[Federal Register Volume 83, Number 243 (Wednesday, December 19, 2018)]
[Proposed Rules]
[Pages 65111-65113]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27450]
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DEPARTMENT OF ENERGY
10 CFR Part 590
Filing of Contracts and Purchase Agreements Associated With the
Export of Natural Gas
AGENCY: Office of Fossil Energy, Department of Energy.
ACTION: Proposed interpretive rule.
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SUMMARY: The Department of Energy (DOE or the Department) is proposing
an interpretive rule to clarify certain DOE regulations governing the
export of natural gas, including liquefied natural gas (LNG), under the
Natural Gas Act (NGA). Under DOE's regulations, any person seeking
authorization to export natural gas from the United States, or to amend
an existing export authorization, must provide DOE's Office of Fossil
Energy (DOE/FE) with a copy of ``all relevant contracts and purchase
agreements.'' DOE is proposing this interpretive rule to clarify the
types of contracts and purchase agreements associated with the export
of natural gas that DOE considers to be ``relevant'' for purposes of
these regulations. DOE's
[[Page 65112]]
regulations also impose a ``continuing obligation'' on authorization
holders to notify DOE/FE ``as soon as practicable'' of any prospective
or actual changes to the information submitted during the application
process upon which the authorization was issued, including ``the terms
and conditions of any applicable contracts.'' In this proposed
interpretative rule, DOE is seeking to clarify the phrase ``as soon as
practicable'' to mean within 30 days of the execution of the contracts.
DATES: Public comment on this proposed interpretive rule will be
accepted until January 18, 2019.
ADDRESSES: You may submit comments using any of the following methods,
although email is preferred:
1. Email: Send email to [email protected] or regulations.gov.
Include ``Natural Gas Contract Guidance'' in the subject line of the
email. Please include the full body of your comments in the text of the
message or as an attachment.
2. Regular Mail: U.S. Department of Energy (FE-34), Office of
Regulation, Analysis, and Engagement, Office of Fossil Energy, P.O. Box
44375, Washington, DC 20026-4375.
3. Hand Delivery or Private Delivery Services (e.g., FedEx, UPS,
etc.): U.S. Department of Energy (FE-34), Office of Regulation,
Analysis, and Engagement, Office of Fossil Energy, Forrestal Building,
Room 3E-042, 1000 Independence Avenue SW, Washington, DC 20585.
Telephone: (202) 586-9478.
Due to potential delays in the delivery of postal mail, we
encourage respondents to submit comments electronically to ensure
timely receipt. PLEASE NOTE: If submitting a filing via email, please
include all related documents and attachments (e.g., exhibits) in the
original email correspondence. Please do not include any active
hyperlinks or password protection in any of the documents or
attachments related to the filing. All electronic filings submitted to
DOE must follow these guidelines to ensure that all documents are filed
in a timely manner. Any hardcopy filing submitted greater in length
than 50 pages must also include, at the time of the filing, a digital
copy on disk of the entire submission.
Docket: This notice of proposed rulemaking and any comments that
DOE receives will be made available on DOE's website at: https://www.energy.gov/fe/services/natural-gas-regulation.
FOR FURTHER INFORMATION CONTACT: Amy Sweeney, U.S. Department of Energy
(FE-34), Office of Regulation, Analysis, and Engagement, Office of
Fossil Energy, Forrestal Building, Room 3E-042, 1000 Independence
Avenue SW, Washington, DC 20585, (202) 586-2627, Email:
[email protected]; or Cassandra Bernstein or Charles Park, U.S.
Department of Energy (GC-76), Office of the Assistant General Counsel
for Electricity and Fossil Energy, Forrestal Building, Room 6D-033,
1000 Independence Avenue SW, Washington, DC 20585; (202) 586-9793 or
(202) 287-6531, Email: [email protected] or
[email protected].
SUPPLEMENTARY INFORMATION:
I. Statutory Background
II. Regulatory Background
III. Proposed Regulatory Interpretations
IV. Public Comment Procedures
V. Approval of the Office of the Secretary
I. Statutory Background
The Department of Energy is responsible for authorizing exports of
natural gas to foreign nations pursuant to section 3 of the NGA, 15
U.S.C. 717b.\1\ Under section 3(c) of the NGA, exports of natural gas
to countries with which the United States has entered into a free trade
agreement (FTA) requiring national treatment for trade in natural gas
and with which trade is not prohibited by U.S. law or policy (FTA
countries) are ``deemed to be consistent with the public interest.''
