Key Takeaways
The Department of Energy, which is responsible for issuing the export permits, is reassessing whether it is properly accounting for the climate impacts from proposed projects, as well as the national security and the domestic economic consequences.
U.S. LNG export capacity is expected to increase from around 84 million metric tons per year in 2023 to over 181 million metric tons per year in 2030, accounting for nearly 30 percent of global LNG production in that year.
The Natural Gas Act requires the Energy Department to consider whether a project is in the public interest before granting approval for an application to export natural gas to a country that does not have a free trade agreement with the United States.
The Department of Energy is examining whether regulators should take climate change into account when deciding whether a proposed gas export project meets the U.S. national interest. The Energy Department is weighing whether to issue a permit for a gas export plant in Louisiana known as Calcasieu Pass 2 (CP2), one of 17 proposed LNG export terminals. The plant would ship up to 24 million metric tons of gas abroad each year from a 546-acre site in Louisiana’s Cameron Parish. The export terminal is also awaiting a determination from the Federal Energy Regulatory Commission (FERC), whose permission is needed to build interstate pipelines and LNG facilities after it assesses their environmental impact and determines whether the project is needed by the market. The CP2 project has had several delays as FERC has requested more data for its environmental review, after anti-fossil energy groups began a campaign to stop them.
The Department of Energy, which is responsible for issuing the export permits, is reassessing whether it is properly accounting for the climate impacts from proposed projects, as well as the national security and the domestic economic consequences. This could include updating how the administration determines climate impacts of the projects, modernizing and updating the climate impact considerations, and considering the full upstream and downstream life cycle impacts of the projects. The Energy Department has never rejected a proposed natural gas project on these grounds. Since 2012, the Energy Department commissioned three studies on the impact of gas exports focusing on the economics of the trade. Those previous reviews had consistently found gas exports benefited the public.
The decades-old Natural Gas Act requires the Energy Department to consider whether a project is in the public interest before granting approval for an application to export natural gas to a country that does not have a free trade agreement with the United States. That export permit is needed for exporters to raise the funds to build the pipelines and compressors that bring the natural gas to the coast and chill it to minus-259 degrees Fahrenheit to turn it into liquid for transport on ships.
Gas exports increased almost four-fold during the past decade as U.S. gas production surged, turning the United States into the world’s largest natural gas exporter and helping Europe replace Russian gas shipments after Russia’s invasion of Ukraine. There are currently eight LNG export plants operating in the United States with another seven approved but still under construction.
Biden, however, faces growing pressure from environmental groups to achieve his pledge of transitioning away from fossil fuels. Without LNG exports, it may be unlikely that Biden can keep European nations united in support of Ukraine after deliveries of Russian gas to the region dropped in 2022 and someone blew up the Nord Stream 2 pipeline. Also, slowing down the approval of new projects could scare away potential customers in allied countries such as Japan and South Korea. U.S. LNG has helped foreign countries reduce the amount of coal they burn to produce electricity, resulting in lower carbon dioxide emissions. It is not a resource scarcity issue for the United States as it has enough natural gas resources in Pennsylvania, Texas and other states to support both foreign and domestic markets.
The $10 billion CP2 would be far larger than other existing U.S. LNG export terminals. It would be sited on a shipping channel that connects Lake Charles to the Gulf of Mexico and its export volume would increase U.S. gas exports by about 20 percent. The project is part of a $21 billion investment into providing domestic natural gas to international markets, and will provide economic benefits to the region as well as good-paying construction jobs. Venture Global, the company behind CP2, had hoped to start building by 2026, and is requesting a permit to operate until 2050. President Biden has an unrealistic goal for the United States to have zeroed out its carbon emissions by then.
U.S. LNG export capacity is expected to increase from around 84 million metric tons per year in 2023 to over 181 million metric tons per year in 2030, accounting for nearly 30 percent of global LNG production in that year. The United States has increased LNG supplies to Europe by about 30 billion cubic meters per year, about 60 percent to 70 percent of its 2030 goal.
Conclusion
The Biden administration is kowtowing to environmentalists by having his Department of Energy undertake a review of LNG export terminals and the climate considerations for their approval. The review would create uncertainty about whether U.S. allies can rely on U.S. LNG for their energy and could shock the global energy market that relies on U.S. energy dominance and supply. A delay of a decision on CP2 until after the November 5, 2024, U.S. presidential election could spare President Biden from criticism from environmentalists, but it could cause havoc to markets and the energy security of our allies who may question the reliability of the United States as a secure energy supplier.
