Procedures for Liquefied Natural Gas Export Decisions, 48132-48136 [2014-19364]

Agencies

• DEPARTMENT OF ENERGY

[Federal Register Volume 79, Number 158 (Friday, August 15, 2014)]
[Notices]
[Pages 48132-48136]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-19364]


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DEPARTMENT OF ENERGY


Procedures for Liquefied Natural Gas Export Decisions

AGENCY: Office of Fossil Energy, Department of Energy.

ACTION: Final revised procedures.

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SUMMARY: The U.S. Department of Energy (DOE or the Department) will act 
on applications to export liquefied natural gas (LNG) from the lower-48 
states to countries with which the United States does not have a free 
trade agreement requiring national treatment for natural gas only after 
completing the review required by the National Environmental Policy Act 
(NEPA), suspending its practice of issuing conditional decisions prior 
to final authorization decisions.

DATES: Effective Date: August 15, 2014.

FOR FURTHER INFORMATION CONTACT: John Anderson, U.S. Department of 
Energy, Office of Oil and Gas Global Security and Supply, Office of 
Fossil Energy, Forrestal Building, Room 3E-042, 1000 Independence 
Avenue SW., Washington, DC 20585, (202) 586-5600; Samuel Walsh, U.S. 
Department of Energy, Office of the General Counsel, Forrestal 
Building, 1000 Independence Avenue SW., Washington, DC 20585, (202) 
586-6732.

SUPPLEMENTARY INFORMATION: 

I. Proposed Procedural Change

    The Department of Energy is responsible for authorizing exports of 
natural gas to foreign nations pursuant to section 3 of the Natural Gas 
Act, 15 U.S.C. 717b. For proposed exports to countries with which the 
United States lacks a free trade agreement requiring national treatment 
for trade in natural gas (non-FTA countries), the Department conducts 
an informal

[[Page 48133]]

