[Federal Register Volume 77, Number 107 (Monday, June 4, 2012)]
[Notices]
[Pages 32962-32965]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-13430]


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DEPARTMENT OF ENERGY

[FE Docket No. 12-05-LNG]


Gulf Coast LNG Export, LLC; Application for Long-Term 
Authorization To Export Domestically Produced Liquefied Natural Gas for 
a 25-Year Period

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 
January 10, 2012, by Gulf Coast LNG Export, LLC (Gulf Coast), 
requesting long-term, multi-contract authorization to export 
domestically produced liquefied natural gas (LNG) in an amount up to 
the equivalent of 1,022 billion cubic feet (Bcf) of natural gas per 
year, which averages to 2.8 Bcf per day (Bcf/d), up to a total of 25.55 
trillion cubic feet (Tcf), over a 25-year period, commencing on the 
earlier of the date of first export or eight years from the date the 
requested authorization is granted. Gulf Coast proposes to export LNG 
from a proposed natural gas liquefaction facility and LNG terminal to 
be located at the Port of Brownsville in Brownsville, Texas, which Gulf 
Coast plans to develop, to any country 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. Gulf Coast seeks 
to export this LNG on its own behalf and also as agent for third 
parties. 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.

[[Page 32963]]


DATES: Protests, motions to intervene or notices of intervention, as 
applicable, requests for additional procedures, and written comments 
are to be filed using procedures detailed in the Public Comment 
Procedures section no later than 4:30 p.m., eastern time, August 3, 
2012.

ADDRESSES:
    Electronic Filing on the Federal eRulemaking Portal under FE Docket 
No. 12-05-LNG: http://www.regulations.gov.
    Electronic Filing by email: [email protected]v.

Regular Mail

    U.S. Department of Energy (FE-34), Office of Natural Gas Regulatory 
Activities, Office of Fossil Energy, P.O. Box 44375, Washington, DC 
20026-4375.

Hand Delivery or Private Delivery Services (e.g., FedEx, UPS, etc.)

    U.S. Department of Energy (FE-34), Office of Natural Gas Regulatory 
Activities, Office of Fossil Energy, Forrestal Building, Room 3E-042, 
1000 Independence Avenue SW., Washington, DC 20585.

FOR FURTHER INFORMATION CONTACT:
    Larine Moore or Lisa Tracy, U.S. Department of Energy (FE-34), 
Office of Natural Gas Regulatory Activities, Office of Fossil Energy, 
Forrestal Building, Room 3E-042, 1000 Independence Avenue SW., 
Washington, DC 20585, (202) 586-9478; (202) 586-4523.
    Edward Myers, U.S. Department of Energy, Office of the Assistant 
General Counsel for Electricity and Fossil Energy, Forrestal Building, 
Room 6B-256, 1000 Independence Ave. SW., Washington, DC 20585, (202) 
586-3397.

SUPPLEMENTARY INFORMATION:

Background

    Gulf Coast is a Delaware limited liability company with its 
principal place of business in Houston, Texas. Gulf Coast is owned by 
Michael Smith, the founder and current Chairman and CEO of Freeport LNG 
Development, L.P. (97 percent), the Kaily Morgan Smith Irrevocable 
Trust (1.5 percent), and the Tara Marielle Smith Irrevocable Trust (1.5 
percent).
    Gulf Coast plans to develop, own and operate a natural gas 
liquefaction facility and LNG export terminal at the Port of 
Brownsville, in Brownsville, Texas (Brownsville Terminal). Gulf Coast 
states that the Brownsville Terminal will include four trains capable 
of liquefying up to 2.8 Bcf/d of natural gas, a marine berth, full 
containment LNG storage tanks, a pipeline connection to natural gas 
transportation lines, and associated utilities.

