[Federal Register Volume 77, Number 29 (Monday, February 13, 2012)]
[Notices]
[Pages 7568-7571]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-3247]


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DEPARTMENT OF ENERGY

[FE Docket No. 11-161-LNG]


Freeport LNG Expansion, L.P. and FLNG Liquefaction, LLC; 
Application for Long-Term Authorization To Export Domestically Produced 
Liquefied Natural Gas to Non Free Trade Agreement Countries for a 25-
Year Period

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 (Application), filed on 
December 19, 2011, by Freeport LNG Expansion, L.P. and FLNG 
Liquefaction, LLC (collectively, FLEX), requesting long-term, multi-
contract authorization to export domestically produced liquefied 
natural gas (LNG) in an amount up to the equivalent of 511 Billion 
cubic feet (Bcf) of natural gas per year, which averages to 1.4 Bcf per 
day (Bcf/d), over a 25-year period, commencing on the earlier of the 
date of first export or eight years from the date the requested 
authorization is granted. The LNG would be exported from the Freeport 
LNG Terminal on Quintana Island near Freeport, Texas, to any country 
(1) with which the United States does not have a free trade agreement 
(FTA) requiring national treatment for trade in natural gas, (2) which 
has developed or in the future develops the capacity to import LNG via 
ocean-going carrier, and (3) with which trade is not prohibited by U.S. 
law or policy. The Application is filed independent of, and in addition 
to, FLEX's prior application filed with DOE/FE under Docket No. 10-161-
LNG. This Application was filed under section 3 of the Natural Gas Act 
(NGA). Protests, motions to intervene, 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 using procedures detailed in the Public Comment 
Procedures section no later than 4:30 p.m., eastern time, April 13, 
2012.

ADDRESSES:
    Electronic Filing on the Federal eRulemaking Portal under FE Docket 
No. 11-161-LNG: http://www.regulations.gov.
    Electronic Filing by email: <a href="/cdn-cgi/l/email-protection#305655425751437058411e545f551e575f46"><span class="__cf_email__" data-cfemail="27414255404654674f560943484209404851">[email protected]</span></a>.

Regular Mail

    U.S. Department of Energy (FE-34), Office of Natural Gas Regulatory

[[Page 7569]]

Activities, Office of Fossil Energy, P.O. Box 44375, Washington, DC 
20026-4375.

Hand Delivery or Private Delivery Services (e.g., FedEx, UPS, etc.)

    U.S. Department of Energy (FE-34), Office of Natural Gas Regulatory 
Activities, Office of Fossil Energy, Forrestal Building, Room 3E-042, 
1000 Independence Avenue SW., Washington, DC 20585.

FOR FURTHER INFORMATION CONTACT:
    Larine Moore or Marc Talbert, U.S. Department of Energy (FE-34), 
Office of Natural Gas Regulatory Activities, Office of Fossil Energy, 
Forrestal Building, Room 3E-042, 1000 Independence Avenue SW., 
Washington, DC 20585. (202) 586-9478; (202) 586-7991.
    Edward Myers, U.S. Department of Energy, Office of the Assistant 
General Counsel, Electricity & Fossil Energy, Forrestal Building, Room 
6B-159, 1000 Independence Ave. SW., Washington, DC 20585. (202) 586-
3397.

SUPPLEMENTARY INFORMATION:

