Life in the Fast Lane – New DOE Rule Changes Push LNG Projects … – RBN Energy

The incredible growth in U.S. LNG export capacity over the past few years has been facilitated by a mostly predictable federal permitting process. It may sometimes be slower than developers like and leave them more open to pushback at the state and local level, but LNG export projects that enter the federal permitting process with both the Department of Energy (DOE) and the Federal Energy Regulatory Commission (FERC) are generally granted their authorizations and export licenses. And once they have them, theyve been able to hold onto them until now. Both FERC and the DOE had been granting extensions to these permits as their authorization windows were closing, meaning that projects that were authorized a decade ago and still not online have retained their authorizations and export licenses. But with a DOE rule change announced April 21, the era of repeatedly renewing authorizations appears to be over. The DOE is sending a clear message to LNG developers: Get your project across the finish line in a timely manner or get out of the way and make space for someone who can. In todays RBN blog, we take a closer look at the DOE rule change and its impact on LNG projects currently under development.

The policy in question here concerns the DOEs export licenses, which typically get a lot less press, public pushback and notice than the FERC environmental review and authorization process. Nonetheless, every project that plans to export U.S. natural gas as LNG meaning not only the projects in the U.S. but any project in Mexico or Canada that plans to source feedgas from the U.S. requires an export license from the DOE. The export licenses come in two varieties, one for Free Trade Agreement (FTA) countries and one for non-Free Trade Agreement (non-FTA) countries. Projects need both licenses to export competitively they are usually granted in that order (FTA first, then non-FTA) and both typically come after a project has already received its FERC authorization. All LNG export licenses contain a clause that essentially says the project has seven years to begin exporting or the license expires. The LNG terminal does not need to reach commercial operations in that seven-year window; the condition is satisfied with the first LNG cargo exported, and commissioning cargoes count.

This time frame was established during permitting for the U.S.s first LNG export facility, Sabine Pass, after some back and forth with Cheniere around a fair and realistic process. (For more on permitting for energy infrastructure, see Dont Pass Me By.) Every U.S. LNG terminal that is currently operational, including the still-commissioning Calcasieu Pass, has met the conditions of that clause without needing an extension, a fact noted by the DOE when it announced its new rule. That includes Calcasieu Pass, which has been able to achieve LNG exports during its seven-year window despite its construction happening during COVID, a reason frequently cited by projects seeking extension requests. In 2020, the DOE granted extensions to three LNG projects: the under-construction Golden Pass as well as pre-FID projects Lake Charles LNG and the Cameron expansion project. Golden Passs original export license would have expired April 25, 2024, and that was pushed back to September 30, 2025; however, Golden Pass is expected to begin commissioning later this year and it might not even need the extra time it was granted. In the policy change, the DOE reaffirmed that seven-year window and said it will no longer consider extensions unless the project is (1) already under construction and (2) can prove extenuating circumstances outside its control. While there are no specifics on what those extenuating circumstances could be, it certainly seems like saying COVID or bad markets isnt going to cut it anymore. If a project isnt eligible for an extension, it has to restart the DOE licensing process and get in line behind all the new projects in the queue.

At the time of this policy change there were four pending extension requests, which would be grandfathered into the old consideration metrics. With the most recent announcement the DOE also ruled on two of those: The under-construction Port Arthur project was granted an extension from May 2, 2026, to June 18, 2028, but Lake Charles LNG was denied a second extension of its authorization window. The projects original non-FTA export license was granted in 2013, but with its previously granted extension it has until December 16, 2025, to begin exporting. The unprecedented second extension request was cited by the DOE as grounds for the denial. Of course, given the project is not under construction it would be impossible to make that window. The project's developer, Energy Transfer, has said it plans to appeal the decision, but if Lake Charles is to move forward it will need to win that appeal or a new export license. The other two extensions still under consideration are for Magnolia LNG and Pierdae LNG in Canada. The DOE will consider these extensions under the previous policy, so they may still be granted. Magnolia has requested a 29-month extension until April 15, 2026, and Pierdae until February 5, 2028. However, neither of these projects are remotely likely to move forward in the near future and subsequent extensions would be subject to the same rule change.

