[Federal Register Volume 65, Number 85 (Tuesday, May 2, 2000)]
[Notices]
[Pages 25475-25477]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-10895]


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DEPARTMENT OF ENERGY

[ERA Docket No. 88-22-LNG; FE Docket No. 96-99-LNG]


Office of Fossil Energy: Phillips Alaska Natural Gas Corporation 
and Marathon Oil Company; Application To Amend Authorization To Export 
Liquefied Natural Gas

AGENCY: Office of Fossil Energy, DOE.

ACTION: Notice of application.

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SUMMARY: The Office of Fossil Energy (FE) of the Department of Energy 
(DOE) gives notice of receipt of an application filed jointly on March 
22, 2000, by Phillips Alaska Natural Gas Corporation (PANGC) and 
Marathon Oil Company (Marathon) to amend their authorization to export 
liquefied natural gas (LNG) from the Kenai peninsula of Alaska to 
Japan. The Applicants seek approval of a revision in the pricing 
provisions of their Japanese sales contracts. The application is filed 
under section 3 of the Natural Gas Act and DOE Delegation Order Nos. 
0204-111 and 0204-127. Protests, motions to intervene or notices of 
intervention, and written comments are invited.

DATES: Protests, motions to intervene or notices of intervention, as 
applicable, requests for additional procedures and written comments are 
to be filed at the address listed below no later than 4:30 p.m., 
eastern time, June 1, 2000.

ADDRESSES: Office of Natural Gas & Petroleum Import & Export 
Activities, Office of Fossil Energy, U.S. Department of Energy, 
Forrestal Building, Room 3E-042, FE-34, 1000 Independence Avenue, SW, 
Washington, DC 20585,

FOR FURTHER INFORMATION CONTACT: Patrick J. Fleming, Allyson C. Reilly, 
Office of Natural Gas & Petroleum Import & Export Activities, Office of 
Fossil Energy, U.S. Department of Energy, Forrestal Building, Room 3E-
042, 1000 Independence Avenue, SW, Washington, DC 20585, (202) 586-
4819, (202) 586-9394.
    Diane Stubbs, Office of the Assistant General Counsel for Fossil 
Energy, U.S. Department of Energy, Forrestal Building, Room 6E-042, GC-
75, 1000 Independence Avenue, SW, Washington, DC 20585, (202) 586-6667.

SUPPLEMENTARY INFORMATION:
    PANGC, a Delaware corporation with its principal place of business 
in Bartlesville, Oklahoma, is a wholly owned subsidiary of Phillips 
Petroleum Company, a Delaware corporation. Marathon, an Ohio 
corporation with its principal place of business in Houston, Texas, is 
a wholly owned subsidiary of USX Corporation, also a Delaware 
corporation. PANGC and Marathon are not affiliated with each other. 
They own and operate natural gas liquefaction and marine terminal 
facilities at Kenai, Alaska.
    The Applicants have maintained an uninterrupted export relationship 
with Japan's two largest utilities, The Tokyo Electric Power Company 
Inc. (Tokyo Electric) and Tokyo Gas Company Limited (Tokyo Gas) since 
1967.\1\ The most recent of numerous amendments \2\

[[Page 25476]]