Background

    FLNG Expansion is a Delaware limited partnership and a wholly owned 
subsidiary of Freeport LNG Development, L.P. with its principal place 
of business in Houston, Texas. FLNG Liquefaction is a Delaware limited 
liability company and a wholly owned subsidiary of FLNG Expansion with 
its principal place of business in Houston, Texas. FLEX, through one or 
more of its subsidiaries, intends to develop, own and operate natural 
gas liquefaction facilities to receive and liquefy domestic natural gas 
for export (Liquefaction Project) to foreign markets, pursuant to the 
export authorization sought herein. The Liquefaction Project facilities 
will be integrated into the existing Freeport Terminal, and is in 
addition to a separate liquefaction project proposed at the same 
terminal for substantially the same volume. The Freeport Terminal 
presently consists of a marine berth, two 160,000 cubic meter full 
containment LNG storage tanks, LNG vaporization systems, associated 
utilities and a 9.6-mile pipeline and meter station.
    FLEX intends to expand the terminal to provide natural gas 
pretreatment, liquefaction, and export capacity of up to 511 Bcf per 
year, which averages to 1.4 Bcf/d.\1\ The facility will be designed so 
that the addition of liquefaction capability will not preclude the 
Freeport Terminal from operating in vaporization and send-out mode. 
FLEX states that although this Application requests authorization 
substantially similar to the pending application in DOE/FE Docket No. 
10-161-LNG, this is a wholly separate Application.\2\ As a result, the 
total of the liquefaction capacity at the Freeport Terminal of both 
this Application and the prior application in Docket 10-161-LNG is 2.8 
Bcf/d. FLEX further states that demand for liquefaction capacity has 
been significant since it filed its initial export applications a year 
ago, and it expects to secure long-term contracts for the liquefaction 
and export of the equivalent of an additional 1.4 Bcf/d of natural gas.
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    \1\ When added to the first proposed liquefaction project 
associated with applications received by DOE/FE in 2010, the 
combined projects will have the capacity to produce LNG for export 
from domestic sources equivalent to 2.8 Bcf/d.
    \2\ On December 17, 2010, FLEX filed two applications to export 
domestically produced LNG from a proposed liquefaction project at 
the Freeport Terminal capable of producing LNG from domestic 
resources up to the equivalent of 1.4 Bcf/d of natural gas. The 
first of these applications, which requested long-term authorization 
to export LNG to FTA countries, was granted by DOE/FE in Order No. 
2913 on February 10, 2011. The second application (DOE/FE Docket No. 
10-161-LNG), which requested long-term authorization to export LNG 
to countries with which the United States does not have an FTA, is 
still pending before DOE/FE. Both applications sought to each export 
the entire capacity of the proposed facility.
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Current Application

    In the instant application, FLEX seeks long-term, multi-contract 
authorization to export domestically produced LNG up to the equivalent 
of 511 Bcf of natural gas per year, 1.4 Bcf/d, for a period of twenty-
five years beginning on the earlier of the date of first export or 
eight years from the date the authorization is granted by DOE/FE. FLEX 
requests that such long-term authorization provide for export from the 
Freeport LNG Terminal on Quintana Island, Texas to any country with 
which the United States does not have an FTA requiring national 
treatment for trade in natural gas, which has developed or in the 
future develops the capacity to import LNG via ocean-going carrier, and 
with which trade is not prohibited by U.S. law or policy.
    FLEX states that rather than enter into long-term natural gas 
supply or LNG export contracts, it contemplates that its business model 
will be based primarily on Liquefaction Tolling Agreements (LTA), under 
which individual customers who hold title to natural gas will have the 
right to deliver that gas to FLEX and receive LNG. FLEX states that in 
the current natural gas market, LTAs fulfill the role previously 
performed by long-term supply contracts, in that they provide stable 
commercial arrangements between companies involved in natural gas 
services. FLEX states that the Liquefaction Project will require 
significant capital expenditures on fixed assets. FLEX further states 
that although it has not yet entered into long-term LTAs or other 
commercial arrangements, long-term export authorization is required to 
attract prospective LTA customers willing to make large-scale, long-
term investments in LNG export arrangements. FLEX states that both are 
required to obtain necessary financing for the Liquefaction Project.
    FLEX requests long-term, multi-contract authorization to engage in 
exports of LNG on its own behalf or as agent for others. FLEX 
contemplates that the title holder at the point of export \3\ may be 
FLEX or one of FLEX's LTA customers, or another party that has 
purchased LNG from an LTA customer pursuant to a long-term contract. 
FLEX requests authorization to register each LNG title holder for whom 
FLEX seeks to export as agent, and proposes that this registration 
include a written statement by the title holder acknowledging and 
agreeing to comply with all applicable requirements included by DOE/FE 
in FLEX's export authorization, and to include those requirements in 
any subsequent purchase or sale agreement entered into by that title 
holder. In addition to its registration of any LNG title holder for 
whom FLEX seeks to export as agent, FLEX states that it will file under 
seal with DOE/FE any relevant long-term commercial agreements between 
FLEX and such LNG title holder, including LTAs, once they have been 
executed.\4\ FLEX provides further discussion of the gas supply markets 
in the Application.
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    \3\ LNG exports occur when the LNG is delivered to the flange of 
the LNG export vessel. See The Dow Chemical Company, FE Docket No. 
10-57-LNG, Order No. 2859 at p. 7 (October 5, 2010).
    \4\ FLEX states the practice of filing of contracts after the 
DOE/FE has granted export authorization is well established. See 
Yukon Pacific Corporation, ERA Docket No. 87-68-LNG, Order No. 350 
(November 16, 1989); Distrigas Corporation, FE Docket No. 95-100-
LNG, Order No. 1115, at p. 3 (November 7, 1995); See also Freeport 
LNG Expansion and FLNG Liquefaction, LLC, FE Docket No. 10-160-LNG, 
Order No. 2913 at 9-10 (February 10, 2011).
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    FLEX states that the natural gas supply underlying the proposed 
exports will come primarily from the highly liquid Texas market, but 
may draw upon the interconnected general U.S. natural gas market. FLEX 
states that given the size of the traditional natural gas market in 
close proximity to the Freeport Terminal, and the exponential growth of 
unconventional resources in the region, a diverse and reliable source

