Could Judge’s Ruling Mark the Beginning of the End for LNG Pause?

Mark Green
Posted July 3, 2024

Ever since the government paused new and pending liquefied natural gas (LNG) export project permits in January, many have argued the action ran afoul of law and precedent – and that was at odds with American LNG’s obvious benefit to allies abroad and its value in creating U.S. jobs and generating economic growth here at home. In addition, the action seemed politically timed, coming at the start of a presidential election year.

On the legal and economic points, a federal judge agreed this week. U.S District Judge James D. Cain Jr. of the Western District of Louisiana, blocked the pause by the U.S. Department of Energy (DOE), at least temporarily.

It’s unlikely DOE will immediately start issuing LNG permits again, given that in the 11 months before the LNG pause was announced, DOE had not issued a single exports permit to non-Free Trade Agreement countries.

The big takeaway is that DOE’s justifications for the pause crumbled under judicial scrutiny. Judge Cain wrote:

“The Court has reviewed the voluminous studies attached as exhibits, all of which boast of both the economic and environmental benefits of exporting natural gas. It appears that the DOE’s decision to halt the permit approval process for entities to export LNG to non-FTA countries is completely without reason or logic…”

The ruling is welcome news for America’s friends around the globe and for American workers in natural gas and in the LNG sector – as well as the communities they help support. Perhaps – just perhaps – the ruling marks the beginning of the end of a misguided policy that has damaged American credibility and reliability as an energy supplier while potentially risking domestic economic benefits.

The court’s decision was a strong blow to the notion, advanced by DOE and others in the government, that America’s world-leading role as an LNG supplier needed a new study that Energy Secretary Jennifer Granholm indicated would not be complete until sometime in 2025. Again, DOE issued zero non-FTA permits in the 11 months prior to the pause – meaning that by the first quarter of 2025, the department may have gone two years without issuing a non-FTA permit.

On the domestic economic side, expansion of LNG exports could lead to $63 billion in capital spending and boost GDP by $46 billion, in accumulated totals, from 2025 to 2030 and support 71,500 jobs annually, according to a recent ICF study.

Judge Cain also pointed to research showing that Americans benefit from among the lowest residential natural gas prices in the world, even as the U.S. leads the world in LNG exports – another of DOE’s publicly stated reasons for imposing the pause.

These points were compelling to Judge Cain. He wrote that the LNG pause was at odds with the federal Natural Gas Act – which requires DOE to act expeditiously on permit applications and that any determination by DOE that a particular application wasn’t in the public interest “must be supported by substantial evidence and cannot be arbitrary and capricious.” The pause failed those tests, the court ruled.

The LNG pause was bad energy policy and has undermined American energy leadership in the world. Ending the pause is one of the pillars in API’s five-point policy roadmap to sustain and grow America’s oil and natural gas-based energy advantage.

LNG strengthens America’s competitive edge against global adversaries, and it gives other countries the opportunity to reduce their emissions by using natural gas instead of higher-emitting fuels.

Rob Jennings, API vice president of Natural Gas Markets:

“We welcome this week’s court decision as a positive signal for U.S. energy workers and our allies abroad. The benefits of U.S. LNG exports are well-established – they help stabilize global energy markets, support thousands of American jobs and drive emissions reductions around the world by displacing dirtier fuels. The administration should swiftly begin issuing long-overdue non-FTA permits to resume American energy leadership.”