Study on Macroeconomic Outcomes of LNG Exports: Response to Comments Received on Study, 67251-67273 [2018-28238]

Download as PDF 67251 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices Preferred Alternative DOE does not have a preferred alternative for the disposal of depleted uranium, but does identify factors that DOE plans to consider in developing a preferred alternative or alternatives for inclusion in the Final SEIS. These factors are discussed in the SUMMARY and chapter four of the Draft SEIS. The preferred alternative could be a combination of two or more alternatives. DOE invites public comments on these factors and any additional factors that should be considered in the selection of a preferred alternative and why. Next Steps Following the end of the public comment period, DOE will consider public comments on the Draft SEIS in preparing the Final SEIS. After issuing the Final SEIS, DOE will consider the environmental impacts presented in the Final SEIS, along with other appropriate information in proposing its decision(s) related to the disposal of depleted uranium for an Amended Record of Decision. amozie on DSK3GDR082PROD with NOTICES1 Web-based Public Hearing Information Registration details are included below and are also available on the DOE EM SEIS project website (See ADDRESSES section). If you are joining the web-based public hearing via internet, copy and paste the link below to login to the WebEx Meeting Room, then follow prompts after entering the access code. If you are joining the webbased public hearing via phone, dial the US Toll number below and follow prompts to enter access code. For Global Call in numbers, visit the DU Oxide SEIS website. 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Copies may also be found for public review at the locations listed below: District of Columbia U.S. Department of Energy Freedom of Information Act Electronic Reading Room: https://www.energy.gov/management/ office-management/operationalmanagement/freedom-informationact/reading-room Nevada Nevada Site Office, U.S. Department of Energy Public Reading Room 755 East Flamingo Road, Room 103 Las Vegas, NV 89119, (702) 794–5106. Amargosa Valley Library 829 E Farm Road HCR 69 Box 401–T Amargosa, NV 89020, (775) 372–5340. Clark County Library 1401 E Flamingo Road Las Vegas, NV 89119, (702) 507–3400. Indian Springs Library 715 Gretta Lane P.O. Box 629 Indian Springs, NV 89018, (702) 879– 3845. Las Vegas Library 833 N Las Vegas Boulevard Las Vegas, NV 89101, (702) 507–3500. Pahrump Community Library, 701 S. East Street Pahrump, NV 89048, (775) 727–5930. Tonopah Public Library, 167 S Central Street Tonopah, NV 89049, (775) 482–3374. 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DOE plans to reproduce comment documents in their entirety in the Final SEIS, as appropriate, and to post all comment documents received in their entirety on the DU oxide SEIS website at the close of the public comment period. Any person wishing to have his/her name, address, or other identifying information withheld from the public record of comment documents must state this request prominently at the beginning of any comment document. DOE will honor the request to the extent allowable by law. All submissions from organizations or businesses will be included in the public record and open to public inspection in their entirety. Issued at Washington, DC on December 20, 2018. Elizabeth A. Connell, Acting Associate Principal Deputy Assistant Secretary for Regulatory and Policy Affairs. [FR Doc. 2018–28249 Filed 12–27–18; 8:45 am] BILLING CODE 6450–01–P DEPARTMENT OF ENERGY Study on Macroeconomic Outcomes of LNG Exports: Response to Comments Received on Study Office of Fossil Energy, Department of Energy. ACTION: Notice of response to comments. AGENCY: FE Docket No. Jordan Cove Energy Project, L.P ........................................................................................................................................................ Gulf LNG Liquefaction Company, LLC ................................................................................................................................................ VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 PO 00000 Frm 00041 Fmt 4703 Sfmt 4703 E:\FR\FM\28DEN1.SGM 28DEN1 12–32–LNG 12–101–LNG 67252 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices FE Docket No. CE FLNG, LLC .................................................................................................................................................................................... MPEH LLC ........................................................................................................................................................................................... Venture Global Calcasieu Pass, LLC .................................................................................................................................................. Eos LNG LLC ...................................................................................................................................................................................... Barca LNG LLC ................................................................................................................................................................................... Commonwealth LNG, LLC ................................................................................................................................................................... Venture Global Calcasieu Pass, LLC .................................................................................................................................................. SCT&E LNG, LLC ................................................................................................................................................................................ Venture Global Calcasieu Pass, LLC .................................................................................................................................................. G2 LNG LLC ........................................................................................................................................................................................ Texas LNG Brownsville LLC ............................................................................................................................................................... Strom Inc ............................................................................................................................................................................................. Port Arthur LNG, LLC .......................................................................................................................................................................... Rio Grande LNG, LLC ......................................................................................................................................................................... Eagle LNG Partners Jacksonville, LLC ............................................................................................................................................... SeaOne Gulfport, LLC ......................................................................................................................................................................... Venture Global Plaquemines LNG, LLC ............................................................................................................................................. Driftwood LNG, LLC ............................................................................................................................................................................ Fourchon LNG, LLC ............................................................................................................................................................................ Galveston Bay LNG, LLC .................................................................................................................................................................... Freeport LNG Expansion L.P., and FLNG .......................................................................................................................................... Corpus Christi Liquefaction Stage III, LLC .......................................................................................................................................... Energı´a Costa Azul, S. de R.L. de C.V ............................................................................................................................................... Energı´a Costa Azul, S. de R.L. de C.V ............................................................................................................................................... On June 12, 2018, the Office of Fossil Energy (FE) of the Department of Energy (DOE) gave notice of the availability of a study, Macroeconomic Outcomes of Market Determined Levels of U.S. LNG Exports (2018 LNG Export Study or 2018 Study), in the abovereferenced proceedings and invited the submission of public comments on the Study. DOE commissioned the 2018 LNG Export Study to inform its decision on pending and future applications seeking authorization to export domestically produced liquefied natural gas (LNG) from the lower-48 states to countries with which the United States does not have a free trade agreement (FTA) requiring national treatment for trade in natural gas, and with which trade is not prohibited by U.S. law or policy (non-FTA countries). The 2018 LNG Export Study evaluates a wider range of scenarios than DOE’s prior LNG export studies, including examining the probability of various export scenarios. In this document, DOE/FE responds to the 19 public comments received on the 2018 Study and summarizes its conclusions on the Study. The 2018 LNG Export Study and the public comments are posted on the DOE/FE website at: https://fossil.energy.gov/app/ docketindex/docket/index/10. DATES: Applicable on: December 28, 2018. FOR FURTHER INFORMATION CONTACT: Amy Sweeney, U.S. Department of Energy (FE–34), Office of Regulation, Analysis, and Engagement, Office of Fossil Energy, Forrestal Building, Room 3E–042, 1000 Independence Avenue SW, Washington, DC 20585; (202) 586– amozie on DSK3GDR082PROD with NOTICES1 SUMMARY: VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 2627; amy.sweeney@hq.doe.gov; or Cassandra Bernstein, U.S. Department of Energy (GC–76), Office of the Assistant General Counsel for Electricity and Fossil Energy, Forrestal Building, Room 6D–033, 1000 Independence Ave. SW, Washington, DC 20585; (202) 586–9793; cassandra.bernstein@hq.doe.gov. SUPPLEMENTARY INFORMATION: Acronyms and Abbreviations. A number of acronyms and abbreviations are used in this document and set forth below for reference. AEO Annual Energy Outlook APA Administrative Procedure Act API American Petroleum Institute Bcf/d Billion Cubic Feet per Day Bcf/yr Billion Cubic Feet per Year CLNG Center for Liquefied Natural Gas CNG Compressed Natural Gas DOE Department of Energy DQA Data Quality Act EA Environmental Assessment EIA U.S. Energy Information Administration EIS Environmental Impact Statement FE Office of Fossil Energy, U.S. Department of Energy FERC Federal Energy Regulatory Commission FTA Free Trade Agreement GDP Gross Domestic Product GNGM Global Natural Gas Model HOGR High Oil and Gas Resource and Technology IEA International Energy Agency IEO International Energy Outlook JCEP Jordan Cove Energy Project L.P. LNG Liquefied Natural Gas LOGR Low Oil and Gas Resource and Technology MMBtu Million British Thermal Units mtpa Million Metric Tons per Annum NEPA National Environmental Policy Act PO 00000 Frm 00042 Fmt 4703 Sfmt 4703 12–123–LNG 13–26–LNG 13–69–LNG 13–116–LNG 13–118–LNG 13–153–LNG 14–88–LNG 14–98–LNG 15–25–LNG 15–45–LNG 15–62–LNG 15–78–LNG 15–96–LNG 15–190–LNG 16–15–LNG 16–22–CGL 16–28–LNG 16–144–LNG 17–105–LNG 17–167–LNG 18–26–LNG 18–78–LNG 18–144–LNG 18–145–LNG of 1969 NERA NERA Economic Consulting NGA Natural Gas Act of 1938 NGL Natural Gas Liquid NOA Notice of Availability ppm Parts Per Million ROW Rest of World Tcf Trillion Cubic Feet WEO World Energy Outlook I. Background A. DOE Export Authorizations Under Section 3 of the Natural Gas Act B. Public Interest Review for Non-FTA Export Authorizations C. Judicial Decisions Upholding DOE’s Non-FTA Authorizations II. DOE’s Prior LNG Export Studies A. 2012 EIA and NERA Studies (Collectively, the 2012 LNG Export Study) B. 2014 and 2015 LNG Export Studies III. Overview of 2018 LNG Export Study IV. 2018 LNG Export Study, Macroeconomic Outcomes of Market Determined Levels of U.S. LNG Exports A. Overview of NERA’s Findings B. Methodology and Scenarios C. NERA’s Global Natural Gas Model (GNGM) D. NERA’s NewEra Macroeconomic Model E. Results of the 2018 Study V. Notice of Availability of the 2018 LNG Export Study VI. Comments on the 2018 LNG Export Study and DOE/FE Responses A. Data Input and Estimates of Natural Gas Demand B. Economic Benefits Associated With LNG Exports C. Distributional Impacts D. Regional Impacts E. Estimates of Domestic Natural Gas Supply E:\FR\FM\28DEN1.SGM 28DEN1 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices F. Cost of Environmental Externalities G. Natural Gas Price Impacts H. Benefits to U.S. Trade Balance I. Procedural Arguments J. Potential Impact on DOE/FE’s Regulatory Process VII. Discussion and Conclusions I. Background A. DOE Export Authorizations Under Section 3 of the Natural Gas Act DOE is responsible for authorizing exports of domestically produced natural gas to foreign countries pursuant to section 3 of the Natural Gas Act (NGA), 15 U.S.C. 717b.1 In relevant part, section 3(c) of the NGA applies to applications for exports of natural gas, including LNG, to countries with which the United States has entered into a free trade agreement (FTA) requiring national treatment for trade in natural gas, and with which trade is not prohibited by U.S. law or policy (FTA countries).2 Section 3(c) was amended by section 201 of the Energy Policy Act of 1992 (Pub. L. 102–486) to require that FTA applications ‘‘shall be deemed to be consistent with the public interest’’ and granted ‘‘without modification or delay.’’ 3 Therefore, DOE/FE approves applications for FTA authorizations without modification or delay.4 None of the comments or discussion herein apply to FTA authorizations issued under NGA section 3(c). For applications to export natural gas to non-FTA countries, section 3(a) of the NGA sets forth the following standard of review: amozie on DSK3GDR082PROD with NOTICES1 [N]o person shall export any natural gas from the United States to a foreign country or import any natural gas from a foreign country without first having secured an order of the [Secretary of Energy 5 ] authorizing it to do so. The [Secretary] shall issue such 1 The authority to regulate the imports and exports of natural gas, including liquefied natural gas, under section 3 of the NGA (15 U.S.C. 717b) has been delegated to the Assistant Secretary for FE in Redelegation Order No. 00–006.02 issued on November 17, 2014. 2 15 U.S.C. 717b(c). The United States currently has FTAs requiring national treatment for trade in natural gas with Australia, Bahrain, Canada, Chile, Colombia, Dominican Republic, El Salvador, Guatemala, Honduras, Jordan, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, Republic of Korea, and Singapore. FTAs with Israel and Costa Rica do not require national treatment for trade in natural gas. 3 15 U.S.C. 717b(c). 4 Unless otherwise stated, all references to exports of LNG herein refer to domestically produced natural gas liquefied in the United States. Additionally, DOE/FE uses the terms ‘‘authorization’’ and ‘‘order’’ interchangeably. 5 The Secretary’s authority was established by the Department of Energy Organization Act, 42 U.S.C. 7172, which transferred jurisdiction over imports and export authorizations from the Federal Power Commission to the Secretary of Energy. VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 order upon application, unless after opportunity for hearing, [he] finds that the proposed exportation or importation will not be consistent with the public interest. The [Secretary] may by [the Secretary’s] order grant such application, in whole or part, with such modification and upon such terms and conditions as the [Secretary] may find necessary or appropriate.6 DOE has consistently interpreted this provision as creating a rebuttable presumption that a proposed export of natural gas to non-FTA countries is in the public interest.7 Accordingly, DOE conducts an informal adjudication on non-FTA applications and will grant each application unless DOE finds that the proposed exportation will not be consistent with the public interest.8 Before reaching a final decision, DOE must also comply with the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et seq. B. Public Interest Review for Non-FTA Export Authorizations Although section 3(a) establishes a broad public interest standard and a presumption favoring export authorizations, the statute does not define ‘‘public interest’’ or identify criteria that must be considered. In prior decisions, DOE/FE has identified a range of factors that it evaluates when reviewing an application to export LNG to non-FTA countries. These factors include economic impacts, international impacts, security of natural gas supply, and environmental impacts, among others. To conduct this review, DOE/FE looks to record evidence developed in the application proceeding.9 DOE/FE’s prior decisions have also looked to certain principles established 6 15 U.S.C. 717b(a) (emphasis added). Sierra Club v. U.S. Dep’t of Energy, 867 F.3d 189, 203 (DC Cir. 2017) (‘‘We have construed [NGA section 3(a)] as containing a ‘general presumption favoring [export] authorization.’ ’’) (quoting W. Va. Pub. Serv. Comm’n v. U.S. Dep’t of Energy, 681 F.2d 847, 856 (DC Cir. 1982)). 8 See id. (‘‘there must be ‘an affirmative showing of inconsistency with the public interest’ to deny the application’’ under NGA section 3(a)) (quoting Panhandle Producers & Royalty Owners Ass’n v. Econ. Regulatory Admin., 822 F.2d 1105, 1111 (DC Cir. 1987)). We note that, as of August 24, 2018, qualifying small-scale exports of natural gas to nonFTA countries are treated differently—specifically, they are deemed to be consistent with the public interest under NGA section 3(a) (10 CFR 590.102(p); 590.208(a)). See U.S. Dep’t of Energy, Small-Scale Natural Gas Exports; Final Rule, 83 FR 35106 (July 25, 2018). 9 See, e.g., Eagle LNG Partners Jacksonville II LLC, DOE/FE Order No. 4078, FE Docket No. 17–79– LNG, Opinion and Order Granting Long-Term, Multi-Contract Authorization to Export Liquefied Natural Gas in ISO Containers Loaded at the Eagle Maxville Facility in Jacksonville, Florida, and Exported by Vessel to Free Trade Agreement and Non-Free Trade Agreement Nations (Sept. 15, 2017). 7 See PO 00000 Frm 00043 Fmt 4703 Sfmt 4703 67253 in its 1984 Policy Guidelines.10 The goals of the Policy Guidelines are to minimize federal control and involvement in energy markets and to promote a balanced and mixed energy resource system. The Guidelines provide: The market, not government, should determine the price and other contract terms of imported [or exported] natural gas . . . . The federal government’s primary responsibility in authorizing imports [or exports] will be to evaluate the need for the gas and whether the import [or export] arrangement will provide the gas on a competitively priced basis for the duration of the contract while minimizing regulatory impediments to a freely operating market.11 While nominally applicable to natural gas import cases, DOE/FE subsequently held in Order No. 1473 that the same policies should be applied to natural gas export applications.12 In Order No. 1473, DOE/FE stated that it was guided by DOE Delegation Order No. 0204–111. That delegation order, which authorized the Administrator of the Economic Regulatory Administration to exercise the agency’s review authority under NGA section 3, directed the Administrator to regulate exports ‘‘based on a consideration of the domestic need for the gas to be exported and such other matters as the Administrator finds in the circumstances of a particular case to be appropriate.’’ 13 Although DOE Delegation Order No. 0204–111 is no longer in effect, DOE/ FE’s review of export applications has continued to focus on: (i) The domestic need for the natural gas proposed to be exported, (ii) whether the proposed exports pose a threat to the security of domestic natural gas supplies, (iii) whether the arrangement is consistent with DOE/FE’s policy of promoting market competition, and (iv) any other factors bearing on the public interest described herein. Under this public interest standard, DOE has issued 30 final authorizations to export domestically produced LNG or compressed natural gas (CNG) to nonFTA countries to date, bringing the 10 New Policy Guidelines and Delegations Order Relating to Regulation of Imported Natural Gas, 49 FR 6684 (Feb. 22, 1984) [hereinafter 1984 Policy Guidelines]. 11 Id. at 6685. 12 Phillips Alaska Natural Gas, DOE/FE Order No. 1473 at 14 (citing Yukon Pacific Corp., DOE/FE Order No. 350, Order Granting Authorization to Export Liquefied Natural Gas from Alaska, 1 FE ¶ 70,259, ¶ 71,128 (1989)). 13 DOE Delegation Order No. 0204–111 at 1; see also 1984 Policy Guidelines, 49 FR 6690. In February 1989, the Assistant Secretary for Fossil Energy assumed the delegated responsibilities of the Administrator of the Economic Regulatory Administration. E:\FR\FM\28DEN1.SGM 28DEN1 67254 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices cumulative total of approved non-FTA exports to 23.05 billion cubic feet per day (Bcf/d) of natural gas, or 8.41 trillion cubic feet (Tcf) per year.14 Each of these non-FTA orders authorize an export term of 20 years, as set forth in the orders. amozie on DSK3GDR082PROD with NOTICES1 C. Judicial Decisions Upholding DOE’s Non-FTA Authorizations Beginning in 2015, Sierra Club petitioned the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) for review of five long-term LNG export authorizations issued by DOE/FE under the standard of review described above. Sierra Club challenged DOE/FE’s approval of LNG exports to non-FTA countries from projects proposed or operated by the following authorization holders: Freeport LNG Expansion, L.P., et al.; Dominion Energy Cove Point LNG, LP (formerly Dominion Cove Point LNG, LP); Sabine Pass Liquefaction, LLC; and Cheniere Marketing, LLC, et al. The D.C. Circuit subsequently denied four of the five petitions for review: one in a published decision issued on August 15, 2017 (Sierra Club I),15 and three in a consolidated, unpublished opinion issued on November 1, 2017 (Sierra Club II).16 Sierra Club subsequently withdrew its fifth and remaining petition for review.17 In Sierra Club I, the D.C. Circuit concluded that DOE/FE had complied with both NGA section 3(a) and NEPA in issuing the challenged non-FTA authorization. Freeport LNG Expansion, L.P. and its related entities (collectively, Freeport) had applied to DOE/FE for authorization to export LNG to non-FTA countries from the Freeport Terminal located on Quintana Island, Texas. DOE/FE granted the application in 2014 in a volume equivalent to 0.4 Bcf/d of natural gas, finding that Freeport’s proposed exports were in the public interest under NGA section 3(a). DOE/ 14 See Mexico Pacific Limited LLC, DOE/FE Order No. 4312, FE Docket No. 18–70–LNG, Opinion and Order Granting Long-Term, Multi-Contract Authorization to Export U.S.-Sourced Natural Gas by Pipeline to Mexico for Liquefaction and ReExport in the Form of Liquefied Natural Gas to NonFree Trade Agreement Countries, at 37 (Dec. 14, 2018). 15 Sierra Club vs. U.S. Dep’t of Energy, 867 F.3d 189 (Aug. 15, 2017) (denying petition of review of the LNG export authorization issued to Freeport LNG Expansion, L.P., et al.). 16 Sierra Club v. U.S. Dep’t of Energy, Nos. 16– 1186, 16–1252, 16–1253, 703 Fed. Appx. 1 (D.C. Cir. Nov. 1, 2017) (denying petitions of review of the LNG export authorization issued to Dominion Cove Point LNG, LP; Sabine Pass Liquefaction, LLC; and Cheniere Marketing, LLC, et al., respectively). 17 See Sierra Club v. U.S. Dep’t of Energy, No. 16– 1426, Per Curiam Order (D.C. Cir. Jan. 30, 2018) (granting Sierra Club’s unopposed motion for voluntarily dismissal). VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 FE also considered and disclosed the potential environmental impacts of its decision under NEPA. Sierra Club petitioned for review of the Freeport authorization, arguing that DOE fell short of its obligations under both the NGA and NEPA. The D.C. Circuit rejected Sierra Club’s arguments in a unanimous decision, holding that, ‘‘Sierra Club has given us no reason to question the Department’s judgment that the [Freeport] application is not inconsistent with the public interest.’’ 18 In the consolidated opinion in Sierra Club II issued on November 1, 2017, the D.C. Circuit ruled that ‘‘[t]he court’s decision in [Sierra Club I] largely governs the resolution of the [three] instant cases.’’ 19 Upon its review of the remaining ‘‘narrow issues’’ in those cases, the Court again rejected Sierra Club’s arguments under the NGA and NEPA, and upheld DOE/FE’s actions in issuing the non-FTA authorizations in those proceedings.20 II. DOE’s Prior LNG Export Studies The 2018 LNG Export Study 21 builds upon four prior studies commissioned by DOE to examine the economic impacts of U.S. LNG exports. With one early exception, DOE/FE has issued the 30 existing non-FTA authorizations based on its consideration of one or more of these economic studies under NGA section 3(a). These studies are summarized below. A. 2012 EIA and NERA Studies (Collectively, the 2012 LNG Export Study) In 2011, DOE/FE engaged the U.S. Energy Information Administration (EIA) and NERA Economic Consulting (NERA) to conduct a two-part study of the economic impacts of U.S. LNG exports, which together was called the ‘‘2012 LNG Export Study.’’ The first part, performed by EIA and originally published in January 2012, assessed how specified scenarios of increased natural gas exports could affect domestic energy markets. Specifically, EIA examined how prescribed levels of natural gas exports (at 6 Bcf/d and 12 Bcf/d) above baseline cases could affect domestic energy markets. The second part, performed by NERA under contract to DOE, evaluated the macroeconomic impact of LNG exports 18 Sierra 19 Sierra Club I, 867 F.3d at 203. Club, 703 Fed. Appx. 1 at *2. 20 Id. 21 NERA Economic Consulting, Macroeconomic Outcomes of Market Determined Levels of U.S. LNG Exports (June 7, 2018), available at: https:// www.energy.gov/sites/prod/files/2018/06/f52/ Macroeconomic%20LNG%20Export%20Study %202018.pdf [hereinafter 2018 LNG Export Study]. PO 00000 Frm 00044 Fmt 4703 Sfmt 4703 on the U.S. economy. NERA used a general equilibrium macroeconomic model of the U.S. economy with an emphasis on the energy sector and natural gas in particular. The 2012 NERA Study projected that, across all scenarios studied—assuming either 6 Bcf/d or 12 Bcf/d of LNG export volumes—the United States would experience net economic benefits from allowing LNG exports. In December 2012, DOE/FE published a notice of availability of the 2012 LNG Export Study in the Federal Register for public comment.22 DOE/FE subsequently responded to the public comments in connection with the LNG export proceedings identified in that notice.23 B. 2014 and 2015 LNG Export Studies By May 2014, in light of the volume of LNG exports to non-FTA countries then-authorized by DOE/FE and the number of non-FTA export applications still pending, DOE/FE determined that an updated study was warranted to consider the economic impacts of exporting LNG from the lower-48 states to non-FTA countries.24 On May 29, 2014, DOE announced plans to undertake new economic studies to gain a better understanding of how potentially higher levels of U.S. LNG exports—at levels between 12 and 20 Bcf/d of natural gas—would affect the public interest.25 DOE/FE commissioned two new macroeconomic studies. The first, Effect of Increased Levels of Liquefied Natural Gas Exports on U.S. Energy Markets, was performed by EIA and published in October 2014 (2014 EIA LNG Export Study or 2014 Study).26 The 2014 Study 22 See 2012 LNG Export Study, 77 FR 73627 (Dec. 11, 2012), available at: http://energy.gov/sites/prod/ files/2013/04/f0/fr_notice_two_part_study.pdf (Notice of Availability of the LNG Export Study). 23 See, e.g., Freeport LNG Expansion L.P., et al., DOE/FE Order No. 3282, FE Docket No. 10–161– LNG, Order Conditionally Granting Long-Term, Multi-Contract Authorization to Export Liquefied Natural Gas by Vessel from the Freeport LNG Terminal on Quintana Island, Texas to Non-Free Trade Agreement Nations, at 56–109 (May 17, 2013). 24 Because there is no natural gas pipeline interconnection between Alaska and the lower 48 states, DOE/FE generally views those LNG export markets as distinct. DOE/FE therefore focuses on LNG exports from the lower-48 states for purposes of determining macroeconomic impacts. 25 See U.S. Dep’t of Energy, Office of Fossil Energy, Request for an Update of EIA’s January 2012 Study of Liquefied Natural Gas Export Scenarios, available at: http://energy.gov/fe/ downloads/request-update-eia-s-january-2012study-liquefied-natural-gas-export-scenarios (May 29, 2014) (memorandum from FE to EIA). 26 U.S. Energy Information Administration, Effect of Increased Levels of Liquefied Natural Gas Exports on U.S. Energy Markets (Oct. 2014), available at: https://www.eia.gov/analysis/requests/ fe/pdf/lng.pdf. E:\FR\FM\28DEN1.SGM 28DEN1 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices assessed how specified scenarios of increased natural gas exports could affect domestic energy markets. At DOE’s request, this 2014 Study served as an update of EIA’s January 2012 study of LNG export scenarios and used baseline cases from EIA’s Annual Energy Outlook 2014 (AEO 2014).27 The second study, The Macroeconomic Impact of Increasing U.S. LNG Exports, was performed jointly by the Center for Energy Studies at Rice University’s Baker Institute and Oxford Economics under contract to DOE/FE (together, Rice-Oxford) and published in October 2015 (2015 LNG Export Study or 2015 Study).28 The 2015 Study is a scenario-based assessment of the macroeconomic impact of levels of U.S. LNG exports, sourced from the lower-48 states, under different assumptions including U.S. resource endowment, U.S. natural gas demand, international LNG market dynamics, and other factors. The 2015 Study considers export volumes ranging from 12 to 20 Bcf/d of natural gas, as well as a high resource recovery case examining export volumes up to 28 Bcf/ d of natural gas. The analysis covers the 2015 to 2040 time period. In December 2015, DOE/FE published a Notice of Availability of the 2014 and 2015 LNG Export Studies in the Federal Register, and invited public comment on those Studies.29 DOE/FE subsequently responded to the public comments in connection with the LNG export proceedings identified in that notice.30 III. Overview of 2018 LNG Export Study amozie on DSK3GDR082PROD with NOTICES1 At the time DOE commissioned the 2018 LNG Export Study earlier this year, DOE/FE had 25 pending applications requesting authorization to export domestically produced LNG to non-FTA 27 Each Annual Energy Outlook (AEO) presents EIA’s long-term projections of energy supply, demand, and prices. It is based on results from EIA’s National Energy Modeling System (NEMS) model. 28 Center for Energy Studies at Rice University Baker Institute and Oxford Economics, The Macroeconomic Impact of Increasing U.S. LNG Exports (Oct. 29, 2015), available at: http:// energy.gov/sites/prod/files/2015/12/f27/20151113_ macro_impact_of_lng_exports_0.pdf. 29 U.S. Dep’t of Energy, Macroeconomic Impacts of LNG Exports Studies; Notice of Availability and Request for Comments, 80 FR 81300, 81302 (Dec. 29, 2015). 30 See, e.g., Sabine Pass Liquefaction, LLC, DOE/ FE Order No. 3792, FE Docket No. 15–63–LNG, Final Opinion and Order Granting Long-Term, Multi-Contract Authorization to Export Liquefied Natural Gas by Vessel From the Sabine Pass LNG Terminal Located in Cameron Parish, Louisiana, to Non-Free Trade Agreement Nations, at 66–121 (Mar. 11, 2016). VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 countries.31 In light of both the cumulative volume of exports to nonFTA countries authorized at that time (equivalent to 21.35 Bcf/d of natural gas) and the additional volume of LNG requested for export in those pending applications, DOE/FE determined that a new macroeconomic study was warranted.32 Accordingly, DOE/FE, through its support contractor KeyLogic Systems, Inc., commissioned NERA to conduct the 2018 LNG Export Study. Like the four prior economic studies, the 2018 LNG Export Study examines the impacts of varying levels of LNG exports on domestic energy markets. As explained below, the 2018 LNG Export Study assesses different levels of ‘‘unconstrained’’ LNG exports (defined as market-determined levels of exports), and analyzes the outcomes of different LNG export levels on the U.S. natural gas markets and the U.S. economy as a whole, over the 2020 to 2050 time period. As part of this analysis, DOE/FE directed NERA to examine the likelihood of conditions leading to various export scenarios, making it the first DOE macroeconomic study to squarely address this issue. To summarize, the 2018 LNG Export Study differs from DOE/FE’s prior economic studies in the following ways: (i) Includes a larger number of scenarios (54 scenarios) to capture a wider range of uncertainty in four natural gas market conditions than examined in the previous studies; (ii) Includes LNG exports in all 54 scenarios that are market-determined levels, including the three alternative baseline scenarios that are based on the projections in EIA’s Annual Energy Outlook 2017 (AEO 2017);33 (iii) Examines unconstrained LNG export volumes beyond the levels examined in the previous studies; (iv) Examines the likelihood of those market-determined LNG export volumes; and (v) Provides macroeconomic projections associated with several of the scenarios lying within the more likely range. 31 See U.S. Dep’t of Energy, Study on Macroeconomic Outcomes of LNG Exports; Notice of Availability of the 2018 LNG Export Study and Request for Comments, 83 FR 27314 (June 12, 2018) (identifying 25 docket proceedings). 32 Additionally, to date, DOE/FE has authorized a cumulative total of LNG exports to FTA countries under section 3(c) of the NGA in a volume of 59.33 Bcf/d from LNG projects. These FTA volumes are not additive to the authorized non-FTA volumes. 33 U.S. Energy Info. Admin., Annual Energy Outlook 2017 (with projections to 2050) (Jan. 5, 2017), available at: https://www.eia.gov/outlooks/ aeo/pdf/0383(2017).pdf. PO 00000 Frm 00045 Fmt 4703 Sfmt 4703 67255 IV. 2018 LNG Export Study, Macroeconomic Outcomes of Market Determined Levels of U.S. LNG Exports A. Overview of NERA’s Findings NERA’s key findings in the 2018 Study include the following: • The more likely range of LNG exports in the year 2040 was judged to range from 8.7 to 30.7 Bcf/d of natural gas. This assessment was based on a probabilistic analysis of 54 different scenarios constructed for the Study.34 • U.S. natural gas prices range from $5 to approximately $6.50 per million British thermal unit (MMBtu) in 2040 (in constant 2016 dollars) under Reference case supply assumptions. These central cases have a combined probability of 47%.35 • Levels of gross domestic product (GDP) are most sensitive to assumptions about U.S. supply of natural gas, with high supply driving higher levels of GDP. For each of the supply scenarios, higher levels of LNG exports in response to international demand consistently lead to higher levels of GDP. GDP achieved with the highest level of LNG exports in each group exceeds GDP with the lowest level of LNG exports by $13 to $72 billion in 2040 (in constant 2016 dollars).36 • About 80% of the increase in LNG exports is satisfied by increased U.S. production of natural gas, with positive effects on labor income, output, and profits in the natural gas production sector.37 • Chemical industry subsectors of the economy that rely heavily on natural gas for energy and as a feedstock continue to exhibit robust growth even at higher LNG export levels. This growth is only insignificantly slower than cases with lower LNG export levels. • Even the most extreme scenarios of high LNG exports outside the more likely probability range (exhibiting a combined probability of less than 3%) show higher overall economic performance in terms of GDP, household income, and consumer welfare than lower export levels associated with the same domestic supply scenarios. B. Methodology and Scenarios The 2018 Study develops 54 scenarios by identifying various assumptions for domestic and international supply and demand conditions to capture a wide range of uncertainty in the natural gas markets. The scenarios include three 34 See 2018 LNG Export Study at 14. at 17. 36 Id. at 18. 37 Id. at 21. 35 Id. E:\FR\FM\28DEN1.SGM 28DEN1 67256 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices baseline cases based on EIA’s AEO 2017 projections (the most recent EIA projections available at the time), with varying assumptions about U.S. natural gas supply.38 Alternative scenarios add other assumptions about both future U.S. and international demand for natural gas. International assumptions are based on EIA’s International Energy Outlook 2017 (IEO 2017) and the International Energy Agency’s (IEA) World Energy Outlook 2016 (WEO 2016). As noted above, the 2018 Study also examines the likelihood of conditions leading to various export scenarios. Specifically, the 2018 Study includes peer-reviewed probabilities of uncertainties surrounding developments in the international and domestic natural gas markets that were, in turn, combined to develop the 54 export scenarios and their associated macroeconomic impacts. 1. Scenarios amozie on DSK3GDR082PROD with NOTICES1 a. U.S. Natural Gas Supply The amount of natural gas that can be supplied at a given price depends on a number of factors, including how extraction technology develops, the magnitude of the extractable resource, political positions for or against limits on unconventional natural gas resource development (i.e., hydraulic fracturing), as well as the cost to develop natural gas resources.39 The 2018 Study specifies three different cases for U.S. natural gas supply derived from EIA’s AEO 2017: i. AEO 2017’s Reference case provides a central estimate of U.S. natural gas production; ii. High Oil and Gas Resource and Technology (HOGR) case provides more optimistic resource development estimates than the Reference case; and iii. Low Oil and Gas Resource and Technology (LOGR) case provides less optimistic resource development estimates than the Reference case. The differences in the natural gas production levels across these three cases arise from varying assumptions around unproven offshore resources, onshore shale gas resources, tight gas resources, and conventional and tight oil associated gas resources, as well as the costs of producing these resources.40 b. U.S. Natural Gas Demand The 2018 Study notes that U.S. natural gas demand is primarily influenced by economic growth, population growth, per capita income, and environmental policies that influence fuel choices among sources of energy and total demand for energy.41 The 2018 Study specifies three different cases for U.S. natural gas demand: i. AEO 2017’s Reference case, which provides a central estimate of U.S. natural gas demand; ii. A Robust Economic Growth case, which provides a high estimate for U.S. natural gas demand driven by higher levels of gross domestic product growth; and iii. A Renewables Mandate case, which provides a low estimate for U.S. natural gas demand driven by the imposition of a stringent renewables mandate. c. Rest of World Natural Gas Supply The 2018 Study considers two cases for international natural gas supply: i. IEO 2017’s Reference case; and ii. A Low Supply case, which was created by reducing the IEO 2017 Reference case natural gas production consistent with supply reductions in the LOGR case for U.S. supply.42 d. Rest of World Natural Gas Demand NERA notes that there are relatively few global natural gas forecasts that provide a range of scenarios that would allow NERA to isolate drivers of global natural gas demand outside the United States.43 NERA identifies two such forecasts as EIA’s IEO 2017 and IEA’s WEO 2016. The 2018 Study considers three cases for international natural gas demand: i. IEO 2017’s Reference case; ii. WEO 2016’s Current Policies scenario, which provided a high estimate for international natural gas demand; and iii. WEO 2016’s 450 parts per million (ppm) case, which provides a low estimate for international natural gas demand based on policies with the objective of limiting the average global temperature increase in 2100 to 2 degrees Celsius above pre-industrial levels. 2. Probability Assignments A key feature of the 2018 Study is to provide not only quantification of the effects to the U.S. natural gas market and its overall economy under each of the scenarios outlined, but also an assessment of the probability of each of these scenarios, and thus the probability of the natural gas and macroeconomic outcomes associated with each. NERA first developed estimates of the probabilities for the level of U.S. supply and demand, as well as supply and demand in the rest of the world.44 DOE/ FE and its support contractor KeyLogic, Inc. contacted a set of independent experts recommended by DOE (hereinafter the peer reviewers) to obtain their probability assignments for these same four metrics. After receiving feedback from the peer reviewers, NERA reevaluated the original probability assignments to arrive at the final probabilities. a. U.S. Supply Case Probabilities and Ranges The peer reviewers did not converge on common recommendations for U.S. supply case probabilities and ranges. One peer reviewer suggested focusing the probabilities more towards the Reference case by reducing the prominence of both the high and low cases.45 Another peer reviewer recommended reducing the probability for the Reference case and increasing the probabilities for both the high and low cases. Several other peer reviewers agreed with the original assignment of probabilities. According to NERA, there did not appear to be a consensus on how to change the proposed probabilities. The recommendations from the peer reviewers seemed either to offset each other or to agree with the original probabilities. For this reason, NERA decided to retain the original probability assignments. NERA made no change to its original range of U.S. supply values or the probabilities assigned to them. b. U.S. Demand Scenario Probabilities and Ranges In evaluating NERA’s U.S. demand scenario probabilities and ranges, the peer reviewers did not have a consistent theme in their recommendations. One peer reviewer recommended greater emphasis on the Reference case, while another recommended deemphasizing the Reference case to increase the importance of the high and low cases.46 Two other peer reviewers recommended that NERA retain the probability assignments with no changes. Because the recommendations lacked a common theme but nevertheless seemed to offset each other, NERA retained the original probability assignments and made no changes to the original range of U.S. Demand. 38 See 41 2018 44 Id. 39 2018 42 Id. 45 Id. id. at 12; see also supra at note 33. LNG Export Study at 25. 40 Id. at 25–26, 28; see also AEO 2017 at 12, 16. VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 LNG Export Study at 26. at 29–30. 43 Id. at 30. PO 00000 Frm 00046 Fmt 4703 Sfmt 4703 at 37. at 43. 46 Id. E:\FR\FM\28DEN1.SGM 28DEN1 67257 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices c. Rest of World Supply Scenario Probabilities and Ranges changes to the original range of Rest of World Supply. In evaluating the Rest of World supply scenarios, NERA noted several common themes from the peer reviewers. Several of the peer reviewers felt the proposed probabilities were reasonable. Another peer reviewer recommended assigning greater probability to the Reference case. No peer reviewer recommended that the low case receive more emphasis. As a result, the probability of the Reference case was increased by 5% while reducing the probability of the low case by the same amount. NERA made no d. Rest of World Demand Scenario Probabilities and Ranges In evaluating the Rest of World demand scenarios, NERA noted common agreement on several themes. None of the peer reviewers recommended increasing the probability of the low world demand case. Several of the peer reviewers agreed that the Reference case should receive greater importance, with the high case receiving less importance. The peer reviewers disagreed on the degree to which the relative importance should be modified. In addition, the peer reviewers felt that the high end of the range for Rest of World demand should be increased to a level double the original differential between the reference and high cases. Based on the peer review recommendations, the high end of the range was increased as recommended by one peer reviewer. Overall, the high case probability was decreased to 50%, the Reference case probability was increased to 45%, and the low case stayed at a probability of 5%. Table 1 below presents the final probability assignments after peer review and the central estimate of the ranges adopted for the analysis.47 TABLE 1—FINAL PROBABILITY ASSIGNMENTS AND CENTRAL SUPPLY/DEMAND ESTIMATES (TRILLIONS OF CUBIC FEET) FOR EACH CASE IN 2040 U.S. supply High ............................... Reference ...................... Case .................................................................... AEO 2017, HOGR Estimate ............................................................... Probability ............................................................ Case .................................................................... Estimate ............................................................... Probability ............................................................ Case .................................................................... amozie on DSK3GDR082PROD with NOTICES1 Low ................................ Estimate ............................................................... Probability ............................................................ C. NERA’s Global Natural Gas Model (GNGM) The 2018 Study used the GNGM, which NERA describes as a worldwide model of the natural gas market based on LNG trade, interregional pipelines, and regional supply and demand.48 This model allows NERA to examine the likely direct and indirect impacts on regional natural gas markets of various industry developments and policy choices. Using the GNGM, NERA can take into account developments in individual regions and gauge regionspecific market outcomes. The GNGM’s structure has full flexibility in terms of the time periods and regions it covers. For the 2018 Study, the model divides the world into 18 regions and solves for equilibrium natural gas flows, supply, and demand for the years 2020 to 2040 in five-year time steps.49 The model can be adapted to analyze any individual region in the world, as well as to consider a more granular time scale. The regional structure allows the model to factor in LNG Export Study at 43–44 (Table 3). at 33. 50 Id. VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 WEO 49 30% ........................ ........................ 172 50% AEO 2017, Reference 39 55% AEO 2017, Reference 33 66% IEO 2017, Reference 139 80% IEO 2017, Reference 145 45% AEO 2017, LOGR 28 15% Renewables Mandate 27 17% Low Supply WEO 2016, 450 ppm 113 5% NERA developed the NewERA model to forecast the impact of policy, regulatory, and economic factors on the energy sector and the economy as a whole. To evaluate policies that have significant impacts on the entire U.S. economy, NERA uses the NewERA model to capture the effects as they ripple through all sectors of the economy and the associated feedback effects. The version of the NewERA model used for the 2018 Study includes a macroeconomic model that represents all sectors of the economy. The macroeconomic model incorporates all production sectors, including liquefaction plants required for LNG exports; energy extraction; 49 Id. PO 00000 Fmt 4703 Sfmt 4703 90 20% manufacturing and service sectors; and final demand for goods and services by households, the government, and for investment.50 The consequences of changes in LNG exports are transmitted throughout the U.S. economy as sectors respond until the economy reaches equilibrium. Producers and households are able to change their demand for goods and services in response to changes in prices. The NewERA model addresses the key factors affecting future U.S. natural gas demand, supply, and price. One of the major uncertainties is the availability of shale gas in the United States. To account for this uncertainty and the effect it could have on domestic markets, the NewERA model includes resource supply curves for U.S. natural gas. The model also accounts for pipeline trade in natural gas with Mexico and Canada, and the potential build-up of liquefaction plants for exporting LNG. The NewERA model also has a supply (demand) curve for U.S. imports (exports) that represents how at 34. Frm 00047 ROW demand ........................ D. NERA’s NewERA Macroeconomic Model 48 Id. ROW supply Robust Economic Growth 39 17% key components driving the natural gas market, including pipeline and marine linkages among regions, competition among supplier regions, and competition between LNG and natural gas pipelines. 47 2018 U.S. demand E:\FR\FM\28DEN1.SGM 28DEN1 67258 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices the global LNG market price would react to changes in U.S. imports or exports.51 U.S. wellhead natural gas prices in the NewERA model are matched to the resulting prices from the GNGM. The baselines for the NewERA model are based on EIA’s AEO 2017 Reference, High Oil and Gas Supply, and Low Oil and Gas Supply cases. E. Results of the 2018 Study The 54 scenarios in the 2018 Study provide a wide range of results. NERA chose to focus on a subset of more likely outcomes, given DOE’s assumptions about the probabilities associated with U.S. natural gas production, demand and supply, and demand for natural gas in the rest of the world. NERA defined the more likely outcomes as those that result in U.S. LNG exports that are within a one standard deviation of the mean level of exports.52 In the Study, NERA stated that an interval of plus or minus one standard deviation was chosen as more informative because it indicates a reasonable range of uncertainty without unduly emphasizing very unlikely outcomes.53 The 2018 Study finds that, by the year 2040, there is a 16% chance that U.S. LNG exports will be below 9.0 Bcf/d and a 16% chance that they will be above 30.7 Bcf/d of natural gas.54 Put differently, there is approximately a 68% probability that U.S. LNG exports will be between 9.0 and 30.7 Bcf/d in 2040. Table 2 below lists 27 scenarios that are the ‘‘more likely’’ scenarios in 2040 (i.e., within one standard deviation of the mean for all 54 scenarios).55 The scenario nomenclature in Table 2 refers to the case used for U.S. natural gas supply, U.S. natural gas demand, Rest of World natural gas supply, and Rest of World natural gas demand, respectively. TABLE 2—LNG EXPORTS AND SCENARIO PROBABILITY FOR THE MORE LIKELY SCENARIOS IN 2040 LNG exports Bcf/day Scenario amozie on DSK3GDR082PROD with NOTICES1 Low_High_Low_High ................................................................................................................................................ Low_Low_Low_High ................................................................................................................................................ Low_Low_Low_Ref .................................................................................................................................................. Low_Ref_Low_High ................................................................................................................................................. Low_Ref_Low_Ref ................................................................................................................................................... Ref_High_Low_Low ................................................................................................................................................. Ref_High_Low_Ref .................................................................................................................................................. Ref_High_Ref_High .................................................................................................................................................. Ref_High_Ref_Ref ................................................................................................................................................... Ref_Low_Low_Low .................................................................................................................................................. Ref_Low_Low_Ref ................................................................................................................................................... Ref_Low_Ref_High .................................................................................................................................................. Ref_Low_Ref_Ref .................................................................................................................................................... Ref_Ref_Low_Low ................................................................................................................................................... Ref_Ref_Low_Ref .................................................................................................................................................... Ref_Ref_Ref_High ................................................................................................................................................... Ref_Ref_Ref_Ref ..................................................................................................................................................... High_High_Low_Low ................................................................................................................................................ High_High_Ref_High ................................................................................................................................................ High_High_Ref_Low ................................................................................................................................................. High_High_Ref_Ref .................................................................................................................................................. High_Low_Low_Low ................................................................................................................................................ High_Low_Ref_Low ................................................................................................................................................. High_Low_Ref_Ref .................................................................................................................................................. High_Ref_Low_Low ................................................................................................................................................. High_Ref_Ref_High .................................................................................................................................................. High_Ref_Ref_Low .................................................................................................................................................. High_Ref_Ref_Ref ................................................................................................................................................... The 2018 Study summarized changes in Henry Hub prices in 2040 (in constant 2016 dollars) by the different U.S. natural gas supply scenarios, as follows: • For all of the reference U.S. supply scenarios in the more likely range, Henry Hub natural gas prices could be from $5 to $6.50 per million British thermal units (MMBtu) in 2040. These mid-range scenarios have a combined probability of 47%.56 • For all of the HOGR supply scenarios in the more likely range, Henry Hub prices range from $3.50 to $4 51 Id. 52 2018 at 49–50. LNG Export Study at 50–51 (Table 4). 