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Editor's note: This article was updated to include comments and analysis.
President Joe Biden formally paused approvals Jan. 26 for new LNG export projects, in a move that puts the brakes on billions of dollars in development for energy companies.
The major move is a key win for environmentalists in the Democratic Party–and a huge source of frustration for natural gas players–as Biden agrees to have the Department of Energy factor impacts on climate change into LNG permitting. The decision plays into the new election year with ripple effects lasting beyond 2024.
“During this period, we will take a hard look at the impacts of LNG exports on energy costs, America's energy security and our environment,” Biden said in a statement. “This pause on new LNG approvals sees the climate crisis for what it is: the existential threat of our time.”
The order calls for an assessment into LNG export deals with countries that do not have a free-trade agreement with the U.S., as countries with an agreement are already approved by current law. However, the order effectively impacts all LNG export projects that have not yet received approval. LNG is a worldwide commodity frequently sold to countries that don’t have a free-trade agreements with the U.S., and LNG supplier-to-customer contracts are generally written at 20-year lengths.
DOE public interest analysis
The DOE’s plan specifically calls for an initiation process to update assessments to decide if new LNG export authorization requests to non-Free Trade Agreement countries fit within the scope of the “public interest.”
“[The] DOE must use the most complete, updated and robust analysis possible on market, economic, national security, environmental considerations, including current authorized exports compared to domestic supply, energy security, greenhouse gas emissions including carbon dioxide and methane, and other factors,” the agency said Jan. 26 in a statement on its website.
“Today’s action will begin an update of this analysis, and until updated, DOE will pause determinations on pending applications for export of LNG to non-Free Trade Agreement countries,” the DOE said.
The U.S. has comprehensive free trade agreements with 20 countries, with the larger ones being Australia, Canada, Korea, Mexico and Singapore.
Missing from that list is Europe, which relied heavily on Russian energy imports, and which has been the main recipient of U.S. LNG imports in recent years. Over 60% of U.S. LNG exports went to Europe in 2023, according to the DOE. Also largely absent from the list under the Asia umbrella are China, India and other key Asian markets interested in importing LNG.
Appearing on the CNBC network, Energy Secretary Jennifer Granholm said the analysis would be done via the U.S. National Labs and also would consider foreign policy and the energy security of allies.
Granholm emphasized the order called for a temporary pause, followed by a comment period. Analysts predicted the pause would last at least until the national election in November.
Mixed internal opinions
Senator Joe Manchin, (D-W. Va.), who’s flirting with leaving the Democratic Party for a third-party presidential bid, released a statement promising a hearing in the upcoming weeks to review the decision.
“Unfortunately, the announcement today reminds me of the ill-advised and unlawful pause on oil and gas leasing this administration attempted to put in place in the name of climate,” Manchin said. “If the administration has the facts to prove that additional LNG export capacity would hurt Americans, they must make that information public and clear. But 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.”
Democratic Senator Ed Markey of Massachusetts applauded the decision from the Biden Administration, saying the measure was necessary to protect American communities from “export-driven pollution and profiteering.”
“For too long, the United States served as an enabler for Big Oil and Big Gas’ get-rich-quick scheme, as it got countries around the world addicted to fossil fuels at the expense of American families,” Markey said in a statement. “This surge in natural gas exports was matched by rising energy costs at home and soaring global temperatures driven by fossil-fueled climate change.”
Granholm said the project would not affect projects that have already gained government approval. One project that would be affected is Venture Global’s Calcasieu Pass 2 LNG project, which was slated to begin production in 2025, and would be the largest LNG export facility in the U.S.
U.S. LNG: Filling Russian energy voids
The DOE’s announcement comes as U.S. LNG exporters were eying further growth in years ahead after arguably helping to settle three years of energy market volatility that spanned from the start of the COVID-19 pandemic in 2020 through the aftermath of Vladimir Putin’s decision to invade Ukraine in early 2022.
These events forced world leaders to rethink and prioritize energy security, even if that meant delaying decarbonization goals, as was the case in Germany and other countries that turned to coal amid the recent energy crunch.
Ongoing heightened uncertainties continue to favor U.S. LNG exporters and boosted interest in the build-out of U.S.-based liquefaction facilities, as well as gasification facilities around the world.
The U.S. currently exports roughly around 14 Bcf/d of LNG, according to the DOE. The U.S. also exports another 5 Bcf/d-6 Bcf/d of piped natural gas to Mexico; a number of Mexican-based liquefaction facilities will use U.S. gas to anchor a boom in that country’s LNG exports.
To date, approximately 48 Bcf/d in total authorizations for LNG exports have been approved by the DOE, which is around 3.4 times the current export capacity, the DOE said, reiterating that the temporary pause on pending applications doesn’t affect these already authorized exports.
“Within this decade, another 12 Bcf/d of U.S. export capacity already authorized and under construction will come online—enabling exports to nearly double and putting the U.S. on track to exceed the export capacity of any other country by more than 50%, even taking into account planned global LNG expansion capacity,” the DOE said.
Qatar and Australia are the U.S.’ primary competitors in the battle amongst the top three global LNG suppliers.
Effects on LNG market
Analysts predicted the move would have not have an immediate effect on the LNG market.
“In the short term for facilities coming online 2024 through 26, there is no impact,” said Jack Weixel, senior director of East Daley Analytics. “They’re either under construction or already have the requisite DOE approval.”
Securities firm TD Cowen did not see an immediate boost happening for LNG facilities that are already operational.
“LNG equities currently operating may not see an increase in replacement value given forecast oversupply through 2028 and global queue of proposed projects; unsanctioned projects with government approvals could benefit as FID probability increases,” the firm reported in an analysis.
The decision could affect, however, the overall growth environment for LNG exports, Weixel said, as the pause essentially announces that natural gas supply is further subjected to U.S. political processes.
“This decision injects uncertainty and volatility into the long-term natural gas market,” he said. “Developers, financers and producers in particular will have less surety of demand that they can count on, which impacts future plans for production levels and return on investment for the industry as a whole.”
Industry, politicians and environmentalists respond
LNG industry groups quickly blasted the decision, saying the U.S. was backing off promises made to allies and making the transition to renewable energy more difficult.
“After Russia invaded Ukraine, the Biden administration made a pledge to the EU: The United States commits to maintaining an enabling regulatory environment with procedures to review and expeditiously act upon applications to permit any additional export LNG capacities,” said Fred Hutchinson, president and CEO of LNG Allies. “Today’s announcement does not keep faith with that pledge,”
American Energy Alliance President Thomas Pyle said the decision was a political sop to environmentalists that hurts the U.S. economy.
“A delay of a decision on CP2 [Calcasieu Pass 2] until after the November 2024 presidential election could spare President Biden from criticism from environmentalists, but it will likely wreak havoc on markets and the energy security of our allies who may question the reliability of the United States as a secure energy supplier,” Pyle said.
Alternatively, Environmentalist praised the announcement as a major win against climate change and for communities affected by the LNG projects.
“This announcement from the Biden administration is truly monumental for our communities,” said Roishetta Ozane, director of the Vessel Project. “As someone who has witnessed the devastating impacts of fossil fuel extractive industries, I am filled with hope and gratitude for this important step towards justice. Halting permits for these industries is a clear acknowledgment of the urgent need to protect the well-being and rights of those of us who have been disproportionately affected.”
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