Why is the LNG Pause Still in Place?
Mark Green
Posted August 29, 2024
Three recent headlines to consider as the Biden administration continues to pause federal permitting for American liquefied natural gas (LNG) export projects:
“Natural-Gas Prices Hit 2024 High in Europe After Ukraine’s Russia Incursion”
“Europe’s gas surplus has mostly been eliminated”
“US LNG industry under pressure as challenges and uncertainty mount”
Each headline points to: (1) The continuing European need for reliable American natural gas; and (2) the urgency in ending the administration’s misguided – and unjustified – pause on new and pending LNG export projects to non-Free Trade Agreement countries.
We put emphasis on “unjustified” because it’s clear – seven months after the pause was imposed – that the administration’s reasons are without merit.
Uncertainty over future supply growth created by the LNG pause has put American producers in a difficult spot going forward, the Financial Times reported. “LNG plants are energy infrastructure,” ClearView Energy’s Kevin Book told the newspaper, “and building energy infrastructure in America today is hard.”
It shouldn’t be that way.
Unfortunately, instead of ending the pause when a federal judge ruled in July that the U.S. Energy Department had failed to justify its action, the administration extended uncertainty by appealing the ruling.
The pause goes on, perhaps buoyed by the justifications we debunked in January, when President Biden announced the pause. Let’s review. The administration said it needed to:
1. Evaluate ongoing demand for LNG exports
More than two years after American producers met Europe’s energy needs as it moved away from piped Russian natural gas, U.S. LNG supplies remain important to allies’ security.
Natural gas prices in Europe have edged higher as its storage levels have waned. This points to the need for more and reliable supply, with the winter heating season not that far off. Meanwhile, other nations including Russia are escalating LNG production to meet growing market demand.
Given these developments, the need for American LNG in Europe and other places around the world isn’t in question. Strike one.
2. Measure climate risks associated with LNG exports
There’s ample evidence that the increased use of natural gas in the U.S. power sector has played a major role in reducing American emissions – accounting for 60% of the carbon dioxide reductions from power generation since 2005. American LNG could help other countries reduce their emissions as well. A recent study by Berkeley Research Group found that even when accounting for the emissions associated with producing, transporting, liquefying and shipping natural gas, the climate impact of U.S. LNG delivered to Europe and Asia is roughly 50% lower than that of coal in those regions.
Even so, the administration has continued to cite concern about climate risks from LNG as a reason to keep pausing permits for export projects. It may have leaned on a flawed study circulated by a long-time opponent of natural gas – an analysis that was deemed “riddled with errors” by a Breakthrough Institute review published in July. Strike two.
3. Determine the effect of LNG exports on domestic prices
This also was a spurious concern. American families have benefited from some of the lowest residential natural gas prices in the world, even as the U.S. became the world’s leading LNG exporter, according to an analysis published earlier this year.
Over the past decade, average Henry Hub natural gas prices in the U.S. were 54% lower than in the decade before. Over the past 15 years, any significant increase in natural gas demand has been accompanied by a production increase, helping maintain affordability for American families and small businesses. Strike three.
Bottom line: U.S. producers have been able to maintain a well-supplied domestic market while also sending LNG to allies abroad.
Last word goes to Rob Jennings, API vice president of Natural Gas Markets:
“The administration’s publicly stated reasons for pausing LNG export permitting never squared with the facts. The benefits of U.S. LNG have been confirmed numerous times. As Europe and other American allies look to the U.S. for reliable energy, the evidence weighs strongly against continuing this potentially harmful restriction on America’s LNG exporting ability.
About The Author
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Previously, Mark was a reporter, copy editor and sports editor at an assortment of newspapers. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela have two grown children and six grandchildren.