Natural Gas Act

On June 22, the U.S. Court of Appeals for the D.C. Circuit issued a decision in Environmental Defense Fund v. FERC vacating and remanding FERC’s order issuing a certificate of public convenience and necessity to Spire STL Pipeline LLC (“Spire STL”) under Section 7 of the Natural Gas Act.  The decision is a rare instance of the D.C. Circuit vacating a FERC certificate order upon finding that FERC’s determination regarding the market need for the proposed pipeline was arbitrary and capricious, and was not supported by the Commission’s Certificate Policy Statement. Thus, there is no clear precedent for how FERC may approach Spire STL’s application moving forward.  The D.C. Circuit’s decision also comes as FERC considers revising its Certificate Policy Statement, including the framework for determining need for a proposed project, after receiving over 100 comment filings from interested stakeholders in response to FERC’s February 18 Notice of Inquiry on certificate policy.
Continue Reading D.C. Circuit Vacates FERC’s Spire STL Pipeline Certificate Order

The Department of Energy (DOE) adopted a new policy which extends the standard term for authorizations to export natural gas and liquefied natural gas (LNG) from the U.S. lower-48 states to countries without a free trade agreement with the U.S. to December 31, 2050.  The standard term had been 20 years.  The new standard term will be allowed for current and future export authorizations.
Continue Reading DOE Extends LNG Export Terms

The Department of Energy proposes to no longer subject LNG exports to evaluation under the National Environmental Policy Act (NEPA).  According to a recent Notice of Proposed Rulemaking (NOPR), DOE says that the only source of potential environmental impacts within its authority to review are those associated with transporting natural gas by ship, and those shipments qualify for categorical exclusion from NEPA review.
Continue Reading DOE Proposes to Stop Evaluating Environmental Impacts of LNG Exports

The Department of Energy (“DOE”) is proposing to extend to December 31, 2050 the standard twenty-year term for authorizations to export natural gas and liquefied natural gas (LNG) from the U.S. lower-48 states.  According to DOE, the longer term would better match the operational life of LNG export facilities, provide more security in their financing, and maximize the ability to contract for exports.  This change in DOE policy will be of interest to gas and LNG export authorization holders and their counterparties in sales contracts, and to proposed export applicants that are now seeking or will seek such authorizations from DOE.
Continue Reading DOE Proposes to Lengthen LNG Export Terms

Under the Natural Gas Act (NGA), FERC certificates the construction and operation of pipelines to transport natural gas in interstate commerce if they are “required by the present or future public convenience and necessity.”  For almost two decades, FERC has used a 1999 policy statement’s guidelines to evaluate whether new pipelines meet that statutory standard. 

Three independent, but not wholly unrelated, events occurred over the last few weeks, each arising out of the Natural Gas Act’s application and the growing importance of LNG exports to the United States and the international community.

(1) Following the crisis in Ukraine, there were continuing calls from a variety of politicians and pundits to increase LNG exports to Europe and decrease Europe’s reliance on Russian exports of natural gas. In particular, a congressional sub-committee considered and advanced  H.R. 6 (The Domestic Prosperity and Global Freedom Act). This measure would expedite the application process for contracts with supplies destined for any member nation of the WTO (currently, an expedited process only applies to contracts with supplies destined for countries with which the United States has a free-trade agreement).

(2) Cheniere Energy and Endesa, a Spanish utility company, signed two 20-year LNG sale and purchase agreements (“SPAs”) for 2.25 million tonnes per annum (“mtpa”) commencing upon completion of the Corpus Christi Liquefaction Project.  Cheniere Energy has also entered into agreements with counter-parties from the Asian markets, including South Korea and Indonesia. Notably, each of these agreements is at least partially indexed to Henry Hub.

(3) The Department of Energy (“DoE”) conditionally approved an LNG export application for the Jordan Cove Energy Project in Coos Bay, Oregon. This is the seventh permit conditionally granted by the DoE (over 20 remain in progress). The approval is conditioned on future approval by the  Federal Energy Regulatory Commission. DoE reviews applications to ensure that sales resulting to countries that do not have free-trade agreements are in the “public interest” (in accordance with the standard set out in section 3(a) of the Natural Gas Act). Significantly, the DoE continues to highlight the importance of  supply security to allies of the United States as one of the considerations in making its decision, stating at page 142:Continue Reading An International Approach: Events Shaping the Application of the Natural Gas Act