The Tea Leaves Suggest This Administration Will Limit LNG Exports -- But Is This News?

Platts is reporting:

In an interview with Platts, Freeport CEO Michael Smith said he was “quite disappointed” in the order, claiming that DOE was “arbitrarily” limiting what it can export to non-FTA nations.

“There is nothing in the regulations that allow this,” he said. “We filed for 1.4 Bcf/d, and unless all of it isn’t in the public interest, they are required to approve our filing. Once someone else is approved for any more, they have no argument that our application wasn’t in the public interest.”

Under a provision of the US Natural Gas Act, the DOE must issue an order to export to non-FTA countries unless it finds such exports “will not be consistent with the public interest.”

“This provision creates a rebuttable presumption that a proposed export of natural gas is in the public interest,” DOE wrote in its Freeport order. The agency “must grant such an application unless opponents of the application overcome that presumption by making an affirmative showing of inconsistency with the public interest.”

Essentially, what that means is this: DOE has to approve an LNG export application unless it can prove exporting that gas would not be in the public interest.

Platts describes the issue as clearly as one could expect. This does not bode well for the pro-LNG export crowd.

But then, this is not news for this administration whose decisions are capricious to begin with. 

The article continues:

This gets into some double-negative wording territory which makes English majors cringe, but, under the statute, the DOE must prove that the LNG export proposal is not in the public interest to reject it. Most simply, DOE does not have to prove that the exports would be in the public interest.

Which brings us to the Freeport order: did DOE cut the export request by 1 Bcf/d because it believed exports at that level would not be in the public interest? In other words: was the Freeport request reduced by 1 Bcf/d because DOE believes that an additional 1 Bcf/d would not be in the public interest?

It does not appear so, since throughout the order DOE claims that opponents of the Freeport proposal failed to prove that 1.4 Bcf/d of LNG exports was not in the public interest.

But DOE’s decision to cut the request by 1 Bcf/d could ultimately be extremely problematic for future approvals for Gulf Coast LNG export projects. If the DOE can prevent Freeport from shipping another 1 Bcf/d from its Texas facility it would stand to reason that it could also limit shipping 1.7 Bcf/d from Cameron LNG’s facility in Louisiana or even more from other pending export proposals. Cameron LNG is the next export project in line for DOE approval.

And:

Pro-LNG export sources claim that DOE seems to be overstepping their legal bounds here and taking on more than it may be allowed under the Natural Gas Act. And DOE has offered little explanation on why it limited the Freeport order.

William Gibbons, a DOE spokesman, declined to comment, but in the Freeport order DOE says it limited the Freeport approval to “the extent of the liquefaction capacity” of the project. Freeport has told the Federal Energy Regulatory Commission that the project would have a liquefaction capacity of 1.8 Bcf/d, not the 2.8 Bcf/d total it requested in its two export applications.

Much more at the link. Some readers may want to take an extra Valium.