[Federal Register Volume 83, Number 143 (Wednesday, July 25, 2018)]
[Rules and Regulations]
[Pages 35106-35119]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-15903]
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DEPARTMENT OF ENERGY
10 CFR Part 590
[FE Docket No. 17-86-R]
RIN 1901-AB43
Small-Scale Natural Gas Exports
AGENCY: Office of Fossil Energy, Department of Energy.
ACTION: Final rule.
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SUMMARY: The Department of Energy (DOE or the Department) is revising
its regulations to provide that DOE will issue an export authorization
upon receipt of any complete application that seeks to export natural
gas, including liquefied natural gas (LNG), to countries with which the
United States has not entered into a free trade agreement (FTA)
requiring national treatment for trade in natural gas and with which
trade is not prohibited by U.S. law or policy (non-FTA countries),
provided that the application satisfies the following two criteria: The
application proposes to export natural gas in a volume up to and
including 51.75 billion cubic feet (Bcf) per year (Bcf/yr) (equivalent
to 0.14 Bcf per day (Bcf/d)), and DOE's approval of the application
does not require an environmental impact statement (EIS) or an
environmental assessment (EA) under the National Environmental Policy
Act of 1969 (NEPA). Applications that satisfy these criteria are
requesting authorization for ``small-scale natural gas exports,'' and
DOE deems such exports to be consistent with the public interest under
the Natural Gas Act (NGA). DOE's regulations regarding
[[Page 35107]]
notice of applications and procedures conducted on applications do not
apply to applications that satisfy these criteria. This regulation is
intended to expedite DOE's processing of these applications and reduce
administrative burdens for the small-scale natural gas export market.
DATES: This final rule is effective August 24, 2018.
FOR FURTHER INFORMATION CONTACT: Amy Sweeney, U.S. Department of Energy
(FE-34), Office of Regulation and International Engagement, Office of
Fossil Energy Forrestal Building, Room 3E-042, 1000 Independence Avenue
SW, Washington, DC 20585; (202) 586-2627; or Cassandra Bernstein or
Ronald (R.J.) Colwell, U.S. Department of Energy (GC-76), Office of the
Assistant General Counsel for Electricity and Fossil Energy, Forrestal
Building, Room 6D-033, 1000 Independence Ave. SW, Washington, DC 20585;
(202) 586-9793 or (202) 586-8499.
SUPPLEMENTARY INFORMATION:
Acronyms and Abbreviations. A number of acronyms and abbreviations
are used in this final rule and set forth below for reference.
AEO Annual Energy Outlook
APA Administrative Procedure Act
Bcf/d Billion Cubic Feet per Day
Bcf/yr Billion Cubic Feet per Year
CNG Compressed Natural Gas
DOE Department of Energy
EA Environmental Assessment
EIA U.S. Energy Information Administration
EIS Environmental Impact Statement
FE Office of Fossil Energy, U.S. Department of Energy
FERC Federal Energy Regulatory Commission
FTA Free Trade Agreement
ISO ISO IMO7/TVAC-ASME LNG
LNG Liquefied Natural Gas
mtpa Million Metric Tons per Annum
NEPA National Environmental Policy Act of 1969
NGA Natural Gas Act of 1938
I. Background
II. Discussion of Final Rule and Response to Comments
A. Public Interest Determination
1. General
2. Scope of Rule
3. Public Interest Standard
4. Domestic Supply of Natural Gas
5. Cumulative Impacts
6. Economic Impacts
7. Environmental Issues
8. Administrative Procedures and Judicial Review Under the
Natural Gas Act
B. Regulatory Criteria
1. Volume Limitation
2. Categorical Exclusion From NEPA
C. Other Issues
III. Regulatory Review
A. Executive Orders 12866 and 13563
B. Executive Orders 13771, 13777, and 13783
C. National Environmental Policy Act
D. Regulatory Flexibility Act
E. Paperwork Reduction Act
F. Unfunded Mandates Reform Act of 1995
G. Treasury and General Government Appropriations Act, 1999
H. Executive Order 13132
I. Executive Order 12988
J. Treasury and General Government Appropriations Act, 2001
K. Executive Order 13211
L. Congressional Notification
IV. Approval of the Office of the Secretary
I. Background
The Department of Energy is responsible for authorizing exports of
domestically produced natural gas to foreign nations pursuant to
section 3 of the NGA, 15 U.S.C. 717b. For applications to export
natural gas to non-FTA countries under NGA section 3(a), 15 U.S.C.
717b(a),\1\ DOE has consistently interpreted section 3 of the NGA as
creating a rebuttable presumption that a proposed export of natural gas
is in the public interest.\2\ Accordingly, DOE will conduct an informal
adjudication and grant a non-FTA application unless DOE finds that the
proposed exportation will not be consistent with the public
interest.\3\ Before reaching a final decision, DOE must also comply
with NEPA, 42 U.S.C. 4321 et seq.
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\1\ This final rule does not apply to exports to FTA countries
under section 3(c) of the NGA, 15 U.S.C. 717b(c). This final rule
also does not affect existing DOE authorizations or DOE's evaluation
of any non-FTA application that does not meet the criteria for
small-scale natural gas exports.
\2\ See Sierra Club v. U.S. Dep't of Energy, 867 F.3d 189, 203
(D.C. Cir. 2017) (``We have construed [NGA section 3(a)] as
containing a `general presumption favoring [export] authorization.'
'') (quoting W. Va. Pub. Serv. Comm'n v. U.S. Dep't of Energy, 681
F.2d 847, 856 (D.C. Cir. 1982)).
\3\ See id. (``there must be `an affirmative showing of
inconsistency with the public interest' to deny the application''
under NGA section 3(a)) (quoting Panhandle Producers & Royalty
Owners Ass'n v. Econ. Regulatory Admin., 822 F.2d 1105, 1111 (D.C.
Cir. 1987)).
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In this final rule, DOE revises its regulations to expedite the
application and approval process for ``small-scale'' exports of natural
gas to non-FTA countries, pursuant to section 3(a) of the NGA. This
emerging market involves exports of small volumes of natural gas from
the United States to countries primarily in, but not limited to, the
Caribbean, Central America, and South America. The small-scale export
market has developed as a solution to the practical and economic
constraints limiting large-scale natural gas exports to these
countries. In contrast to large-scale natural gas exports, small-scale
exports typically originate from existing facilities in the United
States, are transported shorter distances, and rely on a variety of
transportation modes, such as approved ISO IMO7/TVAC-ASME LNG (ISO)
containers loaded onto container ships and barges. DOE believes that
facilitating small-scale natural gas exports will allow for greater
diversity and competition in the natural gas market, consistent with
the public interest under NGA section 3(a).
For each small-scale export application submitted to DOE, DOE will
first determine if the application is complete under DOE's regulations.
If the application is complete, DOE will post the application on DOE's
website, consistent with DOE practice. This final rule establishes
that, upon receipt of any complete application to export natural gas
(including LNG) to non-FTA countries, DOE will grant the application
provided that it satisfies the following two criteria: (1) The
application proposes to export natural gas in a volume up to and
including 51.75 Bcf/yr \4\ (10 CFR 590.102(p)(1)); and (2) DOE's
approval of the application does not require an EIS or EA under NEPA
(10 CFR 590.102(p)(2))--that is, the application is eligible for a
categorical exclusion under DOE's NEPA regulations.
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\4\ In this final rule, DOE is changing the volume criterion
from a daily limitation of ``up to and including 0.14 Bcf/d,'' as
stated in the proposed rule, to an annualized limitation of ``up to
and including 51.75 Bcf/yr.'' This change does not affect the total
volume, as 0.14 Bcf/d and 51.75 Bcf/yr represent the same amount of
natural gas expressed in different terms. DOE has determined that
expressing the volume criterion in an annualized figure is both more
consistent with industry practice and more practicable for DOE's
administration of the small-scale export program.
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Any non-FTA application that satisfies these two criteria will
qualify as a ``small-scale natural gas export'' as that term is defined
under this final rule (10 CFR 590.102(p)), and will be deemed to be
consistent with the public interest under NGA section 3(a) (10 CFR
590.208(a)). DOE will issue an export authorization granting the
application on an expedited basis. Specifically, DOE will not provide
notice of each individual application nor apply other procedures
typically conducted for non-FTA export applications under DOE's
regulations, 10 CFR 590.205 and 10 CFR part 590, subpart C (10 CFR
590.303-10 CFR 590.317).
On September 1, 2017, DOE published the notice of proposed
rulemaking (NOPR or proposed rule) to revise its regulations to provide
for this expedited approval of small-scale export applications (82 FR
41570; Sept. 1, 2017). Publication of the NOPR began a 45-day public
comment period that ended on October 16, 2017. DOE received
approximately 85 unique
[[Page 35108]]
comments on the NOPR from a variety of sources, including natural gas
industry groups, environmental organizations, and individuals. The NOPR
and comments received on the NOPR can be accessed through DOE's website
at https://www.energy.gov/fe/articles/notice-proposed-rulemaking-regarding-small-scale-lng-exports.
For additional background information on this final rule, please
see the proposed rule. In the proposed rule, DOE provides information
on DOE's practice of issuing non-FTA export authorizations and the
various studies DOE has commissioned to evaluate the reasonably
foreseeable economic and environmental impacts of natural gas exports--
including those that would qualify as small-scale exports under this
final rule.
II. Discussion of Final Rule and Response to Comments
DOE has evaluated the comments received during the public comment
period. In this section, DOE discusses the relevant, significant
comments received on the proposed rule and provides DOE's responses to
those comments. Some commenters raised a variety of other concerns that
are outside the scope of the rule--including criticizing individual LNG
export projects currently in operation or pending before DOE and
questioning the scope of the Federal Energy Regulatory Commission's
(FERC) jurisdiction over certain types of LNG export facilities under
NGA section 3. DOE does not address these comments in the final rule.
A. Public Interest Determination
1. General
In issuing this final rule, DOE has determined that small-scale
natural gas exports are consistent with the public interest under NGA
section 3(a). In reaching this conclusion, DOE has considered its
obligations under NGA section 3(a), the public comments received on the
proposed rule, and a wide range of information bearing on the public
interest, including (but not limited to) information on economic
impacts, international impacts, security of domestic natural gas
supply, and environmental impacts associated with these exports (82 FR
41573-41574; Sept. 1, 2017).
Additionally, DOE has considered the 29 final non-FTA export
authorizations issued to date,\5\ as well as authoritative projections
for natural gas supply, demand, and prices set forth in the U.S. Energy
Information Administration's (EIA) Annual Energy Outlook 2017 (AEO
2017) \6\ (discussed in the proposed rule) and Annual Energy Outlook
2018 (AEO 2018).\7\ With respect to the regulatory criteria established
by this rulemaking, DOE considered industry sources in establishing the
volume limitation, as well as its obligations under NEPA in
establishing the NEPA criterion.