Current Application

    In the instant Application, Gulf Coast seeks long-term, multi-
contract authorization to export domestically produced LNG up to the 
equivalent of 1,022 Bcf of natural gas per year (2.8 Bcf/d), up to a 
total of 25.55 Tcf, for a period of twenty-five years beginning on the 
earlier of the date of first export or eight years from the date the 
authorization is granted by DOE/FE. Gulf Coast seeks authorization to 
export domestically produced LNG to countries from the United States to 
any country 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. In the alternative, Gulf Coast requests 
authorization for that portion of Gulf Coast's requested authorization 
quantity or term that DOE/FE determines to be in the public interest.
    When submitted in January 2012, the Application did not contain 
evidence that Gulf Coast had established a business relationship with 
the Port of Brownsville where the proposed liquefaction facility and 
LNG export terminal are to be constructed. Absent some credible 
evidence that an applicant for an LNG export authorization has taken 
meaningful steps toward establishing the sorts of business 
relationships essential for performing the services for which 
authorization is sought from this agency (for example, securing a means 
of obtaining LNG for export, contracting for capacity at an existing 
LNG terminal, or initiating the process of securing property to 
construct such a terminal), DOE/FE will generally consider such an 
application deficient and, if the deficiency is not corrected in a 
reasonable time, the application may be dismissed without prejudice to 
refilling at a later time. See, 10 CFR 590.203.
    On March 27, 2012, Gulf Coast sent DOE/FE a copy of an option 
agreement between Gulf Coast and the Brownsville Navigation District of 
Cameron County, Texas, to demonstrate its commercial relationship with 
the owner of the property on which the proposed facility would be 
built. Gulf Coast requested the agreement be afforded confidential 
treatment and not posted to the public docket. Subsequently, Gulf Coast 
agreed to allow a redacted version of the option agreement to be placed 
in the public docket of the proceeding. On May 16, 2012, Gulf Coast 
submitted the redacted agreement, and DOE/FE deemed the application 
complete at that time.
    Gulf Coast states that rather than entering into long-term natural 
gas supply or LNG export contracts, it contemplates that its business 
model will be based primarily on Liquefaction Tolling Agreements 
(LTAs), under which individual customers who hold title to natural gas 
will have the right to deliver that gas to Gulf Coast and receive LNG. 
Gulf Coast 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.
    Gulf Coast requests long-term multi-contract authorization to 
engage in exports of LNG on its own behalf or as agent for others. Gulf 
Coast contemplates that the title holder at the point of export \1\ may 
be Gulf Coast or one of Gulf Coast's LTA customers, or another party 
that has purchased LNG from an LTA customer pursuant to a long-term 
contract. Gulf Coast requests authorization to register each LNG title 
holder for whom Gulf Coast 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 Gulf Coast'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 Gulf Coast seeks to export as agent, Gulf Coast 
states that it will file under seal with DOE/FE any relevant long-term 
commercial agreements between Gulf Coast and such LNG title holder, 
including LTAs, once they have been executed.\2\
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    \1\ 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).
    \2\ Gulf Coast states that the practice of filing 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); 
See also Freeport LNG Expansion and FLNG Liquefaction, LLC, FE 
Docket No. 10-160-LNG, Order No. 2913 at 9-10 (February 10, 2011).
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    Gulf Coast states that the natural gas supply underlying the 
proposed exports will come from the interconnected and highly liquid 
domestic market for natural gas. Gulf Coast states that given the size 
of the traditional natural gas market in Texas, and the exponential 
growth of unconventional resources in the region, a diverse and 
reliable source of natural gas will be available to support the 
requested authorization.

[[Page 32964]]

Gulf Coast provides further discussion of the gas supply markets in the 
Application.

