NCPA - National Center for Policy Analysis

Approval Process for LNG Export Terminals Needs Reform

September 18, 2014

Recently, the U.S. Department of Energy approved two new liquefied natural gas (LNG) export projects, a positive move for American energy. Still, Diana Furchtgott-Roth of the Manhattan Institute reports that two dozen applications for natural gas exports are pending, tied up in regulatory red tape. Some of those applications have been waiting for approval since 2011.

Allowing natural gas exports could have a major impact in Europe, where countries depend on Russia for gas. In fact:

  • Finland, Lithuania, Latvia and Estonia depend entirely on Russia for natural gas.
  • Poland gets 59 percent of its gas from Russia.
  • Germany gets more than one-third (37 percent) of its gas from Russia.

Furchtgott-Roth explains that the European Union has almost two dozen LNG import terminals ready to take in natural gas, but American companies cannot export natural gas to countries with whom it lacks a free trade agreement without receiving approval to do so from the Department of Energy. That is why two dozen LNG export applications are still sitting in bureaucratic limbo, because the approval process is messy and slow:

  • The Federal Energy Regulatory Commission (FERC) requires an Environmental Impact Statement (EIS) for new projects. That EIS subsequently requires approval from several different federal agencies, including the National Oceanic Atmospheric Administration and the Army Corps of Engineers.
  • When Freeport LNG applied for an export terminal in Texas, the associated Environmental Impact Statement was almost 600 pages long.
  • After FERC completes the impact statement, the Department of Energy decides whether the gas exports are in the public's interest.

Furchtgott-Roth encourages policymakers to look at the approval process and find a way to make it faster and more efficient. According to NERA Economic Consulting, competition from American gas companies could reduce Russia's natural gas export revenues by 30 percent in just five years. Over the long term, that number could reach 60 percent.

Source: Diana Furchtgott-Roth, "LNG Exports Are a Win For All Concerned," Real Clear Markets, September 16, 2014.

 

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