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\5\ As of the date of the proposed rule, DOE had issued 28 final
authorizations to export LNG or compressed natural gas (CNG) to non-
FTA countries (82 FR 41572). After the proposed rule was published,
DOE issued an additional non-FTA export authorization. See Eagle LNG
Partners Jacksonville II LLC, DOE/FE Order No. 4078, FE Docket No.
17-79-LNG, Opinion and Order Granting Long-Term, Multi-Contract
Authorization to Export Liquefied Natural Gas in ISO Containers
Loaded at the Eagle Maxville Facility in Jacksonville, Florida, and
Exported by Vessel to Free Trade Agreement and Non-Free Trade
Agreement Nations (Sept. 15, 2017). Thus, to date, DOE has issued 29
final export authorizations to non-FTA countries, bringing the
cumulative total of approved non-FTA exports of LNG and CNG to 21.35
Bcf/d of natural gas, or 7.79 trillion cubic feet per year. See id.
at 34-37.
\6\ U.S. Energy Info. Admin., Annual Energy Outlook 2017 (Jan.
2017), available at: https://www.eia.gov/outlooks/archive/aeo17/.
\7\ U.S. Energy Info. Admin., Annual Energy Outlook 2018 (Feb.
2018), available at: http://www.eia.gov/outlooks/aeo.
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In sum, DOE has thoroughly analyzed the many factors affecting the
export of U.S. natural gas, as well as the unique characteristics and
minimal adverse impacts of the emerging small-scale natural gas market.
On this basis (and as discussed in the proposed rule), DOE has
determined that the final rule is in accordance with section 3 of the
NGA, DOE's interpretation of the public interest standard set forth in
NGA section 3(a), and DOE's long-standing policy of minimizing federal
control and involvement in energy markets and promoting a balanced and
mixed energy resource system. Based on this evidence, 10 CFR 590.208 of
the final rule establishes that small-scale natural gas exports, as
defined in 10 CFR 590.102(p), are deemed to be consistent with the
public interest under NGA section 3(a).
Many commenters expressed overall support for DOE's authorization
of LNG exports and, specifically, for DOE's efforts to expedite the
approval of applications for small-scale natural gas exports to non-FTA
countries. Several commenters agreed that small-scale natural gas
exports are an important emerging market that DOE should facilitate
through a streamlined approval process for qualifying applicants. They
commented that small-scale exports will provide a variety of benefits
both to the United States and to the anticipated importing countries
primarily located in the Caribbean, Central America, and South America.
Benefits identified for the United States include stimulating the
natural gas market, generating economic growth, strengthening the
global natural gas market, and enhancing U.S. national security
interests abroad. Benefits identified for the importing countries
include expanding natural gas markets and providing access to cleaner
and more reliable sources of energy. Commenters also expressed support
for DOE's regulatory definition of ``small-scale natural gas export,''
such that qualifying applications are deemed consistent with the public
interest; as well as DOE's efforts to reduce regulatory burdens for
these applicants. DOE generally agrees with these comments and
recognizes the variety of important benefits that are expected to occur
under the final rule.
2. Scope of Rule
Some commenters remarked that this rulemaking is an important step,
yet encouraged DOE to liberalize all natural gas exports--not just
qualifying small-scale natural gas exports--to ensure that the benefits
of natural gas exports can be fully realized.
Based on findings from The Macroeconomic Impact of Increasing U.S.
LNG Exports (2015 LNG Export Study),\8\ DOE agrees that higher natural
gas exports are associated with marginally higher macroeconomic
benefits to the United States (82 FR 41572).\9\ This rulemaking focuses
only on small-scale natural gas exports to non-FTA countries, in light
of the unique characteristics and minimal adverse impacts associated
with that market. Insofar as the commenters are suggesting that DOE
undertake additional deregulatory efforts under NGA section 3(a), DOE
welcomes suggestions, data, and information on this topic through its
regulatory reform email inbox at [email protected].
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\8\ Center for Energy Studies at Rice University Baker Institute
and Oxford Economics, The Macroeconomic Impact of Increasing U.S.
LNG Exports (Oct. 29, 2015), available at: http://energy.gov/sites/prod/files/2015/12/f27/20151113_macro_impact_of_lng_exports_0.pdf
[hereinafter 2015 LNG Export Study].
\9\ On June 12, 2018, DOE published a notice of availability of
the 2018 LNG Export Study and request for comments. See U.S. Dep't
of Energy, Study on Macroeconomic Outcomes of LNG Exports, 83 FR
27314 (June 12, 2018).
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3. Public Interest Standard
Several commenters disagreed with various aspects of DOE's public
interest analysis generally. For example, some commenters disagreed
with DOE's position that NGA section 3(a) creates a
[[Page 35109]]
rebuttable presumption that natural gas exports are consistent with the
public interest. Some stated that Congress, not DOE, must define
``public interest'' under section 3(a), whereas other commenters
criticized DOE for not providing a regulatory definition of the public
interest. Another commenter suggested that applications to export
natural gas should be subjected to the same standard, regardless of
whether the natural gas is being exported to FTA or non-FTA countries.
As an initial matter, section 3 of the NGA (as amended by section
201 of the Energy Policy Act of 1992 (Pub. L. 102-486)) distinguishes
between exports to non-FTA countries under section 3(a) and FTA
countries under section 3(c).\10\ These provisions establish different
standards of review for proposed exports to FTA and non-FTA countries,
and DOE has comported with the appropriate standard of review for the
future non-FTA exports at issue in this rulemaking.\11\
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\10\ See supra note 1.
\11\ See id.
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In every non-FTA authorization to date,\12\ as well as in the
proposed rule (82 FR 41571-41572; Sept. 1, 2017), DOE has explained its
interpretation of the public interest analysis under NGA section 3(a).
The commenters' concerns reflect a lack of familiarity with both the
statute and DOE's long-standing practice in evaluating non-FTA
applications--a practice that was upheld by the U.S. Court of Appeals
for the District of Columbia Circuit in a series of cases decided in
2017.\13\ Indeed, the D.C. Circuit has consistently affirmed DOE's
interpretation that NGA section 3(a) creates a rebuttable presumption
favoring authorization of applications to import or export natural
gas.\14\
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\12\ See, e.g., Eagle LNG Partners Jacksonville II LLC, DOE/FE
Order No. 4078, at 8-10, supra note 5.
\13\ See Sierra Club v. U.S. Dep't of Energy, 867 F.3d 189 (D.C.
Cir. 2017) (denying petition for review challenging non-FTA export
authorization); Sierra Club v. U.S. Dep't of Energy, Nos. 16-1186,
16-1252, 16-1253, 703 Fed. Appx. 1 (D.C. Cir. Nov. 1, 2017) (denying
petitions for review challenging three non-FTA export
authorizations).
\14\ See Sierra Club, 867 F.3d at 203; see also, e.g., W. Va.
Pub. Serv. Comm'n v. U.S. Dep't of Energy, 681 F.2d 847 (D.C. Cir.
1982); Panhandle Producers and Royalty Owners Ass'n v. Economic
Regulatory Admin., 822 F.2d 1105 (D.C. Cir. 1987); Panhandle
Producers and Royalty Owners Ass'n v. Economic Regulatory Admin.,
847 F.2d 1168 (1988).
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Although section 3(a) establishes a broad public interest standard
and a presumption favoring export authorizations, Congress has not
defined the phrase ``public interest'' or identified specific criteria
that must be considered in issuing a non-FTA authorization under that
statute. As a result, DOE has identified a range of factors, described
above, that it considers when determining whether a proposed export of
natural gas is consistent with the public interest. The D.C. Circuit
has upheld DOE's non-FTA export authorizations granted on the basis of
this public interest evaluation.\15\
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\15\ See supra note 13.
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In this rulemaking, DOE has followed its established approach in
interpreting NGA section 3(a) to determine that qualifying small-scale
natural gas exports are consistent with the public interest after
considering all relevant factors (82 FR 41573). There is nothing
fundamentally unique about small-scale exports that would alter DOE's
analysis of the public interest in this context.
4. Domestic Supply of Natural Gas
Numerous commenters disagreed as to whether the United States has
sufficient natural gas supplies to support the expedited approval of
small-scale exports under this rule. Some commenters asserted that the
United States has sufficient natural gas supplies to meet both
increased natural gas exports and increased domestic natural gas
demand, as DOE set forth in the proposed rule (82 FR 41573-41574).
Other commenters asserted that the United States does not have
sufficient natural gas supplies to meet current demand, much less
increased demand associated with this rulemaking. One commenter, for
example, argued that approvals for natural gas exports to FTA and non-
FTA countries combined already exceed 71% of domestic demand, thereby
calling into question the sufficiency of U.S. natural gas supplies.
First, DOE notes that the volumes authorized for export to FTA and
non-FTA countries are not additive to one another. The 71% figure cited
by the commenter for ``combined LNG exports'' fails to acknowledge this
fact, which is reflected in DOE's orders. Rather, each authorization
grants authority to export the entire volume of a facility to FTA or
non-FTA countries, respectively, to provide the authorization holder
with maximal flexibility in determining its export destinations.
Next, to date DOE has issued 29 final non-FTA authorizations in a
cumulative volume of exports totaling 21.35 Bcf/d of natural gas.\16\
By comparison, approximately 3.5 Bcf/d of capacity has been built and
is being utilized, and approximately 7.5 Bcf/d of additional capacity
is under construction.\17\ Industry outlooks, including Reference cases
in the last several years of EIA's Annual Energy Outlook, do not
foresee long-term LNG exports from the United States exceeding the
volume currently authorized for export from non-FTA countries.
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\16\ See Eagle LNG Partners Jacksonville II LLC, DOE/FE Order
No. 4078, at 34-37, supra note 5.
\17\ See, e.g., U.S. Energy Info. Admin., Existing and Under
Construction Large Scale U.S. Liquefaction Facilities (June 18,
2018), available at: https://www.eia.gov/naturalgas/U.S.liquefactioncapacity.xlsx (also see Contents tab); Cheniere
Energy, Inc., ``Cheniere Makes Positive Final Investment Decision on
Train 3 at the Corpus Christi Liquefaction Project'' (May 22, 2018),
available at: http://phx.corporate-ir.net/phoenix.zhtml?c=101667&p=irol-newsArticle&ID=2350302.
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By DOE's standard measures of supply, there are adequate natural
gas resources to meet demand associated with the final rule. EIA's most
recent natural gas estimates of future production, price, and other
domestic industry fundamentals set forth in AEO 2017 and AEO 2018
support this conclusion. For example, the AEO 2017 Reference case
projection of lower-48 states dry natural gas production in 2035
increased significantly (by 27.9 Bcf/d) as compared with AEO 2011,
while the AEO 2018 Reference case projection of that figure was higher
still, an increase of 33.8 Bcf/d over AEO 2011. Projections of domestic
natural gas consumption in 2035 also increased in both AEO 2017 and AEO
2018, as compared to AEO 2011 (by 11.3 Bcf/d in AEO 2017 and by 13.3
Bcf/d in AEO 2018). Even with higher production and consumption, the
2035 projected natural gas market price in the Reference case declined
from $8.04/MMBtu (2017$) in AEO 2011 to $5.20/MMBtu (2017$) in AEO 2017
and to $4.26/MMBtu (2017$) in AEO 2018. The implication of the latest
EIA projections in AEO 2017 and AEO 2018 is that a significantly
greater quantity of natural gas is projected to be available at a lower
cost than was estimated seven years ago.
