Federal Permitting and Oversight
of Export of Fossil Fuels
Adam Vann
Legislative Attorney
Daniel T. Shedd
Legislative Attorney
Brandon J. Murrill
Legislative Attorney
January 7, 2014
Congressional Research Service
7-5700
www.crs.gov
R43231
Federal Permitting and Oversight of Export of Fossil Fuels
Summary
Recent technological developments have led to an increase in the domestic supply of natural gas.
As a result, there is interest among some parties in exporting liquefied natural gas (LNG) to take
advantage of international markets. This has placed new attention on the laws and regulations
governing the export of natural gas as well as other fossil fuels.
In most cases, export of fossil fuels requires federal authorization of both the act of exporting the
fuel and the facility that will be employed to export the fuel. For example, the export of natural
gas is permitted by the Department of Energy’s Office of Fossil Energy, while the construction
and operation of the export facility must be authorized by the Federal Energy Regulatory
Commission (FERC). Oil exports are generally forbidden, but an export that falls under one of
several exemptions to the ban can be authorized by the Department of Commerce’s Bureau of
Industry and Security, while oil pipelines that cross international borders must be permitted by the
State Department. Coal exports do not require special authorization specific to the commodity;
however, as with natural gas and crude oil, other generally applicable federal statutes and
regulations may apply to the export of coal.
Restrictions on exports of fossil fuels could potentially have implications under international
trade rules. They may possibly be inconsistent with the most favored nation requirement of
Article I of the General Agreement on Tariffs and Trade 1994 (GATT 1994) if certain World
Trade Organization (WTO) members are treated differently than others. Limits on exports could
also potentially violate the prohibition on export restrictions contained in Article XI of the GATT
1994 if they prescribe vague and unspecified criteria for export licensing. However, an export
licensing regime does not appear to constitute a “subsidy” to downstream users of fossil fuels
under WTO rules.
Article XXI, the exception for essential security interests, may provide justification for potential
violations of GATT Articles I and XI. The United States has traditionally considered this
exception to be self-judging. However, it is possible that a panel or the Appellate Body might
scrutinize the United States’ use of the exception.
Article XX of the GATT provides additional exceptions that a member country may invoke if it is
found to be in violation of any GATT obligations. For example, WTO Members may maintain an
otherwise GATT inconsistent measure if it is necessary to protect an exhaustible natural resource
or necessary to protect human health or the environment. Article XIII requires that if an otherwise
GATT inconsistent measure is permitted to remain in force due to an Article XX exception, the
measure must be administered in a non-discriminatory manner. Export restrictions that treat WTO
Members differently would appear not to satisfy the non-discriminatory requirements of Article
XIII.
Congressional Research Service
Federal Permitting and Oversight of Export of Fossil Fuels
Contents
Introduction ...................................................................................................................................... 1
Generally Applicable Export Requirements .................................................................................... 1
Statutes Governing Authorization to Export Fossil Fuels ................................................................ 2
Crude Oil ................................................................................................................................... 2
Natural Gas/LNG ....................................................................................................................... 3
Coal ........................................................................................................................................... 4
Export Facility Authorization .......................................................................................................... 4
Oil Pipeline Border Crossings ................................................................................................... 5
Natural Gas Pipeline Border Crossings ..................................................................................... 6
LNG Export Terminals .............................................................................................................. 7
World Trade Organization—General Agreement on Tariffs and Trade ........................................... 8
Article I—Most Favored Nation Treatment .............................................................................. 8
Article XI—Export Restrictions ................................................................................................ 9
Articles VI, XVI, and the Agreement on Subsidies and Countervailing Measures—
Export Restraints as Actionable Subsidies ........................................................................... 10
Articles XX and XIII—General Exceptions ............................................................................ 10
Article XXI—Security Exceptions .......................................................................................... 11
NAFTA and Other Free Trade Agreements.................................................................................... 12
Pending Legislation ....................................................................................................................... 12
Conclusion ..................................................................................................................................... 13
Contacts
Author Contact Information........................................................................................................... 14
Congressional Research Service
Federal Permitting and Oversight of Export of Fossil Fuels
Introduction
Partly as a result of the increased use of horizontal drilling and hydraulic fracturing to extract
natural gas from shale formations in the United States, the domestic supply of natural gas has
increased relative to demand, leading to lower domestic prices. This has generated increased
interest by some U.S. companies in exporting liquefied natural gas (LNG) to take advantage of
relatively higher prices in world markets.1 This new interest in exporting natural gas has also
produced renewed interest in the laws and regulations governing the export of other fossil fuels,
including crude oil, natural gas, and coal.2
This report reviews federal laws and the regulatory regime governing the export of natural gas,
crude oil, and coal. This report provides an overview of federal laws and regulations and agency
roles in authorizing and regulating the export of these fossil fuels. The report addresses several
categories of federal laws and regulations, including (1) statutes that establish the authorization
process for the actual export of any of the three listed fossil fuels; (2) statutes that govern the
permitting of the facilities that export any of the listed fossil fuels; and (3) generally applicable
trade statutes and treaties that affect exports of fossil fuels.
