Strife over US LNG permit freeze: Win for environmentalists and loss for Big Oil but is there more to it?

As energy transition wheels keep turning, more fuel is being added to the decarbonization fire to invigorate the net zero race, but oil and gas remain the main protagonists of the global energy story. This is why the Biden administration’s imposed pause on pending approvals of liquefied natural gas (LNG) exports is seen as a controversial move, which has brought the strife between Big Oil and climate campaigners to the fore. What’s at stake if this remains in place indefinitely? Does the LNG permitting freeze put energy security in the U.S. and abroad at risk or will this move supercharge the shift to clean energy?

The LNG permit pause comes after the Biden administration took credit for record LNG exports, which were instrumental in helping U.S. allies, primarily in Europe, to stave off power outages when the Ukraine crisis started and Russia cut off gas supplies to European nations. While some saw the decision as a step forward in climate change mitigation efforts, others were quick to pinpoint its alleged ability to hinder the development of U.S. LNG infrastructure and endanger not just energy security in the long run but also the efforts being made to transition away from coal and switch to lower carbon sources.

Many, including the American Petroleum Institute (API), believe that U.S. LNG has the potential to accelerate global emission reductions by displacing higher-emitting fuels. Among those who strongly criticized the Biden administration’s pause of LNG export approvals is the National Hispanic Energy Council (NHEC), which claimed that the move was sending market signals that could slow natural gas production and lead to American LNG customers opting for less cleanly produced fuels to meet growing energy demand.

In response to the White House’s announcement, the Western States and Tribal Nations (WSTN) Natural Gas Initiative, a trans-national organization led by state and sovereign tribal governments to drive rural and tribal economic development and lower global emissions, urged the Biden administration to reverse its pause of LNG export permit approvals to non-Free Trade Agreement nations.

The American Petroleum Institute sees this LNG freeze as a politically motivated decision and uses excerpts from three media reports to justify its view. These include a description from the Washington Post, seeing the LNG permitting freeze as “an election-year sop to climate activists,” a note in the Wall Street Journal, portraying it as a “raw political payoff to the climate left,” and an article in the Economist, which said that “it was all about politics.”

Ahead of a hearing, which was scheduled to be held by the Senate Energy and Commerce Committee on Thursday, February 8, 2024, to examine the consequences of the Biden administration’s recent decision to freeze permitting for U.S. LNG, API revealed five questions for the Biden administration:

1. Wasn’t the Biden administration in favor of U.S. LNG before it was against it?
2.  Won’t the LNG freeze work against reducing coal consumption and set environmental progress back?
3. Isn’t the LNG pause more of a delay tactic than it is an attempt to ‘review’ the clear and obvious benefits of U.S. LNG for the American economy and consumers?
4. Does the Biden administration still support U.S. LNG as a means to help Europe transition away from Russian natural gas?
5. Isn’t it true that the Department of Energy commissioned six different studies on U.S. LNG over the past decade and that the administration’s decision to freeze permits while another is conducted is more about politics than sound policymaking?

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While shedding some more light on its first question, API points out that senior Biden administration officials, including Deputy Energy Secretary, David Turk, who testified before the committee, have previously recognized the critical role of U.S. LNG in supporting America’s allies, U.S. jobs, and global climate progress while citing U.S. Energy Secretary, Jennifer Granholm, as saying: “I believe U.S. LNG exports can have an important role to play in reducing international consumption of fuels that have greater contribution to greenhouse gas emissions.”

The American Petroleum Institute hammers its point further home by underscoring that U.S. Secretary of State, Antony Blinken, once said that the U.S. was “the leading supplier of LNG to Europe to help compensate for any gas or oil that it’s losing as a result of Russia’s aggression against Ukraine.” More to the point, Turk previously said that the United States is “a democracy; we’re the leader of the free world. I think it’s a much better outcome for Japan or others to get their energy supplies from the U.S. than to get it from Russia or other countries.”