[[Page 35110]]
Proved reserves of natural gas--i.e., volumes of oil and natural
gas that geologic and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs--also
have been increasing. From 2000 to 2015, proved reserves have increased
73% to 307,730 Bcf, while production has increased only 41% during the
same period, demonstrating the growing supply of natural gas available
under existing economic and operating conditions.\18\
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\18\ U.S. Energy Info. Admin., U.S. Dry Natural Gas Proved
Reserves (Feb. 12, 2018), available at: http://www.eia.gov/dnav/ng/ng_enr_dry_dcu_nus_a.htm; U.S. Energy Info. Admin., U.S. Dry Natural
Gas Production (Feb. 12, 2018), available at: https://www.eia.gov/dnav/ng/hist/n9070us2a.htm (additional calculations conducted to
produce percentage change and R/P ratios).
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EIA's estimates of technically recoverable reserves point to the
availability of domestic natural gas for decades to come. These
reserves are resources in accumulations (both proved and unproved) that
are producible using current recovery technology but without reference
to economic profitability. EIA's estimates of lower-48 natural gas
technically recoverable reserves total 1,796 Tcf in AEO 2017.\19\
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\19\ See U.S. Energy Info. Admin., Assumptions to the Annual
Energy Outlook 2017 (July 2017), Table 9.2. Technically recoverable
U.S. dry natural gas resources as of January 1, 2015, at 133,
available at: https://www.eia.gov/outlooks/aeo/assumptions/pdf/oilgas.pdf (2017).pdf, and Assumptions to the Annual Energy Outlook
2010 (Apr. 2010), Table 9.2. Technically recoverable U.S. natural
gas resources as of January 1, 2008, at 111, available at: http://www.eia.gov/oiaf/aeo/assumption/pdf/0554(2010).pdf.
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Next, the 2014 and 2015 Studies concluded that, for the period of
the analysis (through 2040), the United States is projected to have
ample supplies of natural gas resources that can meet domestic needs
for natural gas and the LNG export market. Further, most projections of
domestic natural gas resources extend beyond 20 to 40 years. Although
not all technically recoverable resources are currently economical to
produce, it is instructive to note that EIA's recent estimate of
technically recoverable resources as of January 1, 2015, equates to
nearly 66 years of natural gas supply at the 2015 domestic consumption
level of 27.24 Tcf.\20\
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\20\ See U.S. Energy Info. Admin., Natural Gas Consumption by
End Use (Feb. 12, 2018), available at: http://www.eia.gov/dnav/ng/ng_cons_sum_dcu_nus_a.htm.
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Based upon this record evidence and the discussion in the proposed
rule, DOE finds that the small-scale exports will not adversely affect
the availability of natural gas supplies to domestic consumers, such as
would negate the net economic benefits to the United States.
5. Cumulative Impacts
Several commenters asserted that DOE must account for cumulative
impacts in various ways as part of its public interest determination
for this final rule. Some commenters urged DOE to provide a ``cap'' or
other language in the final rule to halt automatic approval of small-
scale exports if the cumulative volume of exports exceeds the scope of
existing cumulative impact analyses (which the commenters acknowledge
is 28 Bcf/d of exports based on the 2015 LNG Export Study, 82 FR
41572), or if other circumstances arise that would render these exports
inconsistent with the public interest. Commenters suggested, for
example, that DOE should cease approval of small-scale export
applications if the United States loses its competitive price advantage
in exporting LNG, or if exporting natural gas above a certain volume
would have negative economic impacts or threaten the security of
domestic natural gas supplies. Other commenters expressed concern that
U.S. natural gas production could not meet ``unlimited'' LNG exports as
might occur under the proposed rule, and therefore urged DOE to
implement a ``safety net'' in the rule allowing DOE to halt approvals
of small-scale applications.
DOE declines to adopt a mechanism in the final rule that would
automatically halt approvals of small-scale applications if the
cumulative volume of approvals exceeds the scope of DOE's cumulative
impact analyses to date. The 2015 Study considered export volumes
ranging from 12 to 20 Bcf/d of natural gas, as well as a high resource
recovery case examining export volumes up to 28 Bcf/d of natural gas.
By comparison, to date DOE has issued final non-FTA authorizations in a
cumulative volume of exports totaling 21.35 Bcf/d of natural gas \21\--
well below the 28 Bcf/d case considered in the 2015 Study. DOE already
assesses the cumulative impacts of each succeeding request for export
authorization on the public interest with due regard to the effect on
domestic natural gas supply and demand fundamentals. DOE will continue
to do so for non-small-scale export applications (i.e., applications
requesting an export volume greater than 51.75 Bcf/yr), which
constitute both 99% of the non-FTA LNG export volumes authorized to
date and 99% of the LNG export volumes requested in non-FTA
applications currently pending before DOE.\22\
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\21\ See Eagle LNG Partners Jacksonville II LLC, DOE/FE Order
No. 4078, at 34-37, supra note 5.
\22\ U.S. Dep't of Energy, Office of Fossil Energy, Summary of
LNG Export Applications of the Lower 48 States Annual Energy Outlook
2017 (Feb. 14, 2018), available at: https://energy.gov/fe/downloads/summary-lng-export-applications-lower-48-states.
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For this final rule, DOE has determined that domestic supplies of
natural gas will be adequate to supply small-scale exports of natural
gas while meeting domestic demand. In so doing, DOE considered the
economic impacts of higher natural gas prices, potential increases in
natural gas price volatility, and the security of domestic natural gas
supplies, among other factors. DOE also explained that the prospect of
``unlimited'' exports of U.S. natural gas is not realistic, as
discussed in the 2015 LNG Export Study.\23\ The authors of the 2015
Study had to include several assumptions about the global natural gas
market for U.S. LNG exports to exceed 12 Bcf/d, and include far less
likely assumptions to reach the high resource recovery case of 28 Bcf/d
of exports. Further, as DOE has observed in prior orders, receiving a
non-FTA authorization from DOE does not guarantee that a particular
facility will be financed and built; nor does it guarantee that, if
built, market conditions would continue to favor exports once the
facility is operational.\24\ For more information on DOE's LNG export
studies and DOE's conclusions regarding these public interest factors,
please see the proposed rule (82 FR 41571-41574; Sept. 1, 2017).
---------------------------------------------------------------------------
\23\ The 2015 LNG Export Study included scenarios in which LNG
exports were unconstrained. These scenarios indicated that, should
the U.S. resource base be less robust and more expensive than
anticipated, U.S. LNG exports would be less competitive in the world
market, thereby resulting in lower export levels from the United
States. Further, in all of the unconstrained scenarios, the supply
and price response to LNG exports did not negate the net economic
benefit to the economy from the exports.
\24\ See, e.g., Golden Pass Products LLC, DOE/FE Order No. 3978,
FE Docket No. 12-156-LNG, Opinion and Order Granting Long-Term,
Multi-Contract Authorization to Export Liquefied Natural Gas by
Vessel from the Golden Pass LNG Terminal Located in Jefferson
County, Texas, to Non-Free Trade Agreement, at 148 (Apr. 25, 2017).
---------------------------------------------------------------------------
As to the commenter's concern that the global natural gas market
for U.S. LNG exports could change in the future, DOE notes that the
2015 LNG Export Study included several assumptions about the global
market for the time period covering 2015 to 2040. Nonetheless, DOE's
long-standing policy is to minimize federal control and involvement in
energy markets (82 FR 41571, 41574), such that even a change in the
competitive status of U.S. LNG globally would not affect DOE's
[[Page 35111]]
approval of small-scale natural gas exports as set forth in this final
rule.
Next, commenters stated that the proposed rule is deficient because
DOE has neither: (i) Attempted to predict the potential cumulative size
of the U.S. small-scale export market, nor (ii) identified the
potential LNG demand in the importing Caribbean, Central American, and
South American countries that are the target of this rule.
DOE explained in the proposed rule that foreign demand for imports
of U.S. natural gas has increased as many countries, such as those in
the Caribbean, Central America, and South America, seek to import
cleaner sources of energy. Based on the record evidence and the small
volumes at issue in this rulemaking, DOE has determined that domestic
supplies of natural gas will be adequate both to meet domestic needs
and to supply small-scale exports of natural gas (82 FR 41572-41574).
We therefore disagree with the comment that DOE was required to
consider projections of the potential cumulative size of the U.S.
small-scale market and/or the market demand of the importing regions
among the many factors evaluated as part of its public interest
determination.
6. Economic Impacts
Several commenters agreed with DOE's position that small-scale
natural gas exports will not lead to a detectable impact on domestic
natural gas prices (82 FR 41574), whereas other commenters disputed
this position. The dissenting commenters expressed concern that this
rulemaking will increase exports of U.S. natural gas (including LNG),
leading to increases in natural gas prices. They further argued that
even very small increases in natural gas prices are likely to lead to
the loss of employment in energy-intensive industries. In sum, they
asserted that, if there are any economic or job-creation impacts
associated with this final rule, these impacts are likely to be
negative.
First, as discussed in the proposed rule, the 2014 and 2015 LNG
Export Studies \25\ projected the economic impacts of LNG exports in a
range of scenarios, including scenarios that exceeded the current
amount of LNG exports authorized in the final non-FTA export
authorizations to date. The 2015 LNG Export Study concluded that LNG
exports at these levels (in excess of 12 Bcf/d of natural gas) would
result in higher U.S. natural gas prices, but that these price changes
would remain in a relatively narrow range across the scenarios studied.
However, even with these estimated price increases, the 2015 LNG Export
Study found that the United States would experience net economic
benefits from increased LNG exports in all cases studied.\26\
---------------------------------------------------------------------------
\25\ U.S. Energy Info. Admin., Effect of Increased Levels of
Liquefied Natural Gas Exports on U.S. Energy Markets (Oct. 2014),
available at: https://www.eia.gov/analysis/requests/fe/pdf/lng.pdf
[hereinafter 2014 LNG Export Study]; 2015 LNG Export Study, supra
note 8; see also 82 FR 41571-41572 (Sept. 1, 2017).
\26\ See 2015 LNG Export Study, supra note 8, at 82.
