Administration's LNG Review Worries Allies

Mark Green
Posted January 23, 2024

Reports that the Biden administration might change up the way it reviews new liquefied natural gas (LNG) projects, potentially delaying some or even stopping others, certainly has Europe’s attention.

And why not? In 2022, American natural gas producers stepped up LNG shipments to help Europe avert the worst of an energy crisis after nations committed to move away from Russian pipeline natural gas in response to Russia's invasion of Ukraine. Considering that Russia supplied about 45% of Europe’s total natural gas imports in 2021, American LNG was a big, big deal.

Europe was the main destination for U.S. LNG in 2022. And a recent analysis found that LNG would be a crucial market-balancing factor for Europe in the short- and long-term, with North American well-positioned to be the supplier.

So, yes – the potential for Washington to disrupt supplies has Europe’s attention.

Didier Holleaux, president of trade association EuroGas told POLITICO:

“This LNG has been a relief for Europe and contributed to the stabilisation of gas and electricity prices in Europe for consumers, after a long period of record high prices caused by the Russian supply drop. [A lack of additional U.S. LNG capacity] would risk increasing and prolonging the global supply imbalance.”

POLITICO also reported:

One senior EU official said the bloc’s leadership wouldn’t be drawn into “speculating on potential U.S. cuts in production or supply to the EU,” given that Washington hasn’t communicated any such move.

A scenario where American LNG projects could take longer to gain Washington’s approvals or be stymied altogether certainly is at odds with President Biden’s commitment in March 2022 to supply LNG to the European Union. The U.S. Energy Department (DOE) currently has before it four projects that have the appropriate approvals from the Federal Energy Regulatory Commission – natural gas that otherwise could aid allies and help reduce coal use. Thus far, DOE has not commented on its LNG review process.

API President and CEO Mike Sommers was clear about the LNG situation at the State of American Energy event earlier this month:

“This administration, in our view, has made a lot of really bad decisions. This might be the worst. [The administration’s review] would essentially be a moratorium on these permits out of the Department of Energy for potentially over a year. The lack of investment that would result as a consequence of that kind of decision is very, very concerning to our industry and to liquefied natural gas producers. … Halting U.S. LNG approvals would put our allies at risk.”

America’s allies could suffer, and so would America’s credibility with key allies who in turn are integral to American security. A Wall Street Journal editorial said impeding U.S. LNG projects won’t reduce global emissions and America’s friends will be forced to seek energy from others:

“If new U.S. LNG projects are blocked, Europe and Asia will have to import gas from elsewhere to meet their growing demand. Most won’t come from America’s friends. Yet the climate lobby says new LNG projects will lock in higher CO₂ emissions for decades. They’re apparently less worried by the 305 coal-fired power plants that China has announced or has in the works. News flash: China’s CO₂ emissions increased last year by twice as much as U.S. emissions declined. Blocking new LNG export projects won’t reduce global emissions. But it would be a gift to America’s adversaries and show Europe that the U.S. isn’t a reliable ally.”

Sommers:

“The signal that sends to our allies is very, very concerning. Is the United States going to be a source of LNG and a reliable partner into the future? Our allies are going to start asking that question if [the administration makes] this determination.”

In addition to helping U.S. allies, LNG spurs domestic benefits as well. A recent study estimated that fulfilling the president’s LNG pledge to Europe would generate $63 billion in domestic spending for LNG facilities and pipelines throughout the supply chain, contributing $46 billion to U.S. GDP during 2025-2030 and supporting an average of 71,500 jobs each year.

This development is not a good look for Washington. President Biden should stop misguided efforts that could make it more difficult for American LNG to serve allies while also generating significant economic benefits in the U.S.