to the Applicant's original export authorization was granted by DOE/FE 
Opinion and Order No. 1473 (Order 1473) on April 2, 1999. It extended 
their authority to export up to 64.4 trillion British thermal units 
(TBtus) \3\ of LNG per year through March 31, 2009.\4\
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    \1\ See Federal Power Commission Order issued April 19, 1967 (37 
FPC 777).
    \2\ See DOE/ERA Opinion and Order No. 49 (1 ERA para.70,116, 
December 14, 1982) (extended export authority); DOE/ERA Opinion and 
Order 49-A (I ERA 170,127, April 3, 1986) (transferred authorization 
from Phillips Petroleum Company to Phillips 66 Natural Gas Company); 
DOE/ERA Opinion and Order No. 206 (1 ERA para. 70,128, November 16, 
1987) (amended pricing formula); DOE/ERA Opinion and Order No. 261 
(1 ERA para. 70,130, July 28, 1988) (extended export authority); 
DOE/FE Opinion and Order No. 26 1-A (I FE para. 70,454, June 18, 
1991) (amended pricing formula); DOE/FE Opinion and Order No. 26 1-B 
(I FE 170,506, December 19, 1991) (transferred authorization from 
Phillips 66 Natural Gas Company to PANGC; DOE/FE Opinion and Order 
261-C (I FE para. 70,607, July 15, 1992) (increased annual export 
authority from 52 trillion Btu's to 64.4 trillion Btu's--the 
provision for yearly sales of up to 106 percent of annual contract 
quantity remained unchanged); DOE/FE Opinion and Order No. 26 1-D (1 
FE para. 71,087, March 2, 1995) (amended pricing formula); DOE/FE 
Opinion and Order No. 261-E (2 FE para. 71,429, July 18, 1997) 
(dismissed complaint); and DOE/FE Opinion and Order No. 1473 (2 FE 
para. 70,317) (extended export authority).
    \3\ The gaseous equivalent to approximately 64.4 billion cubic 
feet.
    \4\ Order No. 1473 was issued in FE Docket No. 96-99-LNG.
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    DOE/FE Opinion and Order No. 261-D, issued March 21, 1995, approved 
the currently authorized pricing formula applicable to the Applicants' 
LNG export sales.\5\ This formula is described in an April 19, 1994, 
``Third Amendatory Agreement'' to the Applicants'' June 17, 1988, LNG 
sales contract with Tokyo Electric and Tokyo Gas. It reflects the 
weighted average price over periods of three consecutive months 
relative to all crude oils imported into Japan each month. The crude 
oil prices are obtained from Japan Exports and Imports Monthly, a 
publication of the Japan Tariff Association. The arithmetic average 
price is subject to a ceiling of $26.00 per barrel and a floor of 
$13.00 per barrel. If the arithmetic price is outside this range, the 
formula provides for redetermination of the contract price.
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    \5\ Supra note 2. DOE/ERA Opinion and Order No. 261, the lead 
Order in this sequence of authorizations, was issued July 28, 1988, 
in ERA Docket No. 88-22-LNG.
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    In response to changes in the Japanese LNG markets, the parties met 
in 1999 to discuss the comparability of Alaska LNG pricing with that of 
other projects supplying LNG to Japan under long-term contracts. As a 
result of these discussions, they signed a ``Fourth Amendatory 
Agreement'' on November 16, 1999, which revises the authorized pricing 
formula. The applicants ask DOE to approve the new formula for use 
during the period April 1, 1998, to March 31, 2004.
    Under the new formula proposed by the Applicants, the price is 
calculated monthly based primarily on the weighted average price of all 
crude oils imported into Japan in the third month prior to the time the 
LNG is unloaded. In addition, the revised price formula includes an 
adjustment factor to keep the Applicants' LNG competitive with other 
sales of LNG in the Japanese market.\6\ Redetermination of the contract 
price is triggered when the weighted average price of crude oil is 
outside the range of $11.00 to $25.00 per barrel.
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    \6\ For example, if the weighted average price of crude oil 
imported into Japan is $18.00 per barrel (equivalent to $3.10 per 
million Btu (MMBtu), DOE calculated the LNG would be sold for $3.37 
per MMBtu using the current pricing scheme. In contrast, DOE 
estimated the LNG sales price would be $3.44 per MMBtu under the new 
contract methodology. (The heat content of one barrel of crude oil 
is approximately 5.8 MMBtu).
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    The Applicants assert the revised formula is similar to the price 
formulas used by most other LNG projects that sell into the Japanese 
market. They also assert the new formula will permit ``more market 
responsive'' pricing, thereby maintaining the competitiveness of their 
LNG exports.
    The application of PANGC and Marathon to amend their authorization 
to export LNG from Alaska to Japan will be reviewed pursuant to section 
3 of the Natural Gas Act,\7\ as amended by section 201 of the Energy 
Policy Act of 1992 (Pub. L. 102-486), and the authority contained in 
DOE Delegation Order Nos. 0204-111 and 0204-127.\8\ Under section 3, an 
export from Alaska to a foreign country must be authorized unless there 
is a finding ``it will not be consistent with the public interest.'' 
\9\ Section 3 thus creates a statutory presumption in favor of approval 
of this application which opponents bear the burden of overcoming.
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    \7\ 15 U.S.C. Sec. 717b.
    \8\ See 49 F.R. 6684, February 22, 1984. On January 6, 1989, 
certain functions including the regulation of natural gas imports 
and exports, were transferred from the Economic Regulatory 
Administration (a predecessor of FE) to FE. DOE Delegation Order No. 
0204-127 specifies the transferred functions (54 FR 11436, March 20, 
1989).
    \9\ See supra note 5.
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    Furthermore, in evaluating an export application, the Department 
applies the principles described in DOE Delegation Order No. 0204-111, 
which focuses primarily on domestic need for the natural gas to be 
exported and the Secretary's natural gas import policy guidelines, 
which presume trade arrangements freely negotiated by commercial 
parties will benefit the public.\10\
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    \10\ See 49 FR 6684, February 22, 1984. While those policy 
guidelines deal specifically with imports, the principles are 
applicable to exports as well (Yukon Pacific Corporation, DOE/FE 
Opinion and Order No. 350, 1 FE para. 70,259 (1989), reh'g denied, 1 
FE para. 70,303 (1990).
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    The Department previously determined there is no domestic need for 
the LNG exports affected by the revised price formula and will evaluate 
the requested amendment based on whether it is in accord with DOE's 
international gas trade policy.\11\ Parties that may oppose this 
application should comment in their responses on this issue as it 
relates to the contract price revision. The Applicants assert the 
proposed amendment is in the public interest. Parties opposing the 
amendment bear the burden of overcoming this assertion.
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    \11\ See supra note 2.
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NEPA Compliance

