TRENDING—EASING PERMITTING SUGGESTED TO FUEL U.S. ENERGY EXPORTS TO EUROPE
President Donald Trump held out the hope, after his July 25 meeting with European Commission President Jean-Claude Juncker, of new and increased U.S. liquefied natural gas (LNG) exports to Europe. Europe has been working to diversify its energy sources, and, in early August, the EU Commission reiterated support for U.S.-EU trade in natural gas, urging America to ease LNG export regulations.
Currently, Europe mostly imports piped gas from Russia, Norway and Algeria. LNG is a secondary source, accounting for 12 percent of European gas demand in 2017, although it is significant in some markets, such as Spain. The EU pipeline imports are less expensive that U.S. LNG.
However, as noted in a recent report from the Atlantic Council, “a shift in the U.S. regulatory framework can help reduce costs of U.S. imports and can build confidence in the overall trade relationship,” and the study went on to urge U.S. policymakers to take steps in that direction.
Negotiations between the U.S. and EU have already taken place within the framework of the Transatlantic Trade and Investment Partnership (TTIP), which has been dormant since even before Trump took office.
One measure urged on the U.S. by the Atlantic Council is to remove what the EU considers a non-tariff barrier to U.S. LNG exports: the requirement of export licenses—a measure that dates back to the passage of the Natural Gas Act of 1938. Under that scheme, export permits must be issued by the Federal Energy Regulatory Commission (FERC) and the Department of Energy (DoE). FERC also acquires input from the U.S. Coast Guard, the Department of Transportation and the Maritime Administration. The DoE must also separately determine that exports are “in the national interest.” Regulatory changes in 2014 actually lengthened the permit process.
The Atlantic Council report urges the U.S. to amend the Natural Gas Act of 1938 by eliminating the national interest determination and otherwise streamlining the LNG export permitting process. “These rule changes,” the report says, “if proposed in the autumn of 2018, could be finalized in early 2019 following formal notice and comment process in the United States. Importantly, these reforms do not require lengthy trade treaty negotiations.”
These measures, according to the report, would “support more U.S. LNG exports to the EU” and “help counterbalance Russian influence on the European continent.” It will be difficult to compete with Russian gas on price, the report noted, although increased supplies of U.S. LNG may bring those prices down and “some Europeans may buy U.S. LNG at somewhat higher prices just to have another reliable supplier.” It is also necessary on the European side to upgrade LNG infrastructures.
However, increased European demand for LNG is not a foregone conclusion. A new paper from the Columbia University Energy Policy Center finds that a renaissance of natural gas in the EU-28 electricity sector looks unlikely, with only modest room for fuel switching and growth. According to the report, “Fuel prices, carbon prices and interest rates will be critical factors in determining whether demand for natural gas increases or declines.”
FMC RELEASES INTERIM REPORT ON DETENTION AND DEMURRAGE PRACTICES
Bringing clarity, access, and efficiency to the delivery of cargo from carrier to shipper will be key to improving the process for how and when marine terminal demurrage and ocean carrier detention charges are levied.
This is among key initial observations made by Commissioner Rebecca Dye in the interim report for Fact Finding 28, an investigation into “Conditions and Practices Relating to Detention, Demurrage and Free Time in International Oceanborne Commerce,” submitted to the Federal Maritime Commission during a closed meeting in early September. Dye serves as the investigative officer for Fact Finding 28, which was initiated in March.
Since the launch, Dye has conducted scores of interviews with executives, managers, government officials and policy experts with experience in, or specialized knowledge of, international ocean shipping and port operations. She also solicited submissions from shippers, consignees and drayage providers.
“Throughout this process, my priority has been how ocean carrier and marine terminal demurrage and detention approaches can optimize, not diminish, the performance of the overall American international freight delivery system,” said Dye.
As a concurrent part of the investigation, the commissioner issued an information demand to ocean carriers and marine terminal operators (MTOs) which yielded extensive data related to demurrage and detention practices. These materials assisted Dye in developing the preliminary observations contained in the report of her investigation.
Dye advised the commission that she has identified six areas to be developed: transparent, standardized language for demurrage, detention and free time practices; clarity, simplification and accessibility regarding demurrage and detention billing practices and dispute resolution processes; explicit guidance regarding types of evidence relevant to resolving demurrage and detention disputes; consistent notice to shippers of container availability; an optional billing model wherein MTOs bill shippers directly for demurrage; and VOCCs bill shippers for detention.
“While Fact Finding 28 is an investigation, it also represents a unique opportunity for industry leaders to have their voices heard and their experiences recognized on an important policy and operational issue,” said Dye. “I am grateful for the valuable contributions so many different parties from every sector of the industry made to this investigation. I look forward to continuing conversations with all industry leaders as we work to further develop the record and the above ideas.”