Public Interest Considerations

    In the instant Application, Gulf Coast requests authorization to 
export to any country 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. Gulf Coast states that this may 
include countries with which the United States has an FTA requiring 
national treatment for trade in natural gas or LNG, as well as non-FTA 
countries. Gulf Coast acknowledges that in the review of its 
Application, DOE/FE will be guided by the individual statutory 
provisions that apply separately to the export of LNG to FTA and non-
FTA countries. In either case, Gulf Coast contends that the requested 
authorization would not be inconsistent with the public interest and 
should be granted by DOE/FE.
    Gulf Coast asserts that applications submitted to DOE/FE that seek 
to export LNG to FTA countries should be reviewed pursuant to the 
public interest standard in Section 3(c) of the Natural Gas Act 
(NGA).\3\ Gulf Coast maintains that these exports are deemed to be in 
the public interest and must be granted without modification or delay.
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    \3\ 15 U.S.C. 717b(c).
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    With regard to exports of LNG to non-FTA countries, Gulf Coast 
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. Gulf Coast 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 
(D.C. Cir. 1987).
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    Gulf Coast 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.'' Gulf 
Coast cites DOE/FE Order No. 2961,\6\ in which DOE/FE stated that its 
public interest review of applications to export natural gas to 
countries with which the United States does not have an FTA ``has 
continued to focus on the domestic need for the natural gas proposed to 
be exported; whether the proposed exports pose a threat to the security 
of domestic natural gas supplies; and any other issue determined to be 
appropriate * * *''.
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    \5\ Policy Guidelines and Delegation Orders Relating to the 
Regulation of Imported Natural Gas, 49 FR 6684 (Feb. 22, 1984).
    \6\ Sabine Pass Liquefaction LLC, DOE/FE Docket No. 10-110 LNG 
(DOE/FE Order No. 2961), May 20, 2011.
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    Gulf Coast 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. Gulf Coast asserts that the United States is now 
estimated to have more natural gas resources than it can use in a 
century.\7\ Gulf Coast 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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    \7\ Gulf Coast states that total U.S. recoverable natural gas 
reserves equal about 2,543 trillion cubic feet (Tcf), which Gulf 
Coast states is more than 105 times the total domestic consumption 
of 24.1 Tcf in 2010. U.S. Energy Information Administration, Annual 
Energy Outlook 2011, at 79 (April 26, 2011).
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    Gulf Coast 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 in the developed world. Gulf Coast states that LNG 
supply contracts in Asian markets are pegged to crude oil prices. Gulf 
Coast asserts that while Europe receives pipeline gas from various 
sources, the long supply chains and relative inflexibility of markets 
have made diversification of supply a high priority. Gulf Coast states 
that domestic natural gas prices are projected to remain low relative 
to European and Asian markets well into the future, thereby making 
exports of LNG by vessel a viable long-term opportunity for the United 
States.
    Gulf Coast states the project is positioned to provide the Gulf 
Coast region and the United States with significant economic benefits 
by increasing domestic natural gas production. Gulf Coast states that 
these benefits will be obtained with only a minimal effect on domestic 
natural gas prices. Gulf Coast states that at current and forecasted 
rates of demand, the United States' natural gas reserves will meet 
demand for 100 years. Gulf Coast states that the project allows the 
United States to benefit now from the natural gas resources that may 
not otherwise be produced for many decades, if ever. Gulf Coast 
provides further discussion on why the proposed export authorization is 
in the public interest.
    First, Gulf Coast contends that the project will cause direct and 
indirect job creation through construction (3,000 onsite jobs over five 
to six years) and operation (more than 250 permanent jobs) of the 
planned project, and indirect jobs as a result of increased drilling 
for and production of natural gas (34,000 to 42,000 jobs).\8\
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    \8\ Gulf Coast cites to the following: Baumann, Robert H., D.E. 
Dismukes, D.V. Mesyanzhinov, and A.G. Pulsipher, Analysis of the 
Economic Impact Associated with Oil and Gas Activities on State 
Leases, Louisiana State University Center for Energy Studies (2002); 
Snead, Mark C., The Economic Impact of Oil and Gas Production and 
Drilling on the Oklahoma Economy, Oklahoma State University (2002); 
Considine, Timothy J., The Economic Impacts of the Marcellus Shale: 
Implications for New York, Pennsylvania and West Virginia, A Report 
to the American Petroleum Institute (2010).
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    Second, Gulf Coast maintains the project would create significant 
economic stimulus, with the total economic benefits to the American 
economy estimated to be between $7.2 and $10.4 billion per year from 
2018 to 2043, or $90 to $130 billion over the requested 25-year export 
term.\9\
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    \9\ Id.
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    Third, Gulf Coast contends that there will be a material 
improvement in the U.S. balance of trade. Gulf Coast states that 
assuming an average value of $7 per million Btu, exporting 
approximately 2.8 Bcf/d of LNG through the project will improve the 
U.S. balance of payments by approximately $7.3 billion per year, or 
$183 billion over the requested 25-year export term.
    Fourth, Gulf Coast states that 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, Gulf Coast states that the project supports American energy 
security. Gulf Coast maintains 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. Gulf Coast 
contends that the project will not adversely affect U.S. energy 
security. Gulf Coast references a report by the Massachusetts Institute 
of Technology's Energy Initiative, which concludes that ``[t]he U.S. 
should sustain North American energy market integration and support 
development of a global `liquid' natural gas market with diversity of 
supply. A corollary is that the U.S. should not erect barriers to gas 
imports or exports.'' \10\
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    \10\ MIT Energy Initiative, MIT Study on the Future of Natural 
Gas, at 157 (2011).

