You are here
(Editor’s Note: 3E is expanding news coverage to provide customers with insights into topics that enable a safer, more sustainable world by protecting people, safeguarding products, and helping businesses grow. Deep Dive articles, produced by reporters, feature interviews with subject matter experts and influencers as well as exclusive analysis provided by 3E researchers and consultants.)
The United States is the world’s leading supplier of liquefied natural gas (LNG), having just entered the market in 2016. After a record-breaking year for the industry in 2023, why has President Joe Biden’s administration paused any permits for new facilities that export LNG to non-Free Trade Agreement (FTA) countries?
The answer depends on a confluence of factors, ranging from climate change to the supply of LNG within the country.
Notably, the surge in exports has occurred during a global shift toward cleaner and more renewable energy sources. LNG demand is expected to rise by more than 50% by 2024 as China and South Asia switch to gas from coal. A McKinsey study projects that gas is the only fossil fuel that is expected to grow through 2035.
Environmental activist groups supported the Biden Administration’s stance on LNG projects.
“It’s never been clearer that rubber-stamping LNG exports is not in the public interest,” Earthjustice president Abigail Dillen said.
In light of this expected increase in demand, industry leaders are urging the president to lift the pause.
“This is an ill-advised action that destabilizes energy markets and damages U.S. relations with our allies, energy security, and shared climate goals,” said Dena Wiggins, President and CEO of the Natural Gas Supply Association (NGSA). “It endangers future natural gas projects and the jobs associated with them here in the United States, while slowing the global transition away from coal.”
Playing Politics
In a 15 February 2024 floor vote, the Republican-led House of Representatives passed the Unlocking our Domestic LNG Potential Act by a 224-200 margin. The bill would repeal the pause of export permits and transfer the authority to approve or deny such applications from the Department of Energy (DOE) to the Federal Energy Regulatory Commission (FERC).
House Democrats labeled the bill a “rerun” and criticized their GOP colleagues for advancing this iteration of the bill for discussion for a fourth time.
The White House strongly opposed the legislation in a 13 February 2024 statement, saying it would “undermine the ability of the United States to ensure that export of a critical and strategic resource is consistent with our economic, energy security, foreign policy, and environmental interests.”
While the bill passed in the House, it still would have to pass in the Senate and be signed by President Biden in order to become law.
In his ENR testimony, DOE Deputy Secretary David Turk underscored that currently operational LNG facilities and already authorized facilities will be unaffected by the pause undertaken by the DOE’s Office of Fossil Energy and Carbon Management to conduct an LNG export study, similar to those completed in 2018, 2015, and 2012, to assess the macroeconomic impact of the exports.
“It is not a retroactive review of already authorized exports,” Turk said. “It will not affect our ability to supply our allies.”
Energy industry-friendly Republicans and environmentally-inclined Democrats are divided — mostly along typical party lines in both chambers of Congress — with a significant exception. Senator Joe Manchin (D-WV), Chairman of the U.S. Senate Energy and Natural Resources Committee, is one of the most vocal opponents of the pause.
“There are sensible reasons to update the market assessments that DOE uses when reviewing export applications to ensure the trajectory we’re on won’t risk harming American families and businesses,” Manchin said in a statement before an 8 February 2024 hearing. “But these types of decisions should be firmly based on facts, not politics.”
The U.S. Energy Information Administration (EIA) said in its 2023 long-term outlook that as the U.S. exports more LNG, global and domestic prices converge, “higher LNG exports create a tighter domestic natural gas market (all else held equal), increasing domestic natural gas prices.”
Charlie Riedl, Executive Director of the Center for LNG, who testified in front of ENR, said the pause is not a prerequisite for the completion of the macroeconomic studies conducted by the DOE and that such a move was unprecedented.
“Using natural gas for electricity generation emits approximately 50-60% less CO2 than coal, making LNG an essential component in the transition toward a lower-carbon energy mix,” Riedl said in his testimony. “In all the previous instances, they never paused [LNG exports] in order to complete the analysis.”
The previous three studies were accompanied by a Federal Register notice and a public comment period.
Senator Lisa Murkowski (R-AK) said Biden’s announcement lacked transparency, direction, and scope. “It was kind of stunning,” Murkowski said. “There was no public process leading up to this. There’s a fair amount of skepticism and cynicism about this with the politics and the timing.”
In a 7 February 2024 letter from Frank Lucas (R-Okla.), chair of the House Committee on Science, Space, and Technology to Secretary of Energy Jennifer Granholm, House GOP members wrote that the permitting pause places an unfair burden on the DOE’s National Laboratories to conduct the analyses, which are projected to take longer than 15 months and is a departure from past procedures.
Previously, the reports were commissioned by DOE’s Office of Fossil Energy and performed by the U.S. Energy Information Administration, NERA Economic Consulting, or in a partnership between Rice University and Oxford Economics.
There are currently 12 LNG projects to export to non-FTA countries pending approval, the majority of which are based in Texas and Louisiana, according to the DOE.
Igniting Global Implications
Along with the specter of the Russia-Ukraine war and other geopolitical unrest in China and the Middle East weighing U.S. energy policy, there are also practical environmental considerations for stakeholders.
The International Energy Agency (IEA) projects an even steeper drop in natural gas demand to meet its Net Zero 2050 targets, which are 20% lower by 2030 and 75% lower by 2050.
James Watson, secretary general of Brussels-based industry body Eurogas, advocated in his ENR testimony for a more robust partnership between the United States and the EU on LNG exports as a bulwark against Russia, which has seen its LNG exports grow in volume to Europe since 2021, despite import bans in the U.K. and EU.
“The expansion of U.S. LNG exports to the European Union aligns with the shared climate objectives of the U.S. and the EU,” Watson said, “notably through our commitment to implementing ambitious policies aimed at reducing methane emissions from the gas sector.”
Proponents of LNG production argue natural gas has played a significant role in reducing CO2 emissions because of its relatively low carbon content and the ability to pair it with renewables.
-----------------
(About the author: Stefan Modrich is a Washington, D.C.- based reporter for 3E. He covers the latest developments in environmental health and safety policy and regulation. Modrich previously wrote for S&P Global Market Intelligence, The Arizona Republic, and Chicago Tribune. He is an alumnus of Arizona State University and the University of Zagreb.)
Top