Therefore, applications authorizing natural gas and LNG exports to FTA
countries must be granted ``without modification or delay.'' \2\
Section 3(a) of the NGA governs exports to any other country with which
trade is not prohibited by U.S. law or policy (non-FTA countries). DOE
has consistently interpreted section 3(a) of the NGA as creating a
rebuttable presumption that a proposed export of natural gas to non-FTA
countries is in the public interest.\3\ Accordingly, DOE conducts an
informal adjudication and grants the application unless DOE finds that
the proposed exportation will not be consistent with the public
interest.\4\
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\1\ Authority to regulate the imports and exports of natural
gas, including LNG, under section 3 of the NGA (15 U.S.C. 717b) has
been delegated to the Assistant Secretary for Fossil Energy in
Redelegation Order No. 00-006.02, issued on November 17, 2014.
\2\ 15 U.S.C. 717b(c). The United States currently has FTAs
requiring national treatment for trade in natural gas with
Australia, Bahrain, Canada, Chile, Colombia, Dominican Republic, El
Salvador, Guatemala, Honduras, Jordan, Mexico, Morocco, Nicaragua,
Oman, Panama, Peru, Republic of Korea, and Singapore. FTAs with
Israel and Costa Rica do not require national treatment for trade in
natural gas.
\3\ See Sierra Club v. U.S. Dep't of Energy, 867 F.3d 189, 203
(D.C. Cir. 2017) (``We have construed [NGA section 3(a)] as
containing a `general presumption favoring [export] authorization.'
'') (quoting W. Va. Pub. Serv. Comm'n v. U.S. Dep't of Energy, 681
F.2d 847, 856 (D.C. Cir. 1982)).
\4\ See id. (``there must be `an affirmative showing of
inconsistency with the public interest' to deny the application''
under NGA section 3(a)) (quoting Panhandle Procedures & Royalty
Owners Ass'n v. Econ Regulatory Admin., 822 F.2d 1105, 1111 (D.C.
Cir. 1987)).
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II. Regulatory Background
DOE's regulations implementing section 3 of the NGA are codified in
10 CFR part 590. Under those regulations, ``[a]ny person seeking
authorization to . . . export natural gas . . . from the United States,
[seeking] to amend an existing . . . export authorization, or seeking
any other requested action'' \5\ is required to provide DOE/FE with,
inter alia, ``a copy of all relevant contracts and purchase
agreements.'' \6\ DOE's regulations do not specify what types of
``contracts and purchase agreements'' associated with the export of
natural gas are considered ``relevant'' for purposes of 10 CFR
590.202(c).
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\5\ 10 CFR 590.201(a).
\6\ Id. at 590.202(c).
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DOE implements this regulatory authority as part of its long-term
export authorizations for natural gas, including LNG.\7\ For example,
in the ``Terms and Conditions'' section of DOE/FE's long-term LNG
export orders, DOE/FE states that authorization holders are required to
file, or cause to be filed, ``any relevant long-term commercial
agreements'' pursuant to which the authorization holder or LNG title-
holder (i.e., Registrant) exports LNG ``once those agreements have been
executed.'' \8\ Similarly, in the ``Order'' section, DOE/FE states that
the authorization holder shall file, or cause others to file, ``all
executed long-term contracts'' associated with both the long-term
export of LNG and the long-term supply of natural gas to the export
facility.\9\
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\7\ For purposes of this proposal, the terms ``authorization''
and ``order'' are used interchangeably.
\8\ See, e.g., Eagle LNG Partners Jacksonville II LLC, DOE/FE
Order No. 4078, FE Docket No. 17-79-LNG, Opinion and Order Granting
Long-Term, Multi-Contract Authorization to Export Liquefied Natural
Gas in ISO Containers Loaded at the Eagle Maxville Facility in
Jacksonville, Florida, and Exported by Vessel to Free Trade
Agreement and Non-Free Trade Agreement Nations (Sept. 15, 2017), at
43 (Terms and Conditions Para. H).
\9\ See id. at 46-47 (Ordering Paras. I(i), (ii)).
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DOE regulations also impose a ``continuing obligation'' on
authorization holders to give DOE/FE ``written notification, as soon as
practicable, of any prospective or actual changes to the information
submitted during the application process upon which the authorization
was based, including, but not limited to, changes . . . to the terms
and conditions of any
[[Page 65113]]
applicable contracts.'' \10\ DOE regulations do not specify when
submission of such written notification must be made to constitute ``as
soon as practicable.'' However, in DOE/FE's long-term export orders,
DOE/FE expressly ``finds that the submission of all such [long-term
commercial export] agreements or contracts within 30 days of their
execution . . . will be consistent with the `to the extent practicable'
requirement of section 590.202(b).'' \11\ Likewise, DOE/FE imposes a
30-day time period for an authorization holder to notify DOE/FE of a
change in the company name, the term of any long-term contracts, and
other relevant modifications.\12\
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\10\ 10 CFR 590.407.
\11\ See, e.g., Eagle LNG Partners Jacksonville II LLC, DOE/FE
Order No. 4078, at 43 (Terms and Conditions Para. H); see also id.
at 46-47 (Ordering Paras. I(i), (ii), K, Q) (imposing 30-day
reporting periods).
