The incredible growth in U.S. LNG export capacity in recent years has been facilitated by a largely predictable federal permitting process. It can sometimes be slower than developers like and leave them more open to pushback at the state and local level, but LNG export projects entering the federal permitting process with both the Department of Energy (DOE) and with the Federal Energy Regulatory Commission (FERC) generally receive their authorizations and export licenses. And once they have them, they’ve been able to keep them, until now. Both FERC and DOE had been granting extensions to these permits as their permitting windows closed, meaning projects that were permitted a decade ago and not yet online have retained their permits and licenses from export But with a DOE rule change announced on April 21, the era of repeated renewal of authorizations appears to be over. The DOE is sending a clear message to LNG developers: get your project to the finish line in a timely manner or get out of the way and make room for someone who can. In today’s RBN blog, we take a closer look at the DOE rule change and its impact on LNG projects currently under development.
The policy at issue here concerns DOE export licenses, which typically receive far less press, public pushback, and notices than FERC’s permitting and environmental review process. However, all projects that plan to export US natural gas as LNG, meaning not just projects in the US, but any project in Mexico or Canada that plans to source US feed gas, require a DOE export license. Export licenses come in two varieties, one for Free Trade Agreement (FTA) countries and one for non-FTA (non-FTA) countries. Projects need both licenses to export competitively, they are usually granted in that order (FTA first, then non-FTA), and both usually come after a project has already received its FERC authorization. All LNG export licenses contain a clause that basically says the project has seven years to start exporting or the license expires. The LNG terminal does not need to reach commercial operations in this seven-year period; the condition is met with the first exported LNG cargo and start-up cargoes count.
This time frame was established during the permit for the first US LNG export facility, Sabine Pass, after going back and forth with Cheniere around a fair and realistic process. (For more information on permits for energy infrastructure, see You don’t pass me by.) Every U.S. LNG terminal currently in operation, including the Calcasieu Pass still in operation, has met the terms of this clause without requiring an extension, a fact noted by the DOE when it announced your new norm. That includes Calcasieu Pass, which has been able to achieve LNG exports over its seven-year run despite its construction occurring during COVID, a reason often cited by projects seeking expansion requests. In 2020, the DOE granted extensions to three LNG projects: the under-construction Golden Pass, as well as the pre-FID Lake Charles LNG projects and the Cameron Expansion Project. The original Golden Pass export license would have expired on 25 April 2024 and was backdated to 30 September 2025; however, Golden Pass is expected to begin operating by the end of the year and may not even need the extra time it was granted. In the policy change, DOE reaffirmed that seven-year period and said it will no longer consider extensions unless the project (1) is already under construction and (2) can demonstrate extenuating circumstances beyond its control. While there are no details on what those extenuating circumstances might be, it certainly seems like saying “COVID” or “bad markets” isn’t going to cut it anymore. If a project is ineligible for an extension, it must restart the DOE licensing process and fall in line behind all new projects in the queue.