56 Id. at 54; see also id. at 53 (Figure 12). LNG Export Study at 47. 53 Id. VerDate Sep<11>2014 18:13 Dec 27, 2018 per MMBtu in 2040.57 These scenarios with natural gas prices at the low end of the range have a combined probability of 22%.58 • For all of the LOGR supply scenarios in the more likely range, Henry Hub prices range from $10 to $13 per MMBtu in 2040. These scenarios with natural gas prices at the high end of the range have a combined probability of 3%. The 2018 Study finds two important relationships between U.S. LNG exports and U.S. natural gas prices: Jkt 247001 57 Id. 55 2018 58 Id. Frm 00048 Fmt 4703 Sfmt 4703 0.3 0.3 0.2 1.0 0.9 0.1 0.8 3.7 3.4 0.1 0.8 3.7 3.4 0.4 3.3 14.5 13.1 0.1 2.0 0.2 1.8 0.1 0.2 1.8 0.2 7.9 0.8 7.1 • ‘‘Increasing U.S. LNG exports under any given set of assumptions about U.S. natural gas resources and their production leads to only small increases in U.S. natural gas prices;’’ 59 and • ‘‘Available natural gas resources have the largest impact on natural gas prices. Therefore, U.S. natural gas prices are far more dependent on available resources and technologies to extract 54 Id. PO 00000 22.7 26.1 12.4 23.4 9.9 15.5 28.9 23.4 12.4 18.3 30.5 25.7 18.6 17.0 29.6 24.0 12.9 22.2 30.1 8.7 22.6 23.6 12.4 23.6 22.8 30.7 9.0 23.3 Scenario probability (%) at 53 (Table 12). at 54. 59 Id. at 55 (discussing Figure 12). E:\FR\FM\28DEN1.SGM 28DEN1 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices available resources than on U.S. policies surrounding LNG exports.’’ 60 Applying the same one-standard deviation interval of a probability greater than 16% and less than 84% reveals that the more likely range of Henry Hub price is from $3.90 to $6.70 per MMBtu of natural gas.61 The 2018 Study identifies 12 representative scenarios for macroeconomic analysis. The 12 scenarios include three different baselines and nine alternative shock scenarios (three per baseline).62 The scenarios are grouped according to the outlook for U.S. natural gas supply, as described previously: Reference, HOGR, and LOGR cases. All of the nine alternative NewERA scenarios project LNG export levels that are higher than their corresponding reference scenario. This selection of scenarios allows the analysis to capture the macroeconomic effects of higher LNG exports associated with higher levels of demand for U.S. LNG exports from the rest of the world. 67259 However, not all of the scenarios evaluated produce LNG export levels that fall within a one-standard deviation interval around the mean of modeled LNG export volumes (the ‘‘more likely’’ range). Therefore, the 2018 Study discusses the macroeconomic effects for the seven macroeconomic scenarios that do fall within the range of more likely scenarios, as shown in bold in Table 3: 63 TABLE 3—MACROECONOMIC SCENARIOS U.S. supply U.S. demand ROW supply ROW demand Ref .............. Ref .............. Ref ............... Ref .............. High ............ High ............. High ............. High ............ Low .............. Low ............. Low ............. Low .............. Ref .............. Ref .............. Ref ............... Ref .............. Ref .............. Ref ............... Ref ............... Ref .............. Ref .............. Ref .............. Ref .............. Ref .............. Ref .............. Low ............. Low ............. Ref .............. Ref .............. Low ............. Low ............. Ref .............. Ref ............... Low ............. Low ............. Ref ............... Ref .............. Ref .............. High ............. High ............ Ref .............. Ref ............... High ............. High ............ Ref ............... Ref .............. High ............ High ............. Finally, the 2018 Study summarizes a number of the broad macroeconomic effects on the U.S. economy of increased LNG exports, as discussed below. amozie on DSK3GDR082PROD with NOTICES1 1. U.S. Consumer Well-Being Increases With Rising LNG Exports For the more likely scenarios, consumer welfare ranges from $30.25 trillion to $30.26 trillion (a variation of $10 billion).64 As U.S. LNG exports increase, U.S. households receive additional income from two sources. First, the LNG exports provide additional export revenues, and second, households that hold shares in companies that own liquefaction plants receive additional income from take-orpay tolling charges for LNG exports. These additional sources of income for U.S. consumers outweigh the income loss associated with higher energy prices. 2. Total Economic Activity Expands With Rising LNG Exports Gross domestic product (GDP), or the level of total economic activity in the economy, is another economic metric that is often used to evaluate the effect of a change to the economy. The GDP effects associated with higher LNG 60 Id. 61 2018 LNG Export Study at 55; see also id. at 56 (Figure 13). 62 Id. at 62. VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 LNG exports (Bcf/day) Cumulative probability (%) 12.9 29.6 45.7 24.0 23.3 40.4 52.8 30.7 0.1 9.9 23.4 8.2 exports increase as the economy benefits from investment in the liquefaction process, export revenues, resource income, and additional wealth transfers (in the form of tolling charges). The impact of LNG exports results in shifts in income between different sources, but overall GDP improves as LNG exports increase for all scenarios with the same U.S. natural gas supply conditions. Levels of GDP are most sensitive to assumptions about U.S. supply, with high natural gas supply driving higher levels of GDP. For each of the supply scenarios, higher levels of LNG exports in response to international demand consistently lead to higher levels of GDP. GDP achieved with the highest level of LNG exports in each group exceeds GDP with the lowest level of LNG exports by $13 to $72 billion in 2040 (in constant 2016 dollars).65 3. Sectoral Growth Rates Change Negligibly for Key Economic Sectors and Energy-Intensive Sectors Sectoral growth rates remain robust for all of the sectors that rely on natural gas as fuel and raw material input. The variation in the growth rates attributable at 63 (Table 9). id. at 67; see also id. at 66 (Figure 16), 67 (Table 10). 65 2018 LNG Export Study at 18. to differences in LNG exports ranges from one to seven basis points (0.01% to 0.07%). Even for the scenario with the largest change in sectoral growth rates, the change is still relatively small.66 According to NERA, it is reasonable to conclude that an increased level of LNG exports will have a negligible effect on how quickly these sectors grow.67 4. Household Income Shifts Between Different Sources But Is Positive Overall When comparing changes in resource income between the baseline and the scenarios, resource income associated with natural gas significantly increases. This is because both the value of the natural gas resource, as well as returns to specialized capital and labor, increase when additional LNG exports are allowed.68 Value-added income (wage and capital income) also increases because of the increased opportunity for exports and the resulting boost to labor income, profits, and GDP. At the same time, the resource income associated with coal and crude oil changes minimally. Therefore, the total change in resource income is positive for the scenarios, and the changes in 63 Id. 66 Id. 64 See 67 Id. PO 00000 Frm 00049 Fmt 4703 Sfmt 4703 33 76 96 68 47 91 99 87 5 16 48 11 68 Id. E:\FR\FM\28DEN1.SGM at 70. at 73. 28DEN1 67260 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices resource income increase with the level of LNG exports. Income associated with net transfers includes government transfers and all tolling charges on LNG exports. Government transfers remain the same between the baseline and scenarios, so the net transfer reflects the additional wealth transfer. Changes in tax revenue are ‘‘grossed up’’ in value added.69 5. Aggregate Consumption and Investment Is Higher Aggregate consumption measures the total spending on goods and services in the economy. Within each U.S. natural gas supply scenario, aggregate consumption is higher when LNG exports are higher. As with the welfare and GDP results, wealth transfer associated with LNG exports increases household income which, in turn, leads to higher spending on goods and services. Under the Reference U.S. natural gas supply scenario, aggregate consumption is $25,049 billion and LNG exports are 12.9 Bcf/d. When LNG exports increase as a result of natural gas demand pull, aggregate consumption is $25,054 billion (for 29.6 Bcf/d), an increase of about $5 billion.70 A similar pattern is observed in the outcomes for aggregate consumption in each of the groups of scenarios based on alternative U.S. natural gas supply assumptions.71 6. U.S. LNG Exports Are Backed by Increased Natural Gas Production The results from NERA’s analysis indicate there is no support for the concern that LNG exports would come at the expense of domestic natural gas consumption. To the contrary, a large share of the increase in LNG exports is supported by an increase in domestic natural gas production, leading to a modest increase in natural gas prices and additional income from export revenues.72 About 80% of the increase in LNG exports is satisfied by increased domestic production of natural gas, with positive effects on labor income, output, and profits in the natural gas production sector. In the Reference U.S. supply scenarios, as total natural gas exports increase from 5.8 Tcf (in the Ref_Ref_ 69 Id. at 73. noted that, in the narrative section of the 2018 Study on this point, there is a typo in the Reference case number. See 2018 LNG Export Study at 75 (‘‘Under the Reference U.S. natural gas supply scenario, Ref_Ref_Ref_Ref, aggregate consumption is $24,049 billion and LNG exports are 12.9 Bcf/ d.’’). The $24,049 billion number is actually $25,049, as shown in the corresponding Table 14. See id. at 76. 71 2018 LNG Export Study at 75. 72 Id. at 77. amozie on DSK3GDR082PROD with NOTICES1 70 We VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 Ref_Ref scenario) to 12.9 Tcf (in the Ref_ Ref_Low_Ref scenario), natural gas production increases for the corresponding scenarios from 37.7 Tcf to 43.9 Tcf, respectively, in 2040.73 V. Notice of Availability of the 2018 LNG Export Study On June 12, 2018, DOE published notice of availability (NOA) of the 2018 LNG Export Study and a request for comments.74 The purpose of the NOA was ‘‘to enter the 2018 LNG Export Study into the administrative record of the 25 pending non-FTA export proceedings [identified in the NOA] and to invite comments on the Study for use in the pending and future non-FTA application proceedings.’’ 75 DOE provided the following instructions: Comments must be limited to the methodology, results, and conclusions of the 2018 LNG Export Study on the factors evaluated. These factors include the potential impact of LNG exports on domestic energy consumption, production, and prices; the macroeconomic factors identified in the Study, including gross domestic product, consumption, U.S. economic sector analysis, and U.S. LNG export feasibility analysis; and any other factors included in the Study. In addition, comments may be directed toward the feasibility of various scenarios used in the Study.76 Publication of the NOA began a 45-day public comment period that ended on July 27, 2018. DOE received 19 comments on the 2018 LNG Export Study from a variety of sources, including participants in the natural gas industry, environmental organizations, and individuals. Of those, nine comments supported the Study,77 eight comments opposed the 2018 Study and/or exports of LNG,78 one comment 73 Id. at 78 and Figure 21. U.S. Dep’t of Energy, Study on Macroeconomic Outcomes of LNG Exports; Notice of Availability of the 2018 LNG Export Study and Request for Comments, 83 FR 27314 (June 12, 2018). 75 Id. at 27315. 76 Id. at 27316 (noting that ‘‘[w]hile this invitation to comment covers a broad range of issues, DOE may disregard comments that are not germane to the present inquiry.’’). 77 Supporting comments were filed by the Marcellus Shale Coalition; the Center for Liquefied Natural Gas (CLNG); the Pennsylvania Chamber of Business and Industry; the American Petroleum Institute (API); Cheniere Energy, Inc. (Cheniere); Jordan Cove Energy Project L.P. (JCEP); LNG Allies; NextDecade Corp.; and Anonymous. The Anonymous comment is comprised of five comments filed by the same anonymous author. 78 Opposing comments were filed by Patricia Weber; Oil Change International; Food & Water Watch; Industrial Energy Consumers of America (IECA); Oregon Wild; Sierra Club; Deb Evans and Ron Schaaf (the Evans Schaaf Family); and Jody McCaffree (individually and as executive director of Citizens for Renewables/Citizens Against LNG). Oil Change International and Food & Water Watch filed identical comments. 74 See PO 00000 Frm 00050 Fmt 4703 Sfmt 4703 took no position,79 and one comment was non-responsive.80 The NOA and comments received on the NOA are available on DOE’s website at https:// fossil.energy.gov/app/docketindex/ docket/index/10. VI. Comments on the 2018 LNG Export Study and DOE/FE Response DOE has evaluated the comments received during the public comment period. Below, DOE/FE summarizes: (i) The pertinent arguments by topic, with reference to representative comments, and (ii) DOE/FE’s basis for the conclusions that it drew in reviewing those comments. In so doing, DOE/FE has responded to the relevant and significant issues raised by the commenters.81 A. Data Inputs and Estimates of Natural Gas Demand 1. Comments Every commenter supporting the 2018 LNG Export Study expresses support for NERA’s study design. For example, Cheniere states that the 2018 Study’s ‘‘refined approach’’ is well-suited to the present context, in which DOE/FE has approved non-FTA exports in a volume (at the time of Cheniere’s filing) up to 21.35 Bcf/d, with more non-FTA applications pending.82 The commenters point out that the study design—with 54 different scenarios reflecting a range of market uncertainties and market-determined levels of export volumes—differs from past studies that were based on prescribed LNG export volumes. JCEP states that the 2018 Study takes the ‘‘next logical step’’ in studying unbounded exports driven by market demand.83 For this reason, commenters including LNG Allies and API characterize the 2018 Study as the most comprehensive of DOE’s export studies to date. LNG Allies observes that the 2018 Study uses data from AEO 2017 for its analysis, but notes that the projections in EIA’s Annual Energy Outlook 2018 (AEO 2018) 84 indicate ‘‘significantly lower natural gas prices in the United States in the future, as well as considerably higher U.S. natural gas production under all scenarios (versus 79 Comment of John Young. of Vincent Burke. 81 See, e.g., Public Citizen v. F.A.A., 988 F.2d 186, 197 (D.C. Cir. 1993). 82 Comment of Cheniere at 3. 83 Comment of JCEP at 3. 84 U.S. Energy Info. Admin., Annual Energy Outlook 2018 (with projections to 2050) (Feb. 6, 2018), available at: https://www.eia.gov/outlooks/ aeo/pdf/AEO2018.pdf. 80 Comment E:\FR\FM\28DEN1.SGM 28DEN1 amozie on DSK3GDR082PROD with NOTICES1 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices AEO 2017).’’ 85 LNG Allies asserts that, had it been possible for the 2018 Study to draw upon EIA’s most recent data in AEO 2018, the evidence supporting market-determined levels of U.S. LNG exports would have been ‘‘even more persuasive.’’ 86 JCEP also endorses the 2018 Study’s design as ‘‘appropriate and important given the state of the U.S. LNG export market to date.’’ 87 Specifically, JCEP notes that some LNG export projects have received authorizations from the Federal Energy Regulatory Commission (FERC) and DOE, but have not yet moved forward on construction or may never move forward. In JCEP’s view, these ‘‘stalled’’ projects should not prevent other projects from obtaining export authorizations through artificial limits on approved export volumes. Therefore, JCEP asserts, the 2018 Study correctly evaluated LNG exports limited only by market demand, not by regulatory constraints imposed by DOE.88 On the other hand, several commenters—including Sierra Club, Oregon Wild, and the Industrial Energy Consumers of America (IECA)— challenge the scope of the 2018 Study and the data used as inputs. Specifically, these commenters assert that the 2018 Study relies on inaccurate assumptions that fail to reflect conditions that adversely affect (and will continue to affect) the viability of U.S. LNG exports. First, Oregon Wild states that the U.S. market for fossil fuels is deeply flawed. According to Oregon Wild, the current prices for natural gas do not reflect either the full costs of production or significant externalities (e.g., global climate change and ocean acidification), and thus are artificially low. Low prices for LNG, in turn, result in artificially high demand and supply that ‘‘far exceeds’’ optimal levels.89 Consequently, Oregon Wild states that increasing exports of U.S. LNG ‘‘will increase the supply of a commodity that is already oversupplied at a global scale.’’ 90 Commenters including Oil Change International, Food & Water Watch, and Sierra Club assert that the 2018 Study is based on flawed projections of global demand for natural gas. Sierra Club argues that the 2018 Study ‘‘drastically overstates’’ global demand, which ‘‘significantly skews’’ the 2018 Study’s 85 Comment of LNG Allies at 2. (emphasis in original). 87 Comment of JCEP at 3. 88 Id. 89 Comment of Oregon Wild at 1. 90 Id. 86 Id. VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 overall analysis and conclusions.91 Oil Change International, Food & Water Watch, and other commenters also allege the following deficiencies in NERA’s study design: • Fails to account for the negative impacts of increased natural gas production and related infrastructure; • Fails to consider shifts in anti-fossil fuel energy policies at the state level that will impact U.S. supplies; • Fails to acknowledge the transition to renewable energy and storage (i.e., flexible generation technologies) that compete with natural gas globally, as well as efforts in the United States to build out renewable energy sources and increase energy efficiency; • Improperly relies on ‘‘projected diminishing Rest of World’’ natural gas supplies; • Fails to properly account for economic costs related to environmental issues, particularly the costs associated with climate change; and • Fails to account for international efforts to address climate change and/or assumes that such efforts will fail, which allegedly will impact global demand for natural gas.92 Addressing the climate change argument, Oil Change International and Food & Water Watch first challenge the statement in the 2018 Study that ‘‘ ‘NERA [has] followed the development of international agreements on climate change for many years, and we do not expect that future progress will be very much greater than in the past.’ ’’ 93 On this basis, NERA attributed a ‘‘low probability’’—specifically, a 5% probability—to the ‘‘low international demand case’’ for the rest of the world (ROW), in which international demand for natural gas is reduced due to policies to address climate change.94 The Evans Schaaf Family submitted a comment challenging NERA’s assumption, asserting that ‘‘[t]he most glaring of [NERA’s] predictions is that there is a mere 5% probability that the [Rest of World] would meet the 450 ppm [parts per million] of CO2e [carbon dioxide equivalent] as set forth in the Paris Climate Agreement.’’ 95 The 450 ppm case assumes a set of policies with the objective of limiting the average global temperature increase in 2100 to 2 degrees Celsius above pre-industrial levels.96 NERA noted that, ‘‘[t]o achieve 91 Comment of Sierra Club at 1. of Oil Change International and Food & Water Watch at 1. 93 Id. at 2 (citing 2018 LNG Export Study at 42). 94 2018 LNG Export Study at 41–42. 95 Comment of the Evans Schaaf Family at 1. 96 2018 LNG Export Study at 30; see also id. at 41 (explaining that the ‘‘lowest natural gas demand is obtained from a scenario in which the IEA 92 Comments PO 00000 Frm 00051 Fmt 4703 Sfmt 4703 67261 this concentration, it is necessary to phase out all fossil fuel use including natural gas over the course of the next century.’’ 97 Oil Change International and Food & Water Watch contend, however, that NERA ‘‘provide[d] no scientific reasoning for attributing a 5% probability to international gas demand levels that align with the . . . 450 ppm Scenario.’’ 98 Oil Change International and Food & Water Watch also state that the 2018 Study should have given much greater emphasis to low natural gas demand scenarios that align with the Paris Agreement.99 In their view, rather than NERA adopting a ‘‘subjective and cynical’’ view towards international climate negotiations, a ‘‘methodologically sound approach would be to project the level of U.S. LNG exports that align with global success in meeting the Paris goals.’’ 100 They point out that the Paris Agreement has been ratified by more than 170 nations, with the United States being the only country to back away from the Agreement. According to the commenters, this approach would show a much lower global demand for U.S. LNG exports by the middle of this century, indicating a very different trajectory to any of those described in the 2018 Study. They claim that, by attributing a low probability to the likelihood that demand for U.S. natural gas will be reduced in light of climate policies, the 2018 Study is ‘‘predicated on a failure to prevent catastrophic climate impacts.’’ 101 Similarly, Sierra Club asserts that the 2018 Study overstates global natural gas demand, and thus market support for U.S. LNG exports, ‘‘by assuming that the most likely [demand] scenario is for the rest of the world to take no further action to limit greenhouse gas emissions.’’ 102 Specifically, Sierra Club disputes NERA’s judgment that the high demand case—assigned a 65% probability—should assume that 2016 is the last year in which the global community undertakes any effort to limit greenhouse gas emissions, i.e., that no further action is taken between 2018 and 2040.103 In Sierra Club’s view, ‘‘this assumes that every country adopts policies sufficient to keep global greenhouse gas concentrations under 450 ppm CO2e.’’). 97 Id. at 41. 98 Comments of Oil Change International and Food & Water Watch at 2. 99 Id. 100 Id. 101 Id. 102 Comments of Sierra Club at 1 (emphasis in original). 103 Id. (citing 2018 LNG Export Study at 41–43) (NERA explaining that ‘‘we assign . . . the highest E:\FR\FM\28DEN1.SGM Continued 28DEN1 67262 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices amozie on DSK3GDR082PROD with NOTICES1 scenario might represent a useful hypothetical ‘ceiling’ on global natural gas demand,’’ but the 2018 Study does not demonstrate that it is plausible, much less the ‘‘most likely’’ scenario.104 Turning to renewable energy, Oil Change International and Food & Water Watch cite recent analysis from Bloomberg New Energy Finance, the New Energy Outlook 2018.105 They argue that this Bloomberg analysis projects a very different picture of future energy demand than assumed in the 2018 Study. For example, they argue that, by 2050, renewable energy will make up over two-thirds of global power generation, while fossil energy will have declined to 29% from 63% today.106 Citing these and other projections, the commenters argue that there will be substantial constraints on growth in the demand for U.S. LNG. The commenters argue that, without these adjustments, the 2018 Study exaggerates both the potential for U.S. LNG exports and the related macroeconomic benefits. Patricia Weber and other commenters express concern about NERA’s statement that the 2018 Study ‘‘ ‘does not investigate’ ’’ the variations in domestic versus foreign ownership of assets as part of its NewEra model.107 Ms. Weber questions why NERA did not consider the implications for the U.S. economy of a foreign-owned pipeline exporting U.S. LNG through a foreignowned facility. She cites JCEP’s pending LNG export project, in which the proposed Jordan Cove Energy Project and associated Pacific Connector Gas Pipeline would be owned by a Canadian corporation.108 Similarly, Ms. Weber and the Evans Schaaf Family question whether the 2018 Study excludes Canadian (or Mexican) natural gas supply as a factor. In their view, since NERA states that ‘‘countries in the North American region share a single natural gas market,’’ 109 any macroeconomic benefits associated with LNG exports should be applied across North America, and not assumed probability to the WEO Current Policies case that assumes no additional actions to limit emissions [after 2016].’’). 104 Id. 105 Comments of Oil Change International and Food & Water Watch at 3 n.4 (citation omitted). 106 Id. at 3. 107 Comment of Patricia Weber at 1 (quoting 2018 LNG Export Study at 34 n.34) (NERA stating that, ‘‘[i]n the NewERA model, it is possible to represent these variations in domestic versus foreign ownership of assets and capture export revenues to better understand the issues. However, this study does not investigate these issues.’’). 108 Id. 109 2018 LNG Export Study at 56 n.48. VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 to accrue only to the United States, as the 2018 Study suggests. Finally, some commenters, including Ms. Weber and Jody McCaffree, dispute the 2018 Study’s conclusions regarding international levels of U.S. LNG exports. They suggest that the current volumes of LNG exports across the world (not only U.S. LNG) are already excessive and will result in a global oversupply. Citing a 2017 report by the International Gas Union, Ms. McCaffree warns that ‘‘it would take 15 years . . . until the current excess of LNG volumes would likely be absorbed into the international LNG export markets.’’ 110 Ms. Weber also questions whether the 2018 Study considers any potential macroeconomic impacts if the infrastructure created from increased LNG exports exceeds the bounds of what the market demands— for example, if the LNG industry ‘‘overbuilds’’ two to three times more export capacity than ultimately needed.111 2. DOE/FE Response The 2018 Study considered 54 different scenarios of LNG exports from the United States over the coming decades. Different assumptions regarding future supply and demand conditions provided a wide range of possible outcomes for further macroeconomic analysis. Through a peer-reviewed process, the 2018 Study assigned probabilities for each of the supply and demand cases, which, when combined, provided likelihoods for the scenarios. This approach allowed NERA to consider very unlikely scenarios for U.S. LNG exports—with export levels much lower and much higher than the Reference case—thus providing a more comprehensive range of outcomes than considered in DOE’s previous LNG export studies. The 2018 Study found a ‘‘positive correlation between GDP and LNG exports for the more likely scenarios in 2040,’’ such that ‘‘[i]n all scenarios with common assumptions about U.S. natural gas supply and demand, there is greater gain in GDP as the LNG export volume increases.’’ 112 We take note of EIA’s projections in AEO 2018, published on February 6, 2018, for natural gas supply, demand, and prices.113 One commenter noted the lower domestic natural gas prices and higher domestic natural gas production projected in AEO 2018 than in the projections from AEO 2017 used in the 110 Comment of Jody McCaffree at 2 (emphasis in original) (citing International Gas Union, 2017 World LNG Report, at 4–5) (attached as Exh. 1 to McCaffree Comment). 111 Id. 112 2018 LNG Export Study at 67. 113 See AEO 2018, supra note 84. PO 00000 Frm 00052 Fmt 4703 Sfmt 4703 2018 Study. Projected Reference case domestic dry natural gas production for the year 2040 increased by 2.41 Tcf between AEO 2017 and AEO 2018 (from 37.74 Tcf to 40.15 Tcf, respectively). The Henry Hub price in 2040 declined from $5.18 per million British thermal units (MMBtu) in the AEO 2017 projections to $4.50/MMBtu in the AEO 2018 projections (both prices in constant 2017 dollars). Reference case LNG exports in the year 2040 increased from the 2017 to 2018 projections by 0.92 Tcf (from 4.44 Tcf to 5.36 Tcf). As described here, the AEO 2018 Reference case, even more so than AEO 2017, projects robust domestic supply conditions that are more than adequate to meet domestic needs and supply exports. Several commenters suggested the 2018 LNG Export Study overstates the future level of U.S. LNG exports, as well as the probability of those levels of exports occurring. DOE/FE commissioned the 2018 Study to inform its public interest analysis of pending long-term applications to export LNG to non-FTA countries beyond the 21.35 Bcf/d of exports already approved at that time. To develop scenarios with much larger volumes of exports than under Reference case conditions, the 2018 Study performers examined unconstrained cases and assigned probabilities to help illustrate the likelihood of LNG export levels much lower and much higher than the Reference case. The macroeconomic analysis of the export scenarios provides valuable input to inform DOE/FE’s public interest analysis. The 2018 Study does not (and was not intended to) provide an analysis of any ‘‘optimal’’ level of LNG exports based on different policy objectives. Further, the 2018 Study Reference case rate of exports in 2040 (‘‘Ref_Ref_Ref_Ref’’) is in the range of LNG exports projected in AEO 2018 for the same time period—12.9 Bcf/d in the 2018 Study, compared to 14.7 Bcf/ d in AEO 2018. If increased global demand for U.S. LNG exports does not materialize, as some commenters suggest, there would be no corresponding incremental domestic supply or price impact since additional LNG exports would not occur, irrespective of regulatory approvals. As some commenters point out, multiple proposed projects have received full approval for their export facilities from FERC and DOE, yet they have neither made a final investment decision nor begun construction. Given the significant capital costs of liquefaction and export facilities, project developers in the United States typically must demonstrate long-term E:\FR\FM\28DEN1.SGM 28DEN1 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices demand for their projects through the execution of long-term contracts to raise the needed capital to finance their projects. DOE/FE also notes that current large-scale liquefaction capacity in operation or under construction in the United States today equals approximately 11 Bcf/d of exports, which is more than 3 Bcf/d below the AEO 2018 Reference case rate of LNG exports projected in 2040. B. Economic Benefits Associated With LNG Exports 1. Economic Benefits Realized to Date a. Comments Cheniere states that it agrees with the results of the 2018 LNG Export Study, and emphasizes that, ‘‘for Cheniere, the positive economic impacts of LNG exports are not just a matter of economic theory.’’ 114 In the years since DOE/FE published its first LNG export study, Cheniere—through its subsidiary, Sabine Pass Liquefaction, LLC—has constructed and launched operations at the Sabine Pass Liquefaction Project, located at the Sabine Pass LNG Terminal in Cameron Parish, Louisiana. Cheniere states that it has constructed four liquefaction trains at the Sabine Pass LNG Terminal, and is in the process of commencing exports from a fifth train.115 DOE/FE (as well as the Anonymous commenter) notes that Cheniere began exporting U.S. LNG from the Sabine Pass LNG Terminal on February 24, 2016, and, to date, has exported 501 LNG cargoes from Sabine Pass (both long-term and short-term exports) with deliveries to 29 countries and regions worldwide.116 Cheniere states that, through other subsidiaries, it is also in the process of constructing three liquefaction trains at the Corpus Christi LNG Terminal in San Patricio County, Texas. According to Cheniere, these two LNG export projects have created approximately 9,000 direct construction jobs at peak construction over a period of several years, as well as more than 1,000 permanent, full-time jobs.117 Cheniere asserts that the construction and operation of both the Sabine Pass 114 Comment of Cheniere at 1. amozie on DSK3GDR082PROD with NOTICES1 115 Id. 116 See FE LNG Monthly, Dec. 2018, and LNG Annual 2016, 2017, available at: https:// www.energy.gov/fe/listings/lng-reports; see also Comment of NextDecade Corp. at 9; Comment of API at 2. Additionally, we note that Dominion Energy Cove Point LNG, LP (DECP) commenced LNG exports on March 2, 2018. To date, DECP has exported 36 LNG cargoes from its terminal in Lusby, Maryland (both long-term and short-term exports), with deliveries to 13 countries and regions worldwide. 117 See Comment of Cheniere at 2. VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 and Corpus Christi Liquefaction Projects have generated, and will continue to generate, tens of thousands of indirect jobs across the United States. Cheniere states that, to date, it has sourced natural gas for the Sabine Pass Liquefaction Project from dozens of producers located in Texas, Louisiana, Arkansas, Pennsylvania, Ohio, West Virginia, Oklahoma, Illinois, and Kentucky. Cheniere maintains that jobs have been created due to the demand its LNG export operations have created for natural gas infrastructure—including in the steel industry and in other segments of the natural gas supply chain.118 In this regard, Cheniere states that liquefaction projects require a wide variety of manufactured parts and components, many of which can be sourced from domestic manufacturers. Cheniere states that, to date, its LNG facilities have procured components from 1,590 U.S. manufacturers in 46 states.119 In sum, Cheniere maintains that, ‘‘through its procurement of domestic natural gas and across its manufacturing supply chain,’’ it ‘‘has seen first-hand the broad economic benefits of LNG exports to the American economy.’’ 120 The American Petroleum Institute (API) agrees that the results of the 2018 LNG Export Study ‘‘are consistent with U.S. LNG experience to date.’’ 121 Specifically, API states that U.S. LNG cargoes commenced in early 2016, yet the impact on domestic prices of natural gas has been negligible. Likewise, the Pennsylvania Chamber of Business and Industry states that concerns about significant increases in natural gas prices occurring after DOE/FE began authorizing LNG exports have not been borne out.122 b. DOE/FE Response The 2018 Study did not attempt to quantify the macroeconomic impacts or other direct and indirect effects of LNG exports since February 2016. Nonetheless, to provide one estimate of the current value of U.S. LNG exports, DOE/FE points to the quantity and price of U.S. LNG exported to date, as reported by DOE/FE export authorization holders. Since initial exports began from the lower-48 states in February 2016, a cumulative volume of over 1.7 trillion cubic feet of natural gas has been exported through October 2018, and the corresponding volume118 See 119 See id. id. 120 Id. 121 Comment of API at 2. of Pennsylvania Chamber of Business and Industry at 1–2; see infra at § VI.G. 122 Comment PO 00000 Frm 00053 Fmt 4703 Sfmt 4703 67263 weighted prices for the same period yield a value of over $7.9 billion.123 Additionally, as noted previously, since U.S. LNG exports from the lower-48 states began, the projected Henry Hub price in 2040 has decreased from AEO 2017 to AEO 2018, which is a function of the size of domestic natural gas supply to meet both domestic and export demand. 2. Macroeconomic Benefits Under DOE’s Studies to Date a. Comments Several commenters point out that the 2018 LNG Export Study builds on both DOE’s prior macroeconomic studies and several studies conducted by other authors in reaffirming the economic benefits of LNG exports.124 Cheniere notes that, even before the 2018 Study, DOE/FE had already developed a large body of analysis demonstrating the substantial macroeconomic benefits of LNG exports to the United States. Cheniere, JCEP, and API state that DOE’s four prior studies were varied in their methodology, but they all confirm the same fundamental conclusion: LNG exports are a clear net benefit to the U.S. economy and are therefore in the public interest.125 The commenters maintain that the conclusions of the 2018 LNG Export Study—especially when considered along with DOE’s prior LNG studies—should put to rest any lingering concerns that increased U.S. LNG exports are not in the public interest. According to API, ‘‘[i]t should now be abundantly clear that U.S. LNG offers sizable benefits to U.S. consumers, workers, and the economy overall.’’ 126 b. DOE/FE Response DOE’s prior LNG export studies (the 2012, 2014, and 2015 LNG Export Studies) consistently have projected positive economic benefits from increased levels of U.S. LNG exports, as measured by GDP. 123 LNG exports of 186,841 million cubic feet (MMcf) in 2016 * $4.71/thousand cubic feet (Mcf) + LNG exports of 707,542 MMcf in 2017 * $4.69/ Mcf + LNG exports of 852,368 MMcf from Jan.–Oct. 2018 at $4.90/Mcf, as reported in EIA’s Natural Gas Monthly (Nov. 2018), available at: https://www.eia. gov/naturalgas/monthly/pdf/table_05.pdf (Table 5, U.S. natural gas exports, 2016–2018) and FE LNG Monthly, Dec. 2018, available at: https:// www.energy.gov/fe/listings/lng-reports. 124 Cheniere, LNG Allies, and API identify other studies examining LNG exports by authors including the Brookings Institution, Deloitte, IHS, IHS Energy, ICF International, and API. 125 Comment of Cheniere at 2–3 & nn.6–10 (citations omitted); Comment of JCEP at 3; Comment of API at 2. 126 Comment of API at 3. E:\FR\FM\28DEN1.SGM 28DEN1 67264 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices C. Distributional Impacts amozie on DSK3GDR082PROD with NOTICES1 1. Gross Domestic Product (GDP) a. Comments Some commenters, including IECA, Sierra Club, and the Evans Schaaf Family, allege that any macroeconomic benefits from the 2018 LNG Export Study are likely overstated. These commenters allege that, in concluding that LNG exports would create a net benefit to the economy, the 2018 Study relied too heavily on the fact that exports will increase GDP while failing to give adequate weight to projected domestic natural gas price increases, as well as to negative socio-economic, sectoral, and regional impacts. IECA also disagrees with the fact that the 2018 Study emphasizes the national net economic benefits of LNG exports. IECA charges that this focus is not consistent with the U.S. Supreme Court’s definition of ‘‘public interest,’’ which it claims is intended to focus on ‘‘impacts to people, not GDP.’’ 127 Other commenters—including the Marcellus Shale Coalition, API, CLNG, NextDecade Corp., and the Anonymous commenter—assert that LNG exports will provide macroeconomic benefits to the United States. These commenters point out that, across a wide range of scenarios, the 2018 Study found that LNG exports will provide a net benefit to the U.S. economy and will allow for continued economic growth. JCEP and Cheniere emphasize the 2018 Study’s conclusion that ‘‘ ‘there is greater gain in GDP as the LNG export volume increases.’ ’’128 Specifically, as commenters point out, the 2018 Study demonstrates that GDP grows as LNG exports increase because the U.S. economy benefits from investment in liquefaction facilities, export revenues, income from the upstream and midstream natural gas industry, and tolling charges generated by the LNG export facilities. JCEP emphasizes that these increases in GDP result, in part, from the fact that exports of LNG will not result in decreased domestic consumption of natural gas. Rather, LNG exports will be in addition to, not in place of, domestic uses of natural gas.129 NextDecade acknowledges the 2018 Study’s conclusion that ‘‘there is virtually no chance’’ that non-FTA LNG exports will reach the 55.04 Bcf/d level in aggregate volumes for which DOE had approved and/or received 127 Comment of IECA at 3. e.g., Comment of Cheniere at 5 (quoting 2018 LNG Export Study at 67–68). 129 Comment of JCEP at 4 (citing 2018 LNG Export Study at 77). 128 See, VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 applications by 2040 (as of the date of the Study).130 Nonetheless, NextDecade points out that, regardless of the volume of LNG ultimately exported, the 2018 Study found that LNG exports are in the public interest. For this reason, NextDecade asserts that the market, not DOE, should decide which of the pending LNG export projects will meet global market demand. NextDecade further notes the 2018 Study’s finding that ‘‘ ‘any restrictions on LNG exports would forgo the additional GDP to be gained by allowing exports to respond to market conditions.’ ’’ 131 In sum, these commenters support NERA’s conclusion that allowing the market to determine the level of U.S. LNG exports will ‘‘lead to an increase in overall economic activity leading to higher GDP.’’ 132 b. DOE/FE Response The 2018 Study measured the broad macroeconomic effects on the U.S. economy through several metrics, including ‘‘the wellbeing of the average U.S. consumer, total household income from all sources, economy-wide investment, output effects on key manufacturing sectors, and gross domestic product (GDP).’’ 133 With respect to consumer well-being, the 2018 Study found that all scenarios within the more likely range of results are welfare-improving for the average U.S. household. This result is driven by households’ receipt of additional income from export revenues and takeor-pay tolling charges for LNG exports, and this additional income outweighs the income lost from higher energy prices.134 In terms of total household income, the 2018 Study considered two broad categories of income sources: Resource income and value-added income. The resource income reflects the value of the natural gas resource as well as returns to specialized capital and labor. The value-added income is a measure of labor income and capital income. In the 2018 Study, both resource income and value-added income increase as LNG exports increase for given domestic natural gas supply assumptions across the more likely scenarios examined.135 In terms of economy-wide investment, the 2018 Study shows higher levels of aggregate investment for higher levels of LNG exports. Within the natural gas sector, additional investments take place to expand natural gas production 130 Comment of NextDecade Corp. at 11 (quoting 2018 LNG Export Study at 49). 131 Id. (quoting 2018 LNG Export Study at 68). 132 2018 LNG Export Study at 68. 133 Id. at 65. 134 Id. at 66–67. 135 Id. at 73–74. PO 00000 Frm 00054 Fmt 4703 Sfmt 4703 and to build liquefaction capacity. Overall aggregate investment also grows with capacity increases in industries that supply machinery and equipment that make up the overall natural gas value chain.136 Finally, in terms of GDP, as noted previously, the 2018 Study found a ‘‘positive correlation between GDP and LNG exports for the more likely scenarios in 2040.’’ 137 2. Sectoral Impacts a. Comments Some commenters, including IECA, Jody McCaffree, and the Evans Schaaf Family, debate whether LNG exports will impact the domestic energyintensive, trade-exposed (EITE) sectors disproportionately, at too high a cost to the U.S. economy to justify exporting LNG.138 Specifically, IECA asserts that increasing U.S. LNG exports reduces the cost of natural gas to global competitors and simultaneously increases the domestic cost of natural gas and electricity—creating a ‘‘double negative impact’’ on EITE industries.139 According to these commenters, these price impacts will lead to lost jobs and lower wages in the EITE sectors, while also making it more difficult for the U.S. to compete globally, invest capital, and create high-paying middle class jobs. According to IECA, the oil and natural gas industry employed 512,000 jobs in 2017, whereas the manufacturing sector currently employs 12,713,000 jobs.140 Of the approximately 12.7 million manufacturing jobs, approximately 5,125,600 jobs in the EITE industries would be most affected by LNG exports.141 IECA cautions that if DOE ‘‘approves too many export terminals and natural gas prices rise,’’ DOE will be putting ‘‘at risk trillions of dollars of manufacturing assets and over 12.7 million jobs.’’ 142 In light of the various alleged flaws in the 2018 Study identified by IECA and discussed herein, IECA maintains that the 2018 Study overinflates economic growth and job projections attributed to LNG exports. Other commenters, including CLNG and API, dispute these arguments. They disagree with the notion that an LNG 136 Id. at 76. at 67. 138 IECA states that its members in EITE sectors represent industries including: Chemicals, plastics, steel, iron ore, aluminum, paper, food processing, fertilizer, insulation, glass, industrial gases, building products, automotive, independent oil refining, and cement. See Comment of IECA at 2. 139 Id. 140 Id. 141 Id. 142 Id. 137 Id. E:\FR\FM\28DEN1.SGM 28DEN1 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices amozie on DSK3GDR082PROD with NOTICES1 export industry cannot co-exist with a growing domestic manufacturing base. They emphasize the size and productivity of the U.S. natural gas resource base, contending that there is an abundance of natural gas to support both LNG export demand and continued growth in the EITE industries. CLNG argues that the ‘‘dramatic increase’’ in natural gas supply has enabled an industrial renaissance in the U.S. manufacturing sector, with demand for natural gas from the manufacturing sector reaching an all-time high this past winter.143 According to CLNG, growth in LNG exports sends market signals to incentivize domestic production of natural gas. This increased production benefits U.S. consumers, as well as industries involved in the natural gas supply chain (such as construction and manufacturing)—spurring more economic growth.144 NextDecade similarly asserts that, under the 2018 Study’s most likely scenarios, industries that rely on natural gas for fuel and as a raw material input will maintain strong growth, even if LNG exports increase.145 Additionally, API argues that the economic benefits of increased natural gas use extend to the industrial sector— including through the increased production of associated natural gas liquids (NGLs), which must be extracted before natural gas is liquefied for export. CLNG and API maintain that growth in NGLs creates a competitive advantage for U.S. chemical manufacturers and leads to greater investment, industry growth, and new jobs.146 API contends that NGLs ‘‘have bolstered the U.S. petrochemical sector and fostered a renaissance in U.S. manufacturing,’’ underscoring the value of U.S. LNG at home and abroad.147 Next, CLNG argues that companies from around the world are investing in new projects to build or expand their ‘‘shale-advantaged capacity’’ in the United States. CLNG states that, between 2010 and 2015, 48 new industrial projects in the petrochemical, fertilizer, steel, and natural gas-toliquids sectors were completed, representing an investment of $28 billion.148 According to CLNG, experts forecast additional industrial investment of $135 billion to build 59 143 Comment of CLNG at 4 & n.17 (citing Energy Ventures Analysis, Inc., 2017–2018 Winter Outlook for Natural Gas, 2017). 144 See id. at 4. 145 Comment of NextDecade Corp. at 5. 146 Comment of CLNG at 4. 147 Comment of API at 2–3. 148 Comment of CLNG at 4. VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 new projects and 11 expansions between 2017 and 2022.149 In sum, CLNG cautions that suppressing LNG exports will limit production of natural gas which, in turn, will limit both: (i) Overall economic benefits to the domestic economy, and (ii) the opportunity for the United States to continue growing its manufacturing sectors that benefit from increased supplies of natural gas.150 b. DOE/FE Response With respect to the argument that natural gas confers greater value on the U.S. economy when used in manufacturing than when produced for export, DOE observes that more natural gas is likely to be produced domestically if LNG exports are authorized than if they are prohibited. There is no one-for-one trade-off between natural gas used in manufacturing and natural gas diverted for export. These observations are consistent with DOE/FE’s analysis of similar arguments made in response to its prior macroeconomic studies.151 The competition between the demand for natural gas for domestic consumption and the demand for natural gas for export is captured in the modelling for the 2018 Study. In scenarios with increased levels of U.S. LNG exports with common domestic natural gas supply assumptions, the 2018 Study found that greater economic benefits, in terms of GDP, accrued to the U.S. economy due to those exports. Contrary to IECA’s concerns about the negative impacts to EITE industries potentially caused by increased LNG exports, the 2018 Study found: ‘‘All negatively affected sectors, and in particular the natural gas intensive sectors, continue to grow robustly at higher levels of LNG exports, albeit at slightly lower rates of increase than they would at lower levels.’’ 152 The 2018 Study further found that, ‘‘[s]ectoral growths rates remain robust for all of the sectors that rely on natural gas as fuel and raw material input,’’ with ‘‘[t]he variation in the growth rates attributable to differences in LNG exports ranges from one to seven basis points (0.01% to 0.07%).’’ 153 Based on these findings 149 Id. (citing Energy Ventures Analysis, Inc., 2017–2018 Winter Outlook for Natural Gas, 2017). 150 Id. at 4. 151 See, e.g., Golden Pass Products LLC, DOE/FE Order No. 3978, FE Docket No. 12–156–LNG, Opinion and Order Granting Long-Term, MultiContract Authorization to Export Liquefied Natural Gas by Vessel from the Golden Pass LNG Terminal Located in Jefferson County, Texas, to Non-Free Trade Agreement Nations, at 77–80 (Apr. 25, 2017). 152 2018 LNG Export Study at 70. 153 Id. PO 00000 Frm 00055 Fmt 4703 Sfmt 4703 67265 (which no commenters attempt to rebut), we are not persuaded by IECA’s claim that DOE’s approval of LNG exports will put trillions of dollars of U.S. manufacturing assets and millions of jobs at risk, among other alleged negative impacts. With respect to the argument that some industries derive greater economic value from natural gas than others, DOE/FE continues to be guided by the long-standing principle established in the 1984 Policy Guidelines that resource allocation decisions of this nature are better left to the market, rather than to DOE, to resolve.154 3. Consumer Welfare a. Comments Sierra Club, IECA, the Evans Schaaf Family, and other commenters maintain that the positive macroeconomic benefits of LNG exports will not accrue to most U.S. citizens. They contend that the 2018 Study acknowledges both the positive and negative effects associated with LNG exports, but glosses over the fact that these positive and negative effects are not equally or evenly distributed.155 According to these commenters, exports of LNG will harm all Americans by increasing natural gas prices, and thus most Americans will not share in any benefits associated with LNG exports. Sierra Club and IECA argue that the main beneficiaries of LNG exports will be a very small fraction of the U.S population—namely, American households that own stock in natural gas production and export companies. Sierra Club claims that the 2018 Study ‘‘simply asserts’’ that households in general own the LNG production processes and industries, without providing any analysis of which households own this stock or how the benefits and harms of exports will be distributed among the American public.156 These commenters argue that, without such analysis, DOE cannot conclude that LNG exports are in the public interest. IECA adds that a future revenue stream from LNG exports cannot predict the level of dividends paid out to shareholders or whether a share price will rise—and alleges that NERA did not disclose the economics behind this claim.157 Additionally, IECA argues that the 2018 Study points to a second economic benefit of LNG exports that will offset household economic losses due to 154 See infra § I.B. of Sierra Club at 2 (quoting 2018 LNG Export Study at 64). 156 Id. 157 Comment of IECA at 3. 155 Comment E:\FR\FM\28DEN1.SGM 28DEN1 67266 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices amozie on DSK3GDR082PROD with NOTICES1 higher energy costs: an increase in the value of the U.S. dollar. IECA disputes this benefit, contending (among other arguments) that it is speculative to assume that LNG exports would increase the value of the dollar, when there are far greater influences on the dollar’s value.158 On the other hand, NextDecade contends that all of the ‘‘more likely’’ scenarios considered by NERA will improve consumer welfare for the average U.S. household, with consumer welfare strengthening even when global demand for LNG exports increases.159 According to NextDecade, the 2018 Study shows that consumer welfare is highest when the United States has an abundant, low-cost, domestic natural gas supply.160 Citing the 2018 Study, NextDecade and JCEP argue that this wealth transfer will benefit U.S. households through increased labor income and lower prices overall for imported goods—such that the benefits of LNG exports will outweigh any potential increase to the marginal cost of supplying natural gas.161 b. DOE/FE Response Consistent with DOE/FE’s prior studies, DOE believes that the public interest generally favors authorizing proposals to export natural gas that have been shown to lead to net benefits to the U.S. economy. DOE has observed in previous export authorizations that, although there could be circumstances in which the distributional consequences of an authorizing decision could be shown to be so negative as to outweigh net positive benefits to the U.S. economy as a whole, DOE had not been presented with sufficiently compelling evidence that those circumstances were present. The 2018 Study describes how different households could be affected by increased levels of LNG exports. In terms of direct benefits, the 2018 Study states that, ‘‘[i]f U.S. households, or their retirement funds, hold stock in natural gas producers, they will benefit from the increase in the value of their investment.’’ 