Energy approves application for permission to export LNG will streamline the process by focusing on the projects that have the greatest chance of being built, a DOE official said in Houston Monday.
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"We need to be cognizant of market forces," Christopher Smith, principal deputy assistant secretary for Fossil Energy, said in a presentation on the proposed changes at Rice University.
DOE announced a proposal last month "to review applications and make final public interest determinations only after completion of the review required by environmental laws and regulations," scrapping its previous practice of issuing conditional approvals at the outset of the approval process.
Under the Natural Gas Act, the department is required to swiftly approve proposals to export LNG to countries with which the US has free trade agreements, but must determine if proposals to ship LNG to non-FTA countries are in the public interest before approving those projects.
The DOE's prior approach created queues of projects awaiting either conditional approval or final approval, all handled on a first-come, first-served basis.
Smith said that under the proposed changes, any projects already in a queue would still be considered for review ahead of any newly submitted projects. However, those in a queue would be considered in order based on which ones were further along in getting other needed approvals -- such as a permit to build the LNG terminal issued by the Federal Energy Regulatory Commission -- rather than the order in which DOE received their applications.
Smith said one project was still in the process of undergoing review for conditional approval, after which DOE would phase out that step.
The department's existing policy for considering applications for approval, which the DOE issued in December 2012 and revised in March, has come under criticism by LNG industry advocates and their political allies as being too slow and cumbersome for applicants.
To date the department has issued final approval for 2.2 Bcf/d of LNG exports, and conditional authorization for 9.27 Bcf/d, Smith said.
The proposed change to the process is subject to a 45-day public comment period that will end July 21, Smith said.
INDUSTRY CHANGES BEHIND NEW POLICY PLAN
Smith said the DOE decided to change the approval process in response to changes in the market, when it saw that companies proposing to build LNG export terminals were no longer waiting to receive the DOE conditional approval before moving forward to secure financial contracts and other needed environmental approvals for their projects.
"Over the past year and a half we've seen a real change in the way companies are behaving. Companies are going out and negotiating sales and purchase and agreements and spending tens of millions of dollars," he said.
"Markets change and evolve," Smith said. "We need to be cognizant of market forces."
In addition to the proposed changes in the department's permitting process, DOE also last month released two environmental reports related to LNG exports. One study addressed the environmental footprint of unconventional gas production and the other focused on the lifecycle greenhouse gas impacts of US LNG exports.
DOE also had announced that it would initiate an update of its existing economic study on LNG exports. While the previous study had examined the economic impacts of LNG exports of up to 12 Bcf/d, the revision will examine the impact that the export of up to 20 Bcf/d of LNG would have on the domestic market, Smith said.
He said that in preparing this study update, DOE's Energy Information Administration would look at domestic supply and demand issues, while a third-party consultant would look at global LNG markets.
Smith said a timeline has not been established for the completion of the economic study, although the department hopes to have it in place before the majority of US LNG export capacity is brought online, toward the end of this decade.
Despite Smith's contention that the proposed changes to the LNG permitting process were in response to the needs of the market, Bill Cooper, president of the Center for Liquefied Natural Gas, said applicants for LNG export permits were wary of the switch.
"It's another change and change creates uncertainty among applicants," Cooper said on the sidelines of the presentation.
Cooper added that the announced revision of the economic impact study on LNG imports "can only delay the process."