adjudication and grants the application unless the Department finds 
that the proposed exportation will not be consistent with the public 
interest. 15 U.S.C. 717b(a). Before reaching a final decision on a non-
FTA application, the Department must also comply with the National 
Environmental Policy Act (NEPA), 42 U.S.C. 4321 et seq. Typically, the 
agency responsible for permitting the export facility serves as the 
lead agency in the NEPA review process and DOE serves as a cooperating 
agency within the meaning of the Council on Environmental Quality's 
(CEQ) regulations. 40 CFR 1501.4, 1501.5. For LNG terminals located 
onshore or in state waters, the agency responsible for permitting the 
export facilities is the Federal Energy Regulatory Commission (FERC) 
pursuant to Section 3(e) of the Natural Gas Act. 15 U.S.C. 717b(e). For 
LNG terminals located offshore beyond state waters, the responsible 
agency is the Maritime Administration (MARAD) within the Department of 
Transportation pursuant to Section 3(9) of the Deepwater Ports Act, as 
amended by Section 312 of the Coast Guard and Maritime Transportation 
Act of 2012 (Pub. L. 112-213).
    For more than 30 years, DOE's regulations governing natural gas 
imports and exports have allowed for conditional decisions, on a 
discretionary basis, before DOE completes its review process.\1\ DOE's 
regulations at 10 CFR 590.402, entitled ``Conditional orders,'' state 
that DOE may issue a conditional order at any time during a proceeding 
prior to issuance of a final opinion and order. In the past three 
years, DOE has issued eight conditional authorizations for exports of 
LNG to non-FTA countries.\2\ In each of these proceedings, DOE has made 
preliminary findings on all factors relating to the public interest 
other than environmental issues. The conditional authorization orders 
have explained that, before taking final action, DOE will reconsider 
its public interest analysis in light of the information gathered in 
the environmental review.\3\
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    \1\ Dep't of Energy, Import and Export of Natural Gas; New 
Administrative Procedures; Proposed Rule, 46 FR 44696 (Sept. 4, 
1981).
    \2\ LNG Develop. Co., LLC (d/b/a Oregon LNG), DOE/FE Order No. 
3465 (July 31, 2014) [hereinafter Oregon LNG]; Jordan Cove Energy 
Project, L.P., DOE/FE Order No. 3413 (March 24, 2014); Cameron LNG, 
LLC, DOE/FE Order No. 3391 (Feb. 11, 2014); Freeport LNG Expansion, 
L.P. et al., DOE/FE Order No. 3357 (Nov. 15, 2013); Dominion Cove 
Point LNG, LP, DOE/Order No. 3331 (September 11, 2013); Lake Charles 
Exports, LLC, DOE/FE Order No. 3324 (Aug. 7, 2013); Freeport LNG 
Expansion, L.P. et al., DOE/FE Order No. 3282 (May 17, 2013); Sabine 
Pass Liquefaction, LLC, DOE/FE Order No. 2961 (May 20, 2011).
    \3\ See, e.g., Oregon LNG, DOE/FE Order No. 3465, at 138.
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    DOE has acted on non-FTA LNG export applications according to the 
order of precedence posted on DOE's Web site on December 5, 2012. On 
June 4, 2014, however, DOE published a notice in the Federal Register 
proposing to suspend its practice of issuing conditional decisions 
prior to completion of the NEPA review process for LNG export 
applications from the lower-48 states. Dep't of Energy, Proposed 
Procedures for Liquefied Natural Gas Export Decisions; Notice of 
Proposed Procedures, 79 FR 32261 (Proposed Procedures Notice). DOE did 
not propose to amend 10 CFR 590.402 and, therefore, under the proposal 
would retain discretion to issue conditional decisions in the future.
    DOE explained that, under the newly proposed procedures, DOE would 
cease to act on non-FTA LNG export applications according to the 
published order of precedence. Instead, DOE would act on applications 
in the order they become ready for final action. The Proposed 
Procedures Notice stated that an application is ready for final action 
when DOE has sufficient information on which to base a public interest 
determination and when DOE has completed its NEPA review. The Proposed 
Procedures Notice further explained that, for purposes of setting the 
order in which DOE will act, an application would be deemed to have 
completed the pertinent NEPA review process as follows: (1) For those 
projects requiring an Environmental Impact Statement (EIS), 30 days 
after publication of a Final EIS; (2) for projects for which an 
Environmental Assessment (EA) has been prepared, upon publication by 
DOE of a Finding of No Significant Impact (FONSI); or (3) upon a 
determination by DOE that an application is eligible for a categorical 
exclusion pursuant to DOE's regulations implementing NEPA, 10 CFR 
1021.410, Appx. A & B. DOE explained that this test would apply in the 
same fashion regardless of whether FERC, MARAD, or DOE has served as 
the lead agency for preparation of the environmental review document.
    The Proposed Procedures Notice also made clear that the proposed 
procedures would not affect the continued validity of the conditional 
authorizations DOE had already issued. For those applications, DOE 
stated it would proceed as explained in the orders: By reconsidering 
the conditional authorization in light of the information gathered in 
the environmental review once that review is complete and taking 
appropriate final action.
    The Department offered four reasons for the proposed procedural 
change. See Proposed Procedures Notice at 79 FR 32263-32264. First, the 
Department explained that conditional authorizations no longer appear 
necessary for FERC or the majority of applicants to commit resources to 
the NEPA review process. Second, the Department explained that by 
suspending its practice of issuing conditional decisions and ceasing to 
follow the order of precedence published on December 5, 2012, DOE would 
better be able to ensure prompt action on applications that are 
otherwise ready to proceed. Third, the Department explained that the 
proposed procedures would improve the quality of information on which 
DOE bases its decisions. Finally, the Department noted that suspending 
its practice of issuing conditional decisions would better allocate 
departmental resources by reducing the likelihood that the Department 
would be forced to act on applications with little prospect of 
proceeding.

II. Public Comments

    The Department received 74 comments in response to the Proposed 
Procedures Notice.\4\ Many of the comments expressed general support 
for or opposition to LNG exports or otherwise urged substantive changes 
to DOE's public interest analysis. DOE officials have read and 
considered these comments carefully, but consider them outside the 
scope of the Proposed Procedures Notice, which addressed only whether 
DOE should suspend its current practice of issuing conditional 
decisions prior to completion of NEPA review.
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    \4\ The comments are available at: https://energy.gov/fe/proposed-procedures-liquefied-natural-gas-export-decisions 
(Comments).
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    The remaining relevant comments generally fall into three groups: 
Comments on the rationale DOE provided for the proposed procedures, 
comments on the test proposed for when an application is ready for 
final decision, and comments on the timing of final decisionmaking once 
an application is ready for final action.

