Summary
On April 21, 2023, the Department of Energy (DOE) issued a policy statement (Policy Statement) reaffirming the requirement that authorization holders commence exports of domestically produced natural gas, including liquefied natural gas (LNG), to non-free trade agreement (non-FTA) countries on or prior to the date that is seven years from the date DOE issued such export authorization. DOE will no longer consider applications for extensions to export commencement deadlines unless an authorization holder submits an application prior to its commencement deadline demonstrating: (A) that such authorization holder has commenced construction on the applicable export facility before the date of such application and (B) that such authorization holder's failure to comply with the seven-year deadline results from extenuating circumstances outside of the authorization holder's control. The authorization holder must submit the application for extension to DOE at least 90 days before the commencement deadline. DOE will evaluate timely-submitted applications under the good cause standard provided under Section 3(a) of the Natural Gas Act (NGA) with appropriate consideration of the public interest. If an authorization holder does not timely apply for such extension or the application is not granted by DOE, the non-FTA export authorization will expire on the commencement deadline set forth in such export authorization, and the authorization holder may submit a new non-FTA application, which DOE will consider without prejudice.
Background of DOE's Policy Shift
Section 3(a) of the NGA prohibits the export of LNG from the United States to a foreign country without prior approval from DOE. When reviewing an export application, DOE has historically held the NGA creates a rebuttable presumption that exporting LNG to a non-FTA country is in the public interest, and will grant such application unless it finds the export "will not be consistent with the public interest." Over time, DOE has adopted a policy providing authorization holders seven years (beginning on the date DOE issues an order granting export authorization) to commence exports to non-FTA countries. DOE's rationale for the seven-year period is that the deadline prevents would-be export authorization applicants from being "frustrated in their efforts to obtain those authorizations by authorization holders that are not engaged in actual export operations."
Given the capitally intensive, time consuming, and commercially unpredictable nature of building operable LNG export terminals, DOE anticipates that authorization holders will continue to request commencement deadline extensions to keep their export authorizations current, even if the future of such export terminals remains uncertain. However, in the Policy Statement, DOE indicates that a growing "approval gap" - in which more authorization holders are authorized to export than are actually doing so - undermines the "public interest" analysis supporting each non-FTA export authorization and is deleterious to DOE's planning and analysis of the LNG export market.
Thus, through the Policy Statement DOE established its intent to more closely align the total volume of non-FTA exports authorized with the actual LNG export capacity of project developers. By requiring each authorization holder requesting an extension to demonstrate both that it has commenced construction on its export facility and that its failure to comply with the seven-year deadline results from extenuating circumstances outside of its control, DOE anticipates that it will be better able to fulfil its mission and can provide more certainty to global LNG export markets.
The Policy Statement will apply to all existing and future long-term (greater than two years) non-FTA export authorizations, except for those authorization holders who requested an export commencement deadline extension before April 21, 2023. For any applications filed before the Policy Statement was issued, DOE will review the applications under the case-by-case approach that was previously in effect.
The full policy statement issued by DOE can be read here.
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