162 The 2018 Study noted indirect benefits of increased LNG exports accruing to households through the additional wealth transferred into the United States, ‘‘which increases the value of the dollar and reduces prices of other imported goods.’’ 163 Overall, ‘‘[l]ike other trade measures, LNG of NextDecade Corp. at 5. 160 Id. 161 Comment of JCEP at 5 (citing 2018 LNG Export Study at 64–65). 162 2018 LNG Export Study at 64. 163 Id. VerDate Sep<11>2014 D. Regional Impacts 1. Comments Some commenters, including Jody McCaffree and the Evans Schaaf Family, address the negative regional impacts potentially associated with LNG exports. They argue that local communities near shale gas production areas, pipelines, and/or LNG export terminals could be adversely affected by increases in natural gas production and 164 Id. at 64–65. at 66–67. 166 See Sierra Club v. U.S. Dep’t of Energy, Nos. 16–1186, 16–1252, 16–1253, 703 Fed. Appx. 1, at *3 (DC Cir. Nov. 1, 2017) (Sierra Club II), discussed infra at § I.C. 167 Id. (emphasis added, internal quotations omitted, and alteration in original). 168 Id. 165 Id. 158 Id. 159 Comment exports will cause shifts in industrial output, employment, and in sources of income.’’ 164 However, the effects on different households from increased LNG exports will depend on their income sources. As described previously, with respect to consumer well-being, the 2018 Study found that all scenarios within the more likely range of results are welfareimproving for the average U.S. household. This result is driven by households’ receipt of additional income from export revenues and takeor-pay tolling charges for LNG exports, and this additional income outweighs the income lost from higher energy prices.165 Finally, we note that in the consolidated Sierra Club II case, the D.C. Circuit rejected—in all three cases—Sierra Club’s argument that DOE ‘‘erred by failing to consider distributional impacts’’ when evaluating the public interest under NGA section 3(a).166 The Court upheld DOE/FE’s conclusion that ‘‘given that exports will benefit the economy as a whole and absent stronger record evidence on the distributional consequences, [DOE/FE] could not say that . . . exports were inconsistent with the public interest on these grounds.’’ 167 On this basis, the Court held that DOE/FE had ‘‘adequately addressed’’ Sierra Club’s concerns regarding distributional impacts.168 None of the commenters advancing this argument have provided a quantitative analysis of the distributional consequences of authorizing LNG exports at the household level. Absent stronger record evidence on these alleged distributional consequences, we cannot say that increased LNG exports are inconsistent with the public interest on these grounds. 18:13 Dec 27, 2018 Jkt 247001 PO 00000 Frm 00056 Fmt 4703 Sfmt 4703 LNG exports. They cite loss of property through eminent domain, property devaluation, degradation of infrastructure, environmental and public health issues (including local air pollution and poisoned drinking water), and harm to local economies, among other issues. Other commenters seek to rebut these concerns by identifying the positive regional benefits associated with LNG exports, both in regions where shale development and production occur, and the regions in which LNG export terminals may be located. For example, the Marcellus Shale Coalition (comprised of nearly 200 producing, midstream, transmission, and supply chain members committed to the development of natural gas resources in the Marcellus, Utica, and related geological formations) cites the economic benefits of LNG exports to Pennsylvania’s economy. The Coalition further asserts that increasing LNG exports is crucial to stabilizing domestic natural gas markets—particularly in the Appalachian Basin—and positioning these markets for continued growth.169 2. DOE/FE Response A general consideration of regional impacts is outside of the scope of the 2018 LNG Export Study. DOE/FE believes regional impacts are appropriately considered on a case-bycase basis during the review of each non-FTA application, consistent with DOE/FE’s longstanding practice. E. Estimates of Domestic Natural Gas Supply 1. Comments Jody McCaffree points to DOE/FE’s total approved volume of exports to both FTA and non-FTA countries in alleging that DOE ‘‘has already approved LNG exports in excess of projected U.S. production’’ of natural gas.170 Other commenters, including API, CLNG, and the Marcellus Shale Coalition, assert that the United States has abundant domestic natural gas reserves. Pointing to the 2018 Study, CLNG asserts that ‘‘[t]he scenarios where the U.S. reaps the most economic gains at the lowest price from exporting LNG are those where our supply of natural gas is highest.’’ 171 CLNG further asserts that the United States is more than capable of continuing to meet high production and supply expectations, citing the growth of U.S. natural gas 169 Comment of Marcellus Shale Coalition at 1– 170 Comment of Jody McCaffree at 4. of CLNG at 3. 2. 171 Comment E:\FR\FM\28DEN1.SGM 28DEN1 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices production, the growth in total natural gas resource estimates, and improvements in the ability to detect and extract natural gas. Commenters, such as API and the Pennsylvania Chamber of Business and Industry, likewise point to the conclusions of the 2018 Study in arguing that the vast resources of U.S. natural gas can provide affordable supplies to meet domestic demand, while simultaneously providing for an increase in LNG exports. The Pennsylvania Chamber of Business and Industry maintains that authorizing LNG exports results in a stable, affordable supply of natural gas to residential, commercial, and industrial customers. In the Chamber’s view, the market development of natural gas, both domestically and abroad, promotes natural gas production and the build-out of natural gas transmission and LNG infrastructure in the United States.172 2. DOE/FE Response amozie on DSK3GDR082PROD with NOTICES1 First, DOE/FE notes that the volumes authorized for export to FTA and nonFTA countries are not additive to one another. Ms. McCaffree’s argument does not appear to recognize this fact, which is reflected in DOE’s orders. Rather, each authorization grants authority to export the entire volume of a facility to FTA or non-FTA countries, respectively, to provide the authorization holder with maximal flexibility in determining its export destinations. According to EIA data, U.S. domestic dry natural gas production for the year 2017 averaged a rate of 74.77 Bcf/d, well in excess of current long-term FTA and non-FTA authorizations (in non-additive volumes of 59.33 Bcf/d and 23.05 Bcf/d, respectively).173 DOE/FE takes note of the natural gas production projections in EIA’s AEO 2018, which show significant increases over the forecast period. In the Reference case, dry natural gas production is projected to increase by 49% from 2016 to 2040 (26.94 Tcf to 40.15 Tcf).174 In the High Oil and Gas Resource and Technology case, the growth from 2016 to 2040 in dry natural 172 Comment of Pennsylvania Chamber of Business and Industry at 1–2. 173 U.S. Energy Information Administration, ‘‘Short-Term Energy Outlook,’’ available at: https:// www.eia.gov/outlooks/steo/data/browser/#/?v=15& f=A&s=0&maptype=0&ctype=linechart (Table 5a, U.S. Natural Gas Supply, Consumption, and Inventories, ‘‘Total Dry Gas Production’’). 174 See AEO 2018, supra note 84, https:// www.eia.gov/outlooks/aeo/data/browser/#/?id=13AEO2018&cases=ref2018&sourcekey=0;0 (link to table: Natural Gas Supply, Disposition, and Prices, ‘‘Dry Gas Production’’). VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 gas production is even larger at 85% (26.94 Tcf to 49.98 Tcf).175 F. Cost of Environmental Externalities 1. Comments Several commenters, including Sierra Club, Oregon Wild, Jody McCaffree, and the Evans Schaaf Family, maintain that LNG exports will increase demand for natural gas, thereby increasing negative environmental and economic consequences associated with natural gas production. Sierra Club adds that every stage of the LNG lifecycle has important environmental impacts. These commenters assert that the 2018 Study failed to consider the cost of environmental externalities associated with LNG exports. The externalities identified by these commenters include, but are not limited to, the following: • Environmental costs associated with producing more natural gas to support LNG exports, including the costs, risks, and impacts associated with hydraulic fracturing and drilling to produce natural gas; and costs associated with increased water scarcity to support hydraulic fracturing; • Environmental costs associated with the life cycle of U.S. LNG (hydraulic fracturing of shale gas, liquefaction, and export) in the form of increased emissions of GHGs and other global warming pollution, climate change and climate instability (including droughts and other extreme weather events), and ocean acidification; • Local and regional costs associated with LNG exports, including impacts on local communities and industries; • The costs associated with eminent domain, which may be necessary to build new pipelines to transport natural gas; and • The potential regulatory costs and impacts of environmental regulations governing hydraulic fracturing and natural gas drilling. According to Sierra Club, ‘‘DOE has demonstrated that it plainly has the tools needed to consider these issues,’’ 176 yet the 2018 Study failed to consider them. The Evans Schaaf Family also urges DOE to clarify what emissions are being calculated and whether a cost of those emissions has been included in the results of the 2018 Study.177 2. DOE/FE Response Analysis of environmental impacts from the export of U.S. LNG was not 175 Id. 176 Comment 177 Comment PO 00000 Frm 00057 of Sierra Club at 2. of Evans Schaaf Family at 6. Fmt 4703 Sfmt 4703 67267 part of the scope of the 2018 Study. Consistent with DOE/FE practice, all environmental issues will be analyzed in the final order issued in each of the pending and future non-FTA proceedings. G. Natural Gas Price Impacts 1. Comments Several commenters, such as IECA and Sierra Club, address potential natural gas price impacts associated with LNG exports. They contend that increases in LNG exports will increase demand for natural gas, driving up prices in the United States and adversely affecting electric and natural gas utility consumers, EITE industries, and residential consumers. In particular, IECA asserts that the 2018 Study’s ‘‘most likely’’ scenario—LNG exports up to 30.7 Bcf/d by 2040—could increase prices 117% above today’s Henry Hub prices by 2040, and 44% above EIA’s AEO 2018 price in 2040 (which assumes 14.5 Bcf/d of LNG exports).178 IECA alleges that such price hikes would threaten the domestic supply of natural gas at reasonable prices, such that exports of this magnitude would not be in the public interest.179 IECA further warns that ‘‘excessive LNG exports’’ may result in domestic prices for natural gas becoming tied to global demand-driven pricing.180 According to IECA, when global demand increases, so will U.S. natural gas prices—to the detriment of U.S. consumers. On the other hand, commenters such as API, NextDecade, and the Pennsylvania Chamber of Business and Industry dispute the likelihood of price increases due to LNG exports. For example, NextDecade points to the finding of the 2018 Study that U.S. natural gas prices are more dependent on both the availability of natural gas and extraction technology than on U.S. LNG export policy—which, it states, demonstrates the importance of policies that continue to support natural gas infrastructure, including LNG export authorizations. For this reason, NextDecade asserts, the 2018 Study shows that higher LNG exports cause only ‘‘very small’’ increases in U.S. natural gas prices, if any.181 These commenters contend that, in fact, there have been no significant price increases since exports of U.S. LNG began in 2016, contrary to warnings 178 Comment of IECA at 2–3. at 2 (citing Fed. Power Comm’n v. Hope Gas Co., 320 U.S. 591, 610 (1944)). 180 Id. at 1. 181 Comment of NextDecade Corp. at 5–6 (citing 2018 LNG Export Study at 55). 179 Id. E:\FR\FM\28DEN1.SGM 28DEN1 67268 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices made by commenters on DOE’s prior LNG export studies. They point to the 2018 Study in arguing that domestic natural gas prices are unlikely to increase to a level that would impair manufacturing cost competitiveness or hurt consumers. According to API, the 2018 Study clearly shows that even at high levels of LNG exports, the impact on domestic prices is minimal because these exports are generating incremental new natural gas production that otherwise would not have a domestic market.182 CLNG further argues that allowing U.S. Henry Hub indexed exports will help sustain lower pricing over the long-term and provide an alternative to oil-linked natural gas contracts.183 NextDecade states that, even in New England (which experiences frequent natural gas price spikes), the 2018 Study shows that the average base differential between New England and Henry Hub prices is unlikely to be affected by increases in LNG exports in the long run. As NextDecade explains, NERA found that these price spikes in New England are the result of the region’s limited natural gas pipeline infrastructure and localized weather events. Therefore, NextDecade asserts, the prices spikes will continue regardless of the level of LNG exports.184 2. DOE/FE Response The 2018 Study described two relationships between U.S LNG exports and U.S. natural gas prices based on the modeling results: • ‘‘Increasing U.S. LNG exports under any given set of assumptions about U.S. natural gas resources and their production leads to only small increases in U.S. natural gas prices;’’ and • ‘‘Available natural gas resources have the largest impact on natural gas prices. Therefore, U.S. natural gas prices are far more dependent on available resources and technologies to extract available resources than on U.S. policies surrounding LNG exports.’’ 185 In the 2018 Study results, natural gas prices range from $5 to $6.50 per MMBtu in 2040 for all the Reference supply scenarios in the more likely range with a combined probability of 47%. In the high resource supply scenarios, natural gas prices range from $3.50 to $4 per MMBtu in 2040 with a combined probability of 22%.186 As an initial matter, IECA incorrectly identified the ‘‘most likely’’ scenario of LNG exports from the 2018 Study. ‘‘Table 4’’ in the Study provides the scenario probabilities for the more likely scenarios.187 The most likely scenario has a probability of 14.5% and is the ‘‘Ref_Ref_Ref_High’’ case with exports of 24.0 Bcf/d in 2040.188 This scenario is somewhat more likely than the Reference case (‘‘Ref_Ref_Ref_Ref’’), which has a probability of 13.1% and exports of 12.9 Bcf/d.189 The 30.7 Bcf/ d scenario (‘‘High_Ref_Ref_High’’) identified by IECA is the third most likely at 7.9%.190 Table 4 below shows modeled Henry Hub natural gas prices in 2040 for these three scenarios:’’ 191 TABLE 4—EXPORTS AND HENRY HUB PRICES FOR THREE MOST LIKELY SCENARIOS LNG exports in 2040 (Bcf/d) Scenario Ref_Ref_Ref_High ................................................................................................................................................... Ref_Ref_Ref_Ref ..................................................................................................................................................... High_Ref_Ref_High .................................................................................................................................................. amozie on DSK3GDR082PROD with NOTICES1 These Henry Hub prices in the 2018 Study are somewhat higher than those projected in EIA’s AEO 2018. AEO 2018 projects LNG exports at a rate of 14.5 Bcf/d in the Reference case in 2040 with a corresponding Henry Hub price of $4.50 (in constant 2017 dollars). In the High Oil and Gas Resource and Technology (HOGR) case, LNG exports are larger at 21.9 Bcf/d with a Henry Hub price of $3.02.192 The price projections in the 2018 Study and in EIA’s AEO 2018 are consistent with average annual Henry Hub spot prices over the past two decades. Between 2000 and 2009, annual average Henry Hub spot prices ranged from $3.38 to $8.86 per MMBtu; between 2010 and 2017, prices ranged from $2.52 to $4.37 per MMBtu.193 of API at 1. of CLNG at 5. 184 Comment of NextDecade Corp. at 6 (citing 2018 LNG Export Study at 54 n.47). 185 2018 LNG Export Study at 55. 186 Id. at 54. 187 Id. at 50–51. 188 Id. 189 Id. In response to comments noting that increased global demand for natural gas will increase domestic natural gas prices, several scenarios in the 2018 Study analyze this relationship and its domestic macroeconomic impact. Within a domestic natural gas supply scenario, increased ROW demand for natural gas increases domestic natural gas prices, all else being equal.194 This increased ROW demand also causes prices throughout the world to increase.195 The 2018 Study discusses this through an ‘‘international demand pull’’ scenario, quantifying the differences between the High_Ref_Ref_ Low and High_Ref_Ref_High cases (where the only assumption changed is the ROW demand for natural gas). When moving from low to high ROW demand, 182 Comment 190 Id. 183 Comment 191 2018 VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 LNG Export Study at Appendix E (pages unnumbered). 192 AEO 2018, supra note 84, https://www.eia.gov/outlooks/aeo/data/browser/ #/?id=13-AEO2018&region=0-0&cases=highrt& start=2016&end=2050&f=A&sourcekey=0 (link to table: Natural Gas Supply, Disposition, and Prices, ‘‘High resource and technology case,’’ ‘‘Natural gas spot price at Henry Hub’’). PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 24.0 12.9 30.7 Henry Hub in 2040 2016$/MMBtu 6.0 5.6 3.9 the 2018 Study shows an increase in the Henry Hub price of $0.50 and an increase of $2.70 in the wellhead price outside of North America.196 While domestic and ROW natural gas prices both increase, the increased ROW demand drives a larger increase in ROW prices than domestically. In this way, the 2018 Study shows that U.S. natural gas prices will not rise to the same levels as global natural gas prices as a result of increased LNG exports. This result is consistent with the 2015 Study’s analysis of the linkages between U.S. and global natural gas prices, as DOE/FE previously discussed.197 As noted previously, the 2018 Study consistently shows macroeconomic benefits to the U.S. economy in every scenario at the projected Henry Hub 193 See EIA, Henry Hub Natural Gas Spot Price (Annual), available at: https://www.eia.gov/dnav/ ng/hist/rngwhhda.htm (Dec. 12, 2018). 194 2018 LNG Export Study at 57–58. 195 Id. at 59. 196 Id. at 57–60. 197 See, e.g., Golden Pass Products LLC, DOE/FE Order No. 3978, at 91–92. E:\FR\FM\28DEN1.SGM 28DEN1 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices natural gas prices, as well as positive annual growth across the energyintensive sectors.198 H. Benefits to U.S. Trade Balance 1. Comments API and JCEP point to the conclusion of the 2018 LNG Export Study that increased exports of natural gas will improve the U.S. balance of trade. API further argues that LNG exports have helped to position the United States as an ‘‘energy superpower,’’ changing the ‘‘energy equation’’ to the benefit of the United States.199 NextDecade maintains that, with estimated export revenues of up to $129 billion per year by 2040, LNG exports present a significant opportunity to close the U.S. trade gap. NextDecade further states that, within the range of the Henry Hub price scenarios, the 2018 Study demonstrates that the United States is and will be a net exporter of natural gas—and, indeed, may ‘‘emerge as the world’s largest supplier of LNG in the coming years.’’ 200 According to NextDecade, the 2018 Study also demonstrates that, even though natural gas supply and demand shocks both inside and outside of the United States have different impacts on natural gas prices, they result in similar levels of net LNG exports. Accordingly, NextDecade states that increased LNG exports will benefit the trade balance regardless of the volume exported.201 The Pennsylvania Chamber of Business and Industry agrees that the 2018 Study affirms the significant benefits that global trade can bring to the United States—specifically, through both LNG exports and in attracting new investment in manufacturing assets reliant on affordable natural gas.202 2. DOE/FE Response Consistent with the observations on the benefits of trade made by the commenters, the 2018 Study notes that ‘‘[i]ncreased exports of natural gas will improve the U.S. balance of trade and result in a wealth transfer into the U.S.’’ 203 I. Procedural Arguments 1. Compliance With Data Quality Act amozie on DSK3GDR082PROD with NOTICES1 a. Comments IECA argues that the 2018 LNG Export Study violates the Data Quality Act 198 2018 LNG Export Study at 67, 70. of API at 2. 200 Comment of NextDecade Corp. at 4. 201 Id. at 8. 202 Comment of Pennsylvania Chamber of Business and Industry at 1–2. 203 2018 LNG Export Study at 64. 199 Comment VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 (DQA) because: (i) NERA used a ‘‘proprietary and non-reproducible economic model,’’ and (ii) the Study’s peer reviewers allegedly have a financial interest in LNG exports, such that they could not be independent in their views.204 For these reasons, IECA contends that the 2018 Study ‘‘cannot be used in decision-making by DOE.’’ 205 i. Background on Data Quality Act In December 2000, Congress passed and the President signed the Treasury and General Government Appropriations Act for Fiscal Year 2001 (Pub. L. 106–554). Section 515 of that bill is commonly referred to as the ‘‘Data Quality Act’’ or the ‘‘Information Quality Act.’’ 206 Section 515 directed the Office of Management and Budget (OMB) to issue government-wide guidelines that ‘‘provide policy and procedural guidance to Federal agencies for ensuring and maximizing the quality, objectivity, utility, and integrity of information (including statistical information) disseminated by Federal agencies . . . .’’ 207 Between 2001 and 2002, OMB published a series of guidelines and supplementary information implementing the Data Quality Act.208 In final guidelines issued in February 2002, OMB instructed federal agencies to issue their own implementing guidelines by October 1, 2002. In its Guidelines, OMB observed that the Data Quality Act ‘‘denotes four substantive terms regarding information disseminated by Federal agencies: quality, utility, objectivity, and integrity.’’ 209 In October 2002, in response to OMB’s Guidelines, DOE issued a document entitled Final Report Implementing Office of Management and Budget Information Dissemination Quality Guidelines.210 DOE explained 204 Comment of IECA at 4. 205 Id. 206 Most federal agencies (including DOE) refer to section 515 as the ‘‘Information Quality Act,’’ but because IECA uses the ‘‘Data Quality Act’’ terminology, we will do so here. 207 Section 515, Treasury & General Gov’t Appropriations Act for Fiscal Year 2001 (Pub.L. 106–554; 114 Stat. 2763A–154)). The Data Quality Act amended the Paperwork Reduction Act of 1995 (44 U.S.C. Ch. 35). 208 Office of Mgmt. & Budget, Guidelines for Ensuring and Maximizing the Quality, Objectivity, Utility, and Integrity of Information Disseminated by Federal Agencies; Republication, 67 FR 8452, 8452–8454 (Feb. 22, 2002) (summarizing OMB’s procedural history in implementing section 515) [hereinafter OMB Guidelines]. 209 Id. (‘‘quality’’ is ‘‘the encompassing term, of which ‘utility,’ ‘objectivity,’ and ‘integrity’ are the constituents); see also id. at 8459 (definition of ‘‘quality’’). 210 U.S. Dep’t of Energy, Final Report Implementing Office of Management and Budget Info. Dissemination Quality Guidelines, 67 FR PO 00000 Frm 00059 Fmt 4703 Sfmt 4703 67269 that it modeled its Guidelines on the OMB Guidelines with modifications specific to DOE.211 ii. IECA’s Arguments IECA argues that the 2018 Study violates three standards set forth in the DOE Guidelines: reproducibility, objectivity, and integrity.212 The DOE Guidelines define these terms as follows: • Reproducibility: ‘‘means capability of being substantially reproduced, subject to an acceptable degree of imprecision, and with respect to analytical results, ‘capable of being substantially reproduced’ means that independent analysis of the original or supporting data using identical methods would generate similar analytic results . . . .’’ 213 • Objectivity: ‘‘means the information is presented in an accurate, clear, complete, and unbiased manner and the substance of the information is accurate, reliable, and unbiased.’’ 214 • Integrity: ‘‘means the information has been secured and protected from unauthorized access or revision, to ensure that the information is not compromised through corruption or falsification.215 IECA also asserts that the 2018 Study is ‘‘influential’’ under the DOE Guidelines, which is defined as: [W]hen used in the context of scientific, financial, or statistical information, information (1) that is subject to embargo until the date of its dissemination . . . because of potential market effects; (2) that is the basis for a DOE action that may result in an annual effect on the economy of $100 million or more; and (3) that is designated by a DOE Element as ‘influential.’ 216 Information qualifying as ‘‘influential’’ is generally subject to a ‘‘high degree of transparency of data and methods . . . to facilitate the reproducibility of [the] information by qualified third parties,’’ unless it falls within a stated exemption.217 First, addressing reproducibility, IECA states that the 2018 Study uses a ‘‘NERA proprietary economic model,’’ such that ‘‘third party economists have concluded that the results of the study 62446 (Oct. 7, 2002), available at: https:// www.energy.gov/sites/prod/files/nepapub/nepa_ documents/RedDont/G-DOE-67FR6244 6OMBquality.pdf [hereinafter DOE Guidelines]. 211 Id. at 62446–47. 212 See Comment of IECA at 4–5. 213 DOE Guidelines, 67 FR 62451 (Definition #9, ‘‘Reproducibility’’). 214 Id. (Definition #7, ‘‘Objectivity’’). 215 Id. (Definition #6, ‘‘Integrity’’). 216 Id. (Definition #3, ‘‘Influential’’). 217 Id. at 62452. E:\FR\FM\28DEN1.SGM 28DEN1 67270 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices are not reproducible.’’ 218 IECA also claims that the 2018 Study qualifies as ‘‘influential’’ under the DQA because ‘‘it may result in an annual effect on the economy of $100 million or more.’’ 219 IECA thus appears to suggest that the 2018 Study is subject to a ‘‘high degree of transparency’’ for purposes of reproducibility by ‘‘qualified third parties.’’ 220 Second, IECA alleges that the 2018 Study is not ‘‘objective’’ and lacks ‘‘integrity’’ within the meaning of the DQA due to alleged personal bias on the part of NERA’s external peer review panel. IECA claims that ‘‘it is likely that every one of the individuals [involved in the peer review]—with the exception of peer reviewer John Staub of EIA— ‘‘have or will receive financial benefits from the oil and natural gas industries.’’ 221 IECA contends that ‘‘[i]ndependent objectivity and integrity is [sic] needed to validate the economic model and whether its assumptions are sound regardless of [the peer reviewers’] understanding of the oil and gas business, and not slanted to support the views of those who desire to export substantial volumes of LNG.’’ 222 On this basis, IECA asks DOE whether the peer reviewers ‘‘disclosed their financial association with the oil and gas industry.’’ 223 The Evans Schaaf Family similarly questions the basis for the 2018 Study, given that (in their view) the data inputs for the Study ‘‘are coming entirely from industry leaders who would likely have something to gain in developing LNG as a global commodity.’’ 224 amozie on DSK3GDR082PROD with NOTICES1 b. DOE/FE Response i. Reproducibility DOE has carefully considered IECA’s arguments and determined that the 2018 LNG Export Study satisfies the DQA’s standard for ‘‘reproducibility,’’ as discussed below. DOE/FE has determined that the 2018 Study fulfills the DQA’s objectives in both providing transparency about the Study and ensuring the quality of information disseminated to the public. As discussed above, NERA relies on publicly available data for input into its models, including EIA’s AEO 2017, EIA’s IEO 2017, and the IEA’s WEO 2016. The AEO and IEO projections are published pursuant to the Department of Energy Organization Act of 1977, 218 Comment of IECA at 4. at 5. 220 DOE Guidelines, 67 FR 62452. 221 Comment of IECA at 5. 222 Id. 223 Id. 224 Comment of Evans Schaaf Family at 1. 219 Id. VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 which requires the EIA Administrator to prepare annual reports on trends and projections for energy use and supply.225 In the Study, NERA explains that it developed the possible choices for each uncertainty beginning with EIA’s AEO 2017 Reference case—a DOE requirement of the Study. In addition, the 2018 Study discusses the U.S. and Rest of World natural gas market assumptions, including the linkages between the scenarios and publicly available projections from EIA and IEA. Appendix B to the Study describes the NewEra model and provides a detailed discussion of the natural gas supply elasticity estimates used in the U.S. supply scenarios, which were based on an analysis of four recent studies.226 Appendix C provides the supply and demand ranges and probability scenarios.227 Appendix E provides the detailed GNGM model results for the 54 scenarios considered in the 2018 Study, including levels of LNG exports, export revenues, natural gas production, natural gas consumption, Henry Hub prices, U.S. LNG destinations, and North American pipeline trade.228 DOE/ FE believes the incorporation of this extensive information about the data, assumptions, and models used in the 2018 Study satisfies the requirements of the DQA and the corresponding DOE guidelines. In short, DOE has ‘‘disclose[d] the specific data sources that have been used and the specific quantitative methods and assumptions that have been employed.’’ 229 We note that IECA has not provided any evidence to support its claim that ‘‘[t]hird party economists have concluded that the results of the study are not reproducible.’’ 230 The public comment procedures followed by DOE/ FE in this proceeding (as with its prior LNG export studies) allow IECA and other commenters to provide differing analyses about LNG exports—including third-party economic projections using EIA data—should they choose to do so. IECA elected not to submit any rebuttal studies, projections, or other evidence to counter the conclusions of the 2018 Study. Next, even if the 2018 Study were ‘‘influential’’ under the DQA as IECA claims, the DOE Guidelines ‘‘do not direct that all disseminated original and supporting data be subjected to the 225 See 2018 LNG Export Study at 80–95. at 84–96 (Appx. B). 227 Id. at 97–106 (Appx. C). 228 Id. at 111 (Appx. E, with attached spreadsheet). 229 DOE Guidelines, 67 FR 62452. 230 Comment of IECA at 4. 226 Id. PO 00000 Frm 00060 Fmt 4703 Sfmt 4703 reproducibility requirement applicable to influential information.’’ 231 The DOE Guidelines acknowledge that certain types of data are not practicably subject to replication due to ‘‘confidentiality, privacy, trade secret, security, and intellectual property constraints,’’ among others.232 We further note that, in the DOE Guidelines, DOE declined to ‘‘adopt a general prohibition against use of . . . ‘third party proprietary models.’ ’’ 233 DOE reasoned that such a prohibition was not required by the OMB Guidelines and ‘‘would be too restrictive.’’ 234 Consistent with the DOE Guidelines, DOE/FE finds that, although NERA’s proprietary GNGM and NewERA models are intellectual property subject to trade secret and confidentiality constraints, the incorporation of the information about the data, assumptions, and models used in the 2018 Study satisfies the DQA and DOE’s guidelines. For all of these reasons, we disagree with IECA’s position that the 2018 Study fails to meet the reproducibility standard of the DOE Guidelines.235 ii. Objectivity IECA acknowledges that the 2018 Study involved peer review by a panel of experts, but it attempts to discredit the Study by suggesting that the peer reviewers are financially self-interested in the outcome of the Study— specifically, in promoting the ‘‘export of substantial volumes of LNG.’’ 236 On this basis, IECA argues that the 2018 Study fails to meet the ‘‘objectivity’’ and ‘‘integrity’’ standards of the DOE Guidelines for this reason.237 As explained below, however, IECA provides no evidence to support these allegations of bias, other than pointing to the professional affiliations of the peer review panel. NERA explained the peer review process for the 2018 Study as follows: Nine experts on international LNG supply and demand, listed in the acknowledgement, agreed to review and comment on the proposed forecast assumptions and propose 231 DOE Guidelines, 67 FR 62446, 62452. at 62452. 233 Id. at 62448. 234 Id. 235 We note that ‘‘[t]he DOE Guidelines do not purport to impose legally binding substantive policies on DOE Elements.’’ Id. at 62449. Additionally, ‘‘neither section 515 [the DQA] nor the OMB Guidelines nor DOE’s Guidelines create private rights or contemplate judicial oversight of its directives through judicial review.’’ Id. at 62450. 236 Comment of IECA at 5; see also Comment of Evans Schaaf Family at 1 (stating that the 2018 Study’s probabilities are ‘‘problematic’’ because ‘‘they are coming entirely from industry leaders who would likely have something to gain in developing LNG as a global commodity’’). 237 Comment of IECA at 5. 232 Id. E:\FR\FM\28DEN1.SGM 28DEN1 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices modifications to the probabilities assigned to each case. The reviewers were provided with a brief written report describing the proposed probabilities and assumptions. KeyLogic Systems, Inc. gathered the individual reviewer’s responses and provided them to the study team for consideration.238 Each of these experts’ names and institutional affiliations are identified in the Study.239 Their invitation to participate as peer reviewers came directly from DOE/FE, consistent with standard protocols for peer review. In the Study (and as discussed above), NERA identified both the probability assumptions and any changes made to those assumptions based on input from the peer reviewers.240 IECA alleges that eight of the nine peer reviewers ‘‘have or will receive financial benefits from the oil and natural gas industries.’’ IECA expressly omits John Staub of EIA from this allegation—presumably because he works for the U.S. Government, whereas the other eight peer reviewers work for entities including universities, independent research firms, and consulting firms.241 IECA suggests that the peer reviewers’ input to the 2018 Study is selfinterested and lacking objectivity, such that NERA’s modifications to the Study based upon the peer reviewers’ feedback are likewise tainted. However, IECA fails to demonstrate how the professional affiliations of the peer reviewers create bias or how that alleged bias impacted the design or results of the 2018 Study. IECA also does not acknowledge that NERA selected the peer reviewers because they are ‘‘experts on the topic of global LNG supply and demand.’’ 242 This is consistent with the DOE Guidelines, which note that, under OMB policy, peer reviewers should ‘‘be selected primarily on the basis of necessary technical expertise.’’ 243 In the Study, NERA explained its determination that these peer reviewers would assist in providing the ‘‘broadest possible perspective on the potential range of natural gas supply and demand 238 2018 LNG Export Study at 41. at 1 (Acknowledgment). 240 See id. 42–44. 241 See id. at 1 (identifying the peer reviewers, besides John Staub of EIA, as: Kevin Book (ClearView Energy Partners, LLC); Dr. Fereidun Fesharaki (Facts Global Energy); Dr. Hillard G. Huntington (Stanford University, Dep’t. of Management Science and Engineering); Vello A. Kuuskraa (Advanced Resources International, Inc.); Majed Limam and Mike Reimers (Poten and Partner’s Americas LNG & Natural Gas Consulting); and Dr. Scott Tinker (University of Texas, Bureau of Economic Geology)). 242 Id. at 1, 42. 243 DOE Guidelines, 67 FR 62352 (citation omitted). amozie on DSK3GDR082PROD with NOTICES1 239 Id. VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 outcomes during the review period.’’ 244 The participation of the peer reviewers thus enhanced, rather than undermined, both the objectivity and the integrity of the Study. Finally, although IECA invokes the ‘‘integrity’’ standard under the DOE Guidelines, that standard pertains to ensuring that ‘‘information has been secured and protected from unauthorized access or revision.’’ 245 IECA has not presented any argument or evidence to suggest that the security of the 2018 Study was compromised, and therefore we decline to address this point. 2. Reliance on NERA’s Analysis a. Comments John Young does not expressly oppose the 2018 Study, but he questions DOE’s reliance on NERA’s work in the 2018 Study for reasons independent of the Data Quality Act. Mr. Young asks whether DOE has examined NERA’s ‘‘track record in retrospect’’—and, specifically, whether DOE has attempted to square NERA’s ‘‘optimism’’ for U.S. LNG exports given that some proposed LNG projects have not yet moved forward or achieved revenue flow. He urges DOE to hire Synapse Energy Economics (Synapse) as a third party contractor to critique the 2018 Study. According to Mr. Young, Synapse has published critiques of LNG exports and natural gas projects, which he suggests would allow Synapse to critique the 2018 Study. b. DOE/FE Response In response, DOE/FE notes that the scenarios evaluated by NERA were based on four different uncertainties affecting natural gas markets, with three different cases for U.S. natural gas supply based on EIA’s AEO 2017. As explained above, NERA enlisted external peer review of the Study’s scenario design and probability assignments, and made modifications based on feedback from the peer reviewers. NERA also made clear that ‘‘[its] findings . . . may contain projections based on current data and historical trends,’’ and that ‘‘[a]ny such predictions are subject to inherent risks and uncertainties.’’ 246 Additionally, consistent with its past practice, DOE/ FE has made the 2018 Study available for public comment. Commenters were free to submit a third-party critique of the 2018 Study by Synapse or other firms, although none did. J. Potential Impact on DOE/FE’s Regulatory Process 1. Pending Non-FTA Applications a. Comments The Evans Schaaf Family states that, ‘‘given the 68% probability [in the 2018 Study] that U.S. LNG exports will be between 9.0 and 30.7 Bcf/d in 2040,’’ DOE ‘‘has an obligation to look closely at individual proposed projects, including where the gas is sourced, to determine whether or not projects are consistent with the public interest . . . .’’ 247 In the Family’s view, the 2018 Study implies that FE ‘‘[should] approve all 55.04 Bcf/d LNG export projects for non-FTA export.’’ 248 The Family disagrees with this implication, and urges DOE against assuming that ‘‘all LNG projects are equal.’’ 249 Other commenters argue that, given the results of the 2018 Study and DOE’s prior macroeconomic studies, DOE/FE should proceed expeditiously in reviewing and approving all pending applications to export LNG to non-FTA countries. API asserts that any unnecessary delay in approving nonFTA applications will put U.S. projects at ‘‘a competitive disadvantage in the global race to construct LNG facilities,’’ such that the United States will miss out on the economic and foreign policy gains associated with marketdetermined levels of U.S. LNG exports.250 JCEP states that DOE/FE should promptly approve the pending applications following the completion of the environmental review for each facility.251 CLNG similarly contends that, on the basis of the 2018 Study and DOE’s LNG export regulatory program to date, ‘‘DOE is fully armed to approve the remaining applications for export and should do so without delay.’’ 252 LNG Allies states that DOE can now ‘‘safely shift its policy perspective to grant approvals to all . . . export applications to non-FTA countries without the need for any further macroeconomic studies (at least for the next four to five years).’’ 253 Citing the 2018 Study, NextDecade asserts that ‘‘DOE should continue approving export applications so that regulatory barriers do not distort the proper functioning of the marketplace.’’ 254 Finally, JCEP maintains that any opponent of LNG exports would need to make an 247 Comment of Evans Schaaf Family at 8. 248 Id. 249 Id. 250 Comment of API at 2. of JCEP at 5–6. 252 Comment of CLNG at 2; see also id. at 6. 253 Comment of LNG Allies at 2. 254 Comment of NextDecade Corp. at 4. 251 Comment 244 2018 LNG Export Study at 24. Guidelines, 67 FR 62451. 246 Id. at 1–2. 245 DOE PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 67271 E:\FR\FM\28DEN1.SGM 28DEN1 67272 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices ‘‘overwhelming showing’’ that an individual export proposal is inconsistent with the public interest, so as to overcome both the presumption in favor of exports codified in section 3(a) of the NGA and the findings of the 2018 LNG Export Study.255 making. Consistent with its past practice, DOE/FE will evaluate each pending non-FTA application as required under the NGA and NEPA, based on the administrative record compiled in each individual proceeding. b. DOE/FE Response As mentioned above, the 2018 Study found a ‘‘positive correlation between GDP and LNG exports for the more likely scenarios in 2040.’’ 256 Under the NGA section 3(a), DOE examines each pending non-FTA application to determine whether the proposed exports are in the public interest. As discussed in prior non-FTA orders, DOE/FE reviews a substantial administrative record for each application proceeding under NGA section 3(a). That record typically includes (but is not limited to) the following: The application; any motions to intervene, protests, and/or comments submitted in response to the notice of application; DOE’s environmental studies (i.e., the Addendum 257 and the Life Cycle Greenhouse Gas Report); 258 public comments received on DOE/FE’s various analyses; any final environmental document for the export facility issued by FERC or the U.S. Maritime Administration (MARAD) under NEPA (such as a final environmental impact statement or environmental assessment); 259 and any order by FERC or MARAD granting or denying authorization for the applicant to site, construct, and operate the export facility. Accordingly, DOE/FE does not prejudge any of the pending non-FTA applications on the basis of the 2018 LNG Export Study alone. For the reasons discussed herein, the 2018 LNG Export provides significant supporting evidence in DOE/FE’s public interest analysis under NGA section 3(a), but the 2018 Study is one of many considerations in DOE/FE’s decision- 2. Extended Term of Non-FTA Authorizations 255 Comment of JCEP at 6. LNG Export Study at 67. 257 Addendum to Environmental Review Documents Concerning Exports of Natural Gas From the United States, 79 FR 48132 (Aug. 15, 2014). The Addendum and related documents are available at: https://www.energy.gov/sites/prod/ files/2014/08/f18/Addendum.pdf. 258 Life Cycle Greenhouse Gas Perspective on Exporting Liquefied Natural Gas from the United States, 79 FR 32260 (June 4, 2014). The Life Cycle Greenhouse Gas Report is available at: http:// energy.gov/fe/life-cycle-greenhouse-gas-perspectiveexporting-liquefied-natural-gas-united-states. 259 Typically, the Federal agency responsible for permitting the export facility—usually either FERC or MARAD—serves as the lead agency in the NEPA review process, and DOE serves as a cooperating agency. Where no other Federal agency is responsible for permitting the export facility, DOE serves as the lead agency in the NEPA review process. amozie on DSK3GDR082PROD with NOTICES1 256 2018 VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 a. Comments LNG Allies and Cheniere assert that the design of the 2018 Study will allow for greater flexibility for DOE/FE’s regulatory process going forward. They point out that, whereas DOE’s prior studies had a horizon of 20 years, the 2018 Study extends 30 years into the future (i.e., through December 31, 2050). Therefore, Cheniere asserts, ‘‘[t]he findings establish an evidentiary basis for DOE/FE to make public interest determinations and [issue] export authorizations for 30-year terms.’’ 260 On this basis, these commenters urge DOE/ FE to: (i) Grant new non-FTA authorizations for a term of 30 years, and (ii) initiate a consolidated proceeding to add an additional 10-year term to the existing 20-year LNG export authorizations for both FTA and nonFTA countries. They assert that the LNG industry would receive substantial benefits from extended 30-year authorizations—particularly since, for foreign buyers deciding between U.S. LNG and alternative long-term sources, longer authorization periods may prove decisive. b. DOE/FE Response A request to extend the term for existing or future non-FTA authorizations goes beyond the scope of this proceeding. If, in the future, DOE/ FE decides to propose an extended export term for existing or future nonFTA orders, DOE/FE will commence a new docket proceeding and publish notice of the proposal in the Federal Register. Insofar as any authorization holder wishes to request a longer export term for an existing FTA authorization, it is free to do so at any time under NGA section 3(c).261 3. Policy Recommendations a. Comments IECA recommends that DOE/FE implement two policy changes to ensure that the U.S. economy benefits from LNG exports. First, IECA states that DOE/FE should ensure that price levels 260 Comment of Cheniere at 2. U.S.C. 717b(c) (requiring DOE to grant applications for FTA authorizations, including applications to amend such authorizations, ‘‘without modification or delay’’). 261 15 PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 for U.S. LNG are not dictated by global demand, as is currently happening with prices for U.S. crude oil (in IECA’s view). IECA states that DOE’s policy should be ‘‘to export LNG volumes to levels where demand in China, Japan, South Korea, India, and the EU [European Union] will not determine [U.S.] prices.’’ 262 According to IECA, such a policy is especially important during the winter heating season because the largest LNG importing countries have winter at the same time as the United States—potentially resulting in global price spikes for heating and electricity.263 Second, IECA asks DOE/FE to ‘‘issue an order that would specify that it is unlawful for U.S. LNG exports to be shipped to countries that subsidize natural gas to their manufacturing industry.’’ 264 As discussed above, IECA argues that allowing exports of U.S. LNG to ‘‘subsidizing’’ countries damages the competitiveness of U.S. manufacturing and threatens U.S. jobs. b. DOE/FE Response The policy recommendations offered by IECA go beyond the scope of this proceeding. DOE/FE takes no position on the proposed policy recommendations at this time. VII. Discussion and Conclusions DOE/FE commissioned the 2018 LNG Export Study and invited the submission of responsive comments on the Study. DOE/FE has analyzed this material and determined that the 2018 Study provides substantial support for the pending non-FTA applications identified in this docket, as well as future non-FTA applications within the export volumes considered by the 2018 Study (0.1 to 52.8 Bcf/d of natural gas). Specifically, the conclusion of the 2018 LNG Export Study is that the United States will experience net economic benefits from issuance of authorizations to export domestically produced LNG. Other key findings of the 2018 Study include: • ‘‘Increasing U.S. LNG exports under any given set of assumptions about U.S. natural gas resources and their production leads to only small increases in U.S. natural gas prices.’’ 265 262 Comment of IECA at 1 (defining ‘‘subsidize’’ as ‘‘a foreign government and/or foreign government related entities that in whole or part, are either owned, controlled or regulated by such government entities, provide natural gas to their industrial and or electric generating sectors at prices that are below the market or purchased costs.’’). 263 Id. 264 Id. at 7. 265 2018 LNG Export Study at 55. E:\FR\FM\28DEN1.SGM 28DEN1 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices • ‘‘Increased exports of natural gas will improve the U.S. balance of trade and result in a wealth transfer into the United States.’’ 266 • ‘‘Overall [U.S.] GDP improves as LNG exports increase for all scenarios with the same U.S. natural gas supply condition.267 • ‘‘There is no support for the concern that LNG exports would come at the expense of domestic natural gas consumption.’’ 268 • ‘‘[A] large share of the increase in LNG exports is supported by an increase in domestic natural gas production.’’ 269 • ‘‘Natural gas intensive [industries] continue to grow robustly at higher levels of LNG exports, albeit at slightly lower rates of increase than they would at lower levels.’’ 270 We have evaluated the public comments submitted in response to the 2018 Study. None of the eight comments opposing the 2018 Study have provided sufficient evidence to rebut or otherwise undermine these findings. Specifically, the opposing comments criticize aspects of the models, assumptions, and design of the 2018 Study. As discussed above, however, EIA’s most recent projections in AEO 2018 continue to show market conditions that will accommodate increased exports of natural gas. When compared to prior AEO Reference cases (including AEO 2017’s Reference case used in the 2018 Study), the AEO 2018 Reference case projects increases in domestic natural gas production—well in excess of what is required to meet projected increases in domestic consumption. Accordingly, DOE/FE finds that the 2018 LNG Export Study is fundamentally sound and supports the proposition that exports of LNG from the lower-48 states, in volumes up to and including 52.8 Bcf/d of natural gas, will not be inconsistent with the public interest.271 As stated above, DOE will consider each application as required under the NGA and NEPA based on the administrative record compiled in each individual proceeding. Signed in Washington, DC, on December 20, 2018. Steven E. Winberg, Assistant Secretary, Office of Fossil Energy. amozie on DSK3GDR082PROD with NOTICES1 [FR Doc. 2018–28238 Filed 12–27–18; 8:45 am] BILLING CODE 6450–01–P 266 Id. at 64. at 67. 268 Id. at 77. 269 Id. at 77. 270 Id. at 70. 271 2018 LNG Export Study at 63 & Appx F. 267 Id. VerDate Sep<11>2014 18:13 Dec 27, 2018 Jkt 247001 DEPARTMENT OF ENERGY Federal Energy Regulatory Commission [Docket No. EL19–16–000] Michigan Electric Transmission Company, LLC; Notice of Institution of Section 206 Proceeding and Refund Effective Date On December 20, 2018, the Commission issued an order in Docket No. EL19–16–000, pursuant to section 206 of the Federal Power Act (FPA), 16 U.S.C. 824e (2012), instituting an investigation into whether the transmission formula rate of Michigan Electric Transmission Company, LLC may be unjust, unreasonable, or unduly discriminatory or preferential. Int’l Transmission Co., et al., 165 FERC 61,236 (2018). The refund effective date in Docket No. EL19–16–000, established pursuant to section 206(b) of the FPA, will be the date of publication of this notice in the Federal Register. Any interested person desiring to be heard in Docket No. EL19–16–000 must file a notice of intervention or motion to intervene, as appropriate, with the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, in accordance with Rule 214 of the Commission’s Rules of Practice and Procedure, 18 CFR 385.214, within 21 days of the date of issuance of the order. Dated: December 20, 2018. Nathaniel J. Davis, Sr., Deputy Secretary. [FR Doc. 2018–28253 Filed 12–27–18; 8:45 am] BILLING CODE 6717–01–P DEPARTMENT OF ENERGY Federal Energy Regulatory Commission Combined Notice of Filings #2 Take notice that the Commission received the following electric rate filings: Docket Numbers: ER10–1276–008; ER10–1287–007; ER10–1292–007; ER10–1303–007; ER10–1319–009; ER10–1353–009. Applicants: Consumers Energy Company, CMS Energy Resource Management Company, Grayling Generating Station Limited Partnership, Genesee Power Station Limited Partnership, CMS Generation Michigan Power, LLC, Dearborn Industrial Generation, L.L.C. Description: Supplement to May 31, 2018 Notice of Non-Material Change-In- PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 67273 Status of Consumer Energy Company, et al. Filed Date: 12/20/18. Accession Number: 20181220–5208. Comments Due: 5 p.m. ET 1/10/19. Docket Numbers: ER10–2390–004. Applicants: Bicent (California) Malburg LLC. Description: Updated Market Power Analysis for the Southwest Region of Bicent (California) Malburg LLC. Filed Date: 12/20/18. Accession Number: 20181220–5190. Comments Due: 5 p.m. ET 2/19/19. Docket Numbers: ER12–1946–012; ER10–1333–012; ER13–2387–006; ER15–190–009; ER17–543–006; ER18– 1343 003. Applicants: Duke Energy Beckjord, LLC, Duke Energy Florida, LLC, Duke Energy Commercial Enterprises, Inc., Duke Energy Renewable Services, LLC, Duke Energy SAM, LLC, Carolina Solar Power, LLC. Description: Notice of Change in Status of the Duke MBR Sellers. Filed Date: 12/20/18. Accession Number: 20181220–5192. Comments Due: 5 p.m. ET 1/10/19. Docket Numbers: ER18–920–001. Applicants: Marco DM Holdings, L.L.C. Description: Triennial Market Power Update for the Southwest Power Pool Region of Marco DM Holdings, L.L.C. Filed Date: 12/20/18. Accession Number: 20181220–5218. Comments Due: 5 p.m. ET 2/19/19. Docket Numbers: ER18–1646–001. Applicants: Electric Energy, Inc. Description: eTariff filing per 1450: Amended Show Cause Response to be effective 3/21/2018. Filed Date: 12/20/18. Accession Number: 20181220–5125. Comments Due: 5 p.m. ET 1/10/19. Docket Numbers: ER19–132–001. Applicants: Niagara Mohawk Power Corporation, New York Independent System Operator, Inc. Description: Compliance filing: NMPC Compliance: Depreciation Rates to be effective 4/1/2018. Filed Date: 12/20/18. Accession Number: 20181220–5127. Comments Due: 5 p.m. ET 1/10/19. Docket Numbers: ER19–329–001. Applicants: AEP Texas Inc. Description: Tariff Amendment: AEPTX-Shakes Solar Interconnection Agreement First Amend & Restated to be effective 12/14/2018. Filed Date: 12/20/18. Accession Number: 20181220–5106. Comments Due: 5 p.m. ET 1/10/19. Docket Numbers: ER19–627–000. Applicants: Florida Power & Light Company. E:\FR\FM\28DEN1.SGM 28DEN1