A. Comments on the Rationale for the Proposed Procedures

    Public Comments: DOE's first rationale advanced in support of the 
proposed procedural change was that conditional decisions no longer 
appear necessary for FERC or the majority of

[[Page 48134]]

applicants to commit resources to the NEPA review process. Many 
commenters supported this claim. Several other commenters questioned 
it, however, observing that conditional decisions may have value for 
applicants even if they have already initiated NEPA review. Likewise, 
they asserted that conditional decisions may be of value to other 
stakeholders, such as financial parties, LNG purchasers, or foreign 
governments.
    DOE Response: DOE acknowledges that conditional decisions may hold 
value for some applicants and may supply useful information to third 
parties. Nevertheless, the justification for issuing conditional 
decisions before completing NEPA review is much weaker in an 
environment where applicants are willing to commit resources to NEPA 
review even without a conditional decision. In the approximately 18 
months since we established the existing order of precedence, we have 
had an opportunity to observe industry developments, as well as the 
progress of numerous individual projects in the FERC-led NEPA review 
processes. We have seen numerous instances where applicants have proven 
willing to commit resources to NEPA review before having received a 
conditional authorization. As noted above, to date DOE has issued eight 
conditional authorizations (including one, Sabine Pass, which is now 
final) cumulatively authorizing non-FTA exports in a combined total of 
10.52 billion cubic feet per day of natural gas (Bcf/d). Many of these 
applicants had made substantial progress in preparing resource reports 
for the NEPA review process before receiving their conditional 
authorizations. Likewise, among applicants that have not yet received a 
conditional decision, at least seven projects constituting 9.51 Bcf/d 
in requested export capacity have made considerable progress in the 
NEPA review process.\5\ These examples demonstrate that, broadly 
speaking, conditional decisions are no longer necessary for applicants 
to commit substantial resources to the NEPA review process.
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    \5\ See Corpus Christi Liquefaction, LLC, FERC Docket No. CP12-
507; Excelerate Liquefaction Solutions (Port Lavaca I), LLC et al., 
FERC Docket Nos. CP14-71, 72 & 73; Southern LNG Co. LLC, FERC Docket 
No. CP14-103; CE FLNG, FERC Docket No. PF13-11, Golden Pass Products 
LLC, FERC Docket No. PF13-14; Sabine Pass Liquefaction, LLC and 
Sabine Pass LNG, L.P., FERC Docket No. CP14-12; Magnolia LNG, LLC, 
FERC Docket No. PF13-9. In addition to these projects that have made 
substantial progress, two others have recently been accepted for 
pre-filing at FERC. See Gulf LNG Liquefaction Company, L.L.C., FERC 
Docket No. PF 13-4, Louisiana Energy, LLC, FERC Docket No. PF14-17.
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    Public Comments: The second rationale advanced in support of the 
proposed procedural change was that it would ensure that applications 
otherwise ready for DOE action will not be held back by their position 
in the order of precedence. Many commenters voiced support for the 
proposed procedures for this reason. One commenter, however, asserted 
that under the proposed procedures, DOE will no longer concurrently 
evaluate whether applications are in the public interest while these 
applications are undergoing NEPA review. This commenter, therefore, 
concluded that the proposed procedures would lengthen DOE's review 
time. This commenter also asserted that it is arbitrary for DOE to 
require the completion of NEPA review before DOE completes its public 
interest review.
    DOE Response: DOE wishes to clarify that applicants can and should 
apply concurrently to DOE and to FERC or MARAD. DOE will begin the 
process of evaluating whether an application is in the public interest 
prior to completion of NEPA review, but will not issue a final decision 
before the NEPA review is complete. The requirement that NEPA review be 
completed prior to a final public interest determination is not 
arbitrary, but rather flows from the most fundamental requirement in 
NEPA: that agencies consider environmental impacts prior to deciding to 
undertake a major federal action. See 10 CFR 1021.210(b) (``DOE shall 
complete its NEPA review for each DOE proposal before making a decision 
on the proposal.''); see also Silentman v. Federal Power Commission, 
566 F.2d 237 (D.C. Cir. 1977) (a cooperating agency must await the lead 
agency's completion of its impact statement before taking final 
action).
    Public Comments: The third rationale advanced in support of the 
proposed procedural change was that it would improve the quality of 
information on which DOE bases its decisions. One reason provided for 
why the proposed procedures would improve the quality of information is 
that, by restricting its decisions to applicants that have undertaken 
the considerable expense of providing the engineering and design 
information necessary to complete NEPA review, DOE would make its 
decisions on a cohort of projects that are, on average, more likely to 
be financed and built than those that have not completed NEPA review. 
By focusing on projects that are more likely to proceed, DOE reasoned 
that it would be better positioned to evaluate the cumulative impacts 
of its decisions on natural gas markets. One commenter rejected this 
reasoning, stating that applicants with the wherewithal to build LNG 
export facilities also have the wherewithal to complete the permitting 
process.
    DOE Response: The commenter's observation that applicants with the 
wherewithal to build LNG export facilities also have the wherewithal to 
complete the permitting process supports rather than undermines DOE's 
reasoning. DOE's view is that LNG projects for which NEPA review is 
complete have already shown themselves more likely to advance to 
commercial operation than projects that have not yet commenced the NEPA 
process (or have stalled at that stage) for whatever reason. By 
eliminating the possibility that DOE will issue conditional decisions 
on applications that never complete the NEPA review process, the 
proposed procedures will help to focus DOE's decisionmaking on projects 
that are more likely to proceed and, therefore, will benefit DOE's 
ability to assess cumulative market impacts.
    Public Comments: DOE noted that it generally would be preferable to 
integrate the consideration of all public interest factors in a single, 
final order. Under existing procedures, DOE has focused on economic and 
international factors at the conditional decision stage and considered 
environmental factors at the final stage, once NEPA review is complete. 
Under the proposed procedures, DOE would evaluate all such public 
interest factors in one order. One commenter asserted that DOE failed 
to explain why it is generally preferable to integrate analysis of all 
public interest factors in a single order.
    DOE Response: DOE's public interest determinations involve 
consideration of a wide range of factors. These public interest factors 
include economic, international, and environmental considerations that, 
under current practice, have been bifurcated between DOE's conditional 
and final authorizations. In some instances, the bifurcation is not 
problematic because the issues are largely distinct. In other 
instances, however, there may be overlap between environmental and non-
environmental issues that would be more efficiently and thoroughly 
resolved in a single order. For these reasons, DOE believes that it is 
generally preferable to consider these factors concurrently and to 
present them in a single analysis. Further, doing so demonstrates that 
each factor is given full consideration and allows DOE to communicate 
its decision to the public in a simpler, more comprehensible way.