In a bid to elaborate on its second question, API noted that emissions were rising globally, with coal use reaching an all-time high, even though GHG emissions were declining in the U.S. As natural gas emits 50% less CO₂ than coal, the switch from coal to natural gas in the power sector is perceived to be a key reason the U.S. leads the world in reducing CO₂ emissions. From 2005 through 2021, fuel switching from coal to natural gas accounted for more than 60% of CO₂ reductions in the U.S. power sector, based on the U.S. Energy Information Administration’s data.

The logic behind the American Petroleum Institute’s third question is encapsulated in its belief that expanding U.S. LNG means increased domestic production, a well-supplied global market, and more jobs for Americans. The International Energy Agency’s data shows that U.S. natural gas prices remain among the lowest in the world. While U.S. LNG shipments reached record highs in 2023, domestic prices fell 62% from the 2022 annual average as U.S. natural gas production also surged to record levels.

API underlines that the U.S. natural gas and oil industry supports nearly 11 million American jobs and contributes upwards of $2 trillion to the economy. As a result, U.S. LNG is deemed to be critical to sustaining these growing economic contributions. A recent study estimated that meeting President Biden’s pledge to supply Europe with U.S. LNG would support an average of 71,500 jobs each year from 2025 to 2030 and contribute a total of $46 billion to the U.S. economy.

This brings API to its fourth question. President Biden pledged “to ensure additional EU market demand for 50 billion cubic meters of LNG from the United States annually by 2030,” in the wake of the Ukraine crisis. In 2022, the U.S. surged more than 800 LNG cargoes to Europe – a 141% increase from 2021, but the American Petroleum Institute is convinced that permitting delays jeopardize America’s ability to sustain this commitment and fulfill the Biden administration’s pledge.

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Furthermore, both Europe and Asia face long-term natural gas supply gaps that threaten their energy security, based on recent studies, as roughly 10% of the EU’s natural gas supplies still come from Russia. Regarding its fifth and final question, API emphasizes that the Department of Energy has evaluated U.S. LNG at least six different times in the last decade and the research consistently showed clear national security, economic, and environmental benefits of U.S. LNG.

Those who are unhappy with the Biden administration’s LNG permitting freeze have continued to raise concerns. This group covers a wide spectrum of players made up of members of both U.S. parties and American allies alike. The freeze is problematized as it is perceived to be at odds with prior statements from senior administration officials on the crucial role U.S. LNG will play in supporting global energy security and reducing emissions around the world. These opponents of the Biden administration’s LNG permitting freeze believe this move is a loss for America’s allies.

Ken Saito, Japan’s Minister of Economy, Trade and Industry, was quoted by Reuters as saying: “We are concerned that the temporary suspension of export permits will delay the start of new LNG production from the U.S. … We would like to carefully examine the medium to long-term impact of the issue and take necessary steps to ensure that Japan’s stable energy supply is not compromised.” 

Progressive Policy Institute is convinced that “the threat of curtailing LNG exports” to U.S. allies will put the markets, the EU, and Asia in turmoil, “threatening the energy security of our allies with no climate benefit,” as those, like Olivier Becht, French Minister Delegate for Foreign Trade, have already pointed out that Europe is counting on American gas in the current geopolitical environment.

Menelaos Ydreos, Secretary General of the International Gas Union, stated: “The current dynamic we are seeing unfold is highly worrying. It is eroding these fundamental market principles and will harm global energy security and emission reduction.” 

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It is believed that U.S. LNG can pave the way for significant emission declines both in terms of CO2 emissions and air pollution if it replaces coal in Asia. Rep. Marc Veasey (D-TX) led nine Democrats in a letter urging President Biden to “refocus” his administration’s policies on natural gas, writing that “every molecule of U.S. LNG exported helps limit the growth of global emissions and provides energy security around the world.” 

Paul Everingham, Asian Natural Gas and Energy Association President, said to Washington Times: “Without sufficient access to gas imports, energy security and the energy transition will be elusive for the people of Southeast Asia, and that in turn places at risk the ambitious decarbonization plans spearheaded by Japan, which take into account Asian nations’ specific requirements.” 

