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POLITICS: PennAve

Energy Department to prioritize 'commercially advanced' natural gas exports

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Energy Department,PennAve,FERC,Energy and Environment,Zack Colman,Mary Landrieu,Natural Gas,Lisa Murkowski,Trade

The Energy Department proposed changes to the natural gas export review process to prioritize "the more commercially advanced projects," a move that would address concerns that the department is moving too slowly on proposals involving countries that lack a free-trade agreement with the United States.

The DOE proposed ending its practice of conditionally approving applications and would instead reject or approve projects once they received a passing environmental grade from the Federal Energy Regulatory Commission. That would lay waste to the first-come, first-served basis the department currently employs, in effect moving projects that have already spent millions of dollars in a FERC pre-filing process to the front of the line.

"In response to an evolving market, this proposed change will streamline the regulatory process for applicants, ensure that applications that have completed [National Environmental Policy Act] review will not be delayed by their position in the current order of precedence, and give the Department a more complete understanding of project impacts," said Christopher Smith, principal deputy assistant secretary for Fossil Energy at the DOE, in a statement.

The proposal, which faces a 45-day comment period, earned mixed reviews from lawmakers who have pressed the DOE to change how it evaluates applications to non-FTA countries. Such deals face more stringent review because the department must find such exports to be in the public interest — it's approved seven so far, with 26 pending.

Senate Energy and Natural Resources Committee Chairwoman Mary Landrieu, D-La., called it a "positive step."

Sen. Lisa Murkowski, the top Republican on the Energy and Natural Resources Committee, was "cautiously optimistic," said Robert Dillon, a spokesman for the Alaska Republican. He cautioned the DOE should not delay reviewing other applications in the interim, but spoke favorably of the proposal, saying, "This is basically taking the politics out of it. In fact, it sends a good signal to the market."

But House Republicans said the change invited more uncertainty into the process, as DOE will still retain the right to approve or deny projects at the end of the FERC review process. That DOE said it would conduct another economic analysis regarding natural gas exports also riled Republicans.

"This action will further slow down approvals and could discourage investment in export projects. Instead of adding more uncertainty to the process, we need a solution that brings an end to the existing queue," House Energy and Commerce Committee Chairman Fred Upton, R-Mich., and Rep. Cory Gardner, R-Colo., who is sponsoring legislation to expedite approvals, said in a statement.

Those sentiments echoed some in industry, though some groups sounded a note of guarded optimism.

"It remains to be seen whether the new guidelines will improve the current process, but there’s no doubt that the system today is too slow," Erik Milito, director of industry and upstream operations with the American Petroleum Institute, said in a statement, though he called it an "important signal."

Dan Whitten, a spokesman for America's Natural Gas Alliance, said his group was "hopeful" the proposal would speed application approvals.

Others said leaving the final decision up to DOE after developers had already spent more than $100 million on the FERC process could create consternation.

“Many of the changes to the DOE process have taken the department even further from both their legal role and their sphere of competency. As such we believe that the process will become both more bureaucratic and protracted, resulting in greater project cost and lost job opportunities,” said Bill Cooper, president of industry group the Center for Liquefied Natural Gas.

Republicans and a sizable portion of Democrats favor exports, seeing it as a jobs and revenue booster that would incentivize more natural gas drilling and chip away at the trade deficit. Supporters also said U.S. exports could break the hold Russia has on Central and Eastern Europe through its domination of the natural gas market.

Still, the proposal is likely to rankle some Democrats and environmental groups on the eve of the Environmental Protection Agency announcing the centerpiece of President Obama's climate change strategy -- the first-ever greenhouse gas emissions limits on the nation's 1,600 power plants, which account for 40 percent of U.S. carbon emissions.

Some Democrats and environmental groups are concerned that expanding natural gas exports would lead to more hydraulic fracturing, or fracking, when there are still questions about how much methane leaks during the drilling process. Experts believe that "fugitive" methane emissions of 3 percent could erase the climate benefit of natural gas, which is half as carbon dense as coal.

To that point, the DOE also released two reports Thursday that will inform further reviews: One that said lifecycle emissions of natural gas exports would be lower than the regionally burned coal in Asia and Europe that it would replace, and that concluded it was not "reasonably foreseeable" that more fracking would result in domestic environmental impact.

Some in industry said they were unsure whether those reports would raise the bar for environmental reviews.

Sierra Club attorney Nathan Matthews said his group looked forward to commenting on the reports, and applauded the DOE for ending conditional approvals for export projects that had not yet gotten a clean environmental review.

"It's never made sense to evaluate LNG exports without knowing the impact they would have on the environment and on our climate, so this announcement is a step in the right direction," Matthews said.

Still, a key change included in the proposal could give the DOE room to approve more projects than originally anticipated, a move that will raise concern among some Democrats and energy-intensive manufacturers who worry sending too much natural gas abroad would raise domestic prices.

FERC will now tally the amount of approved exports as 2.2 billion cubic feet per day as opposed to the 9.3 bcfd that DOE has conditionally approved. That's because while the DOE had given the green light to seven projects, not all of them have completed the steps necessary to enter the FERC process.

Kevin Book, managing director at ClearView Energy Partners LLC, said starting at the 2.2 bcfd mark "hews more closely to economic reality," referring to the likelihood of those projects being developed.

But some Democrats have cautioned against exceeding 12 bcfd, viewing that mark as a Rubicon for maintaining natural gas prices, which are clocking in at around $4.50 per million British thermal unit.

As such, the DOE also announced Thursday that it would begin studying the economic effects of exporting up to 20 bcfd. A 2012 DOE-commissioned study by NERA Economic Consulting found exports would be a net economic winner, though it added domestic prices would rise marginally.

Sen. Ed Markey, D-Mass., who has been one of the more outspoken lawmakers pressing for export restraint, praised the DOE for undertaking a new evaluation.

"America shouldn’t export first and ask questions later. This new push for more analysis by the Energy Department is a welcome development," he said in a statement.

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Zack Colman

Staff Writer
The Washington Examiner