Toward a Fluid Global Market: A Guide to Understanding the Changing State of U.S. Liquefied Natural Gas Exports, Regulatory Procedures, and Stakeholder Interests

Abstract

The close of 2014 ended a lively and prodigious year for energy. This follows $1.6 trillion in energy investments “to provide the world’s consumers with energy” in 2013 — a year in which energy production and consumption levels reached “record levels for every fuel type except nuclear power.” While the 2014 statistics had yet to be released at the time this article was completed, those in the energy field and observers alike undoubtedly saw 2014 as yet another instance of energy bolstering its status as one of the preeminent global issues of the 21st century.The natural gas sector — and liquefied natural gas (LNG) particularly — saw significant movement in 2014. In fact, long-term global growth is expected on the order of up to $500 billion in LNG development by 2025. The United States is seeing a considerable portion of this development due to massive underground natural gas reserves that have been unlocked through multi-directional drilling and hydraulic fracturing, which has opened the door to natural gas exports when, only a few years earlier, the United States was projected to be a growing natural gas importer. The year 2014 was, in a way, the visible beginning of a U.S. LNG export transformation — visible in the sense that approvals were granted for, and construction started on, a number of facilities seeking to export LNG produced in the United States. The United States Department of Energy (DOE) and the Federal Energy Regulatory Commission (FERC) authorized four LNG liquefaction and export terminals (at least conditionally) to site, construct, expand, and operate those facilities and export up to several billion cubic feet per day globally. These approvals mark one of the most recent shifts in the U.S. LNG market over the last 50 years, though another wrinkle came to the forefront in the fourth quarter of 2014: oil prices slid to nearly half of their opening value at the beginning of 2014, and in the process, at least partially quelled U.S. LNG export enthusiasm.This article is a guide to exploring the U.S. LNG liquefaction and export sectors, and specifically, how these sectors progressed over 2014. Part I of this article summarizes the natural gas lifecycle from underground wells to end-users on the opposite side of the globe. Part II then provides a brief history of U.S. LNG imports and exports. Part III outlines the processes necessary to obtain authorizations from the DOE and FERC, which differ depending on where the natural gas originated and its destination. Part IV provides information and statistics regarding four U.S. LNG liquefaction and export projects that received federal approvals in 2014 to site, construct, expand, and operate LNG terminals and export LNG to Free Trade Agreement (FTA) and non-FTA nations. Part V highlights some of the environmental, security, and community concerns that are being considered by stakeholders.