The Other Side of LNG Exports: Alaskan Exports to Free Trade Countries Approved

The capability of the U.S. to enter the global energy market as a net natural gas exporter has been the subject of much discussion, given the number of years that applications seeking approval to export liquefied natural gas (“LNG”) to countries that do not have a free trade agreement with the U.S. (“non-FTA countries”) have been pending.  There is another side to U.S. LNG exports that does not garner as much attention – exports to countries with free trade agreements with the U.S. that require the national treatment for trade in natural gas (“FTA countries”).  In contrast to the involved procedure for non-FTA countries, under which the Department of Energy (“DOE”) must conduct a public interest determination prior to approving LNG exports, applications for LNG exports to FTA countries are deemed by statute to be in the public interest and the DOE must approve them promptly.  On July 18, 2014, Alaska LNG, LLC filed an application seeking approval to export LNG to both FTA and non-FTA countries from an LNG terminal that has yet to be constructed in south central Alaska.  Just a few months later, the DOE approved the project to export LNG to FTA countries on November 21, 2014.

The DOE identified the following qualified FTA countries to which Alaska LNG may export:

Despite the rapid approval of Alaska LNG’s exports to FTA countries, this is a long-term project with a potential 12-year time horizon before Alaska LNG is ready to export and the authorization enables the company to export approximately 929 Bcf/yr for 30 years thereafter.  The authorization will become effective upon the first export of LNG from the facility or on November 21, 2026, whichever comes first.

The DOE was clear in its order that the authorization of exports to FTA countries has no bearing on its review of and ultimate determination regarding Alaska LNG’s pending application for exports to non-FTA countries.  The DOE took note of Alaska LNG’s claims that the project – described as an “integrated mega-project” – will be unique and the largest integrated gas and LNG terminal.  As we previously discussed, the DOE’s recent modification of its review process for LNG export applications does not apply to the Alaska LNG project.  Therefore, it is possible that the DOE could issue a conditional authorization for the Alaskan project to export to non-FTA countries, given the scope and time horizon for the project.  To date, the DOE has issued final approval to four LNG projects for exports to non-FTA countries from the lower-48 states.  The most recent final authorization was issued by the DOE to Freeport LNG on November 14, 2014 via two orders found here and here.  By notable contrast to the four month approval process for Alaska LNG’s application for exports to FTA countries, Freeport LNG’s applications for export to non-FTA countries had been pending nearly four years before final authorization was granted.