The Biden administration in late January announced a temporary pause on pending decisions regarding LNG exports to countries with which the US doesn’t have free trade agreements (FTA). The pause’s stated purpose was to allow the US Department of Energy (DOE) to update its processes by incorporating factors such as potential domestic energy-cost increases and the effects of greenhouse-gas emissions.
Industry condemnation of the move was expectedly vigorous and unequivocal. Among the most frequently cited concerns was that the move would shrink investment in LNG; limiting related job growth and diminishing our ability to supply natural gas to US allies in Europe and elsewhere.
The potential discouragement of direct foreign investment in the projects and lack of willingness to sign long-term purchase contracts were also invoked as reasons the pause was bad. And to be sure, the industry would be better off without it.
But among the 10 pre-final investment decision LNG plants under development in the US still awaiting DOE authorization, only four had made substantial progress on securing long-term contracts, making the futures of the other six—including the largest, Venture Global LNG Inc.’s 20-million tonne/year (tpy) Delta LNG plant—less than certain even before the pause.
Venture Global is also in a dispute with contractual customers of its 10-million tpy Calcasieu Pass plant regarding when deliveries on those contracts will begin; the customers noting that the plant is operating at its full 10-million tpy capacity and should be supplying them, while the company maintains that it’s still in commissioning. It has shipped hundreds of cargoes. Both Shell PLC and bp PLC (two of its contract customers) have written letters describing the “impact on our ability to meet critical long-term energy supply needs” and “harming the stability and growth of the LNG industry,” respectively, of Venture Global’s refusal to supply them.
Raise the curtains
These events aside, there’s a performative aspect to what’s going on that shouldn’t be ignored. The Biden administration knew it had to do something to shore up its environmental bona fides in an election year. Temporarily pausing approvals related to where proposed LNG plants could ship their wares was likely seen as the least damaging option available that would still be seen by its base as ‘doing something.’ The administration also likely knew that the reactions of both its Republican opponents and the industry would help raise the pause’s profile.
On the other side of the equation, critics of the pause had an opportunity to launch whatever attacks they wanted, including lawsuits, without fear of return fire. Pres. Biden can’t indicate that the pause isn’t sincere and that he understands the importance of the US LNG industry at this moment in history without unravelling the politically based reason it was initiated.
Repeated administration statements categorizing the pause’s duration as “months” long, however, are a tip of the hand regarding expectations: that business as usual will return soon. And indeed, regardless of what happens in the 2024 elections, by first-quarter 2025 the DOE will likely again be issuing permits for non-FTA exports.
If Donald J. Trump wins the presidential election, the pause could well be lifted on Day 1. The reelection of Pres. Biden, on the other hand, will probably extend the pause through March, at which point a geopolitical imperative of some sort could be invoked to explain (with just the right amount of handwringing) why US LNG exports are needed to keep the world safe.
If revisions to the export approval process are complete by then, they’ll be incorporated as part of lifting the pause. If not, the pause will get lifted while the revision process continues.
All parties to this situation should be able to see this timeline and these motivations. But they’ll keep dancing their parts until the last vote is counted Nov. 5.