    The National Environmental Policy Act (NEPA), 42 U.S.C. 4321 et 
seq., requires DOE to give appropriate consideration to the 
environmental effects of its proposed decisions. No final decision will 
be issued in this proceeding until DOE has met its NEPA 
responsibilities.

Public Comment Procedures

    In response to this notice, any person may file a protest, motion 
to intervene or notice of intervention, as applicable, and written 
comments. Any person wishing to become a party to the proceeding and to 
have their written comments considered as the basis for any decision on 
the application must, however, file a motion to intervene or notice of 
intervention, as applicable. The filing of a protest with respect to 
this application will not serve to make the protestant a party to the 
proceeding, although protests and comments received from persons who 
are not parties will be considered in determining the appropriate 
action to be taken on the application. All protests, motions to 
intervene, notices of intervention, and written comments must meet the 
requirements specified by the regulations in 10 CFR part 590. Protests, 
motions to intervene, notices of intervention, requests for additional 
procedures, and written comments should be filed with the Office of 
Natural Gas & Petroleum Import & Export Activities at the address 
listed above.
    It is intended that a decisional record on this application will be 
developed through responses to this notice by parties, including the 
parties' written comments and replies thereto. Additional procedures 
will be used as necessary to achieve a complete understanding of the 
facts and issues. A party seeking intervention may request

[[Page 25477]]

that additional procedures be provided, such as additional written 
comments, an oral presentation, a conference, or trial-type hearing. 
Any request to file additional written comments should explain why they 
are necessary. Any request for an oral presentation should identify the 
substantial question of fact, law, or policy at issue, show that it is 
material and relevant to a decision in the proceeding, and demonstrate, 
why an oral presentation is needed. Any request for a conference should 
demonstrate why the conference would materially advance the proceeding. 
Any request for a trial-type hearing must show that there are factual 
issues genuinely in dispute that are relevant and material to a 
decision and that a trial-type hearing is necessary for a full and true 
disclosure of the facts.
    If an additional procedure is scheduled, a notice will provide 
notice to all parties. If no party requests additional procedures, a 
final opinion and order may be issued based on the official record, 
including the application and responses filed by parties pursuant to 
this notice, in accordance with 10 CFR 590.316.
    The application filed by PANGC and Marathon is available for 
inspection and copying in the Natural Gas & Petroleum Import & Export 
Activities Docket Room, 3E-042, at the above address. The docket room 
is open between the hours of 8:00 a.m. and 4:30 p.m., Monday through 
Friday, except Federal holidays.

    Issued in Washington, DC, on April 21, 2000.
John W. Glynn,
Manager, Natural Gas Regulation, Office of Natural Gas & Petroleum 
Import & Export Activities, Office of Fossil Energy.
[FR Doc. 00-10895 Filed 5-1-00; 8:45 am]
BILLING CODE 6450-01-P