---------------------------------------------------------------------------
Next, for the proposed rule, DOE reviewed EIA's AEO 2017. The
Reference case of this projection includes the effects of the Clean
Power Plan (CPP) final rule,\27\ which was intended to reduce carbon
emissions from the power sector. DOE assessed AEO 2017 to evaluate any
differences from AEO 2014, which formed the basis for the 2014 LNG
Export Study.\28\ Comparing key results from 2040 (the end of the
projection period in Reference case projections from AEO 2014) shows
that the latest Reference case Outlook foresees lower-48 market
conditions that would be even more supportive of LNG exports, including
higher production and demand coupled with notably lower prices. Results
from EIA's AEO 2017 no-CPP case, which is the same as the Reference
case but does not include the CPP, are also more supportive of LNG
exports on the basis of higher production with lower prices relative to
AEO 2014.
---------------------------------------------------------------------------
\27\ U.S. Envtl. Prot. Agency, Carbon Pollution Emission
Guidelines for Existing Stationary Sources: Electric Utility
Generating Units; Final Rule, 80 FR 64662 (Oct. 23, 2015). On
February 9, 2016, the U.S. Supreme Court issued a stay of the
effectiveness of the CPP final rule pending review by the U.S. Court
of Appeals for the District of Columbia Circuit in consolidated
cases challenging the rule. See Chamber of Commerce, et al. v. EPA,
et al., No. 15A787, Order in Pending Case (U.S. Feb. 9, 2016). The
litigation over the CPP final rule pending in the D.C. Circuit has
been held in abeyance as the U.S. Environmental Protection Agency
(EPA) reviews the rule. See West Virginia, et al. v. EPA, et al.,
Case Nos. 15-1363 et al., EPA Status Report, at 3 (D.C. Cir. June 1,
2018). On October 10, 2017, EPA issued a notice proposing to repeal
the CPP final rule. U.S. Envtl. Prot. Agency, Repeal of Carbon
Pollution Emission Guidelines for Existing Stationary Sources:
Electric Utility Generating Units; Proposed Rule, 82 FR 48035 (Oct.
16, 2017). That rulemaking is on-going, and EPA has asked for the
consolidated cases to remain in abeyance pending the conclusion of
the rulemaking. See EPA Status Report at 4-5.
\28\ See 2014 LNG Export Study, supra note 25 (discussed in the
proposed rule at 82 FR 41571-41572; Sept. 1, 2017).
---------------------------------------------------------------------------
For the year 2040, the AEO 2017 Reference case anticipates 3% more
natural gas production in the lower-48 than AEO 2014. It also projects
an average Henry Hub natural gas price that is lower than AEO 2014 by
38% in 2017$. In the AEO 2017 no-CPP case, for the year 2040, lower-48
production is 2% higher than in AEO 2014, with the price differential
being approximately the same. Both higher production and lower prices
in both AEO 2017 cases illustrate a market environment supportive of
LNG exports.
On February 6, 2018, EIA issued AEO 2018. For this final rule, DOE
has considered AEO 2018 to determine whether EIA's most recent
projections present any material difference in terms of price impacts.
AEO 2018, which does not include the CPP in its Reference case, is even
more supportive of exports than AEO 2017 and AEO 2014, showing Henry
Hub prices of $4.50 in 2040, which is 46% lower than AEO 2014 and 13%
lower than AEO 2017 in 2017$. Production levels are also increased in
2040 in AEO 2018 over AEO 2014 and AEO 2017--with AEO 2018 showing
lower-48 dry production at 109.1 Bcf/d over lower-48 production levels
of 99.7 and 102.5 in AEO 2014 and 2017, respectively, as shown in the
table below.
----------------------------------------------------------------------------------------------------------------
AEO 2017
AEO 2014 AEO 2017 reference case AEO 2018
reference case reference case without clean reference case
power plan
----------------------------------------------------------------------------------------------------------------
Henry Hub Prices in 2040 (in 2017$)............. $8.27 $5.18 $5.01 $4.50
Lower-48 Production (Bcf/d) in 2040............. 99.7 102.5 101.6 109.1
----------------------------------------------------------------------------------------------------------------
In sum, the conclusion of the 2015 LNG Export Study is that the
United States will experience net economic benefits from issuance of
authorizations to export domestically produced LNG. The 2015 LNG Export
Study projected that an increase in U.S. natural gas exports will
generate small declines in output at the margin for some energy-
[[Page 35112]]
intensive, trade-exposed industries, but that negative impacts in
energy-intensive sectors will be offset by positive impacts (82 FR
41572; Sept 1, 2017).
DOE has reviewed both the evidence in the record and relevant
precedent, and has not found evidence to support the commenters' claims
of negative economic impact. Nor have those commenters presented
sufficient evidence to support their assertions of economic harm.\29\
On this basis, DOE concludes that small-scale natural gas exports are
expected to generate positive economic benefits in the United States
through direct and indirect job creation, increased economic activity,
tax revenues, and improved U.S. balance of trade.
---------------------------------------------------------------------------
\29\ Some commenters criticized the LNG export studies
commissioned by DOE and cited in the proposed rule (82 FR 41571-
41572; Sept. 1, 2017), including the 2014 and 2015 LNG Export
Studies. They argued, for example, that these macroeconomic studies
are flawed in various respects and have been refuted by peer-
reviewed evidence. DOE notes, however, that each of those studies
was published in the Federal Register. DOE received comments on each
study--including on their models, assumptions, and design--and
responded to the comments in other proceedings. Based upon the
record evidence, DOE determined that these studies are fundamentally
sound. See, e.g., Eagle LNG Partners Jacksonville II LLC, DOE/FE
Order No. 4078, at 27-28, supra note 5. Accordingly, criticisms of
DOE's macroeconomic studies are outside the scope of this
rulemaking.
---------------------------------------------------------------------------
7. Environmental Issues
In reviewing the potential environmental impacts of the proposed
rulemaking, DOE has considered both its obligations under NEPA
(discussed in Section II.B.2) and its obligation under NGA section 3(a)
to ensure that the proposal is not inconsistent with the public
interest.
In the context of NGA section 3(a), several commenters contended
that this rulemaking is inconsistent with the public interest on
environmental grounds. According to these commenters, expediting the
approval of small-scale natural gas exports will lead to increased
natural gas production and transmission which, in turn, will result in
negative environmental impacts. They cite, for example, the possibility
of accelerated climate change and increased greenhouse gas emissions,
both in the United States and in the importing countries, as a result
of these increased small-scale exports. These commenters contend that,
rather than facilitating small-scale exports, DOE should closely
scrutinize or ban natural gas exports to non-FTA countries altogether.
As discussed in Section II.B.2 and in the proposed rule, qualifying
applications for small-scale exports must not require an environmental
impact statement (EIS) or an environmental assessment (EA) under NEPA.
That is, the application must be eligible for a categorical exclusion.
Further, DOE has determined--and the D.C. Circuit has agreed \30\--that
NEPA does not require consideration of induced ``upstream'' natural gas
production related to increased natural gas production, contrary to the
commenters' assertions.
---------------------------------------------------------------------------
\30\ See Sierra Club v. U.S. Dep't of Energy, 867 F.3d 189, 201-
02 (D.C. Cir. 2017).
---------------------------------------------------------------------------
Specifically, DOE determined that the current rapid development of
natural gas resources in the United States will continue, with or
without the export of natural gas to non-FTA nations. DOE also found
that fundamental uncertainties constrain its ability to foresee and
analyze with any particularity the incremental natural gas production
that may be induced by permitting exports of LNG (or CNG) to non-FTA
countries--whether from unconventional shale gas formations or
otherwise. Nevertheless, a decision by DOE to authorize exports to non-
FTA countries--including the small-scale exports at issue here--could
accelerate that development by some increment.
For these reasons, and because DOE previously had received comments
regarding the potential environmental impacts associated with
unconventional production, DOE produced a document in 2014 entitled
Addendum to Environmental Review Documents Concerning Exports of
Natural Gas from the United States (Addendum), and made it available
for public comment.\31\ The Addendum takes a broad look at
unconventional natural gas production in the United States, with
chapters covering water resources (including water quantity and
quality), air quality, greenhouse gas emissions, induced seismicity,
and land use.
---------------------------------------------------------------------------
\31\ U.S. Dep't of Energy, Addendum to Environmental Review
Documents Concerning Exports of Natural Gas From the United States,
79 FR 48132 (Aug. 15, 2014), available at: http://energy.gov/fe/addendum-environmental-review-documents-concerning-exports-natural-gas-united-states [hereinafter Addendum]. DOE takes administrative
notice of the Addendum in this proceeding.
---------------------------------------------------------------------------
The Addendum shows that there are potential environmental issues
associated with unconventional natural gas production as a whole that
need to be carefully managed, especially with respect to emissions of
volatile organic compounds and methane, and the potential for
groundwater contamination. These environmental concerns do not lead DOE
to conclude, however, that the proposed small-scale exports of natural
gas are not in the public interest and/or should be prohibited. Rather,
DOE believes the public interest is better served by addressing these
concerns directly--through federal, state, or local regulation, or
through self-imposed industry guidelines where appropriate--rather than
by prohibiting exports of natural gas. Unlike DOE, environmental
regulators have the legal authority to impose requirements on natural
gas production that appropriately balance benefits and burdens, and to
update these regulations from time to time as technological practices
and scientific understanding evolve. Declining to approve (or to
expedite) small-scale natural gas exports would cause the United States
to forego the economic and international benefits discussed herein, but
would have little more than a small, incremental impact on the
environmental issues identified by these commenters. This is
particularly true because--as the Addendum illustrates--DOE is unable
to predict at a local level where any additional natural gas production
would occur and in what quantity to support the small-scale
exports.\32\ For these reasons, we conclude that the environmental
concerns associated with natural gas production do not establish that
the small-scale exports at issue in this rulemaking are inconsistent
with the public interest. We also note that DOE's legal analysis in
this regard has been upheld by the D.C. Circuit in the context of four
different non-FTA authorizations together approving far more
significant volumes of U.S. LNG for export.\33\
---------------------------------------------------------------------------
\32\ See, e.g., Golden Pass Products LLC, DOE/FE Order No. 3978,
supra note 24, at 147-49.
\33\ See Sierra Club, 867 F.3d at 198-200 (upholding DOE's
conclusion that, inter alia, there was not sufficiently specific
information to identify where incremental natural gas production
would occur at the local level); Sierra Club v. U.S. Dep't of
Energy, Nos. 16-1186, 16-1252, 16-1253, 703 Fed. Appx. 1, *2 (D.C.
Cir. Nov. 1, 2017) (same).
---------------------------------------------------------------------------
Next, one commenter questioned whether small-scale exports will, in
fact, facilitate the transition of importing countries away from the
use of diesel and fuel oil, and argued that DOE has not provided
sufficient evidence of this displacement to justify the final rule. We
emphasize that foreign demand for U.S. natural gas has increased as
countries in the Caribbean, Central America, and South America seek to
import cleaner sources of energy. DOE further observes that many of
these countries are currently dependent on diesel and/or fuel oil for
their generation needs. These energy needs are challenging from both a
cost- and emissions-perspective. By importing
[[Page 35113]]
LNG from the United States, these countries will have access to a more
reliable, cost-effective supply of energy that also has emissions
benefits over current energy sources. Small-scale natural gas exports
will fulfill an important need for natural gas in importing countries
that often lack the customer demand, waterway infrastructure, and
transmission infrastructure necessary to handle large quantities of
natural gas and large LNG carriers.
