The U.S. Department of Energy (DOE) has conditionally approved a plan by Freeport LNG Expansion, L.P., to export liquefied natural gas (LNG) from its terminal in Freeport, Texas, to non-free trade agreement (FTA) countries. This is the agency’s second such approval of an export application from the lower 48 states.

Freeport’s plan allows the company to export 1.4 billion cubic feet of LNG per day. In May 2011, DOE authorized Cheniere Energy to export 2.2 billion cubic feet of LNG per day from the Sabine Pass LNG Terminal in Cameron Parish, Louisiana, to non-FTA countries.

Dow Chemical Co., an opponent of unfettered exports, stated that the Freeport approval “provides the greater clarity and certainty that businesses need to make investment decisions.” Dow is reported to be a limited partner in Freeport, the parent company of the proposed export terminal. Dow clarified that it does not oppose all LNG exports, but said that any approach to exports must be “balanced,” weighing the benefits of specific projects against increased manufacturing costs and other factors. 

After the Sabine Pass project was approved, DOE halted its reviews of export projects to non-FTA countries until it received two studies that it has commissioned to look into the cumulative effects of exports. A January 2012 Energy Information Administration (EIA) study found that, from 2015 to 2035, natural gas bills paid by end-use consumers would increase by a range of 3 to 9 percent, compared to a baseline case with no exports, and that electricity bills would increase by anywhere from 1 to 3 percent. The second study, performed by NERA Economic Consulting and published in December 2012, concluded that the projected impact of LNG exports is a net economic benefit for the United States in spite of higher domestic natural gas prices. 

After the two studies were completed, pressure grew on DOE to resume its review of export projects. Freeport is the first decision by DOE since then, and other decisions are expected to follow soon. 

Approximately 20 export projects are still awaiting DOE’s approval. In the unlikely event that all of the pending projects are approved and actually constructed, they could export as much as 29 billion cubic feet of LNG per day, representing more than 40 percent of current U.S. production.

If you have questions about DOE’s approval of the Freeport export plan, please contact any member of the Energy and Project Finance Group. 

Copyright © 2013 by Ballard Spahr LLP.
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