A letter to President Biden regarding the LNG permitting freeze, sent by Reps. Carol Miller, Lou Correa, Jodey Arrington, Henry Cuellar, and more than a dozen other House lawmakers, concluded: “To hamstring an industry that provides millions of jobs and trillions of dollars in GDP would be blatantly against the public interest.” 

Sens. John Cornyn and Bill Cassidy, said: “Biden’s decision to halt new LNG export projects is sure to bolster hostile nations, line the pockets of dictators and increase global emissions. It’s a dangerous move that hurts our allies and helps our adversaries.” 

Moreover, Pennsylvania Senators, Bob Casey and John Fetterman expressed concerns about the long-term impacts that the LNG permitting pause would have on the thousands of jobs in Pennsylvania’s natural gas industry, as it could put the state’s energy jobs at risk. In a letter to President Biden,  Colorado Reps. Yadira Caraveo and Doug Lamborn warned that the decision to pause new LNG exports would have “a chilling effect on the gas sector and cause real harm to Colorado consumers and workers.” 

Smantha Goss, Brookings Fellow, noted: “In addition to undermining U.S. foreign policy, cutting back on LNG exports is unlikely to make much difference in prices at home. The United States consistently enjoys some of the world’s lowest natural gas prices. U.S. LNG export capacity is expanding, but the United States has huge natural gas reserves and production is likely to expand along with export capacity.” 

Environmental and climate groups, such as Sierra Club, have hailed the LNG permit pause as a “bold” and “historic” step to phase out fossil fuels. This pause affects the controversial Calcasieu Pass 2 (CP2) project, which climate activists have been trying to stop from being built on the Gulf Coast of Louisiana. Friends of the Earth and those who are in favor of the LNG permitting freeze claim that President Biden took “a major stand against big oil and gas greed.”

Lauren Parker, Attorney at Center for Biological Diversity, emphasized: “Tapping the brakes on CP2 is the best signal yet that the Biden administration is ready to put people and the planet over fossil fuel profiteers. This is a crucial moment to protect future generations by halting the biggest fossil fuel expansion on Earth. Now that the administration is listening to frontline communities, youth and climate advocates fighting for a livable planet, it needs to go all in on phasing out fossil fuels. We need a public interest test that denies any fossil fuel expansion that would drive us deeper into climate catastrophe and violate U.S. commitments to transition away from fossil fuels.”

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Lukas Ross, Deputy Director of The Climate and Energy Justice Program at Friends of the Earth, commented: “Across the country, proposed liquid natural gas export terminals have been waiting approval. One proposed terminal in Louisiana would have destroyed coastal wetlands, devastated local finishing economies and left communities vulnerable to flooding and hurricane storm surges. It also would have pumped out emissions equivalent to 51 coal-fired power plants!

“This catastrophic dirty energy project won’t be approved anytime soon – and neither will ANY similar projects! Friends of the Earth released groundbreaking research about the danger of these LNG terminals, organized a global letter with more than 300 groups from 40 countries, and built public pressure on President Biden to make this crucial decision.”

According to the White House, the temporary pause on pending decisions for LNG exports will enable the Department of Energy to evaluate the impacts of LNG exports on energy costs, America’s energy security, and climate change, as President Biden has led and delivered on “the most ambitious climate agenda in history.”

Ben Jealous, Executive Director of Sierra Club, underlined: “President Biden and Secretary Granholm’s bold step today continues this administration’s historic efforts to meet the global commitment to phase out fossil fuels and confront the climate crisis head on. This decision is a major win for communities and advocates that have long spoken out about the dangers of LNG, and makes it clear that the Biden administration is listening to the calls to break America’s reliance on dirty fossil fuels and secure a livable future for us all.

“Strong leadership, that rejects fossil fuel industry fear-mongering, is our best bet to protect communities and ensure energy is affordable. It’s undeniable that LNG export projects are simply not in the public interest and we are confident that if this review is done right, that would end the rubber-stamping of these projects. The Biden administration is making the right choice on behalf of the planet, our communities, and our national security.”