Additionally, increased diversity of fuel supplies and sources used
for generating electricity are expected to make these importing
countries more, not less, resilient against energy outages after
hurricanes, earthquakes, and other natural disasters. At the same time,
the United States will facilitate stronger relationships with these
importing countries, while promoting U.S. leadership in the global
energy market. In sum, the commenter's argument as to DOE's lack of
``evidence'' of this expected transition to U.S. natural gas
misconceives DOE's public interest analysis and seeks to impose a
burden of proof where none exists, although DOE anticipates numerous
environmental benefits to the importing countries from this rulemaking.
Finally, some commenters argued that DOE should be focused on
encouraging renewable sources of energy, rather than facilitating
exports of natural gas through this rulemaking. They asserted that
renewable sources of energy are more environmentally friendly than
natural gas, whereas (in their view) the proposed exports of natural
gas are not in the public interest. DOE notes, however, that imports of
U.S. LNG can work in concert with the development of renewable
generation in importing countries. Imported natural gas can provide
reliable standby energy supply available immediately, while renewable
development is occurring. Imported LNG also can provide continued
reliability to enhance solar or other renewable sources once they are
developed. For these reasons, small-scale natural gas exports approved
under this rule may provide indirect benefits to the use of renewable
energy in importing countries.
8. Administrative Procedures and Judicial Review Under the Natural Gas
Act
Some commenters argued that DOE cannot, in interpreting the phrase
``in the public interest'' in NGA section 3(a), remove public notice
and comment procedures for individual small-scale export applications.
According to these commenters, the phrase ``opportunity for hearing''
in NGA section 3(a) means that members of the public must be afforded
the opportunity to present evidence to DOE regarding each non-FTA
export application on a case-by-case basis. These commenters expressed
concern that the proposed rule would frustrate the design of the NGA by
eliminating the opportunity for public comment on individual small-
scale applications.
Some commenters also asserted that the final rule is inconsistent
with the NGA's judicial review provisions set forth in NGA section 19
(15 U.S.C. 717r) and the implementing regulation (10 CFR 590.501(a)).
They argued that these judicial review provisions are available only to
a ``party'' to a proceeding, yet under the proposed rule, there would
be no clear way for a member of the public to intervene in an
individual small-scale application proceeding and become a party to
that proceeding. In their view, absent the availability of this remedy,
judicial review would be provided by the Administrative Procedure Act
(APA) (5 U.S.C. 704) and thus lie in the district courts--creating
tension with the NGA's intent to provide for direct review in the
federal courts of appeals under NGA section 19(b).
As to the administrative concerns, we note that under NGA section
3(a), the Secretary of Energy ``shall'' issue an order upon application
unless, after ``opportunity for hearing,'' DOE finds that the proposed
export will not be consistent with the public interest.\34\ Section
3(a) does not require adjudication of applications to be determined
``on the record after opportunity for a hearing'' under the APA.\35\
That type of statutory language imposes the need for a formal
adjudication under the APA. Section 3(a) also does not require the
individual adjudication of each application. The statutory language in
NGA section 3(a)--``opportunity for hearing''--allows DOE to conduct an
informal (rather than a formal) adjudication and affords DOE broad
discretion to determine that the notice and public comment period on
the proposed rule constitutes the notice and opportunity for comment on
all prospective small-scale natural gas export applications. In this
proceeding, DOE sought public comment on the proposed rule for a 45-day
period and received comments from a variety of stakeholders and
interested persons. DOE has reviewed the comments and taken them into
consideration in this final rule. Therefore, DOE disagrees that
expediting the review and approval process for qualifying small-scale
natural gas applications under 10 CFR 590.208(a) would frustrate the
design of NGA section 3(a). Rather, DOE believes it is has provided
sufficient process under the APA to determine that all prospective
small-scale natural gas export applications--if meeting the qualifying
criteria--are in the public interest.
---------------------------------------------------------------------------
\34\ 15 U.S.C. 717b(a).
\35\ 5 U.S.C. 554.
---------------------------------------------------------------------------
As to the judicial review comments, to the extent that small-scale
export authorizations are reviewable, NGA section 19(b) vests exclusive
jurisdiction in the appropriate federal court of appeals.\36\ A federal
district court thus would lack jurisdiction over the dispute.\37\
---------------------------------------------------------------------------
\36\ NGA section 19(b) states that ``[a]ny party to a proceeding
under this chapter aggrieved by an order issued by the Commission in
such proceeding may obtain a review of such order in the court of
appeals of the United States for any circuit wherein the natural-gas
company to which the order relates is located or has its principal
place of business, or in the United States Court of Appeals for the
District of Columbia . . . . [S]uch court shall have jurisdiction,
which upon the filing of the record with it shall be exclusive, to
affirm, modify, or set aside such order in whole or in part.'' 15
U.S.C. 717r(b).
\37\ See, e.g., Sierra Club, 867 F.3d at 202 (citing 15 U.S.C.
717r(b)).
---------------------------------------------------------------------------
B. Regulatory Criteria
In the final rule, DOE establishes a regulatory definition for
``small-scale natural gas export,'' to be codified at 10 CFR
590.102(p). Under this provision, a small-scale natural gas export is
any export of natural gas to non-FTA nations, provided that the
application for the export authority satisfies both the volume and NEPA
criteria identified in 10 CFR 590.102(p)(1) and (2).
1. Volume Limitation
10 CFR 590.102(p)(1) establishes the volume limitation for small-
scale natural gas exports. Under this criterion, a qualifying
application must propose to export natural gas in a volume up to and
including 51.75 Bcf/yr--an annualized figure that corresponds to the
0.14 Bcf/d volume criterion proposed by DOE. In the proposed rule, DOE
stated that this volume criterion is consistent with industry practice
for the emerging small-scale export market, but invited comment on any
other appropriate volume limitation (82 FR 41573; Sept. 1, 2017).
Some commenters generally disagreed with this volume criterion,
asserting that exports up to and including 0.14 Bcf/d (51.75 Bcf/yr)
are substantial and cannot reasonably be considered ``small scale.''
These commenters, however, neither presented evidence supporting their
claims in the context of small-scale natural gas exports nor suggested
a
[[Page 35114]]
different volume limitation they believe to be more appropriate. As
explained in the proposed rule, DOE based the volume criterion on
industry standards that define ``small-scale LNG'' as 1.0 million
metric tons per annum (mtpa) or lower (82 FR 41573 note 21). Using
DOE's conversion factor to convert mtpa of LNG to Bcf of natural gas
(82 FR 41573), this amount equates to a volume of 0.14 Bcf/d, or 51.75
Bcf/yr, of natural gas. On this basis, DOE believes that it is
reasonable to define small-scale natural gas exports as any export of
natural gas up to and including a volume of 51.75 Bcf/yr.
One commenter expressed concern that the volume criterion is too
large for a single project. This commenter pointed out that, of DOE's
seven non-FTA export authorizations identified in the proposed rule as
falling under this volume threshold (82 FR 41572), the volumes
authorized in those orders were, in fact, smaller than 0.14 Bcf/d even
if all of the volumes are combined. Specifically, the commenter states
that the proposed volume criterion is approximately 25% larger than the
combined total of those seven authorizations--0.14 Bcf/d for a single
project, as opposed to a combined 0.112 Bcf/d for the seven
authorizations identified in the proposed rule.
The seven authorizations identified in the proposed rule were not
intended to suggest a limiting parameter for this rulemaking. Rather,
they provide context in showing small-scale LNG export authorizations
previously issued by DOE--particularly as compared to the large-scale
LNG export authorizations issued by DOE in volumes up to and exceeding
2.0 Bcf/d of natural gas for a single project.\38\ As discussed above,
DOE proposed the volume criterion for this rulemaking based on industry
sources that mark the boundary between large-scale and small-scale
exports at 1 mtpa (82 FR 41573 note 21)--equivalent to the 51.75 Bcf/yr
volume criterion in this final rule. DOE sees no basis to depart from
this volume limitation on the basis of the information presented in the
comments.
---------------------------------------------------------------------------
\38\ See Eagle LNG Partners Jacksonville II LLC, DOE/FE Order
No. 4078, supra note 5, at 34-37 (identifying DOE's 29 final non-FTA
authorizations for LNG and CNG issued to date).
---------------------------------------------------------------------------
The same commenter argued that the proposed rule is overbroad
insofar as it may apply in export circumstances beyond those identified
by DOE as justifying the rule. The commenter therefore urged DOE to
expand the mandatory criteria for small-scale exports to include
specific export characteristics beyond the volume criterion--such as
the exporter's use of ISO containers or other non-traditional
transport, destination countries in specific regions, and evidence that
the exports will displace diesel or fuel oil in the importing markets.
DOE has considered this proposal but sees no reason to unnecessarily
confine the development of the small-scale export market by adding
criteria that are, in fact, already market-driven.
As explained in the proposed rule, many of the countries in the
Caribbean, Central America, and South America do not generate enough
demand to import the large volumes of natural gas supplied by the
large-scale natural gas import/export market. Given these diseconomies
of scale, a gap has emerged in the regional natural gas import/export
market, and small-scale natural gas exports represent a market-driven
response to fill this gap. Because the small-scale market already
reflects the specific characteristics identified by the commenter,
imposing these characteristics as additional mandatory criteria is
unlikely to benefit the public interest or otherwise enhance the
objectives or implementation of this final rule. Further, imposing such
criteria would be at odds with DOE's long-standing practice of
minimizing regulatory impediments to a freely operating market and
promoting market competition (82 FR 41571, 41574; Sept. 1, 2017). DOE
has concluded that the volume criterion, in addition to the NEPA
criterion discussed below, is sufficient in defining and regulating the
small-scale export market.
Commenters asked DOE whether the proposed rule would allow
exporters to submit multiple applications, each below the 0.14 Bcf/d
(51.75 Bcf/yr) volume limitation, as a way to expand the authorized
export volumes for their facilities without triggering the jurisdiction
of FERC or the U.S. Maritime Administration (MARAD) under NEPA. These
types of applications--commonly referred to as ``design increases'' or
expansions--typically arise from the improved engineering of proposed
or existing LNG facilities that allows for additional LNG production
without new construction. Some commenters asked DOE to add language to
the final rule that would expressly allow this practice, so as to
encourage investment in and innovation at LNG export facilities. Other
commenters suggested that this practice, if allowed, would effectively
change the nature of this rule by encouraging ``segmentation'' of
additional export volumes at large-scale facilities, as opposed to the
intended small-scale facilities.
