The future of the anticipated expansion of US LNG was put in jeopardy Friday when the White House ordered a halt of new export authorizations while the US Department of Energy (DOE) beefs up its review process to consider the climate and economic effects of greater exports.
The US, which became the world’s leading LNG exporter in 2023, was poised for a wave of new exports to meet an anticipated near doubling of demand in China, as well as significant demand growth in Northeast Asia and South Asia.
The US’s total LNG operating capacity currently stands at 14 bcfd, but DOE has already authorized a three-fold increase to 48 bcfd, DOE said in a statement Friday. The decision will not affect the 8 LNG terminals already in operation, nor will the review impede the 10 projects that already hold DOE export authorizations and are currently under construction.
But the White House said any further boost in LNG exports demands that the US take “a hard look” at its impact on climate change. “This pause on new LNG approvals sees the climate crisis for what it is: the existential threat of our time,” President Joe Biden said in a statement.
Developing the new LNG review process will take months, a DOE spokeswoman said, adding that Energy Secretary Jennifer Granholm said the process would include public comments, which would require further time. This would likely delay approval of nearly a dozen proposed LNG export projects until after the November presidential election.
US LNG exports to allies
Sen. Joe Manchin (D-WVa), chairman of the Senate Energy and Natural Resources Committee, Friday blasted the decision and vowed to hold hearings in the coming weeks. “Let me be crystal clear: America’s LNG policy should be based on facts, not politics. The indisputable facts are that, to date, America’s LNG production has strengthened our economy, created good-paying jobs, supported the energy needs of our allies around the world, and helped reduce global emissions,” he said in a statement.
Manchin likened the LNG decision to the administration’s decision last year to issue an “ill-advised and unlawful pause on oil and gas leasing.” Manchin spearheaded the effort in Congress that reinstated several lease sales.
Over 30 oil and gas industry groups, along with the US Chamber of Commerce, earlier this week warned the administration against halting permits. American Petroleum Institute (API) president Mike Sommers called the halt a “broken promise” to European allies.
But Energy Secretary Granholm stressed that the pause would “not impact our ability to supply our allies in Europe, Asia, or other recipients of already authorized US exports,” noting that the department could make exceptions due to national security emergencies.
About 12 bcfd of US LNG export capacity will come online in the next decade, “enabling exports to nearly double and putting the US on track to exceed the export capacity of any other country by more than 50%,” even accounting for planned global LNG expansion capacity growth, Granholm said in a statement.
“This increased capacity has and will continue to support our European, Asian, and other allies,” she said. “Just as it has since 2022 when US LNG played a critical role in helping Europe backfill its lost gas supplies from Russia and reduce its energy dependence following Putin’s invasion of Ukraine.” Granholm noted that over 60% of US LNG exports went to Europe last year.
While the indefinite pause effects only new export authorizations to non-Free Trade Agreement (FTA) countries, the US has only 20 FTAs, and none with the world’s leading LNG importers – China, Japan, and European countries – or with growing markets like India, Pakistan, and Bangladesh. “With 90% of US LNG going to non-FTA destinations, withholding licensing effectively halts project development,” said John Miller, managing director of ESG and sustainability policy, at TD Cowen, a division of TD Securities.
The industry says further LNG export expansion is necessary to help growing economies move away from coal. Industry groups argue that the Biden administration’s move will harm efforts to reduce greenhouse gas emissions.
“LNG is critical for accelerating global emissions reductions by displacing higher-emitting fuels,” API’s Sommers said in a statement. “By 2024, three out of every four tons of coal consumed will occur in China, India, and Southeast Asia. LNG can displace higher-emitting fuels like coal, allowing these countries advance their respective climate goals.”
Climate activists, however, have identified expansion of LNG exports as incompatible with US climate commitments.