US DOE tightens LNG export extension policy, denies request from Lakes Charles LNG

The US Department of Energy has denied Lake Charles LNG's request for a second extension of its deadline to start exports from its planned Louisiana export terminal, as the regulator rolled out a new policy raising the bar for extending deadlines for commencement of US LNG exports to non-free trade agreement nations.

Finding the seven years that it generally allows projects for the start of exports to be "reasonable" and "achievable," the DOE said in its new policy that it will no longer consider applications for extensions -- unless an applicant can show it has physically begun construction and that it faced "extenuating circumstances" beyond its control to meeting the deadline.

While the new policy did not directly apply to the Lake Charles decision, the DOE said April 21 its ruling on that extension request was consistent with the new approach.

The DOE determined that Energy Transfer's Lake Charles LNG has not shown good cause for "an unprecedented second extension" of the commencement deadline for gas exports to non-FTA nations. The extension would have pushed a December 2025 deadline out to December 2028. The DOE first issued an export authorization for the project in 2016 and granted an extension in 2020.

To support its request, Lake Charles had argued that global events including the coronavirus pandemic created an extremely difficult environment for constructing large-scale infrastructure projects. It also said that several recent off-take agreements involving the project were contingent on a deadline of 2028.

But the department agreed with environmental advocates that Lakes Charles LNG's "generalized statements" failed to show with specificity how the project was delayed by global events since its first extension application. And the DOE said the developer did not show evidence of actions taken to advance the project since the initial 2020 extension, aside from entering into several long-term offtake contracts in 2022.

"We agree with environmental advocates that these contracts alone do not demonstrate that Energy Transfer has made significant progress toward physical completion of the liquefaction project since 2020, including 'progress towards reaching FID,'" the order said.

The DOE also found that the project had not achieved the level of commercial progress that other authorization holders had reached in a similar time period. The department said that Venture Global had built and begun operating its Calcasieu Pass project within three years of getting its non-FTA authorization in 2019, and that since 2022 three other authorization holders have reached FID and started construction, within three or four years of receiving their long-term non-FTA authorization from the DOE.

The decision marks a setback for the 16.5 million mt/year Lake Charles project, which gained an extension from the Federal Energy Regulatory Commission for its authorization for the LNG terminal in May 2022. Energy Transfer has secured long-term contracts covering some 7.9 million mt/year of capacity and has said it is in talks for additional long-term offtake agreements that include preliminary deals with two Japanese customers.

The DOE's current deadline, of Dec. 16, 2025, remains in effect for Lake Charles LNG, according to the DOE.

Energy Transfer did not immediately reply April 24 to a request for comment.

Policy shift

In laying out its new policy on export extensions, the DOE said it aimed to improve transparency for the LNG export market.

The gap between authorized exports and those operating or under construction has grown to 25.64 Bcf/d, the DOE said, adding that "this overhang obscures an accurate picture" of investment-backed commitments involving US LNG.

The uncertainty has become disruptive to the DOE's analysis feeding into non-FTA export applications, increases challenges to market participants and could deter new entrants including those seeking to use newer technology or adopt better environmental practices, the DOE said.

ClearView Energy Partners, in a research note, said the new policy applies on a prospective basis from April 21 and would limit the ability for license holders to defer construction indefinitely.

"As such, we consider this to be a positive policy move for projects that may be coming to market later but with stronger commercial prospects," ClearView said.

The action came the same day that the DOE agreed to extend export time frame for the Port Arthur LNG project. The deadline for non-FTA exports to begin would be extended by 25 months to June 18, 2028, the DOE said. Port Arthur's export authorization for up to 698 Bcf/year runs to Dec. 31, 2050.

In granting the Port Arthur extension, the DOE pointed to the March 20, 2023, announcement of a final investment decision and start of construction on the Port Arthur Phase 1 project.

"The recent milestone supports PALNG's assertions that it 'has worked diligently' to complete the construction and place the export facilities into service," the DOE order said.

Weighing a protest by Public Citizen, the DOE said the advocacy group had not shown how allowing more time to start exports would impact public interest factors the DOE had previously considered in authorizing the project.