While describing the LNG permitting freeze as “the right call,” Manish Bapna, President and CEO of Natural Resources Defense Council pointed out that the stakes could not be higher not just for the climate, but also for U.S. leadership and its future. Bapna sees LNG projects as “dangerous” undertakings as they have the potential to lock in decades of more dependence on fossil fuels.

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Gene Karpinski, President of League of Conservation Voters, noted: “This is huge. The Biden-Harris administration’s decision to take a deeper look at all the impacts of LNG exports is a major step forward towards protecting our families, our communities, and our climate. This decision sends a clear signal that the administration is taking the global commitment reached in December to transition away from fossil fuels seriously. No president has done more on climate, from day one executive orders to the historic investments in the Inflation Reduction Act to today’s announcement, President Biden is slashing climate pollution, increasing affordable, renewable energy, and transitioning away from fossil fuels.

“Exporting LNG is harmful to our environment, our economy, and our communities. Continuing to allow the massive expansion of this industry would mean even more toxic pollution and higher energy bills for communities across the country who are already overburdened by pollution and energy costs, and would make it nearly impossible for the world to reach its climate goals. Meanwhile Big Oil is willing to say and spend anything to pad their already record profits. Our future must be powered by clean energy, not the polluting, volatile, and unreliable fossil fuels of the past.”

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Elida Castillo, Program Director at Chispa Texas, stated: “We thank the Biden-Harris administration for listening to our communities experiencing the devastating impacts of massive oil and gas exports firsthand. This is a hopeful and critical step forward to prioritize people over polluters for our future generations and our communities along the Gulf coast. After record-breaking heat across the country last year, this major action is crucial to combat the climate crisis and environmental injustice, especially for our communities most harmed by toxic pollution from oil and gas extraction.

“For too long, big polluters have been allowed to export more fossil fuels year after year regardless of the cost to communities who are living with even more consequences from toxic pollution, consumers across the country already facing higher costs and unreliable energy sources, and more impacted communities by our reliance on fossil fuels. Despite what Big Oil wants us to believe, renewables are bringing down the energy costs for everyone. This is the path to a more sustainable and equitable clean energy future that stabilizes our economy and supports our domestic energy security.”

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Abigail Dillen, President of Earthjustice, underscored: “We applaud the Biden administration for taking this tremendously important step to align its decision-making on gas exports with U.S. climate goals. As communities across the country face the devastating impacts of the climate crisis and fossil fuel pollution, it’s never been clearer that rubber-stamping LNG exports is not in the public interest. We look forward to working with the Department of Energy to make sure that the environmental and economic risks of LNG exports are fully accounted for when it makes public interest determinations.”

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Laura Jay, North America Regional Director at C40 Cities, emphasized: “The devastating impacts of climate breakdown are here. Urban residents, and particularly frontline communities, are experiencing the harmful consequences of fossil fuel pollution, from extreme heat and storms to rising energy costs, every day. At COP28, C40 mayors called on national governments to rapidly phase out the use of fossil fuels. In the final agreement, countries agreed to ‘transition away’ from fossil fuels. Today’s action gives life to that promise.

“The decision by the Biden administration today to pause new LNG export facilities is a welcome and necessary recognition of the urgent need to protect the health, safety, and economic well-being of our communities by shifting to a clean energy future. It is a critical step in the global phase-out of fossil fuels and will accelerate the clean energy market both in the United States and around the world.”

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Lori Lodes, Executive Director at Climate Power, outlined: “President Biden has done more to protect our planet and build a booming clean energy economy that ends our reliance on dirty fossil fuels than any other president in history. The president’s action today is a historic move to protect the health and economic security of our nation from corporate polluters and address the global threat of a very real climate crisis.

