WASHINGTON — Key senators are pressuring the Energy Department to abandon its 2012 plan for processing applications to broadly export natural gas, insisting that the two-year-old approach does not do enough to prioritize projects that have secured financing, signed up customers and are close to winning other needed permits.
The top Democrat and Republican on the Senate Energy and Natural Resources Committee suggested this week that a new tack could better reflect realities on the ground, ensuring licenses are steered first to the multi-billion dollar projects most likely to be built.
“Should you go by the way the order is presented or who is most likely not only to get financing but also siting?” panel chairman Mary Landrieu, D-La., told reporters after a Tuesday hearing on the issue. “There are several steps to this process of siting and financing and actually building these terminals.”
Sen. Lisa Murkowski, R-Alaska, questioned whether it “would make more sense” to shuffle an existing queue dictating the order in which the Energy Department reviews applications to widely export natural gas.
Both the Energy Department and the Federal Energy Regulatory Commission have roles vetting proposed liquefied natural gas export facilities. The Energy Department is responsible for deciding whether proposals to export natural gas to countries that don’t have free-trade agreements with the United States are in the “public interest.” Meanwhile, FERC vets the proposed liquefaction facilities and the infrastructure to support them.
In 2012, when the Energy Department started working through a backlog of applications for those LNG export licenses, it created an order of precedence” that prioritized all existing proposals based first on whether they had begun a pre-filing process at FERC. The rest of the applications pending on Dec. 5, 2012 were put at the bottom, in the order the Energy Department received their applications. Subsequent filings have simply gone to the back of the line.
That means some companies who are well into the lengthy, expensive FERC permitting process and even have formal applications pending with the agency may end up behind other proposals in the Energy Department’s queue. For instance, the proposed Jordan Cove LNG terminal in Oregon won its non-FTA export license from the Energy Department on Monday, even though other projects are further along in their FERC reviews. In fact one — a proposal to expand export capacity at Cheniere’s Sabine Pass, La., facility — has already won FERC’s blessing, but its pending export application is effectively 20th in the Energy Department’s line.
“All you need for the DOE approval is a letter and a stamp,” said David Goldwyn, a former special envoy for international energy affairs at the U.S. State Department. “To get FERC approval, you’ve got to have millions of dollars in environmental assessments, and you have to have credible financing.”
The current approach means that in some cases, the Energy Department license is “really just a license to market” natural gas — not an indication that the project is ever going to get off the ground.
Goldwyn has outlined a plan that he said would ensure Energy Department approval goes “to projects that are ready to be built.”
“If you just let projects which have cleared FERC and have a formal FERC application go to the head of the line, you’d be accelerating projects which are not just licenses to market but which are projects which are already commercially mature,” Goldwyn said.
Energy Department officials did not immediately respond to a request for comment Thursday. But in May 2013, a top Energy Department official said it “would not be out of the realm of the possible to consider different ways of ordering” the sequence.
Energy Department officials have stressed that the original 2012 approach was meant to provide fairness by using a kind of litmus test for the viability of projects based on whether companies had started spending serious sums of money seeking FERC approval.
Some natural gas export advocates, who have complained that the existing Energy Department licensing process is taking too long, want the Obama administration to scrap the case-by-case reviews altogether, in favor of a single, en masse approval.
Several bills pending in the House and Senate would abandon the “public interest” test for proposed exports to nations that aren’t U.S. free-trade partners, at least for countries that are members of the World Trade Organization or the North Atlantic Treaty Organization.
Landrieu said she was going to be looking closely at this issue, and specifically “should these be done on a case-by-case basis, or is there a more expedited approach.”