Generally Applicable Export Requirements
In general, transactions involving the export of items from the United States to a foreign country
are subject to the Export Administration Regulations (EAR) enforced by the Department of
Commerce’s Bureau of Industry and Security (BIS).3 However, transactions that fall within the
scope of the EAR do not necessarily require an export license from BIS.4 Whether an export
license is required depends on several factors, including the nature of the item, its end use, and its
ultimate destination.5 The EAR provides instructions for exporters to follow when determining
whether an export transaction is subject to the EAR and, if so, whether the transaction requires a
license.6
Other general requirements may apply to transactions involving the export of items from the
United States. For example, for exports of items subject to the EAR that do not take place
electronically or in another intangible form, an exporter is required in certain circumstances to
submit a Shipper’s Export Declaration (SED) or Automated Export System (AES) Record to BIS
and the International Trade Administration in the Department of Commerce’s Bureau of the
Census.7 A declaration or record typically contains an identification of the exporter and the
1 For more information about the potential for natural gas exports, see CRS Report R42074, U.S. Natural Gas Exports:
New Opportunities, Uncertain Outcomes, by Michael Ratner et al.
2 For more information about the potential for crude exports, see CRS Report R42465, U.S. Oil Imports and Exports,
by Robert Pirog.
3 Export transactions that fall within the exclusive jurisdiction of another federal agency are not subject to the EAR. 15
C.F.R. Part 734. In some cases, more than one federal agency may be responsible for exercising oversight over the
export of a particular item.
4 15 C.F.R. Part 732.
5 Id.
6 Id.
7 15 C.F.R. Parts 30 and 758. The Bureau of Census uses the SED or AES to compile trade statistics. 15 C.F.R. §758.1.
BIS uses the records for export control purposes. Id. Circumstances in which an SED or AES record is required to be
(continued...)
Congressional Research Service
1
Federal Permitting and Oversight of Export of Fossil Fuels
commodity being shipped; the date of exportation; and the country of ultimate destination, among
other information.8
Statutes Governing Authorization
to Export Fossil Fuels
Crude Oil
The Energy Policy and Conservation Act of 19759 directed the President to “promulgate a rule
prohibiting the export of crude oil and natural gas produced in the United States, except that the
President may ... exempt from such prohibition such crude oil or natural gas exports which he
determines to be consistent with the national interest and the purposes of this chapter.”10 The act
further provides that the exemptions to the prohibition should be “based on the purpose for
export, class of seller or purchaser, country of destination, or any other reasonable classification
or basis as the President determines to be appropriate and consistent with the national interest and
the purposes of this chapter.”11
This general prohibition on crude oil exports and the exemptions to that prohibition are found in
the BIS regulations on Short Supply Controls at 15 C.F.R. §754.2. The regulations provide that a
license must be obtained for all exports of crude oil, including those to Canada.12 The regulations
further provide that BIS will issue licenses for certain crude oil exports that fall under one of the
listed exemptions, including (i) exports from Alaska’s Cook Inlet; (ii) exports to Canada for
consumption or use therein; (iii) exports in connection with refining or exchange of strategic
petroleum reserve oil; (iv) exports of heavy California crude oil up to an average volume not to
exceed 25,000 barrels per day; (v) exports that are consistent with certain international
agreements; (vi) exports that are consistent with findings made by the President under certain
statutes; and (vii) exports of foreign origin crude oil where, based on satisfactory written
documentation, the exporter can demonstrate that the oil is not of U.S. origin and has not been
commingled with oil of U.S. origin.13 The regulations also direct BIS to review applications to
export crude oil that do not fall under one of these exemptions on a “case by case basis” and to
approve such applications on a finding that the proposed export is “consistent with the national
interest and the purposes of the Energy Policy and Conservation Act.”14
(...continued)
submitted for the export of items subject to the EAR include when the items are destined for certain countries; when the
export of the items requires submission of a license application under the EAR; and when the value of the exported
commodities classified under a single Schedule B Number (or Harmonized Tariff Schedule number) exceeds $2,500.
Id. Certain exceptions may apply. See id.
8 U.S. Department of Commerce, A Basic Guide to Exporting 75 (1998).
9 P.L. 94-163.
10 42 U.S.C. §6212(b)(1).
11 Id. at §6212(b)(2).
12 15 C.F.R. §754.2(a).
13 Id. at §754.2(b)(1).
14 Id. at §754.2(b)(2).
Congressional Research Service
2
Federal Permitting and Oversight of Export of Fossil Fuels
Natural Gas/LNG
Section 3 of the Natural Gas Act (NGA) provides that “no person shall export any natural gas
from the United States to a foreign country or import any natural gas from a foreign country
without having first secured an order of the Commission authorizing it to do so.”15 This
authorization is to be issued “unless, after opportunity for hearing, [the Commission] finds that
the proposed exportation or importation will not be consistent with the public interest.”16 The
Commission is further empowered to grant authorizations in part and to modify or place terms
and conditions upon authorizations and to supplement its orders as appropriate.17
At the time of the NGA’s enactment in 1938, the “Commission” referred to the Federal Power
Commission. However, in 1977 the Federal Power Commission was dissolved and its
responsibilities were transferred to the Department of Energy (DOE) as well as the Federal
Energy Regulatory Commission (FERC), an independent agency operating within DOE, pursuant
to the Department of Energy Organization Act.18 Title III of this act transferred all functions of
the Federal Power Commission to DOE except for those subsequently assigned to FERC in Title
IV.19
Title III of the DOE Organization Act thus transferred the authority to authorize natural gas
imports and exports from the Federal Power Commission to DOE. Title IV provides added clarity
on this point. Section 402(f) of the act specifically states that “[n]o function ... which regulates the
exports or imports of natural gas or electricity shall be within the jurisdiction of [FERC] unless
the Secretary assigns such functions to [FERC].”20
Natural gas exporting responsibilities are handled by the Office of Fossil Energy within DOE.