[[Page 48135]]

B. Comments on the Test for When an Application is Ready for Final 
Decision

    Public Comments: As explained above, DOE proposed that it would act 
on applications in the order they become ready for final decision. DOE 
specified that an application is ready for final decision when DOE has 
completed the NEPA review and when DOE has sufficient information on 
which to base a public interest determination. One commenter 
recommended that the requirement that DOE has sufficient information on 
which to base a public interest determination be removed. This 
commenter asserted that, because the Natural Gas Act creates a 
rebuttable presumption in favor of authorizing imports and exports, DOE 
lacks the power to ensure that the record in a proceeding is complete 
before taking final action.
    DOE Response: In the revised procedures, DOE will retain the 
requirement that it have sufficient information on which to base a 
public interest determination as a predicate to final action. The 
commenter is correct that the Natural Gas Act creates a rebuttable 
presumption in favor of authorizing imports and exports. But that 
presumption does not remove DOE's power to impose informational 
requirements on applicants or to decide when it has a complete record 
on which to base its decision. See, e.g., 10 CFR 590.202, 590.203.
    Public Comments: DOE proposed that it would act on applications in 
the order they become ready for final decision and that an application 
is ready for final decision when DOE has completed the pertinent NEPA 
review. DOE further specified that the application will be deemed to 
have completed the pertinent NEPA review (1) for those projects 
requiring an EIS, 30 days after publication of a Final EIS, (2) for 
projects for which an EA has been prepared, upon publication by DOE of 
a Finding of No Significant Impact (FONSI), or (3) upon a determination 
by DOE that an application is eligible for a categorical exclusion 
pursuant to DOE's regulations implementing NEPA, 10 CFR 1021.410, Appx. 
A & B.
    Commenters urged DOE to clarify that the pertinent NEPA review may 
be one in which DOE serves as a cooperating agency and either FERC or 
MARAD serves as lead agency. Relatedly, one commenter sought 
clarification as to whether DOE intends to issue a FONSI in cases where 
it adopts an EA prepared by another agency, and whether DOE may accept 
a categorical exclusion determination made by another agency.
    DOE Response: The pertinent NEPA review referred to in the Proposed 
Procedures Notice may be one for which another agency is the lead 
agency and DOE is a cooperating agency, provided that DOE ultimately 
elects to adopt the EA or EIS produced by the lead agency. As a 
cooperating agency, DOE may adopt an EIS or EA prepared by another 
agency and need not re-publish those documents for additional comment. 
40 CFR 1506.3(c). Nevertheless, even when it is participating as a 
cooperating agency, DOE is ultimately responsible for its own NEPA 
compliance. Therefore, where another agency has prepared an EA or EIS 
that DOE has chosen to adopt, DOE must conduct its own independent 
analysis and issue its own FONSI or Record of Decision, respectively. 
Similarly, DOE must issue its own categorical exclusion determination. 
A categorical exclusion determination issued by another agency may 
inform DOE's decisionmaking, but DOE may only determine that a proposed 
action is categorically excluded from NEPA review in accordance with 
its own regulations. 10 CFR 1021.410, Appx. A & B. We note that DOE's 
list of categorical exclusions applicable to specific agency actions 
includes: ``approvals or disapprovals of new authorizations or 
amendments of existing authorizations to import or export natural gas 
under section 3 of the Natural Gas Act that involve minor operational 
changes (such as changes in natural gas throughput, transportation, and 
storage operations) but not new construction.'' Id. Appx. B at B5.7.
    Public Comments: One commenter questioned why, for projects 
requiring an EIS, completion of the NEPA review process occurs 30 days 
after publication of the EIS rather than upon publication of the EIS.
    DOE Response: The CEQ regulations implementing NEPA generally 
prohibit agencies from making a final decision in reliance on an EIS 
until 30 days after publication by the Environmental Protection Agency 
of the notice of availability for the final EIS. 40 CFR 1506.10(b)(2). 
In cases where DOE is a cooperating agency in the preparation of an 
EIS, DOE must also adopt the final EIS before it can issue a Record of 
Decision.

