Highlights

  • The Biden Administration on Jan. 26, 2024, announced that the U.S. would pause pending decisions on permits to export liquefied natural gas (LNG) to non-free trade agreement countries until the U.S. Department of Energy can update the underlying analyses for authorizations.
  • It should be noted that the decision does not represent a ban on LNG exports, but rather an opportunity to review current projects seeking approval.
  • The decision to freeze authorizations has received stiff criticism from international business interests, as well as members of Congress.

President Joe Biden on Jan. 26, 2024, announced a pause on pending decisions for permits to export liquified natural gas (LNG) to non-free trade agreement countries until the U.S. Department of Energy (DOE) can update the underlying analyses for authorizations.1 In announcing the decision, Energy Secretary Jennifer Granholm stated that "we must review export applications using the most comprehensive, up-to-date analysis of the economic, environmental and national security considerations." The decision follows an LNG export boom in the U.S. in 2023, when it became the largest exporter of LNG in the world by exporting 88.9 million metric tons. The U.S. went from basically zero LNG exports to the world leader in eight years2 and was able to surpass Qatar and Australia due to the reintroduction and addition of new LNG plants in 2023, mostly along the Gulf Coast.

What We Know About the Pause

Granholm was quick to note that this is not a "ban" on exports, but it is a pause to "review" the current projects in the queue. The temporary pause on pending applications will not affect already authorized exports, which, combined with existing plants, total 48 billion cubic feet per day (bcf/d) in export capacity. The Biden Administration believes a pause is needed because the last review of the impact of LNG occurred in 2018, before U.S. LNG exports started to substantially increase.

Regarding the review, the DOE has promised that it will utilize only the most concrete and robust information and include the expertise of national laboratories, as well as open a period for the public to offer comment. The Biden Administration has yet to offer any word on the timing of the review, but news agencies are reporting that the review is expected to last up to 15 months, or after the 2024 elections. The pause is subject to exception for unanticipated and immediate national security emergencies.

The Factors at Play

The review will consider the environmental impact of LNG, but this is not the only stated reason for the decision. According to the DOE, the U.S. currently has an LNG export capacity of 14 bcf/d, and there are new LNG export facilities with 12 bcf/d capacity that have been authorized and are under construction. In addition, there are facilities totaling 22 bcf/d of capacity that have been approved but have not yet started construction. Granholm described this new capacity – combined with existing infrastructure – as more than enough to make the U.S. a "behemoth" in the LNG field.3 Granholm believes that it is worth investigating whether further development of LNG facilities could hurt U.S. citizens as higher percentages of produced natural gas is exported.

This line of thinking follows the historical rhetoric on this issue as domestic users of natural gas want to ensure their feedstock price is stable. To support those claims, recent studies have concluded that "higher LNG exports create a tighter domestic natural gas market (all else held equal), increasing domestic natural gas prices."4 According to these groups, there is a point "where it is no longer economical to construct more LNG capacity, limiting LNG exports in the projection period." Stated differently, at some juncture, according to U.S. manufacturing interests, the continuous increase of LNG export capacity will have an adverse effect on U.S. natural gas prices. With the current capacity already poised to increase dramatically, the Biden Administration may think the U.S. is nearing that point already. The counter argument is that the U.S. has ample natural gas reserves and the market will increase production to stabilize prices.5 With the U.S. Energy Information Administration (EIA) predicting there will be 2.5 percent more demand for natural gas in 20246 and with the geopolitical instability in many regions around the world, the U.S. is clearly an attractive market for many gas-thirsty countries around the world.

Conclusion

The decision to pause authorizations has been met with stiff criticism from international business interests, as well as members of Congress.7 The main focus of that criticism has been on the impact it will have on European allies. Over the past two years, more than 60 percent of U.S. LNG exports ended up in Europe. There is little debate that U.S. LNG exports played a significant role in stabilizing the European energy market in 2022 in light of European Union countries restricting gas imports from Russia due to its aggression in Ukraine. European reliance on U.S. LNG has only increased since that time. The Biden Administration believes that "through existing LNG production and export infrastructure, the U.S. has – and will continue – to deliver for our allies." Although, the U.S. does not have a free-trade agreement with any country in Europe, so it is difficult to predict how the "pause" on new LNG export permits will impact European gas supply at a time when the U.S. has strongly encouraged Europe to ween off Russian gas supplies as the war in Ukraine continues.

Footnotes

1. A vast majority of U.S. LNG goes to Europe and Asia for countries that do not have free trade agreements with the U.S. Thus, the pause on new permits is an absolute pause on the ability to get a new LNG processing plant approved.

2. Center for Strategic & International Studies: "U.S. LNG Export Boom: Defining National Interests."

3. The U.S. also has more than 20.0 Bcf/d of natural gas pipeline capacity under construction to feed these plants.

4. EIA: AEO2023 Issues in Focus: Effects of Liquefied Natural Gas Exports on the U.S. Natural Gas Market (May 2023).

5. U.S. monthly dry natural gas production already reached a record high in November 2023.

6. IEA: "Global gas demand set for stronger growth in 2024 despite heightened geopolitical uncertainty" (Jan. 26, 2024).

7. E&E Daily: "Biden's pause on LNG export approvals riles Republicans" (Jan. 26, 2024).

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