1. U.S. Natural Gas Import/Export Regulatory Process Exporting LNG: Permitting & Economic Analysis Presentation to APEC Energy Working Group Bob Corbin Director Oil and Gas Global Security and Supply Office of Oil and Natural Gas U.S. Department of Energy November 7, 2012

2. Statutory Authority and Standard of Review  Statutory Authority –DOE’s authority to regulate the imports and exports of natural gas arises under section 3 of the Natural Gas Act, 15 USC 717b.  Standard of Review –Section 3(a): Exports to non-Free Trade Agreement Countries Authorization must be granted unless after opportunity for hearing, proposed export found to not be consistent with the public interest Authorization may be issued with terms and conditions as the Secretary may find necessary or appropriate Section 3(a) of the Natural Gas Act does not provide for the waiver of a public interest determination for applications to export LNG to non-FTA countries –Section 3(c): Free Trade Agreement (FTA) Countries and LNG Imports By law, deemed to be consistent with the public interest Authorization must be granted without modification or delay 2

3. Public Interest Determination Evaluation Criteria in Notice of Application  Criteria for Evaluating the Public Interest –Domestic need for the natural gas proposed for export –Adequacy of domestic natural gas supply –U.S. energy security –Other Considerations: –Impact on U.S. economy (GDP); consumers; and industry, including impact on domestic natural gas prices –Job creation –U.S. balance of trade –International considerations –Environmental considerations –Consistency with Departmental policy of promoting competition in the marketplace through free negotiation of trade arrangements –Other issues raised by commenters and/or interveners deemed relevant to the proceeding  Criteria are non-Statutory –Determined by DOE utilizing precedent of prior decisions and reasoned decision-making –Publicly transparent – described in DOE Federal Register Notice of application 3

4. Key Information Evaluated by DOE  Key Information Evaluated by DOE –Application, to include any supporting reports and analyses, such as: Report on natural gas resources and producing capacity Report on domestic hydrocarbon liquids production from gas shales and other unconventional resources Natural gas market and economics analysis –All public comments, protests, and interventions –Applicant responses to protests and interventions –Other information entered into the record of the proceeding  In reaching a decision, DOE will base its decision on evidence of record and arguments of the participants. 4

5. Sabine Pass non-FTA LNG Export - DOE/FE Order No. 2961 - Key Findings & Conclusions  Studies introduced by applicant indicated LNG exports will result in a modest projected increase in domestic market price for natural gas, which reflects the increasing marginal costs of domestic production  The public record supported the conclusion that the requested authorization will yield tangible benefits to the public whereas the allegations of negative impacts submitted by interveners opposing the application were not substantiated on the record. In particular, the interveners failed to offer any rebuttal studies of natural gas supply, demand and/or price analysis to support their claim the application was not consistent with the public interest.  Following a review of the record in this proceeding, DOE concluded that the opponents of the application had not demonstrated that a grant of the requested authorization would be inconsistent with the public interest, and DOE granted the requested authorization subject to terms and conditions.  DOE noted in its authorization that the cumulative impact of pending and future applications could pose a threat to the public interest and stated it will evaluate cumulative impacts. 5

6. DOE/FE Cumulative Impact of Exports Study  In order to address the potential cumulative impact of a grant of the pending applications, DOE has commissioned a two-part case study with: –DOE’s Energy Information Administration (EIA) –Private Contractor  Taken together this case study will address the impacts of additional natural gas exports on: –Domestic energy consumption, production, and prices, as well as the impact on other domestic energy sectors; and –U.S. macroeconomic impacts, including GDP, job creation, and balance of trade  Provides independent analysis of above issues  EIA analysis completed and report issued January 19, 2012  Private contractor study to be completed by end of this year –Publish study and seek public comment to help inform DOE’s decision-making process 6

7. Applications to Export Domestically Produced Lower-48 States LNG as of November 2, 2012 CompanyQuantityFTANon-FTA Sabine Pass Liquefaction LLC2.2 Bcf/dApproved Freeport LNG Expansion, L.P. and FLNG Liquefaction, LLC 1.4 Bcf/dApprovedUnder DOE Review Lake Charles Exports, LLC2.0 Bcf/dApprovedUnder DOE Review Carib Energy (USA) LLC 0.03 Bcf/d: FTA 0.01 Bcf/d: non-FTA ApprovedUnder DOE Review Dominion Cove Point LNG, L.P.1.0 Bcf/dApprovedUnder DOE Review Jordan Cove Energy Project, L.P. 1.2 Bcf/d: FTA 0.8 Bcf/d: non-FTA ApprovedUnder DOE Review Cameron LNG, LLC1.7 Bcf/dApprovedUnder DOE Review Freeport LNG Expansion, L.P. and FLNG Liquefaction, LLC 1.4 Bcf/d ApprovedUnder DOE Review Gulf Coast LNG Export, LLC2.8 Bcf/dApprovedUnder DOE Review Gulf LNG Liquefaction Company, LLC 1.5 Bcf/dApprovedUnder DOE Review LNG Development Company, LLC (d/b/a Oregon LNG) 1.25 Bcf/dApprovedUnder DOE Review 7

8. Applications to Export Domestically Produced Lower-48 States LNG as of November 2, 2012 CompanyQuantityFTANon-FTA SP Power Solutions, Inc.0.07 Bcf/dApprovedn/a Southern LNG Company, LLC0.5 Bcf/dApprovedUnder DOE Review Excelerate Liquefaction Solutions I, LLC 1.38 Bcf/dApproved Under DOE Review Golden Pass Products, LLC2.6 Bcf/d Approved Under DOE Review Cheniere Marketing, LLC2.1 Bcf/d Approved Under DOE Review Main Pass Energy Hub, LLC3.22 Bcf/dPending Approvaln/a CE FLNG, LLC1.07 Bcf/dPending ApprovalUnder DOE Review Waller LNG Services, LLC0.16 Bcf/dPending Approvaln/a Total of Applications Received (FTA and non-FTA are not additive) 27.58 Bcf/d23.71 Bcf/d 8

9. Free Trade Agreement Countries  Free trade agreements that require national treatment for trade in natural gas with 18 countries: –Australia, Bahrain, Canada, Chile, Colombia, Dominican Republic, El Salvador, Guatemala, Honduras, Jordan, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, Singapore, and Republic of Korea Canada, Chile, Dominican Republic, Mexico, and South Korea currently have LNG import terminal capability  Free trade agreements that do not require national treatment for trade in natural gas with two countries (these countries are treated as non-FTA countries for purposes of any natural gas export applications): –Costa Rica and Israel 9

10. DOE Contacts Please view DOE/FE Order No. 2961, in FE Docket 10-111-LNG, issued May 20, 2011, to Sabine Pass Liquefaction, LLC, on the Natural Gas Regulation website at: www.fossil.energy.gov/programs/gasregulation/authorizations/Orders_Issued_2011/ord2961.pdf Bob Corbin – Director, Oil and Gas Global Security and Supply Robert.corbin@hq.doe.gov (202) 586-9460 John Anderson – Manager, Natural Gas Regulatory Activities John.Anderson@hq.doe.gov (202) 586-0521 10