Agencies

[Federal Register Volume 83, Number 248 (Friday, December 28, 2018)]
[Notices]
[Pages 67251-67273]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-28238]


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DEPARTMENT OF ENERGY


Study on Macroeconomic Outcomes of LNG Exports: Response to 
Comments Received on Study

AGENCY: Office of Fossil Energy, Department of Energy.

ACTION: Notice of response to comments.

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                                                           FE Docket No.
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Jordan Cove Energy Project, L.P.........................       12-32-LNG
Gulf LNG Liquefaction Company, LLC......................      12-101-LNG

[[Page 67252]]

 
CE FLNG, LLC............................................      12-123-LNG
MPEH LLC................................................       13-26-LNG
Venture Global Calcasieu Pass, LLC......................       13-69-LNG
Eos LNG LLC.............................................      13-116-LNG
Barca LNG LLC...........................................      13-118-LNG
Commonwealth LNG, LLC...................................      13-153-LNG
Venture Global Calcasieu Pass, LLC......................       14-88-LNG
SCT&E LNG, LLC..........................................       14-98-LNG
Venture Global Calcasieu Pass, LLC......................       15-25-LNG
G2 LNG LLC..............................................       15-45-LNG
Texas LNG Brownsville LLC...............................       15-62-LNG
Strom Inc...............................................       15-78-LNG
Port Arthur LNG, LLC....................................       15-96-LNG
Rio Grande LNG, LLC.....................................      15-190-LNG
Eagle LNG Partners Jacksonville, LLC....................       16-15-LNG
SeaOne Gulfport, LLC....................................       16-22-CGL
Venture Global Plaquemines LNG, LLC.....................       16-28-LNG
Driftwood LNG, LLC......................................      16-144-LNG
Fourchon LNG, LLC.......................................      17-105-LNG
Galveston Bay LNG, LLC..................................      17-167-LNG
Freeport LNG Expansion L.P., and FLNG...................       18-26-LNG
Corpus Christi Liquefaction Stage III, LLC..............       18-78-LNG
Energ[iacute]a Costa Azul, S. de R.L. de C.V............      18-144-LNG
Energ[iacute]a Costa Azul, S. de R.L. de C.V............      18-145-LNG
------------------------------------------------------------------------

SUMMARY: On June 12, 2018, the Office of Fossil Energy (FE) of the 
Department of Energy (DOE) gave notice of the availability of a study, 
Macroeconomic Outcomes of Market Determined Levels of U.S. LNG Exports 
(2018 LNG Export Study or 2018 Study), in the above-referenced 
proceedings and invited the submission of public comments on the Study. 
DOE commissioned the 2018 LNG Export Study to inform its decision on 
pending and future applications seeking authorization to export 
domestically produced liquefied natural gas (LNG) from the lower-48 
states to countries with which the United States does not have a free 
trade agreement (FTA) requiring national treatment for trade in natural 
gas, and with which trade is not prohibited by U.S. law or policy (non-
FTA countries). The 2018 LNG Export Study evaluates a wider range of 
scenarios than DOE's prior LNG export studies, including examining the 
probability of various export scenarios. In this document, DOE/FE 
responds to the 19 public comments received on the 2018 Study and 
summarizes its conclusions on the Study. The 2018 LNG Export Study and 
the public comments are posted on the DOE/FE website at: https://fossil.energy.gov/app/docketindex/docket/index/10.

DATES: Applicable on: December 28, 2018.

FOR FURTHER INFORMATION CONTACT: Amy Sweeney, U.S. Department of Energy 
(FE-34), Office of Regulation, Analysis, and Engagement, Office of 
Fossil Energy, Forrestal Building, Room 3E-042, 1000 Independence 
Avenue SW, Washington, DC 20585; (202) 586-2627; 
amy.sweeney@hq.doe.gov; or Cassandra Bernstein, U.S. Department of 
Energy (GC-76), Office of the Assistant General Counsel for Electricity 
and Fossil Energy, Forrestal Building, Room 6D-033, 1000 Independence 
Ave. SW, Washington, DC 20585; (202) 586-9793; 
cassandra.bernstein@hq.doe.gov.

SUPPLEMENTARY INFORMATION:

    Acronyms and Abbreviations. A number of acronyms and abbreviations 
are used in this document and set forth below for reference.