The procedures for filing for authorization to import or export natural gas are set forth in DOE
regulations found at 10 C.F.R. Part 590. The regulations establish filing requirements as well as
the procedures for review of applications, including procedures that allow interested parties to
participate in the process prior to the issuance of orders by DOE. The regulations also provide for
an expedited filing and review process for one-time small volume imports and exports for
“scientific, experimental or other non-utility gas use” without necessitating a permit.21
The Energy Policy Act of 199222 amended the NGA Section 3 generic requirement for a permit in
order to export natural gas to create a more streamlined authorization process for imports from
and exports to certain countries. Subsection (c) of Section 3 provides that the importation of
natural gas from or exportation of natural gas to a country with which the United States has in
effect “a free trade agreement requiring national treatment for trade in natural gas shall be deemed
15 15 U.S.C. §717b(a). This prohibition on natural gas exports without a determination from the executive branch that
the national or public interest echoes the language found in the Energy Policy and Conservation Act of 1975, discussed
above. The DOE regulations at 10 CFR. Part 590 cite to both acts as authority for the regulations governing export
permitting.
16 Id.
17 Id.
18 P.L. 95-91.
19 Id. at §301.
20 42 U.S.C. §7172(f).
21 10 C.F.R. §590.208.
22 P.L. 102-486.
Congressional Research Service
3
Federal Permitting and Oversight of Export of Fossil Fuels
to be consistent with the public interest, and applications for such importation and exportation
shall be granted without modification or delay.”23 This provision eased the authorization process
for certain countries in the interest of free trade, including Canada and Mexico, the only countries
with whom natural gas importation and exportation takes place via pipeline.
Section 3 of the NGA also protects the role of the states in the permitting decisions. State rights
under various environmental statutes are protected with respect to both export authorization by
DOE and permitting by FERC (discussed infra) in Section 3(d),24 and Section 3(e) mandates the
notification of relevant state authorities in order to gather their input during the process.25
Coal
Although the Energy Policy and Conservation Act of 1975 authorized the President to restrict
coal exports,26 the President does not appear to have exercised this authority to impose any
significant export restrictions specific to coal. In fact, there have been legislative efforts aimed at
expanding coal exports. For example, Section 1338 of the Energy Policy Act of 1992 directed the
Secretary of Commerce to create a plan for expanding coal exports.27 Almost all U.S. coal exports
pass through ports on the East Coast or in the Gulf of Mexico,28 so laws and regulations
applicable to such facilities would potentially affect coal exports. Such laws and regulations are
briefly discussed below.
Export Facility Authorization
The previous section of this report discusses federal authorization of the export of natural
resources, not the construction and operation of export facilities. However, in many cases
approval for the export facility itself also must be obtained from the federal government. This
section discusses various approval requirements for different types of facilities that enable the
export of oil and natural gas.
Note that, in addition to the facility approvals described below, a facility used in the export or
import of fossil fuels may require additional federal approvals or authorizations. For instance,
construction and operation of ports in any navigable waters in the United States are regulated by
the U.S. Army Corps of Engineers (ACE). In order to construct any port facility, permits must be
obtained from ACE, which will review applications to see that they are in compliance with the
Clean Water Act,29 the Rivers and Harbors Act,30 and the Marine Protection Research and
Sanctuaries Act.31 Because coal is generally not exported via a special facility designed to
23 15 U.S.C. §717b(c).
24 Id. at §717b(d).
25 Id. at §717b(e)(2).
26 42 U.S.C. §6212(a).
27 42 U.S.C. §13367.
28 Energy Information Admin, Quarterly Coal Exports October-December 2012 (March 2013), Table 13: U.S. Coal
Exports by Customs District, available at http://www.eia.gov/coal/production/quarterly/pdf/t13p01p1.pdf.
29 33 U.S.C. §1344.
30 33 U.S.C. §403.
31 33 U.S.C. §§1401 et. seq.
Congressional Research Service
4
Federal Permitting and Oversight of Export of Fossil Fuels
transport the commodity, there are no special facility permitting requirements applicable to coal
exports, but facilities through which coal (or any fossil fuel) may be exported must satisfy these
generic federal requirements.
