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Researched by Industrial Info Resources (Sugar Land, Texas)--The jury is out about the effects of proposed changes in the U.S. Department of Energy's (DOE) conditional approval process to export liquefied natural gas (LNG) to countries without a free-trade agreement with the U.S.
In a blog post on the DOE website late last week, Christopher A. Smith, the principal deputy assistant secretary for fossil energy at the DOE, wrote that the department was proposing to shift the queue order for conditional export approvals for LNG facilities. These had previously been based, more or less, on the order that the applications had been received. Now, however, the DOE is proposing to grant approval only to those facilities that have undergone the National Environmental Policy Act review by the Federal Energy Regulatory Commission (FERC).
In theory, the change will free up the DOE's resources to focus on the projects proposed by serious players with enough capital to actually see the large, multibillion-dollar projects through to fruition. While an export application with the DOE costs $20,000, companies spend in the neighborhood of $100 million to complete the environmental review process with FERC. Therefore, if the proposed changes take effect, the department will be examining facilities for which the parent companies already have invested significant capital.
This is good for some, bad for others. DOE export approval can provide a boost of confidence for potential investors and LNG purchasers. Foreign LNG buyers are probably more likely to purchase LNG from a company that already has received export approval; investors are more likely to financially back facilities with export approval, particularly those with purchase agreements in place.
The proposed changes will probably not have much effect on the next two projects in the queue for DOE consideration. The department says it will continue its current process through the 45-day comment period for the proposed changes.
Recent export approvals have come every two months or so from the DOE, with the last export approval being the Jordan Cove Energy Project in Coos Bay, Oregon, on March 24. Another Oregon facility, Oregon LNG's proposed facility in Warrenton, Oregon, should be through the DOE process if the current timing is kept. After this comes Cheniere Energy's (Houston, Texas) facility in Corpus Christi, Texas, which has already begun the environmental review process. Oregon LNG is controlled by Leucadia National Corporation (New York, New York).
Of course, the changes need to be approved first. Some are already crying foul about the proposed change, including U.S. Representative Fred Upton (R-Michigan), chairman of the House Energy and Commerce Committee, and Representative Cory Gardner (R-Colorado), who authored the Domestic Prosperity and Global Freedom Act, which aims to expedite the LNG export approval process. The two issued a joint statement saying, "Rather than working with Congress to fix the problem, the administration announces an abrupt move to introduce new excuses to delay an already-broken process. This action will further slow down approvals and could discourage investment in export projects. Instead of adding more uncertainty to the process, we need a solution that brings an end to the existing queue." Those companies still seeking investors or near the top of the queue are also likely to protest the change, accusing the DOE of arbitrarily changing the existing queue order and unnecessarily shaking up the approval process.
View Project Report - 300080797 300079947 300110838 300057246 300057250 300057257
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
In a blog post on the DOE website late last week, Christopher A. Smith, the principal deputy assistant secretary for fossil energy at the DOE, wrote that the department was proposing to shift the queue order for conditional export approvals for LNG facilities. These had previously been based, more or less, on the order that the applications had been received. Now, however, the DOE is proposing to grant approval only to those facilities that have undergone the National Environmental Policy Act review by the Federal Energy Regulatory Commission (FERC).
In theory, the change will free up the DOE's resources to focus on the projects proposed by serious players with enough capital to actually see the large, multibillion-dollar projects through to fruition. While an export application with the DOE costs $20,000, companies spend in the neighborhood of $100 million to complete the environmental review process with FERC. Therefore, if the proposed changes take effect, the department will be examining facilities for which the parent companies already have invested significant capital.
This is good for some, bad for others. DOE export approval can provide a boost of confidence for potential investors and LNG purchasers. Foreign LNG buyers are probably more likely to purchase LNG from a company that already has received export approval; investors are more likely to financially back facilities with export approval, particularly those with purchase agreements in place.
The proposed changes will probably not have much effect on the next two projects in the queue for DOE consideration. The department says it will continue its current process through the 45-day comment period for the proposed changes.
Recent export approvals have come every two months or so from the DOE, with the last export approval being the Jordan Cove Energy Project in Coos Bay, Oregon, on March 24. Another Oregon facility, Oregon LNG's proposed facility in Warrenton, Oregon, should be through the DOE process if the current timing is kept. After this comes Cheniere Energy's (Houston, Texas) facility in Corpus Christi, Texas, which has already begun the environmental review process. Oregon LNG is controlled by Leucadia National Corporation (New York, New York).
Of course, the changes need to be approved first. Some are already crying foul about the proposed change, including U.S. Representative Fred Upton (R-Michigan), chairman of the House Energy and Commerce Committee, and Representative Cory Gardner (R-Colorado), who authored the Domestic Prosperity and Global Freedom Act, which aims to expedite the LNG export approval process. The two issued a joint statement saying, "Rather than working with Congress to fix the problem, the administration announces an abrupt move to introduce new excuses to delay an already-broken process. This action will further slow down approvals and could discourage investment in export projects. Instead of adding more uncertainty to the process, we need a solution that brings an end to the existing queue." Those companies still seeking investors or near the top of the queue are also likely to protest the change, accusing the DOE of arbitrarily changing the existing queue order and unnecessarily shaking up the approval process.
View Project Report - 300080797 300079947 300110838 300057246 300057250 300057257
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
