Senate Permitting Legislation—S. 5653, or BAAJA—Undermines Regulation of Existing LNG Exports, Exposing Consumers To Massive Affordability Harm
Project Certainty provisions in Title IV Deregulates Billions of Tons of Existing And Future Gas Exports - The Permitting Bill Will Restrict The Executive Branch’s Ability To Regulate LNG Exports To Address Energy Affordability
By Tyson Slocum
Senate permitting legislation (named the Bipartisan American Affordability and Jobs Act, or BAAJA) and its manager’s amendment are characterized by supporters as necessary to eliminate barriers to building needed energy and mining infrastructure. While the legislation contains admirable efforts to improve transparency and accountability for electric transmission projects and implement ratepayer protections for data centers, it bestows significant new legal rights for fossil fuel developers and—importantly—undermines long-standing statutory protections over existing and future Liquified Natural Gas (LNG) exports. BAAJA is unfortunately reminiscent of the ill-fated 2015 deal brokered by President Obama and Congressional Republicans to eliminate long-standing regulations over oil exports in exchange for an extension of clean energy tax breaks. Deregulating oil exports has had catastrophic consequences in the loss of the ability to subject them to a modicum of regulatory oversight to protect consumers, and BAAJA will prove to be far worse for LNG exports.
BAAJA Interferes With Natural Gas Act Provisions That Allow the Secretary of Energy To Alter Or Rescind Existing LNG Export Authorizations, Thereby Locking In Billions of Tons of Exports
The Natural Gas Act establishes sweeping public interest standards over gas rates and exports. Section 1 of the NGA declares “that the business of transporting and selling natural gas for ultimate distribution to the public is affected with a public interest, and that Federal regulation in matters relating to the transportation of natural gas and the sale thereof in interstate and foreign commerce is necessary in the public interest.” The U.S. Supreme Court noted that the “primary aim” of the NGA is “to protect consumers against exploitation at the hands of natural gas companies”. Section 3 of the Natural Gas Act only permits exports of most natural gas which have first determined to be “not inconsistent with the public interest.” The U.S. Department of Energy regulates the volume of natural gas to be exported, while the Federal Energy Regulatory Commission separately regulates physical facilities used to export the gas.
BAAJA significantly disrupts the Department of Energy’s ability to review and revise existing LNG export authorizations. At present, DOE grants blanket authorizations to LNG export applicants, granting them the right to export their requested volume (typically the maximum capacity of their facility) every year all the way through 2050, with no modifications or check-in.
The Trump Administration admits in a 2018 policy statement that Section 16 of the NGA gives it authority to “amend, and rescind such [export] orders . . . as it may find necessary or appropriate’’ to satisfy its statutory responsibilities. So that means that, under current federal law, the Secretary of Energy can make any modifications to the the more 14 billion cubic feet per day of authorized exports for the seven export facilities under formal commercial operation and the additional 25 bcf/d that are either commissioned or under construction. So under current law, the Secretary of Energy can modify export volumes for the 39 bcf/d of already authorized exports of existing and under construction LNG export facilities to, say, reduce their authorized export volumes by 20% or whatever number to address domestic energy affordability or other public interest considerations.
Title IV of BAAJA directly impedes this Natural Gas Act authority, and will lock in this already-authorized 39 bcf/d of LNG export capacity. Organizations modeling the emissions and other impacts of BAAJA incorrectly assume that our existing LNG export capacity—the largest in the world – and its subsequent doubling in the next few years is already locked in and that BAAJA can’t effect that. This is false. As a result, emissions and other estimates are seriously undercounting the impacts the legislation will have on ensuring the staggering LNG export buildout cannot ever be modified.
Many fail to comprehend the massive scale of America’s natural gas production and LNG exports. The United States is far and away the largest natural gas producer and exporter in the world. Our daily gas production is nearly 25% bigger than Russia and Iran (the #2 and #3 gas producers) combined. America accounts for more than 25 percent of the entire world’s daily gas production and LNG exports. And our record LNG export capacity is set to more than double in the next few years.
Just four U.S. LNG export facilities consume more natural gas than all 74 million American household natural gas utility customers combined. U.S. LNG exports will soon surpass gas consumption for all other industrial consumers, and will only trail U.S. power sector demand. So far, gas fracking has been able to keep pace with rapidly rising LNG exports (and increased pipeline exports to Mexico), but that pace cannot always be sustained. Any gap between production and consumption for export will place upward pressure on domestic prices, and rising LNG exports more frequently link domestic prices with global supply/demand disruptions, routinely exposing American families to price spikes and volatility.
Current federal law is designed to provide the Secretary of Energy unimpeded ability to modify LNG export authorizations to preserve protections for domestic energy affordability. The Natural Gas Act has clear authority—as acknowledged by the Trump Administration—to amend existing LNG export authorizations to ensure the public interest is protected.
But BAAJA significantly interferes with existing Department of Energy authority to maximize protections for domestic energy affordability.
Title IV (“Project Certainty”) clearly applies to natural gas export authorizations. Section 1401(a)(2) defines a Federal authorization or permit as “an authorization . . . for the construction or operation at normal capacity of a project.” Section 1401(b) provides only six criteria under which a federal agency can “revoke, rescind, withdraw, terminate, suspend, vacate, remand, reopen, materially amend, or materially alter a Federal authorization or permit”. The final requirement (F) allows modification of an authorization if “such action is taken pursuant to any applicable law or regulation.” But Section 1401(b)(4)(B) establishes the standard of judicial review for any entity challenging a modification of an LNG authorization or other federal permit, placing “the burden of proof on the Federal department or agency to demonstrate that 1 or more of the matters described in subparagraphs (A) through (F) of that paragraph applies.” So this shifts the clear public interest mandate in the Natural Gas Act to now force the Secretary of Energy – rather than the recipient of an LNG export authorization – to establish a new burden of proof hurdle. And of course Section 1401(b)(4)(D) entitles LNG project developers and holders of export authorizations to sweeping financial damages, creating a new financial disincentive for the federal government to exercise its public interest mandate under the Natural Gas Act.
Furthermore, Section 1401(b)(1)(D) omits energy affordability, protection of consumers or protection of the public interest as enshrined in the Natural Gas Act. The failure to include energy affordability as a criteria of permitting review also undermines Natural Gas Act protections.
Many organizations simply do not fully understand that the Natural Gas Act entitles the government to modify already-approved LNG export authorizations. For example, the Center on Global Energy Policy at Columbia University writes that BAAJA won’t “translate into substantially more LNG export capacity or exports”, ignoring that BAAJA will significantly curtail the ability to modify already-authorized exports. Similarly, Rhodium Group fails to model that BAAJA could result in significant emission increases by eliminating the ability of the Secretary of Energy to modify existing LNG export authorizations (they also sharply undercount the emissions impacts of LNG exports, as their models exclude any emissions once an LNG cargo departs the United States).
The Natural Gas Act was crafted to protect America’s household consumers, in part by requiring most gas exports to only be authorized if they first conform with the public interest. BAAJA establishes new, industry-friendly criteria that significantly erode the NGA’s core protections, and will make it more difficult to modify billions of tons of already authorized LNG exports. As a result, BAAJA will have catastrophic impacts not only on the climate and for environmental justice communities, but for future efforts to address energy affordability by regulating already-approved LNG export authorizations.