On September 11, 2013, the United States Department of Energy (DOE) issued an order conditionally granting Dominion Cove Point LNG, LP (DCP) long-term, multi-contract authorization to export liquefied natural gas (LNG) by vessel from the Cove Point LNG Terminal in Calvert County, Maryland to non-Free Trade Agreement (non-FTA) countries (Cove Point Order). DCP is the fourth company to receive conditional authorization from the DOE to export LNG to non-FTA countries and the third company to receive such authorization in the past four months.

The First Three LNG Export Approvals

The first LNG export project to receive conditional authorization from the DOE was the Sabine Pass Liquefaction Project in Cameron Parish, Louisiana, which received conditional authorization on May 20, 2011. Almost two years to the day after the DOE issued its order conditionally granting authorization to Sabine Pass, the DOE issued an order on May 17, 2013, conditionally granting Freeport LNG Expansion L.P. and FLNG Liquefaction, LLC authorization to export LNG to non-FTA countries from the Freeport LNG Terminal on Quintana Island, Texas (Freeport Order). This was soon followed on August 7, 2013 by the issuance of an order conditionally granting authorization to Lake Charles Exports, LLC to export LNG to non-FTA countries from the Lake Charles Terminal in Lake Charles, Louisiana (Lake Charles Order).

To date, Sabine Pass is the only LNG export project to have received final authorization from both the DOE and the Federal Energy Regulatory Commission (FERC). FERC granted authorization to Sabine Pass to site, construct and operate the Sabine Pass Liquefaction Project on April 16, 2012. The DOE issued its final order granting long-term authorization to export LNG from the Sabine Pass LNG Terminal to non-FTA countries on August 7, 2012, and construction of the Sabine Pass Liquefaction Project has begun.

The Fourth: Cove Point LNG Terminal

The DOE Cove Point Order, like the Freeport Order and Lake Charles Order before it, expressly conditions final authorization on the satisfactory completion of FERC’s environmental review of the project. As the DOE explains in its Order, FERC is serving as the lead agency for purposes of review of the Cove Point LNG Terminal project under the National Environmental Policy Act (NEPA). The DOE is participating in that environmental review as a cooperating agency in tandem with FERC’s review of the project with the intention to avoid duplication of effort, to achieve early coordination among agencies, and to concentrate public participation in a single forum.

In the Cove Point Order, the DOE clearly states that “persons wishing to raise questions regarding the environmental review of the present Application are responsible for doing so within the FERC proceedings.” The DOE then cautions that absent a showing of good cause for failure of interested persons to participate in the FERC environmental review proceeding, the DOE may dismiss such claims if raised out of time in the DOE proceeding. Those exact statements also appear in the Freeport Order and Lake Charles Order. The DOE apparently is seeking to avoid the situation faced in the Sabine Pass proceedings in which the Sierra Club attempted to raise new environmental challenges sixteen months out of time and after FERC had completed its environmental review and issued its final order authorizing the Sabine Pass Liquefaction Project.

Based on the Orders issued in the Cove Point LNG, Freeport LNG, and Lake Charles LNG proceedings, the DOE’s approach to environmental issues is becoming clearer:

• First, the DOE will participate as a cooperating agency in FERC’s environmental review of LNG export projects and let FERC take the lead. The DOE will then independently review FERC’s conclusions when FERC’s environmental review is complete.

• Second, the DOE will condition its approval of all LNG export projects on the satisfactory completion of the environmental review process at FERC. Accordingly, applicants should not expect to receive final authorization to export LNG to non-FTA countries until FERC’s environmental review process is completed.

• Finally, all questions or concerns over the scope or substance of the environmental review should be raised within the FERC proceedings. Otherwise, interested persons likely will be precluded from raising new environmental challenges in the DOE proceeding. Conversely, if an interested person raises an issue in the FERC environmental review proceeding that FERC considers but rejects, that person likely will not receive a second bite at the apple on the same issue before the DOE.