Under Section 3 of the Natural Gas Act, exporting natural gas requires authorizations from the Department of Energy’s Office of Fossil Energy and from the Federal Energy Regulatory Commission (FERC).
Generally speaking, DOE determines whether an LNG export application would be consistent with the public interest, while FERC is responsible for authorizing the siting and construction of LNG facilities, and preparing environmental assessment or impact statements for proposed LNG facilities, as required by the National Environmental Policy Act (NEPA).
DOE applications to export LNG are divided into two broad categories: whether or not the LNG is destined for countries with a free trade agreement (FTA) with the U.S.
Exports to FTA countries are automatically deemed consistent with the public interest, and the U.S. currently has FTAs with 20 countries: Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, Singapore.
Applications to export LNG to non-FTA (NFTA) countries require an additional step, certification from DOE that exports are in the public interest, as presumed by the rebuttable presumption written into the Natural Gas Act.
Despite the rebuttable presumption that LNG exports are in the public interests its has been unnecessarily difficult for DOE to grant NFTA export permits. Over the last five years DOE has paused approvals while it conducted macroeconomic analyses of LNG exports twice – both studies found that LNG exports would benefit the U.S. economy. DOE has also been inconsistent in the time taken to grant NFTA export permits to applicants, some of whom have spent millions of dollars and waited hundreds of days for DOE to act. These inconsistencies have prompted legislative solutions in both the House and Senate which would impose a timeline on DOE to act on NFTA applications. CLNG supports this legislation which would provide critical regulatory certainty to a growing industry.
The Federal Energy Regulatory Commission (FERC) has the exclusive authority to approve or deny an application for the siting, construction, expansion, or operation of an LNG terminal per the Natural Gas Act. FERC is the lead federal agency that will determine whether an application will be issued an Order Granting Authority under Section 3 of the Natural Gas Act for the construction an LNG project. The Commission, under Section 7 of the Natural Gas Act, also issues certificates of public convenience and necessity for LNG facilities engaged in interstate natural gas transportation by pipeline. FERC will also monitor all construction and restoration activities to insure that an applicant complies with all federal, state and local permits, plans and regulations.
The applicant’s initial step in the process is requesting from FERC the ability to engage in the pre-filing environmental review process. The pre-filing process provides opportunities for federal and state cooperating agencies such as state Departments of Environmental Quality, U.S. Army Corps of Engineers, U.S. Fish and Wildlife Service and other public stakeholders to comment on project impacts prior to an application’s FERC submission. When permission is granted to begin the FERC pre-filing process, an applicant will then prepare the draft resource reports.
The next step is for the applicant to submit draft resource reports to FERC for consideration in an environmental review.
The resource reports are divided into the following subjects:
- General project description
- Water use and quality
- Fish, wildlife, and vegetation
- Cultural resources
- Geological resources
- Land use, recreation, and aesthetics
- Air and noise quality
- Reliability and safety
- PCB contamination
- Engineering and design material
The stakeholders will then be given the opportunity to comment on the resource reports through public meetings and postings. Any issues that are identified will be addressed prior to final review.
Applicants submit draft resource reports to aid FERC in its preparation of an Environmental Assessment (EA) or an Environmental Impact Statement (EIS). An EA or EIS is required to fulfill the requirements of the National Environmental Policy Act (NEPA). The purpose of the EA or EIS is to inform the public and the permitting agencies about the potential adverse and/or beneficial environmental and safety impacts of proposed projects and their alternatives. FERC is the lead federal agency for NEPA compliance and other federal agencies, like the Department of Energy and the Environmental Protection Agency, contribute to FERC’s NEPA analysis. When FERC’s environmental review is finished and released publicly, all other relevant agencies, like the Department of Energy, adopt FERC’s analysis and consider NEPA review complete.
Upon FERC approval of the project, the applicant will receive:
- A Commission Order stating its decision on whether to approve construction and operation of the LNG terminal;
- Market rate authority; and
- Conditions that must be met prior to construction.