Oil Pipeline Border Crossings
Crude oil can be exported either by pipeline or via tanker or other vessel. If an oil pipeline crosses
the border with Canada or Mexico, the border crossing facility must be authorized by the federal
government.32 The executive branch exercises permitting authority over the construction and
operation of “pipelines, conveyor belts, and similar facilities for the exportation or importation of
petroleum, petroleum products” and other products pursuant to a series of executive orders. This
authority has been vested in the U.S. State Department since the promulgation of Executive Order
11423 in 1968.33 Executive Order 13337 amended this authority and the procedures associated
with the review, but did not substantially alter the exercise of authority or the delegation to the
Secretary of State in Executive Order 11423.34
Executive Order 11423 provides that, except with respect to cross-border permits for electric
energy facilities, natural gas facilities, and submarine facilities:
The Secretary of State is hereby designated and empowered to receive all applications for
permits for the construction, connection, operation, or maintenance, at the borders of the
United States, of: (i) pipelines, conveyor belts, and similar facilities for the exportation or
importation of petroleum, petroleum products, coal, minerals, or other products to or from a
foreign country; (ii) facilities for the exportation or importation of water or sewage to or
from a foreign country; (iii) monorails, aerial cable cars, aerial tramways and similar
facilities for the transportation of persons or things, or both, to or from a foreign country; and
(iv) bridges, to the extent that congressional authorization is not required.35
Executive Order 13337 designates and empowers the Secretary of State to “receive all
applications for Presidential Permits, as referred to in Executive Order 11423, as amended, for the
construction, connection, operation, or maintenance, at the borders of the United States, of
facilities for the exportation or importation of petroleum, petroleum products, coal, or other fuels
to or from a foreign country.”36 Executive Order 13337 further provides that after consideration of
the application and comments received:
If the Secretary of State finds that issuance of a permit to the applicant would serve the
national interest, the Secretary shall prepare a permit, in such form and with such terms and
32 For tankers or other vessels conveying oil, the use of such facilities for exportation, in and of itself, does not require a
permit akin to that required for oil pipelines that cross international borders. However, oil tankers or other such vessels
must comply with other generally applicable export requirements, which are discussed elsewhere in this report.
33 Exec. Order No. 11423, Providing for the performance of certain functions heretofore performed by the President
with respect to certain facilities constructed and maintained on the borders of the United States, 33 Fed. Reg 11741.
(August 20, 1968).
34 Exec. Order No. 13337, Issuance of Permits With Respect to Certain Energy-Related Facilities and Land
Transportation Crossings on the International Boundaries of the United States, 69 Federal Register 25299 (May 5,
2004).
35 Exec. Order No. 11423, 33 Federal Register at 11741.
36 Exec. Order No. 13337, 69 Federal Register at 25299.
Congressional Research Service
5
Federal Permitting and Oversight of Export of Fossil Fuels
conditions as the national interest may in the Secretary’s judgment require, and shall notify
the officials required to be consulted ... that a permit be issued.37
Thus, the Secretary of State is directed by the order to authorize those border crossing facilities
that the Secretary has determined would “serve the national interest.”
Note that the source of the executive branch’s permitting authority is not explicitly stated within
the executive orders. Powers exercised by the executive branch are authorized by legislation or
are inherent presidential powers based in the Constitution. Executive Order 11423 does not
reference any statute or constitutional provision as the source of its authority, although it does
state that “the proper conduct of foreign relations of the United States requires that executive
permission be obtained for the construction and maintenance” of border crossing facilities.38
Executive Order 13337 refers only to the “Constitution and the Laws of the United States of
America, including Section 301 of title 3, United States Code.”39 Section 301 of Title 3 provides
that the President is empowered to delegate authority to the head of any department or agency of
the executive branch. Courts that have addressed the legitimacy of this exercise of authority have
found that it is a legitimate exercise of “the President’s constitutional authority over foreign
affairs and his authority as Commander in Chief.”40
Natural Gas Pipeline Border Crossings
As discussed above, Executive Orders 11423 and 13337 explicitly exclude cross-border natural
gas pipelines (among others) from their reach. Instead, permitting for these facilities is addressed
in Executive Order 10485, which governs the issuance of Presidential Permits for natural gas
facilities.41 Executive Order 10485 designates and empowers the now-defunct Federal Power
Commission:
(1) To receive all applications for permits for the construction, operation, maintenance, or
connection, at the borders of the United States, of facilities for the transmission of electric
energy between the United States and a foreign country.
(2) To receive all applications for permits for the construction, operation, maintenance, or
connection, at the borders of the United States, of facilities for the exportation or importation
of natural gas to or from a foreign country.
(3) Upon finding the issuance of the permit to be consistent with the public interest, and,
after obtaining the favorable recommendations of the Secretary of State and the Secretary of
Defense thereon, to issue to the applicant, as appropriate, a permit for such construction,
operation, maintenance, or connection. The Secretary of Energy shall have the power to
attach to the issuance of the permit and to the exercise of the rights granted thereunder such
conditions as the public interest may in its judgment require.42
37 Id. at 25230.
38 33 Federal Register at 11741.
39 69 Federal Register at 25299.
40 Sierra Club v. Clinton, 689 F. Supp. 2d 1147, 1162 (D. Minn. 2010).
41 Exec. Order No. 10485, Providing for the performance of certain functions heretofore performed by the President
with respect to electric power and natural gas facilities located on the borders of the United States, 18 Federal
Register 5397 (Sept. 3, 1953).
42 Id.
Congressional Research Service
6
Federal Permitting and Oversight of Export of Fossil Fuels
In many ways, this authority resembles the authority over oil pipelines granted to the State
Department in Executive Orders 11423 and 13337. However, as mentioned above, Executive
Orders 11423 and 13337 do not describe the source of the executive branch permitting authority
granted by the orders. Judicial opinions strongly suggest the permitting authority is an exercise of
the President’s “inherent constitutional authority to conduct foreign affairs.”43 By contrast,
Executive Order 10485 cites federal statutes which may at least partially form the basis for the
permitting authority granted to the DOE by the order. The order states that “section 202(e) of the
Federal Power Act, as amended ... requires any person desiring to transmit any electric energy
from the United States to a foreign country to obtain an order from the Federal Power
Commission authorizing it to do so” and that “section 3 of the Natural Gas Act ... requires any
person desiring to export any natural gas from the United States to a foreign country or to import
any natural gas from a foreign country to the United States to obtain an order from the Federal
Power Commission authorizing it to do so.” These appeals to statutory authority should be
considered and possibly addressed in any legislation seeking to amend the current Presidential
Permit process for border crossings for energy facilities.