AEO Annual Energy Outlook
APA Administrative Procedure Act
API American Petroleum Institute
Bcf/d Billion Cubic Feet per Day
Bcf/yr Billion Cubic Feet per Year
CLNG Center for Liquefied Natural Gas
CNG Compressed Natural Gas
DOE Department of Energy
DQA Data Quality Act
EA Environmental Assessment
EIA U.S. Energy Information Administration
EIS Environmental Impact Statement
FE Office of Fossil Energy, U.S. Department of Energy
FERC Federal Energy Regulatory Commission
FTA Free Trade Agreement
GDP Gross Domestic Product
GNGM Global Natural Gas Model
HOGR High Oil and Gas Resource and Technology
IEA International Energy Agency
IEO International Energy Outlook
JCEP Jordan Cove Energy Project L.P.
LNG Liquefied Natural Gas
LOGR Low Oil and Gas Resource and Technology
MMBtu Million British Thermal Units
mtpa Million Metric Tons per Annum
NEPA National Environmental Policy Act of 1969
NERA NERA Economic Consulting
NGA Natural Gas Act of 1938
NGL Natural Gas Liquid
NOA Notice of Availability
ppm Parts Per Million
ROW Rest of World
Tcf Trillion Cubic Feet
WEO World Energy Outlook

I. Background

    A. DOE Export Authorizations Under Section 3 of the Natural Gas 
Act
    B. Public Interest Review for Non-FTA Export Authorizations
    C. Judicial Decisions Upholding DOE's Non-FTA Authorizations

II. DOE's Prior LNG Export Studies

    A. 2012 EIA and NERA Studies (Collectively, the 2012 LNG Export 
Study)
    B. 2014 and 2015 LNG Export Studies

III. Overview of 2018 LNG Export Study

IV. 2018 LNG Export Study, Macroeconomic Outcomes of Market Determined 
Levels of U.S. LNG Exports

    A. Overview of NERA's Findings
    B. Methodology and Scenarios
    C. NERA's Global Natural Gas Model (GNGM)
    D. NERA's NewEra Macroeconomic Model
    E. Results of the 2018 Study

V. Notice of Availability of the 2018 LNG Export Study

VI. Comments on the 2018 LNG Export Study and DOE/FE Responses

    A. Data Input and Estimates of Natural Gas Demand
    B. Economic Benefits Associated With LNG Exports
    C. Distributional Impacts
    D. Regional Impacts
    E. Estimates of Domestic Natural Gas Supply

[[Page 67253]]

    F. Cost of Environmental Externalities
    G. Natural Gas Price Impacts
    H. Benefits to U.S. Trade Balance
    I. Procedural Arguments
    J. Potential Impact on DOE/FE's Regulatory Process

VII. Discussion and Conclusions

I. Background

A. DOE Export Authorizations Under Section 3 of the Natural Gas Act

    DOE is responsible for authorizing exports of domestically produced 
natural gas to foreign countries pursuant to section 3 of the Natural 
Gas Act (NGA), 15 U.S.C. 717b.\1\ In relevant part, section 3(c) of the 
NGA applies to applications for exports of natural gas, including LNG, 
to countries with which the United States has entered into a free trade 
agreement (FTA) requiring national treatment for trade in natural gas, 
and with which trade is not prohibited by U.S. law or policy (FTA 
countries).\2\ Section 3(c) was amended by section 201 of the Energy 
Policy Act of 1992 (Pub. L. 102-486) to require that FTA applications 
``shall be deemed to be consistent with the public interest'' and 
granted ``without modification or delay.'' \3\ Therefore, DOE/FE 
approves applications for FTA authorizations without modification or 
delay.\4\ None of the comments or discussion herein apply to FTA 
authorizations issued under NGA section 3(c).
---------------------------------------------------------------------------

    \1\ The authority to regulate the imports and exports of natural 
gas, including liquefied natural gas, under section 3 of the NGA (15 
U.S.C. 717b) has been delegated to the Assistant Secretary for FE in 
Redelegation Order No. 00-006.02 issued on November 17, 2014.
    \2\ 15 U.S.C. 717b(c). The United States currently has FTAs 
requiring national treatment for trade in natural gas with 
Australia, Bahrain, Canada, Chile, Colombia, Dominican Republic, El 
Salvador, Guatemala, Honduras, Jordan, Mexico, Morocco, Nicaragua, 
Oman, Panama, Peru, Republic of Korea, and Singapore. FTAs with 
Israel and Costa Rica do not require national treatment for trade in 
natural gas.
    \3\ 15 U.S.C. 717b(c).
    \4\ Unless otherwise stated, all references to exports of LNG 
herein refer to domestically produced natural gas liquefied in the 
United States. Additionally, DOE/FE uses the terms ``authorization'' 
and ``order'' interchangeably.
---------------------------------------------------------------------------

    For applications to export natural gas to non-FTA countries, 
section 3(a) of the NGA sets forth the following standard of review:

    [N]o person shall export any natural gas from the United States 
to a foreign country or import any natural gas from a foreign 
country without first having secured an order of the [Secretary of 
Energy \5\ ] authorizing it to do so. The [Secretary] shall issue 
such order upon application, unless after opportunity for hearing, 
[he] finds that the proposed exportation or importation will not be 
consistent with the public interest. The [Secretary] may by [the 
Secretary's] order grant such application, in whole or part, with 
such modification and upon such terms and conditions as the 
[Secretary] may find necessary or appropriate.\6\
---------------------------------------------------------------------------

    \5\ The Secretary's authority was established by the Department 
of Energy Organization Act, 42 U.S.C. 7172, which transferred 
jurisdiction over imports and export authorizations from the Federal 
Power Commission to the Secretary of Energy.
    \6\ 15 U.S.C. 717b(a) (emphasis added).

DOE has consistently interpreted this provision as creating a 
rebuttable presumption that a proposed export of natural gas to non-FTA 
countries is in the public interest.\7\ Accordingly, DOE conducts an 
informal adjudication on non-FTA applications and will grant each 
application unless DOE finds that the proposed exportation will not be 
consistent with the public interest.\8\ Before reaching a final 
decision, DOE must also comply with the National Environmental Policy 
Act of 1969 (NEPA), 42 U.S.C. 4321 et seq.
---------------------------------------------------------------------------

    \7\ See Sierra Club v. U.S. Dep't of Energy, 867 F.3d 189, 203 
(DC Cir. 2017) (``We have construed [NGA section 3(a)] as containing 
a `general presumption favoring [export] authorization.' '') 
(quoting W. Va. Pub. Serv. Comm'n v. U.S. Dep't of Energy, 681 F.2d 
847, 856 (DC Cir. 1982)).
    \8\ See id. (``there must be `an affirmative showing of 
inconsistency with the public interest' to deny the application'' 
under NGA section 3(a)) (quoting Panhandle Producers & Royalty 
Owners Ass'n v. Econ. Regulatory Admin., 822 F.2d 1105, 1111 (DC 
Cir. 1987)). We note that, as of August 24, 2018, qualifying small-
scale exports of natural gas to non-FTA countries are treated 
differently--specifically, they are deemed to be consistent with the 
public interest under NGA section 3(a) (10 CFR 590.102(p); 
590.208(a)). See U.S. Dep't of Energy, Small-Scale Natural Gas 
Exports; Final Rule, 83 FR 35106 (July 25, 2018).
---------------------------------------------------------------------------

B. Public Interest Review for Non-FTA Export Authorizations

    Although section 3(a) establishes a broad public interest standard 
and a presumption favoring export authorizations, the statute does not 
define ``public interest'' or identify criteria that must be 
considered. In prior decisions, DOE/FE has identified a range of 
factors that it evaluates when reviewing an application to export LNG 
to non-FTA countries. These factors include economic impacts, 
international impacts, security of natural gas supply, and 
environmental impacts, among others. To conduct this review, DOE/FE 
looks to record evidence developed in the application proceeding.\9\
---------------------------------------------------------------------------

    \9\ See, e.g., Eagle LNG Partners Jacksonville II LLC, DOE/FE 
Order No. 4078, FE Docket No. 17-79-LNG, Opinion and Order Granting 
Long-Term, Multi-Contract Authorization to Export Liquefied Natural 
Gas in ISO Containers Loaded at the Eagle Maxville Facility in 
Jacksonville, Florida, and Exported by Vessel to Free Trade 
Agreement and Non-Free Trade Agreement Nations (Sept. 15, 2017).
---------------------------------------------------------------------------

    DOE/FE's prior decisions have also looked to certain principles 
established in its 1984 Policy Guidelines.\10\ The goals of the Policy 
Guidelines are to minimize federal control and involvement in energy 
markets and to promote a balanced and mixed energy resource system. The 
Guidelines provide:
---------------------------------------------------------------------------

    \10\ New Policy Guidelines and Delegations Order Relating to 
Regulation of Imported Natural Gas, 49 FR 6684 (Feb. 22, 1984) 
[hereinafter 1984 Policy Guidelines].

    The market, not government, should determine the price and other 
contract terms of imported [or exported] natural gas . . . . The 
federal government's primary responsibility in authorizing imports 
[or exports] will be to evaluate the need for the gas and whether 
the import [or export] arrangement will provide the gas on a 
competitively priced basis for the duration of the contract while 
minimizing regulatory impediments to a freely operating market.\11\
---------------------------------------------------------------------------

    \11\ Id. at 6685.

While nominally applicable to natural gas import cases, DOE/FE 
subsequently held in Order No. 1473 that the same policies should be 
applied to natural gas export applications.\12\
---------------------------------------------------------------------------

    \12\ Phillips Alaska Natural Gas, DOE/FE Order No. 1473 at 14 
(citing Yukon Pacific Corp., DOE/FE Order No. 350, Order Granting 
Authorization to Export Liquefied Natural Gas from Alaska, 1 FE ] 
70,259, ] 71,128 (1989)).
---------------------------------------------------------------------------

    In Order No. 1473, DOE/FE stated that it was guided by DOE 
Delegation Order No. 0204-111. That delegation order, which authorized 
the Administrator of the Economic Regulatory Administration to exercise 
the agency's review authority under NGA section 3, directed the 
Administrator to regulate exports ``based on a consideration of the 
domestic need for the gas to be exported and such other matters as the 
Administrator finds in the circumstances of a particular case to be 
appropriate.'' \13\
---------------------------------------------------------------------------

    \13\ DOE Delegation Order No. 0204-111 at 1; see also 1984 
Policy Guidelines, 49 FR 6690. In February 1989, the Assistant 
Secretary for Fossil Energy assumed the delegated responsibilities 
of the Administrator of the Economic Regulatory Administration.
---------------------------------------------------------------------------

    Although DOE Delegation Order No. 0204-111 is no longer in effect, 
DOE/FE's review of export applications has continued to focus on: (i) 
The domestic need for the natural gas proposed to be exported, (ii) 
whether the proposed exports pose a threat to the security of domestic 
natural gas supplies, (iii) whether the arrangement is consistent with 
DOE/FE's policy of promoting market competition, and (iv) any other 
factors bearing on the public interest described herein. Under this 
public interest standard, DOE has issued 30 final authorizations to 
export domestically produced LNG or compressed natural gas (CNG) to 
non-FTA countries to date, bringing the

[[Page 67254]]

cumulative total of approved non-FTA exports to 23.05 billion cubic 
feet per day (Bcf/d) of natural gas, or 8.41 trillion cubic feet (Tcf) 
per year.\14\ Each of these non-FTA orders authorize an export term of 
20 years, as set forth in the orders.
---------------------------------------------------------------------------

    \14\ See Mexico Pacific Limited LLC, DOE/FE Order No. 4312, FE 
Docket No. 18-70-LNG, Opinion and Order Granting Long-Term, Multi-
Contract Authorization to Export U.S.-Sourced Natural Gas by 
Pipeline to Mexico for Liquefaction and Re-Export in the Form of 
Liquefied Natural Gas to Non-Free Trade Agreement Countries, at 37 
(Dec. 14, 2018).
---------------------------------------------------------------------------

C. Judicial Decisions Upholding DOE's Non-FTA Authorizations

    Beginning in 2015, Sierra Club petitioned the U.S. Court of Appeals 
for the District of Columbia Circuit (D.C. Circuit) for review of five 
long-term LNG export authorizations issued by DOE/FE under the standard 
of review described above. Sierra Club challenged DOE/FE's approval of 
LNG exports to non-FTA countries from projects proposed or operated by 
the following authorization holders: Freeport LNG Expansion, L.P., et 
al.; Dominion Energy Cove Point LNG, LP (formerly Dominion Cove Point 
LNG, LP); Sabine Pass Liquefaction, LLC; and Cheniere Marketing, LLC, 
et al. The D.C. Circuit subsequently denied four of the five petitions 
for review: one in a published decision issued on August 15, 2017 
(Sierra Club I),\15\ and three in a consolidated, unpublished opinion 
issued on November 1, 2017 (Sierra Club II).\16\ Sierra Club 
subsequently withdrew its fifth and remaining petition for review.\17\
---------------------------------------------------------------------------

    \15\ Sierra Club vs. U.S. Dep't of Energy, 867 F.3d 189 (Aug. 
15, 2017) (denying petition of review of the LNG export 
authorization issued to Freeport LNG Expansion, L.P., et al.).
    \16\ Sierra Club v. U.S. Dep't of Energy, Nos. 16-1186, 16-1252, 
16-1253, 703 Fed. Appx. 1 (D.C. Cir. Nov. 1, 2017) (denying 
petitions of review of the LNG export authorization issued to 
Dominion Cove Point LNG, LP; Sabine Pass Liquefaction, LLC; and 
Cheniere Marketing, LLC, et al., respectively).
    \17\ See Sierra Club v. U.S. Dep't of Energy, No. 16-1426, Per 
Curiam Order (D.C. Cir. Jan. 30, 2018) (granting Sierra Club's 
unopposed motion for voluntarily dismissal).
---------------------------------------------------------------------------

    In Sierra Club I, the D.C. Circuit concluded that DOE/FE had 
complied with both NGA section 3(a) and NEPA in issuing the challenged 
non-FTA authorization. Freeport LNG Expansion, L.P. and its related 
entities (collectively, Freeport) had applied to DOE/FE for 
authorization to export LNG to non-FTA countries from the Freeport 
Terminal located on Quintana Island, Texas. DOE/FE granted the 
application in 2014 in a volume equivalent to 0.4 Bcf/d of natural gas, 
finding that Freeport's proposed exports were in the public interest 
under NGA section 3(a). DOE/FE also considered and disclosed the 
potential environmental impacts of its decision under NEPA. Sierra Club 
petitioned for review of the Freeport authorization, arguing that DOE 
fell short of its obligations under both the NGA and NEPA. The D.C. 
Circuit rejected Sierra Club's arguments in a unanimous decision, 
holding that, ``Sierra Club has given us no reason to question the 
Department's judgment that the [Freeport] application is not 
inconsistent with the public interest.'' \18\
---------------------------------------------------------------------------

    \18\ Sierra Club I, 867 F.3d at 203.
---------------------------------------------------------------------------

    In the consolidated opinion in Sierra Club II issued on November 1, 
2017, the D.C. Circuit ruled that ``[t]he court's decision in [Sierra 
Club I] largely governs the resolution of the [three] instant cases.'' 
\19\ Upon its review of the remaining ``narrow issues'' in those cases, 
the Court again rejected Sierra Club's arguments under the NGA and 
NEPA, and upheld DOE/FE's actions in issuing the non-FTA authorizations 
in those proceedings.\20\
---------------------------------------------------------------------------

    \19\ Sierra Club, 703 Fed. Appx. 1 at *2.
    \20\ Id.
---------------------------------------------------------------------------

II. DOE's Prior LNG Export Studies

    The 2018 LNG Export Study \21\ builds upon four prior studies 
commissioned by DOE to examine the economic impacts of U.S. LNG 
exports. With one early exception, DOE/FE has issued the 30 existing 
non-FTA authorizations based on its consideration of one or more of 
these economic studies under NGA section 3(a). These studies are 
summarized below.
---------------------------------------------------------------------------

    \21\ NERA Economic Consulting, Macroeconomic Outcomes of Market 
Determined Levels of U.S. LNG Exports (June 7, 2018), available at: 
https://www.energy.gov/sites/prod/files/2018/06/f52/Macroeconomic%20LNG%20Export%20Study%202018.pdf [hereinafter 2018 
LNG Export Study].
---------------------------------------------------------------------------

A. 2012 EIA and NERA Studies (Collectively, the 2012 LNG Export Study)

    In 2011, DOE/FE engaged the U.S. Energy Information Administration 
(EIA) and NERA Economic Consulting (NERA) to conduct a two-part study 
of the economic impacts of U.S. LNG exports, which together was called 
the ``2012 LNG Export Study.'' The first part, performed by EIA and 
originally published in January 2012, assessed how specified scenarios 
of increased natural gas exports could affect domestic energy markets. 
Specifically, EIA examined how prescribed levels of natural gas exports 
(at 6 Bcf/d and 12 Bcf/d) above baseline cases could affect domestic 
energy markets.
    The second part, performed by NERA under contract to DOE, evaluated 
the macroeconomic impact of LNG exports on the U.S. economy. NERA used 
a general equilibrium macroeconomic model of the U.S. economy with an 
emphasis on the energy sector and natural gas in particular. The 2012 
NERA Study projected that, across all scenarios studied--assuming 
either 6 Bcf/d or 12 Bcf/d of LNG export volumes--the United States 
would experience net economic benefits from allowing LNG exports.
    In December 2012, DOE/FE published a notice of availability of the 
2012 LNG Export Study in the Federal Register for public comment.\22\ 
DOE/FE subsequently responded to the public comments in connection with 
the LNG export proceedings identified in that notice.\23\
---------------------------------------------------------------------------

    \22\ See 2012 LNG Export Study, 77 FR 73627 (Dec. 11, 2012), 
available at: http://energy.gov/sites/prod/files/2013/04/f0/fr_notice_two_part_study.pdf (Notice of Availability of the LNG 
Export Study).
    \23\ See, e.g., Freeport LNG Expansion L.P., et al., DOE/FE 
Order No. 3282, FE Docket No. 10-161-LNG, Order Conditionally 
Granting Long-Term, Multi-Contract Authorization to Export Liquefied 
Natural Gas by Vessel from the Freeport LNG Terminal on Quintana 
Island, Texas to Non-Free Trade Agreement Nations, at 56-109 (May 
17, 2013).
---------------------------------------------------------------------------

B. 2014 and 2015 LNG Export Studies

    By May 2014, in light of the volume of LNG exports to non-FTA 
countries then-authorized by DOE/FE and the number of non-FTA export 
applications still pending, DOE/FE determined that an updated study was 
warranted to consider the economic impacts of exporting LNG from the 
lower-48 states to non-FTA countries.\24\ On May 29, 2014, DOE 
announced plans to undertake new economic studies to gain a better 
understanding of how potentially higher levels of U.S. LNG exports--at 
levels between 12 and 20 Bcf/d of natural gas--would affect the public 
interest.\25\
---------------------------------------------------------------------------

    \24\ Because there is no natural gas pipeline interconnection 
between Alaska and the lower 48 states, DOE/FE generally views those 
LNG export markets as distinct. DOE/FE therefore focuses on LNG 
exports from the lower-48 states for purposes of determining 
macroeconomic impacts.
    \25\ See U.S. Dep't of Energy, Office of Fossil Energy, Request 
for an Update of EIA's January 2012 Study of Liquefied Natural Gas 
Export Scenarios, available at: http://energy.gov/fe/downloads/request-update-eia-s-january-2012-study-liquefied-natural-gas-export-scenarios (May 29, 2014) (memorandum from FE to EIA).
---------------------------------------------------------------------------

    DOE/FE commissioned two new macroeconomic studies. The first, 
Effect of Increased Levels of Liquefied Natural Gas Exports on U.S. 
Energy Markets, was performed by EIA and published in October 2014 
(2014 EIA LNG Export Study or 2014 Study).\26\ The 2014 Study

[[Page 67255]]

assessed how specified scenarios of increased natural gas exports could 
affect domestic energy markets. At DOE's request, this 2014 Study 
served as an update of EIA's January 2012 study of LNG export scenarios 
and used baseline cases from EIA's Annual Energy Outlook 2014 (AEO 
2014).\27\
---------------------------------------------------------------------------

    \26\ U.S. Energy Information Administration, Effect of Increased 
Levels of Liquefied Natural Gas Exports on U.S. Energy Markets (Oct. 
2014), available at: https://www.eia.gov/analysis/requests/fe/pdf/lng.pdf.
    \27\ Each Annual Energy Outlook (AEO) presents EIA's long-term 
projections of energy supply, demand, and prices. It is based on 
results from EIA's National Energy Modeling System (NEMS) model.
---------------------------------------------------------------------------

    The second study, The Macroeconomic Impact of Increasing U.S. LNG 
Exports, was performed jointly by the Center for Energy Studies at Rice 
University's Baker Institute and Oxford Economics under contract to 
DOE/FE (together, Rice-Oxford) and published in October 2015 (2015 LNG 
Export Study or 2015 Study).\28\ The 2015 Study is a scenario-based 
assessment of the macroeconomic impact of levels of U.S. LNG exports, 
sourced from the lower-48 states, under different assumptions including 
U.S. resource endowment, U.S. natural gas demand, international LNG 
market dynamics, and other factors. The 2015 Study considers export 
volumes ranging from 12 to 20 Bcf/d of natural gas, as well as a high 
resource recovery case examining export volumes up to 28 Bcf/d of 
natural gas. The analysis covers the 2015 to 2040 time period.
---------------------------------------------------------------------------

    \28\ Center for Energy Studies at Rice University Baker 
Institute and Oxford Economics, The Macroeconomic Impact of 
Increasing U.S. LNG Exports (Oct. 29, 2015), available at: http://energy.gov/sites/prod/files/2015/12/f27/20151113_macro_impact_of_lng_exports_0.pdf.
---------------------------------------------------------------------------

    In December 2015, DOE/FE published a Notice of Availability of the 
2014 and 2015 LNG Export Studies in the Federal Register, and invited 
public comment on those Studies.\29\ DOE/FE subsequently responded to 
the public comments in connection with the LNG export proceedings 
identified in that notice.\30\
---------------------------------------------------------------------------

    \29\ U.S. Dep't of Energy, Macroeconomic Impacts of LNG Exports 
Studies; Notice of Availability and Request for Comments, 80 FR 
81300, 81302 (Dec. 29, 2015).
    \30\ See, e.g., Sabine Pass Liquefaction, LLC, DOE/FE Order No. 
3792, FE Docket No. 15-63-LNG, Final Opinion and Order Granting 
Long-Term, Multi-Contract Authorization to Export Liquefied Natural 
Gas by Vessel From the Sabine Pass LNG Terminal Located in Cameron 
Parish, Louisiana, to Non-Free Trade Agreement Nations, at 66-121 
(Mar. 11, 2016).
---------------------------------------------------------------------------

III. Overview of 2018 LNG Export Study

    At the time DOE commissioned the 2018 LNG Export Study earlier this 
year, DOE/FE had 25 pending applications requesting authorization to 
export domestically produced LNG to non-FTA countries.\31\ In light of 
both the cumulative volume of exports to non-FTA countries authorized 
at that time (equivalent to 21.35 Bcf/d of natural gas) and the 
additional volume of LNG requested for export in those pending 
applications, DOE/FE determined that a new macroeconomic study was 
warranted.\32\ Accordingly, DOE/FE, through its support contractor 
KeyLogic Systems, Inc., commissioned NERA to conduct the 2018 LNG 
Export Study.
---------------------------------------------------------------------------

    \31\ See U.S. Dep't of Energy, Study on Macroeconomic Outcomes 
of LNG Exports; Notice of Availability of the 2018 LNG Export Study 
and Request for Comments, 83 FR 27314 (June 12, 2018) (identifying 
25 docket proceedings).
    \32\ Additionally, to date, DOE/FE has authorized a cumulative 
total of LNG exports to FTA countries under section 3(c) of the NGA 
in a volume of 59.33 Bcf/d from LNG projects. These FTA volumes are 
not additive to the authorized non-FTA volumes.
---------------------------------------------------------------------------

    Like the four prior economic studies, the 2018 LNG Export Study 
examines the impacts of varying levels of LNG exports on domestic 
energy markets. As explained below, the 2018 LNG Export Study assesses 
different levels of ``unconstrained'' LNG exports (defined as market-
determined levels of exports), and analyzes the outcomes of different 
LNG export levels on the U.S. natural gas markets and the U.S. economy 
as a whole, over the 2020 to 2050 time period. As part of this 
analysis, DOE/FE directed NERA to examine the likelihood of conditions 
leading to various export scenarios, making it the first DOE 
macroeconomic study to squarely address this issue.
    To summarize, the 2018 LNG Export Study differs from DOE/FE's prior 
economic studies in the following ways:
    (i) Includes a larger number of scenarios (54 scenarios) to capture 
a wider range of uncertainty in four natural gas market conditions than 
examined in the previous studies;
    (ii) Includes LNG exports in all 54 scenarios that are market-
determined levels, including the three alternative baseline scenarios 
that are based on the projections in EIA's Annual Energy Outlook 2017 
(AEO 2017);\33\
---------------------------------------------------------------------------

    \33\ U.S. Energy Info. Admin., Annual Energy Outlook 2017 (with 
projections to 2050) (Jan. 5, 2017), available at: https://www.eia.gov/outlooks/aeo/pdf/0383(2017).pdf.
---------------------------------------------------------------------------

    (iii) Examines unconstrained LNG export volumes beyond the levels 
examined in the previous studies;
    (iv) Examines the likelihood of those market-determined LNG export 
volumes; and
    (v) Provides macroeconomic projections associated with several of 
the scenarios lying within the more likely range.

IV. 2018 LNG Export Study, Macroeconomic Outcomes of Market Determined 
Levels of U.S. LNG Exports

A. Overview of NERA's Findings

    NERA's key findings in the 2018 Study include the following:
     The more likely range of LNG exports in the year 2040 was 
judged to range from 8.7 to 30.7 Bcf/d of natural gas. This assessment 
was based on a probabilistic analysis of 54 different scenarios 
constructed for the Study.\34\
---------------------------------------------------------------------------

    \34\ See 2018 LNG Export Study at 14.
---------------------------------------------------------------------------

     U.S. natural gas prices range from $5 to approximately 
$6.50 per million British thermal unit (MMBtu) in 2040 (in constant 
2016 dollars) under Reference case supply assumptions. These central 
cases have a combined probability of 47%.\35\
---------------------------------------------------------------------------

    \35\ Id. at 17.
---------------------------------------------------------------------------

     Levels of gross domestic product (GDP) are most sensitive 
to assumptions about U.S. supply of natural gas, with high supply 
driving higher levels of GDP. For each of the supply scenarios, higher 
levels of LNG exports in response to international demand consistently 
lead to higher levels of GDP. GDP achieved with the highest level of 
LNG exports in each group exceeds GDP with the lowest level of LNG 
exports by $13 to $72 billion in 2040 (in constant 2016 dollars).\36\
---------------------------------------------------------------------------

    \36\ Id. at 18.
---------------------------------------------------------------------------

     About 80% of the increase in LNG exports is satisfied by 
increased U.S. production of natural gas, with positive effects on 
labor income, output, and profits in the natural gas production 
sector.\37\
---------------------------------------------------------------------------

    \37\ Id. at 21.
---------------------------------------------------------------------------

     Chemical industry subsectors of the economy that rely 
heavily on natural gas for energy and as a feedstock continue to 
exhibit robust growth even at higher LNG export levels. This growth is 
only insignificantly slower than cases with lower LNG export levels.
     Even the most extreme scenarios of high LNG exports 
outside the more likely probability range (exhibiting a combined 
probability of less than 3%) show higher overall economic performance 
in terms of GDP, household income, and consumer welfare than lower 
export levels associated with the same domestic supply scenarios.

B. Methodology and Scenarios

    The 2018 Study develops 54 scenarios by identifying various 
assumptions for domestic and international supply and demand conditions 
to capture a wide range of uncertainty in the natural gas markets. The 
scenarios include three

[[Page 67256]]

baseline cases based on EIA's AEO 2017 projections (the most recent EIA 
projections available at the time), with varying assumptions about U.S. 
natural gas supply.\38\ Alternative scenarios add other assumptions 
about both future U.S. and international demand for natural gas. 
International assumptions are based on EIA's International Energy 
Outlook 2017 (IEO 2017) and the International Energy Agency's (IEA) 
World Energy Outlook 2016 (WEO 2016).
---------------------------------------------------------------------------

    \38\ See id. at 12; see also supra at note 33.
---------------------------------------------------------------------------

    As noted above, the 2018 Study also examines the likelihood of 
conditions leading to various export scenarios. Specifically, the 2018 
Study includes peer-reviewed probabilities of uncertainties surrounding 
developments in the international and domestic natural gas markets that 
were, in turn, combined to develop the 54 export scenarios and their 
associated macroeconomic impacts.
1. Scenarios
a. U.S. Natural Gas Supply
    The amount of natural gas that can be supplied at a given price 
depends on a number of factors, including how extraction technology 
develops, the magnitude of the extractable resource, political 
positions for or against limits on unconventional natural gas resource 
development (i.e., hydraulic fracturing), as well as the cost to 
develop natural gas resources.\39\ The 2018 Study specifies three 
different cases for U.S. natural gas supply derived from EIA's AEO 
2017:
---------------------------------------------------------------------------

    \39\ 2018 LNG Export Study at 25.
---------------------------------------------------------------------------

    i. AEO 2017's Reference case provides a central estimate of U.S. 
natural gas production;
    ii. High Oil and Gas Resource and Technology (HOGR) case provides 
more optimistic resource development estimates than the Reference case; 
and
    iii. Low Oil and Gas Resource and Technology (LOGR) case provides 
less optimistic resource development estimates than the Reference case.

The differences in the natural gas production levels across these three 
cases arise from varying assumptions around unproven offshore 
resources, onshore shale gas resources, tight gas resources, and 
conventional and tight oil associated gas resources, as well as the 
costs of producing these resources.\40\
---------------------------------------------------------------------------

    \40\ Id. at 25-26, 28; see also AEO 2017 at 12, 16.
---------------------------------------------------------------------------

b. U.S. Natural Gas Demand
    The 2018 Study notes that U.S. natural gas demand is primarily 
influenced by economic growth, population growth, per capita income, 
and environmental policies that influence fuel choices among sources of 
energy and total demand for energy.\41\ The 2018 Study specifies three 
different cases for U.S. natural gas demand:
---------------------------------------------------------------------------

    \41\ 2018 LNG Export Study at 26.
---------------------------------------------------------------------------

    i. AEO 2017's Reference case, which provides a central estimate of 
U.S. natural gas demand;
    ii. A Robust Economic Growth case, which provides a high estimate 
for U.S. natural gas demand driven by higher levels of gross domestic 
product growth; and
    iii. A Renewables Mandate case, which provides a low estimate for 
U.S. natural gas demand driven by the imposition of a stringent 
renewables mandate.
c. Rest of World Natural Gas Supply
    The 2018 Study considers two cases for international natural gas 
supply:
    i. IEO 2017's Reference case; and
    ii. A Low Supply case, which was created by reducing the IEO 2017 
Reference case natural gas production consistent with supply reductions 
in the LOGR case for U.S. supply.\42\
---------------------------------------------------------------------------

    \42\ Id. at 29-30.
---------------------------------------------------------------------------

d. Rest of World Natural Gas Demand
    NERA notes that there are relatively few global natural gas 
forecasts that provide a range of scenarios that would allow NERA to 
isolate drivers of global natural gas demand outside the United 
States.\43\ NERA identifies two such forecasts as EIA's IEO 2017 and 
IEA's WEO 2016. The 2018 Study considers three cases for international 
natural gas demand:
---------------------------------------------------------------------------

    \43\ Id. at 30.
---------------------------------------------------------------------------

    i. IEO 2017's Reference case;
    ii. WEO 2016's Current Policies scenario, which provided a high 
estimate for international natural gas demand; and
    iii. WEO 2016's 450 parts per million (ppm) case, which provides a 
low estimate for international natural gas demand based on policies 
with the objective of limiting the average global temperature increase 
in 2100 to 2 degrees Celsius above pre-industrial levels.
2. Probability Assignments
    A key feature of the 2018 Study is to provide not only 
quantification of the effects to the U.S. natural gas market and its 
overall economy under each of the scenarios outlined, but also an 
assessment of the probability of each of these scenarios, and thus the 
probability of the natural gas and macroeconomic outcomes associated 
with each.
    NERA first developed estimates of the probabilities for the level 
of U.S. supply and demand, as well as supply and demand in the rest of 
the world.\44\ DOE/FE and its support contractor KeyLogic, Inc. 
contacted a set of independent experts recommended by DOE (hereinafter 
the peer reviewers) to obtain their probability assignments for these 
same four metrics. After receiving feedback from the peer reviewers, 
NERA reevaluated the original probability assignments to arrive at the 
final probabilities.
---------------------------------------------------------------------------

    \44\ Id. at 37.
---------------------------------------------------------------------------

a. U.S. Supply Case Probabilities and Ranges
    The peer reviewers did not converge on common recommendations for 
U.S. supply case probabilities and ranges. One peer reviewer suggested 
focusing the probabilities more towards the Reference case by reducing 
the prominence of both the high and low cases.\45\ Another peer 
reviewer recommended reducing the probability for the Reference case 
and increasing the probabilities for both the high and low cases. 
Several other peer reviewers agreed with the original assignment of 
probabilities. According to NERA, there did not appear to be a 
consensus on how to change the proposed probabilities. The 
recommendations from the peer reviewers seemed either to offset each 
other or to agree with the original probabilities. For this reason, 
NERA decided to retain the original probability assignments. NERA made 
no change to its original range of U.S. supply values or the 
probabilities assigned to them.
---------------------------------------------------------------------------

    \45\ Id. at 43.
---------------------------------------------------------------------------

b. U.S. Demand Scenario Probabilities and Ranges
    In evaluating NERA's U.S. demand scenario probabilities and ranges, 
the peer reviewers did not have a consistent theme in their 
recommendations. One peer reviewer recommended greater emphasis on the 
Reference case, while another recommended deemphasizing the Reference 
case to increase the importance of the high and low cases.\46\ Two 
other peer reviewers recommended that NERA retain the probability 
assignments with no changes. Because the recommendations lacked a 
common theme but nevertheless seemed to offset each other, NERA 
retained the original probability assignments and made no changes to 
the original range of U.S. Demand.
---------------------------------------------------------------------------

    \46\ Id.

---------------------------------------------------------------------------

[[Page 67257]]

c. Rest of World Supply Scenario Probabilities and Ranges
    In evaluating the Rest of World supply scenarios, NERA noted 
several common themes from the peer reviewers. Several of the peer 
reviewers felt the proposed probabilities were reasonable. Another peer 
reviewer recommended assigning greater probability to the Reference 
case. No peer reviewer recommended that the low case receive more 
emphasis. As a result, the probability of the Reference case was 
increased by 5% while reducing the probability of the low case by the 
same amount. NERA made no changes to the original range of Rest of 
World Supply.
d. Rest of World Demand Scenario Probabilities and Ranges
    In evaluating the Rest of World demand scenarios, NERA noted common 
agreement on several themes. None of the peer reviewers recommended 
increasing the probability of the low world demand case. Several of the 
peer reviewers agreed that the Reference case should receive greater 
importance, with the high case receiving less importance. The peer 
reviewers disagreed on the degree to which the relative importance 
should be modified. In addition, the peer reviewers felt that the high 
end of the range for Rest of World demand should be increased to a 
level double the original differential between the reference and high 
cases. Based on the peer review recommendations, the high end of the 
range was increased as recommended by one peer reviewer. Overall, the 
high case probability was decreased to 50%, the Reference case 
probability was increased to 45%, and the low case stayed at a 
probability of 5%.
    Table 1 below presents the final probability assignments after peer 
review and the central estimate of the ranges adopted for the 
analysis.\47\
---------------------------------------------------------------------------

    \47\ 2018 LNG Export Study at 43-44 (Table 3).

