Providing coverage of Alaska and northern Canada's oil and gas industry
February 2020

Vol. 25, No.07 Week of February 16, 2020

DOE proposes non-FTA gas export extensions

Authorizations have been issued for 20 years; but based on 2018 study, agency says 30 years, through end of 2050, more appropriate

Kristen Nelson

Petroleum News

The U.S. Department of Energy’s Office of Fossil Energy is proposing to extend the standard 20-year term for authorizations to export natural gas, including liquefied natural gas, from the Lower 48 states to countries with which the United States does not have a free trade agreement for natural gas and with which trade is not prohibited by U.S. law or policy.

Holders of existing non-FTA authorizations could apply to extend the term of those authorizations through Dec. 31, 2050, the Office of Fossil Energy said in a Feb. 11 Federal Register notice. All future authorizations would have a standard term through 2050, unless a shorter term is requested.

DOE is inviting comments on the proposal, with comments due by 4:30 p.m. Eastern time March 12.

DOE said while this policy proposal is for non-FTA authorizations, it expects that if the policy is adopted that FTA authorization holders would likely request a comparable extension.

DOE said its first conditional long-term export authorization for domestically produced LNG from the Lower 48 was issued to Sabine Pass Liquefaction in 2011. Sabine Pass requested an export term of 20 years, and DOE said it determined that a 20-year term was in the public interest and has continued to issue long-term non-FTA authorizations for 20-year terms, even when longer terms were requested, with the exception of a conditional authorization to export LNG to non-FTA countries from Alaska. DOE said the Alaska LNG Project requested a 30-year export term, citing unique aspects of the Alaska-based project. DOE said it has not yet issued a final order in that proceeding.

New economic study

DOE said it commissioned a new economic study in 2017 from NERA Economic Consulting, which had done a 2012 economic study for the department. The new study, referred to as the 2018 LNG Export Study, like prior studies analyzed outcomes of different LNG export levels on U.S. natural gas markets and the U.S. economy.

DOE said that for the first time the 2018 study “assessed the likelihood of different levels of ‘unconstrained’ LNG exports, defined as market-determined levels of exports,” examining 2020 through 2050 and beyond. DOE said the study was based, in part, on projections in the U.S. Energy Information Administration’s Annual Energy Outlook 2017 through 2050.

DOE said it received and responded to comments on the 2018 study, and based on the record, determined that the study provides support for non-FTA applications for export volumes between 0.1 billion and 52.8 billion cubic feet per day of natural gas.

Authorizations to date

DOE said it has issued 38 final long-term authorizations to export domestically produced LNG or compressed natural gas to non-FTA countries, with a cumulative volume of 38.06 bcf per day of natural gas, 13.9 trillion cubic feet per year.

There are 18 long-term non-FTA applications pending, with a cumulative volume of 24.5 bcf per day or 8.94 tcf per year.

DOE said it has also authorized exports of 56.24 bcf per day of natural gas to FTA countries, but said the FTA and non-FTA volumes are not additive, because each order grants authority to export volumes to FTA or non-FTA countries to provide flexibility to the authorization holder to determine export destinations.

DOE cited EIA’s estimate that U.S. domestic dry natural gas production for 2019 averaged 92.03 bcf per day and said U.S. LNG export capacity operating or under construction totals 15.54 bcf per day, which covers eight large scale export projects in the Lower 48.

30-year requests

DOE said authorization holders have recently indicated that a 30-year export term would better match the operational life of their LNG export facilities, allowing “more security in financing their facility and maximizing their ability to contract for exports.”

DOE said LNG export terminals are typically designed for a 30 to 50-year service life.

It said the 20-year export terms in existing authorizations were based on earlier studies, but “that limitation is no longer required based on the findings of the 2018 LNG Export Study that included analysis of an expanded time period.”

The extension through 2050 would not, DOE said, alter currently approved maximum daily rates of export, which are based on each facility’s capacity or set by the agency approving the siting and construction - either the Federal Energy Regulatory Commission or the U.S. Maritime Administration.

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