Curiouser and curiouser

The US Environmental Protection Agency has turned down Cheniere Energy’s request to exempt LNG turbines from 18-year-old regulations that the agency decided (early this year) will go into effect (also this year).

Reuters first reported the news, which was confirmed by Cheniere spokesman Eben Burnham-Snyder in a statement to the FT. With our emphasis:

. . . we will work with our state and federal regulators to develop solutions that ensure compliance . . . we believe that the steps needed to come into full compliance will not result in a material financial or operational impact and that we will be able to continue to reliably supply LNG to customers and countries around the world.”

That backs up a point we made in July: this decision doesn’t mean half of the US’s natural-gas exports will be shut off on Sept 7.

It does, however, put a regulatory hurdle in front of a major source of US natural-gas exports, at a time when they are more important globally. And remember, this particular hurdle has in theory existed for almost two decades, but hasn’t been enforced until now.

Most of our readers already know that European natural-gas prices jumped this week as Russia said it was shutting off Nord Stream 1 to address some “technical faults” that sound a lot like the very existence of sanctions.

But energy prices are also very important for the US’s domestic political scene as the US grapples with high inflation; natural-gas prices slid in late August on news that the Freeport LNG facility was delaying its start until mid-November.

Still, the EPA’s decision didn’t necessarily cause Tuesday’s decline in US natural-gas futures. Reuters’ report on the decision didn’t come out until 5pm, and most of the sell-off had occurred before then.

Going by Cheniere’s statement, the company’s next step is to develop a plan with state and federal regulators to come into compliance with the rules. An EPA spokesman told Reuters that while the “EPA is denying Cheniere’s request for a special subcategory to comply with the turbines rule, the Agency will continue to work with them and with other companies as needed to assure they meet Clean Air Act obligations.”