Locke Lord QuickStudy: FERC and DOE Authorize LNG Export Projects

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    On July 30, 2014, the Federal Energy Regulatory Commission (FERC) issued its third authorization for a liquefied natural gas (LNG) export project.1 FERC issued the authorization to Freeport LNG Development, L.P., FLNG Liquefaction, LLC, FLNG Liquefaction 2, LLC, and FLNG Liquefaction 3, LLC (collectively, Freeport). FERC previously authorized LNG export projects for Sabine Pass Liquefaction, LLC and Sabine Pass LNG, L.P. in April 2012 and Cameron LNG, LLC in June 2014.

    The Freeport Liquefaction Project, which will be constructed at Freeport’s existing Quintana Island terminal located near the city of Freeport, Brazoria County, Texas, includes a liquefaction plant with three trains, each with a capacity of 4.4 million metric tons per annum, for a total liquefaction capacity of 1.8 Bcf/d.

    There are currently ten LNG export projects that have formal applications pending before FERC. In addition, there are three LNG export projects in FERC’s prefiling process.

    On July 31, 2014, the United States Department of Energy (DOE) issued its eighth authorization to export LNG to non-Free Trade Agreement (non-FTA) countries.2 The DOE granted authorization to LNG Development Company, LLC (d/b/a Oregon LNG) to export LNG from a terminal in Clatsop County, Oregon. Oregon LNG previously sought FERC approval to build an LNG import terminal and now proposes to amend the pending FERC request in order to convert the proposed import terminal to bidirectional facilities that will offer both liquefaction and regasification capability.

    The major terms and conditions of Oregon LNG’s authorization to export LNG to non-FTA countries include:

    • Export Sources: Oregon LNG received authorization to export (i) natural gas produced in Canada and imported into the United States, and (ii) domestically produced natural gas. According to DOE, “the Project’s geographic location suggests that natural gas from Canada will be a likely, and possibly the predominant, source of supply.”3
    • Volume: Oregon LNG may export the requested volume of up to 9.6 million metric tons per annum (mtpa) of LNG, a volume equivalent to approximately 456.25 billion cubic feet per year (Bcf/yr) of natural gas (1.25 Bcf per day (Bcf/d)).
    • Term: Though Oregon LNG requested a 25-year term, the DOE authorized Oregon LNG to export LNG for a term of 20 years beginning on the date of first export. This term is consistent with the DOE’s prior non-FTA orders.
    • Commencement of Operations: Oregon LNG must commence LNG export operations within seven years from the authorization date.
    • Agency Rights: Oregon LNG may export LNG on its own behalf, or as agent for others. Where Oregon LNG proposes to export LNG as agent for others, Oregon LNG must register the other entity with DOE.
    • Commissioning Volumes: Oregon LNG will be permitted to apply for short-term export authorizations to export Commissioning Volumes prior to the commencement of the first commercial exports of domestically sourced LNG from the Oregon LNG Terminal. “Commissioning Volumes” are defined as the volume of LNG produced and exported under a short-term authorization during the initial start-up of each LNG train, before each LNG train has reached its full steady-state capacity and begun its commercial exports pursuant to Oregon LNG’s long-term contracts. Commissioning Volumes will not be counted against the maximum level of volumes authorized for export by Oregon LNG.
    • Make-Up Period: Oregon LNG will be permitted to continue exporting for a total of three years following the end of the 20-year term, solely to export any Make-Up Volume that it was unable to export during the original export period.

    1 Freeport LNG Development, L.P., 148 FERC ¶ 61,076 (2014)
    2 LNG Development Company, LLC (d/b/a Oregon LNG), DOE/FE Order No. 3465 (July 31, 2014)
    3 Id. at 132

    For more information on the matters discussed in this Locke Lord QuickStudy, please contact the authors.

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