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Trump Admin Quietly Pushing ‘Small Scale’ LNG Exports That Avoid Environmental Reviews

The Trump administration proposed regulations to expedite the permitting process for natural gas exports from “small-scale” facilities on the Friday before Labor Day.

The U.S. Department of Energy (DOE) had proposed an alteration of the rules for the export of “small-scale” liquefied natural gas (LNG) under the Natural Gas Act. The proposal will now be open to a public commenting period set to end October 16.

The Trump Administration is focused on finding ways to unleash American energy and providing a reliable and environmentally friendly fuel to our trading partners who face unique energy infrastructure challenges. The Department of Energy and this Administration are wholeheartedly committed to strengthening the energy security of the United States and our allies,” Rick PerryU.S. Secretary of Energy, said in a press release.

Normally, LNG export terminals have to go through a comprehensive environmental impact statement process, which is required by the National Environmental Policy Act (NEPA), but the proposed rule would undo that process. NEPA also requires a public commenting period and sometimes a public hearing period, in which citizens with varying viewpoints can share their thoughts on the proposed projects, with those comments being used as part of the decision-making process for federal agencies.

Section 3(a) of the Natural Gas Act centers around the “public interest” regulatory review that LNG export terminals undergo, a process overseen by the DOE. If the agency does not see the proposed LNG export terminal as fitting within the “public interest” — which is almost never the case, despite widespread criticism from the environmental advocacy community — then it does not receive a permit from the DOE.

[N]o person shall export any natural gas from the United States to a foreign country or import any natural gas from a foreign country without first having secured an order of the Commission authorizing it to do so,” reads the Natural Gas Act, with the commission, in this case, being the DOE. “The Commission shall issue such order upon application, unless, after opportunity for hearing, it finds that the proposed exportation or importation will not be consistent with the public interest.”

But “public interest,” in the new proposed rule, is taken as a given for “small-scale” LNG exports. The problem and the opportunity for the gas industry, as DOE points out in its new proposed rule, is that “public interest” goes completely undefined in the Natural Gas Act.

“The statute, however, does not define ‘public interest’ or identify criteria that DOE must consider when determining whether a proposed export of natural gas is consistent with the public interest under section 3(a),” reads the proposed DOErule. “In this proposed rule, DOE is interpreting NGA section 3(a) to determine that small-scale natural gas exports are consistent with the public interest after considering all relevant factors, including the domestic need for the small volumes of natural gas to be exported and the security of domestic natural gas supplies.”

Most LNG exported from the U.S. originates as gas obtained via hydraulic fracturing (“fracking”) from shale fields nationwide. Since the Obama administration opened the floodgates for LNG exports from the U.S., LNG has been been exported at record levels. And under President Donald Trump, it surpassed natural gas imports for the first time in 60 years.

What Is ‘Small-Scale’ LNG?

Unlike massive LNG terminals situated on the coasts, which rely on long-term shipping contracts with companies, the “small-scale” variety relies on slightly smaller tankers and exists on a shorter-term and more flexible contract-to-contract basis.

The term [small-scale] refers to the direct use of liquefied natural gas in its liquid form, as opposed to the traditional model of regasification and subsequent introduction into the gas transmission grid,” explains a July 2017 PricewaterhouseCoopers report.

These plants provide supply to end-users in places where traditional infrastructure does not reach, or to consumers requiring liquid fuel. There are three major end uses for [small scale LNG]: marine fuel (bunkering), fuel for heavy road transport, and power generation in off-grid locations … The size of the market is expected to grow to approximately 100 million tons per year by 2030.”

Cheniere, Tellurian, and Lobbying

One of the titans of the burgeoning “small-scale” industry is Tellurian, a company owned and co-founded by Charif Souki, the former CEO of LNG exports giant Cheniere. Souki was forced out as CEO in 2015 by Carl Icahn, whose firm Icahn Associates owns 13.7 percent of Cheniere. Until recently, Icahn also served as a regulations adviser to the Trump White House.

