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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Which of These 2 Energy Events is Most Critical?

The most widely-followed news of the week has been Obama's big move against coal.

As reports have it, the president has mandated the U.S. Environmental Protection Agency (EPA) to introduce significant curbs on carbon dioxide emissions. Presumably targeting emitters like coal plants.

There has also been speculation that the EPA will move to limit the amount of coal-fired power in America's generating mix. To just 14% by 2030--a big reduction from the current 37%.

It's easy to see why these eye-catching promises are getting a lot of press. But in terms of practical effect, a less-followed event in U.S. energy policy may be much more critical.

That's because the new coal rules are far from certain. They face a political--and likely legal battle--in getting approved. With the eventual date for implementation likely being years into the future.

At the same time, events in the liquefied natural gas (LNG) sector may have a much more immediate effect.

Late last week, the U.S. Department of Energy (DOE) said it is changing its permitting regime for LNG export projects. Developers will now be required to get environmental approval from the Federal Energy Regulatory Commission (FERC) before the DOE will issue a trade approval for exports.

That's a setback for smaller projects. Who up until now often pursued DOE approval prior to the more time-consuming and expensive FERC process. Using DOE permits as a milestone achievement to help backstop their project financing efforts.

Such projects will now face greater uncertainty. Needing to pay up to $100 million to complete their FERC approvals--before they know if the DOE will allow exports to take place from their proposed facility. By way of comparison, a DOE permit application costs about $20,000 to file.

This is a critical development for the sector and its investors. Likely meaning that smaller development companies are going to struggle with the large costs involved. Perhaps giving an edge to larger firms in the industry.

The effects of this rule-change could be felt within the next few months--following a 45-day comment period for the public. Perhaps representing a much more impactful shift in the energy landscape.

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Here's to the rules of the game,

By Dave Forest


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