The People of America's Oil and Natural Gas Indusry

Uncertainty and Delay is Not an Energy Strategy

Mark Green

Mark Green
Posted May 30, 2014

In announcing plans to revamp the way it considers permit applications for projects to export U.S. liquefied natural gas (LNG) to non-free trade agreement countries, the Energy Department said changes would help streamline the process and increase efficiency.

Unfortunately, the revisions could mean more Washington delay and inject additional uncertainty for multi-billion-dollar investments – hampering efforts to harness America’s game-changing opportunity to create new jobs, boost the economy and stimulate domestic production with LNG exports.

In a DOE blog post, Christopher Smith, principal deputy assistant secretary for fossil energy, writes that the department will review export applications and make final public interest determinations only after environmental reviews are completed. It would end the department’s procedure of the past year and a half of issuing conditional approvals pending environmental review. Smith:

By removing the intermediate step of conditional decisions and setting the order of DOE decision-making based on readiness for final action, DOE will prioritize resources on the more commercially advanced projects. The proposed procedural change will improve the quality of information on which DOE makes its public interest determinations. By considering for approval those projects that are more likely to actually be constructed, DOE will be able to base its decision on a more accurate evaluation of the project’s impact on the public interest. DOE will also be better positioned to judge the cumulative market impacts of its authorizations in its public interest review.

A couple of points. First, it’s hard to see how the changes would streamline or expedite a process that already is too slow. Basically, DOE is saying it will wait until the Federal Energy Regulatory Commission has done its environmental review, a process that’s costly and can take a year or more to complete. Creating a scenario where a company would invest considerable time and money in an environmental review, only to have its application rejected by DOE, is fraught with the kind of uncertainty that likely would chill project investments. House Energy and Commerce Committee Chairman Fred Upton and Rep. Cory Gardner, author of bipartisan legislation that would require DOE to make a decision on LNG export applications within 90 days:

“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. …  By simply requiring DOE to make a decision, we can avoid more Keystone-like delays and send a much-needed and immediate signal to our allies, and our enemies, that American natural gas will be an available source of affordable energy.”

Second is the sentence in DOE’s blog post, saying that the change will allow the department to be “better positioned to judge the cumulative market impacts” of the LNG export projects up for review. Unfortunately, the department continues to have its eye on setting LNG export levels, in its role as the export permit gatekeeper, instead of leaving the determination to the marketplace where it belongs. The quest for a “sweet spot” in LNG exports is illusory. The dynamics of free-market supply and demand, not the government, should pick the winners in the sorting out of how many and which projects ultimately are built.

The United States is the world’s leading producer of natural gas and has a golden opportunity to put its natural gas abundance, tapped with advanced hydraulic fracturing and horizontal drilling, to work for America. We have ample reserves to meet domestic needs and supply friendly buyers overseas. Studies project broad benefits in terms of job creation and economic growth if the U.S. becomes a major player in the developing global market for LNG.

But the window of opportunity could close as other export projects come on line around the world. While DOE has approved seven export projects over the past year and a half, more than 20 remain pending – and could be delayed even more as DOE not only moves the goalposts in the approval process but also rewrites the rules of the game.

Americans understand the link between energy wealth, energy exports and added prosperity here at home. Recent polling of registered voters found that 70 percent agree natural gas exports help create U.S. jobs, and 67 percent say natural gas exports are good for the economy. Unfortunately, Washington is being too slow to act on the connections. There’s an energy revolution unfolding, but in Washington only delay amid the appearance of activity. API’s Erik Milito, director of upstream and industry operations:

“It remains to be seen whether the new guidelines will improve the current process, but there’s no doubt that the system today is too slow. The economic and environmental benefits of LNG exports are well-established by numerous studies and reports, and the time for review is past. We’ll continue to work with the administration and Congress to move the process forward and lock down America’s trade advantage as the world’s leading producer of natural gas.”

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.