There are currently five LNG projects under construction and on the clock to keep their DOE export license, with four in the U.S. Golden Pass, Plaquemines LNG, Corpus Christi Stage III and Port Arthur LNG along with ECA LNG in Mexico. As we mentioned above, Golden Pass already has an extension, which it may not even need, and Port Arthur was already granted an extension to 2028. As you can see from Figure 1 below, none of these projects is likely to need an extension absent some significant extenuating circumstances. (Remember that the window is satisfied with the first LNG export, which can come well before commercial operations.)

Figure 1. Export Licenses for FID/Under Construction LNG Terminals. Sources: DOE, RBN

The policy shift will be felt most by the projects not yet under construction. Lake Charles is the first project that the DOE did not grant an extension for, but likely not the last, as older projects will soon reach the point where they too will need an extension. Of the potential LNG projects we track in our LNG Voyager Quarterly report, there are 14 that already have their DOE export license but have not yet taken FID (see Figure 2). As we noted earlier, the two projects with the nearest license expiry (Pierdae and Magnolia) were grandfathered in under the old policy review, but the other projects will see their export licenses expire as soon as 2024 and no later than 2028. Construction times for LNG vary greatly depending on the technology being used, whether a project is using large trains (Port Arthur, Golden Pass, etc.), mid-scale modular technology (all the Venture Global projects, Corpus Christi Stage III) or floating LNG (FLNG; Delfin and Altamira).

Figure 2. Export license status for Pre-FID LNG projects. Sources: DOE, RBN

* Projects have extensions currently under review by the DOE under the previous policy.

All of the projects on this list have at least a moderate risk of needing an extension. For the projects whose licenses expire in 2026 or before, with the exception of Cameron Phase 2, that risk is very high considering theyd likely need to be under construction by now to make that window. For the two nearest expiries not currently under review for extension Delfin and MPL they just about certainly will need an extension. The latest estimates from both developers are for 2026 startups, or after their authorizations are set to expire. Starting construction without a valid license would be a huge risk around what the DOE would accept as extenuating circumstances under the new policy, meaning that these projects may decide to reapply for export license and open themselves up to further regulatory scrutiny. That would require them to get in line behind the six LNG projects with export licenses currently under review and other potential projects that have yet to file. Venture Globals Delta LNG as well as Chenieres two newest projects, Corpus Christi 8 & 9 and the Sabine Pass expansion, all have yet to file for export licenses. But thats perhaps the DOEs point, these projects have had their shot and maybe its time for newer, faster, greener projects to get their chance.

Life in the Fast Lane was written by Joe Walsh, Glenn Frey and Don Henley. It appears as the third song on side one of The Eagles fifth studio album, Hotel California. The song was based on a guitar riff from Joe Walsh, with the title idea coming from Glenn Frey after a scary high-speed drive with an associate on a freeway in Los Angeles. Frey and Don Henley collaborated on the lyrics. Life in the Fast Lane was the third single from Hotel California, released in May 1977. It went to #11 on the Billboard Hot 100 Singles chart. Personnel on the record were: Don Henley (lead vocals, drums), Joe Walsh (lead guitar, rhythm guitar), Glenn Frey (Clavinet, backing vocals), Don Felder (lead guitar, rhythm guitar) and Randy Meisner (bass, backing vocals).

Hotel California was recorded between March and October 1976 at Criteria Studios in Miami and Record Plant Studios in Los Angeles, with Bill Szymczyk producing. Released in December 1976, the album went to #1 on the Billboard Top 200 Albums chart. It has been certified 26x Platinum by the Recording Industry Association of America.

The Eagles are an American rock band formed in Los Angeles in 1971. They have released seven studio albums, two live albums, 10 compilation albums and 32 singles. The band has won five American Music Awards and six Grammy Awards and is a member of the Rock and Roll Hall of Fame and the Vocal Group Hall of Fame. In 2016, The Eagles were recipients of Kennedy Center Honors. Nine members have passed through the ranks of The Eagles since its formation, with Don Henley being the only original member still in the band. Founding member Glenn Frey passed away in 2016. The band still records and tours and recently completed its Hotel California tour.

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Life in the Fast Lane - New DOE Rule Changes Push LNG Projects ... - RBN Energy