Two new natural gas export plans set up challenge to controversial policy


Hopeful US exporters, eager to tap relatively newfound domestic natural gas abundance into the global market, have long had their projects shepherded into a Department of Energy queue they claim has created years of delays and regulatory risk.

But two recent export proposals may launch unique challenges to that contentious queue and might force agency officials to radically overhaul its approval process.

When the DOE began receiving applications to export US liquefied natural gas, it found it needed to establish the approval queue as a way to ensure that applications were dealt with fairly. The queue is set up based on both when an application was submitted to the DOE (which costs $50) and whether a project has gone through a pre-filing process at the Federal Energy Regulatory Commission (which can cost millions).

As of December 6, the last time DOE updated it, the queue was 23 projects long. Given that the DOE seems to be taking about three to four months between approvals, projects at the bottom of the list might not get the green light from the agency until near the end of the decade, when international gas demand may all be spoken for.

But two new projects on opposite ends of the country pose rather unique challenges to the rationale for this queue.

The first is a proposal by ConocoPhillips to reopen its mothballed LNG plant on the Kenai Peninsula south of Anchorage to ship gas seasonally, when regional demand is low and wells might otherwise be shut in.

The company has applied for a two-year authorization to export about 20 Bcf/yr of gas produced in south-central Alaska’s Cook Inlet region as LNG, according to a pair of applications filed with DOE on December 11.

The second is a new proposal by Canada’s Emera to ship US compressed natural gas from a Florida port to fuel power generation to the Caribbean.

In its proposal, apparently the first CNG export facility to seek approval from US officials, Emera wants to export as much as 9.125 Bcf/year, or 0.025 Bcf/d, of CNG for 20 years from a compression and loading facility it plans to build in the Port of Palm Beach.

Both companies have declined to discuss these projects and their status with the DOE. In addition, the DOE has declined to comment on whether the ConocoPhillips or the Emera project will wind up in the approval queue.

But both companies are pushing the DOE to consider their respective projects separately and not wind up as the 24th and 25th projects in the DOE’s queue.

Emera is requesting that its project be considered separately mainly because the amount of gas the project involves are minuscule compared with the amount most potential LNG exporters want to ship out of the US. The 0.025 Bcf/d Emera wants to ship from Florida “could not be reasonably argued to have any impact on US domestic supply or pricing,” Dan Muldoon, Emera CNG’s president and COO, wrote in a letter to DOE.

By comparison, Cheniere’s Sabine Pass export project, the only export project which has both DOE and FERC approval, plans to export as much as 2.2 Bcf/d.

In its application, Emera also argues that the CNG facility could be operational by 2015 and would not require FERC approval. In addition, the project is targeting Caribbean countries that “represent too small a market to be attractive to companies seeking to export LNG by tanker.”

Lawmakers and lobbyists are also pressing the case for the ConocoPhillips application to be approved quickly due to its long history (it was built in 1969) and because the gas it plans to ship would otherwise be stranded and disconnected from the Lower 48 states. The Kenai project is also seeking approval for a two-year contract, unlike the other projects that involve deals as long as 25 years.

“Those things set this apart and give us some assurances that DOE will handle it differently,” said Robert Dillon, a spokesman for Alaska Senator Lisa Murkowski, the top Republican on the Energy and Natural Resources Committee. “We feel at this time that the project is significantly different enough that DOE will recognize its uniqueness and lack of impact on Lower 48 consumers

If those arguments are successful, they could open the door for a host of unique export project getting separate and, arguably, expedited consideration from the DOE.

Developers of export projects with existing infrastructure, a relatively small amount of gas they plan to ship, or even new CNG export proposals, could create a series of new approval paths the DOE would need to launch.

While DOE officials have said a change to the approval process is possible, they have given no indication they are considering one.

For now, hopeful exporters need to continue to wait in line.

Source from : Platts