This section describes the factors affecting recent LNG activities in the United States, the liquefaction process, DOE’s responsibilities for authorizing export applications, FERC’s responsibilities for authorizing export facilities, and positions of those supporting or opposing the export of LNG. According to the Congressional Research Service, in the early 2000s, natural gas production in the United States was declining as energy demand was increasing and, as recently as the mid-to-late 2000s the United States was projected to be a growing natural gas importer. In addition to four onshore import terminals that were already operational, natural gas companies built five LNG onshore import facilities in the latter half of the 2000s to meet the expected need for natural gas imports. However, technology enhancements improved the extraction of natural gas from shale formations and resulted in a dramatic increase in domestic natural gas production. These technology enhancements allow companies to extract natural gas from shale formations that were previously considered to be inaccessible because traditional techniques did not yield sufficient amounts for economically viable production. According to Energy Information Administration (EIA) data, between 2007 and 2013, domestic natural gas withdrawals increased by 22 percent, driven primarily by increased withdrawals from shale formations. According to EIA, increases in natural gas supplies generally cause prices to drop. Specifically, between 2007 and 2013, the price of natural gas in the United States decreased by nearly 50 percent. As the price of natural gas in the United States declined, prices in Europe and Asia remained considerably higher. In July 2014, FERC estimated that prices of LNG imported to Europe and Asia during August of 2014 would be about 100 and 250 percent higher than prices in the United States, respectively. These price differences have motivated U.S companies to apply to export natural gas. The majority of U.S. trade in natural gas is by pipeline with Canada and Mexico; however, over long distances separated by water, natural gas is generally converted to LNG and transported by specialized tanker ship. To convert natural gas to LNG, companies pretreat the natural gas to remove components that would freeze during the liquefaction process and contaminate the LNG.through a complex system called a liquefaction train that cools the natural gas to -260 degrees Fahrenheit, converting it to a liquid state. This process reduces the volume of the gas by 600 times. Once liquefied, the After the gas is pretreated, it is processed natural gas is stored in large tanks until it is offloaded to a ship for transport. Once the ship reaches its destination, it is offloaded to tanks for storage or converted to natural gas for distribution by pipeline.illustrates some of the common components of an LNG export facility. Under Section 3 of the NGA, the import or export of LNG and the construction or expansion of LNG facilities requires authorization from DOE. In 1984, DOE delegated the responsibility to approve or deny applications for LNG facilities to FERC. Under Section 3, an authorization is to be granted unless DOE finds that approving the export or import is inconsistent with the public interest. According to DOE, Section 3(a) of the NGA creates a rebuttable presumption that a proposed export of natural gas is in the public interest—that is, it places the burden on those opposing an application to demonstrate that an export is inconsistent with the public interest. The NGA also authorizes DOE to attach terms and conditions necessary to protect the public interest. DOE evaluates public interest under Section 3, and can conduct studies or other reviews to support its public interest determination. In the Energy Policy Act of 1992, Congress amended the NGA to require DOE to use a different standard for the review of applications for export to countries with FTAs with the United States (FTA countries). Specifically, under Section 3(c) of the NGA, DOE must treat applications to export LNG to FTA countries as consistent with the public interest, and DOE is to approve these applications without modification or delay. These FTA applications therefore do not require the same public interest review as non-FTA applications. DOE started to receive applications to export LNG in 2010 and, since then, it has approved 37 of 42 applications to export LNG to FTA countries. During this same period, DOE approved 9 (3 final and 6 conditional) of 35 applications to export LNG to non-FTA countries. Most major importers of LNG are non-FTA countries such as Japan and India, among others. As previously mentioned, this report discusses DOE’s process to review applications to export to non-FTA countries. In keeping with its obligation to authorize LNG facility siting and construction under the NGA, FERC reviews applications to construct and operate LNG export facilities. FERC’s review is considered a federal action and subject to the National Environmental Policy Act (NEPA). NEPA requires federal agencies to assess the projected effects of major federal actions that significantly affect the environment. Prior to the NEPA review, the