Delays and changes of the rules in exporting natural gas caused dissatisfaction among U.S oil companies. Read more from this Reuters article:
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(Reuters) - U.S. companies hoping to export natural gas are frustrated by lengthy delays and rule changes as they await U.S. Department of Energy approval of their applications and may turn to the courts to speed up the process.
Both the slow pace of decisions on applications to ship U.S. liquefied natural gas abroad and the process for making those decisions could be challenged, legal sources say.
Potential strategies could be laid out during a House of Representatives panel on Tuesday, which will focus on the current impediments to U.S. LNG exports.
The surge in shale gas production has helped make the United States a leading natural gas-producing nation, and potentially a major exporter. The Obama administration has cautiously embraced the energy boom, while promising to protect the economy from major price spikes from gas exports.
LNG exports are allowed to only a few countries with free-trade agreements with the United States. But others, including large consumers like Japan and India and those outside free-trade pacts, are keen to buy U.S. gas if the DOE approves.
Over a dozen projects are awaiting Energy Department permission to export gas to all countries. Four have been in limbo for between 18 and 25 months.
The industry welcomed approval of Freeport LNG's Quintana Island, Texas, terminal in May. Energy Secretary Ernest Moniz has said additional decisions will come this year and follow the order laid out by the department, without being more specific on the timing or number of decisions.
TROUBLE IN THE QUEUE?
One likely focus for legal challenges is the order in which the Energy Department rules on applications, a policy made in midstream that put some major players at a disadvantage.
"DOE's issuance of its order of precedence (the queue) is unlawful," Bill Cooper, head of the Center for Liquefied Natural Gas, a trade group of LNG producers, shippers, developers and others, said in testimony prepared for Tuesday's hearing.
The administration set up the queue in December 2012 based on when applications were filed with the department, as well as when project backers filed for a license from the U.S. Federal Energy Regulatory Commission.
Applying at the department costs about $20,000, but the FERC application can cost as much as $100 million. A FERC license is required to begin construction of any gas export project.
Since criteria for the queue were revealed only in December, companies had no way of knowing that they would be ranked based on the timing of their application with FERC.
"For those 16 pending applications, they had no clue when they started the process that DOE was going to come up with an order to consider those applications based on when they filed someplace else," Cooper told Reuters.
If the department waits about two months between each export decision, as Acting Assistant Secretary for Fossil Energy Christopher Smith has signaled, projects near the end of queue might not get a DOE permit before late 2015.
Golden Pass, a proposed Exxon Mobil $10 billion joint export venture with Qatar Petroleum, is one project near the end of the queue.
"I don't want to start on this process if you tell me it's going to take five years for you to get around to my application," Exxon CEO Rex Tillerson said during an event in Washington last week. "It's not like people are just going to stand at our door like panting dogs just waiting for us."
A HARD CASE TO PROVE?
Law experts say making a case for speeding up the DOE's decision-making process will be difficult. But with multi-billion dollar projects on the line, some firms may try.
The challenges might hang on proving that an extended delay by the department is tantamount to a denial.
"Legally, the argument would be that as an applicant to the Department of Energy you have a right to a decision," said David Wochner, an attorney with K&L Gates who represents LNG clients. "You could make a case that there has been unreasonable delay."
The Natural Gas Act of 1938, which set up the requirement for federal permission to export natural gas, does not set a timeline for the department to make decisions. But Cooper argues that the separate Administrative Procedures Act requires that agencies conclude matters within a "reasonable time."
However, courts are typically reluctant to interfere in the regulatory process unless a statutory deadline has been missed.
But some factors could work in the favor of a plaintiff looking to speed up the process.
The natural gas export law offers general backing for exports, forcing opponents to show a project is not in the public interest.
Under the administrative regulations set up to implement the law, the department must give opponents an opportunity, typically 60 days, to intervene in an export application.
After receiving a rash of applications in 2011 and 2012, the administration could legitimately argue that it needed time to study the impact of LNG exports and receive public feedback.
But with the review process dragging on for more than two years, in some cases, the window for critics to respond is long closed for nearly all of the projects under review.
The decision on the Freeport terminal came about two months after the public comment period ended for two major government-commissioned studies on exports. That could make it harder for the department to argue, if taken to court, that it needs even more time to consider other applications.
"Why would it take longer to issue the next one than it did this one? They've already processed the 200,000 comments," said Steven Miles, the head of law firm Baker Botts' LNG practice.
Dr. Ali Ghalambor has worked with some of the leading universities and organizations that specialize in petroleum engineering. Visit this Facebook page for more updates.
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