U.S. LNG Exports: DOE and FERC Roles and Boundaries

The United States is the world’s largest exporter of liquefied natural gas (LNG), but that milestone is not without debate and controversy. The U.S. Department of Energy (DOE) announced on January 26 that it would “pause” its approvals of proposed LNG export projects while it considers the climate, domestic market, and environmental justice issues associated with U.S. LNG exports. The timeline for the pause is uncertain, but senior White House officials have suggested it could last between 10 and 14 months.

This commentary outlines the existing framework under the Natural Gas Act (NGA) that governs the DOE authorization of LNG exports and summarizes the recent history of DOE and Federal Energy Regulatory Commission (FERC) actions and interpretations of their authorities. The commentary outlines possible postelection LNG export policies and how they may fit the constraints of the DOE’s statutory authorities. 

The Natural Gas Act Framework

The Supreme Court has held that Congress enacted the NGA with the “principal purpose” of “[encouraging] the orderly development of plentiful supplies of . . . natural gas at reasonable prices.” “Subsidiary purposes” of the NGA include respecting “conservation, environmental, and antitrust” limitations. Section 3 of the NGA requires companies seeking to export LNG to secure an authorization from the DOE. In the case of countries with which the United States has a free trade agreement (FTA), DOE discretion is minimal. Section 3 simply deems LNG trade with FTA countries to be in the “public interest,” and it mandates that DOE grant applications for such exports “without modification or delay.”

For non-FTA countries, Section 3 notes that the DOE “shall” authorize exports “unless . . . it finds that the proposed exportation . . . will not be consistent with the public interest.” The Court of Appeals for the District of Columbia Circuit has construed this language as containing a “general presumption favoring export authorization.” Section 3 also authorizes the DOE to modify or impose terms and conditions on a non-FTA export authorization “as it may find necessary or appropriate.”

FTA nations accounted for only about 20 percent of the volume of LNG exported from the lower 48 states from 2016–2023, per DOE data. As of January 26, the department cited 48.45 billion cubic feet per day (Bcf/d) of authorized non-FTA capacity, of which 14.28 Bcf/d are operating and another 12.01 Bcf/d are under construction, implying more than 26 Bcf/d of capacity potentially online or due to come online this decade. In practice, however, some fully approved projects have limited commercial momentum and will not be constructed.

DOE and FERC Reviews

Though the NGA designates the DOE as the agency in charge of export reviews, the department delegated a portion of the process to FERC in the 1970s. Under this division of labor, the DOE reviews applications for exports of the commodity while FERC reviews applications to build or expand liquefication facilities, which includes consideration of siting, safety, and environmental criteria. Both reviews are subject to the “public interest” standard.

Section 3 does not define “public interest” or provide explicit criteria for reviews. In the absence of explicit statutory direction, the DOE has considered the following factors in its reviews of non-FTA export applications: (1) the domestic need for the natural gas proposed to be exported, (2) whether the proposed exports pose a threat to the security of domestic natural gas supplies, (3) whether the arrangement is consistent with the DOE’s policy of promoting market competition, and (4) any other factors bearing on the public interest as determined by the DOE, such as international and environmental impacts.

The DOE has never denied an LNG export application. As recently as July 2023, the DOE reiterated that its policy goals for export application reviews are to “minimize federal control and involvement in energy markets and to promote a balanced and mixed energy resource system.”

To conduct its reviews, DOE relies on evidence developed in each application proceeding, including via public comment. The DOE also has commissioned studies to establish a cumulative understanding of the potential economic and environmental impacts of increasing export volumes. One study from the Energy Information Administration (EIA), delivered in January 2012, found that exports would increase domestic gas prices. Another published in December 2012 projected “net economic benefits from allowing LNG exports” and assessed that “for every one of the market scenarios examined, net economic benefits increased as the level of LNG exports increased.” The DOE commissioned subsequent updates from the EIA (in October 2014, updated in May 2023) as well as outside parties in 2015 and 2018. In May 2014, the DOE released a study of LNG’s greenhouse gas lifecycle emissions from the National Energy Technology Laboratory, updated in September 2019.

Both FERC’s and DOE’s actions under NGA Section 3 are considered “major federal actions” under the National Environmental Policy Act (NEPA), which requires agencies conducting such actions to undertake a “hard look” at the environmental impacts of their decisions. A NEPA review must identify reasonably foreseeable environmental impacts of the federal action. Section 313 of the 2005 Energy Policy Act clarified that FERC is the lead agency for NEPA review of NGA Section 3 orders. To avoid redundant, time-consuming reviews, the DOE typically adopts the NEPA analysis completed by FERC and can use the review to inform its public interest analysis. In some cases, the DOE has undertaken a supplemental review.

