Federal regulators just removed a barrier to exporting more US natural gas

Key Points
  • FERC pushed through an impasse over how it assesses climate change impacts of liquefied natural gas export terminals.
  • The breakthrough by federal energy regulators means they approved an LNG project for the first time in two years and creates a path for future developments.
  • Divisions remain between Democratic and Republican members over how they assess the global warming implications of expanding US LNG infrastructure.
LNG carrier ship sits docked at a terminal in Sabine Pass, Texas, U.S., on Monday, Feb. 22, 2016. The first tanker that will ship liquefied natural gas from Cheniere Energy Inc.'s Sabine Pass terminal in Louisiana has arrived, signaling the imminent start of exports as a result of the U.S. shale boom.
Bloomberg | Contributor

Federal regulators on Thursday broke an impasse over approving new projects to export natural gas from the United States, potentially easing the way for a flurry of applications to build the multi-billion dollar facilities.

In doing so, the regulators approved a liquefied natural gas export terminal for the first time in two years, pushing through a disagreement over how they should assess the facilities' contribution to climate change. However, divisions remain within the commission on the issue, and one of the four sitting members dissented from the majority decision.

The Federal Energy Regulatory Commission on Thursday decided to approve Venture Global's proposed Calcasieu Pass export terminal in Cameron Parish, Louisiana, as well as a pipeline to supply the facility. The project is one of about a dozen vying to tap surging U.S. natural gas production and export LNG, a form of the fuel chilled to liquid form and shipped overseas in massive tankers.

However, applications have been held up while FERC's four commissioners hash out the greenhouse gas issue. The five-person commission has been down one member since former commissioner and Republican Kevin McIntyre passed away last month, leaving the body split between two Democrats and two Republicans.

FERC Chairman Neil Chatterjee said he's optimistic that in light of Thursday's deal, FERC now has a framework in place that will help the commission more expeditiously process applications.

"No question about it, it's a top priority of mine and I think my colleagues' as well," he told CNBC on Friday.

Neil Chatterjee, chairman of the Federal Energy Regulatory Commission (FERC), listens during an open meeting in Washington, D.C., U.S., on Thursday, Dec. 20, 2018.
Andrew Harrer | Bloomberg | Getty Images

FERC has authority over interstate oil and gas pipelines and electric transmission lines, but it also plays a role in approving LNG export terminals, along with the Department of Energy.

Democratic commissioners Cheryl LaFleur and Richard Glick have pushed FERC to exercise its authority to conduct environmental reviews to assess planet-warming greenhouse gas emissions linked to the nation's growing LNG infrastructure.

Chatterjee is a former aide to Senate Majority Leader Mitch McConnell. He drew attention early in his tenure at FERC for voicing support for a controversial Trump administration plan to bolster uncompetitive coal and nuclear power plants, but ultimately concurred with a unanimous decision to shoot down the proposal.

His fellow Republican commissioner, Roger McNamee, helped design the plan at the Department of Energy. He lost the support of West Virginia Democrat Sen. Joe Manchin during his FERC nomination after video emerged of McNamee expressing climate change denial.

On Thursday, FERC commissioners reached a compromise of sorts. In approving the Calcasieu Pass project, FERC disclosed the direct greenhouse gas impacts of the project and compared them to the nation's overall inventory of emissions.

Continuing division

LaFleur, who voted to approve the project, said the greenhouse gas disclosure and comparison "provided important context" but said it was only a "first step."

She criticized the commission's "failure" to disclose how the project would contribute to the combined effects of LNG infrastructure development. She also said FERC should have made a determination on the significance of the project's greenhouse gas emissions, an endeavor she called challenging but achievable.

"Indeed, the Commission makes challenging determinations on quantitative and qualitative issues in many other areas of our work, but has simply chosen not to attempt a significance determination in this context," she wrote on Thursday.

Glick, the sole dissenting member, said FERC failed to embrace "reasoned" decision-making while determining whether Calcasieu Pass is in the public interest. He said it failed to meet FERC's requirements under the Natural Gas Act and the National Environmental Policy Act.

"Neither the NGA nor NEPA permit the Commission to assume away the climate change implications of constructing and operating an LNG facility that will directly emit large volumes of greenhouse gas (GHG) emissions," he wrote in his dissent. "Yet that is precisely what is happening today."

Since FERC is a quasi-judicial body that sets precedent, Chatterjee says he is confident the commission has a way to address the climate question in future applications, now that a majority has determined FERC's approach is legally viable and durable.

"The reason for my sense of optimism on the pipeline of projects going forward is that from a macro level the biggest sticking point seemed to be how to address this question of considering GHG emissions," he said.