Yesterday the Energy Department announced that their overhaul of the approval process for liquefied natural gas exports was finished.
Now when companies apply for a permit for an LNG export facility, The Energy Department will get its final say after the Federal Energy Regulatory Commission (FERC) completes an environmental review.
This new process does two things…
First, it ends the interminable practice of “conditional approvals” by the Energy Department. Before, when a company would apply for an LNG export permit, the Department of Energy would give them approval, but then they would have to wait for the extremely long review by FERC.
Now the Department of Energy has to wait until all environmental reviews are complete before they can give their final yes or no on a project.
Second, it helps to weed out companies who are serious about the projects and those who can’t really develop a multi-billion dollar export facility.
The FERC environmental review can cost $100 million or more to complete, and since it’s now the first phase of approval, only companies with the finances to pay for it will come to the table.
Before yesterday’s changes a company that wanted to export LNG could just pay the Energy Department $20,000 for their permit and wait to raise funds for the environmental review, but now that they have flip flopped only serious competitors can start the process.
The new changes do not apply to companies who have already received “conditional approval” from the Energy Department…
Those include Dominion Resources’s Cove Point Project, Sempra Energy’s Cameron LNG facility, and the Oregon LNG Project.
Under the new process, Cheniere Energy (NYSE: LNG) will see its Corpus Christi project reviewed by FERC in October, adding to the already approved Sabine Pass Terminal in Louisiana.
Because of this, Cheniere will most directly benefit form the new rules since they look set to have two projects underway before anyone else in the game gets reviewed.
Also other projects such as Dominion’s Cove Point and the Oregon LNG project seek approval in states less friendly to fossil fuel development than Louisiana and Texas.
They are in Maryland and Oregon respectively, and the state and local governments there have been pushing back against the development of these facilities.
So for right now it seems that the projects on the Gulf Coast are more feasible, and thus better positioned to benefit an investor on the open market.
And Cheniere, who has already seen stellar gains in the last few years, will be the premier beneficiary from their pending approval.
Their stock has jumped 400% in two years without even shipping a single tanker of fuel from their facilities. And even though shares cost over $70 a piece they are still a good bet.
As more good news rolls in, and once they start shipping from Sabine Pass at the end of 2015 other investors will rush in resulting in even more upward movement.