               Table 1--Final Probability Assignments and Central Supply/Demand Estimates (Trillions of Cubic Feet) for Each Case in 2040
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            U.S. supply     U.S. demand     ROW supply      ROW demand
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 Case...................................  AEO 2017, HOGR          Robust  ..............             WEO
                                                                                                                Economic
                                                                                                                  Growth
High...........................................  Estimate...............................              49              39  ..............             172
                                                 Probability............................             30%             17%  ..............             50%
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 Case...................................       AEO 2017,       AEO 2017,       IEO 2017,       IEO 2017,
                                                                                               Reference       Reference       Reference       Reference
Reference......................................  Estimate...............................              39              33             139             145
                                                 Probability............................             55%             66%             80%             45%
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 Case...................................       AEO 2017,      Renewables      Low Supply       WEO 2016,
                                                                                                    LOGR         Mandate                         450 ppm
Low............................................  Estimate...............................              28              27              90             113
                                                 Probability............................             15%             17%             20%              5%
--------------------------------------------------------------------------------------------------------------------------------------------------------

C. NERA's Global Natural Gas Model (GNGM)

    The 2018 Study used the GNGM, which NERA describes as a worldwide 
model of the natural gas market based on LNG trade, interregional 
pipelines, and regional supply and demand.\48\ This model allows NERA 
to examine the likely direct and indirect impacts on regional natural 
gas markets of various industry developments and policy choices. Using 
the GNGM, NERA can take into account developments in individual regions 
and gauge region-specific market outcomes.
---------------------------------------------------------------------------

    \48\ Id. at 33.
---------------------------------------------------------------------------

    The GNGM's structure has full flexibility in terms of the time 
periods and regions it covers. For the 2018 Study, the model divides 
the world into 18 regions and solves for equilibrium natural gas flows, 
supply, and demand for the years 2020 to 2040 in five-year time 
steps.\49\ The model can be adapted to analyze any individual region in 
the world, as well as to consider a more granular time scale. The 
regional structure allows the model to factor in key components driving 
the natural gas market, including pipeline and marine linkages among 
regions, competition among supplier regions, and competition between 
LNG and natural gas pipelines.
---------------------------------------------------------------------------

    \49\ Id.
---------------------------------------------------------------------------

D. NERA's NewERA Macroeconomic Model

    NERA developed the NewERA model to forecast the impact 
of policy, regulatory, and economic factors on the energy sector and 
the economy as a whole. To evaluate policies that have significant 
impacts on the entire U.S. economy, NERA uses the NewERA 
model to capture the effects as they ripple through all sectors of the 
economy and the associated feedback effects. The version of the 
NewERA model used for the 2018 Study includes a 
macroeconomic model that represents all sectors of the economy.
    The macroeconomic model incorporates all production sectors, 
including liquefaction plants required for LNG exports; energy 
extraction; manufacturing and service sectors; and final demand for 
goods and services by households, the government, and for 
investment.\50\ The consequences of changes in LNG exports are 
transmitted throughout the U.S. economy as sectors respond until the 
economy reaches equilibrium. Producers and households are able to 
change their demand for goods and services in response to changes in 
prices.
---------------------------------------------------------------------------

    \50\ Id. at 34.
---------------------------------------------------------------------------

    The NewERA model addresses the key factors affecting 
future U.S. natural gas demand, supply, and price. One of the major 
uncertainties is the availability of shale gas in the United States. To 
account for this uncertainty and the effect it could have on domestic 
markets, the NewERA model includes resource supply curves 
for U.S. natural gas. The model also accounts for pipeline trade in 
natural gas with Mexico and Canada, and the potential build-up of 
liquefaction plants for exporting LNG. The NewERA model also 
has a supply (demand) curve for U.S. imports (exports) that represents 
how

[[Page 67258]]

the global LNG market price would react to changes in U.S. imports or 
exports.\51\
---------------------------------------------------------------------------

    \51\ Id.
---------------------------------------------------------------------------

    U.S. wellhead natural gas prices in the NewERA model are 
matched to the resulting prices from the GNGM. The baselines for the 
NewERA model are based on EIA's AEO 2017 Reference, High Oil 
and Gas Supply, and Low Oil and Gas Supply cases.

E. Results of the 2018 Study

    The 54 scenarios in the 2018 Study provide a wide range of results. 
NERA chose to focus on a subset of more likely outcomes, given DOE's 
assumptions about the probabilities associated with U.S. natural gas 
production, demand and supply, and demand for natural gas in the rest 
of the world. NERA defined the more likely outcomes as those that 
result in U.S. LNG exports that are within a one standard deviation of 
the mean level of exports.\52\ In the Study, NERA stated that an 
interval of plus or minus one standard deviation was chosen as more 
informative because it indicates a reasonable range of uncertainty 
without unduly emphasizing very unlikely outcomes.\53\
---------------------------------------------------------------------------

    \52\ 2018 LNG Export Study at 47.
    \53\ Id.
---------------------------------------------------------------------------

    The 2018 Study finds that, by the year 2040, there is a 16% chance 
that U.S. LNG exports will be below 9.0 Bcf/d and a 16% chance that 
they will be above 30.7 Bcf/d of natural gas.\54\ Put differently, 
there is approximately a 68% probability that U.S. LNG exports will be 
between 9.0 and 30.7 Bcf/d in 2040. Table 2 below lists 27 scenarios 
that are the ``more likely'' scenarios in 2040 (i.e., within one 
standard deviation of the mean for all 54 scenarios).\55\ The scenario 
nomenclature in Table 2 refers to the case used for U.S. natural gas 
supply, U.S. natural gas demand, Rest of World natural gas supply, and 
Rest of World natural gas demand, respectively.
---------------------------------------------------------------------------

    \54\ Id. at 49-50.
    \55\ 2018 LNG Export Study at 50-51 (Table 4).

    Table 2--LNG Exports and Scenario Probability for the More Likely
                            Scenarios in 2040
------------------------------------------------------------------------
                                                             Scenario
                Scenario                    LNG exports     probability
                                              Bcf/day           (%)
------------------------------------------------------------------------
Low_High_Low_High.......................            22.7             0.3
Low_Low_Low_High........................            26.1             0.3
Low_Low_Low_Ref.........................            12.4             0.2
Low_Ref_Low_High........................            23.4             1.0
Low_Ref_Low_Ref.........................             9.9             0.9
Ref_High_Low_Low........................            15.5             0.1
Ref_High_Low_Ref........................            28.9             0.8
Ref_High_Ref_High.......................            23.4             3.7
Ref_High_Ref_Ref........................            12.4             3.4
Ref_Low_Low_Low.........................            18.3             0.1
Ref_Low_Low_Ref.........................            30.5             0.8
Ref_Low_Ref_High........................            25.7             3.7
Ref_Low_Ref_Ref.........................            18.6             3.4
Ref_Ref_Low_Low.........................            17.0             0.4
Ref_Ref_Low_Ref.........................            29.6             3.3
Ref_Ref_Ref_High........................            24.0            14.5
Ref_Ref_Ref_Ref.........................            12.9            13.1
High_High_Low_Low.......................            22.2             0.1
High_High_Ref_High......................            30.1             2.0
High_High_Ref_Low.......................             8.7             0.2
High_High_Ref_Ref.......................            22.6             1.8
High_Low_Low_Low........................            23.6             0.1
High_Low_Ref_Low........................            12.4             0.2
High_Low_Ref_Ref........................            23.6             1.8
High_Ref_Low_Low........................            22.8             0.2
High_Ref_Ref_High.......................            30.7             7.9
High_Ref_Ref_Low........................             9.0             0.8
High_Ref_Ref_Ref........................            23.3             7.1
------------------------------------------------------------------------

    The 2018 Study summarized changes in Henry Hub prices in 2040 (in 
constant 2016 dollars) by the different U.S. natural gas supply 
scenarios, as follows:
     For all of the reference U.S. supply scenarios in the more 
likely range, Henry Hub natural gas prices could be from $5 to $6.50 
per million British thermal units (MMBtu) in 2040. These mid-range 
scenarios have a combined probability of 47%.\56\
---------------------------------------------------------------------------

    \56\ Id. at 54; see also id. at 53 (Figure 12).
---------------------------------------------------------------------------

     For all of the HOGR supply scenarios in the more likely 
range, Henry Hub prices range from $3.50 to $4 per MMBtu in 2040.\57\ 
These scenarios with natural gas prices at the low end of the range 
have a combined probability of 22%.\58\
---------------------------------------------------------------------------

    \57\ Id. at 53 (Table 12).
    \58\ Id. at 54.
---------------------------------------------------------------------------

     For all of the LOGR supply scenarios in the more likely 
range, Henry Hub prices range from $10 to $13 per MMBtu in 2040. These 
scenarios with natural gas prices at the high end of the range have a 
combined probability of 3%.
    The 2018 Study finds two important relationships between U.S. LNG 
exports and U.S. natural gas prices:
     ``Increasing U.S. LNG exports under any given set of 
assumptions about U.S. natural gas resources and their production leads 
to only small increases in U.S. natural gas prices;'' \59\ and
---------------------------------------------------------------------------

    \59\ Id. at 55 (discussing Figure 12).
---------------------------------------------------------------------------

     ``Available natural gas resources have the largest impact 
on natural gas prices. Therefore, U.S. natural gas prices are far more 
dependent on available resources and technologies to extract

[[Page 67259]]

available resources than on U.S. policies surrounding LNG exports.'' 
\60\
---------------------------------------------------------------------------

    \60\ Id.

Applying the same one-standard deviation interval of a probability 
greater than 16% and less than 84% reveals that the more likely range 
of Henry Hub price is from $3.90 to $6.70 per MMBtu of natural gas.\61\
---------------------------------------------------------------------------

    \61\ 2018 LNG Export Study at 55; see also id. at 56 (Figure 
13).
---------------------------------------------------------------------------

    The 2018 Study identifies 12 representative scenarios for 
macroeconomic analysis. The 12 scenarios include three different 
baselines and nine alternative shock scenarios (three per 
baseline).\62\ The scenarios are grouped according to the outlook for 
U.S. natural gas supply, as described previously: Reference, HOGR, and 
LOGR cases. All of the nine alternative NewERA scenarios 
project LNG export levels that are higher than their corresponding 
reference scenario. This selection of scenarios allows the analysis to 
capture the macroeconomic effects of higher LNG exports associated with 
higher levels of demand for U.S. LNG exports from the rest of the 
world.
---------------------------------------------------------------------------

    \62\ Id. at 62.
---------------------------------------------------------------------------

    However, not all of the scenarios evaluated produce LNG export 
levels that fall within a one-standard deviation interval around the 
mean of modeled LNG export volumes (the ``more likely'' range). 
Therefore, the 2018 Study discusses the macroeconomic effects for the 
seven macroeconomic scenarios that do fall within the range of more 
likely scenarios, as shown in bold in Table 3: \63\
---------------------------------------------------------------------------

    \63\ Id. at 63 (Table 9).

                                        Table 3--Macroeconomic Scenarios
----------------------------------------------------------------------------------------------------------------
                                                                                                    Cumulative
    U.S. supply          U.S. demand          ROW supply          ROW demand        LNG exports     probability
                                                                                     (Bcf/day)          (%)
----------------------------------------------------------------------------------------------------------------
Ref................  Ref................  Ref...............  Ref...............            12.9              33
Ref................  Ref................  Low...............  Ref...............            29.6              76
Ref................  Ref................  Low...............  High..............            45.7              96
Ref................  Ref................  Ref...............  High..............            24.0              68
High...............  Ref................  Ref...............  Ref...............            23.3              47
High...............  Ref................  Low...............  Ref...............            40.4              91
High...............  Ref................  Low...............  High..............            52.8              99
High...............  Ref................  Ref...............  High..............            30.7              87
Low................  Ref................  Ref...............  Ref...............             0.1               5
Low................  Ref................  Low...............  Ref...............             9.9              16
Low................  Ref................  Low...............  High..............            23.4              48
Low................  Ref................  Ref...............  High..............             8.2              11
----------------------------------------------------------------------------------------------------------------

    Finally, the 2018 Study summarizes a number of the broad 
macroeconomic effects on the U.S. economy of increased LNG exports, as 
discussed below.
1. U.S. Consumer Well-Being Increases With Rising LNG Exports
    For the more likely scenarios, consumer welfare ranges from $30.25 
trillion to $30.26 trillion (a variation of $10 billion).\64\ As U.S. 
LNG exports increase, U.S. households receive additional income from 
two sources. First, the LNG exports provide additional export revenues, 
and second, households that hold shares in companies that own 
liquefaction plants receive additional income from take-or-pay tolling 
charges for LNG exports. These additional sources of income for U.S. 
consumers outweigh the income loss associated with higher energy 
prices.
---------------------------------------------------------------------------

    \64\ See id. at 67; see also id. at 66 (Figure 16), 67 (Table 
10).
---------------------------------------------------------------------------

2. Total Economic Activity Expands With Rising LNG Exports
    Gross domestic product (GDP), or the level of total economic 
activity in the economy, is another economic metric that is often used 
to evaluate the effect of a change to the economy. The GDP effects 
associated with higher LNG exports increase as the economy benefits 
from investment in the liquefaction process, export revenues, resource 
income, and additional wealth transfers (in the form of tolling 
charges). The impact of LNG exports results in shifts in income between 
different sources, but overall GDP improves as LNG exports increase for 
all scenarios with the same U.S. natural gas supply conditions.
    Levels of GDP are most sensitive to assumptions about U.S. supply, 
with high natural gas supply driving higher levels of GDP. For each of 
the supply scenarios, higher levels of LNG exports in response to 
international demand consistently lead to higher levels of GDP. GDP 
achieved with the highest level of LNG exports in each group exceeds 
GDP with the lowest level of LNG exports by $13 to $72 billion in 2040 
(in constant 2016 dollars).\65\
---------------------------------------------------------------------------

    \65\ 2018 LNG Export Study at 18.
---------------------------------------------------------------------------

3. Sectoral Growth Rates Change Negligibly for Key Economic Sectors and 
Energy-Intensive Sectors
    Sectoral growth rates remain robust for all of the sectors that 
rely on natural gas as fuel and raw material input. The variation in 
the growth rates attributable to differences in LNG exports ranges from 
one to seven basis points (0.01% to 0.07%). Even for the scenario with 
the largest change in sectoral growth rates, the change is still 
relatively small.\66\ According to NERA, it is reasonable to conclude 
that an increased level of LNG exports will have a negligible effect on 
how quickly these sectors grow.\67\
---------------------------------------------------------------------------

    \66\ Id. at 70.
    \67\ Id.
---------------------------------------------------------------------------

4. Household Income Shifts Between Different Sources But Is Positive 
Overall
    When comparing changes in resource income between the baseline and 
the scenarios, resource income associated with natural gas 
significantly increases. This is because both the value of the natural 
gas resource, as well as returns to specialized capital and labor, 
increase when additional LNG exports are allowed.\68\ Value-added 
income (wage and capital income) also increases because of the 
increased opportunity for exports and the resulting boost to labor 
income, profits, and GDP.
---------------------------------------------------------------------------

    \68\ Id. at 73.
---------------------------------------------------------------------------

    At the same time, the resource income associated with coal and 
crude oil changes minimally. Therefore, the total change in resource 
income is positive for the scenarios, and the changes in

[[Page 67260]]

resource income increase with the level of LNG exports. Income 
associated with net transfers includes government transfers and all 
tolling charges on LNG exports. Government transfers remain the same 
between the baseline and scenarios, so the net transfer reflects the 
additional wealth transfer. Changes in tax revenue are ``grossed up'' 
in value added.\69\
---------------------------------------------------------------------------

    \69\ Id. at 73.
---------------------------------------------------------------------------

5. Aggregate Consumption and Investment Is Higher
    Aggregate consumption measures the total spending on goods and 
services in the economy. Within each U.S. natural gas supply scenario, 
aggregate consumption is higher when LNG exports are higher.
    As with the welfare and GDP results, wealth transfer associated 
with LNG exports increases household income which, in turn, leads to 
higher spending on goods and services. Under the Reference U.S. natural 
gas supply scenario, aggregate consumption is $25,049 billion and LNG 
exports are 12.9 Bcf/d. When LNG exports increase as a result of 
natural gas demand pull, aggregate consumption is $25,054 billion (for 
29.6 Bcf/d), an increase of about $5 billion.\70\ A similar pattern is 
observed in the outcomes for aggregate consumption in each of the 
groups of scenarios based on alternative U.S. natural gas supply 
assumptions.\71\
---------------------------------------------------------------------------

    \70\ We noted that, in the narrative section of the 2018 Study 
on this point, there is a typo in the Reference case number. See 
2018 LNG Export Study at 75 (``Under the Reference U.S. natural gas 
supply scenario, Ref_Ref_Ref_Ref, aggregate consumption is $24,049 
billion and LNG exports are 12.9 Bcf/d.''). The $24,049 billion 
number is actually $25,049, as shown in the corresponding Table 14. 
See id. at 76.
    \71\ 2018 LNG Export Study at 75.
---------------------------------------------------------------------------

6. U.S. LNG Exports Are Backed by Increased Natural Gas Production
    The results from NERA's analysis indicate there is no support for 
the concern that LNG exports would come at the expense of domestic 
natural gas consumption. To the contrary, a large share of the increase 
in LNG exports is supported by an increase in domestic natural gas 
production, leading to a modest increase in natural gas prices and 
additional income from export revenues.\72\ About 80% of the increase 
in LNG exports is satisfied by increased domestic production of natural 
gas, with positive effects on labor income, output, and profits in the 
natural gas production sector.
---------------------------------------------------------------------------

    \72\ Id. at 77.
---------------------------------------------------------------------------

    In the Reference U.S. supply scenarios, as total natural gas 
exports increase from 5.8 Tcf (in the Ref_Ref_Ref_Ref scenario) to 12.9 
Tcf (in the Ref_Ref_Low_Ref scenario), natural gas production increases 
for the corresponding scenarios from 37.7 Tcf to 43.9 Tcf, 
respectively, in 2040.\73\
---------------------------------------------------------------------------

    \73\ Id. at 78 and Figure 21.
---------------------------------------------------------------------------

V. Notice of Availability of the 2018 LNG Export Study

    On June 12, 2018, DOE published notice of availability (NOA) of the 
2018 LNG Export Study and a request for comments.\74\ The purpose of 
the NOA was ``to enter the 2018 LNG Export Study into the 
administrative record of the 25 pending non-FTA export proceedings 
[identified in the NOA] and to invite comments on the Study for use in 
the pending and future non-FTA application proceedings.'' \75\ DOE 
provided the following instructions:
---------------------------------------------------------------------------

    \74\ See U.S. Dep't of Energy, Study on Macroeconomic Outcomes 
of LNG Exports; Notice of Availability of the 2018 LNG Export Study 
and Request for Comments, 83 FR 27314 (June 12, 2018).
    \75\ Id. at 27315.

    Comments must be limited to the methodology, results, and 
conclusions of the 2018 LNG Export Study on the factors evaluated. 
These factors include the potential impact of LNG exports on 
domestic energy consumption, production, and prices; the 
macroeconomic factors identified in the Study, including gross 
domestic product, consumption, U.S. economic sector analysis, and 
U.S. LNG export feasibility analysis; and any other factors included 
in the Study. In addition, comments may be directed toward the 
feasibility of various scenarios used in the Study.\76\
---------------------------------------------------------------------------

    \76\ Id. at 27316 (noting that ``[w]hile this invitation to 
comment covers a broad range of issues, DOE may disregard comments 
that are not germane to the present inquiry.'').

Publication of the NOA began a 45-day public comment period that ended 
on July 27, 2018.
    DOE received 19 comments on the 2018 LNG Export Study from a 
variety of sources, including participants in the natural gas industry, 
environmental organizations, and individuals. Of those, nine comments 
supported the Study,\77\ eight comments opposed the 2018 Study and/or 
exports of LNG,\78\ one comment took no position,\79\ and one comment 
was non-responsive.\80\ The NOA and comments received on the NOA are 
available on DOE's website at https://fossil.energy.gov/app/docketindex/docket/index/10.
---------------------------------------------------------------------------

    \77\ Supporting comments were filed by the Marcellus Shale 
Coalition; the Center for Liquefied Natural Gas (CLNG); the 
Pennsylvania Chamber of Business and Industry; the American 
Petroleum Institute (API); Cheniere Energy, Inc. (Cheniere); Jordan 
Cove Energy Project L.P. (JCEP); LNG Allies; NextDecade Corp.; and 
Anonymous. The Anonymous comment is comprised of five comments filed 
by the same anonymous author.
    \78\ Opposing comments were filed by Patricia Weber; Oil Change 
International; Food & Water Watch; Industrial Energy Consumers of 
America (IECA); Oregon Wild; Sierra Club; Deb Evans and Ron Schaaf 
(the Evans Schaaf Family); and Jody McCaffree (individually and as 
executive director of Citizens for Renewables/Citizens Against LNG). 
Oil Change International and Food & Water Watch filed identical 
comments.
    \79\ Comment of John Young.
    \80\ Comment of Vincent Burke.
---------------------------------------------------------------------------

VI. Comments on the 2018 LNG Export Study and DOE/FE Response

    DOE has evaluated the comments received during the public comment 
period. Below, DOE/FE summarizes: (i) The pertinent arguments by topic, 
with reference to representative comments, and (ii) DOE/FE's basis for 
the conclusions that it drew in reviewing those comments. In so doing, 
DOE/FE has responded to the relevant and significant issues raised by 
the commenters.\81\
---------------------------------------------------------------------------

    \81\ See, e.g., Public Citizen v. F.A.A., 988 F.2d 186, 197 
(D.C. Cir. 1993).
---------------------------------------------------------------------------

A. Data Inputs and Estimates of Natural Gas Demand

1. Comments
    Every commenter supporting the 2018 LNG Export Study expresses 
support for NERA's study design. For example, Cheniere states that the 
2018 Study's ``refined approach'' is well-suited to the present 
context, in which DOE/FE has approved non-FTA exports in a volume (at 
the time of Cheniere's filing) up to 21.35 Bcf/d, with more non-FTA 
applications pending.\82\ The commenters point out that the study 
design--with 54 different scenarios reflecting a range of market 
uncertainties and market-determined levels of export volumes--differs 
from past studies that were based on prescribed LNG export volumes. 
JCEP states that the 2018 Study takes the ``next logical step'' in 
studying unbounded exports driven by market demand.\83\ For this 
reason, commenters including LNG Allies and API characterize the 2018 
Study as the most comprehensive of DOE's export studies to date.
---------------------------------------------------------------------------

    \82\ Comment of Cheniere at 3.
    \83\ Comment of JCEP at 3.
---------------------------------------------------------------------------

    LNG Allies observes that the 2018 Study uses data from AEO 2017 for 
its analysis, but notes that the projections in EIA's Annual Energy 
Outlook 2018 (AEO 2018) \84\ indicate ``significantly lower natural gas 
prices in the United States in the future, as well as considerably 
higher U.S. natural gas production under all scenarios (versus

[[Page 67261]]

AEO 2017).'' \85\ LNG Allies asserts that, had it been possible for the 
2018 Study to draw upon EIA's most recent data in AEO 2018, the 
evidence supporting market-determined levels of U.S. LNG exports would 
have been ``even more persuasive.'' \86\
---------------------------------------------------------------------------

    \84\ U.S. Energy Info. Admin., Annual Energy Outlook 2018 (with 
projections to 2050) (Feb. 6, 2018), available at: https://www.eia.gov/outlooks/aeo/pdf/AEO2018.pdf.
    \85\ Comment of LNG Allies at 2.
    \86\ Id. (emphasis in original).
---------------------------------------------------------------------------

    JCEP also endorses the 2018 Study's design as ``appropriate and 
important given the state of the U.S. LNG export market to date.'' \87\ 
Specifically, JCEP notes that some LNG export projects have received 
authorizations from the Federal Energy Regulatory Commission (FERC) and 
DOE, but have not yet moved forward on construction or may never move 
forward. In JCEP's view, these ``stalled'' projects should not prevent 
other projects from obtaining export authorizations through artificial 
limits on approved export volumes. Therefore, JCEP asserts, the 2018 
Study correctly evaluated LNG exports limited only by market demand, 
not by regulatory constraints imposed by DOE.\88\
---------------------------------------------------------------------------

    \87\ Comment of JCEP at 3.
    \88\ Id.
---------------------------------------------------------------------------

    On the other hand, several commenters--including Sierra Club, 
Oregon Wild, and the Industrial Energy Consumers of America (IECA)--
challenge the scope of the 2018 Study and the data used as inputs. 
Specifically, these commenters assert that the 2018 Study relies on 
inaccurate assumptions that fail to reflect conditions that adversely 
affect (and will continue to affect) the viability of U.S. LNG exports.
    First, Oregon Wild states that the U.S. market for fossil fuels is 
deeply flawed. According to Oregon Wild, the current prices for natural 
gas do not reflect either the full costs of production or significant 
externalities (e.g., global climate change and ocean acidification), 
and thus are artificially low. Low prices for LNG, in turn, result in 
artificially high demand and supply that ``far exceeds'' optimal 
levels.\89\ Consequently, Oregon Wild states that increasing exports of 
U.S. LNG ``will increase the supply of a commodity that is already 
oversupplied at a global scale.'' \90\
---------------------------------------------------------------------------

    \89\ Comment of Oregon Wild at 1.
    \90\ Id.
---------------------------------------------------------------------------

    Commenters including Oil Change International, Food & Water Watch, 
and Sierra Club assert that the 2018 Study is based on flawed 
projections of global demand for natural gas. Sierra Club argues that 
the 2018 Study ``drastically overstates'' global demand, which 
``significantly skews'' the 2018 Study's overall analysis and 
conclusions.\91\ Oil Change International, Food & Water Watch, and 
other commenters also allege the following deficiencies in NERA's study 
design:
---------------------------------------------------------------------------

    \91\ Comment of Sierra Club at 1.
---------------------------------------------------------------------------

     Fails to account for the negative impacts of increased 
natural gas production and related infrastructure;
     Fails to consider shifts in anti-fossil fuel energy 
policies at the state level that will impact U.S. supplies;
     Fails to acknowledge the transition to renewable energy 
and storage (i.e., flexible generation technologies) that compete with 
natural gas globally, as well as efforts in the United States to build 
out renewable energy sources and increase energy efficiency;
     Improperly relies on ``projected diminishing Rest of 
World'' natural gas supplies;
     Fails to properly account for economic costs related to 
environmental issues, particularly the costs associated with climate 
change; and
     Fails to account for international efforts to address 
climate change and/or assumes that such efforts will fail, which 
allegedly will impact global demand for natural gas.\92\
---------------------------------------------------------------------------

    \92\ Comments of Oil Change International and Food & Water Watch 
at 1.
---------------------------------------------------------------------------

    Addressing the climate change argument, Oil Change International 
and Food & Water Watch first challenge the statement in the 2018 Study 
that `` `NERA [has] followed the development of international 
agreements on climate change for many years, and we do not expect that 
future progress will be very much greater than in the past.' '' \93\ On 
this basis, NERA attributed a ``low probability''--specifically, a 5% 
probability--to the ``low international demand case'' for the rest of 
the world (ROW), in which international demand for natural gas is 
reduced due to policies to address climate change.\94\
---------------------------------------------------------------------------

    \93\ Id. at 2 (citing 2018 LNG Export Study at 42).
    \94\ 2018 LNG Export Study at 41-42.
---------------------------------------------------------------------------

    The Evans Schaaf Family submitted a comment challenging NERA's 
assumption, asserting that ``[t]he most glaring of [NERA's] predictions 
is that there is a mere 5% probability that the [Rest of World] would 
meet the 450 ppm [parts per million] of CO2e [carbon dioxide 
equivalent] as set forth in the Paris Climate Agreement.'' \95\ The 450 
ppm case assumes a set of policies with the objective of limiting the 
average global temperature increase in 2100 to 2 degrees Celsius above 
pre-industrial levels.\96\ NERA noted that, ``[t]o achieve this 
concentration, it is necessary to phase out all fossil fuel use 
including natural gas over the course of the next century.'' \97\ Oil 
Change International and Food & Water Watch contend, however, that NERA 
``provide[d] no scientific reasoning for attributing a 5% probability 
to international gas demand levels that align with the . . . 450 ppm 
Scenario.'' \98\
---------------------------------------------------------------------------

    \95\ Comment of the Evans Schaaf Family at 1.
    \96\ 2018 LNG Export Study at 30; see also id. at 41 (explaining 
that the ``lowest natural gas demand is obtained from a scenario in 
which the IEA assumes that every country adopts policies sufficient 
to keep global greenhouse gas concentrations under 450 ppm CO2e.'').
    \97\ Id. at 41.
    \98\ Comments of Oil Change International and Food & Water Watch 
at 2.
---------------------------------------------------------------------------

    Oil Change International and Food & Water Watch also state that the 
2018 Study should have given much greater emphasis to low natural gas 
demand scenarios that align with the Paris Agreement.\99\ In their 
view, rather than NERA adopting a ``subjective and cynical'' view 
towards international climate negotiations, a ``methodologically sound 
approach would be to project the level of U.S. LNG exports that align 
with global success in meeting the Paris goals.'' \100\ They point out 
that the Paris Agreement has been ratified by more than 170 nations, 
with the United States being the only country to back away from the 
Agreement.
---------------------------------------------------------------------------

    \99\ Id.
    \100\ Id.
---------------------------------------------------------------------------

    According to the commenters, this approach would show a much lower 
global demand for U.S. LNG exports by the middle of this century, 
indicating a very different trajectory to any of those described in the 
2018 Study. They claim that, by attributing a low probability to the 
likelihood that demand for U.S. natural gas will be reduced in light of 
climate policies, the 2018 Study is ``predicated on a failure to 
prevent catastrophic climate impacts.'' \101\
---------------------------------------------------------------------------

    \101\ Id.
---------------------------------------------------------------------------

    Similarly, Sierra Club asserts that the 2018 Study overstates 
global natural gas demand, and thus market support for U.S. LNG 
exports, ``by assuming that the most likely [demand] scenario is for 
the rest of the world to take no further action to limit greenhouse gas 
emissions.'' \102\ Specifically, Sierra Club disputes NERA's judgment 
that the high demand case--assigned a 65% probability--should assume 
that 2016 is the last year in which the global community undertakes any 
effort to limit greenhouse gas emissions, i.e., that no further action 
is taken between 2018 and 2040.\103\ In Sierra Club's view, ``this

[[Page 67262]]

scenario might represent a useful hypothetical `ceiling' on global 
natural gas demand,'' but the 2018 Study does not demonstrate that it 
is plausible, much less the ``most likely'' scenario.\104\
---------------------------------------------------------------------------

    \102\ Comments of Sierra Club at 1 (emphasis in original).
    \103\ Id. (citing 2018 LNG Export Study at 41-43) (NERA 
explaining that ``we assign . . . the highest probability to the WEO 
Current Policies case that assumes no additional actions to limit 
emissions [after 2016].'').
    \104\ Id.
---------------------------------------------------------------------------

    Turning to renewable energy, Oil Change International and Food & 
Water Watch cite recent analysis from Bloomberg New Energy Finance, the 
New Energy Outlook 2018.\105\ They argue that this Bloomberg analysis 
projects a very different picture of future energy demand than assumed 
in the 2018 Study. For example, they argue that, by 2050, renewable 
energy will make up over two-thirds of global power generation, while 
fossil energy will have declined to 29% from 63% today.\106\ Citing 
these and other projections, the commenters argue that there will be 
substantial constraints on growth in the demand for U.S. LNG. The 
commenters argue that, without these adjustments, the 2018 Study 
exaggerates both the potential for U.S. LNG exports and the related 
macroeconomic benefits.
---------------------------------------------------------------------------

    \105\ Comments of Oil Change International and Food & Water 
Watch at 3 n.4 (citation omitted).
    \106\ Id. at 3.
---------------------------------------------------------------------------

    Patricia Weber and other commenters express concern about NERA's 
statement that the 2018 Study `` `does not investigate' '' the 
variations in domestic versus foreign ownership of assets as part of 
its NewEra model.\107\ Ms. Weber questions why NERA did not 
consider the implications for the U.S. economy of a foreign-owned 
pipeline exporting U.S. LNG through a foreign-owned facility. She cites 
JCEP's pending LNG export project, in which the proposed Jordan Cove 
Energy Project and associated Pacific Connector Gas Pipeline would be 
owned by a Canadian corporation.\108\
---------------------------------------------------------------------------

    \107\ Comment of Patricia Weber at 1 (quoting 2018 LNG Export 
Study at 34 n.34) (NERA stating that, ``[i]n the NewERA 
model, it is possible to represent these variations in domestic 
versus foreign ownership of assets and capture export revenues to 
better understand the issues. However, this study does not 
investigate these issues.'').
    \108\ Id.
---------------------------------------------------------------------------

    Similarly, Ms. Weber and the Evans Schaaf Family question whether 
the 2018 Study excludes Canadian (or Mexican) natural gas supply as a 
factor. In their view, since NERA states that ``countries in the North 
American region share a single natural gas market,'' \109\ any 
macroeconomic benefits associated with LNG exports should be applied 
across North America, and not assumed to accrue only to the United 
States, as the 2018 Study suggests.
---------------------------------------------------------------------------

    \109\ 2018 LNG Export Study at 56 n.48.
---------------------------------------------------------------------------

    Finally, some commenters, including Ms. Weber and Jody McCaffree, 
dispute the 2018 Study's conclusions regarding international levels of 
U.S. LNG exports. They suggest that the current volumes of LNG exports 
across the world (not only U.S. LNG) are already excessive and will 
result in a global oversupply. Citing a 2017 report by the 
International Gas Union, Ms. McCaffree warns that ``it would take 15 
years . . . until the current excess of LNG volumes would likely be 
absorbed into the international LNG export markets.'' \110\ Ms. Weber 
also questions whether the 2018 Study considers any potential 
macroeconomic impacts if the infrastructure created from increased LNG 
exports exceeds the bounds of what the market demands--for example, if 
the LNG industry ``overbuilds'' two to three times more export capacity 
than ultimately needed.\111\
---------------------------------------------------------------------------

    \110\ Comment of Jody McCaffree at 2 (emphasis in original) 
(citing International Gas Union, 2017 World LNG Report, at 4-5) 
(attached as Exh. 1 to McCaffree Comment).
    \111\ Id.
---------------------------------------------------------------------------

2. DOE/FE Response
    The 2018 Study considered 54 different scenarios of LNG exports 
from the United States over the coming decades. Different assumptions 
regarding future supply and demand conditions provided a wide range of 
possible outcomes for further macroeconomic analysis. Through a peer-
reviewed process, the 2018 Study assigned probabilities for each of the 
supply and demand cases, which, when combined, provided likelihoods for 
the scenarios. This approach allowed NERA to consider very unlikely 
scenarios for U.S. LNG exports--with export levels much lower and much 
higher than the Reference case--thus providing a more comprehensive 
range of outcomes than considered in DOE's previous LNG export studies. 
The 2018 Study found a ``positive correlation between GDP and LNG 
exports for the more likely scenarios in 2040,'' such that ``[i]n all 
scenarios with common assumptions about U.S. natural gas supply and 
demand, there is greater gain in GDP as the LNG export volume 
increases.'' \112\
---------------------------------------------------------------------------

    \112\ 2018 LNG Export Study at 67.
---------------------------------------------------------------------------

    We take note of EIA's projections in AEO 2018, published on 
February 6, 2018, for natural gas supply, demand, and prices.\113\ One 
commenter noted the lower domestic natural gas prices and higher 
domestic natural gas production projected in AEO 2018 than in the 
projections from AEO 2017 used in the 2018 Study. Projected Reference 
case domestic dry natural gas production for the year 2040 increased by 
2.41 Tcf between AEO 2017 and AEO 2018 (from 37.74 Tcf to 40.15 Tcf, 
respectively). The Henry Hub price in 2040 declined from $5.18 per 
million British thermal units (MMBtu) in the AEO 2017 projections to 
$4.50/MMBtu in the AEO 2018 projections (both prices in constant 2017 
dollars). Reference case LNG exports in the year 2040 increased from 
the 2017 to 2018 projections by 0.92 Tcf (from 4.44 Tcf to 5.36 Tcf). 
As described here, the AEO 2018 Reference case, even more so than AEO 
2017, projects robust domestic supply conditions that are more than 
adequate to meet domestic needs and supply exports.
---------------------------------------------------------------------------

    \113\ See AEO 2018, supra note 84.
---------------------------------------------------------------------------

    Several commenters suggested the 2018 LNG Export Study overstates 
the future level of U.S. LNG exports, as well as the probability of 
those levels of exports occurring. DOE/FE commissioned the 2018 Study 
to inform its public interest analysis of pending long-term 
applications to export LNG to non-FTA countries beyond the 21.35 Bcf/d 
of exports already approved at that time. To develop scenarios with 
much larger volumes of exports than under Reference case conditions, 
the 2018 Study performers examined unconstrained cases and assigned 
probabilities to help illustrate the likelihood of LNG export levels 
much lower and much higher than the Reference case. The macroeconomic 
analysis of the export scenarios provides valuable input to inform DOE/
FE's public interest analysis. The 2018 Study does not (and was not 
intended to) provide an analysis of any ``optimal'' level of LNG 
exports based on different policy objectives. Further, the 2018 Study 
Reference case rate of exports in 2040 (``Ref_Ref_Ref_Ref'') is in the 
range of LNG exports projected in AEO 2018 for the same time period--
12.9 Bcf/d in the 2018 Study, compared to 14.7 Bcf/d in AEO 2018.
    If increased global demand for U.S. LNG exports does not 
materialize, as some commenters suggest, there would be no 
corresponding incremental domestic supply or price impact since 
additional LNG exports would not occur, irrespective of regulatory 
approvals. As some commenters point out, multiple proposed projects 
have received full approval for their export facilities from FERC and 
DOE, yet they have neither made a final investment decision nor begun 
construction. Given the significant capital costs of liquefaction and 
export facilities, project developers in the United States typically 
must demonstrate long-term

[[Page 67263]]

demand for their projects through the execution of long-term contracts 
to raise the needed capital to finance their projects. DOE/FE also 
notes that current large-scale liquefaction capacity in operation or 
under construction in the United States today equals approximately 11 
Bcf/d of exports, which is more than 3 Bcf/d below the AEO 2018 
Reference case rate of LNG exports projected in 2040.