[[Page 7570]]

of natural gas will be available to support the requested 
authorization.

Public Interest Considerations

    In support of its Application, FLEX states that DOE/FE has 
consistently ruled that section 3(a) of the NGA creates a rebuttable 
presumption that proposed exports of natural gas are in the public 
interest. FLEX asserts that unless opponents of an export license make 
an affirmative showing based on evidence in the record that the export 
would be inconsistent with the public interest, DOE/FE must grant the 
export application.\5\
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    \5\ DOE/FE Order No. 1473, note 42 at p. 13, citing Panhandle 
Producers and Royalty Owners Association v. ERA, 822 F.2d 1105, 1111 
(DC Cir. 1987).
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    FLEX asserts that in evaluating whether the proposed exportation is 
within the public interest, DOE/FE applies the principles established 
by the Policy Guidelines,\6\ which promote free and open trade by 
minimizing federal control and involvement in energy markets, and DOE 
Delegation Order No. 0204-111, which requires ``consideration of the 
domestic need for the gas to be exported.'' FLEX refers to DOE/FE Order 
No. 2961,\7\ in which DOE/FE stated that its public interest review of 
applications to export natural gas to countries with which the United 
States does not have an FTA ``has continued to focus on the domestic 
need for the natural gas proposed to be exported; whether the proposed 
exports pose a threat to the security of domestic natural gas supplies; 
and any other issue determined to be appropriate * * *''.
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    \6\ Policy Guidelines and Delegation Orders Relating to the 
Regulation of Imported Natural Gas, 49 FR 6684 (Feb. 22, 1984).
    \7\ Sabine Pass Liquefaction LLC, DOE/FE Docket No. 10-110 LNG 
(DOE/FE Order No. 2961), May 20, 2011.
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    FLEX states that as a result of technological advances, huge 
reserves of domestic shale gas that were previously infeasible or 
uneconomic to develop are now being profitably produced in many regions 
of the United States. FLEX asserts that the United States is now 
estimated to have more natural gas resources than it can use in a 
century.\8\ FLEX also states that large volumes of domestic shale gas 
reserves and continued low production costs will enable the United 
States to export LNG while also meeting domestic demand for natural gas 
for decades to come.
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    \8\ FLEX states that domestic natural gas reserves, including 
both Alaska and the Lower 48, are estimated to total about 2,100 
Tcf, which is about 92 times the annual U.S. consumption of 22.8 Tcf 
in 2009. MIT Energy Initiative Study on The Future of Natural Gas 
Massachusetts Institute of Technology Report (MIT REPORT), at 30 
(2011).
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    FLEX asserts that as U.S. natural gas reserves and production have 
risen, U.S. natural gas prices have fallen to the point where they are 
among the lowest in the developed world. FLEX states that LNG supply 
contracts in Asian markets are pegged to crude oil prices. FLEX asserts 
that while Europe receives pipeline gas from various sources, the long 
supply chains and relative inflexibility of markets have made 
diversification of supply a high priority. FLEX states that domestic 
natural gas prices are projected to remain low relative to European and 
Asian markets well into the future, making exports of LNG by vessel a 
viable long-term opportunity for the United States.
    FLEX states that the Liquefaction Project is positioned to provide 
the Gulf Coast region and the United States with significant economic 
benefits by increasing domestic natural gas production. FLEX states 
that these benefits will be obtained with only a minimal effect on 
domestic natural gas prices. FLEX states that at current and forecasted 
rates of demand, the United States' natural gas reserves will meet 
demand for 100 years. FLEX states that the Liquefaction Project allows 
