The US Department of Energy (DOE) is tightening its policy on granting extensions for its approvals of plans for LNG exports, a policy change to reduce the number of export approvals given to companies that are not yet building an export plant and cannot meet their export deadlines.
The policy statement, in effect as of Apr. 21 and set for publication in the Apr. 26 Federal Register, revises the department’s policy on authorizing exports to non-Free Trade Agreement (non-FTA) countries. In most cases the authorizations allow for up to 7 years between the granting of the approval and the start of exports, assuming DOE has decided that the exports are in the public interest.
Under the new policy, a company that seeks an extension of its deadline must start construction of the export plant before requesting the additional time, and it must demonstrate that its inability to meet its existing export deadline is the result of extenuating circumstances outside its control.
If a company reaches the 7-year deadline and still has not begun construction and has not demonstrated that its lack of work is not its own fault, its authorization for non-FTA exports will expire. The company can submit a new non-FTA application, which will be considered without prejudice.
Problems in obtaining financing and winning long-term contracts from buyers are among the biggest hurdles for would-be exporters. The multibillion-dollar projects commonly pull in private equity partners to help pay for the export plants, pipelines, and tankers.
Market assessment problems
“Currently the cumulative volume of LNG approved for non-FTA exports is over 49 bcfd, which is nearly half of domestic natural gas production and approximately four times the actual volume of current LNG exports,” DOE said in an Apr. 21 announcement of the policy change.
More than half of the volume approved for non-FTA exports is held by LNG projects that are not operating or under construction, DOE said. This situation “obscures the true demand for US LNG and makes it difficult for DOE to assess the impacts of any new non-FTA applications,” the department said.
The new policy “will allow DOE to better assess whether new non-FTA applications are in the public interest; provide more certainty to the US and global LNG export markets; and ensure that DOE is making decisions utilizing the latest market information and analytical tools available,” DOE said.
The new policy also may help potential new competitors assess the markets and make their decisions. Under the revised policy, potential entrants are less likely to be discouraged or delayed because of approved export projects that have not secured financing or begun construction, DOE said.
So far there are 41 long-term orders authorizing export of LNG sourced from the US to non-FTA countries under Natural Gas Act Section 3(a).
All seven of the large-scale export plants currently operating in the US met their 7-year deadlines, demonstrating that the deadlines are reasonable, DOE said.
Three deadline extensions
In addition to the new policy, DOE announced it was issuing final orders on pending applications for a deadline extension for non-FTA exports from three companies: Lake Charles LNG Export Co. LLC and Lake Charles Exports LLC, both associated with the same export plant in Louisiana; and Port Arthur LNG LLC, with a plant in Texas. All three deadline extension requests were filed in 2022. These applications were ripe for a final extension decision prior to the publication of the new policy statement, the administration said.
The policy announcement came from DOE’s Office of Fossil Energy along with much emphasis on supplying allies and partners, especially given the problems created by Russia’s invasion of Ukraine.
The announcement also was threaded through with references to climate goals.
DOE said it is issuing a request for information on strategies and technologies that natural gas and LNG companies are deploying, or could deploy, to reduce greenhouse gas emissions and other pollutants associated with natural gas delivered to a liquefaction plant; at liquefaction plants; and during the loading, transport, and delivery of natural gas to a regasification terminal.