The Department of Energy ("DOE") issued a final rule that will expedite the approval process of small-scale export applications and alleviate administrative burdens for the small-scale natural gas export market.
As explained in a Cadwalader memorandum, the DOE will provide "export authorization" for applicants attempting to export natural gas to countries where (i) the United States has not entered into free trade agreements ("FTAs") that require national treatment for trade in natural gas and (ii) trade is not prohibited by U.S. law or policy. This expedited process is designed for exports to non-FTA countries. To receive authorization, the following two criteria must be met:
- the export volume cannot exceed 51.75 billion cubic feet ("Bcf") per year (or 0.14 Bcf per day), and
- the application must not require an environmental assessment under the National Environmental Policy Act of 1969.
Additionally, the new process (i) does not apply to applications for exports to countries that have FTAs with the United States, (ii) cannot be used to increase the export authorization of an existing export facility (e.g., a large-scale facility) and (iii) will not affect existing DOE authorizations.
The final rule will become effective on August 24, 2018.
Commentary / Brett Snyder
As this rule shows, there is a robust and evolving niche market for smaller-scale LNG projects. On the export side, there is a second tranche of credible buyers who want cargoes smaller than those of the large LNG carriers serving traditional terminals. The DOE explained that the small-scale natural gas export market involves exports of small volumes of natural gas from the United States to countries primarily in Central America, South America, and the Caribbean. The DOE noted that the small-scale export market has developed as a solution to the practical and economic constraints limiting large-scale natural gas exports to these countries. The final rule is also consistent with the DOE's policy of minimizing federal control and involvement in energy markets and promoting energy diversification.
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