To assess emissions impacts, the DOE has utilized broad-based assumptions about the fuel sources displaced by U.S. LNG exports. The DOE typically assumes that U.S. LNG displaces the use of coal or other natural gas in importing countries. It has resisted calls from environmental groups to implement nation-specific analyses, explaining in 2013 that such modeling would be “too speculative to inform the public interest determination.” A reviewing court found “nothing arbitrary” about the DOE’s approach but was not asked to address whether the DOE was prohibited from relying on such an analysis. 

Evolution of FERC and DOE Approval Processes

Environmental reviews are key drivers of FERC LNG export review timeframes, which can in some cases take years. FERC’s increasingly complex environmental analyses cover a wide range of issues, including the greenhouse gas and climate change impacts stemming from the siting, construction, operation, and expansion of LNG facilities. Environmental justice considerations also come into play when FERC examines communities in proximity to LNG facilities, with special focus on the potential for disproportionate environmental and economic impacts to low-income and minority populations. These reviews are frequent targets for litigation, often by environmental nongovernmental organizations. Over the course of 20 FERC approvals between August 2015 and September 2022 (approximately 27.2 Bcf/d of capacity) the interval between the posting of environmental documents on the FERC website and project approvals averaged 158 days.

The DOE’s process for authorizing exports to non-FTA nations has evolved. In May 2011, the department conditionally authorized exports from Cheniere’s Sabine Pass liquefaction plant and finalized its approval in August 2012. In August 2014, the department ended its practice of granting conditional non-FTA licenses and established a new process of reviewing projects once FERC environmental reviews were complete, which remains in force today. Initially, the DOE allowed lower 48 non-FTA applicants seven years from the point of licensing to start operations, followed by 20-year authorizations for exports and a three-year “make up” terms for cargoes they were not able to ship. In April 2023, a DOE policy statement noted that export authorizations would not be extended beyond an initial seven-year period unless projects have started construction and face extenuating circumstances.

Scenarios for Future U.S. LNG Export Policies

The DOE pause has attracted strenuous opposition, but hurdles to reversing the pause prior to the November elections are high. A proposed bill to remove the DOE’s role in authorizing non-FTA exports, H.R. 7176, attracted significant support but has little chance of advancing. Other options such as leveraging the Congressional Review Act or defunding DOE programs through the appropriations process also face steep obstacles.

Assuming the DOE pause extends beyond the November elections, what policies could follow? The next Congress could amend NGA Section 3 in a way that reflects the interests of the majority party. However, experience suggests that enacting laws of this kind in Congress is quite difficult. Even if one party controls both chambers and the executive branch, the Senate filibuster can act as a brake on new legislation.

So executive authority is the most likely policy vector, but the executive branch—even if it adopts new post-pause policies for LNG exports—still must act within the boundaries of existing laws. The discussion below outlines scenarios for policies that might be adopted by the DOE under either a Republican or Democratic president. 

Before delving into these scenarios, it is important to note that litigation challenging the LNG export pause is highly likely. The American Petroleum Institute and others filed a petition for rehearing with the DOE on February 26 arguing that its action is procedurally and substantively flawed. It is not clear whether or how the DOE will respond. The NGA permits “any person, State, municipality, or State commission aggrieved by an order” of the DOE to “apply for a rehearing within thirty days after the issuance of such order.” The DOE may argue that the petition is not ripe, as the pause is not “final agency action.”

Beyond this petition, it is reasonable to expect that either industry or the states will litigate against the pause. Depending on the outcome, courts could issue legal pronouncements, even before 2025, on the meaning of key aspects of Section 3 of the NGA, thereby constraining the administrative discretion of the DOE. And more immediately, a court could prevent the DOE from implementing the pause through an injunction before considering the merits of the pause, though such actions are normally difficult to obtain.

If a Republican wins the White House, the DOE will likely end the pause and return to reviewing and granting applications for exports. However, it is possible that a Republican-controlled DOE would also modify past policies. For example, it might adopt new approaches to address climate impacts from exports. One approach would be for the DOE to declare that consideration of potential climate impacts from the use of exported LNG in non-FTA countries is simply not germane to the “public interest” evaluation under NGA Section 3. A Republican-led DOE might also modify NEPA reviews for LNG exports by determining that such impacts are too speculative and therefore not “reasonably foreseeable.” 