DOE declines to add the requested language to this final rule. DOE
emphasizes that the final rule is intended to facilitate small-scale
exports of natural gas for the reasons discussed herein. This rule does
not preclude applicants from applying for more than one authorization
for small-scale natural gas exports. Such flexibility may be useful,
for example, for authorization holders seeking to export small-scale
volumes from different facilities. DOE, however, will not accept
requests by authorization holders seeking to combine more than one
small-scale export authorization as an indirect means of expanding the
DOE-approved export volume from their facility, including from large-
scale facilities.
Further, DOE notes that, in the non-FTA export authorizations
issued to date, DOE has approved an applicant's export volume from a
specific facility (or facilities), based on the approved production (or
export) capacity of that facility.\39\ Likewise, approved export
volumes for a particular facility under this rule may not, on their own
or added together, exceed the maximum approved production (or export)
capacity of that facility.\40\ Finally, nothing in this final rule
affects the authorities exercised by FERC under the NGA or by MARAD
under the Deepwater Port Act.\41\
---------------------------------------------------------------------------
\39\ See, e.g., 10 CFR 590.202(b)(1) (requiring applicants to
identify the facilities to be utilized or constructed for the
proposed export).
\40\ See, e.g., Dominion Cove Point LNG, LP, DOE/FE Order No.
3331-A, FE Docket No. 11-128-LNG, Final Opinion and Order Granting
Long-Term, Multi-Contract Authorization to Export Liquefied Natural
Gas from the Cove Point LNG Terminal in Calvert County, Maryland, to
Non-Free Trade Agreement Nations, at 1-2 (May 7, 2015); see also
Eagle LNG Partners Jacksonville II LLC, DOE/FE Order No. 4078, supra
note 5, at 37.
\41\ 33 U.S.C. 1501, et seq.
---------------------------------------------------------------------------
2. Categorical Exclusion From NEPA
10 CFR 590.102(p)(2) establishes the NEPA criterion for small-scale
natural gas exports. As the second criterion for this final rule, DOE's
approval of the application must not require an EIS or EA under NEPA--
that is, the application must be eligible for a categorical exclusion
under DOE's NEPA regulations.
As explained in the proposed rule, DOE's environmental review
process under NEPA usually results in the preparation or adoption of an
EIS or EA describing the potential environmental impacts associated
with the application. In some cases, DOE may determine that an
application is eligible for a categorical exclusion pursuant to DOE's
[[Page 35115]]
regulations implementing NEPA, 10 CFR 1021.410, appendices A & B. The
categorical exclusion most commonly used in this context is categorical
exclusion B5.7 (10 CFR part 1021, subpart D, appendix B5.7), which
applies to natural gas import or export activities requiring minor
operational changes to existing projects, but no new construction.\42\
---------------------------------------------------------------------------
\42\ This categorical exclusion states in full: ``B5.7 Import or
export natural gas, with operational changes: Approvals or
disapprovals of new authorizations or amendments of existing
authorizations to import or export natural gas under section 3 of
the Natural Gas Act that involve minor operational changes (such as
changes in natural gas throughput, transportation, and storage
operations) but not new construction.'' 10 CFR part 1021, subpart D,
appendix B5.7.
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This NEPA criterion is very conservative. Based on DOE's
experience, this criterion will limit application of this final rule to
a small subset of all export applications. For example, of the 29 final
non-FTA export authorizations for LNG (and CNG) issued as of the date
of this final rule, only seven would meet both the volume and NEPA
criteria to qualify as small-scale natural gas exports.\43\ Together,
these seven authorizations approve exports in a combined volume of
0.074 Bcf/d--representing only 0.35% of the cumulative volume of non-
FTA exports approved to date (21.35 Bcf/d of natural gas).
---------------------------------------------------------------------------
\43\ Carib Energy (USA) LLC (FE Docket No. 11-141-LNG), 0.04
Bcf/d; American LNG Marketing LLC (FE Docket No. 14-209-LNG), 0.008
Bcf/d; Floridian Natural Gas Storage Company, LLC (FE Docket No. 15-
38-LNG); Air Flow North American Corp. (FE Docket No. 15-206-LNG,
0.002 Bcf/d; Flint Hills Resources, LP (FE Docket No. 15-168-LNG,
0.01 Bcf/d; Carib Energy (USA), LLC (FE Docket No. 16-98-LNG), 0.004
Bcf/d; and Eagle LNG Partners Jacksonville II LLC (FE Docket No. 17-
79-LNG), 0.01 Bcf/d. The Carib and Floridian orders are both 0.04
Bcf/d, yet are not additive to one another because the source of LNG
approved under both orders is from the Floridian Facility.
---------------------------------------------------------------------------
Nonetheless, some of the comments on the proposed rule reflected
widespread confusion about the meaning and applicability of a
categorical exclusion under NEPA. Several commenters expressed concern
that this criterion will result in small-scale natural gas exports that
have no environmental protections or oversight because they are not
subject to an EIS or EA under NEPA. These commenters asserted that an
EA or EIS must be prepared in every instance to consider a variety of
perceived risks to the environment, public safety, and public health
posed by natural gas exports. In their view, an export application
approved by DOE on the basis of a categorical exclusion under NEPA will
lead to ``unregulated'' natural gas export facilities and
infrastructure.
DOE emphasizes that its determination that a particular application
qualifies for a DOE categorical exclusion is the result of a thorough
NEPA assessment process. A categorical exclusion does not circumvent or
``relax'' the NEPA review process (as some commenters suggest) but, in
fact, is a means to comply with NEPA. Indeed, categorical exclusions
facilitate NEPA by allowing federal agencies to focus their
environmental review and resources on actions that could have
significant impacts. The Council on Environmental Quality's NEPA
regulations provide for categorical exclusions when an agency has
identified a ``category of actions which do not individually or
cumulatively have a significant effect on the human environment and
which have been found to have no such effect in procedures adopted by a
federal agency. . .'' \44\ DOE has made such a determination with
respect to categorical exclusion B5.7, Import or Export of Natural Gas,
with Operational Changes. Accordingly, there is no basis to conclude
that qualifying small-scale exports would originate from
``unregulated'' LNG export facilities lacking sufficient oversight of
potential risks to the environment, public safety, and public health.
---------------------------------------------------------------------------
\44\ 40 CFR 1508.4.
---------------------------------------------------------------------------
In determining that an export application is eligible for a
categorical exclusion under DOE's NEPA regulations, DOE must not only
determine that the application fits within a specific categorical
exclusion, but it must also determine that ``there are no extraordinary
circumstances related to the proposal that may affect the significance
of the environmental effects of the proposal.'' \45\ For qualifying
small-scale natural gas export applications, DOE will satisfy this
requirement by conducting an assessment of appropriate environmental-
related documents to determine whether there are ``extraordinary
circumstances'' associated with the proposed exports. This review
includes consideration of potential impacts to property of historic,
archeological, or architectural significance; federally-listed
threatened or endangered species and their habitat; and wetlands
regulated under the Clean Water Act.\46\ To ensure transparency, all
categorical exclusions used by DOE to comply with NEPA are made
publicly available on DOE's NEPA website.\47\ DOE will follow the same
practice for qualifying small-scale natural gas export applications.
---------------------------------------------------------------------------
\45\ 10 CFR 1021.410(b)(2).
\46\ Id.
\47\ See U.S. Dep't of Energy, Office of NEPA Policy and
Compliance, Categorical Exclusion (CX) Determinations, available at:
https://energy.gov/nepa/categorical-exclusion-cx-determinations.
---------------------------------------------------------------------------
Finally, regardless of whether DOE determines that an application
is subject to an EIS, an EA, or is eligible for a categorical exclusion
under NEPA, DOE expressly conditions all of its non-FTA authorizations
on the authorization holder's ongoing compliance with all preventative
and mitigative measures at the facility imposed by federal, state, and/
or local agencies.\48\ Small-scale natural gas exports will be subject
to the same conditions and oversight.\49\
---------------------------------------------------------------------------
\48\ See, e.g., Eagle LNG Partners Jacksonville II LLC, DOE/FE
Order No. 4078, supra note 5, at 46.
\49\ In the context of NEPA, many commenters discussed the
environmental and health risks that, in their view, are associated
with the siting and operation of LNG export facilities and related
transportation infrastructure near their home or community. They
asserted, for example, that they will suffer from any accidents at
nearby LNG export facilities and pipelines, or explosions of ISO
containers loaded onto trains or trucks. They expressed concern that
such accidents could result in harm to air, water, and other natural
resources. They also assert that natural disasters, such as
hurricanes and wildfires, in the vicinity of LNG export facilities
and infrastructure can threaten public safety. DOE notes that these
concerns generally involve the siting of natural gas-related
infrastructure. These concerns are outside the scope of this
rulemaking, which is based on existing facilities subject to a
categorical exclusion under NEPA. Nonetheless, as stated above, DOE
requires all authorization holders to comply with any preventative
and mitigative measures at natural gas import and export facilities
imposed by federal, state, and/or local agencies.
---------------------------------------------------------------------------
For these reasons, DOE does not agree that this criterion of this
rule--whereby an application must be eligible for a categorical
exclusion under NEPA--will lead to natural gas exports lacking in
environmental protection and/or to unregulated LNG export facilities.
DOE is committed to a thorough NEPA assessment process and,
accordingly, DOE is not changing this criterion in the final rule.
C. Other Issues
Below, DOE addresses a variety of other comments on the proposed
rule. To the extent commenters have urged DOE to take some different
type of action with respect to natural gas exports, DOE notes that it
may consider additional measures under section 3(a) of the Natural Gas
Act as part of its regulatory reform efforts and welcomes suggestions,
data, and information on this topic through its regulatory reform email
inbox at [email protected].
One commenter asserted that this rulemaking is arbitrary and
capricious because it lacks substantive analysis and viable
alternatives. Under the APA, an
[[Page 35116]]
agency decision is arbitrary and capricious only if the agency's
decision is not based on a consideration of the relevant factors and
where there is a clear error of judgment by the agency.\50\ As
explained above and in the proposed rule, DOE has determined that
small-scale natural gas exports are consistent with the public interest
after considering its obligations under NGA section 3(a), the public
comments received on the proposed rule, and a wide range of information
bearing on the public interest (82 FR 41573-41574; Sept. 1, 2017).
Additionally, DOE has considered its 29 final non-FTA export
authorizations issued to date, as well EIA's authoritative projections
for natural gas supply, demand, and prices set forth in both the AEO
2017 and AEO 2018. DOE has thoroughly analyzed the many factors
affecting the export of U.S. natural gas, as well as the unique
characteristics and minimal adverse impacts of the emerging small-scale
natural gas market. On this basis, DOE has determined that this rule is
consistent with both NGA section 3(a) and DOE's established practice in
authorizing such exports.
---------------------------------------------------------------------------
\50\ See, e.g., 5 U.S.C. 706; Motor Vehicle Mfr. Ass'n v. State
Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).