the United States to benefit now from the natural gas resources that 
may not otherwise be produced for many decades, if ever. FLEX provides 
further discussion on why the proposed export authorization is in the 
public interest.
    First, FLEX contends that the project will cause direct and 
indirect job creation through construction (3,000 onsite jobs over 3-4 
years) and operation (20 to 30 permanent jobs) of the Liquefaction 
Project, and indirect jobs as a result of increased drilling for and 
production of natural gas (17,000 to 21,000 jobs).\9\
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    \9\ Freeport LNG Expansion, L.P. and FLNG Liquefaction, LLC, 
DOE/FE Docket 10-161-LNG, Appendix B: Analysis of Freeport LNG 
Export Impact on U.S. Markets, 12 (Altos Management Partners, Inc. 
2010).
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    Second, FLEX maintains that the Liquefaction Project would create 
significant economic stimulus, with the total economic benefits to the 
American economy estimated to be between $3.6 and $5.2 billion per year 
from 2015 to 2040, or $90 to $130 billion over the requested 25-year 
export term.\10\
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    \10\ Id.
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    Third, FLEX contends that there will be a material improvement in 
the U.S. balance of trade. FLEX states that assuming an average value 
of $7 per million Btu, exporting approximately 1.4 Bcf/d of LNG through 
the Liquefaction Project will improve the U.S. balance of payments by 
approximately $3.9 billion per year, or $97.5 billion over the 
requested 25-year export term.
    Fourth, FLEX states the project will have significant environmental 
benefits by reducing global greenhouse gas emissions if the natural gas 
exported is used as a substitute for coal and fuel oil.
    Fifth, FLEX states the Liquefaction Project supports American 
energy security. To support this statement, FLEX states that the United 
States has developed a massive natural gas resource base that is 
sufficient to supply domestic demand for a century, even with 
significant exports of LNG. FLEX states the Liquefaction Project will 
not adversely affect U.S. Energy security. FLEX references the MIT 
Report supra, which concludes that ``[t]he U.S. should sustain North 
American energy market integration and support development of a global 
`liquid' natural gas market with diversity of supply. A corollary is 
that the U.S. should not erect barriers to gas imports or exports.'' 
\11\
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    \11\ MIT Report supra note 8, at 157.
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    Finally, FLEX provides further discussion of various studies that 
allegedly support FLEX's public interest analysis.
    Based on the reasoning provided in the Application, FLEX requests 
that DOE/FE determine that FLEX's request for long-term, multi-contract 
authorization to export LNG to non-FTA countries is not inconsistent 
with the public interest.

Environmental Impact

    FLEX states that the Federal Energy Regulatory Commission (FERC) 
has already authorized the Phase II expansion of the Freeport LNG 
Terminal. FLEX also states that the Liquefaction Project improvements, 
including those required to conduct operations under the current 
Application will be contained within the previously authorized 
operational area of the Freeport LNG Terminal on Quintana Island, 
Texas. FLEX states that the potential air impacts of the Liquefaction 
Project, including the facilities required to support the Export 
Authorization, will be reviewed by the Texas Commission on 
Environmental Quality (TCEQ) and the Environmental Protection Agency 
(EPA). FLEX states that other environmental impacts of the Liquefaction 
Project will be reviewed by FERC under the National Environmental 
Policy Act (NEPA). FLEX states that the FERC authorization will be 
conditioned upon issuance of air quality permits from TCEQ and EPA. 
Accordingly, FLEX requests that DOE/FE issue a conditional order 
authorizing export of domestically produced LNG pending

[[Page 7571]]

completion of FERC's environmental review.