law requires applicants to communicate with FERC for a minimum of 6 months—known as pre-filing—before submitting an application. FERC acts as the lead agency for the environmental review required by NEPA, prepares the NEPA environmental documentation, and coordinates and sets the schedule for all federal authorizations. The outcome of this review is an environmental document, also called the NEPA document, which provides the commissioners with staff’s assessment of the environmental impacts from facility construction and operation. DOE and FERC consider comments from the public during the application review process, and these comments reflect a range of perspectives on the potential benefits or harm from exports. Proponents maintain that LNG exports are consistent with U.S. free trade policies and will provide an economic boon for the United States, resulting in increased employment and an improved trade balance among other things. They assert that the increased availability of natural gas resources will prevent a significant increase in natural gas prices. Opponents have expressed numerous environmental and economic concerns about LNG exports. For example, opponents have expressed concern that exports will increase hydraulic fracturing and its associated environmental effects, as well as increase greenhouse gas emissions from the production and consumption of natural gas.that exports will increase domestic natural gas prices, hurting the public and the growing industrial and manufacturing sectors that are sensitive to natural gas prices. Opponents have also stated that the primary beneficiaries of LNG exports will be a small segment of society involved in natural gas development and trade, and that most segments of society Other opponents have expressed concern will lose economically. Evaluating whether exports of LNG to non-FTA countries are consistent with the public interest is beyond the scope of this report. Since 2010, DOE has granted final approval to 3 applications and conditional approval to 6 others. DOE considers a range of factors to determine whether approving an export application is in the public interest. As of mid-September 2014, DOE has granted 3 final approvals for applications to export LNG, including the Sabine Pass application in 2012 and the Cameron LNG and Carib Energy applications in September 2014. Sabine Pass is the only LNG export facility currently under construction in the United States and is expected to begin operations in late 2015. In August 2011, after DOE conditionally approved exports from Sabine Pass, DOE commissioned a study of the cumulative effects of additional LNG exports on the economy and the public interest.approve any conditional applications during the 16-month period of the DOE did not study. The study was completed in December 2012. Since then, DOE has conditionally approved 7 applications, including the Cameron LNG application that it granted final approval in September 2014 (See fig. 2). DOE also approved the Carib Energy application in September 2014. DOE’s export approvals, as of late August 2014, amount to 10.56 billion cubic feet of natural gas per day in the form of LNG; for comparison, Qatar, the world’s largest exporter of LNG, exported about 10 billion cubic feet per day in 2012. According to DOE, when determining whether approval of an application is in the public interest, DOE focuses on (1) the domestic need for natural gas, (2) whether the proposed export threatens the security of domestic natural gas supplies, and (3) whether the arrangement is consistent with DOE’s policy of promoting market competition along with other factors bearing on the public interest, such as environmental concerns. In passing the NGA, Congress did not define “public interest;” however, in 1984, DOE developed policy guidelines establishing criteria that the agency uses to evaluate applications for natural gas imports. The guidelines stipulate that, among other things, the market—not the government—should determine the price and other contract terms of imported natural gas. In 1999, DOE began applying these guidelines to natural gas exports. DOE’s review of export applications is not a standardized process, according to agency officials; rather, it is a case-by-case deliberation, where each application is considered separately from others. DOE’s review process begins when an applicant submits documentation to DOE requesting permission to export LNG. DOE examines applications one at a time, and it issues a notice of application in the Federal Register to invite persons interested in the application to comment, protest, or Applicants are then given an opportunity to respond to intervene.comments. DOE’s internal review includes an examination of the application and analysis of public interest using public comments and applicant responses, the criteria outlined in its policy guidelines, the NGA, DOE’s study of the effects of additional LNG exports, and past DOE authorizations. As discussed above, the NGA authorizes DOE to attach terms and conditions necessary to protect the public interest. To further inform its public interest review, DOE commissioned the study of the potential effects of additional exports on the economy.