The Department of Energy Organization Act of 197744 eliminated the Federal Power Commission
and transferred its functions to either the newly created DOE or the FERC, an independent
regulatory agency within DOE. Section 402(f) of that act specifically reserved import/export
permitting functions for DOE rather than FERC. As a result, DOE took over the FPC’s
Presidential Permit authority for border crossing facilities under Executive Order 10485 pursuant
to the act. The authority to issue Presidential Permits for natural gas pipeline border crossings was
subsequently transferred to FERC in 2006 via DOE Delegation Order No. 00-004.00A.45
LNG Export Terminals
Section 3(e) of the NGA, adopted in Section 311 of the Energy Policy Act of 2005,46 assigns the
“exclusive authority to approve or deny an application for the siting, expansion or operation of a
Liquefied Natural Gas (LNG) terminal” to FERC.47 Section 3 designates FERC as the “lead
agency for the purposes of coordinating all applicable Federal authorizations” and for complying
with federal environmental requirements.48 Section 3(e) also directs FERC to promulgate
regulations for pre-filing of LNG import terminal siting applications and directs FERC to consult
with designated state agencies regarding safety in considering such applications.49
FERC implements its authority over onshore LNG terminals through the agency’s regulations at
18 C.F.R. §153. These regulations detail the application process and requirements under Section 3
of the NGA. The process begins with a pre-filing, which must be submitted to FERC at least six
months prior to the filing of a formal application. The pre-filing procedures and review processes
are set forth at 18 C.F.R. §157.21. Once the pre-filing stage is completed, a formal application
may be filed. FERC’s formal application requirements include detailed site engineering and
43 Sisseton-Wahpeton Oyate v. U.S. Department of State, 659 F. Supp. 2d 1071, 1081 (D.S.D. 2009).
44 P.L. 95-91, 42 U.S.C. §4101 note.
45 Available at http://www.ferc.gov/industries/electric/indus-act/siting/doe-delegation.pdf.
46 P.L. 109-58.
47 15 U.S.C. §717b(e). Gas must be converted to LNG for export by means other than pipeline.
48 Id.
49 Id.
Congressional Research Service
7
Federal Permitting and Oversight of Export of Fossil Fuels
design information, evidence that a facility will safely receive or deliver LNG, and delineation of
a facility’s proposed location.50 The regulations also require LNG facility builders to notify
landowners who would be affected by the proposed facility.51 To facilitate natural gas
infrastructure projects, which includes LNG projects, FERC has adopted rules to provide “blanket
certificates” that provide authorization to interstate pipelines to improve or upgrade existing
facilities or construct certain new facilities pursuant to a streamlined process.52
World Trade Organization—General Agreement
on Tariffs and Trade
The Marrakesh Agreement Establishing the World Trade Organization (WTO) contains the
agreements relating to international trade that are binding for all WTO Members. Although there
is no specific agreement relating to trade in energy products, such as liquefied natural gas, coal,
or oil, the trade in these products is regulated under the General Agreement on Tariffs and Trade
(GATT). Several of these sections could potentially impact a nation’s ability to limit or restrict
fossil fuels.
Article I—Most Favored Nation Treatment
Article I of the GATT 1994 requires that “any advantage, favour, privilege or immunity granted
by any [WTO Member] to any product originating in or destined for any other country shall be
accorded immediately and unconditionally to the like product originating in or destined for the
territories of all other [WTO Members].”53 Article I applies to all rules and formalities in
connection with importation and exportation.54 This broad category of rules and formalities
appears likely to include prerequisites for exportation such as licensing requirements or other
preliminary measures.55 More favorable treatment given to imports from particular countries in
the context of import licensing requirements has been held to confer an advantage within the
meaning of Article I.56
Generally, this means that as soon as the United States provides for certain treatment of fossil fuel
exports to one country, the United States has to treat exports to all other WTO Members in the
same fashion. A licensing regime that provided for more favorable treatment for exports of fossil
fuels to some countries, but subjected other WTO countries to a slower process could potentially
be inconsistent with Article I of the GATT.
50 18 C.F.R. §153.8.
51 18 C.F.R. §157.6d.
52 18 C.F.R. §§157.201-157.218.
53 General Agreement on Tariffs and Trade 1994, Art. I:1 (hereinafter GATT 1994).
54 Id.
55 See Panel Report, U.S.—Certain Measures Affecting Imports of Poultry from China, paras. 7.407, 7.410,
WT/DS392/R (September 29, 2010) (“We conclude that ‘in connection with importation’ as used in Article I, not only
encompasses measures which directly relate to the process of importation but could also include those measures ...
which relate to other aspects of the importation of a product or have an impact on actual importation.”). The same
reasoning could apply to measures that have an impact on actual exportation, such as licensing requirements.
56 Panel Report, EC—Regime for the Importation, Sale, and Distribution of Bananas, ¶ 7.193, WT/DS27/R/USA (May
22, 1997).