Alternatively, a Republican-controlled DOE could develop a new greenhouse gas life cycle assessment study finding that U.S. LNG exports provide net global climate benefits, because they are most likely to displace more carbon-intensive fuel sources in importing countries—an argument made by some industry supporters. The department then could rely on this new study for its future export application reviews. A Republican-controlled DOE might also restrict exports in particular ways, for example by determining that new exports to China are not in the public interest, citing either national security concerns or the need to ensure sufficient domestic supplies. Opponents would likely challenge the legal and technical basis of such policies. They also might argue that the policies are not valid interpretations of the DOE’s obligations under NGA Section 3 and NEPA. 

A Democrat-controlled DOE would likely consider a range of policy objectives. In announcing the pause, the Biden administration said it will “take a hard look” at the “impacts of LNG exports on energy costs, America’s energy security, and our environment.” The White House noted the need to “adequately guard against the risks to the health of our communities, especially front-line communities in the United States who disproportionately shoulder the burden of pollution from new export facilities.”

If a Democrat-controlled DOE sought to achieve these objectives through changes to the export review framework, it would need to take pains to avoid exceeding its existing authorities under the NGA. This could be especially important in a post-Chevron deference judicial environment, in which the judicial branch is inclined to interpret such authorities very strictly. It would also need to consider any new findings under the currently planned studies.

One possibility is a Democrat-controlled DOE would deny future applications based on a study finding that the export applications already approved are sufficient to meet forecasted global LNG demand. The DOE might argue that wasteful exports of domestically produced gas are inconsistent with the public interest. The White House may feel such a ban could serve its “subsidiary” environmental interests. A less aggressive approach would be to grant export applications subject to certain terms and conditions the agency finds “necessary or appropriate.” These conditions could address some of the “subsidiary” environmental concerns raised by the Biden White House. Examples could include requirements that LNG facilities implement carbon capture and sequestration or use electric drive technologies. The department might also require that facilities implement a community benefits plan or more substantially address environmental justice concerns.

Other conditions could impose requirements related to the methane intensity of the supply chain. The department might require disclosure of methane intensity, perhaps using an internationally agreed measurement, monitoring, reporting, and verification standard. A more assertive policy would be to condition an export approval on a demonstration that the proposed supply chain will have methane intensity lower than the thresholds that Congress established under the Inflation Reduction Act’s Waste Emissions Charge or methane fee.

Any of these post-pause policies would attract a vigorous legal challenge. The DOE would have to demonstrate that any new policy is consistent with the scope of “public interest” considerations under the NGA, that the DOE has reasonably rebutted the presumption in favor of exports, that any additional conditions are “necessary or appropriate,” that any conditions are under the reasonable control of the applicant, and that it has not invaded FERC’s jurisdiction over facility siting. The DOE would run the risk that a reviewing court would find that it had elevated impermissible “subsidiary” environmental concerns over the NGA’s “primary” of purpose of encouraging production of natural gas.

The permitting process for U.S. LNG exports projects has evolved over time, and the current pause in new DOE authorizations for non-FTA exports introduces new uncertainties. It will be challenging for the White House to accommodate questions over climate impacts, domestic market impacts, and environmental justice while maneuvering within the confines of DOE and FERC statutory and regulatory authority. In the meantime, new policy uncertainties run the risk of quashing investment in proposed LNG projects. A key question is whether gas buyers will have sufficient confidence to sign offtake agreements with U.S. projects that are now on hold, or whether instead they will look to other global gas suppliers. 

Kevin Book is a non-resident senior adviser with the Energy Security and Climate Change Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C., and cofounder and managing director at ClearView Energy Partners, LLC. Ben Cahill is a senior fellow with the Energy Security and Climate Change Program at CSIS. Michael Catanzaro is a senior associate (non-resident) with the Energy Security and Climate Change Program at CSIS and president and chief policy officer of the CGCN Group, LLC. Kyle Danish is a senior associate (non-resident) with the Energy Security and Climate Change Program at CSIS and Partner at Van Ness Feldman, LLP.

The views, positions, and conclusions expressed in this publication do not necessarily represent the views of ClearView Energy Partners, LLC, CGCN Group, or Van Ness Feldman or their clients.