Three reasons why the moratorium on LNG projects is Joe Biden’s latest energy misstep

By TED GARRISH | REAL CLEAR WIRE

The Biden administration is putting a moratorium on permitting for future liquefied natural gas (LNG) projects seeking approval, in a major blow to the entire LNG export industry. 

Since the invasion in Ukraine, the U.S. LNG industry has played a key role in helping Europe shift reliance away from Russian gas and maintain energy security. As a result of the administration’s decision to stall LNG projects, the U.S. can expect three negative outcomes, among others.

1. American allies will be harmed – In March 2022, President Biden committed to send American LNG to the European Union, in the midst of an energy crisis after Russia cut off pipeline natural gas. The Administration’s announcement that it plans to indefinity freeze permitting will make it harder for pending U.S. LNG projects to move forward. LNG projects rely on two major components: long-term contracts from customers and billions of dollars in financing from banks. This action will chill both the commercial and capital markets. Currently, the U.S. has five LNG facilities under construction and a number of others awaiting a final investment decision, pending government approval.

The bet here is the Europeans thought the president’s pledge came with a longer shelf life. A Rystad Energy analysis said Europe has long-term energy needs, and U.S. LNG is very well positioned to help strengthen European energy security. But not so fast. The world’s largest LNG supplier – the United States – plans to restrict its own ability to meet LNG demand in Europe and globally.

During my time at the Department of Energy, I saw firsthand the appetite for U.S. LNG and interest from European and Asian nations to diversify their energy sources, while reducing reliance on Russia. 

It would indeed be a troubling move from an administration that has already been slower to approve LNG projects compared to its presidential predecessors from both parties. As reported by Bloomberg, reviews of LNG project applications have stretched to more than 330 days under the Biden administration, up from 49 days during the Trump administration and 155 days during the Obama administration. Continuing this trend of stalling LNG projects puts our allies at risk. Approving LNG exports should not be controversial since liquefied natural gas has proven to be a cleaner fuel compared to coal.

2. Emissions Will Rise – The irony is that the climate activists trying to cut off American LNG shipments to the world, with an assist from the administration by delaying on LNG reviews, would end up hurting their own cause.

Consider: Coal use in the U.S. has fallen to levels not seen since the early days of the Nixon administration more than a half-century ago, according to a recent Rhodium Group study. The same analysis found that U.S. carbon dioxide (CO2) emissions fell 8% last year as coal continued to be displaced, mostly by natural gas. More broadly, in the U.S., switching to natural gas from coal in the power sector can reduce carbon emissions by more than 50%, which is the main reason our CO2 emissions from that sector are at generational lows. Natural gas accounted for more than 60% of the CO2 reductions from the power sector from 2005-2021 per EIA data.

Yet, around the world, coal use is rising – expected to set a record in 2023 – with China and India leading the way. Natural gas has displaced coal in the U.S., and given foreign governments’ stated priority focus on reducing global emissions, there’s a good likelihood that LNG could broadly displace coal abroad. The obvious question for the Biden administration is why take actions that would limit the climate benefits found in American LNG, while encouraging continued coal use elsewhere?

A new poll released by co/efficient revealed that 73% of self-described moderate voters and 60% of self-described liberal voters “believe natural gas is a cleaner energy source and cleaner fuel than coal.” It’s therefore unclear why President Biden would contradict the public opinion of the voter base he is pursuing.

During a recent energy panel, U.S. Sen. Bill Cassidy (R-Louisiana) called the administration’s reported deliberations “short-sighted” and said they are counterproductive to other nations realizing the environmental benefit of using natural gas to fuel power generation instead of coal.

“If we limit the export of natural gas, we limit the ability to substitute clean-burning natural gas for coal,” Sen. Cassidy said. “India’s not going to consign itself to economic irrelevancy because someone in the Department of Energy decides not to permit [a project], because they think if they don’t allow the exporting of that clean natural gas, somehow China’s emissions are going to go down. It is absurd.”

3. America will lose credibility – Ultimately the potential damage to America’s relationship with friends and allies abroad could be significant. If America’s allies doubt our promises, reliability and resolve, that’s a problem.

As noted by Eurogas President Didier Holleaux, many new LNG import terminals “are based on the assumption of stable long-term supply relationships with the US.” He further stated, “any doubts regarding the stability of US LNG supplies are putting the development of the necessary infrastructure at risk and raises concerns of potential price volatility.”

CSIS scholar Joseph Majkut correctly noted, “it is now pretty much conventional wisdom that the U.S. LNG industry played a big role helping Europe shift away from Russian gas after the invasion of Ukraine and that helped maintain European solidarity, and in Northeast Asia it’s a big part of energy security planning.”

The new climate review undertaken by the Energy Department could forever imperil America’s relationships with our allies at a time when they need our LNG to keep their lights on and homes heated during this cold winter.

The bottom line: American natural gas is advancing U.S. climate goals, and U.S. LNG has the potential to help other nations achieve their climate goals. There’s also the potential benefit of cleaner natural gas to help people in parts of the world still living in energy poverty, without reliable access to electricity – about 750 million by one estimate.

American LNG helps allies strengthen their energy security, while also generating domestic benefits – including jobs and economic growth from production and development of LNG projects.

This is the wrong move from an administration that already has made too many bad calls on energy. Officials should drop misguided efforts that make it more difficult for American LNG to serve allies, protect the environment and generate domestic economic benefits.

Ted Garrish is Former Assistant Secretary for International Affairs and General Counsel at the U.S. Department of Energy. 

This article was originally published by RealClearEnergy and made available via RealClearWire.