Congress should end newly relaxed LNG export regulation

Jan. 14, 2019
Sensible regulatory change by the US Department of Energy should be followed by legislation killing the changed regulation.

Sensible regulatory change by the US Department of Energy should be followed by legislation killing the changed regulation.

Aiming to streamline authorization of LNG exports, the DOE on Dec. 19 eliminated end-use reporting requirements.

For more than 40 export authorizations issued since February 2016, it has required exporters to report not only where LNG is delivered but also where the gas is used.

The requirement is cumbersome, at best.

The DOE’s approval authority for gas exports under the Natural Gas Act distinguishes between countries with which the US has free trade agreements (FTAs) and those with which it does not. Approval is automatic for FTA countries.

LNG exporters always have had to report where LNG is “actually delivered.”

DOE added end-use reporting requirements out of concern that gas exported by pipeline to Canada or Mexico, both FTA countries, might be liquefied and exported for use in non-FTA countries without DOE’s knowledge.

As DOE correctly recognizes, however, an expanding and increasingly flexible market makes tracking methane molecules to the point of consumption increasingly difficult.

So why require it? Why should DOE still make exporters report delivery locations? Why, indeed, must DOE approve gas exports?

The US quit controlling exports of crude oil in 2016 and is the better for it. It now should quit controlling exports of natural gas.

LNG trade is a rich opportunity for the US. But exporters must overcome the disadvantage of distance to markets in Asia and Europe. They have done so with flexible contracts offering prices linked to low-cost US gas.

Export approvals and destination controls create delays and rigidities damaging to the competitiveness of US LNG. And they’re unnecessary.

In a market for a fungible product, with supply increasing from proliferating sources via trade of growing complexity and sophistication, why should the US care where its methane goes?

Siting and construction of gas-export facilities properly remain subject to regulation by the Federal Energy Regulatory Commission.

Regulation of gas exports, however, has outlived its purpose.

(From the subscription area of www.ogj.com; posted Dec. 21, 2018. To comment join the Commentary channel at www.ogj.com/oilandgascommunity.)