WASHINGTON — A top Energy Department official hinted Tuesday that the Obama administration could issue licenses to export natural gas every two months, while acknowledging pressure to speed up the review process for projects with firm contracts and solid financing deals.
The comments by Christopher Smith, the acting assistant secretary for fossil energy, shed new light on how the administration might scrutinize 19 pending applications to export natural gas to countries that do not have free trade agreements with the United States.
So far, the Energy Department has blessed two such projects — Cheniere Energy’s Sabine Pass terminal in western Louisiana, which secured an export license last year, and the Freeport LNG terminal in Quintana Island, granted conditional export approval on Friday.
Energy Secretary Ernest Moniz, who was sworn in on Tuesday, reaffirmed to reporters that he plans to review economic data on natural gas exports before the department acts on any of the remaining applications.
Separately, during a Senate Energy and Natural Resources Committee roundtable, Smith said that the Energy Department issued Freeport LNG’s conditional approval roughly two months after a public comment period closed. When Sen. Lisa Murkowski, R-Alaska, questioned if a continual 60-day process is possible, Smith signaled that would be the timeline going forward.
The Energy Department and the Federal Energy Regulatory Commission both have roles vetting proposed liquefied natural gas export facilities. The Energy Department is fielding export applications on a first-come, first-served basis, but the department’s initial order gave some preference to companies that already have launched the expensive and separate regulatory process with the commission.
“Essentially, it’s first-in, first-out with priority given to those projects that have initiated that FERC pre-filing process, which is the part of the evaluation where you start spending more serious sums of money,” Smith said. “As we go through this process, some companies will make the argument that they should be ahead of other companies because they’ve achieved certain milestones, and I think that’s an argument we understand and that we’re sympathetic to.”
But for now, the Energy Department has not changed the order in which it will review applications. “It would not be out of the realm of the possible to consider different ways of ordering,” he said, “but for now, the policy … is that we’ve set an order … and that’s the sequence we’re currently working through.”
Smith’s carefully worded comments could give room for Moniz to make changes and put his imprint on one of the biggest policy debates at the Energy Department.
The timing issues loom large as energy experts and natural gas producers warn that the United States has a narrow window to capitalize on surging Asian and European demand for the fossil fuel amid heavy competition from Australia, Russia and the Middle East. Globally, 63 projects are planned to liquefy natural gas for shipment.
Pat Outtrim, Houston-based Cheniere’s vice president of governmental and regulatory affairs, said U.S. projects will compete in that fray, and that delays could jeopardize a “golden economic and strategic opportunity for the country.”
At the same time, some U.S. manufacturers and other big natural gas users, which benefit from domestic natural gas priced much lower than in many other countries, argue that unfettered exports could cause U.S. prices to rise and blunt the nation’s competitive edge in transforming natural gas into other products for sale overseas.
Federal law requires that fossil fuel exports to countries without free trade agreements with the U.S. be in the public interest. But it presumes they are, tilting the advantage to those seeking foreign sales rather than parties challenging export licenses.
Sen. Ron Wyden, D-Ore., the head of the natural resources committee, said that approach might not strike the right balance.
“Done right, there ought to be a way to get the trade benefits to exporters and our trading partners, while maintaining the domestic economic and energy security benefits to our country,” Wyden said. “The current application process for approval of expert terminals may not properly reflect these larger economic challenges. I am not convinced that the application process is right for the times.”
Sempra Energy Vice President Octavio Simoes urged regulators to focus on the projects that are closest to the finish line as evidenced by advanced filings with Federal Energy Regulatory Commission and contracts with buyers of the natural gas the facilities will process. That approach — going beyond simply looking at the order of preliminary commission filings — could give an advantage to Sempra’s planned Cameron LNG export project in southwest Louisiana, which already has a formal application pending before the commission.
The commission has approved Cheniere’s Sabine Pass terminal. Besides Cameron LNG, projects that have reached the formal application stage are Dominion’s Cove Point, Freeport LNG and Cheniere’s Corpus Christi LNG.