While there is not much time remaining in the congressional calendar, there are several timely legislative and regulatory items that the American Public Gas Association (APGA) is currently working on that will impact public natural gas systems, or in some cases, public power systems that utilize natural gas for generation. A few of these issues are identified below.
The Department of Energy (DOE) has received over 40 applications to export domestic LNG from the contiguous United States to free trade agreement (FTA) or non-FTA nations. To date, the total export capacity applied for is 39.31 Bcf/d and 35.95 Bcf/d to FTA and non-FTA nations, respectively. The sum total of these applications equates to approximately 50 percent of U.S. natural gas production. APGA has taken a position in opposition to the export of LNG that it will harm consumers by increasing the price of natural gas in the U.S. and squanders a chance to reduce our energy dependence, arguing, among other things.
Recently, DOE issued a final decision regarding its process for reviewing LNG export applications. Specifically, DOE will now make final public interest determinations on an LNG export application only after completion of the review required by environmental laws and regulations that are included in the National Environmental Policy Act (NEPA). Conducting a NEPA review can be a costly and sometimes lengthy process. DOE also announced plans to undertake a new economic study in order to gain a better understanding of how potential LNG exports between 12 and 20 Bcf/day could affect the public interest. APGA supported these actions.
The House passed legislation (H.R. 6) in June that would require DOE to approve or deny any export application within 30 days. APGA opposed this legislation. Similar legislation has been introduced in the Senate, but has yet to move.
Federal Reserve advanced notice of proposed rulemaking (ANPR) on the physical commodity activities of financial holding companies: The Board of Governors of the Federal Reserve System is considering actions that would impact the activities of large banks—referred to as financial holding companies in an ANPR—as they pertain to the trading of physical commodities, including natural gas. Specifically, the Board of Governors of the Federal Reserve System has described natural gas and other energy commodities as “environmentally sensitive commodities” and implied that contact with natural gas and other environmentally sensitive commodities could expose financial holding companies to unwarranted risks.
Given that many public natural gas systems utilize financial holding companies as counterparties for a number of transactions—including natural gas prepays—unduly limiting or preventing these entities from engaging in the physical natural gas business would harm market liquidity for public natural gas systems. This could potentially increase physical transaction costs, and threaten the viability of natural gas prepayment transactions. APGA has expressed concern regarding the implementation of regulations that would prohibit, or inappropriately restrict, financial holding companies from engaging in physical natural gas commodity transactions. The timing of a proposed regulation on this issue is unclear, but APGA anticipates that a regulation will be released at some point in the next year.