June 22, 2018

Two More Important LNG Export Developments

Holland & Knight Energy and Natural Resources Blog
Dianne R. Phillips

wrote recently about the Department of Energy’s (DOE) liquefied natural gas (LNG) Export Study which was good news for LNG exporters. The study found that across the entire range of scenarios, U.S. economic output is higher whenever global markets call for higher levels of LNG exports, assuming that LNG exports are unconstrained. Since then, the Financial Times has reported on China's decision regarding "retaliatory" tariffs. Recognizing the reality of the large demand for U.S. LNG in China, LNG was specifically excluded from the list of fossil fuels which were not subject to Chinese import tariffs. This is further good news for domestic LNG exporters seeking to capture Chinese market share, which is driven by limits on coal consumption and continual increases in the use of cleaner burning natural gas over the last decade.

Another piece of good news for LNG exporters was buried in yesterday's Federal Register as a DOE "Policy Statement." In two short pages, the DOE has reaffirmed its long-standing policy for evaluating requests under section 3 of the Natural Gas Act (NGA), 15 U.S.C. § 717b, for authorizations to export LNG to countries with which the United States does not have a free trade agreement (non-FTA countries), including China. Specifically, the Policy Statement is intended to address expressed concerns "from potential importers of U.S. LNG and financiers of LNG export projects."  It goes on to state as follows:

"As a preliminary matter, DOE/FE wishes to allay concerns about the security of existing (or future) non-FTA export authorizations. In this policy statement, DOE/FE affirms its commitment to all export authorizations issued under the NGA, including long-term authorizations approving the export of LNG to non-FTA countries."

Though the statement neither announces a new policy nor a change in legal requirements or other new developments, it is designed simply to send an official governmental message to all who watch pronouncements from the U.S. to assure them that it will not back-track on its prior decisions—and in today's climate, that warrants a blog post.

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