C. Comments Related to the Timing of Final Decisions

    Public Comments: Numerous commenters urged DOE to establish a 
uniform deadline by which DOE will issue final decisions after an 
application's NEPA review is complete. These commenters contend that a 
deadline would provide greater regulatory certainty enabling better 
planning and investment decisions.
    DOE Response: DOE is sympathetic to this concern. Indeed, one of 
the overriding purposes of the procedural changes announced in this 
notice is to enable prompt action on applications that are ready for 
final decision. However, DOE has several concerns with creating a 
uniform deadline. First, each application contains novel issues such 
that a deadline that is reasonable for the majority of cases may be 
unreasonable in an individual case. Second, DOE lacks control over when 
the NEPA review for applications is complete. Were the final EIS for 
several applications to be completed at or around the same time, 
compliance with a fixed deadline may be unworkable. For these reasons, 
DOE declines to create a deadline for final decisions in this notice.

III. Revised Procedures

    For the reasons provided in the Proposed Procedures Notice and in 
this notice, DOE will implement the procedural changes substantially as 
proposed. Specifically, DOE will suspend its practice of issuing 
conditional decisions on applications to export LNG to non-FTA 
countries from the lower-48 states.\6\
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    \6\ The revised procedures will apply only to exports from the 
lower-48 states. In the Proposed Procedures Notice, DOE stated that 
no long-term applications to export LNG from Alaska were currently 
pending and, therefore, DOE could not say whether there may be 
unique features of Alaskan projects that would warrant exercise of 
the DOE's discretionary authority to issue conditional decisions. 
After publishing the Proposed Procedures Notice, DOE received one 
application to export LNG from Alaska. See Alaska LNG Project LLC, 
Application for Long-Term Authorization to Export Liquefied Natural 
Gas, Docket No. 14-96-LNG (July 18, 2014). DOE will consider whether 
to issue a conditional decision on that application, or any future 
application to export from Alaska, in the context of those 
proceedings.
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    DOE will no longer act in the published order of precedence, but 
will act on applications in the order they become ready for final 
action. An application is ready for final action when DOE has completed 
the pertinent NEPA review process and when DOE has sufficient 
information on which to base a public interest determination. For 
purposes of determining the order in which DOE will act on applications 
before it, DOE will use the following criteria: (1) For those projects 
requiring an EIS, 30 days after publication of a Final EIS, (2) for 
projects for which an EA has been prepared, upon publication by DOE of 
a Finding of No Significant Impact, or (3) upon a determination by DOE 
that an application is eligible for a categorical exclusion pursuant to 
DOE's

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regulations implementing NEPA, 10 CFR 1021.410, Appx. A & B.
    These revised procedures will not affect the continued validity of 
the conditional orders the Department has already issued. For those 
applications, the Department will proceed as explained in the 
conditional orders: When the NEPA review process for those projects is 
complete, the Department will reconsider the conditional authorization 
in light of the information gathered in the environmental review and 
take appropriate final action.

    Issued in Washington, DC, on August 11, 2014.
Christopher A. Smith,
Principal Deputy Assistant Secretary, Office of Fossil Energy.
[FR Doc. 2014-19364 Filed 8-14-14; 8:45 am]
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