Through multiple presidential administrations, law governing energy exports not followed, leaving government exposed to lawsuit; Consumer impact of natural gas exports runs in tens of billions
WASHINGTON (June 16, 2014) – Multiple presidential administrations stretching back to the Gerald Ford administration have failed to follow the principal law governing natural gas and other energy exports requiring rules restricting sending American natural gas abroad, creating huge uncertainty for the future of natural gas exports and exposing the U.S. government to lawsuits, Senator Edward J. Markey (D-Mass.) explained today in a letter to the Obama administration.
The Energy Policy and Conservation Act of 1975 (EPCA) required that rules be created and issued to prohibit both crude oil and natural gas exports but only the government standards for crude oil exports were ever released by the Commerce Department. The Department of Energy has issued separate regulations under a preexisting statute – the Natural Gas Act of 1938 – to authorize the export of natural gas but those regulations do not satisfy the requirement of the 1975 law.
By not creating the rules for natural gas, the authority of DOE to approve natural gas exports is cast in doubt, and the government could potentially be sued by a company or organization harmed by the increased prices that will come from sending domestic natural gas abroad.
Since May of 2011, DOE approved seven licenses to export liquefied natural gas at six export facilities and has for years approved exports through pipelines to Canada and Mexico. The total amount approved by DOE through these terminals and pipelines has now far exceeded the level that DOE’s own study said would increase domestic natural gas prices by more than 50 percent.
The full letter from Senator Markey to Commerce Secretary Penny Pritzker, which asks for the reasons why the law was not followed and what Commerce will do to rectify the situation, can be found HERE.
A full timeline of the events surrounding the enactment of the law, the failure to create rules governing natural gas exports, and the developments in the natural gas sector can be found HERE.
“Natural gas exports could cost consumers and businesses tens of billions of dollars in higher energy bills, and yet it appears that every presidential administration since 1975 has failed to follow the law governing these exports,” said Senator Markey, who chairs the Foreign Relation subcommittee that oversees international energy issues. “This is a four decade failure to follow the law that could have huge impacts for decades to come on consumers, businesses, and our energy and national security policies. The Obama administration did not create this problem, but they have an opportunity to follow the law and create the required rules for natural gas exports to protect consumers and our energy security. Families and businesses in Massachusetts and across the country could benefit from cheaper, cleaner natural gas, but not if we send it abroad.”
In EPCA, signed by President Gerald Ford, the law clearly states that the president must create rules to prohibit the export of crude oil and natural gas, with such exemptions as are consistent with the national interest and the purposes of that law. The Ford administration transferred the authority to issue these rules to the Commerce Department. Instead of creating the regulations for natural gas, however, it appears that Commerce simply pointed to existing DOE regulations under the Natural Gas Act, while never actually creating the rules required by EPCA.
In Senator Markey’s letter, he explains that the failure to issue regulations under the law leaves the government exposed to a potential lawsuit under the Administrative Procedure Act (APA), which requires that rulemakings be done in a timely fashion. If a lawsuit were successful, it could force the Commerce Department to finally create and issue rules to restrict natural gas exports.
Senator Markey has already filed legislation to require the Department of Energy to consider a number of important factors before approving additional natural gas exports to ensure that those exports are in the national interest. In late May, DOE also said it will review the cost estimates for large-scale exports and their process for approving export terminals going forward.