Importantly, “small-scale” does not refer to the multinational business ambitions of companies, but rather the size and type of the tankers themselves. Tellurian CEO Meg Gentle, who formerly worked alongside Souki at Cheniere as vice president of marketing, explained it herself when detailing how the new business functions.

So people have started talking about small-scale and mid-scale and we’ve sort of chuckled at that. As you would imagine, there is nothing small scale about LNG,” Gentle said in a March 2017 interview. “It’s just making the refrigerator component itself a little bit more modular, repeatable and standardized. But we’re still using the largest [General Electric] turbines, the largest storage tanks ever built.”

Tellurian landed a DOE permit in March to export LNG from its Driftwood LNG terminal in Calcasieu Parish, Louisiana. In a March investor presentation, Tellurian said it plans to export 26 million metric tons of LNG annually from the Gulf of Mexico-based facility.

Its lobbying efforts have been led by Ankit Desai and Majida Turner, both former lobbyists for Cheniere. Desai, who on his LinkedIn page lists himself as a senior adviser to Tellurian’s CEO, was employed by the presidential campaigns of Hillary Clinton and John Kerry, and worked for then-Senator Joe Biden. Desai appears to support expediting the processing time for LNG permitting, retweeting a quote by his boss Meg Gentle.

Screen Shot 2017-08-31 at 4.02.45 PM.png

Turner (formerly Mourad) served as an aide to U.S. Secretary of Energy Spencer Abraham and was married to U.S. Rep. Mike Turner (R-OH) (the couple recently divorced). The Obama administration’s former top State Department energy adviser, Amos Hochstein, now works for Tellurian as VP and senior adviser. Hochstein predicted in a September 2015 interview with The Turkish Policy Quarterly that the U.S. would soon become a huge player in the global LNG marketplace.

“The U.S. is in the middle of a historic shift from the largest LNG importer to a significant leading exporter. This has been achieved in a very short time frame,” said Hochstein, who at the time was Special Envoy and Coordinator for International Energy Affairs. “The first LNG exports are poised to begin as early as this December, and the amount of gas already licensed for export means that the United States will match Qatar and Australia, as exporters in just a few years.”

French oil giant Total recently purchased a 23 percent stake in Driftwood LNG. Total and BP have both expressed interest in scaling up investments in small-scale LNG. Shell Oil has also lobbied for small-scale LNG as recently as 2016, advocating for “[i]ssues related to the Safe Pipes Act.”

Officials from Tellurian did not respond to a request for comment.

The Pipes Act, Future of Small-Scale LNG

Proposals to ease the regulatory roadmap for small-scale LNG facilities have popped up before, most recently via the Pipes Act. Nearly the entire oil and gas industry lobbied for that bill, including ExxonMobil, American Petroleum Institute, Chevron, BPKoch Industries, and a slew of others.

The Pipes Act became law in 2016 after being signed by President Obama. It contained a provision in the regulatory safety standards which included small-scale LNG facilities among those overseen by the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA), standardizing the infrastructure as a mainstay of the oil and gas industry.

Industry analysts believe small-scale LNG will increasingly become a key part of the gas industry’s portfolio for exports in months and years to come.

Small-scale LNG providers are now superseding the super-majors in the development of new LNG plants,” wrote Joanna Martin Ziegenfuss, an associate director with the Berkeley Research Group, in a recent article for the industry publication OilPrice.com. “Smaller plants are being constructed in response to the growing market demand for smaller cargoes, which are both easier to finance and also allow the buyer the option to diversify its supply.”

The PricewaterhouseCoopers report compares small-scale LNG to fracking, casting it as a technological advance that could play a disruptive role in the industry going forward.

In the same way that ‘fracking’ transformed the U.S. energy sector, [small-scale LNG] may be the next ‘small’ revolution in the gas sector,” it wrote. “Those first off the mark will be the most likely to reap the benefits.”

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Steve Horn is a freelance investigative journalist and Research Fellow at DeSmogBlog, where this piece first appeared. Joshua Frank is managing editor of CounterPunch and can be found on twitter @joshua__frank

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