B. Economic Benefits Associated With LNG Exports

1. Economic Benefits Realized to Date
a. Comments
    Cheniere states that it agrees with the results of the 2018 LNG 
Export Study, and emphasizes that, ``for Cheniere, the positive 
economic impacts of LNG exports are not just a matter of economic 
theory.'' \114\ In the years since DOE/FE published its first LNG 
export study, Cheniere--through its subsidiary, Sabine Pass 
Liquefaction, LLC--has constructed and launched operations at the 
Sabine Pass Liquefaction Project, located at the Sabine Pass LNG 
Terminal in Cameron Parish, Louisiana. Cheniere states that it has 
constructed four liquefaction trains at the Sabine Pass LNG Terminal, 
and is in the process of commencing exports from a fifth train.\115\ 
DOE/FE (as well as the Anonymous commenter) notes that Cheniere began 
exporting U.S. LNG from the Sabine Pass LNG Terminal on February 24, 
2016, and, to date, has exported 501 LNG cargoes from Sabine Pass (both 
long-term and short-term exports) with deliveries to 29 countries and 
regions worldwide.\116\ Cheniere states that, through other 
subsidiaries, it is also in the process of constructing three 
liquefaction trains at the Corpus Christi LNG Terminal in San Patricio 
County, Texas.
---------------------------------------------------------------------------

    \114\ Comment of Cheniere at 1.
    \115\ Id.
    \116\ See FE LNG Monthly, Dec. 2018, and LNG Annual 2016, 2017, 
available at: https://www.energy.gov/fe/listings/lng-reports; see 
also Comment of NextDecade Corp. at 9; Comment of API at 2. 
Additionally, we note that Dominion Energy Cove Point LNG, LP (DECP) 
commenced LNG exports on March 2, 2018. To date, DECP has exported 
36 LNG cargoes from its terminal in Lusby, Maryland (both long-term 
and short-term exports), with deliveries to 13 countries and regions 
worldwide.
---------------------------------------------------------------------------

    According to Cheniere, these two LNG export projects have created 
approximately 9,000 direct construction jobs at peak construction over 
a period of several years, as well as more than 1,000 permanent, full-
time jobs.\117\ Cheniere asserts that the construction and operation of 
both the Sabine Pass and Corpus Christi Liquefaction Projects have 
generated, and will continue to generate, tens of thousands of indirect 
jobs across the United States. Cheniere states that, to date, it has 
sourced natural gas for the Sabine Pass Liquefaction Project from 
dozens of producers located in Texas, Louisiana, Arkansas, 
Pennsylvania, Ohio, West Virginia, Oklahoma, Illinois, and Kentucky. 
Cheniere maintains that jobs have been created due to the demand its 
LNG export operations have created for natural gas infrastructure--
including in the steel industry and in other segments of the natural 
gas supply chain.\118\
---------------------------------------------------------------------------

    \117\ See Comment of Cheniere at 2.
    \118\ See id.
---------------------------------------------------------------------------

    In this regard, Cheniere states that liquefaction projects require 
a wide variety of manufactured parts and components, many of which can 
be sourced from domestic manufacturers. Cheniere states that, to date, 
its LNG facilities have procured components from 1,590 U.S. 
manufacturers in 46 states.\119\ In sum, Cheniere maintains that, 
``through its procurement of domestic natural gas and across its 
manufacturing supply chain,'' it ``has seen first-hand the broad 
economic benefits of LNG exports to the American economy.'' \120\
---------------------------------------------------------------------------

    \119\ See id.
    \120\ Id.
---------------------------------------------------------------------------

    The American Petroleum Institute (API) agrees that the results of 
the 2018 LNG Export Study ``are consistent with U.S. LNG experience to 
date.'' \121\ Specifically, API states that U.S. LNG cargoes commenced 
in early 2016, yet the impact on domestic prices of natural gas has 
been negligible. Likewise, the Pennsylvania Chamber of Business and 
Industry states that concerns about significant increases in natural 
gas prices occurring after DOE/FE began authorizing LNG exports have 
not been borne out.\122\
---------------------------------------------------------------------------

    \121\ Comment of API at 2.
    \122\ Comment of Pennsylvania Chamber of Business and Industry 
at 1-2; see infra at Sec.  VI.G.
---------------------------------------------------------------------------

b. DOE/FE Response
    The 2018 Study did not attempt to quantify the macroeconomic 
impacts or other direct and indirect effects of LNG exports since 
February 2016. Nonetheless, to provide one estimate of the current 
value of U.S. LNG exports, DOE/FE points to the quantity and price of 
U.S. LNG exported to date, as reported by DOE/FE export authorization 
holders. Since initial exports began from the lower-48 states in 
February 2016, a cumulative volume of over 1.7 trillion cubic feet of 
natural gas has been exported through October 2018, and the 
corresponding volume-weighted prices for the same period yield a value 
of over $7.9 billion.\123\ Additionally, as noted previously, since 
U.S. LNG exports from the lower-48 states began, the projected Henry 
Hub price in 2040 has decreased from AEO 2017 to AEO 2018, which is a 
function of the size of domestic natural gas supply to meet both 
domestic and export demand.
---------------------------------------------------------------------------

    \123\ LNG exports of 186,841 million cubic feet (MMcf) in 2016 * 
$4.71/thousand cubic feet (Mcf) + LNG exports of 707,542 MMcf in 
2017 * $4.69/Mcf + LNG exports of 852,368 MMcf from Jan.-Oct. 2018 
at $4.90/Mcf, as reported in EIA's Natural Gas Monthly (Nov. 2018), 
available at: https://www.eia.gov/naturalgas/monthly/pdf/table_05.pdf (Table 5, U.S. natural gas exports, 2016-2018) and FE 
LNG Monthly, Dec. 2018, available at: https://www.energy.gov/fe/listings/lng-reports.
---------------------------------------------------------------------------

2. Macroeconomic Benefits Under DOE's Studies to Date
a. Comments
    Several commenters point out that the 2018 LNG Export Study builds 
on both DOE's prior macroeconomic studies and several studies conducted 
by other authors in reaffirming the economic benefits of LNG 
exports.\124\ Cheniere notes that, even before the 2018 Study, DOE/FE 
had already developed a large body of analysis demonstrating the 
substantial macroeconomic benefits of LNG exports to the United States. 
Cheniere, JCEP, and API state that DOE's four prior studies were varied 
in their methodology, but they all confirm the same fundamental 
conclusion: LNG exports are a clear net benefit to the U.S. economy and 
are therefore in the public interest.\125\ The commenters maintain that 
the conclusions of the 2018 LNG Export Study--especially when 
considered along with DOE's prior LNG studies--should put to rest any 
lingering concerns that increased U.S. LNG exports are not in the 
public interest. According to API, ``[i]t should now be abundantly 
clear that U.S. LNG offers sizable benefits to U.S. consumers, workers, 
and the economy overall.'' \126\
---------------------------------------------------------------------------

    \124\ Cheniere, LNG Allies, and API identify other studies 
examining LNG exports by authors including the Brookings 
Institution, Deloitte, IHS, IHS Energy, ICF International, and API.
    \125\ Comment of Cheniere at 2-3 & nn.6-10 (citations omitted); 
Comment of JCEP at 3; Comment of API at 2.
    \126\ Comment of API at 3.
---------------------------------------------------------------------------

b. DOE/FE Response
    DOE's prior LNG export studies (the 2012, 2014, and 2015 LNG Export 
Studies) consistently have projected positive economic benefits from 
increased levels of U.S. LNG exports, as measured by GDP.

[[Page 67264]]

C. Distributional Impacts

1. Gross Domestic Product (GDP)
a. Comments
    Some commenters, including IECA, Sierra Club, and the Evans Schaaf 
Family, allege that any macroeconomic benefits from the 2018 LNG Export 
Study are likely overstated. These commenters allege that, in 
concluding that LNG exports would create a net benefit to the economy, 
the 2018 Study relied too heavily on the fact that exports will 
increase GDP while failing to give adequate weight to projected 
domestic natural gas price increases, as well as to negative socio-
economic, sectoral, and regional impacts. IECA also disagrees with the 
fact that the 2018 Study emphasizes the national net economic benefits 
of LNG exports. IECA charges that this focus is not consistent with the 
U.S. Supreme Court's definition of ``public interest,'' which it claims 
is intended to focus on ``impacts to people, not GDP.'' \127\
---------------------------------------------------------------------------

    \127\ Comment of IECA at 3.
---------------------------------------------------------------------------

    Other commenters--including the Marcellus Shale Coalition, API, 
CLNG, NextDecade Corp., and the Anonymous commenter--assert that LNG 
exports will provide macroeconomic benefits to the United States. These 
commenters point out that, across a wide range of scenarios, the 2018 
Study found that LNG exports will provide a net benefit to the U.S. 
economy and will allow for continued economic growth. JCEP and Cheniere 
emphasize the 2018 Study's conclusion that `` `there is greater gain in 
GDP as the LNG export volume increases.' ''\128\ Specifically, as 
commenters point out, the 2018 Study demonstrates that GDP grows as LNG 
exports increase because the U.S. economy benefits from investment in 
liquefaction facilities, export revenues, income from the upstream and 
midstream natural gas industry, and tolling charges generated by the 
LNG export facilities. JCEP emphasizes that these increases in GDP 
result, in part, from the fact that exports of LNG will not result in 
decreased domestic consumption of natural gas. Rather, LNG exports will 
be in addition to, not in place of, domestic uses of natural gas.\129\
---------------------------------------------------------------------------

    \128\ See, e.g., Comment of Cheniere at 5 (quoting 2018 LNG 
Export Study at 67-68).
    \129\ Comment of JCEP at 4 (citing 2018 LNG Export Study at 77).
---------------------------------------------------------------------------

    NextDecade acknowledges the 2018 Study's conclusion that ``there is 
virtually no chance'' that non-FTA LNG exports will reach the 55.04 
Bcf/d level in aggregate volumes for which DOE had approved and/or 
received applications by 2040 (as of the date of the Study).\130\ 
Nonetheless, NextDecade points out that, regardless of the volume of 
LNG ultimately exported, the 2018 Study found that LNG exports are in 
the public interest. For this reason, NextDecade asserts that the 
market, not DOE, should decide which of the pending LNG export projects 
will meet global market demand. NextDecade further notes the 2018 
Study's finding that `` `any restrictions on LNG exports would forgo 
the additional GDP to be gained by allowing exports to respond to 
market conditions.' '' \131\ In sum, these commenters support NERA's 
conclusion that allowing the market to determine the level of U.S. LNG 
exports will ``lead to an increase in overall economic activity leading 
to higher GDP.'' \132\
---------------------------------------------------------------------------

    \130\ Comment of NextDecade Corp. at 11 (quoting 2018 LNG Export 
Study at 49).
    \131\ Id. (quoting 2018 LNG Export Study at 68).
    \132\ 2018 LNG Export Study at 68.
---------------------------------------------------------------------------

b. DOE/FE Response
    The 2018 Study measured the broad macroeconomic effects on the U.S. 
economy through several metrics, including ``the wellbeing of the 
average U.S. consumer, total household income from all sources, 
economy-wide investment, output effects on key manufacturing sectors, 
and gross domestic product (GDP).'' \133\ With respect to consumer 
well-being, the 2018 Study found that all scenarios within the more 
likely range of results are welfare-improving for the average U.S. 
household. This result is driven by households' receipt of additional 
income from export revenues and take-or-pay tolling charges for LNG 
exports, and this additional income outweighs the income lost from 
higher energy prices.\134\
---------------------------------------------------------------------------

    \133\ Id. at 65.
    \134\ Id. at 66-67.
---------------------------------------------------------------------------

    In terms of total household income, the 2018 Study considered two 
broad categories of income sources: Resource income and value-added 
income. The resource income reflects the value of the natural gas 
resource as well as returns to specialized capital and labor. The 
value-added income is a measure of labor income and capital income. In 
the 2018 Study, both resource income and value-added income increase as 
LNG exports increase for given domestic natural gas supply assumptions 
across the more likely scenarios examined.\135\
---------------------------------------------------------------------------

    \135\ Id. at 73-74.
---------------------------------------------------------------------------

    In terms of economy-wide investment, the 2018 Study shows higher 
levels of aggregate investment for higher levels of LNG exports. Within 
the natural gas sector, additional investments take place to expand 
natural gas production and to build liquefaction capacity. Overall 
aggregate investment also grows with capacity increases in industries 
that supply machinery and equipment that make up the overall natural 
gas value chain.\136\
---------------------------------------------------------------------------

    \136\ Id. at 76.
---------------------------------------------------------------------------

    Finally, in terms of GDP, as noted previously, the 2018 Study found 
a ``positive correlation between GDP and LNG exports for the more 
likely scenarios in 2040.'' \137\
---------------------------------------------------------------------------

    \137\ Id. at 67.
---------------------------------------------------------------------------

2. Sectoral Impacts
a. Comments
    Some commenters, including IECA, Jody McCaffree, and the Evans 
Schaaf Family, debate whether LNG exports will impact the domestic 
energy-intensive, trade-exposed (EITE) sectors disproportionately, at 
too high a cost to the U.S. economy to justify exporting LNG.\138\ 
Specifically, IECA asserts that increasing U.S. LNG exports reduces the 
cost of natural gas to global competitors and simultaneously increases 
the domestic cost of natural gas and electricity--creating a ``double 
negative impact'' on EITE industries.\139\ According to these 
commenters, these price impacts will lead to lost jobs and lower wages 
in the EITE sectors, while also making it more difficult for the U.S. 
to compete globally, invest capital, and create high-paying middle 
class jobs.
---------------------------------------------------------------------------

    \138\ IECA states that its members in EITE sectors represent 
industries including: Chemicals, plastics, steel, iron ore, 
aluminum, paper, food processing, fertilizer, insulation, glass, 
industrial gases, building products, automotive, independent oil 
refining, and cement. See Comment of IECA at 2.
    \139\ Id.
---------------------------------------------------------------------------

    According to IECA, the oil and natural gas industry employed 
512,000 jobs in 2017, whereas the manufacturing sector currently 
employs 12,713,000 jobs.\140\ Of the approximately 12.7 million 
manufacturing jobs, approximately 5,125,600 jobs in the EITE industries 
would be most affected by LNG exports.\141\ IECA cautions that if DOE 
``approves too many export terminals and natural gas prices rise,'' DOE 
will be putting ``at risk trillions of dollars of manufacturing assets 
and over 12.7 million jobs.'' \142\ In light of the various alleged 
flaws in the 2018 Study identified by IECA and discussed herein, IECA 
maintains that the 2018 Study overinflates economic growth and job 
projections attributed to LNG exports.
---------------------------------------------------------------------------

    \140\ Id.
    \141\ Id.
    \142\ Id.
---------------------------------------------------------------------------

    Other commenters, including CLNG and API, dispute these arguments. 
They disagree with the notion that an LNG

[[Page 67265]]

export industry cannot co-exist with a growing domestic manufacturing 
base. They emphasize the size and productivity of the U.S. natural gas 
resource base, contending that there is an abundance of natural gas to 
support both LNG export demand and continued growth in the EITE 
industries.
    CLNG argues that the ``dramatic increase'' in natural gas supply 
has enabled an industrial renaissance in the U.S. manufacturing sector, 
with demand for natural gas from the manufacturing sector reaching an 
all-time high this past winter.\143\ According to CLNG, growth in LNG 
exports sends market signals to incentivize domestic production of 
natural gas. This increased production benefits U.S. consumers, as well 
as industries involved in the natural gas supply chain (such as 
construction and manufacturing)--spurring more economic growth.\144\ 
NextDecade similarly asserts that, under the 2018 Study's most likely 
scenarios, industries that rely on natural gas for fuel and as a raw 
material input will maintain strong growth, even if LNG exports 
increase.\145\
---------------------------------------------------------------------------

    \143\ Comment of CLNG at 4 & n.17 (citing Energy Ventures 
Analysis, Inc., 2017-2018 Winter Outlook for Natural Gas, 2017).
    \144\ See id. at 4.
    \145\ Comment of NextDecade Corp. at 5.
---------------------------------------------------------------------------

    Additionally, API argues that the economic benefits of increased 
natural gas use extend to the industrial sector--including through the 
increased production of associated natural gas liquids (NGLs), which 
must be extracted before natural gas is liquefied for export. CLNG and 
API maintain that growth in NGLs creates a competitive advantage for 
U.S. chemical manufacturers and leads to greater investment, industry 
growth, and new jobs.\146\ API contends that NGLs ``have bolstered the 
U.S. petrochemical sector and fostered a renaissance in U.S. 
manufacturing,'' underscoring the value of U.S. LNG at home and 
abroad.\147\
---------------------------------------------------------------------------

    \146\ Comment of CLNG at 4.
    \147\ Comment of API at 2-3.
---------------------------------------------------------------------------

    Next, CLNG argues that companies from around the world are 
investing in new projects to build or expand their ``shale-advantaged 
capacity'' in the United States. CLNG states that, between 2010 and 
2015, 48 new industrial projects in the petrochemical, fertilizer, 
steel, and natural gas-to-liquids sectors were completed, representing 
an investment of $28 billion.\148\ According to CLNG, experts forecast 
additional industrial investment of $135 billion to build 59 new 
projects and 11 expansions between 2017 and 2022.\149\
---------------------------------------------------------------------------

    \148\ Comment of CLNG at 4.
    \149\ Id. (citing Energy Ventures Analysis, Inc., 2017-2018 
Winter Outlook for Natural Gas, 2017).
---------------------------------------------------------------------------

    In sum, CLNG cautions that suppressing LNG exports will limit 
production of natural gas which, in turn, will limit both: (i) Overall 
economic benefits to the domestic economy, and (ii) the opportunity for 
the United States to continue growing its manufacturing sectors that 
benefit from increased supplies of natural gas.\150\
---------------------------------------------------------------------------

    \150\ Id. at 4.
---------------------------------------------------------------------------

b. DOE/FE Response
    With respect to the argument that natural gas confers greater value 
on the U.S. economy when used in manufacturing than when produced for 
export, DOE observes that more natural gas is likely to be produced 
domestically if LNG exports are authorized than if they are prohibited. 
There is no one-for-one trade-off between natural gas used in 
manufacturing and natural gas diverted for export. These observations 
are consistent with DOE/FE's analysis of similar arguments made in 
response to its prior macroeconomic studies.\151\ The competition 
between the demand for natural gas for domestic consumption and the 
demand for natural gas for export is captured in the modelling for the 
2018 Study. In scenarios with increased levels of U.S. LNG exports with 
common domestic natural gas supply assumptions, the 2018 Study found 
that greater economic benefits, in terms of GDP, accrued to the U.S. 
economy due to those exports.
---------------------------------------------------------------------------

    \151\ See, e.g., Golden Pass Products LLC, DOE/FE Order No. 
3978, FE Docket No. 12-156-LNG, Opinion and Order Granting Long-
Term, Multi-Contract Authorization to Export Liquefied Natural Gas 
by Vessel from the Golden Pass LNG Terminal Located in Jefferson 
County, Texas, to Non-Free Trade Agreement Nations, at 77-80 (Apr. 
25, 2017).
---------------------------------------------------------------------------

    Contrary to IECA's concerns about the negative impacts to EITE 
industries potentially caused by increased LNG exports, the 2018 Study 
found: ``All negatively affected sectors, and in particular the natural 
gas intensive sectors, continue to grow robustly at higher levels of 
LNG exports, albeit at slightly lower rates of increase than they would 
at lower levels.'' \152\ The 2018 Study further found that, 
``[s]ectoral growths rates remain robust for all of the sectors that 
rely on natural gas as fuel and raw material input,'' with ``[t]he 
variation in the growth rates attributable to differences in LNG 
exports ranges from one to seven basis points (0.01% to 0.07%).'' \153\ 
Based on these findings (which no commenters attempt to rebut), we are 
not persuaded by IECA's claim that DOE's approval of LNG exports will 
put trillions of dollars of U.S. manufacturing assets and millions of 
jobs at risk, among other alleged negative impacts.
---------------------------------------------------------------------------

    \152\ 2018 LNG Export Study at 70.
    \153\ Id.
---------------------------------------------------------------------------

    With respect to the argument that some industries derive greater 
economic value from natural gas than others, DOE/FE continues to be 
guided by the long-standing principle established in the 1984 Policy 
Guidelines that resource allocation decisions of this nature are better 
left to the market, rather than to DOE, to resolve.\154\
---------------------------------------------------------------------------

    \154\ See infra Sec.  I.B.
---------------------------------------------------------------------------

3. Consumer Welfare
a. Comments
    Sierra Club, IECA, the Evans Schaaf Family, and other commenters 
maintain that the positive macroeconomic benefits of LNG exports will 
not accrue to most U.S. citizens. They contend that the 2018 Study 
acknowledges both the positive and negative effects associated with LNG 
exports, but glosses over the fact that these positive and negative 
effects are not equally or evenly distributed.\155\ According to these 
commenters, exports of LNG will harm all Americans by increasing 
natural gas prices, and thus most Americans will not share in any 
benefits associated with LNG exports.
---------------------------------------------------------------------------

    \155\ Comment of Sierra Club at 2 (quoting 2018 LNG Export Study 
at 64).
---------------------------------------------------------------------------

    Sierra Club and IECA argue that the main beneficiaries of LNG 
exports will be a very small fraction of the U.S population--namely, 
American households that own stock in natural gas production and export 
companies. Sierra Club claims that the 2018 Study ``simply asserts'' 
that households in general own the LNG production processes and 
industries, without providing any analysis of which households own this 
stock or how the benefits and harms of exports will be distributed 
among the American public.\156\ These commenters argue that, without 
such analysis, DOE cannot conclude that LNG exports are in the public 
interest. IECA adds that a future revenue stream from LNG exports 
cannot predict the level of dividends paid out to shareholders or 
whether a share price will rise--and alleges that NERA did not disclose 
the economics behind this claim.\157\
---------------------------------------------------------------------------

    \156\ Id.
    \157\ Comment of IECA at 3.
---------------------------------------------------------------------------

    Additionally, IECA argues that the 2018 Study points to a second 
economic benefit of LNG exports that will offset household economic 
losses due to

[[Page 67266]]

higher energy costs: an increase in the value of the U.S. dollar. IECA 
disputes this benefit, contending (among other arguments) that it is 
speculative to assume that LNG exports would increase the value of the 
dollar, when there are far greater influences on the dollar's 
value.\158\
---------------------------------------------------------------------------

    \158\ Id.
---------------------------------------------------------------------------

    On the other hand, NextDecade contends that all of the ``more 
likely'' scenarios considered by NERA will improve consumer welfare for 
the average U.S. household, with consumer welfare strengthening even 
when global demand for LNG exports increases.\159\ According to 
NextDecade, the 2018 Study shows that consumer welfare is highest when 
the United States has an abundant, low-cost, domestic natural gas 
supply.\160\ Citing the 2018 Study, NextDecade and JCEP argue that this 
wealth transfer will benefit U.S. households through increased labor 
income and lower prices overall for imported goods--such that the 
benefits of LNG exports will outweigh any potential increase to the 
marginal cost of supplying natural gas.\161\
---------------------------------------------------------------------------

    \159\ Comment of NextDecade Corp. at 5.
    \160\ Id.
    \161\ Comment of JCEP at 5 (citing 2018 LNG Export Study at 64-
65).
---------------------------------------------------------------------------

b. DOE/FE Response
    Consistent with DOE/FE's prior studies, DOE believes that the 
public interest generally favors authorizing proposals to export 
natural gas that have been shown to lead to net benefits to the U.S. 
economy. DOE has observed in previous export authorizations that, 
although there could be circumstances in which the distributional 
consequences of an authorizing decision could be shown to be so 
negative as to outweigh net positive benefits to the U.S. economy as a 
whole, DOE had not been presented with sufficiently compelling evidence 
that those circumstances were present.
    The 2018 Study describes how different households could be affected 
by increased levels of LNG exports. In terms of direct benefits, the 
2018 Study states that, ``[i]f U.S. households, or their retirement 
funds, hold stock in natural gas producers, they will benefit from the 
increase in the value of their investment.'' \162\ The 2018 Study noted 
indirect benefits of increased LNG exports accruing to households 
through the additional wealth transferred into the United States, 
``which increases the value of the dollar and reduces prices of other 
imported goods.'' \163\ Overall, ``[l]ike other trade measures, LNG 
exports will cause shifts in industrial output, employment, and in 
sources of income.'' \164\ However, the effects on different households 
from increased LNG exports will depend on their income sources.
---------------------------------------------------------------------------

    \162\ 2018 LNG Export Study at 64.
    \163\ Id.
    \164\ Id. at 64-65.
---------------------------------------------------------------------------

    As described previously, with respect to consumer well-being, the 
2018 Study found that all scenarios within the more likely range of 
results are welfare-improving for the average U.S. household. This 
result is driven by households' receipt of additional income from 
export revenues and take-or-pay tolling charges for LNG exports, and 
this additional income outweighs the income lost from higher energy 
prices.\165\
---------------------------------------------------------------------------

    \165\ Id. at 66-67.
---------------------------------------------------------------------------

    Finally, we note that in the consolidated Sierra Club II case, the 
D.C. Circuit rejected--in all three cases--Sierra Club's argument that 
DOE ``erred by failing to consider distributional impacts'' when 
evaluating the public interest under NGA section 3(a).\166\ The Court 
upheld DOE/FE's conclusion that ``given that exports will benefit the 
economy as a whole and absent stronger record evidence on the 
distributional consequences, [DOE/FE] could not say that . . . exports 
were inconsistent with the public interest on these grounds.'' \167\ On 
this basis, the Court held that DOE/FE had ``adequately addressed'' 
Sierra Club's concerns regarding distributional impacts.\168\
---------------------------------------------------------------------------

    \166\ See Sierra Club v. U.S. Dep't of Energy, Nos. 16-1186, 16-
1252, 16-1253, 703 Fed. Appx. 1, at *3 (DC Cir. Nov. 1, 2017) 
(Sierra Club II), discussed infra at Sec.  I.C.
    \167\ Id. (emphasis added, internal quotations omitted, and 
alteration in original).
    \168\ Id.
---------------------------------------------------------------------------

    None of the commenters advancing this argument have provided a 
quantitative analysis of the distributional consequences of authorizing 
LNG exports at the household level. Absent stronger record evidence on 
these alleged distributional consequences, we cannot say that increased 
LNG exports are inconsistent with the public interest on these grounds.

D. Regional Impacts

1. Comments
    Some commenters, including Jody McCaffree and the Evans Schaaf 
Family, address the negative regional impacts potentially associated 
with LNG exports. They argue that local communities near shale gas 
production areas, pipelines, and/or LNG export terminals could be 
adversely affected by increases in natural gas production and LNG 
exports. They cite loss of property through eminent domain, property 
devaluation, degradation of infrastructure, environmental and public 
health issues (including local air pollution and poisoned drinking 
water), and harm to local economies, among other issues.
    Other commenters seek to rebut these concerns by identifying the 
positive regional benefits associated with LNG exports, both in regions 
where shale development and production occur, and the regions in which 
LNG export terminals may be located. For example, the Marcellus Shale 
Coalition (comprised of nearly 200 producing, midstream, transmission, 
and supply chain members committed to the development of natural gas 
resources in the Marcellus, Utica, and related geological formations) 
cites the economic benefits of LNG exports to Pennsylvania's economy. 
The Coalition further asserts that increasing LNG exports is crucial to 
stabilizing domestic natural gas markets--particularly in the 
Appalachian Basin--and positioning these markets for continued 
growth.\169\
---------------------------------------------------------------------------

    \169\ Comment of Marcellus Shale Coalition at 1-2.
---------------------------------------------------------------------------

2. DOE/FE Response
    A general consideration of regional impacts is outside of the scope 
of the 2018 LNG Export Study. DOE/FE believes regional impacts are 
appropriately considered on a case-by-case basis during the review of 
each non-FTA application, consistent with DOE/FE's longstanding 
practice.

E. Estimates of Domestic Natural Gas Supply

1. Comments
    Jody McCaffree points to DOE/FE's total approved volume of exports 
to both FTA and non-FTA countries in alleging that DOE ``has already 
approved LNG exports in excess of projected U.S. production'' of 
natural gas.\170\
---------------------------------------------------------------------------

    \170\ Comment of Jody McCaffree at 4.
---------------------------------------------------------------------------

    Other commenters, including API, CLNG, and the Marcellus Shale 
Coalition, assert that the United States has abundant domestic natural 
gas reserves. Pointing to the 2018 Study, CLNG asserts that ``[t]he 
scenarios where the U.S. reaps the most economic gains at the lowest 
price from exporting LNG are those where our supply of natural gas is 
highest.'' \171\ CLNG further asserts that the United States is more 
than capable of continuing to meet high production and supply 
expectations, citing the growth of U.S. natural gas

[[Page 67267]]

production, the growth in total natural gas resource estimates, and 
improvements in the ability to detect and extract natural gas.
---------------------------------------------------------------------------

    \171\ Comment of CLNG at 3.
---------------------------------------------------------------------------

    Commenters, such as API and the Pennsylvania Chamber of Business 
and Industry, likewise point to the conclusions of the 2018 Study in 
arguing that the vast resources of U.S. natural gas can provide 
affordable supplies to meet domestic demand, while simultaneously 
providing for an increase in LNG exports. The Pennsylvania Chamber of 
Business and Industry maintains that authorizing LNG exports results in 
a stable, affordable supply of natural gas to residential, commercial, 
and industrial customers. In the Chamber's view, the market development 
of natural gas, both domestically and abroad, promotes natural gas 
production and the build-out of natural gas transmission and LNG 
infrastructure in the United States.\172\
---------------------------------------------------------------------------

    \172\ Comment of Pennsylvania Chamber of Business and Industry 
at 1-2.
---------------------------------------------------------------------------

2. DOE/FE Response
    First, DOE/FE notes that the volumes authorized for export to FTA 
and non-FTA countries are not additive to one another. Ms. McCaffree's 
argument does not appear to recognize this fact, which is reflected in 
DOE's orders. Rather, each authorization grants authority to export the 
entire volume of a facility to FTA or non-FTA countries, respectively, 
to provide the authorization holder with maximal flexibility in 
determining its export destinations. According to EIA data, U.S. 
domestic dry natural gas production for the year 2017 averaged a rate 
of 74.77 Bcf/d, well in excess of current long-term FTA and non-FTA 
authorizations (in non-additive volumes of 59.33 Bcf/d and 23.05 Bcf/d, 
respectively).\173\
---------------------------------------------------------------------------

    \173\ U.S. Energy Information Administration, ``Short-Term 
Energy Outlook,'' available at: https://www.eia.gov/outlooks/steo/data/browser/#/?v=15&f=A&s=0&maptype=0&ctype=linechart (Table 5a, 
U.S. Natural Gas Supply, Consumption, and Inventories, ``Total Dry 
Gas Production'').
---------------------------------------------------------------------------

    DOE/FE takes note of the natural gas production projections in 
EIA's AEO 2018, which show significant increases over the forecast 
period. In the Reference case, dry natural gas production is projected 
to increase by 49% from 2016 to 2040 (26.94 Tcf to 40.15 Tcf).\174\ In 
the High Oil and Gas Resource and Technology case, the growth from 2016 
to 2040 in dry natural gas production is even larger at 85% (26.94 Tcf 
to 49.98 Tcf).\175\
---------------------------------------------------------------------------

    \174\ See AEO 2018, supra note 84, https://www.eia.gov/outlooks/aeo/data/browser/#/?id=13-AEO2018&cases=ref2018&sourcekey=0;0 (link 
to table: Natural Gas Supply, Disposition, and Prices, ``Dry Gas 
Production'').
    \175\ Id.
---------------------------------------------------------------------------

F. Cost of Environmental Externalities

1. Comments
    Several commenters, including Sierra Club, Oregon Wild, Jody 
McCaffree, and the Evans Schaaf Family, maintain that LNG exports will 
increase demand for natural gas, thereby increasing negative 
environmental and economic consequences associated with natural gas 
production. Sierra Club adds that every stage of the LNG lifecycle has 
important environmental impacts. These commenters assert that the 2018 
Study failed to consider the cost of environmental externalities 
associated with LNG exports. The externalities identified by these 
commenters include, but are not limited to, the following:
     Environmental costs associated with producing more natural 
gas to support LNG exports, including the costs, risks, and impacts 
associated with hydraulic fracturing and drilling to produce natural 
gas; and costs associated with increased water scarcity to support 
hydraulic fracturing;
     Environmental costs associated with the life cycle of U.S. 
LNG (hydraulic fracturing of shale gas, liquefaction, and export) in 
the form of increased emissions of GHGs and other global warming 
pollution, climate change and climate instability (including droughts 
and other extreme weather events), and ocean acidification;
     Local and regional costs associated with LNG exports, 
including impacts on local communities and industries;
     The costs associated with eminent domain, which may be 
necessary to build new pipelines to transport natural gas; and
     The potential regulatory costs and impacts of 
environmental regulations governing hydraulic fracturing and natural 
gas drilling.
    According to Sierra Club, ``DOE has demonstrated that it plainly 
has the tools needed to consider these issues,'' \176\ yet the 2018 
Study failed to consider them. The Evans Schaaf Family also urges DOE 
to clarify what emissions are being calculated and whether a cost of 
those emissions has been included in the results of the 2018 
Study.\177\
---------------------------------------------------------------------------

    \176\ Comment of Sierra Club at 2.
    \177\ Comment of Evans Schaaf Family at 6.

2. DOE/FE Response
    Analysis of environmental impacts from the export of U.S. LNG was 
not part of the scope of the 2018 Study. Consistent with DOE/FE 
practice, all environmental issues will be analyzed in the final order 
issued in each of the pending and future non-FTA proceedings.

G. Natural Gas Price Impacts

1. Comments
    Several commenters, such as IECA and Sierra Club, address potential 
natural gas price impacts associated with LNG exports. They contend 
that increases in LNG exports will increase demand for natural gas, 
driving up prices in the United States and adversely affecting electric 
and natural gas utility consumers, EITE industries, and residential 
consumers. In particular, IECA asserts that the 2018 Study's ``most 
likely'' scenario--LNG exports up to 30.7 Bcf/d by 2040--could increase 
prices 117% above today's Henry Hub prices by 2040, and 44% above EIA's 
AEO 2018 price in 2040 (which assumes 14.5 Bcf/d of LNG exports).\178\ 
IECA alleges that such price hikes would threaten the domestic supply 
of natural gas at reasonable prices, such that exports of this 
magnitude would not be in the public interest.\179\
---------------------------------------------------------------------------

    \178\ Comment of IECA at 2-3.
    \179\ Id. at 2 (citing Fed. Power Comm'n v. Hope Gas Co., 320 
U.S. 591, 610 (1944)).
---------------------------------------------------------------------------

    IECA further warns that ``excessive LNG exports'' may result in 
domestic prices for natural gas becoming tied to global demand-driven 
pricing.\180\ According to IECA, when global demand increases, so will 
U.S. natural gas prices--to the detriment of U.S. consumers.
---------------------------------------------------------------------------

    \180\ Id. at 1.
---------------------------------------------------------------------------

    On the other hand, commenters such as API, NextDecade, and the 
Pennsylvania Chamber of Business and Industry dispute the likelihood of 
price increases due to LNG exports. For example, NextDecade points to 
the finding of the 2018 Study that U.S. natural gas prices are more 
dependent on both the availability of natural gas and extraction 
technology than on U.S. LNG export policy--which, it states, 
demonstrates the importance of policies that continue to support 
natural gas infrastructure, including LNG export authorizations. For 
this reason, NextDecade asserts, the 2018 Study shows that higher LNG 
exports cause only ``very small'' increases in U.S. natural gas prices, 
if any.\181\
---------------------------------------------------------------------------

    \181\ Comment of NextDecade Corp. at 5-6 (citing 2018 LNG Export 
Study at 55).
---------------------------------------------------------------------------

    These commenters contend that, in fact, there have been no 
significant price increases since exports of U.S. LNG began in 2016, 
contrary to warnings

[[Page 67268]]

made by commenters on DOE's prior LNG export studies. They point to the 
2018 Study in arguing that domestic natural gas prices are unlikely to 
increase to a level that would impair manufacturing cost 
competitiveness or hurt consumers. According to API, the 2018 Study 
clearly shows that even at high levels of LNG exports, the impact on 
domestic prices is minimal because these exports are generating 
incremental new natural gas production that otherwise would not have a 
domestic market.\182\ CLNG further argues that allowing U.S. Henry Hub 
indexed exports will help sustain lower pricing over the long-term and 
provide an alternative to oil-linked natural gas contracts.\183\
---------------------------------------------------------------------------

    \182\ Comment of API at 1.
    \183\ Comment of CLNG at 5.
---------------------------------------------------------------------------

    NextDecade states that, even in New England (which experiences 
frequent natural gas price spikes), the 2018 Study shows that the 
average base differential between New England and Henry Hub prices is 
unlikely to be affected by increases in LNG exports in the long run. As 
NextDecade explains, NERA found that these price spikes in New England 
are the result of the region's limited natural gas pipeline 
infrastructure and localized weather events. Therefore, NextDecade 
asserts, the prices spikes will continue regardless of the level of LNG 
exports.\184\
---------------------------------------------------------------------------

    \184\ Comment of NextDecade Corp. at 6 (citing 2018 LNG Export 
Study at 54 n.47).
---------------------------------------------------------------------------

2. DOE/FE Response
    The 2018 Study described two relationships between U.S LNG exports 
and U.S. natural gas prices based on the modeling results:
     ``Increasing U.S. LNG exports under any given set of 
assumptions about U.S. natural gas resources and their production leads 
to only small increases in U.S. natural gas prices;'' and
     ``Available natural gas resources have the largest impact 
on natural gas prices. Therefore, U.S. natural gas prices are far more 
dependent on available resources and technologies to extract available 
resources than on U.S. policies surrounding LNG exports.'' \185\
---------------------------------------------------------------------------

    \185\ 2018 LNG Export Study at 55.

