The Biden administration on Friday did as rumored and said it would temporarily pause new federal export authorizations for LNG projects while the Department of Energy (DOE) reviews policies to determine whether more capacity is in the public interest.
The White House and DOE ended days of speculation after a New York Times report earlier in the week. The announcement also clarified that the authorization suspension would impact any project now seeking a permit to export liquefied natural gas to countries without a free trade agreement (FTA) with the United States.
“During this period, we will take a hard look at the impacts of LNG exports on energy costs, America’s energy security, and our environment,” President Biden said. “This pause on new LNG approvals sees the climate crisis for what it is: the existential threat of our time.”
Secretary of Energy Jennifer Granholm described the pause as temporary, but DOE did not provide a timeline for how long authorizations may be curtailed. During the freeze, DOE has been directed to update policies on market impacts, national security and climate impact of both new and existing projects when considering a new export authorization.
“This practical action will ensure that DOE remains a responsible actor using the most up-to-date economic and environmental analyses,” Granholm said.
At least 17 facilities have pending authorizations on DOE’s backlog. Rapidan Energy Group’s Alex Munton told NGI that a pause of DOE authorization would likely impact the development of 10 North American projects expected to be fed with U.S. gas, representing almost 20 Bcf/d of additional LNG export capacity.
Along with Venture Global LNG Inc.’s CP2 project, that list could include Commonwealth LNG, Sempra Infrastructure’s Port Arthur Phase Two and Cheniere Energy Inc.’s next expansion of Corpus Christi.
Researchers with ClearView Energy Partners LLC estimated around 9.3 Bcf/d in U.S. LNG projects expected to take final investment decision (FID) this year could be delayed.
DOE has granted authorization for 48 Bcf/d of export projects that are anticipated to be built through the decade. About 10.7 Bcf/d of that capacity is currently under construction in the United States, according to NGI’s North American LNG Export Project Tracker.
Punitive Measures
Commonwealth LNG, which is planning a 9 million metric ton/year (mmty) facility in Louisiana, has been awaiting a non-FTA decision for around four years. After placing around one-half of the capacity under long-term contracts, it targeted an FID for this year.
Commonwealth spokesperson Lyle Hanna told NGI the decision was considered “punitive” for advanced projects, which have been stuck in DOE’s backlog. However, the firm remains committed to completing the project.
“We maintain our position that it’s the responsibility of DOE to weigh permit applications on their individual merits and not subject our application to further delays when they have had more than ample time to review all aspects of our application and approve the permit under the guidelines applicable throughout that period,” Hanna said.
Sempra Infrastructure also said it would continue development during the pause and remained confident in the merits of its proposed projects, including carbon capture and sequestration plans to abate emissions in Louisiana and Texas.
Sempra Infrastructure is building the first phases of Port Arthur LNG southeast of Houston, as well as Energia Costa Azul LNG in Mexico, which would be fed with U.S. supply. The company also operates Cameron LNG in Louisiana. Each facility also has additional phases that are pending approval by DOE for worldwide exports.
“We remain committed to working with regulators and stakeholders to help ensure positive outcomes for our projects, customers and the communities in which we operate and look forward to the opportunity to review and comment on any proposed policy change as it relates to non-FTA permits,” a Sempra representative told NGI.
Natural gas industry trade groups condemned the Biden administration’s decision, arguing that concerns about LNG impacts to climate and domestic natural gas prices were misleading.
Interstate Natural Gas Association of America CEO Amy Andryszak said the pause was “misguided and potentially detrimental” to the country’s position as an LNG supplier to Europe.
“The administration needs to appreciate that even a ‘pause’ on approvals can potentially cause devastating ripple effects on national security, energy investments, the supply chain, and American workers and consumers,” Andryszak said.
Natural Gas Supply Association CEO Dena Wiggins said pausing development of more capacity also could derail the transition by foreign countries to use natural gas instead of coal.
Supply Outlook
In its explanation for the policy review and pause, DOE estimated that the United States could continue to meet European gas demand in the near-term with available export capacity and was on track to outpace capacity expansions elsewhere in the world.
Prices in Europe and Asia have continued to drop for most of the heating season thanks to high storage inventories and an influx of U.S. spot cargoes. The February and March Dutch Title Transfer Facility contracts rose slightly Friday, nearing the low $9/MMBtu range.
However, Europe’s natural gas consumption has been limited by European Union conservation policies since early 2022, impacting industrial sectors and the regional economy.
In the International Energy Agency’s (IEA) latest gas market report, researchers wrote that growth in natural gas demand could be capped in Asia and Europe “by the limited increase in global LNG supply, which is expected to grow by a mere 3.5%.
“However, this forecast comes with an unusually wide range of uncertainty,” IEA researchers wrote. “Potential start-up delays at new liquefaction plants, a tense geopolitical context, worsening feed gas issues at specific legacy projects and risks related to shipping all represent downward risks to the current outlook, which could fuel price volatility through 2024.”
Munton said that supply uncertainty and the wide margin in global natural gas demand outlooks over the next two decades makes a delay in new LNG capacity a big question mark for the future of supply. However, it’s not as easy as tying a delayed or canceled project with a future supply shortfall.
“With Russia cutting off supply to Europe, we saw a once in a generation or once in a century occurrence,” when Europe “was suddenly short of gas that it needed and LNG had to fill the gap,” Munton said. “Broadly speaking, if we're looking at individual projects, things move incrementally and buyers and suppliers move together. You can't say that a pause on approval means there will be a supply gap in 2035. That's just not how the market works.”
