POLITICS: PennAve

Natural gas export worries, pressures grow amid Energy Department lag

By |
Energy Department,PennAve,FERC,Energy and Environment,Zack Colman,Natural Gas,Fred Upton

The pressure and anxiety from backers of expanding natural gas exports are growing in tandem as the Energy Department continues to evaluate more than two dozen proposals to ship the fuel abroad.

At issue is the 25 outstanding applications to ship liquefied natural gas, or LNG, to nations with which the United States lacks a free-trade agreement. In such cases, the Energy Department must determine whether such shipments are in the national interest.

Investors in prospective liquefied natural export terminals, with sympathetic lawmakers on both sides of the aisle, say the process is taking too long. They're now worried by the extended lag between the Energy Department's most recent approval on Nov. 15 and the next. When that will come is anybody's guess.

"What we're hearing, at least from a permitting perspective, 2014 needs to be the year of action," Bill Cooper, president of the Center for Liquefied Natural Gas trade group, told the Washington Examiner. "I think a lot of projects that are on the board start becoming perilously close to being taken off the books."

Export boosters say the U.S. is in danger of missing a window to supply energy-thirsty nations as more export projects come online in other countries. And while the Energy Department has given the green light to five projects in roughly three years, the projects still have to maneuver through a time-consuming and expensive -- more than a year and upwards of $100 million -- permitting and environmental review at the Federal Energy Regulatory Commission.

To get things moving, the House Energy and Commerce Committee fired, in the words of Chairman Fred Upton, R-Mich., a "friendly shot across the bow" at the Obama administration this week when it released a report on the benefits of LNG exports.

Upton left open the prospect of pushing legislation. Existing proposals include imposing a timeline on Energy Department decisions and approving exports to NATO allies and Japan.

"We're going to measure the progress that they [the Energy Department] make during the year, and we'll see where they are at the end of the year," Upton told the Examiner on Thursday. "Maybe they need some friendly help."

But the chances of a bill getting through both chambers, during an election year, aren't great.

"I would not go so far as to say it would be an ambitious lift, but I can't go to the other extreme and say I'm optimistic," Cooper said.

Energy Secretary Ernest Moniz has said the department is evaluating the applications on a case-by-case basis. That has satisfied some Democrats who are concerned that approving too many projects would cause domestic prices to spike.

But analysts say that not all the export terminals would get built even if they were approved. That's because the world market can handle only so much more LNG, and not all of it will come from the U.S.

"Not all of them will get built, and that includes all the ones in the United States," Erik Milito, director of upstream and industry operations for the American Petroleum Institute, told the Examiner.

To date, the Energy Department has approved exports to non-free trade nations amounting to 9.17 billion cubic feet per day.

Proposals for export terminals across the world top 100 bcf per day, according to a May 2013 analysis by ICF International. But global demand is expected to top out between 54 and 64 bcf per day by 2025, compared with 37.9 bcf per day at the end of 2011.

Several companies that have applications on file at the Energy Department, including Sempra LNG, which is at the top of the queue, formed a coalition Wednesday to press the issue. The group, billed as "Our Energy Moment," said LNG exports would amount to "$47 billion in net benefits to the U.S. economy and create up to 450,000 new jobs."

Investors are getting nervous about missing contractual milestones with buyers, one industry source told the Examiner.

The source said applicants knew the Federal Energy Regulatory Commission process would take time, but didn't anticipate the holdup at the Energy Department. So deals that were struck with buyers in, say, Japan, are looking increasingly tenuous.

Thirteen applicants already have begun a prefiling process with the Federal Energy Regulatory Commission, in some cases years ago. Those projects can't break ground until the commission signs off on all permits.

Not all projects take the same amount of time.

Dominion Energy's Cove Point, Md., project, for example, involves adding liquefaction capability to an existing import facility. Construction is expected to start mid-year, with shipments beginning in 2017.

But the projects in the Pacific Northwest, such as the Jordan Cove Energy Project in Coos Bay, Ore., and some on the Gulf Coast are "greenfield" sites that require new construction.

"The longer it takes the United States to issue these permits, the longer it takes to get to construction. We may miss that window for those buyers," Cooper said. "There's a sufficient amount of angst being expressed that we know 2014 is a fairly critical date."

View article comments Leave a comment

More from washingtonexaminer.com