Ideas

DOE Proposed Rule Would Expedite Small-Scale Natural Gas Export Authorizations

Firm Thought Leadership

On September 1, 2017, the U.S. Department of Energy (“DOE”) published a notice of proposed rulemaking (“NOPR”) to revise its regulations by providing for expedited approval of certain applications to authorize the export of small amounts of natural gas, including liquefied natural gas, to countries with which the U.S. has not entered into a free trade agreement (“FTA”).1 To take advantage of this process, the export applicant would need to show that its application is for “small-scale natural gas exports,” meaning (1) it proposes to export no more than 0.14 billion cubic feet per day (“Bcf/d”) of natural gas, and (2) approval would not require DOE to prepare an environmental impact statement (“EIS”) or environmental assessment (“EA”) under the National Environmental Policy Act of 1969 (“NEPA”).

Background

Pursuant to Section 3 of the Natural Gas Act (“NGA”), DOE is responsible for authorizing exports of natural gas to foreign nations. With respect to applications to export natural gas to non-FTA countries, DOE is required to issue an order authorizing export unless, following opportunity for hearing, DOE finds that the proposed export would not be consistent with the public interest. DOE has interpreted Section 3 of the NGA as creating a rebuttable presumption that a proposed export of natural gas is in the public interest. As such, DOE will grant an application to export to non-FTA countries unless opponents of the application are able to affirmatively show that the application is inconsistent with the public interest.

Before reaching a final decision on a natural gas export application, DOE must comply with NEPA. In general, compliance with NEPA requires a review of the environmental impacts of major federal actions, including the permitting of natural gas exports. Such review generally involves an examination of the environmental effects of constructing the project and an analysis of potential alternatives. The agency’s findings are typically set forth in an EIS or EA. However, under some circumstances, no such environmental review is necessary due to a “categorical exclusion.” These “categorical exclusions” include an exclusion for natural gas import or export activities that require minor operational changes to existing projects without new construction.2

DOE’s Proposal

In issuing the NOPR, DOE has recognized the unique characteristics of the small-scale natural gas market, in particular its potential as a market-driven solution to meet demand and provide fuel diversification in the Caribbean, Central America, and South America. Specifically, DOE states in the NOPR that “small-scale natural gas exports” are unlikely to create negative economic or supply impacts in the U.S. but are likely to promote U.S. job creation, foster international relations, trade, and security, and provide positive environmental benefits by driving importing countries to switch to natural gas from heavy fuel oil and diesel. Based on this analysis, DOE concluded that “small-scale natural gas exports” to non-FTA countries are consistent with the public interest under Section 3 of the NGA.3

DOE proposes to implement this public interest determination by providing that, for each “small-scale natural gas export” authorization application, DOE would first assess whether the application is complete under its existing regulations. Complete applications would then be posted to the DOE’s website, as is the current standard practice. If the exports proposed in the application meet the criteria to be considered “small-scale natural gas exports,” DOE would issue the non-FTA export authorization without further notice or other actions.

Next Steps

Public comments on the NOPR will be accepted until October 16, 2017. Although interested parties may comment on any aspect of the proposal, DOE has specifically requested input regarding the appropriate volume limitation for “small-scale natural gas exports” (i.e., 0.14 Bcf/d of natural gas).

1Small-Scale Natural Gas Exports, 82 Fed. Reg. 41,570 (Sept. 1, 2017), available here.
210 C.F.R. part 1021, subpart D, appendix B5.7.
3The proposed rule would not affect existing DOE authorizations, applications that do not meet the “small-scale natural gas exports” criteria, or exports to FTA countries under Section 3(c) of the NGA.


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