---------------------------------------------------------------------------
One commenter characterized this rulemaking as imposing redundant,
burdensome administrative requirements and compliance costs, but did
not specify the basis for that claim. DOE emphasizes that it is not
imposing any administrative requirements or compliance costs through
this rulemaking. To the contrary, as explained in the proposed rule (82
FR 41570), the regulation promulgated in this final rule is intended to
expedite DOE's processing of small-scale applications, thereby reducing
administrative burdens and costs for the small-scale natural gas
market.
On the other hand, another commenter asserted that this rulemaking
is not deregulatory because it creates a new regulation to define
small-scale natural gas exports according to specified criteria. This
commenter claimed that DOE is limiting its ability to adapt to market
changes, should the parameters of the small-scale natural gas market
change. As stated above, however, this rulemaking qualifies as a
deregulatory action because DOE is reducing or eliminating
administrative requirements and compliance costs for the small-scale
export market under NGA section 3(a). DOE is satisfied that the
criteria for this rulemaking, which are based in part on industry
practice, are appropriate for this developing market. Nonetheless,
should unforeseeable changes in the small-scale export market require
DOE to amend this regulation, DOE retains the regulatory authority to
do so.
One commenter asserted that the 45-day public comment period for
the proposed rule should be extended because the link for submitting
comments on the Federal eRulemaking Portal was not working when the
commenter attempted to submit comments. In the proposed rule, DOE
identified a variety of methods that could be used to submit comments,
including email (82 FR 41570; Sept. 1, 2017). DOE also notes that no
other commenter raised this issue and many commenters submitted
comments through the Federal eRulemaking Portal. DOE therefore declines
to extend or re-open the public comment period in this rulemaking.
One commenter argued that DOE failed to provide sufficient notice
of this rule in local media outlets, print media, and online
publications. As a matter of law, however, DOE provided sufficient
notice of this rulemaking by publishing it in the Federal Register.\51\
---------------------------------------------------------------------------
\51\ See 44 U.S.C. 1508 (notice sufficient when published in the
Federal Register).
---------------------------------------------------------------------------
Finally, separate from the NEPA regulatory criterion for small-
scale natural gas exports, several commenters disagreed with DOE's
application of categorical exclusion A6 under NEPA for this rulemaking
itself, as discussed in the ``Regulatory Review'' portion of the
proposed rule (82 FR 41575, ``National Environmental Policy Act'') and
set forth below. In the proposed rule, DOE explained that neither an
EIS nor an EA was required to support this rulemaking. These commenters
disagreed with that assessment, asserting that DOE violated NEPA by not
preparing an EIS or an EA that addressed all potential environmental
impacts associated with this rulemaking and that considered reasonable
alternatives to the proposed rule.
As explained in the proposed rule (as well as in this final rule),
DOE has determined that this regulation ``fall[s] into a class of
actions that does not individually or cumulatively have a significant
impact on the human environment as set forth under DOE's regulations
implementing [NEPA]'' (82 FR 41575). Specifically, DOE has determined
that this rulemaking falls under categorical exclusion A6 (10 CFR part
1021, subpart D, appendix A6).
Categorical exclusion A6 applies to ``rulemakings that are strictly
procedural.'' \52\ This rulemaking is strictly procedural because it
establishes expedited procedures applicable to qualifying small-scale
natural gas export applications. Currently, DOE makes a public interest
determination for all applications to export natural gas to non-FTA
countries under NGA section 3(a), regardless of the proposed export
volume. In making this determination, DOE imposes certain procedural
requirements, which in turn lead to longer processing time for
applications to export natural gas to non-FTA countries. This
rulemaking expedites DOE's administrative processing for qualifying
small-scale natural gas export applications by eliminating the notice
of application and other procedures typically required under DOE's
regulations (82 FR 41573). For these reasons, DOE has determined that
categorical exclusion A6 applies to this rulemaking.
---------------------------------------------------------------------------
\52\ 10 CFR part 1021, subpart D, appendix A6.
---------------------------------------------------------------------------
III. Regulatory Review
A. Executive Orders 12866 and 13563
This regulatory action has been determined to be an ``economically
significant regulatory action'' under Executive Order 12866,
``Regulatory Planning and Review,'' 58 FR 51735 (October 4, 1993).
Accordingly, this action was subject to review under that Executive
Order by the Office of Information and Regulatory Affairs of the Office
of Management and Budget.
DOE has also reviewed this regulation pursuant to Executive Order
13563, issued on January 18, 2011. (76 FR 3281, Jan. 21, 2011.) E.O.
13563 is supplemental to and explicitly reaffirms the principles,
structures, and definitions governing regulatory review established in
Executive Order 12866. To the extent permitted by law, agencies are
required by Executive Order 13563 to: (1) Propose or adopt a regulation
only upon a reasoned determination that its benefits justify its costs
(recognizing that some benefits and costs are difficult to quantify);
(2) tailor regulations to impose the least burden on society,
consistent with obtaining regulatory objectives, taking into account,
among other things, and to the extent practicable, the costs of
cumulative regulations; (3) select, in choosing among alternative
regulatory approaches, those approaches that maximize net benefits
(including potential economic, environmental, public health and safety,
and other advantages; distributive impacts; and equity); (4) to the
extent feasible, specify performance objectives, rather than specifying
the behavior or manner of compliance that regulated entities must
adopt; and (5) identify and assess
[[Page 35117]]
available alternatives to direct regulation, including providing
economic incentives to encourage the desired behavior, such as user
fees or marketable permits, or providing information upon which choices
can be made by the public.
DOE concludes that this final rule is consistent with these
principles. Specifically, this final rule provides that DOE will issue
an export authorization upon receipt of any complete application that
seeks to export natural gas, including LNG, to non-FTA countries,
provided that the application satisfies the following two criteria: (1)
The application proposes to export natural gas in a volume up to and
including 51.75 Bcf/yr, and (2) DOE's approval of the application does
not require an EIS or EA under NEPA. DOE's regulations regarding notice
of applications, 10 CFR 590.205, and procedures applicable to
application proceedings, 10 CFR part 590, subpart C (10 CFR 590.303 to
10 CFR 590.317), do not apply to small-scale natural gas exports. The
final rule is intended to expedite DOE's processing of these
applications, thereby reducing administrative burdens for the small-
scale natural gas export market.
B. Executive Orders 13771, 13777, and 13783
On January 30, 2017, the President issued Executive Order 13771,
``Reducing Regulation and Controlling Regulatory Costs.'' That Order
stated the policy of the executive branch is to be prudent and
financially responsible in the expenditure of funds, from both public
and private sources. The Order stated it is essential to manage the
costs associated with the governmental imposition of private
expenditures required to comply with Federal regulations. This final
rule is expected to be an E.O. 13771 deregulatory action.
Additionally, on February 24, 2017, the President issued Executive
Order 13777, ``Enforcing the Regulatory Reform Agenda.'' The Order
required the head of each agency designate an agency official as its
Regulatory Reform Officer (RRO). Each RRO oversees the implementation
of regulatory reform initiatives and policies to ensure that agencies
effectively carry out regulatory reforms, consistent with applicable
law. Further, E.O. 13777 requires the establishment of a regulatory
task force at each agency. The regulatory task force is required to
make recommendations to the agency head regarding the repeal,
replacement, or modification of existing regulations, consistent with
applicable law. At a minimum, each regulatory reform task force must
attempt to identify regulations that:
(i) Eliminate jobs, or inhibit job creation;
(ii) Are outdated, unnecessary, or ineffective;
(iii) Impose costs that exceed benefits;
(iv) Create a serious inconsistency or otherwise interfere with
regulatory reform initiatives and policies;
(v) Are inconsistent with the requirements of Information Quality
Act, or the guidance issued pursuant to that Act, in particular those
regulations that rely in whole or in part on data, information, or
methods that are not publicly available or that are insufficiently
transparent to meet the standard for reproducibility; or
(vi) Derive from or implement Executive Orders or other
Presidential directives that have been subsequently rescinded or
substantially modified.
Finally, on March 28, 2017, the President signed Executive Order
13783, entitled ``Promoting Energy Independence and Economic Growth.''
Among other things, E.O. 13783 requires the heads of agencies to review
all existing regulations, orders, guidance documents, policies, and any
other similar agency actions (collectively, agency actions) that
potentially burden the development or use of domestically produced
energy resources, with particular attention to oil, natural gas, coal,
and nuclear energy resources. Such review does not include agency
actions that are mandated by law, necessary for the public interest,
and consistent with the policy set forth elsewhere in that order.
Executive Order 13783 defined burden for purposes of the review of
existing regulations to mean to unnecessarily obstruct, delay, curtail,
or otherwise impose significant costs on the siting, permitting,
production, utilization, transmission, or delivery of energy resources.
DOE concludes that this final rule is consistent with the
directives set forth in these executive orders. Specifically, this
final rule is a deregulatory action that requires DOE to issue an
export authorization upon receipt of any complete application that
seeks to export natural gas, including LNG, to non-FTA countries,
provided that the application satisfies the following two criteria: (1)
The application proposes to export natural gas in a volume up to and
including 51.75 Bcf/yr, and (2) DOE's approval of the application does
not require an EIS or an EA under NEPA. Applications that satisfy these
criteria are requesting authorization for ``small-scale natural gas
exports'' and, as such, the exports are deemed to be consistent with
the public interest under NGA section 3(a). DOE's regulations regarding
notice of applications and procedures conducted on applications do not
apply to applications that satisfy these criteria. The final rule will
expedite DOE's processing of these applications, thereby reducing
administrative burdens for the small-scale natural gas export market.
C. National Environmental Policy Act
DOE has determined that adoption of this final rule falls into a
class of actions that does not individually or cumulatively have a
significant impact on the human environment as set forth under DOE's
regulations implementing the National Environmental Policy Act of 1969
(42 U.S.C. 4321 et seq). Specifically, this rulemaking is covered under
the categorical exclusion found in the DOE's National Environmental
Policy Act regulations at paragraph A6 of appendix A to subpart D, 10
CFR part 1021, which applies to rulemakings that are strictly
procedural. Accordingly, neither an EIS nor an EA is required.
D. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires
preparation of an initial regulatory flexibility analysis for any rule
that by law must be proposed for public comment, unless the agency
certifies that the rule, if promulgated, will not have a significant
economic impact on a substantial number of small entities. As required
by Executive Order 13272, ``Proper Consideration of Small Entities in
Agency Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE published
procedures and policies on February 19, 2003, to ensure that the
potential impacts of its rules on small entities are properly
considered during the rulemaking process (68 FR 7990). DOE has made its
procedures and policies available on the Office of General Counsel's
website: http://www.gc.doe.gov.
DOE has reviewed this final rule under the provisions of the
Regulatory Flexibility Act and the procedures and policies published on
February 19, 2003. This final rule will require DOE to issue an export
authorization upon receipt of any complete application that seeks to
export natural gas, including LNG, to non-FTA countries, provided that
the application satisfies the following two criteria: (1) The
application proposes to export natural gas in a volume up to and
including 51.75 Bcf/yr, and (2) DOE's approval of the application does
not require an EIS or an EA under NEPA. DOE's regulations regarding
notice of applications and procedures conducted
[[Page 35118]]
on applications do not apply to applications that satisfy these
criteria.
