January 2, 2019

DOE Releases Response to Comments on LNG Export Study

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

On Dec. 28, 2018, the Office of Fossil Energy of the Department of Energy (DOE) filed a notice in the Federal Register indicating its response to the 19 public comments received on its study entitled Macroeconomic Outcomes of Market Determined Levels of U.S. LNG Exports, and that its conclusions were available on its public docket. DOE had previously sought comments by notice published June 12, 2018.

As described in a prior blog post, pursuant to Section 3 of the Natural Gas Act (NGA), 15 U.S.C. § 717b, DOE must evaluate whether such exports are in the public interest. In making that determination, DOE considers factors such as economic impacts, international impacts, security of natural gas supply and environmental impacts. DOE typically relies upon liquefied natural gas (LNG) export studies in making these determinations. Since 2012, DOE has commissioned five studies to examine the effects of LNG exports. The 2018 study analyzed 54 different export scenarios, including the impact of "unconstrained LNG exports" which are defined as market-determined levels of LNG exports making it the most ambitious study to date.

DOE received 19 comments from a variety of sources including industry, environmental organizations and individuals almost evenly divided between those which supported the study and those which opposed the study (or the export of LNG in general). All of the comments are posted on the public docket. Supporters from industry praised the study design, including the range of scenarios evaluated finding it the most comprehensive of DOE's export studies to date. Opponents argued that the study assumptions fail to reflect conditions that adversely affect (and will continue to affect) the viability of U.S. LNG exports, including significant externalities associated with global climate change and ocean acidification.

DOE defends the scope of the study and the peer-reviewed assigned probabilities. It concludes that if increased global demand for U.S. LNG exports does not materialize, there would be no corresponding incremental domestic supply or price impact since additional LNG exports would not occur, irrespective of regulatory approvals; DOE also notes that several projects which have already received full approvals have neither made a final investment decision nor begun construction.

DOE also responded to comments challenging the economic benefits associated with LNG exports and the impacts on domestic natural gas supply. DOE concluded that none of the eight comments opposing the 2018 study provided sufficient evidence to rebut, or otherwise undermine, the study's core findings—namely that increasing LNG exports results in net economic benefits. With regard to the cost of environmental externalities arising from increasing negative environmental and economic consequences associated with increased demand for natural gas, DOE essentially punted noting that "analysis of environmental impacts from the export of U.S. LNG was not part of the scope of the 2018 Study." This response is sure to fuel continued criticism from the environmental organizations which oppose LNG exports. Accordingly, we can continue to expect wide disagreement about whether LNG exports are "consistent with the public interest."

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