Industry Experts Voice Concerns Over LNG Pause; Impacts on Geopolitical Stability, American Jobs, and the Environment

On Thursday – two days after a hearing from the House Subcommittee on Energy, Climate, and Grid Security – the Senate Committee on Energy and Natural Resources held a hearing to examine the ramifications of the Biden administration’s LNG export freeze. European and American industry experts, as well as bipartisan Congressional members, raised the alarm over how the pause will negatively impact global emissions, global energy security, and American jobs.

In the two weeks since the announcement, the Biden administration’s decision to pause LNG export permitting has been met with widespread criticism from bipartisan House and Senate members, 23 attorneys general, industry experts, and allies from across the globe. Media outlets and elected officials alike are calling the decision – which the Wall Street Journal described as a “raw political payoff” to the climate left – blatantly political.

Further proof of the political nature of this announcement comes from new reporting by the Wall Street Journal that revealed the pause was pushed by coordinated environmental groups funded by familiar anti-oil-and-gas billionaires like the Rockefellers and Michael Bloomberg. From the article:

“’They got our attention,’ a senior Biden administration official said of the activists’ efforts, describing the campaign as intense.”

In his opening remarks at Thursday’s hearing, Senator Joe Manchin (D-WV) rebuked the administration for this clear political hat tip:

“The White House has shown that it is so concerned with indulging radical climate activists that it’s willing to play politics with our energy security and that of our allies. Politicizing LNG exports is reckless and dangerous, and it could empower and enrich Russia, Qatar, and Iran.”

This theme was echoed by members on both sides of the aisle during their questioning of Deputy Secretary of Energy David Turk, who argued that the permitting pause was needed to examine the impact of LNG exports on the environment and on consumer pricing. Turk also justified the decision by claiming that European demand for natural gas is decreasing and would continue to do so in the future.

However, the evidence points to a different story.

Activists claim that LNG exports will raise the price of domestic natural gas, experts disagree

Senators and witness experts, Charlie Riedl, Executive Director for the Center for LNG, and Dr. James Watson, Secretary General of European trade association EuroGas, pointed to a history of LNG export increases correlating with a decrease in the price of domestic gas.

Senator John Barrasso (R-WY) emphasized that increased U.S. LNG exports have coincided with lower domestic spot prices:

“In the eight years since we began exporting LNG, the domestic spot price of gas is on average much lower than the domestic spot price on gas in the eight years before we were able to start exporting LNG.”

Similarly, Riedl explained how U.S. natural gas is able increase production to meet demand surges, and in doing so, stabilize consumer prices:

“The ways in which our natural gas production met the demand surges that occurred in 2022-2023 provide a compelling illustration of the market’s resilience and adaptability. Energy Information Administration (EIA) data shows that natural gas prices decreased during periods of increased production, illustrating the advantages of a market-driven approach. Further, the strength of our export market has been instrumental in ensuring that Henry Hub (domestic) natural gas prices remain competitive, projected to average under $3.00 per MMBtu in 2024 and 2025, despite increased consumption and exports.”

Indeed, the facts confirm this. Henry Hub data from the U.S. Energy Information Association shows that record exports of LNG have not correlated with higher prices but instead have kept prices stable.

Similarly, in 2018, the Department of Energy (DOE) commissioned a study to evaluate the impact of U.S. LNG exports on domestic natural gas markets and on the economy as a whole. Across all 54 scenarios evaluated, higher levels of LNG exports were projected to lead to higher levels of GDP and consumer welfare.

LNG pause threatens commitment to allies

Members from both sides of the aisle also questioned how the impact would threaten the commitments the United States has made to its allies and to protecting global energy security.

Sen. Barrasso emphasized this point:

“American natural gas exports are vital to our nation’s national security…Europe knows the value of American energy. American natural gas exports allowed Europe to cut imports of Russian natural gas while keeping their citizens warm and the lights on.”

Dr. Watson similarly explained that the pause creates instability as it makes America an unreliable business and trading partner, forcing European companies to buy Russian gas:

“Europe will face a future problem if there is not the capacity there to supply our needs… or… we will simply have to continue beyond that 2027 deadline taking Russian gas. There really isn’t much choice for us.”

This directly countered an argument made by Dep. Secretary Turk that demand for natural gas is decreasing in Europe, and therefore, this decision will not impact allies:

“Our volume of natural gas exports is increasing at the same time European demand is decreasing. I think it’s incredibly important to listen to the governments themselves. I think it’s more important to listen to what the European Commission will say. They have said this pause will not have any short- or medium-term impact on EU’s security of supply.”

However, this could not be further from the truth. EID has previously discussed how governments and allies from Europe and Asia have signaled concern over the permitting freeze. At the same time, the International Energy Agency (IEA) projects global gas demand to grow in 2024, as well as a long-term demand through at least 2050. Rystad Energy has also predicted increased natural gas production is needed to both satisfy global demand and meet decarbonization goals.