To date, DOE has received--and granted--eight applications to
export LNG in volumes below 51.75 Bcf/yr of natural gas to non-FTA
countries.\53\ Of these eight applicants, three qualify as small
businesses under the Small Business Administration's size standards of
1000 employees or less under both NAICS 221210, Natural Gas
Distribution, and NAICS 325120, Industrial Gas Manufacturing. Because
the final rule will streamline the application and approval process for
small-scale natural gas exports, it will not result in a significant
economic impact on a substantial number of small entities. The final
rule will, however, provide greater regulatory certainty for applicants
by eliminating the individual application proceeding and public
interest evaluation for qualifying applications. This, in turn, will
both reduce the administrative burden associated with the application
process and expedite authorization of qualifying applications, removing
(at a minimum) the opportunity cost of receiving an application delayed
by the current procedures.
---------------------------------------------------------------------------
\53\ Seven of the eight applications are identified in section
I.C of the proposed rule (82 FR 41572; Sept. 1, 2017). The eighth
authorization was issued on September 15, 2017, after the NOPR was
published. See Eagle LNG Partners Jacksonville II LLC, DOE/FE Order
No. 4078, supra note 5.
---------------------------------------------------------------------------
DOE received no comments on this certification. Comments regarding
the economic impact of the proposed rule are responded to in Section II
of the preamble, and for the reasons explained in Section II, those
comments did not affect this certification, or result in any changes
from the proposal in this final rule.
Therefore, DOE certifies that this rulemaking will not have a
significant economic impact on a substantial number of small entities.
Accordingly, DOE did not prepare an IRFA for this rulemaking. DOE's
certification and supporting statement of factual basis was provided to
the Chief Counsel for Advocacy of the Small Business Administration for
review under 5 U.S.C. 605(b).
E. Paperwork Reduction Act
The final rule does not change any requirements subject to review
and approval by OMB pursuant to the Paperwork Reduction Act of 1995 (44
U.S.C. 3501 et seq.) and the procedures implementing that Act, 5 CFR
1320.1 et seq. Current natural gas import and export authorization
holders, including any approved under this final rule, would be subject
to the information collection requirements approved by the Office of
Management and Budget under OMB Control No. 1901-0294. Public reporting
burden for the certification is estimated to average 3 hours per
response, including the time for reviewing instructions, searching
existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information.
Notwithstanding any other provision of the law, no person is
required to respond to, nor shall any person be subject to a penalty
for failure to comply with, a collection of information subject to the
requirements of the PRA, unless that collection of information displays
a currently valid OMB Control Number.
F. Unfunded Mandates Reform Act of 1995
The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) generally
requires Federal agencies to examine closely the impacts of regulatory
actions on tribal, state, and local governments. Subsection 101(5) of
title I of that law defines a Federal intergovernmental mandate to
include any regulation that would impose upon tribal, state, or local
governments an enforceable duty, except a condition of Federal
assistance or a duty arising from participating in a voluntary Federal
program. Title II of that law requires each Federal agency to assess
the effects of Federal regulatory actions on tribal, state, and local
governments, in the aggregate, or to the private sector, other than to
the extent such actions merely incorporate requirements specifically
set forth in a statute. Section 202 of that title requires a Federal
agency to perform a detailed assessment of the anticipated costs and
benefits of any rule that includes a Federal mandate which may result
in costs to tribal, state, or local governments, or to the private
sector, of $100 million or more in any one year (adjusted annually for
inflation). 2 U.S.C. 1532(a) and (b). Section 204 of that title
requires each agency that proposes a rule containing a significant
Federal intergovernmental mandate to develop an effective process for
obtaining meaningful and timely input from elected officers of tribal,
state, and local governments. 2 U.S.C. 1534.
This final rule will streamline procedures for small-scale natural
gas exports. DOE has determined that the final rule will not result in
the expenditure by tribal, state, and local governments in the
aggregate, or by the private sector, of $100 million or more in any one
year. Accordingly, no assessment or analysis is required under the
Unfunded Mandates Reform Act of 1995.
G. Treasury and General Government Appropriations Act, 1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family
Policymaking Assessment for any final rule that may affect family well-
being. The final rule will not have any impact on the autonomy or
integrity of the family as an institution. Accordingly, DOE has
concluded that it is not necessary to prepare a Family Policymaking
Assessment.
H. Executive Order 13132
Executive Order 13132, ``Federalism,'' 64 FR 43255 (August 4, 1999)
imposes certain requirements on agencies formulating and implementing
policies or regulations that preempt state law or that have Federalism
implications. Agencies are required to examine the constitutional and
statutory authority supporting any action that would limit the
policymaking discretion of the states and carefully assess the
necessity for such actions. DOE has examined this final rule and has
determined that it will not preempt state law and will not have a
substantial direct effect on the states, on the relationship between
the national government and the states, or on the distribution of power
and responsibilities among the various levels of government. No further
action is required by Executive Order 13132.
I. Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of Executive Order 12988,
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on
Executive agencies the general duty to adhere to the following
requirements: (1) Eliminate drafting errors and ambiguity; (2) write
regulations to minimize litigation; and (3) provide a clear legal
standard for affected conduct rather than a general standard and
promote simplification and burden reduction. With regard to the review
required by section 3(a), section 3(b) of Executive Order 12988
specifically requires that Executive agencies make every reasonable
effort to ensure that the regulation: (1) Clearly specifies the
preemptive effect, if any; (2) clearly specifies any effect on existing
Federal law or regulation; (3) provides a clear legal standard for
affected conduct while promoting simplification and burden reduction;
(4) specifies the retroactive effect, if any; (5) adequately defines
key terms; and (6)
[[Page 35119]]
addresses other important issues affecting clarity and general
draftsmanship under any guidelines issued by the Attorney General.
Section 3(c) of Executive Order 12988 requires Executive agencies to
review regulations in light of applicable standards in section 3(a) and
section 3(b) to determine whether they are met or it is unreasonable to
meet one or more of them. DOE has completed the required review and
determined that, to the extent permitted by law, the final rule meets
the relevant standards of Executive Order 12988.
J. Treasury and General Government Appropriations Act, 2001
The Treasury and General Government Appropriations Act, 2001 (44
U.S.C. 3516 note) provides for agencies to review most disseminations
of information to the public under guidelines established by each
agency pursuant to general guidelines issued by OMB.
OMB's guidelines were published at 67 FR 8452 (February 22, 2002),
and DOE's guidelines were published at 67 FR 62446 (October 7, 2002).
DOE has reviewed this final rule under the OMB and DOE guidelines and
has concluded that it is consistent with applicable policies in those
guidelines.
K. Executive Order 13211
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use,'' 66 FR 28355
(May 22, 2001) requires Federal agencies to prepare and submit to the
OMB, a Statement of Energy Effects for any proposed significant energy
action. A ``significant energy action'' is defined as any action by an
agency that promulgated or is expected to lead to promulgation of a
final rule, and that: (1) Is a significant regulatory action under
Executive Order 12866, or any successor order; and (2) is likely to
have a significant adverse effect on the supply, distribution, or use
of energy, or (3) is designated by the Administrator of OIRA as a
significant energy action. For any proposed significant energy action,
the agency must give a detailed statement of any adverse effects on
energy supply, distribution, or use should the proposal be implemented,
and of reasonable alternatives to the action and their expected
benefits on energy supply, distribution, and use. This regulatory
action, which is intended to streamline the application and approval
process for small-scale natural gas exports, will not have a
significant adverse effect on the supply, distribution, or use of
energy, and therefore is not a significant energy action. Accordingly,
DOE has not prepared a Statement of Energy Effects.
L. Congressional Notification
As required by 5 U.S.C. 801, DOE will report to Congress on the
promulgation of this rule prior to its effective date. The report will
state that it has been determined that the rule is not a ``major rule''
as defined by 5 U.S.C. 804(2).
IV. Approval of the Office of the Secretary
The Secretary of Energy has approved the publication of this final
rule.
List of Subjects in 10 CFR Part 590
Administrative practice and procedure, Exports, Natural gas,
Reporting and recordkeeping requirements.
Signed in Washington, DC, on July 19, 2018.
Steven E. Winberg,
Assistant Secretary, Office of Fossil Energy.
For the reasons stated in the preamble, DOE amends part 590,
chapter II of title 10, subchapter G, Code of Federal Regulations as
set forth below:
PART 590--ADMINISTRATIVE PROCEDURES WITH RESPECT TO THE IMPORT AND
EXPORT OF NATURAL GAS
0
1. The authority citation for part 590 continues to read as follows:
Authority: Secs. 301(b), 402(f), and 644, Pub. L. 95-91, 91
Stat. 578, 585, and 599 (42 U.S.C. 7151(b), 7172(f), and 7254), Sec.
3, Act of June 21, 1938, c. 556, 52 Stat. 822 (15 U.S.C. 717b); E.O.
12009 (42 FR 46267, September 15, 1977); DOE Delegation Order Nos.
0204-111 and 0204-127 (49 FR 6684, February 22, 1984; 54 FR 11437,
March 20, 1989).
0
2. Section 590.102 is amended by redesignating paragraph (p) as
paragraph (q) and adding new paragraph (p) to read as follows:
Sec. 590.102 Definitions.
* * * * *
(p) Small-scale natural gas export means an export of natural gas
to nations with which there is not in effect a free trade agreement
with the United States requiring national treatment for trade in
natural gas and with which trade is not prohibited by U.S. law or
policy, provided that the application for such export authority
satisfies the following two criteria:
(1) The application proposes to export natural gas in a volume up
to and including 51.75 billion cubic feet per year, and
(2) DOE's approval of the application does not require an
environmental impact statement or an environmental assessment under the
National Environmental Policy Act, 42 U.S.C. 4321 et seq.
* * * * *
0
3. Section 590.208 is revised to read as follows:
Sec. 590.208 Small volume exports.
(a) Small-scale natural gas exports. Small-scale natural gas
exports are deemed to be consistent with the public interest under
section 3(a) of the Natural Gas Act, 15 U.S.C. 717b(a). DOE will issue
an export authorization upon receipt of any complete application to
conduct small-scale natural gas exports. DOE's regulations regarding
notice of applications, 10 CFR 590.205, and procedures applicable to
application proceedings, 10 CFR part 590, subpart C (10 CFR 590.303 to
10 CFR 590.317), are not applicable to small-scale natural gas exports.
(b) Scientific, experimental, or other non-utility natural gas
exports. Any person may export up to 100,000 cubic feet of natural gas
(14.73 pounds per square inch at 60 degrees Fahrenheit) or the
liquefied or compressed equivalent thereof, in a single shipment for
scientific, experimental, or other non-utility gas use without prior
authorization of the Assistant Secretary.
[FR Doc. 2018-15903 Filed 7-24-18; 8:45 am]
BILLING CODE 6450-01-P