LNG

The American Petroleum Institute (API), whose members include Exxon Mobil, Chevron and Cheniere Energy, is calling on President Trump to exempt LNG tankers from a new rule. The novel regulation mandates producers to move 1% of their exports on US-built ships starting from April 2028, and that share would rise to 15% from April 2047 onwards.

The policy sent shockwaves through the industry when announced by the US Trade Representative on April 17. In a first response, API told the U.S. Energy Secretary Chris Wright and National Energy Dominance Council Chair Doug Burgum the ruling would risk to counteract progress of the Trump administration towards unleashing US LNG sales.

Individual US LNG vendors who do not comply with the rule risk to lose their export licenses, even though the percentages apply to the overall shipping industry and to vessels that LNG exporters do not own and control, API warns.

Quest to get rule abolished

The industry group has rushed to foster closer relation with USTR in a quest to get the rule amended, if not abolished. The aim is to ensure “feasible and durable policies that benefit consumers and advance American energy dominance," said Aaron Padilla, API's vice president of corporate policy.

Today, there are 792 LNG carriers in operation around the world, according to the AXS Marine shipping consultancy. Out of that total, the number of ships built in South Korea and Japan is 703 combined. Some 58 LNG carriers were built in China – and just five come from US shipyards and these 1970-era ships are laid up and currently not in operation, AXS Marine specified.

Unfeasible deadline

There is no way that US shipyards can churn out vessels fast enough to meet the deadline set by USTR and the Trump administration, market participants warn. "There are no such vessels in existence today, and building them would take decades, making compliance impossible for the industry," Charlie Riedl, executive director at the Center for LNG, told Reuters in a statement.

In fact, it would take five years to build one LNG carrier at either of the two American shipyards that have sufficiently long docks to build such a vessel. API CEO Mike Sommers hence urged the Trump administration “to exempt crude oil and refined product imports and exports - consistent with this Administration's approach to exempt these same products from baseline and reciprocal tariffs.”

The American Gas Association has welcomed the balanced perspective taken in the draft guidance released by the White House Council on Environmental Quality in relation to the greenhouse-gas emissions of major energy, pipeline and liquefied natural gas projects.

The new draft guidance is aimed at helping to clarify how federal agencies should consider the greenhouse-gas impacts of major project permitting decisions when conducting environmental reviews under the US National Environmental Policy Act.

“The draft guidance from the White House Council on Environmental Quality will help facilitate the environmentally-responsible construction of natural gas pipelines and other infrastructure that our customers want and need,” said AGA President and Chief executive Karen Harbert.

“Streamlining and clarifying the permitting process helps the natural gas industry provide timely, safe, reliable and affordable service to the 178 million Americans who enjoy the benefits of natural gas and the millions more that want it, but do not yet have access,” added Harbert.

In particular, the draft guidance would help focus agency resources on evaluating the reasonably foreseeable greenhouse-gas impacts of agency permitting decisions, rather than “expending resources on evaluating remote or speculative matters” that do not have a sufficiently close causal relationship with an agency’s permitting decision.

The guidance directs agencies to consider greenhouse-gas emissions when “substantial enough to warrant quantification.”

Agencies do not have to consider how a project might impact greenhouse emissions if doing so would be “overly speculative.”

It reverses a 2016 rule from the same Council under the previous presidency that directed agencies to analyze how the projects they approve will contribute to climate change.

President Donald Trump withdrew the previous guidance in April 2017.

Environmental groups have said the proposal would reduce environmental protection.

The US Congress has been divided along party lines on the proposal, with Republicans praising the Trump Administration for removing hurdles for energy development as the nation embarks on boosting domestic natural gas use in power generation and LNG exports.

“This proposed guidance will help ensure that major energy projects in Wyoming and across the country can move forward without needless delays and litigation,” said John Barrasso, Republican Senator for Wyoming and head of the Environment and Public Works Committee.

The American Petroleum Institute also approved, saying it would “streamline” the National Environmental Policy Act (NEPA).

“NEPA, which is a procedural statute only, increasingly has been misused to delay and prevent development, which negatively affects jobs, tax revenue and investment in communities across the country,” said Howard Feldman, senior director of regulatory and scientific affairs for the American Petroleum Institute.

The US is in the midst of an LNG export build-out focused mostly on the Gulf Coast to earn billions of dollars for the American economy from the shale-gas glut by providing foreign countries with cleaner natural gas to replace coal.

At present four LNG export plants are on stream, Sabine Pass and Cameron LNG in Louisiana, Corpus Christi in Texas and Cove Point in Maryland.

The Elba Island LNG plant in Georgia and the Freeport facility in Texas are also scheduled for start-up to give the US six exporting plants. 

At least a dozen more liquefaction and export plants and feed-gas pipelines are making progress along the regulatory route.

The American Petroleum Institute and the International Association of Oil and Gas Producers have jointly outlined ways to increase US LNG exports to countries in the European Union.

The American Petroleum Institute, the leading US oil and natural gas industry trade group with more than 600 companies as members, has called on LNG exports to be made a top priority at the Department of Energy after the nomination to head the department of former Texas Governor Rick Perry.