\12\ See id. at 48 (Ordering Para. L).
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III. Proposed Regulatory Interpretations
DOE proposes the following clarifications to provide specificity,
and thereby to reduce potential confusion and regulatory burdens,
concerning DOE/FE's practice under the aforementioned regulations. As
set forth above, these proposed clarifications are consistent with DOE/
FE's practice under its long-term export authorizations, and thus are
intended to provide additional guidance for authorization holders in
complying with existing and/or future orders.
A. Proposed Interpretation of 10 CFR 590.202(c)
DOE proposes to clarify the types of ``contracts and purchase
agreements'' associated with the export of natural gas that are
``relevant'' for purposes of 10 CFR 590.202(c). DOE proposes to
interpret the term ``relevant contracts and purchase agreements'' to
include the following types of executed,\13\ long-term \14\ binding
commercial agreements associated with the export of natural gas
(collectively, Executed Agreements):
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\13\ ``Executed'' means that all parties to a long-term
commercial agreement have signed the agreement, regardless of
whether conditions precedent have been met, and that such an
agreement is binding upon all parties to the transaction.
\14\ ``Long-term'' means any Executed Agreement with a term of
two years or longer.
i. Natural gas supply agreements;
ii. Terminal service agreements;
iii. Purchase and sale agreements; \15\
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\15\ ``Purchase and sale agreements'' include long-term
commercial agreements covering ``free on board'' sales subsequent to
a terminal service agreement.
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iv. Liquefaction tolling agreements, liquefaction and
regasification tolling capacity agreements, and similar types of
agreements; and
v. Any other natural gas export contractual agreements that are
associated with the first sale or transfer of natural gas at the
point of export and specify the volume of natural gas under
contract.\16\
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\16\ ``Any other natural gas export contractual agreements'' may
include, but are not limited to, heads of agreement, memoranda of
understanding, letters of intent, and similar types of agreements if
and when they become fully binding and effective in lieu of a
definitive agreement.
Under DOE's proposed interpretation, Executed Agreements may be
associated with the sale, transfer, and/or export of natural gas,
including LNG, prior to export.\17\ For example, for export facilities
that operate on a tolling model, if an off-taker that holds initial
title to the LNG within the storage tank of an export facility (Party
A) enters into an agreement to sell the LNG to another party (Party B)
prior to the LNG being loaded onto a ship, both Party A's and Party B's
contracts would be considered ``relevant'' for purposes of 10 CFR
590.202(c).
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\17\ An ``export'' occurs when the LNG is delivered to the
flange of the LNG export vessel. See Freeport LNG Expansion, L.P.,
et al., DOE/FE Order No. 3282, FE Docket No. 10-161-LNG, Order
Conditionally Granting Long-Term, Multi-Contract Authorization to
Export Liquefied Natural Gas by Vessel from the Freeport LNG
Terminal on Quintana Island, Texas, to Non-Free Trade Agreement
Nations, at 10 n.28 (May 17, 2003) (citation omitted).
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B. Proposed Interpretation of 10 CFR 590.407
DOE proposes to interpret the phrase ``as soon as practicable'' in
10 CFR 590.407 with respect to the continuing obligation of
authorization holders and Registrants to provide written notification
to DOE/FE of any prospective or actual changes to the information
submitted during the application process. Specifically, DOE/FE will
consider a written notification of any Executed Agreement(s) filed
within 30 days of its execution to have been submitted ``as soon as
practicable'' under this regulation. DOE/FE believes a 30-day
timeframe, absent good cause for delay, will provide a reasonably
sufficient time for authorization holders to prepare and file the
written notifications with DOE/FE.
C. Anticipated Administrative Benefits
In this proposed interpretive rule, DOE/FE is not proposing any new
requirements for applicants or authorization holders under 10 CFR part
590. Rather, DOE's intent is to reduce administrative uncertainty and
minimize regulatory burdens associated with the application of 10 CFR
590.202(c) and 10 CFR 509.407.
IV. Public Comment Procedures
Interested persons are invited to participate in this proceeding by
submitting data, views, or arguments. Written comments should be
submitted to the address, and in the form, indicated in the ADDRESSES
section of this proposed rule. To help DOE review the comments,
interested persons are asked to refer to specific proposed provisions,
if possible.
If you submit information that you believe to be exempt by law from
public disclosure, you should submit one complete copy, as well as one
copy from which the information claimed to be exempt by law from public
disclosure has been deleted. DOE is responsible for the final
determination with regard to disclosure or nondisclosure of the
information and for treating it accordingly under the DOE Freedom of
Information regulations at 10 CFR 1004.11.
V. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this proposed
interpretive rule.
Signed in Washington, DC, on December 13, 2018.
Steven E. Winberg,
Assistant Secretary, Office of Fossil Energy.
[FR Doc. 2018-27450 Filed 12-18-18; 8:45 am]
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