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DOE plans to speed small-scale LNG licensing

The US Department of Energy (DOE) plans to expedite its licensing process for US small-scale LNG export projects that meet specified conditions.

“The Trump administration is focused on finding ways to unleash American energy and providing a reliable and environmentally friendly fuel to our trading partners who face unique energy infrastructure challenges,” said secretary of energy Rick Perry.

The proposal likely would only help inland liquefaction facilities not connected to the interstate pipeline grid that send small LNG volumes to ports by truck or rail. In addition, the measure likely would only expedite the approval process for such projects by about 30 to 45 days.

US small-scale LNG projects are targeting the Caribbean and Latin America, as those markets heavily rely on oil-based generation and do not have large enough gas demand to receive supplies from standard LNG vessels, which typically carry an equivalent of about 3.5 Bcf of gas.

Under the proposal, the DOE would grant all necessary export licenses to small-scale projects immediately after their applications are deemed to be complete, if they meet two conditions.

First, they could only export up to 1mn t/yr, equivalent to about 140mn cf/d (396,000m³/d) of gas, and, secondly, they would not need an environmental review under the National Environmental Policy Act (NEPA).

The DOE earlier this month initiated a formal rulemaking procedure to implement the change. The agency does not need legislative approval to turn the proposal into law and plans to work as quickly as possible to complete the process. The DOE is holding a required public comment period until 16 October and after that it will develop a final rule. The time to complete the process will depend on the number of comments and the issue that they raise.

The DOE does not conduct its own NEPA reviews for LNG projects, but uses NEPA reviews conducted by the US Federal Energy Regulatory Commission (FERC), which has jurisdiction over the siting and operation of LNG facilities. FERC in April 2015 ruled that it does not have jurisdiction over inland liquefaction plants that send LNG to ports by truck or rail, as long as such facilities are not connected to the interstate pipeline gird. That means such facilities could qualify for the DOE’s proposed expedited approval if exports are limited to 1mn t/yr.

FERC has jurisdiction over all waterside LNG projects, so such projects require NEPA reviews regardless of their size, a FERC spokesperson told Argus today. In addition, FERC has jurisdiction over all inland LNG facilities tied to the interstate grid. That means that any LNG facilities that directly load ships or are connected to the interstate grid would not qualify for the expedited process.

The DOE did not comment on the matter.

The expedited process would only apply to licenses to export LNG to countries that do not have free trade agreements (FTAs) with the US, since the DOE already currently quickly issues licenses to export LNG to FTA nations.

FTA exports are presumed to be in the national interest, but the DOE must determine if non-FTA exports are in the national interest. It typically only issue non-FTA license to projects that successfully complete a FERC NEPA review. Such reviews can cost up to $150mn for complex projects and can take several years to complete.

If a project does not need a NEPA review it can get a non-FTA license immediately after a public notice of application and a public comment period, a process that typically lasts 30-45 days. The expedited process would remove that short obstacle for qualifying projects.

The DOE has issued 28 non-FTA licenses with a combined volume equivalent to 21.33 Bcf/d of gas. Of those, seven authorizations are for exports of less than 140mn cf/d.
Source: Argus

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