“Make no mistake, if it were up to Donald Trump, these dangerous oil and gas projects would be rushed forward — exporting fossil fuels overseas, increasing our energy costs, and spewing toxic pollution. At every turn, MAGA Republicans are working to tie America’s future to costly, dangerous and dirty fossil fuels – no matter the price.”

Wenonah Hauter, Executive Director at Food & Water Watch, stated: “Given the massive volume of LNG currently being exported, and the numerous additional projects already approved and set to come online in coming years, anything less than a permanent halt to further expansion of this deadly industry is unacceptable. Hopefully this pause represents the beginning of the end of fossil fuel exports in America.”

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Carmen Gravatt, International Program Director at Greenpeace International, said: “We’re pleased to see the U.S. give a lifeline to the climate by making this sensible decision to halt all new LNG export project approvals, which will affect infrastructure projects like the CP2 carbon bomb. If the US is serious about honoring its commitments under the Paris Agreement, this pause needs to become permanent. Global climate bodies have long been warning us that if we want to achieve net zero by 2050 and secure a peaceful and livable planet we must stop new oil and gas.

“Despite what the industry might have you believe, LNG is dirty polluting fossil fuel that is contributing to the climate emergency – our biggest existential threat – and it needs to be stopped. LNG is not a transition fuel, and the U.S. does not need new gas production facilities, LNG terminals and exports, and importing geographies like the EU don’t need its gas. The best way to secure a safe global energy system, and avert the climate crisis, is to supercharge the rollout of renewables like solar and wind and increase efforts at demand reduction and energy efficiency.”

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Ruth Breech, Senior Campaigner at Rainforest Action Network, highlighted: “The White House is sending a very clear signal to Wall Street: the doomed methane export overbuild in the U.S. Gulf is one of many bad investments in fossil fuel expansion. The International Energy Agency reported in 2021 that all investment in new oil and gas projects must stop.

“If fossil fuel backers, from banks and insurance companies, want a healthy return on investment, they must drop all fossil fuel expansion projects and compel clients to have a serious, transparent, time-bound plan for a just energy transition that emphasizes human rights of people like the Gulf coast leaders who made this White House announcement possible. The Gulf is not a sacrifice zone, and neither is the rest of the planet.”

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Natalie Mebane, Vice President of Government Affairs, Rise to Thrive, said: “The communities fighting for their right to breathe have already calculated the climate and health impacts of expanded LNG exports. Though a pause on the approvals of new LNG export terminals is welcomed, we must accept the scientific consensus that in order to have a safe climate, no new fossil fuel infrastructure can be built anywhere. Black and brown communities already suffer at a disproportionate rate from pollution and climate impacts. It is time for President Biden to commit to transitioning the United States off of fossil fuels and fully embrace just energy policies.”

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Arizona Congressman Raul Grijalva, Ranking Member, House Natural Resources Committee, emphasized: “A healthier, more just climate future demands bold, transformational change to our energy system, and today, President Biden is showing he is up for the charge. Aside from being untenable in the face of our climate goals, LNG exports perpetuate the fossil fuel industry’s long, shameful legacy of dumping their most toxic messes into Black, Brown, and poor communities with abandon. Today’s decision marks a major victory for those environmental justice communities, especially in the Gulf, who have been fighting for decades for their right to a healthy future.

“It’s long past time for us to recognize that the public interest does not include polluters. As the Biden administration moves forward with the public interest determination, I commend their commitment to analyzing impacts on climate and frontline communities, and strongly encourage them to follow both the letter and spirit of the president’s Environmental Justice for All executive order in their assessment. Our clean energy future must be one for all Americans, not just the fortunate few.”

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Brian Schatz, Hawaii Senator, said: “As the U.S. makes historic progress towards building a clean energy future on the heels of the Inflation Reduction Act, we can’t simultaneously expand our reliance on fossil fuels like liquified natural gas. I’m glad the Department of Energy will update its review process for future authorizations to ensure approvals are in the public’s interest – both in terms of fighting the climate crisis and not driving up energy costs for consumers.”

