In response to its updated analyses of the impacts of natural gas exports on the US economy and the environment, and competitive forces in the global market for LNG, DOE takes steps to offer term extensions to existing and future long-term non-FTA export authorization holders.
On July 29, 2020, the Department of Energy’s Office of Fossil Energy (DOE/FE) issued a Final Policy Statement that offers the opportunity to extend long-term Natural Gas Export Authorizations to countries that the United States does not have a free trade agreement with (Non-FTA Countries).1 In this Policy Statement, DOE details its intent to extend the standard term of long-term export authorizations of natural gas to Non-FTA Countries by offering applicants the option to request terms of up to 30 years.
Pursuant to its authority under section 3 of the Natural Gas Act (NGA), DOE authorizes the export of domestically produced natural gas, including: liquefied natural gas (LNG), compressed natural gas, and compressed gas liquids. This authority extends both to exports to countries with which the US has entered into a Free Trade Agreement, which are deemed to be in the public interest and consequently DOE is instructed to grant such export authorizations without delay, and to exports to Non-FTA Countries, subject to a rebuttable presumption that they are in the public interest—as it relates to US energy security and positive economic activity.
Neither section 3 of the NGA nor DOE’s regulations prescribe a specific term for export authorizations. DOE’s decision to offer the option to extend the term of export authorizations is based, at least in part, on evidence furnished in two recent studies:
- The 2018 LNG Export Study found that the US will derive “net economic benefits from the export of domestically produced LNG through the 30-year study period, i.e., from 2020 through 2050,” and
- The Life Cycle Greenhouse Gas Perspective on Exporting Liquefied Natural Gas From the United States: 2019 Update gave DOE “no reason to conclude that US LNG exports will increase global GHG emissions in a material or predictable way.”
Such evidence will be instrumental in DOE/FE’s section 3 public interest analysis of extension requests. DOE also cites indications from export authorization holders that 30-year export terms are more consistent with the operational life of LNG export facilities, and thus would provide greater security in financing export facilities, as justification for its extension of the standard term for export authorizations.
Existing non-FTA export authorization holders, existing non-FTA export authorization applicants, and future non-FTA export authorization applicants are eligible to request an extended export authorization term. The extension provides an end-date of December 31, 2020, including any make-up period, for non-FTA export authorizations.
The Final Policy Statement provides that existing non-FTA export authorization holders would be able to extend the term of their export authorizations from 20 to 30 or more years, but that extensions for “the majority of existing authorization holders” would be for a maximum 30-year term. While such extension would increase the total volume of gas authorized for export, it would not alter the maximum annual volume of gas exports permitted to an export authorization holder.
This new policy shall be implemented as follows:
- Existing non-FTA authorization holders would apply to DOE to extend their export term through December 31, 2050, on a voluntary opt-in basis;
- Existing non-FTA applicants would amend their pending non-FTA application to request an export term through December 31, 2050, on a voluntary opt-in basis; and
- DOE would issue all future non-FTA export authorizations with a standard export term lasting through December 31, 2050, unless a shorter term was requested by the applicant.
Applicants for an extension are expected to submit facts and arguments in support of their request for extension. DOE/FE will consider such applications through a typical section 3 public interest analysis and environmental review pursuant to its authority under the National Environmental Policy Act (NEPA). Existing export authorization holders should be aware that they will not automatically receive a categorical exclusion from NEPA review.
Because of the significant impact this extension could have on the decisions of terminal owners/operators and offtakers, as well as the competition faced from exporters based in other countries with export authorizations of longer durations, clients currently holding or seeking export authorizations should be aware of the option to apply for an extension or modify an existing application, and consider whether an extension would be prudent.
1 The following countries have entered into Free Trade Agreements with the US, and therefore, export authorizations to these countries are not eligible for the extension offered in the Final Policy Statement: Australia, Bahrain, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Israel, Jordan, Korea, Morocco, Canada, Mexico, Oman, Panama, Peru, and Singapore. Countries not included in this list, do not hold a current Free Trade Agreement with the US and, accordingly, export authorizations to those countries would be eligible for the extension offered in the Final Policy Statement.
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