Following a year of LNG production increases and plans for a massive gas project pipeline, the Biden administration is finally responding to calls to halt giant new LNG projects, in line with climate pledges. Environmentalists have repeatedly stated the hypocrisy of introducing ambitious climate pledges and calling for a green transition while also accelerating the huge expansion of U.S. LNG production and export. The question now is whether the pause will lead to a block on new projects or whether the country’s bold LNG project pipeline will go ahead.
Natural gas has been hailed by many as a transition fuel that will help countries worldwide to wean themselves off more polluting oil and coal, as they gradually transition to green alternatives. It has been included in major climate documentation, such as the EU’s sustainable finance taxonomy. Further, shortages experienced following the introduction of sanctions on Russian energy have made our addiction to gas even clearer. The shortages led several countries around the globe to search for alternative sources of LNG, with states such as Norway and the U.S. boosting their production to meet demand. However, scientists and climate groups worry that oil majors may be using this as an excuse to develop unnecessary new gas projects, as the U.S. project pipeline rapidly expands.
In January, the Biden administration paused a decision on whether to approve a project that would develop the largest natural gas export terminal in the United States. The pause could go beyond the November election, creating major delays for this project and several others. Project approval depends on the findings of the U.S. Department of Energy (DoE), which has been instructed to evaluate the project in terms of its impact on climate change, the economy, and national security. To date, the DoE has not rejected any natural gas project based on its anticipated impact on the environment.
Following the introduction of several ambitious climate pledges and policies, as well as pressure from climate-conscious voters, Biden is clearly considering the potential impact of new gas projects on the environment as well as on his chances for a second term in office. It was Biden’s bold climate pledges during his campaign trail that won him the support of many young voters in 2020, and he has attracted criticism from these same voters in recent years for failing to curb fossil fuel production and approving several new oil and gas projects. One of the main criticisms over the development of more gas production capacity and export terminals –beyond the environmental risk – is the question of whether the U.S. and the rest of the world need more LNG. The U.S. exported 86 million tonnes of LNG in 2023 and it is home to seven export terminals, with five more already under construction.
The project that has been paused is the Calcasieu Pass 2 (CP2). It is one of 17 more terminals that have been proposed by oil and gas companies. The $10-billion development would be significantly larger than any of the country’s existing gas terminals. CP2 is set to be situated on a shipping channel connecting the Gulf of Mexico to Lake Charles, La. Once complete, it would export around 20 million tonnes of natural gas a year, increasing the existing export capacity by around 20 percent.
While Biden cites environmental concerns for the pause, several Republican opponents and businesses are criticising the move for damaging U.S. energy security. Former President Trump, who is expected to be the Republican presidential candidate in the next election, has made clear his stance on the expansion of fossil fuel production. Business groups worldwide have called for Biden to reverse his pause on the approval of new licenses for LNG export facilities, worried it could lead to more gas shortages.
The US Chamber of Commerce, BusinessEurope and Japan’s Keidanren stated in a joint letter, “With numerous forecasts projecting global natural gas demand to rise well into the next decade, additional supplies of LNG will be needed to supply world markets.” They added, “We know this demand can be met in a manner that continues progress on emissions reductions.”
The U.S. became the world’s biggest LNG exporter in 2023, following a shift away from Russian gas supplies. While the pause could cause eventual delays if it leads to a reduction in the U.S. project pipeline, EU representatives have said it will not affect export levels from the U.S. to Europe within the next two to three years. Despite immediate worries following the announcement of the pause, guarantees of the stability of supplies on already-approved projects are reducing these concerns.
Opposition lawmakers in the U.S. have threatened to introduce legislation to take away the DoE’s power to approve the exports. Meanwhile, the White House responded in a statement saying it strongly opposes the legislation, as it would undermine the ability of the U.S. to ensure that exports of LNG are “consistent with our economic, energy security, foreign policy, and environmental interests.” While it is uncertain whether the pause will lead to the rejection of LNG project licenses, it is consistent with Biden’s climate pledges and will help avoid any rash decision based on (potentially) unfounded fears of fossil fuel shortages.
By Felicity Bradstock for Oilprice.com
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