While the most intense energy debate in 2014 may focus on whether the United States should permit the export of crude oil, we expect continued strong interest in natural gas and coal exports as well. The relatively sudden abundance of fossil fuel resources in the nation is fueling the current export debate.
Crude Oil Exports
No changes to current laws affecting crude oil exports are likely to be enacted in 2014, but the debate over possible changes has officially started and is likely to intensify. In December 2013, Secretary of Energy Ernie Moniz suggested that current restrictions on crude oil exports should be reviewed, while noting that the Department of Commerce, not the Department of Energy (DOE), has jurisdiction over such exports. As part of the review of the current federal policy on crude oil exports, Senator Lisa Murkowski (R-AK), Ranking Minority Member of the Senate Energy and Natural Resources Committee, released a white paper on January 2, 2014, entitled, “A Signal to the World: Renovating the Architecture of U.S. Energy Exports.” The Murkowski white paper described the current status of export regulations on various energy products and offered recommendations for regulatory changes to modernize and capitalize on the current abundant crude oil resources of the nation. While Senator Murkowski favors lifting barriers to crude oil exports, key House Republicans and Democrats in both Houses of Congress have expressed more caution. It is unlikely that Congress will enact legislation modifying the crude oil regulations in 2014, but the case for and against such action will be developed in 2014 through briefings, studies, hearings, and Congressional and Executive Branch focus on the subject.
The pace of regulatory review at DOE and FERC remains uncertain. However, it is still very possible that at least three to four U.S. liquefied natural gas (LNG) export terminals could gain approval in time to be operational by 2017. As of January 14, 2014, DOE has issued conditional approval of the export of 6.7 billion cubic feet per day (bcf/d) of LNG. DOE is expected to continue to review applications for exports of LNG to countries with which the United States does not have a free trade agreement (non-FTA countries) in the order the applications appear in the so-called DOE queue. Although DOE generally has taken eight weeks between posting application approvals, there is a chance the pace of review could slow in 2014 as the volume of non-FTA export approvals increase.
There is some speculation that DOE may take another formal or informal pause after approving 10-12 bcf/d of non-FTA exports. During any such pause, Executive Branch departments could be expected to examine outstanding issues like the applicable public interest criteria, how cumulative impacts of multiple approvals will be measured, or the order of precedence in the queue. If a slowdown in the processing of LNG exports to non-FTA countries were to occur, it could affect efforts by U.S. negotiators working on free trade agreements with Asian countries on the Trans-Pacific Partnership (TPP) and European countries on the Transatlantic Trade and Investment Partnership (TTIP).
In addition to obtaining DOE approval of proposed LNG exports, applicants must also obtain the approval of FERC to site, construct, and operate LNG export facilities. FERC is the lead agency for coordinating the input of other relevant agencies, like the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) regarding safety design. FERC also manages all required National Environmental Policy Act reviews. Opponents of LNG exports are expected to continue to demand that NEPA considerations include not only the facility footprint, but also the entire possible lifecycle footprint related to the facility (such as natural gas production practices in the case of LNG terminals).
2013 marked another year of significant exports of U.S. coal, the biggest customer being China. While there are still proposed projects for the expansion and development of coal terminals along the East and West coasts, expansion ambitions are expected to decline in 2014 if export coal prices do not support large-scale export facilities. In addition to possible weakening demand abroad, coal terminals also face strong opposition from environmental groups. EPA has signaled that it wants agencies, like the Army Corps of Engineers, that must prepare an Environmental Impact Statement (EIS) for a coal terminal to consider not only the direct impacts of a facility but also the potential impacts along the full route associated with the transportation of coal to the terminal. EPA also indicated that the reviewing agency should consider the effects on the United States of pollution associated with coal combusted abroad. (See EPA Nov. 18 letter).