Report

Gassing Up

Gassing Up

In a sign that the United States is slowly but surely coming to terms with its role as a potential energy exporter, the Energy Department said Thursday that it will overhaul its sclerotic and oft-criticized process for approving natural gas export projects.

The regulatory change could help streamline the approval process for dozens of gas-export terminals eagerly awaited by countries in Europe and Asia that are desperate to start tapping into cheap supplies of American natural gas. The status of U.S. gas exports has become especially important in the wake of the Russian incursion in Ukraine and Moscow’s heavy-handed use of energy exports to cow European countries into line.

Instead of reviewing every proposed gas export project, no matter how realistic or viable, the Energy Department said that it will focus only on projects that have cleared other governmental hurdles, especially environmental reviews and final sign-off from the Federal Energy Regulatory Commission.

The idea is to make Energy Department reviews more efficient, something that many U.S. lawmakers and plenty of European and Asian politicians have requested for years. The regulatory tweak won’t open the floodgates to U.S. gas exports anytime soon. The wheels of regulatory approval, like justice, turn slowly. But it is important because when it comes to energy exports, timing matters.

Over the next five years, countries such as Australia, Qatar, Mozambique, and the United States hope to export more natural gas. The clearer the regulatory pathway for U.S. export projects is, the more likely that they can secure financing and line up the needed specialized engineering and construction firms.  

"I have long warned that the United States faces a narrowing window of opportunity to enter the global gas trade," said Alaska’s Lisa Murkowski, the Senate Energy Committee’s ranking Republican. She said the tweak would help fix a "needlessly confusing" regulatory process.

Department officials also said they will conduct a study of the economic consequences of exporting large volumes of natural gas. A previous study published in 2012 found that gas exports would benefit the economy. However, it analyzed only modest levels of future U.S. gas exports. The announcement is a sign that the Obama administration wants to carefully calibrate how much gas the United States could export without risking a jump in domestic gas prices.

"Today’s decision by the Department of Energy to streamline the permit-approval process is a positive step forward to responsibly export America’s abundant supply of natural gas," said Senate Energy Committee Chairwoman Mary Landrieu (D-La.), who is an enthusiastic proponent of exporting more energy.

Her predecessor, Oregon Democrat Ron Wyden, has long been wary that exporting too much gas could actually hurt the economy by eroding the manufacturing boom, for example. He welcomes fresh economic analysis.

"I am pleased to see DOE has taken my suggestions to heart and that we will look before we leap," he said in a statement.

The United States is trying to come to grips with a sudden abundance of natural gas, thanks to the revolution in hydraulic fracturing, or fracking. Once destined to be a large importer of natural gas, the country is now preparing to build several multibillion-dollar terminals to export the stuff. But companies cannot export natural gas to countries lacking free trade agreements with the United States without Energy Department approval.

The Energy Department reviews projects on a first-come, first-served basis, only reviewing a few per year. Seven proposals to export liquefied natural gas have received conditional approval but only one, in Louisiana, has final approval. Energy companies criticize the system because the Energy Department spends months reviewing projects that may have little chance of attracting the billions of dollars needed for construction, while more worthy projects languish at the bottom of the list.

"The proposed changes to the manner in which LNG applications are ordered and processed will ensure our process is efficient by prioritizing resources on the more commercially advanced projects," wrote Chris Smith, the department official overseeing the LNG approval process.