DOE/FE Evaluation

    The Application will be reviewed pursuant to section 3 of the NGA, 
as amended, and the authority contained in DOE Delegation Order No. 00-
002.00L (April 29, 2011) and DOE Redelegation Order No. 00-002.04E 
(April 29, 2011). In reviewing this LNG export Application, DOE will 
consider any issues required by law or policy. To the extent determined 
to be relevant or appropriate, these issues will include the impact of 
LNG exports associated with this Application, and the cumulative impact 
of any other application(s) previously approved, on domestic need for 
the gas proposed for export, adequacy of domestic natural gas supply, 
U.S. energy security, and any other issues, including the impact on the 
U.S. economy (GDP), consumers, and industry, job creation, U.S. balance 
of trade, international considerations, and whether the arrangement is 
consistent with DOE's policy of promoting competition in the 
marketplace by allowing commercial parties to freely negotiate their 
own trade arrangements. Parties that may oppose this Application should 
comment in their responses on these issues, as well as any other issues 
deemed relevant to the Application.
    NEPA 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.
    Due to the complexity of the issues raised by the Applicants, 
interested persons will be provided 60 days from the date of 
publication of this Notice in which to submit comments, protests, 
motions to intervene, notices of intervention, or motions for 
additional procedures.

Public Comment Procedures

    In response to this notice, any person may file a protest, 
comments, or a motion to intervene or notice of intervention, as 
applicable. Any person wishing to become a party to the proceeding must 
file a motion to intervene or notice of intervention, as applicable. 
The filing of comments or a protest with respect to the Application 
will not serve to make the commenter or 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, comments, motions 
to intervene or notices of intervention must meet the requirements 
specified by the regulations in 10 CFR part 590.
    Filings may be submitted using one of the following methods: (1) 
Submitting comments in electronic form on the Federal eRulemaking 
Portal at http://www.regulations.gov, by following the on-line 
instructions and submitting such comments under FE Docket No. 11-161-
LNG. DOE/FE suggests that electronic filers carefully review 
information provided in their submissions and include only information 
that is intended to be publicly disclosed; (2) emailing the filing to 
<a href="/cdn-cgi/l/email-protection#64020116030517240c154a000b014a030b12"><span class="__cf_email__" data-cfemail="2a4c4f584d4b596a425b044e454f044d455c">[email protected]</span></a> with FE Docket No. 11-161-LNG in the title line; (3) 
mailing an original and three paper copies of the filing to the Office 
Natural Gas Regulatory Activities at the address listed in ADDRESSES; 
or (4) hand delivering an original and three paper copies of the filing 
to the Office of Natural Gas Regulatory Activities at the address 
listed in ADDRESSES.
    A decisional record on the 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 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, notice will be provided 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 FLEX is available for inspection and 
copying in the Office of Natural Gas Regulatory Activities docket room, 
Room 3E-042, 1000 Independence Avenue SW., Washington, DC 20585. The 
docket room is open between the hours of 8 a.m. and 4:30 p.m., Monday 
through Friday, except Federal holidays. The Application and any filed 
protests, motions to intervene or notice of interventions, and comments 
will also be available electronically by going to the following DOE/FE 
Web address: http://www.fe.doe.gov/programs/gasregulation/index.html. 
In addition, any electronic comments filed will also be available at: 
http://www.regulations.gov.

    Issued in Washington, DC on February 7, 2012.
John A. Anderson,
Manager, Natural Gas Regulatory Activities, Office of Oil and Gas 
Global Security and Supply, Office of Fossil Energy.
[FR Doc. 2012-3247 Filed 2-10-12; 8:45 am]
BILLING CODE 6450-01-P


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