Biden’s LNG Pause – What’s at Stake

The Biden Administration paused permitting for new liquified Natural Gas facilities in the US, which has been a huge sore point for climate activists and young voters. It’s a big deal.
Texas A&M atmospheric expert Andy Dessler is spot on here.

Andrew Dessler in The Climate Brink:

The Biden administration’s decision to delay the approval of the largest natural gas export terminal in the U.S. is a critical juncture in global climate policy. This postponement, affecting possibly 17 proposed terminals, reflects concern about the long-term impact of liquefied natural gas (LNG) expansion on climate change, the economy, and national security.

Generating energy from natural gas produces around half the carbon dioxide that energy from coal produces. Thus, displacing coal with natural gas does reduce emissions of carbon dioxide. 

This coal-for-gas substitution has been occurring in the U.S. for the last 20 years and is a primary reason for the decline in U.S. emissions over that period.

Thus, in the near future, expanding LNG exports could reduce emissions, as long as it caused emitters to switch from coal to natural gas and upstream methane leakage is kept low — both big ‘ifs’.

But most scenarios for achieving the Paris Agreement’s target of “well below 2°C” have global coal use dropping to near zero in the next 15 years. The LNG infrastructure being proposed, however, will have a lifetime of 50-100 years. This means that building this infrastructure locks us into emissions extending well beyond the expected shutdown date of most coal plants.

Thus, considering the full lifespan of the infrastructure, these LNG plants will lead to higher emissions. This makes it increasingly difficult to meet the Paris Agreement goals. Perhaps we can just build the LNG infrastructure now and shut it down in 2040, when we phase coal out. That seems unlikely — once billions are invested in new pipelines, export terminals, and import facilities, the political pressure to keep operating them will be enormous. 

If we want to avoid being saddled with unnecessary emissions after coal is phased out in a few decades, the time to take action is now.

If you’re interested in a much more detailed analysis about this, read this paper.

Bad for U.S. consumers

Prior to 2016, LNG was not exported from the U.S., and domestic natural gas production basically served only the local market, keeping prices relatively low1.

With the shift towards exportation, U.S. consumers must now pay the global price for natural gas. This is a consequence of the fact that producers want to sell gas for as high a price as possible: if the price in Europe is $3/MMBTU, they’re not going to sell it to U.S. consumers for less than that. Rather, they’ll export it to where it can fetch the highest price.

This in turn exposes U.S. consumers to international political turmoil. For instance, the Russian invasion of Ukraine spiked the price of natural gas in Europe and, because of LNG exports, those price increases rippled into the U.S. market, as this plot shows:

So when you hear something like this, from the NY Times article linked above:

“This move would amount to a functional ban on new LNG export permits,” Senator Mitch McConnell of Kentucky, the Republican leader, said on the Senate floor Wednesday. “The administration’s war on affordable domestic energy has been bad news for American workers and consumers alike.”

Realize that the exact opposite is true. Adding export capacity will, if anything, raise prices for U.S. consumers because they will now be more efficiently competing with consumers in other regions (e.g., Europe and Asia).

This fact that the Russian invasion of Ukraine raised prices for U.S. consumers, despite the U.S. producing far more gas than we consume, illustrates a crucial point: energy security cannot be achieved solely through increased fossil fuel production. 

We can drill, drill, drill, but for both oil and gas, which are priced globally, bad actors like Russia or Saudi Arabia can still raise the price U.S. consumers pay by, for example, raising the price Europeans are paying. 

Thus, when the U.S. exports LNG, it hands dangerous leverage to authoritarian regimes. The Kremlin can weaponize this by throttling supplies, spiking prices, and plunging U.S. families into cold and darkness. They’ll use this to further divide our society, undermine faith in democracy, and advance their anti-Western agenda.

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I’ve been using a variant of the gas price graph above to make the same point in my Wind101 and Sun101 presentations for some years now.

Institute for Energy Economics and Financial Analysis:

European gas demand is expected to fall further by 2030, thanks in part to renewables deployment, energy efficiency programmes, and demand management and destruction. 

Even as gas consumption declines, European energy security is being used to justify the buildout of LNG export and import terminals.

The U.S. continues to construct more LNG terminals; just taking into account projects that are currently being built, the country’s LNG export capacity in 2030 will be 76% higher than Europe’s forecasted demand for the super-chilled fuel in that year.