US LNG Export Delays – what does it actually mean for Supply & Demand in the United States?

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In the wake of the recent decision by the Biden administration to delay the consideration of new natural gas export terminals in the United States, there has been a significant shift in the landscape of the energy market. This decision comes at a time when gas shipments to Europe and Asia have seen a remarkable increase, primarily due to the ongoing conflict in Ukraine.

The Political Landscape

Biden’s decision aligns with the concerns raised by environmentalists. These groups argue that the surge in exports, primarily in the form of Liquefied Natural Gas (LNG), could potentially lock in harmful, planet-warming emissions. This is particularly alarming, given Biden’s commitment to halving climate pollution by 2030.

In a recent statement, Biden emphasized his administration’s commitment to climate action, stating:

“While MAGA Republicans willfully deny the urgency of the climate crisis, condemning the American people to a dangerous future, my administration will not be complacent. We will not cede to special interests. We will heed the calls of young people and frontline communities who are using their voices to demand action from those with the power to act.”

This political stance is in stark contrast to his predecessor, Donald Trump, who withdrew from the Paris climate accords, citing climate change as a hoax.

Evaluating the Economic and Environmental Impact

The current methodologies employed by the Energy Department to evaluate LNG projects have faced criticism for allegedly not accounting for potential cost increases for American consumers and manufacturers or the impact of greenhouse gas emissions. This perceived inadequacy has led to the White House’s decision to halt the consideration of new LNG projects.

Environmentalists have welcomed this decision as a significant step towards countering the approval of the massive Willow oil project in Alaska last year. However, industry groups have condemned the move, labeling it a “win for Russia.”

Environmental activist Bill McKibben lauds the decision as brave and savvy. In his words:

“This decision is brave, because Donald Trump (the man who pulled us out of the Paris climate accords on the grounds that climate change is a hoax) will attack it mercilessly. But it’s also very, very savvy: Biden wants young people, who care about climate above all, in his corner. They were angry about his dumb approval of the Willow oil project.”

The Environmental Inequity

A proposed LNG export terminal in Louisiana could reportedly produce about twenty times the greenhouse gas emissions of the Willow project. This revelation underscores the urgent need for reevaluating the environmental impact of future LNG projects.

McKibben notes the potential for this decision to be overturned if Biden isn’t reelected:

“And of course everyone understands that if Biden is not reelected this win means nothing. It will disappear on Day One when (Trump) begins his relentless campaign to ‘drill drill drill.'”

The Response from the Energy Department

In response to the controversy, Energy Secretary Jennifer Granholm assured that the pause will not impact already authorized exports. Granholm also noted that the US’s gas exports reached record highs last year.

“Nor will it impact our ability to supply our allies in Europe, Asia or other recipients of already authorized exports,” she said. “We remain committed to ensuring our partners’ medium-term energy needs are met.”

The Energy Department, according to Granholm, could allow exceptions for national security needs if required.

The Future of LNG Projects

While the exact duration of the permitting pause remains undisclosed, Granholm confirmed that a study examining the impact of proposed LNG projects on the environment, the economy, and national security would take “some months.” This study, followed by a public comment period, could potentially delay decisions on pending LNG projects until after the 2024 presidential election.

The US has seen significant growth in LNG exports since they began less than a decade ago. This growth has skyrocketed following Russia’s February 2022 invasion of Ukraine. With the US now the world’s largest gas exporter, Biden and Granholm have celebrated the delivery of US gas to Europe and Asia as a key geopolitical weapon against Russian President Vladimir Putin.

The Industry’s Perspective

However, the American Petroleum Institute (API), the largest lobbying group for the oil and gas industry, views Biden’s action as a betrayal. API’s president and CEO, Mike Sommers, argues that the move is a “win for Russia and a loss for American allies, U.S. jobs and global climate progress.”

In Sommers’ view, there is no need for a review to understand the benefits of US LNG exports. He contends that these exports are vital for stabilizing global energy markets, supporting thousands of American jobs, and reducing emissions worldwide by transitioning countries towards cleaner fuels and away from coal.

Sommers criticizes Biden’s action as a “broken promise to U.S. allies,” urging the administration to cease playing politics with global energy security.

The Energy Secretary’s Take

Granholm, who has worked closely with oil and gas executives, notes that a lot has occurred since LNG exports commenced about eight years ago. She believes that a more profound understanding of the global energy market need, long-term supply and demand of energy resources, and environmental factors is necessary.

“So by updating the analysis process now, we will be better informed to avoid export authorizations that diminish our domestic energy availability, that weaken our security or that undermine our economy.”

Granholm emphasizes that the delay is not a retroactive review of already authorized exports, nor is it intended to punish the oil and gas industry. She reaffirms the commitment to strengthening energy security in the US and with its allies and protecting Americans against climate change as the nation leads the way into a clean energy future.

The Environmental Perspective

Jeremy Symons, an environmental consultant and former climate policy adviser at the Environmental Protection Agency, views Biden’s decision as a “game-changer” in the fight against climate change.

“The president is drawing a line in the sand to put the nation’s interests first and listen to climate science,” Symons said in an interview. “The days of massive fossil fuel projects like the CP2 project escaping scrutiny from the federal government are over. We now have a president who cares about climate change.”

Symons, along with other activists, has taken aim at the $10 billion Calcasieu Pass 2 project, or CP2, along Louisiana’s Gulf Coast. If built, this would become the nation’s largest export terminal, exporting up to 20 million tons (18.1 million metric tons) of chilled natural gas per year. This would create more greenhouse gas emissions than even the Willow project, which environmentalists have criticized as a “carbon bomb.”

Symons calls the gas project “bad for our nation, bad for our health, and bad for our economy.”

The Industry’s Response

Shaylyn Hynes, spokeswoman for the project’s owner, Virginia-based Venture Global, argues that the Biden administration “continues to create uncertainty about whether our allies can rely on U.S. LNG for their energy security.”

Hynes warns that a prolonged pause on LNG exports “would shock the global energy market … and send a devastating signal to our allies that they can no longer rely on the United States.”

Hynes argues that this policy would hurt the climate and lead to increased greenhouse gas emissions, as it would force the world to pivot to coal instead of natural gas.

Conclusion

The decision by the Biden administration to delay the consideration of new LNG export terminals in the US has triggered a significant shift in the energy market landscape. While environmentalists applaud the decision, industry groups condemn the move, citing it as a victory for Russia and a betrayal of US allies. As the debate continues, one thing is clear: the future of LNG exports in the US is uncertain, and the implications of this decision will undoubtedly have a far-reaching impact on both the national and global energy markets.

Bear in mind, we have over 14 BCFD of online LNG projects, 5 BCFD under construction (most by 2025), and 20 BCFD “APPROVED” LNG Projects.  It will take years to develop the existing projects – so pausing “NEW” projects does not impact the market much before 2035.


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