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[[Page 32965]]

    Further details can be found in the Application, which has been 
posted at http://www.fe.doe.gov/programs/gasregulation/index.html.
    Based on the reasoning provided in the Application, Gulf Coast 
requests that DOE/FE determine that Gulf Coast's request for long-term, 
multi-contract authorization to export LNG is not inconsistent with the 
public interest.

Environmental Impact

    Gulf Coast states that its proposed LNG exports will require the 
siting, construction and operation of the proposed Brownsville 
Terminal, subject to environmental review and authorization by the 
FERC. Gulf Coast states that it will initiate the FERC authorization 
process within 180 days of DOE/FE's order approving this Application. 
Accordingly, Gulf Coast requests that DOE/FE issue a conditional order 
authorizing the export of domestically produced LNG from the planned 
Brownsville Terminal conditioned on completion of the environmental 
review and subsequent authorization by the FERC.

DOE/FE Evaluation

    The Application will be reviewed pursuant to section 3 of the NGA, 
as amended, and the authority contained in DOE Delegation Order No. 00-
002.00L (April 29, 2011) and DOE Redelegation Order No. 00-002.04E 
(April 29, 2011). In reviewing this LNG export Application, DOE will 
consider any issues required by law or policy. To the extent determined 
to be relevant or appropriate, these issues will include the impact of 
LNG exports associated with this Application, and the cumulative impact 
of any other application(s) previously approved, on domestic need for 
the gas proposed for export, adequacy of domestic natural gas supply, 
U.S. energy security, and any other issues, including the impact on the 
U.S. economy (GDP), consumers, and industry, job creation, U.S. balance 
of trade, international considerations, and 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 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

    In response to this notice, any person may file a protest, 
comments, or a motion to intervene or notice of intervention, as 
applicable. Any person wishing to become a party to the proceeding 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 will be considered in determining the appropriate 
action to be taken on the Application. All protests, comments, motions 
to intervene or notices of intervention must meet the requirements 
specified by the regulations in 10 CFR part 590.
    Filings may be submitted using one of the following methods: (1) 
Submitting comments in electronic form on the Federal eRulemaking 
Portal at http://www.regulations.gov, by following the on-line 
instructions and submitting such comments under FE Docket No. 12-05-
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; (2) emailing the filing to 
[email protected], with FE Docket No. 12-05-LNG in the title line; (3) 
mailing an original and three paper copies of the filing to the Office 
Natural Gas Regulatory Activities at the address listed in ADDRESSES; 
or (4) hand delivering an original and three paper copies of the filing 
to the Office of Natural Gas Regulatory Activities at the address 
listed in ADDRESSES.
    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 Gulf Coast is available for inspection and 
copying in the Office of Natural Gas Regulatory Activities docket room, 
Room 3E-042, 1000 Independence Avenue SW., Washington, DC 20585. 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 May 29, 2012.
John A. Anderson,
Manager, Natural Gas Regulatory Activities, Office of Oil and Gas 
Global Security and Supply, Office of Fossil Energy.
[FR Doc. 2012-13430 Filed 6-1-12; 8:45 am]
BILLING CODE 6450-01-P