Congressional Research Service
8
Federal Permitting and Oversight of Export of Fossil Fuels
However, there are exceptions to the Most Favored Nation Treatment requirements for Free Trade
Agreements (FTA). Article XXIV of GATT 1994 allows countries to provide more favorable
treatment to countries with which they have established an FTA.57 In order to qualify for the
Article XXIV exception, the FTA must meet certain requirements outlined in the Article. Most
notably, the free trade agreement must eliminate duties—such as tariffs—and restrictions on
commerce between the parties to the agreement for “substantially all the trade in products
originating in those territories.”58 Therefore, in order for an agreement to qualify, it is likely that
the FTA would have to cover more than just energy products flowing between the two territories.
However, if the countries have a qualifying FTA, more favorable treatment towards energy
products between those countries could be included in that FTA without violating the GATT.
Article XI—Export Restrictions
Article XI of the GATT covers import and export restrictions. Article XI:1 of the GATT bars the
institution or maintenance of quantitative restrictions on exports to any WTO Member’s
territory.59 Quantitative restrictions limit the amount of a product that may be exported—common
examples are embargoes, quotas, minimum export prices, and certain export licensing
requirements. Under Article XI, duties, taxes, and other charges are the only GATT-consistent
methods of restricting exports.60 Any government action that expressly precludes the exportation
of certain goods is inconsistent with the GATT.
Although there are few WTO panel decisions on export bans, panels have consistently found that
import bans implemented through licensing systems violate Article XI.61 This jurisprudence can
be expected to inform any WTO panel decision on the GATT-consistency of export bans and
licensing.62 WTO Panel decisions have also held that “discretionary” or “non-automatic”
licensing requirements are prohibited under Article XI—therefore, a licensing program that gives
discretion to an agency to deny an export license to potential exporters on the basis of vague or
unspecified criteria would violate Article XI.63 Moreover, a GATT panel held that export licensing
practices that cause delays in issuing licenses may be a restraint of exports that is inconsistent
with Article XI.64
57 GATT 1994, Art. XXIV.
58 Id.
59 GATT 1994, Art. XI:1 (“No prohibitions or restrictions other than duties, taxes or other charges, whether made
effective through quotas, import or export licences [sic] or other measures, shall be instituted or maintained by any
contracting party on the ... exportation or sale for export of any product destined for the territory of any other
contracting party.”).
60 Id.
61 See Panel Report, Brazil—Measures Affecting Imports of Retreaded Tyres, WT/DS332/R (June 12, 2007) (holding a
licensing system to be in violation of Article XI when a person would be ineligible to import tires based on where those
tires came from); Panel Report, India Quantitative Restrictions on Imports of Agricultural, Textile and Industrial
Products, WT/DS90/R (April 6, 1999).
62 See Wen-Chen Shih, Energy Security, GATT/WTO, and Regional Agreements, 49 Nat. Res. J. 433, 451 (2009)
(noting that it is likely that “the jurisprudence concerning quantitative restrictions on import in the interpretation and
application of Article XI:1 also applies to exports.”).
63 See Panel Report, China—Measures Related to the Exportation of Various Raw Materials, WT/DS394/R (July 5,
2011) (holding that vague export licensing criteria allowed for too much discretion in granting licenses and that they
were therefore in violation of Article XI).
64 Panel Report, Japan—Trade in Semi-Conductors (May 4, 1988) GATT B.I.S.D. (35th Supp.), 31.
Congressional Research Service
9
Federal Permitting and Oversight of Export of Fossil Fuels
Articles VI, XVI, and the Agreement on Subsidies and
Countervailing Measures—Export Restraints
as Actionable Subsidies
A fossil fuel export licensing regime that restricts exports could have the effect of keeping
domestic prices of fossil fuels lower than they otherwise would be. This raises the question of
whether such a licensing program could be considered an actionable subsidy to downstream users
of the fossil fuels such as members of the petrochemical industry. Under the GATT 1994 and the
Agreement on Subsidies and Countervailing Measures (SCM Agreement), an actionable subsidy
may be the subject of countervailing measures or challenge before a panel by a WTO Member
when the subsidy adversely affects the interests of that member.65 Adverse effects might result if
export restraints on fossil fuels lead to lower input costs for downstream manufacturers that use
the fuels, giving the manufacturers’ products a competitive edge over the products of the other
members’ manufacturers in domestic or foreign markets.
The SCM Agreement defines a “subsidy” as “a financial contribution by a government or any
public body within the territory of a Member” that confers a benefit.66 Under the agreement, one
way that a “financial contribution” may occur is when a government directs a private body to sell
goods to a domestic purchaser.67 In U.S.—Measures Treating Export Restraints as Subsidies, the
United States Trade Representative (USTR) argued before a WTO panel that a government’s
restriction on exports could be considered “functionally equivalent” to that government directing
private parties to sell a good to domestic purchasers.68 The USTR argued that this resulted in a
subsidy to downstream producers that used the good as an input in their production processes.69
The panel rejected this argument, stating that although a restriction on exports of a good may
result in lower prices for domestic users of that good, the restriction was not an explicit command
or direction by the government to private parties to sell the good within the meaning of the SCM
Agreement.70 This ruling suggests that future panels may be reluctant to find that a restriction on
exports or a similar government intervention in a market is a “financial contribution” by a
government. Thus, it seems unlikely that licensing procedures could constitute a subsidy under
WTO rules, even if they lead to restrictions on exports.
