The New National Liquefied Natural Gas Import Policy Requires Further Improvements

EMD-78-19: Published: Dec 12, 1977. Publicly Released: Dec 12, 1977.

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Over one-fourth of our total energy consumption is supplied by natural gas. One approach to increasing the supply of natural gas is to develop supplemental gas sources such as imported liquefied natural gas (LNG). According to government and industry statistics, imported LNG has the greatest potential to add to our Nation's supplemental gas supplies by 1985. LNG is natural gas converted to liquid form by lowering its temperature to -259 degrees F. Despite the expense of special equipment for liquefaction and oceangoing transportation and storage, the great reduction in volume can make LNG economically feasible to transport and store for subsequent regasification and use elsewhere. As part of President Carter's National Energy Plan, a new LNG import policy was established. The limitation on LNG imports imposed under the previous administration was replaced by a more flexible policy providing for a case-by-case analysis of each project.

The new policy provides for national distribution to avoid a region being seriously affected by a supply interruption, development of contingency plans in case such interruption occurs, and prohibition of dock construction in densely populated areas. This policy has not alleviated uncertainties associated with imported LNG. Import policy should be related to the overall energy program, and a comprehensive energy proposal should clearly indicate how much imported LNG will be needed and methods of obtaining it. There is a need for adequate criteria defining what would constitute overdependence on imported LNG. As LNG imports increase, the United States increases its vulnerability to supply disruptions and price hikes. The policy does not address the problems associated with the lengthy regulatory process and curtailment of low-priority LNG users. Unclear, inaccurate, and misleading statements add to the confusion regarding LNG's future role in supplying U.S. energy needs.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Energy, in cooperation with other federal agencies, should revise the policy statement for imported LNG to: (1) define clearly goals and objectives for imported LNG; (2) establish criteria on what constitutes national dependency for use in determining project acceptability; (3) specify curtailments to be applied for low-priority users of imported LNG; and (4) clarify or correct ambiguous, inaccurate, or potentially misleading statements. The Secretary of Energy should also initiate a study of the regulatory process to identify what actions should, or could, be taken to expedite decisionmaking.

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