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[Federal Register Volume 76, Number 18 (Thursday, January 27, 2011)]
[Notices]
[Pages 4885-4888]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-1812]

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DEPARTMENT OF ENERGY

[FE Docket No. 10-161-LNG]

Freeport LNG Expansion, L.P. and FLNG Liquefaction, LLC 
Application for Long-Term 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 (Application), filed on 
December 17, 2010, by Freeport LNG Expansion L.P. (FLNG Expansion) and 
FLNG Liquefaction, LLC (FLNG Liquefaction) (collectively FLEX), 
requesting long-term, multi-contract authorization to export up to 9 
million metric tons per annum (mtpa) of domestic natural gas as 
liquefied natural gas (LNG) for a 25-year period commencing on the date 
of the first export or five years from the date of the authorization, 
whichever is sooner. The LNG would be exported from the Freeport 
Terminal on Quintana Island near Freeport, Texas, to any country with 
which the United States does not have a free trade agreement (FTA) 
requiring national treatment for trade in natural gas and LNG, which 
has 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. The 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 at the address listed below no later than 4:30 p.m., 
eastern time, March 28, 2011.

ADDRESSES: U.S. Department of Energy (FE-34), Office of Oil and Gas 
Global Security and Supply, 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 Oil and Gas Global Security and 
Supply, 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 for Electricity and 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

[[Page 4886]]

more of its subsidiaries, intends to develop, own and operate natural 
gas liquefaction facilities to receive and liquefy domestic natural gas 
for export (pursuant to the export authorization sought herein) to 
foreign markets (Liquefaction Project). The Liquefaction Project 
facilities will be integrated into the existing Freeport Terminal. 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 9 mtpa of LNG, 
which FLEX states is equivalent to 1.4 billion cubic feet of natural 
gas per day (Bcf/d). 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. The Liquefaction Project 
facilities will include the following facilities that were authorized 
by the Federal Energy Regulatory Commission (FERC) in an order dated 
September 26, 2006 \1\: (1) A second marine berthing dock; (2) A third 
LNG storage tank; and (3) Transfer pipelines between the second marine 
dock and LNG storage tanks.
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    \1\ Freeport LNG Development, L.P., 116 FERC Sec.  61,290, 
Docket No. CP05-361-000 (September 26, 2006).
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Current Application

    In the instant Application, FLEX requests that DOE grant long-term, 
multi-contract authorization for FLEX to export domestic LNG from the 
Freeport Terminal to any country with which the United States does not 
have an FTA requiring national treatment for trade in natural gas and 
LNG, 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 requests this authorization for 
up to 9 mtpa of LNG, up to a total of 225 million metric tons, over a 
25-year term beginning on the date of the first export or five years 
from the date the authorization is granted, whichever is sooner.
    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 \2\ 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.\3\
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    \2\ 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).
    \3\ 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).
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    FLEX states that the source of natural gas supply for the 
Liquefaction Project will be the general United States natural gas 
market, including natural gas produced from shale deposits. 
Specifically, FLEX asserts that natural gas supply will come primarily 
from the highly liquid Texas market, but may draw upon the 
interconnected general U.S. natural gas market. FLEX states that while 
some of the proposed export supply may be secured through long-term 
contracts, large volumes are likely to be acquired on the spot market. 
FLEX provides further discussion of the gas supply markets in the 
Application.

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.\4\
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    \4\ 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,\5\ 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 further states that in 
determining whether a particular application to export is within the 
public interest, the principal focus of DOE/FE's review is an analysis 
of the domestic need for natural gas proposed to be exported, and any 
other factors to the extent they are shown to be relevant to a public 
interest determination.
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    \5\ Policy Guidelines and Delegation Orders Relating to the 
Regulation of Imported Natural Gas, 49 FR 6684 (Feb. 22, 1984).
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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.\6\ 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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    \6\ The Future of Natural Gas, Interim Report MIT Energy 
Initiative at 9 (2010), ``For this study, we have assumed a mean 
remaining [U.S.] resource base of around 2,100 Tcf--about 92 times 
the annual U.S. consumption of 22.8 Tcf in 2009'' (MIT Report).
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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

[[Page 4887]]

in the developed world.\7\ FLEX states that many natural gas and LNG 
supply contracts in European and Asian markets are pegged to the price 
of alternative liquid fuels, such as oil, and global LNG prices have 
increased significantly during the last decade as the price of oil has 
risen. 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.
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    \7\ Analysis of Freeport LNG Export Impact on U.S. Markets, T. 
Choi, D. Nesbitt, and B. Barnds, at 6, 15 (Altos Management 
Partners, Inc. 2010). (Altos Report).
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    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 (1,000 onsite jobs over 2-3 
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 23,000 jobs).\8\
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    \8\ Altos Report, footnote 7, at 12 (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.\9\
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    \9\ 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.
    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 (footnote 6), which recommends policies the United States should 
pursue to ``encourage an efficient integrated global gas market'',\10\ 
and further that the United States ``should not erect barriers to gas 
imports or exports''.\11\
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    \10\ MIT Report, footnote 6, at xvii (2010).
    \11\ Id. at 71.
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    Finally, FLEX provides a further discussion of the Altos Report, 
which FLEX commissioned (see footnote 7).
    Based on the reasoning provided in the Application, FLEX requests 
that the 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 Liquefaction Project improvements will be 
contained within the previously authorized operational area of the 
Freeport Terminal on Quintana Island, that the potential air impacts of 
the Liquefaction Project will be reviewed by the Texas Commission on 
Environmental Quality (TCEQ) and the Environmental Protection Agency 
(EPA), and other environmental impacts of the Liquefaction Project will 
be reviewed by FERC under the National Environmental Protection Act 
(NEPA). FLEX states that 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 completion of FERC's environmental 
review.

DOE/FE Evaluation

    This export Application will be reviewed pursuant to section 3 of 
the NGA, as amended, and the authority contained in DOE Delegation 
Order No. 00-002.00J (Sept. 17, 2010) and DOE Redelegation Order No. 
00-002.04D (Nov. 6, 2007). In reviewing this LNG export Application, 
DOE will consider any issues required by law or policy. To the extent 
determined to be necessary or appropriate, these issues will include 
domestic need for the gas, the impact on U.S. gross domestic product, 
consumers, industry, U.S. balance of trade, jobs creation, and other 
issues, as well as 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 and novelty 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

    You may submit comments in electronic form on the Federal 
eRulemaking Portal at http://www.regulations.gov. Alternatively, 
written comments can be submitted using the procedures discussed below. 
If using electronic filing, follow the on-line instructions and submit 
such comments under FE Docket No. 10-161-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.
    In response to this notice, any person may file a protest, motion 
to intervene or notice of intervention or written comments, by 
hardcopy, as provided in DOE's regulations at 10 CFR part 590.
    Any person wishing to become a party to the proceeding and to have 
their written comments considered as a basis for any decision on the 
Application 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 may 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. Except 
where comments are filed electronically, as described above, comments, 
protests, motions to

[[Page 4888]]

intervene, notices of intervention, and requests for additional 
procedures shall be filed with the Office of Oil and Gas Global 
Security and Supply at the address listed in the ADDRESSES section.
    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 Oil and Gas Global Security and Supply docket 
room, 3E-042, at the above address listed in ADDRESSES. 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 January 21, 2011.
John A. Anderson,
Manager, Natural Gas Regulatory Activities, Office of Oil and Gas 
Global Security and Supply, Office of Fossil Energy.
[FR Doc. 2011-1812 Filed 1-26-11; 8:45 am]
BILLING CODE 6450-01-P
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