The decision is based on “practical concerns” and a “reconsideration of the need for the requirement given those concerns,” DOE said.
The department will revert to the prior practice of requiring authorization holders to report, in relevant part, the country or countries into which the exported LNG or natural gas was actually delivered, as DOE believes this action will improve the accuracy of information provided by authorization holders and reduce administrative burdens for the U.S. LNG export market, DOE said.
DOE started adding an “end use” reporting requirement as a condition to all long-term, and some short-term, LNG export authorizations issued after Feb. 4, 2016.
Per the provision, authorization holders currently are required to include the following provision in any agreement or other contract for the sale or transfer of LNG exported pursuant to its long-term LNG authorization:
“Customer or purchaser acknowledges and agrees that it will resell or transfer U.S.-sourced natural gas in the form of LNG purchased hereunder for delivery to the countries identified in ... and/or to purchasers that have agreed in writing to limit their direct or indirect resale or transfer of such LNG to such countries. Customer or purchaser further commits to cause a report to be provided to [the long-term LNG export authorization holder] that identifies the country of destination (or countries) into which the exported LNG or natural gas was actually delivered and/or received for end use, and to include in any resale contract for such LNG the necessary conditions to ensure that [the long-term LNG export authorization holder] is made aware of all such actual destination countries.”
As part of monthly reporting requirements, authorization holders are required to report, for each LNG cargo, the country or countries of destination into which the exported LNG was actually delivered and/or received for end use.
DOE has defined “end use” to mean combustion or other chemical reaction conversion process. The department has included this end use provision in more than 40 export authorization orders.
But DOE has become aware that it’s impractical, if not impossible, for authorization holders to comply with the end use reporting requirement; for instance, a cargo of LNG could be offloaded and regasified in one country, and a portion of the U.S. natural gas could be re-exported via pipeline to other countries without direct knowledge or control of the parties to the initial export from the U.S., DOE said.
DOE launched the end use reporting provision after concerns arose that companies could attempt to circumvent additional requirements for public interest reviews for exports to countries with which the U.S. doesn’t have a free trade agreement, according to the Federal Register post.
The concerns arose after DOE on Feb. 5, 2016, granted applications of certain Canadian companies requesting authorization to export U.S.-sourced natural gas by pipeline to Canada, an instance wherein the companies planned to re-export the U.S. natural gas in liquid form to other countries, DOE said.
“DOE has determined that, for the reasons described herein, there is currently insufficient concern about authorization holders attempting to circumvent the public interest review process for non-FTA exports to justify an end-use reporting requirement — particularly given the compliance difficulties encountered by authorization holders,” DOE said.
Further, re-exports of all LNG cargoes represent a very small percentage of LNG trade, the department said.
DOE’s policy statement applies only to future orders, and DOE is issuing a blanket order to remove the end use provision from existing authorizations issued on or after Feb. 5, 2016, DOE said.
The department has included a list of the affected export authorizations in that blanket order.