In election years, politicians make decisions to satisfy special political constituencies that aren’t in the best interest of their country, or the world. Such is the case with President Biden’s announcement of a “pause” for new LNG export licenses to non-free trade agreement countries until a study is performed on the purported impacts of LNG exports on climate, the economy and national security. This announcement, made as an election year favor to environmentalists, is already having impacts on LNG projects, the U.S.’ reputation as a reliable source of energy and the long-term energy security of U.S. allies.   

Reaction to the shortsighted announcement has been strong across the board. Predictably, oil and gas executives and trade groups announced their concern and disapproval. Shell CEO Wael Sawan warned it would “erode confidence” in the overall ability of industry to deliver LNG. Republicans admonished the Biden administration for embarking on another “pause,” the same term it previously used to significantly curtail federal oil and gas leasing and permitting, both onshore and offshore. That pause resulted in no federal Outer Continental Shelf (OCS) lease sales being held in 2022, the first year without an offshore lease sale since 1958 and finalization of the weakest-ever federal OCS oil and gas five-year leasing plan.

Some of the most vocal opposition to the pause has come from moderate Democrats. Ten House Democrats penned a letter asking Biden to “refocus” his policy on LNG exports, noting the role natural gas has played in replacing coal and reducing greenhouse-gas emissions in the U.S. and in countries such as India, which uses coal to produce 73% of its electricity.

Senate Democrats were even more forceful on the issue. Pennsylvania’s Democratic Sens. Bob Casey and John Fetterman cited the potential for lost jobs in their state in their call for Biden’s decision to be reversed. Sen. Joe Manchin (D-WV) called it a political stunt, stating “If this pause is just another political ploy to pander to keep-it-in-the-ground climate activists at the expense of American workers, businesses and our allies in need, I will do everything in my power to end this pause immediately.”

Conversely, environmental groups were so happy with the pause that they postponed a planned February sit-in at the U.S. Department of Energy (DOE) headquarters where they were set to demand an end to new LNG project approvals.

One reason cited by the administration for issuing the pause is the need for a better understanding the impacts of LNG exports on U.S. natural gas and electricity prices. This, despite the fact that numerous studies and analyses have already been performed indicating the impact to be minimal and finding that the benefits far outweigh those impacts. The problem with the Biden administration’s strategy to tie LNG exports with rising energy prices is that he is now seen as embarking on another anti-U.S. energy policy that his opponents will use to blame him for energy prices that are already high and global instability.

While the pause does not impact projects that have already received export licenses, it does threaten at least a dozen project proposals that are in line for review at DOE. Those include several projects being planned in Louisiana by Commonwealth LNG, Energy Transfer and Venture Global. Millions of dollars have already been pumped into these projects and into the infrastructure support that will be necessary to make them viable. Missing from the debate and justifications for the decision is any discussion about the collateral impacts that the decision will have on economic development and jobs where additional LNG projects are being planned. Actions like this create millions of dollars in delay costs and generate greater uncertainty about developing projects in the U.S. That uncertainty leads to fewer projects in the future and an increase in the cost of capital based on political risk.

The reputational damage that the Biden decision has caused is impossible to calculate. The pause was reportedly opposed by foreign policy-minded administration officials who warned that it would undermine the U.S. position globally as U.S allies in Europe and Asia remain dependent on future U.S. supplies to meet long-term energy demand and help achieve climate goals.

Just last year, following the Russian invasion of Ukraine, President Biden promised our allies in Europe that the U.S. LNG industry would step up and help replace lost Russian supplies. Now, our allies watch in disbelief after the U.S. goes back on its word to satisfy fringe constituents in an election year.  Foreign policy observers are calling it a gift to Putin. Absent a prompt course correction, Biden may live to regret it, both strategically and politically.