A federal judge halted President Joe Biden’s temporary moratorium on new licenses for exports of US liquefied natural gas (LNG). U.S. District Judge James D. Cain Jr. in Louisiana issued a preliminary injunction in a lawsuit filed by 16 states, including Louisiana, Alaska, Texas, West Virginia and Wyoming, which argued Biden violated the U.S. Constitution and other federal laws by halting licenses in January to assess their impact on climate change. Under Biden’s direction, the Department of Energy stopped approving new licenses to export LNG to Asian nations and other countries that are not free trade partners with the United States, including Europe and Ukraine, while the department reviewed how the shipments affect climate change, the economy and national security. According to U.S. gas producers, the halt in licensing threatens to harm allies dependent on American energy supplies as well as billions of dollars in LNG export projects.
According to Judge Cain, the government’s decision to halt approvals appears to be “completely without reason or logic and is perhaps the epiphany of ideocracy,” adding that the states can pursue their legal challenge to Biden’s moratorium. Cain cited evidence submitted by the plaintiffs that showed loss of revenues and deferred investments in LNG projects due to the Biden administration’s actions. For example, some $61 billion in pending infrastructure construction in Louisiana is at risk from Biden’s pause. The case is Louisiana v. Biden, 24-cv-406, US District Court, Western District of Louisiana (Lake Charles).
Despite the court order, the short-term practical effects are likely to be minimal. Under federal law, the Department of Energy decides whether such LNG exports are in the public interest — and it can continue scrutinizing proposals for new export authorizations. Meanwhile, rival developers with existing licenses remain unaffected by Biden’s decision, and Biden’s LNG pause is a boon to foreign adversaries that produce energy, including Iran and Russia, as well as Qatar, which is expanding LNG production rapidly to corner world market share. Some key U.S. projects affected include:
- Energy Transfer LP’s extension for a Louisiana project whose license expired before construction was completed.
- Commonwealth LNG’s license request that has been under review since November 2022.
- Venture Global LNG’s CP2 project, which has a major deal with Ukraine.
Already-licensed projects can move forward including expansions by NextDecade Corp., Cameron LNG, Freeport LNG, and Texas LNG, whose expansions depend on order books and financing. According to the DOE, current authorizations for exports of LNG to non-free trade agreement countries stand at over 48 billion cubic feet per day, or more than 45 percent of the current domestic production of natural gas. The agency also said the United States will continue to be the largest exporter of LNG for at least the next six years based on the current export capacity.
The judge’s ruling comes just days after the Federal Energy regulatory Commission (FERC) approved what would be the nation’s largest export terminal for liquefied natural gas. Venture Global’s Calcasieu Pass 2 southwestern Louisiana project, often referred to as CP2, was recently approved by the Federal Energy Regulatory Commission, but the project still needs DOE approval. According to DOE, the project’s application is pending.
Ukraine recently struck a major deal with Venture Global to help wean Eastern Europe off Russian natural gas as many EU countries still depend on Russian gas that is shipped through a pipeline that crosses Ukraine. Ukraine does not intend to renew a five-year transit agreement with Russia’s Gazprom that expires at the end of this year. Instead, Ukraine’s largest private energy company, DTEK, recently signed a deal with Venture Global. DTEK would buy LNG from Venture Global’s Plaquemines facility “to support near to medium term energy security needs for Ukraine and the broader Eastern European region.” Under the deal, DTEK will also be able to purchase up to two million metric tons of gas each year from the company’s CP2 facility, which is ensnared in the Administration’s moratorium on new LNG export projects.
Russia still accounts for about 15 percent of Europe’s gas supply. In May, Europe had to import more gas from Russia than the United States for the first time in nearly two years amid problems at a U.S. LNG facility, proving the need for more LNG capacity to support U.S. allies. If Europeans cannot get gas from the United States, they will have to rely on Russia. CP2 could supply about 5 percent of the world’s LNG by 2026. It already has contracts with Germany and Japan in addition to eastern Europe. Biden officials have told allies not to worry, and that the Administration’s permitting pause will not have an immediate impact on U.S. LNG exports. But Biden’s moratorium has caused enormous political uncertainty about the future supply of U.S. gas, which in turn damages investor confidence in projects and affects the jobs and lives of construction workers who would build them.
Conclusion
A U.S. District Judge has temporarily blocked the pause on LNG export licenses that the Biden administration put into effect in January due to a suit by 16 states that the pause violates the Constitution and other federal laws. The short-term impact is expected to be minimal due to the fact that Biden’s Energy Department will still be in charge of scrutinizing the applications for facilities. The pause affects U.S. European allies and their ability to sever their gas imports from Russia. Ukraine has a major deal with an LNG exporter that is affected by the pause. And, while DOE studies the Impact of LNG on climate during Biden’s moratorium, other countries are building LNG facilities, signing deals and creating jobs in their countries.
