[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

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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]
BILLING CODE 6450-01-P