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Ed Markey, Massachusetts Senator, stated: “For too long, the US has enabled Big Oil and Gas’s get-rich-quick scheme to drive global fossil fuel addiction while raising energy costs at home and fueling climate change. I applaud the Biden admin’s move to protect American communities from pollution and profiteering.”

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Jack Reed, Rhode Island Senator, noted: “This is good news for American consumers. It will increase the supply of domestic natural gas, which should create downward pressure on prices for Americans to heat their homes and power their businesses. Energy speculators may be upset that they can’t sell as much gas abroad, but this is a big win for working Americans here at home. The Biden Administration deserves credit for putting America first and helping to lower domestic gas prices.”

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Prof. Dr. Niklas Höhne, NewClimate Institute in Germany, Professor at Wageningen University, The Netherlands: “Europe does not need LNG from the USA in the long run. The current infrastructure is more than sufficient to secure the energy supply – even under extreme scenarios.”

Wood Mackenzie believes that the LNG industry needs to adapt to demonstrate its place as a low-emissions provider in the energy transition. While addressing Biden’s executive order to temporarily pause the approval of new U.S. LNG projects’ right to export to countries that the U.S. does not have a free trade agreement (FTA), Giles Farrer, Head of Gas and LNG Asset Research at Wood Mackenzie, pointed out: “The decision will not affect our forecast for U.S. LNG exports out to 2028, but after that it could affect the trajectory and pace of the sector’s growth and have potential to tighten the market in the long run.”

The U.S. overtook Qatar and Australia in 2023 and became the world’s largest LNG exporter. Based on Wood Mackenzie’s forecasts, U.S. LNG and Mexican LNG project export capacity will reach 238 million metric tons per annum (mmtpa) of LNG by 2050, accounting for 30% of global LNG supply, to meet growing global demand. Despite gas producing around 50% lower emissions than coal when combusted, the energy intelligence group underlines that climate scientists have raised questions about how much methane is leaked along the LNG value chain and what this means for the emissions footprint of LNG around the world.

“With 200 mmtpa of LNG currently under construction around the world, which will add nearly 50% growth to the market, we have long held a view that there will be a slowdown in new investment decisions from 2024 because the global LNG market looks well supplied in the second half of the decade. If the pause is temporary and simply delays FID to 2025 and 2026, the impact on the global market would not be material and perhaps only limited to the 2028-2029 period,” added Farrer.

Wood Mackenzie further highlights that the extent to which all pre-FID projects in the U.S. are affected is still unclear, but the pause could also impact Mexican LNG projects because they plan to use U.S. feed gas. While the pause will impact ten projects awaiting non-FTA approval, it may also impact many of the projects that under their current DOE approval require first exports before 2027.

“While we expect existing LNG buyers to wait in the short term, these and other potential new buyers could start to look at competing projects outside of the U.S., such as those in Canada, Australia and particularly Qatar, as alternative supply sources. Both a short- and long-term pause may result in higher prices for the broader LNG market. It could also have long-term implications for the role that gas and LNG play in the energy transition, with Asian governments potentially scaling back strategies to use gas as a transitional fuel to replace more polluting coal, as they simultaneously ramp up investments in renewables, if possible,” underscored Farrer.

There are almost 90 mmtpa of projects awaiting non-FTA approval. Without non-FTA approval, these projects are expected to struggle to gain sufficient backing to proceed. New LNG projects typically take between three and five years to build. Wood Mackenzie believes that a long-term pause on all new U.S. LNG projects would have lasting implications on the global LNG market and could affect how buyers perceive U.S. LNG.

“It is unclear how long this pause will last and what ultimate effects it will have. Regardless of ongoing and future events, the U.S. LNG industry needs to accept the burden of clearly demonstrating that it is a responsible and dependable provider of a much-needed and less emissions-intensive energy source, which is an essential part of the solution to a smooth energy transition,” concluded Farrer.

“It must assume a leadership role in the broader global LNG industry in this regard. Continued articulation of its efforts and accomplishments, along with strong partnership and deep engagement with all stakeholders, is imperative.”