Articles XX and XIII—General Exceptions
Article XX of the GATT provides for certain exceptions that a member country may invoke if it is
found to be in violation of any GATT obligations. In order for the defense to be successful, the
member country must show that its action fits under one of these general exceptions and that it
satisfies Article XX’s opening clauses, known as the “chapeau.”71 When dealing with trade in
65 GATT 1994, Arts. VI, XVI; SCM Agreement, Arts. V, VII, XI, XIX.
66 SCM Agreement, Art. I.
67 SCM Agreement, Art. I(a)(1)(iv).
68 Panel Report, United States—Measures Treating Export Restraints as Subsidies, ¶ 8.22, WT/DS194/R (June 29,
2001).
69 Id. at paras. 5.36, 5.48-.51.
70 Id. at ¶ 8.42-.44.
71 The “chapeau” requires, for example, that measures falling under these exceptions shall not be a disguised restriction
on international trade. GATT 1994, Art. XX.
Congressional Research Service
10
Federal Permitting and Oversight of Export of Fossil Fuels
energy products, a country will most likely use the exceptions under Article XX(b) or XX(g). A
country may justify a GATT inconsistent practice under Article XX(b) if the practice in question
is “necessary to protect human, animal, or plant life or health.”72 Article XX(g) may permit
otherwise GATT inconsistent measures that “relat[e] to the conservation of exhaustible natural
resources if such measures are made effective in conjunction with restrictions on domestic
production or consumption.”73 If a WTO Member invokes an Article XX exception to the
application of any quantitative export restrictions, Article XIII requires that those export
restrictions must be administered in a non-discriminatory manner—that is, the restrictions must
comport with the most-favored nation treatment discussed above.74
Article XXI—Security Exceptions
Restrictions on fossil fuels for reasons of international or domestic security that would otherwise
violate the GATT 1994 may potentially be justified under the broadly worded exception for
essential security interests contained in Article XXI.75 One paragraph of this article allows a
member to take “any action which it considers necessary for the protection of its essential
security interests ... taken in time of war or other emergency in international relations.”76
Because there is a lack of WTO case law on Article XXI, it is necessary to consult the history of
the exception’s use under the General Agreement on Tariffs and Trade 1947 (GATT 1947). The
GATT 1947 has been incorporated into the GATT 1994. Under the GATT 1947, the contracting
parties broadly interpreted the concept of an “emergency.”77 Thus, each party was basically the
judge of what constituted an emergency in international relations. Measures that parties have
sought to justify under Article XXI have included trade embargoes, import quotas, and
suspensions of tariff concessions.78 Parties have pointed to both potential and actual dangers as
“emergencies” supposedly justifying these typically GATT inconsistent measures.79
With respect to who determines whether a WTO Member’s use of the exception is valid, the
United States has previously taken the position that Article XXI is “self-judging.”80 That is, each
member invoking Article XXI is the judge of whether its use of the exception is valid. As a result,
there is currently no WTO case law on the use of Article XXI. However, some scholars have
speculated that, in the future, a WTO panel or the Appellate Body may decline to defer to a WTO
Member’s judgment about when its use of Article XXI is appropriate.81 One of these international
72 GATT 1994, Art. XX(b). It is worth noting that the “necessary” requirement is a rather high standard to meet.
Appellate Body Report, Brazil—Measures Affecting Imports of Retreaded Tyres, ¶ 150, WT/DS332/AB/R (December
3, 2007).
73 GATT 1994, Art. XX(g). Although “relating to” may be an easier standard to meet when relying on the exception,
the measure in question must also operate in conjunction with domestic restrictions.
74 GATT 1994, Art. XIII.
75 GATT 1994, Art. XXI.
76 GATT 1994, Art. XXI(b)(iii).
77 See GATT Analytical Index—Guide to GATT Law and Practice 602-05 (6th ed. 1995).
78 Id. at 602-05.
79 Id. at 600.
80 Dapo Akande & Sope Williams, International Adjudication on National Security Issues: What Role for the WTO?,
43 Va. J. Int’l L. 365, 375-76 (2003).
81 Id. at 383-84.
Congressional Research Service
11
Federal Permitting and Oversight of Export of Fossil Fuels
quasi-judicial bodies may instead decide to more carefully scrutinize a member’s use of the
exception. For example, a panel may consider whether there is an emergency in international
relations justifying national security screening for exports of fossil fuels to certain countries but
not others.
NAFTA and Other Free Trade Agreements
In addition to the GATT, the United States is party to numerous FTAs. It is beyond the scope of
this report to discuss fully the provisions of each FTA signed by the United States. However, as an
example, several FTAs require national treatment for trade in natural gas. These include FTAs
with Australia, Bahrain, Canada, Chile, Colombia, Dominican Republic, El Salvador, Guatemala,
Honduras, Jordan, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, Republic of Korea, and
Singapore.82 The FTAs with Costa Rica and Israel do not require national treatment for trade in
natural gas.83
As a further example, under the North American Free Trade Agreement (NAFTA) the United
States has certain obligations related to energy trade with Mexico and Canada. Chapter 6 of
NAFTA deals with “Energy and Basic Petrochemicals.” Chapter 6 reconfirms the Parties’
obligations under the GATT and imposes additional obligations on the Parties, such as certain
requirements for export taxes.84 NAFTA also imposes barriers to invoking some of the general
exceptions to the GATT.85 For example, a country may only invoke the “conservation of
exhaustible natural resources” exception if it does not result in a higher price for exports than for
domestic consumption of the energy products.86 These additional obligations illustrate that
compliance with FTAs must be considered when establishing export regulations for energy
products.