Facing rising demand in the medium- and long-term, European government officials have not “welcomed” the White House’s decision, according to Dr. Watson:

“I can only tell you this, there is no European government that has welcomed this decision. The European Commission did not welcome this decision. The European Parliament does not welcome this decision, nor does the European Council. The United Kingdom has not welcomed this decision. No European country has welcomed this decision.”

Dr. Watson also highlighted the supply gap that Europe will face without American natural gas – and where it will be forced to turn in order to fulfill energy needs:

“The IEA is forecasting a supply gap within 2-3 years. This means Europe will face a future problem if there is not the capacity there to supply our future needs.

“By not being able to honor the commitments that have been made in the U.S., you are going to indeed force us to continue to do business with Russia.”

U.S. LNG lowers global emissions

Dep. Secretary Turk also continuously highlighted the need to evaluate LNG exports’ impact on the climate, despite DOE’s own data showing the clear environmental benefits to exporting the resource.

Riedl emphasized this point, stating:

              “When you look at U.S. LNG compared to coal, it’s a reduction of anywhere from 50-60%”

Riedl, went on to explain the crucial role LNG plays in the world’s energy transition, saying:

“LNG is a central role of the global effort to combat climate change. LNG pairs well with renewable energy sources, which further highlights the indispensable role that natural gas will continue to play in facilitating our sustainable energy future.”

Sen. Barrasso also focused on the important role U.S. LNG plays in reducing emissions around the globe:

“There is no basis to the claim that American natural gas exports are bad for the environment. The fact is, American natural gas is among the cleanest in the world, far cleaner than Russia, far cleaner than Iranian gas, and at last year’s climate conference, nearly 200 countries, including the U.S., called out the role natural gas is playing in reducing emissions, not increasing emissions.”

Indeed, two analyses conducted by the DOE’s National Energy Technology Lab have shown the benefits of LNG:

“Both the 2014 and 2019 analysis concluded that that the use of U.S. LNG exports for electricity generation in European and Asian markets will not increase GHG [greenhouse gas] emissions from a life cycle perspective, when compared to regional coal extraction and consumption for electricity generation.”

Even the Rocky Mountain Institute acknowledges that American natural gas exports have a lower greenhouse gas emissions footprint than other sources of energy, including foreign sources of natural gas transmitted via pipeline. During the Senate hearing, Senator Bill Cassidy (R-LA) cited RMI data showing that U.S. LNG exports have a lower lifecycle GHG emissions profile than that of Russian natural gas.

Timing of “pause” elevates uncertainty, risks jobs

Riedl also scrutinized the peculiar timing of the pause, pointing out that prior environmental evaluations have been conducted without a full-on export freeze:

“We didn’t hear an answer from the Deputy Secretary today on how long it would take. . . In every previous instance when we’ve completed these studies, we’ve continued to keep working on processing permits.”

Senator Manchin also voiced his confusion around the timing and pause, saying:

“Facts must come before action, not the other way around.”

“This pause should be eliminated now, then come back and finish your report. You put the cart before the horse. You leaped before you looked.”

Many Senators emphasized the damage Biden’s decision would do to American jobs and the economy. In a noteworthy exchange, Senator Cassidy said:

“This policy is a war on the American worker.”

Witnesses agreed. Riedl explained the real-world impact the decision has on American jobs, saying:

“The average construction price of one [LNG export] facility is 15 to 20 billion dollars and there are typically six-to-eight thousand employees at a job site for upwards of 10 years building these facilities.”

“What would ultimately happen is those projects that were going to make $20 to $25 billion investments just simply won’t be built and we won’t be able to satisfy international demand from the market.”

These comments were echoed by energy CEOs and executives in recent statements and earnings calls.

Riedl continued:

“Fluctuations in the regulatory frameworks will slow innovation and deter investments, which can potentially destabilize U.S. leadership in the global energy market.”

“No one is going to finance a 20-billion-dollar project without firm commitments on the long-term contracts…no bank is going to give a 20-billion-dollar loan to a project developer on the idea that they might get a permit approved down the road.”

“Others who are thinking about long-term contracts in the U.S. will begin turning to Russia, Iran, Qatar.”

Bottom Line: The Biden administration has done exactly what Senator Manchin described: put the cart before the horse. Witness testimony and bipartisan member questioning confirmed that the LNG export pause will weaken our relationship with Asian and European allies while forcing them to turn to adversaries. Furthermore, halting U.S. LNG exports will have a detrimental impact on the domestic economy and slow progress on addressing climate change. President Biden must heed this expert testimony and reverse the ill-advised LNG permitting freeze.

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