U.S. Energy Department Grants Freeport LNG Non-FTA Export Approval

Freeport LNG terminal on Quintana Island, about 70 miles south of Houston, Texas. Photo: Freeport LNG

As Congressman Lankford seemed to hint this week, good news was on its way…

The U.S. Energy Department has just announced today that it has conditionally authorized Freeport LNG to export up to 1.4 billion cubic feet per day (Bcd/d) of domestically produced liquefied natural gas (LNG) to countries that do not have a Free Trade Agreement (FTA) with the United States from their terminal on Quintana Island, Texas.

This is the first such license granted to an LNG export facility in the United States since approval was granted to Sabine Pass LNG in May 2011 for exports at a rate of up to 2.2 Bcf/d.

In an emailed statement this afternoon, Ohio Congressman Bill Johnson, a member of the Congressional LNG Export Working Group commented:

“Our group commends this progress, and encourages the President and the DOE to continue to expeditiously process the requests, evaluating each in a timely order to bring certainty to  the LNG export market. CF International recently released a study that disclosed LNG exports could lead to more than 200,000 American jobs; thus, this is an industry we cannot afford to ignore.”

The Energy Information Administration forecasting a record production rate of 69.3 Bcf/d in 2013.

Within their approval document, the Energy Department’s Policy Guidelines note that:

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 forthe duration of the contract while minimizing regulatory impediments to a freely operating market

The Department of Energy notes that federal law generally requires approval of natural gas exports to countries that have an FTA with the United States. For countries that do not have an FTA with the United States, the Natural Gas Act directs the Department of Energy to grant export authorizations unless the Department finds that the proposed exports “will not be consistent with the public interest.”

The full authorization can be read here: http://energy.gov/sites/prod/files/2013/05/f0/ord3282.pdf

Freeport LNG is a 50/50 joint venture between ConocoPhillips and Michael Smith, founder, Chairman and CEO of Basin Exploration Company.

In July 2012, Freeport LNG executed a Liquefaction Tolling Agreement (LTA)with Japan’s Osaka Gas Co., Ltd. and Chubu Electric Power Co. for a total of 4.4 million tons per annum (mtpa).   In February 2013, a 20-year LTA was signed between Freeport LNG and BP for another 4.4 mtpa over a 20-year period.  This added production coincides with the construction of a second LNG train.

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