Pending Legislation
S. 192, the Expedited LNG for American Allies Act of 2013, was introduced in the Senate on
January 31, 2013, by Senator John Barrasso. An identical bill, H.R. 580, was introduced in the
House of Representatives by Representative Michael Turner. The bills would amend Section 3 of
the NGA to provide that expedited approval of LNG exports would be granted to four different
categories of foreign countries: (1) nations for which there is in effect a free trade agreement
(FTA) requiring national treatment for trade in natural gas; (2) a member country of the North
Atlantic Treaty Organization (NATO); (3) Japan, so long as the Treaty of Mutual Cooperation and
Security of January 19, 1960, between Japan and the United States remains in effect; and (4) “any
other foreign country if the Secretary of State, in consultation with the Secretary of Defense,
82 Department of Energy, How to Obtain Authorization to Import and/or Export Natural Gas and LNG,
http://energy.gov/fe/how-obtain-authorization-import-andor-export-natural-gas-and-lng.
83 Id.
84 North American Free Trade Agreement, Arts. 603, 604 [hereinafter NAFTA].
85 NAFTA, Art. 605.
86 Id.
Congressional Research Service
12
Federal Permitting and Oversight of Export of Fossil Fuels
determines that exportation of natural gas to that foreign country would promote the national
security interests of the United States.”87
At least two other bills that pertain to the export of natural gas have been introduced. H.R. 1189,
the American Natural Gas Security and Consumer Protection Act, was introduced in the House by
then-Representative Ed Markey. The bill would amend the NGA to require the Secretary of
Energy to develop regulations for determining whether an export of natural gas from the United
States to a foreign country is in the public interest for the purposes of issuing an export
authorization.88 Under the regulations, the public interest determination would have to be made
after the Secretary’s consideration of several factors, including the energy security of the United
States; the ability of the United States to reduce greenhouse gas emissions; and an environmental
impact statement issued under the National Environmental Policy Act that analyzes the impact of
extraction of exported natural gas on the environment in communities where the gas is
extracted.89 H.R. 1191, the Keep American Natural Gas Here Act, was also introduced in the
House by then-Representative Ed Markey. Among other things, it would provide that the
Secretary of the Interior could accept bids on new oil and gas leases of federal lands (including
submerged lands) only from bidders certifying that all natural gas produced pursuant to such
leases would be sold only in the United States.90
With regard to oil, H.R. 1190, the Keep America’s Oil Here Act, was introduced in the House by
then-Representative Ed Markey. The bill would provide that the Secretary of the Interior could
accept bids on new oil and gas leases of federal lands (including submerged lands) only from
bidders certifying that oil produced pursuant to such leases, and any refined petroleum products
produced from that oil, would be sold only in the United States.91 The bill would allow the
President to waive this requirement for a lease in certain circumstances, including when a waiver
is necessary under an international agreement.92 In addition, S. 435, the American Oil for
American Families Act of 2013, was introduced in the Senate by Senator Robert Menendez. The
bill would ban the export of crude oil or refined petroleum products derived from federal lands
(including land on the Outer Continental Shelf).93
Conclusion
Recent advances in natural gas exploration and production technology have led to a newfound
interest in the possibility of expanding U.S. fossil fuel exports. Such exports, and the facilities
needed to conduct export operations, are subject to a panoply of federal laws and regulations.
These include the authorizations required by the Natural Gas Act, a generic ban on crude oil
exports, and various laws and regulations applicable to construction and operation of export
facilities. Currently, any party wishing to export fossil fuels must comply with these laws and
regulations.
87 S. 192, §2.
88 H.R. 1189, §2.
89 Id.
90 H.R. 1191, §2.
91 H.R. 1190, §3.
92 Id. §4.
93 S. 435, §2.
Congressional Research Service
13
Federal Permitting and Oversight of Export of Fossil Fuels
Under international trade rules, restrictions on exports of fossil fuels could potentially be difficult
to reconcile with Articles I and XI of the GATT 1994. Article XXI, the exception for essential
security interests, may be cited in order to justify potential violations of GATT Articles I and XI.
The United States has traditionally considered this exception to be self-judging. However, it is
possible that a panel or the Appellate Body might scrutinize the United States’ use of the
exception.
Article XX of the GATT provides additional exceptions that a member country may invoke if it is
found to be in violation of any GATT obligations. However, Article XIII requires that if an
otherwise GATT inconsistent measure is permitted to remain in force due to an Article XX
exception, the measure must be administered in a non-discriminatory manner. Export restrictions
that treat WTO Members differently would appear not to satisfy the non-discriminatory
requirements of Article XIII.
Author Contact Information
Adam Vann
Brandon J. Murrill
Legislative Attorney
Legislative Attorney
avann@crs.loc.gov, 7-6978
bmurrill@crs.loc.gov, 7-8440
Daniel T. Shedd
Legislative Attorney
dshedd@crs.loc.gov, 7-8441
Congressional Research Service
14