Brookings analysts suggest DOE tweak LNG export policy

Aug. 30, 2013
Policy in the US for LNG exports remains a work in progress.

Policy in the US for LNG exports remains a work in progress.

Exporters need approvals from the Federal Energy Regulatory Commission to build facilities and from the Department of Energy to export frigid methane.

Confusion arises at DOE. Approval to export to a country with which the US has a free-trade agreement (FTA) is effectively automatic. But only one FTA country, South Korea, imports much LNG.

For non-FTA countries, DOE can deny LNG exports if it finds them to be not in the public interest, the meaning of which is unclear.

So far, DOE has approved or conditionally approved three projects targeting non-FTA countries. Applications for 18 such projects await its decision.

Some observers have suggested DOE is using procedural fog to finesse opposition to LNG exports from high-volume gas consumers worried about rising prices.

Whatever its origin, confusion about DOE’s handling of LNG export applications hampers assessment of future market conditions and raises risks of producers and consumers.

Two Brookings Institution analysts, in a briefing document this month, suggested ways to improve DOE’s procedures for LNG export applications.

Charles K. Ebinger and Govinda Avasarala called for a balance between a volumetric cap on exports, at one extreme, and approval of any and all applications of exports to non-FTA countries, at the other.

Under the Ebinger-Avasarala approach, a project would be deemed to be in the public interest once the prospective exporter had successfully cleared FERC prefiling steps and secured purchase contracts for a specified portion of supply. The costly requirements, the analysts wrote, “will encourage only serious projects to move forward.”

Ebinger and Avasarala questioned DOE’s plans to assess cumulative market and price effects in each future LNG approval, explaining, “We do not believe these assessments would be made on a timely basis.”

They suggested DOE audit its policy every 5 years and adapt rules to markets.

Much, indeed, can change in 5 years. In 2008, the US still was expected to be a growing importer of LNG.

(This article appeared first at on Aug. 30, 2013; author’s e-mail: [email protected])