    In the 2018 Study results, natural gas prices range from $5 to 
$6.50 per MMBtu in 2040 for all the Reference supply scenarios in the 
more likely range with a combined probability of 47%. In the high 
resource supply scenarios, natural gas prices range from $3.50 to $4 
per MMBtu in 2040 with a combined probability of 22%.\186\
---------------------------------------------------------------------------

    \186\ Id. at 54.
---------------------------------------------------------------------------

    As an initial matter, IECA incorrectly identified the ``most 
likely'' scenario of LNG exports from the 2018 Study. ``Table 4'' in 
the Study provides the scenario probabilities for the more likely 
scenarios.\187\ The most likely scenario has a probability of 14.5% and 
is the ``Ref_Ref_Ref_High'' case with exports of 24.0 Bcf/d in 
2040.\188\ This scenario is somewhat more likely than the Reference 
case (``Ref_Ref_Ref_Ref''), which has a probability of 13.1% and 
exports of 12.9 Bcf/d.\189\ The 30.7 Bcf/d scenario 
(``High_Ref_Ref_High'') identified by IECA is the third most likely at 
7.9%.\190\
---------------------------------------------------------------------------

    \187\ Id. at 50-51.
    \188\ Id.
    \189\ Id.
    \190\ Id.
---------------------------------------------------------------------------

    Table 4 below shows modeled Henry Hub natural gas prices in 2040 
for these three scenarios:'' \191\
---------------------------------------------------------------------------

    \191\ 2018 LNG Export Study at Appendix E (pages unnumbered).

  Table 4--Exports and Henry Hub Prices for Three Most Likely Scenarios
------------------------------------------------------------------------
                                                           Henry Hub in
                Scenario                  LNG exports in    2040 2016$/
                                           2040 (Bcf/d)        MMBtu
------------------------------------------------------------------------
Ref_Ref_Ref_High........................            24.0             6.0
Ref_Ref_Ref_Ref.........................            12.9             5.6
High_Ref_Ref_High.......................            30.7             3.9
------------------------------------------------------------------------

These Henry Hub prices in the 2018 Study are somewhat higher than those 
projected in EIA's AEO 2018. AEO 2018 projects LNG exports at a rate of 
14.5 Bcf/d in the Reference case in 2040 with a corresponding Henry Hub 
price of $4.50 (in constant 2017 dollars). In the High Oil and Gas 
Resource and Technology (HOGR) case, LNG exports are larger at 21.9 
Bcf/d with a Henry Hub price of $3.02.\192\
---------------------------------------------------------------------------

    \192\ AEO 2018, supra note 84,
    https://www.eia.gov/outlooks/aeo/data/browser/#/?id=13-AEO2018®ion=0-0&cases=highrt&start=2016&end=2050&f=A&sourcekey=0 
(link to table: Natural Gas Supply, Disposition, and Prices, ``High 
resource and technology case,'' ``Natural gas spot price at Henry 
Hub'').
---------------------------------------------------------------------------

    The price projections in the 2018 Study and in EIA's AEO 2018 are 
consistent with average annual Henry Hub spot prices over the past two 
decades. Between 2000 and 2009, annual average Henry Hub spot prices 
ranged from $3.38 to $8.86 per MMBtu; between 2010 and 2017, prices 
ranged from $2.52 to $4.37 per MMBtu.\193\
---------------------------------------------------------------------------

    \193\ See EIA, Henry Hub Natural Gas Spot Price (Annual), 
available at: https://www.eia.gov/dnav/ng/hist/rngwhhda.htm (Dec. 
12, 2018).
---------------------------------------------------------------------------

    In response to comments noting that increased global demand for 
natural gas will increase domestic natural gas prices, several 
scenarios in the 2018 Study analyze this relationship and its domestic 
macroeconomic impact. Within a domestic natural gas supply scenario, 
increased ROW demand for natural gas increases domestic natural gas 
prices, all else being equal.\194\ This increased ROW demand also 
causes prices throughout the world to increase.\195\ The 2018 Study 
discusses this through an ``international demand pull'' scenario, 
quantifying the differences between the High_Ref_Ref_Low and 
High_Ref_Ref_High cases (where the only assumption changed is the ROW 
demand for natural gas). When moving from low to high ROW demand, the 
2018 Study shows an increase in the Henry Hub price of $0.50 and an 
increase of $2.70 in the wellhead price outside of North America.\196\ 
While domestic and ROW natural gas prices both increase, the increased 
ROW demand drives a larger increase in ROW prices than domestically. In 
this way, the 2018 Study shows that U.S. natural gas prices will not 
rise to the same levels as global natural gas prices as a result of 
increased LNG exports. This result is consistent with the 2015 Study's 
analysis of the linkages between U.S. and global natural gas prices, as 
DOE/FE previously discussed.\197\
---------------------------------------------------------------------------

    \194\ 2018 LNG Export Study at 57-58.
    \195\ Id. at 59.
    \196\ Id. at 57-60.
    \197\ See, e.g., Golden Pass Products LLC, DOE/FE Order No. 
3978, at 91-92.
---------------------------------------------------------------------------

    As noted previously, the 2018 Study consistently shows 
macroeconomic benefits to the U.S. economy in every scenario at the 
projected Henry Hub

[[Page 67269]]

natural gas prices, as well as positive annual growth across the 
energy-intensive sectors.\198\
---------------------------------------------------------------------------

    \198\ 2018 LNG Export Study at 67, 70.
---------------------------------------------------------------------------

H. Benefits to U.S. Trade Balance

1. Comments
    API and JCEP point to the conclusion of the 2018 LNG Export Study 
that increased exports of natural gas will improve the U.S. balance of 
trade. API further argues that LNG exports have helped to position the 
United States as an ``energy superpower,'' changing the ``energy 
equation'' to the benefit of the United States.\199\
---------------------------------------------------------------------------

    \199\ Comment of API at 2.
---------------------------------------------------------------------------

    NextDecade maintains that, with estimated export revenues of up to 
$129 billion per year by 2040, LNG exports present a significant 
opportunity to close the U.S. trade gap. NextDecade further states 
that, within the range of the Henry Hub price scenarios, the 2018 Study 
demonstrates that the United States is and will be a net exporter of 
natural gas--and, indeed, may ``emerge as the world's largest supplier 
of LNG in the coming years.'' \200\ According to NextDecade, the 2018 
Study also demonstrates that, even though natural gas supply and demand 
shocks both inside and outside of the United States have different 
impacts on natural gas prices, they result in similar levels of net LNG 
exports. Accordingly, NextDecade states that increased LNG exports will 
benefit the trade balance regardless of the volume exported.\201\
---------------------------------------------------------------------------

    \200\ Comment of NextDecade Corp. at 4.
    \201\ Id. at 8.
---------------------------------------------------------------------------

    The Pennsylvania Chamber of Business and Industry agrees that the 
2018 Study affirms the significant benefits that global trade can bring 
to the United States--specifically, through both LNG exports and in 
attracting new investment in manufacturing assets reliant on affordable 
natural gas.\202\
---------------------------------------------------------------------------

    \202\ Comment of Pennsylvania Chamber of Business and Industry 
at 1-2.
---------------------------------------------------------------------------

2. DOE/FE Response

    Consistent with the observations on the benefits of trade made by 
the commenters, the 2018 Study notes that ``[i]ncreased exports of 
natural gas will improve the U.S. balance of trade and result in a 
wealth transfer into the U.S.'' \203\
---------------------------------------------------------------------------

    \203\ 2018 LNG Export Study at 64.
---------------------------------------------------------------------------

I. Procedural Arguments

1. Compliance With Data Quality Act
a. Comments
    IECA argues that the 2018 LNG Export Study violates the Data 
Quality Act (DQA) because: (i) NERA used a ``proprietary and non-
reproducible economic model,'' and (ii) the Study's peer reviewers 
allegedly have a financial interest in LNG exports, such that they 
could not be independent in their views.\204\ For these reasons, IECA 
contends that the 2018 Study ``cannot be used in decision-making by 
DOE.'' \205\
---------------------------------------------------------------------------

    \204\ Comment of IECA at 4.
    \205\ Id.
---------------------------------------------------------------------------

i. Background on Data Quality Act
    In December 2000, Congress passed and the President signed the 
Treasury and General Government Appropriations Act for Fiscal Year 2001 
(Pub. L. 106-554). Section 515 of that bill is commonly referred to as 
the ``Data Quality Act'' or the ``Information Quality Act.'' \206\ 
Section 515 directed the Office of Management and Budget (OMB) to issue 
government-wide guidelines that ``provide policy and procedural 
guidance to Federal agencies for ensuring and maximizing the quality, 
objectivity, utility, and integrity of information (including 
statistical information) disseminated by Federal agencies . . . .'' 
\207\
---------------------------------------------------------------------------

    \206\ Most federal agencies (including DOE) refer to section 515 
as the ``Information Quality Act,'' but because IECA uses the ``Data 
Quality Act'' terminology, we will do so here.
    \207\ Section 515, Treasury & General Gov't Appropriations Act 
for Fiscal Year 2001 (Pub.L. 106-554; 114 Stat. 2763A-154)). The 
Data Quality Act amended the Paperwork Reduction Act of 1995 (44 
U.S.C. Ch. 35).
---------------------------------------------------------------------------

    Between 2001 and 2002, OMB published a series of guidelines and 
supplementary information implementing the Data Quality Act.\208\ In 
final guidelines issued in February 2002, OMB instructed federal 
agencies to issue their own implementing guidelines by October 1, 2002. 
In its Guidelines, OMB observed that the Data Quality Act ``denotes 
four substantive terms regarding information disseminated by Federal 
agencies: quality, utility, objectivity, and integrity.'' \209\ In 
October 2002, in response to OMB's Guidelines, DOE issued a document 
entitled Final Report Implementing Office of Management and Budget 
Information Dissemination Quality Guidelines.\210\ DOE explained that 
it modeled its Guidelines on the OMB Guidelines with modifications 
specific to DOE.\211\
---------------------------------------------------------------------------

    \208\ Office of Mgmt. & Budget, Guidelines for Ensuring and 
Maximizing the Quality, Objectivity, Utility, and Integrity of 
Information Disseminated by Federal Agencies; Republication, 67 FR 
8452, 8452-8454 (Feb. 22, 2002) (summarizing OMB's procedural 
history in implementing section 515) [hereinafter OMB Guidelines].
    \209\ Id. (``quality'' is ``the encompassing term, of which 
`utility,' `objectivity,' and `integrity' are the constituents); see 
also id. at 8459 (definition of ``quality'').
    \210\ U.S. Dep't of Energy, Final Report Implementing Office of 
Management and Budget Info. Dissemination Quality Guidelines, 67 FR 
62446 (Oct. 7, 2002), available at: https://www.energy.gov/sites/prod/files/nepapub/nepa_documents/RedDont/G-DOE-67FR62446OMBquality.pdf [hereinafter DOE Guidelines].
    \211\ Id. at 62446-47.
---------------------------------------------------------------------------

ii. IECA's Arguments
    IECA argues that the 2018 Study violates three standards set forth 
in the DOE Guidelines: reproducibility, objectivity, and 
integrity.\212\ The DOE Guidelines define these terms as follows:
---------------------------------------------------------------------------

    \212\ See Comment of IECA at 4-5.
---------------------------------------------------------------------------

     Reproducibility: ``means capability of being substantially 
reproduced, subject to an acceptable degree of imprecision, and with 
respect to analytical results, `capable of being substantially 
reproduced' means that independent analysis of the original or 
supporting data using identical methods would generate similar analytic 
results . . . .'' \213\
---------------------------------------------------------------------------

    \213\ DOE Guidelines, 67 FR 62451 (Definition #9, 
``Reproducibility'').
---------------------------------------------------------------------------

     Objectivity: ``means the information is presented in an 
accurate, clear, complete, and unbiased manner and the substance of the 
information is accurate, reliable, and unbiased.'' \214\
---------------------------------------------------------------------------

    \214\ Id. (Definition #7, ``Objectivity'').
---------------------------------------------------------------------------

     Integrity: ``means the information has been secured and 
protected from unauthorized access or revision, to ensure that the 
information is not compromised through corruption or 
falsification.\215\
---------------------------------------------------------------------------

    \215\ Id. (Definition #6, ``Integrity'').

    IECA also asserts that the 2018 Study is ``influential'' under the 
---------------------------------------------------------------------------
DOE Guidelines, which is defined as:

[W]hen used in the context of scientific, financial, or statistical 
information, information (1) that is subject to embargo until the 
date of its dissemination . . . because of potential market effects; 
(2) that is the basis for a DOE action that may result in an annual 
effect on the economy of $100 million or more; and (3) that is 
designated by a DOE Element as `influential.' \216\
---------------------------------------------------------------------------

    \216\ Id. (Definition #3, ``Influential'').

    Information qualifying as ``influential'' is generally subject to a 
``high degree of transparency of data and methods . . . to facilitate 
the reproducibility of [the] information by qualified third parties,'' 
unless it falls within a stated exemption.\217\
---------------------------------------------------------------------------

    \217\ Id. at 62452.
---------------------------------------------------------------------------

    First, addressing reproducibility, IECA states that the 2018 Study 
uses a ``NERA proprietary economic model,'' such that ``third party 
economists have concluded that the results of the study

[[Page 67270]]

are not reproducible.'' \218\ IECA also claims that the 2018 Study 
qualifies as ``influential'' under the DQA because ``it may result in 
an annual effect on the economy of $100 million or more.'' \219\ IECA 
thus appears to suggest that the 2018 Study is subject to a ``high 
degree of transparency'' for purposes of reproducibility by ``qualified 
third parties.'' \220\
---------------------------------------------------------------------------

    \218\ Comment of IECA at 4.
    \219\ Id. at 5.
    \220\ DOE Guidelines, 67 FR 62452.
---------------------------------------------------------------------------

    Second, IECA alleges that the 2018 Study is not ``objective'' and 
lacks ``integrity'' within the meaning of the DQA due to alleged 
personal bias on the part of NERA's external peer review panel. IECA 
claims that ``it is likely that every one of the individuals [involved 
in the peer review]--with the exception of peer reviewer John Staub of 
EIA--``have or will receive financial benefits from the oil and natural 
gas industries.'' \221\ IECA contends that ``[i]ndependent objectivity 
and integrity is [sic] needed to validate the economic model and 
whether its assumptions are sound regardless of [the peer reviewers'] 
understanding of the oil and gas business, and not slanted to support 
the views of those who desire to export substantial volumes of LNG.'' 
\222\ On this basis, IECA asks DOE whether the peer reviewers 
``disclosed their financial association with the oil and gas 
industry.'' \223\ The Evans Schaaf Family similarly questions the basis 
for the 2018 Study, given that (in their view) the data inputs for the 
Study ``are coming entirely from industry leaders who would likely have 
something to gain in developing LNG as a global commodity.'' \224\
---------------------------------------------------------------------------

    \221\ Comment of IECA at 5.
    \222\ Id.
    \223\ Id.
    \224\ Comment of Evans Schaaf Family at 1.
---------------------------------------------------------------------------

b. DOE/FE Response
i. Reproducibility
    DOE has carefully considered IECA's arguments and determined that 
the 2018 LNG Export Study satisfies the DQA's standard for 
``reproducibility,'' as discussed below.
    DOE/FE has determined that the 2018 Study fulfills the DQA's 
objectives in both providing transparency about the Study and ensuring 
the quality of information disseminated to the public. As discussed 
above, NERA relies on publicly available data for input into its 
models, including EIA's AEO 2017, EIA's IEO 2017, and the IEA's WEO 
2016. The AEO and IEO projections are published pursuant to the 
Department of Energy Organization Act of 1977, which requires the EIA 
Administrator to prepare annual reports on trends and projections for 
energy use and supply.\225\
---------------------------------------------------------------------------

    \225\ See 2018 LNG Export Study at 80-95.
---------------------------------------------------------------------------

    In the Study, NERA explains that it developed the possible choices 
for each uncertainty beginning with EIA's AEO 2017 Reference case--a 
DOE requirement of the Study. In addition, the 2018 Study discusses the 
U.S. and Rest of World natural gas market assumptions, including the 
linkages between the scenarios and publicly available projections from 
EIA and IEA. Appendix B to the Study describes the NewEra 
model and provides a detailed discussion of the natural gas supply 
elasticity estimates used in the U.S. supply scenarios, which were 
based on an analysis of four recent studies.\226\ Appendix C provides 
the supply and demand ranges and probability scenarios.\227\ Appendix E 
provides the detailed GNGM model results for the 54 scenarios 
considered in the 2018 Study, including levels of LNG exports, export 
revenues, natural gas production, natural gas consumption, Henry Hub 
prices, U.S. LNG destinations, and North American pipeline trade.\228\ 
DOE/FE believes the incorporation of this extensive information about 
the data, assumptions, and models used in the 2018 Study satisfies the 
requirements of the DQA and the corresponding DOE guidelines. In short, 
DOE has ``disclose[d] the specific data sources that have been used and 
the specific quantitative methods and assumptions that have been 
employed.'' \229\
---------------------------------------------------------------------------

    \226\ Id. at 84-96 (Appx. B).
    \227\ Id. at 97-106 (Appx. C).
    \228\ Id. at 111 (Appx. E, with attached spreadsheet).
    \229\ DOE Guidelines, 67 FR 62452.
---------------------------------------------------------------------------

    We note that IECA has not provided any evidence to support its 
claim that ``[t]hird party economists have concluded that the results 
of the study are not reproducible.'' \230\ The public comment 
procedures followed by DOE/FE in this proceeding (as with its prior LNG 
export studies) allow IECA and other commenters to provide differing 
analyses about LNG exports--including third-party economic projections 
using EIA data--should they choose to do so. IECA elected not to submit 
any rebuttal studies, projections, or other evidence to counter the 
conclusions of the 2018 Study.
---------------------------------------------------------------------------

    \230\ Comment of IECA at 4.
---------------------------------------------------------------------------

    Next, even if the 2018 Study were ``influential'' under the DQA as 
IECA claims, the DOE Guidelines ``do not direct that all disseminated 
original and supporting data be subjected to the reproducibility 
requirement applicable to influential information.'' \231\ The DOE 
Guidelines acknowledge that certain types of data are not practicably 
subject to replication due to ``confidentiality, privacy, trade secret, 
security, and intellectual property constraints,'' among others.\232\ 
We further note that, in the DOE Guidelines, DOE declined to ``adopt a 
general prohibition against use of . . . `third party proprietary 
models.' '' \233\ DOE reasoned that such a prohibition was not required 
by the OMB Guidelines and ``would be too restrictive.'' \234\
---------------------------------------------------------------------------

    \231\ DOE Guidelines, 67 FR 62446, 62452.
    \232\ Id. at 62452.
    \233\ Id. at 62448.
    \234\ Id.
---------------------------------------------------------------------------

    Consistent with the DOE Guidelines, DOE/FE finds that, although 
NERA's proprietary GNGM and NewERA models are intellectual 
property subject to trade secret and confidentiality constraints, the 
incorporation of the information about the data, assumptions, and 
models used in the 2018 Study satisfies the DQA and DOE's guidelines. 
For all of these reasons, we disagree with IECA's position that the 
2018 Study fails to meet the reproducibility standard of the DOE 
Guidelines.\235\
---------------------------------------------------------------------------

    \235\ We note that ``[t]he DOE Guidelines do not purport to 
impose legally binding substantive policies on DOE Elements.'' Id. 
at 62449. Additionally, ``neither section 515 [the DQA] nor the OMB 
Guidelines nor DOE's Guidelines create private rights or contemplate 
judicial oversight of its directives through judicial review.'' Id. 
at 62450.
---------------------------------------------------------------------------

ii. Objectivity
    IECA acknowledges that the 2018 Study involved peer review by a 
panel of experts, but it attempts to discredit the Study by suggesting 
that the peer reviewers are financially self-interested in the outcome 
of the Study--specifically, in promoting the ``export of substantial 
volumes of LNG.'' \236\ On this basis, IECA argues that the 2018 Study 
fails to meet the ``objectivity'' and ``integrity'' standards of the 
DOE Guidelines for this reason.\237\ As explained below, however, IECA 
provides no evidence to support these allegations of bias, other than 
pointing to the professional affiliations of the peer review panel.
---------------------------------------------------------------------------

    \236\ Comment of IECA at 5; see also Comment of Evans Schaaf 
Family at 1 (stating that the 2018 Study's probabilities are 
``problematic'' because ``they are coming entirely from industry 
leaders who would likely have something to gain in developing LNG as 
a global commodity'').
    \237\ Comment of IECA at 5.
---------------------------------------------------------------------------

    NERA explained the peer review process for the 2018 Study as 
follows:

    Nine experts on international LNG supply and demand, listed in 
the acknowledgement, agreed to review and comment on the proposed 
forecast assumptions and propose

[[Page 67271]]

modifications to the probabilities assigned to each case. The 
reviewers were provided with a brief written report describing the 
proposed probabilities and assumptions. KeyLogic Systems, Inc. 
gathered the individual reviewer's responses and provided them to 
the study team for consideration.\238\
---------------------------------------------------------------------------

    \238\ 2018 LNG Export Study at 41.

    Each of these experts' names and institutional affiliations are 
identified in the Study.\239\ Their invitation to participate as peer 
reviewers came directly from DOE/FE, consistent with standard protocols 
for peer review. In the Study (and as discussed above), NERA identified 
both the probability assumptions and any changes made to those 
assumptions based on input from the peer reviewers.\240\
---------------------------------------------------------------------------

    \239\ Id. at 1 (Acknowledgment).
    \240\ See id. 42-44.
---------------------------------------------------------------------------

    IECA alleges that eight of the nine peer reviewers ``have or will 
receive financial benefits from the oil and natural gas industries.'' 
IECA expressly omits John Staub of EIA from this allegation--presumably 
because he works for the U.S. Government, whereas the other eight peer 
reviewers work for entities including universities, independent 
research firms, and consulting firms.\241\
---------------------------------------------------------------------------

    \241\ See id. at 1 (identifying the peer reviewers, besides John 
Staub of EIA, as: Kevin Book (ClearView Energy Partners, LLC); Dr. 
Fereidun Fesharaki (Facts Global Energy); Dr. Hillard G. Huntington 
(Stanford University, Dep't. of Management Science and Engineering); 
Vello A. Kuuskraa (Advanced Resources International, Inc.); Majed 
Limam and Mike Reimers (Poten and Partner's Americas LNG & Natural 
Gas Consulting); and Dr. Scott Tinker (University of Texas, Bureau 
of Economic Geology)).
---------------------------------------------------------------------------

    IECA suggests that the peer reviewers' input to the 2018 Study is 
self-interested and lacking objectivity, such that NERA's modifications 
to the Study based upon the peer reviewers' feedback are likewise 
tainted. However, IECA fails to demonstrate how the professional 
affiliations of the peer reviewers create bias or how that alleged bias 
impacted the design or results of the 2018 Study.
    IECA also does not acknowledge that NERA selected the peer 
reviewers because they are ``experts on the topic of global LNG supply 
and demand.'' \242\ This is consistent with the DOE Guidelines, which 
note that, under OMB policy, peer reviewers should ``be selected 
primarily on the basis of necessary technical expertise.'' \243\ In the 
Study, NERA explained its determination that these peer reviewers would 
assist in providing the ``broadest possible perspective on the 
potential range of natural gas supply and demand outcomes during the 
review period.'' \244\ The participation of the peer reviewers thus 
enhanced, rather than undermined, both the objectivity and the 
integrity of the Study.
---------------------------------------------------------------------------

    \242\ Id. at 1, 42.
    \243\ DOE Guidelines, 67 FR 62352 (citation omitted).
    \244\ 2018 LNG Export Study at 24.
---------------------------------------------------------------------------

    Finally, although IECA invokes the ``integrity'' standard under the 
DOE Guidelines, that standard pertains to ensuring that ``information 
has been secured and protected from unauthorized access or revision.'' 
\245\ IECA has not presented any argument or evidence to suggest that 
the security of the 2018 Study was compromised, and therefore we 
decline to address this point.
---------------------------------------------------------------------------

    \245\ DOE Guidelines, 67 FR 62451.
---------------------------------------------------------------------------

2. Reliance on NERA's Analysis
a. Comments
    John Young does not expressly oppose the 2018 Study, but he 
questions DOE's reliance on NERA's work in the 2018 Study for reasons 
independent of the Data Quality Act. Mr. Young asks whether DOE has 
examined NERA's ``track record in retrospect''--and, specifically, 
whether DOE has attempted to square NERA's ``optimism'' for U.S. LNG 
exports given that some proposed LNG projects have not yet moved 
forward or achieved revenue flow. He urges DOE to hire Synapse Energy 
Economics (Synapse) as a third party contractor to critique the 2018 
Study. According to Mr. Young, Synapse has published critiques of LNG 
exports and natural gas projects, which he suggests would allow Synapse 
to critique the 2018 Study.
b. DOE/FE Response
    In response, DOE/FE notes that the scenarios evaluated by NERA were 
based on four different uncertainties affecting natural gas markets, 
with three different cases for U.S. natural gas supply based on EIA's 
AEO 2017. As explained above, NERA enlisted external peer review of the 
Study's scenario design and probability assignments, and made 
modifications based on feedback from the peer reviewers. NERA also made 
clear that ``[its] findings . . . may contain projections based on 
current data and historical trends,'' and that ``[a]ny such predictions 
are subject to inherent risks and uncertainties.'' \246\ Additionally, 
consistent with its past practice, DOE/FE has made the 2018 Study 
available for public comment. Commenters were free to submit a third-
party critique of the 2018 Study by Synapse or other firms, although 
none did.
---------------------------------------------------------------------------

    \246\ Id. at 1-2.
---------------------------------------------------------------------------

J. Potential Impact on DOE/FE's Regulatory Process

1. Pending Non-FTA Applications
a. Comments
    The Evans Schaaf Family states that, ``given the 68% probability 
[in the 2018 Study] that U.S. LNG exports will be between 9.0 and 30.7 
Bcf/d in 2040,'' DOE ``has an obligation to look closely at individual 
proposed projects, including where the gas is sourced, to determine 
whether or not projects are consistent with the public interest . . . 
.'' \247\ In the Family's view, the 2018 Study implies that FE 
``[should] approve all 55.04 Bcf/d LNG export projects for non-FTA 
export.'' \248\ The Family disagrees with this implication, and urges 
DOE against assuming that ``all LNG projects are equal.'' \249\
---------------------------------------------------------------------------

    \247\ Comment of Evans Schaaf Family at 8.
    \248\ Id.
    \249\ Id.
---------------------------------------------------------------------------

    Other commenters argue that, given the results of the 2018 Study 
and DOE's prior macroeconomic studies, DOE/FE should proceed 
expeditiously in reviewing and approving all pending applications to 
export LNG to non-FTA countries. API asserts that any unnecessary delay 
in approving non-FTA applications will put U.S. projects at ``a 
competitive disadvantage in the global race to construct LNG 
facilities,'' such that the United States will miss out on the economic 
and foreign policy gains associated with market-determined levels of 
U.S. LNG exports.\250\ JCEP states that DOE/FE should promptly approve 
the pending applications following the completion of the environmental 
review for each facility.\251\ CLNG similarly contends that, on the 
basis of the 2018 Study and DOE's LNG export regulatory program to 
date, ``DOE is fully armed to approve the remaining applications for 
export and should do so without delay.'' \252\ LNG Allies states that 
DOE can now ``safely shift its policy perspective to grant approvals to 
all . . . export applications to non-FTA countries without the need for 
any further macroeconomic studies (at least for the next four to five 
years).'' \253\ Citing the 2018 Study, NextDecade asserts that ``DOE 
should continue approving export applications so that regulatory 
barriers do not distort the proper functioning of the marketplace.'' 
\254\ Finally, JCEP maintains that any opponent of LNG exports would 
need to make an

[[Page 67272]]

``overwhelming showing'' that an individual export proposal is 
inconsistent with the public interest, so as to overcome both the 
presumption in favor of exports codified in section 3(a) of the NGA and 
the findings of the 2018 LNG Export Study.\255\
---------------------------------------------------------------------------

    \250\ Comment of API at 2.
    \251\ Comment of JCEP at 5-6.
    \252\ Comment of CLNG at 2; see also id. at 6.
    \253\ Comment of LNG Allies at 2.
    \254\ Comment of NextDecade Corp. at 4.
    \255\ Comment of JCEP at 6.
---------------------------------------------------------------------------

b. DOE/FE Response
    As mentioned above, the 2018 Study found a ``positive correlation 
between GDP and LNG exports for the more likely scenarios in 2040.'' 
\256\ Under the NGA section 3(a), DOE examines each pending non-FTA 
application to determine whether the proposed exports are in the public 
interest.
---------------------------------------------------------------------------

    \256\ 2018 LNG Export Study at 67.
---------------------------------------------------------------------------

    As discussed in prior non-FTA orders, DOE/FE reviews a substantial 
administrative record for each application proceeding under NGA section 
3(a). That record typically includes (but is not limited to) the 
following: The application; any motions to intervene, protests, and/or 
comments submitted in response to the notice of application; DOE's 
environmental studies (i.e., the Addendum \257\ and the Life Cycle 
Greenhouse Gas Report); \258\ public comments received on DOE/FE's 
various analyses; any final environmental document for the export 
facility issued by FERC or the U.S. Maritime Administration (MARAD) 
under NEPA (such as a final environmental impact statement or 
environmental assessment); \259\ and any order by FERC or MARAD 
granting or denying authorization for the applicant to site, construct, 
and operate the export facility. Accordingly, DOE/FE does not prejudge 
any of the pending non-FTA applications on the basis of the 2018 LNG 
Export Study alone. For the reasons discussed herein, the 2018 LNG 
Export provides significant supporting evidence in DOE/FE's public 
interest analysis under NGA section 3(a), but the 2018 Study is one of 
many considerations in DOE/FE's decision-making. Consistent with its 
past practice, DOE/FE will evaluate each pending non-FTA application as 
required under the NGA and NEPA, based on the administrative record 
compiled in each individual proceeding.
---------------------------------------------------------------------------

    \257\ Addendum to Environmental Review Documents Concerning 
Exports of Natural Gas From the United States, 79 FR 48132 (Aug. 15, 
2014). The Addendum and related documents are available at: https://www.energy.gov/sites/prod/files/2014/08/f18/Addendum.pdf.
    \258\ Life Cycle Greenhouse Gas Perspective on Exporting 
Liquefied Natural Gas from the United States, 79 FR 32260 (June 4, 
2014). The Life Cycle Greenhouse Gas Report is available at: http://energy.gov/fe/life-cycle-greenhouse-gas-perspective-exporting-liquefied-natural-gas-united-states.
    \259\ Typically, the Federal agency responsible for permitting 
the export facility--usually either FERC or MARAD--serves as the 
lead agency in the NEPA review process, and DOE serves as a 
cooperating agency. Where no other Federal agency is responsible for 
permitting the export facility, DOE serves as the lead agency in the 
NEPA review process.
---------------------------------------------------------------------------

2. Extended Term of Non-FTA Authorizations
a. Comments
    LNG Allies and Cheniere assert that the design of the 2018 Study 
will allow for greater flexibility for DOE/FE's regulatory process 
going forward. They point out that, whereas DOE's prior studies had a 
horizon of 20 years, the 2018 Study extends 30 years into the future 
(i.e., through December 31, 2050). Therefore, Cheniere asserts, ``[t]he 
findings establish an evidentiary basis for DOE/FE to make public 
interest determinations and [issue] export authorizations for 30-year 
terms.'' \260\ On this basis, these commenters urge DOE/FE to: (i) 
Grant new non-FTA authorizations for a term of 30 years, and (ii) 
initiate a consolidated proceeding to add an additional 10-year term to 
the existing 20-year LNG export authorizations for both FTA and non-FTA 
countries. They assert that the LNG industry would receive substantial 
benefits from extended 30-year authorizations--particularly since, for 
foreign buyers deciding between U.S. LNG and alternative long-term 
sources, longer authorization periods may prove decisive.
---------------------------------------------------------------------------

    \260\ Comment of Cheniere at 2.
---------------------------------------------------------------------------

b. DOE/FE Response
    A request to extend the term for existing or future non-FTA 
authorizations goes beyond the scope of this proceeding. If, in the 
future, DOE/FE decides to propose an extended export term for existing 
or future non-FTA orders, DOE/FE will commence a new docket proceeding 
and publish notice of the proposal in the Federal Register. Insofar as 
any authorization holder wishes to request a longer export term for an 
existing FTA authorization, it is free to do so at any time under NGA 
section 3(c).\261\
---------------------------------------------------------------------------

    \261\ 15 U.S.C. 717b(c) (requiring DOE to grant applications for 
FTA authorizations, including applications to amend such 
authorizations, ``without modification or delay'').
---------------------------------------------------------------------------

3. Policy Recommendations
a. Comments
    IECA recommends that DOE/FE implement two policy changes to ensure 
that the U.S. economy benefits from LNG exports. First, IECA states 
that DOE/FE should ensure that price levels for U.S. LNG are not 
dictated by global demand, as is currently happening with prices for 
U.S. crude oil (in IECA's view). IECA states that DOE's policy should 
be ``to export LNG volumes to levels where demand in China, Japan, 
South Korea, India, and the EU [European Union] will not determine 
[U.S.] prices.'' \262\ According to IECA, such a policy is especially 
important during the winter heating season because the largest LNG 
importing countries have winter at the same time as the United States--
potentially resulting in global price spikes for heating and 
electricity.\263\
---------------------------------------------------------------------------

    \262\ Comment of IECA at 1 (defining ``subsidize'' as ``a 
foreign government and/or foreign government related entities that 
in whole or part, are either owned, controlled or regulated by such 
government entities, provide natural gas to their industrial and or 
electric generating sectors at prices that are below the market or 
purchased costs.'').
    \263\ Id.
---------------------------------------------------------------------------

    Second, IECA asks DOE/FE to ``issue an order that would specify 
that it is unlawful for U.S. LNG exports to be shipped to countries 
that subsidize natural gas to their manufacturing industry.'' \264\ As 
discussed above, IECA argues that allowing exports of U.S. LNG to 
``subsidizing'' countries damages the competitiveness of U.S. 
manufacturing and threatens U.S. jobs.
---------------------------------------------------------------------------

    \264\ Id. at 7.
---------------------------------------------------------------------------

b. DOE/FE Response
    The policy recommendations offered by IECA go beyond the scope of 
this proceeding. DOE/FE takes no position on the proposed policy 
recommendations at this time.

VII. Discussion and Conclusions

    DOE/FE commissioned the 2018 LNG Export Study and invited the 
submission of responsive comments on the Study. DOE/FE has analyzed 
this material and determined that the 2018 Study provides substantial 
support for the pending non-FTA applications identified in this docket, 
as well as future non-FTA applications within the export volumes 
considered by the 2018 Study (0.1 to 52.8 Bcf/d of natural gas). 
Specifically, the conclusion of the 2018 LNG Export Study is that the 
United States will experience net economic benefits from issuance of 
authorizations to export domestically produced LNG. Other key findings 
of the 2018 Study include:
     ``Increasing U.S. LNG exports under any given set of 
assumptions about U.S. natural gas resources and their production leads 
to only small increases in U.S. natural gas prices.'' \265\
---------------------------------------------------------------------------

    \265\ 2018 LNG Export Study at 55.

---------------------------------------------------------------------------

[[Page 67273]]

     ``Increased exports of natural gas will improve the U.S. 
balance of trade and result in a wealth transfer into the United 
States.'' \266\
---------------------------------------------------------------------------

    \266\ Id. at 64.
---------------------------------------------------------------------------

     ``Overall [U.S.] GDP improves as LNG exports increase for 
all scenarios with the same U.S. natural gas supply condition.\267\
---------------------------------------------------------------------------

    \267\ Id. at 67.
---------------------------------------------------------------------------

     ``There is no support for the concern that LNG exports 
would come at the expense of domestic natural gas consumption.'' \268\
---------------------------------------------------------------------------

    \268\ Id. at 77.
---------------------------------------------------------------------------

     ``[A] large share of the increase in LNG exports is 
supported by an increase in domestic natural gas production.'' \269\
---------------------------------------------------------------------------

    \269\ Id. at 77.
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     ``Natural gas intensive [industries] continue to grow 
robustly at higher levels of LNG exports, albeit at slightly lower 
rates of increase than they would at lower levels.'' \270\
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    \270\ Id. at 70.

We have evaluated the public comments submitted in response to the 2018 
Study. None of the eight comments opposing the 2018 Study have provided 
sufficient evidence to rebut or otherwise undermine these findings.
    Specifically, the opposing comments criticize aspects of the 
models, assumptions, and design of the 2018 Study. As discussed above, 
however, EIA's most recent projections in AEO 2018 continue to show 
market conditions that will accommodate increased exports of natural 
gas. When compared to prior AEO Reference cases (including AEO 2017's 
Reference case used in the 2018 Study), the AEO 2018 Reference case 
projects increases in domestic natural gas production--well in excess 
of what is required to meet projected increases in domestic 
consumption. Accordingly, DOE/FE finds that the 2018 LNG Export Study 
is fundamentally sound and supports the proposition that exports of LNG 
from the lower-48 states, in volumes up to and including 52.8 Bcf/d of 
natural gas, will not be inconsistent with the public interest.\271\
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    \271\ 2018 LNG Export Study at 63 & Appx F.
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    As stated above, DOE will consider each application as required 
under the NGA and NEPA based on the administrative record compiled in 
each individual proceeding.

    Signed in Washington, DC, on December 20, 2018.
Steven E. Winberg,
Assistant Secretary, Office of Fossil Energy.
[FR Doc. 2018-28238 Filed 12-27-18; 8:45 am]
 BILLING CODE 6450-01-P