The Media Coverage of Biden’s Natural Gas Decision Is Ridiculous
On Friday morning, the White House announced that it will pause new approvals for new liquified natural gas (LNG) export facilities. The decision has been framed across the board as a “victory for climate activists,” and a concession to a constituency Biden is eager to please on the campaign trail. That’s not wholly false: The climate movement did indeed push for today’s decision, and the White House explicitly cited the climate crisis and “calls of young people” in its statement about it. What’s shocking about the announcement is that anyone had to pressure the Biden administration to make it at all.
Left out of more bombastic coverage about some alleged annihilation of U.S. liquid natural gas (LNG) export capacity is just how modest Friday’s announcement really is. Over the coming months, the White House will go through the process of re-evaluating the basis on which the Department of Energy considers its approval of gas export licenses. Currently, under Section 3 of the Natural Gas Act of 1938, that is, the DOE is required to determine whether gas exports to countries with which the U.S. does not have a free-trade agreement are “consistent with the public interest,” and grant approvals accordingly. These kinds of long-term “blanket” licenses last for decades and aren’t subject to reviews in the interim.
To make such determinations, the Department relies on macroeconomic studies it commissions periodically. The most recent of those was published during the Trump administration in 2018, by NERA Economic Consulting. Trump cited NERA figures on the purportedly massive cost of the Obama administration’s Clean Power Plan —commissioned by the American Coalition for Clean Coal Electricity—in announcing the United States’ withdrawal from the Paris Agreement. He referenced the same study in a press briefing held the night he signed an executive order rescinding the Clean Power Plan, which NERA claimed would have “meaningless environmental impacts.” Environmental groups have criticized NERA reports for painting a misleading picture of climate and environmental policies, like disproven claims that increasing U.S. energy efficiency would raise consumers’ energy bills.
Tyson Slocum, director of the energy program at watchdog group Public Citizen, argues the NERA study the Department of Energy still uses to decide on LNG exports contains similarly questionable claims, for example downplaying costs to consumers as companies profit off shipping gas abroad. The 2018 report stated that there is just a 3 percent chance that increased U.S. LNG exports—which only began in 2016—would increase prices by any significant amount. More fantastically, the report argued that any impact of increased LNG prices on consumers would be outweighed by the “additional income” received by “households who hold shares in companies that own liquefaction plants.”
Even the Center for Strategic and International Studies (CSIS)—funded by ExxonMobil, Chevron, ConocoPhillips and the gas exporter Cheniere—noted in an analysis earlier this month that the rapid build-out of LNG export capacity “suggests a need to re-examine” the impact of rising imports on domestic prices. “Within five years,” a CSIS commentary released earlier this month notes, “LNG facilities could consume 20 percent of U.S. natural gas supply. It is reasonable to ask about the potential impact on other industries.”
“The Department of Energy’s methodology for assessing the public interest is woefully out of date,” says Slocum. “Until today, there has been no difference in the review process between the Trump and Biden administrations for LNG exports.”
While climate activists are no doubt glad to see Biden acknowledge the outlandishness of the country’s current gas policies, the reality is that Friday’s decision doesn’t on its own pose a significant threat to the considerable momentum behind America’s booming liquid natural gas export business. The temporary pause on pending decisions will have no bearing on projects already built, which constitute the planet’s single largest source of LNG export capacity. The U.S. will remain the world’s largest gas exporter and is due for a significant expansion over the coming years. Earlier this week, Bloomberg New Energy Finance (BNEF) found that the U.S. is on course to more than double its gas liquefaction capacity over the next five years. Four major projects—which on their own are slated to expand export capacity by more than 80 percent if completed by 2027—have already been approved and reached final investment decision. “The decision still impacts high profile projects like the second stage of Calcasieu Pass, but U.S. LNG export capacity is still well positioned to see a significant increase,” Enrique Gonzalez, BNEF’s lead analyst for US gas, wrote in an email Friday afternoon. For better or for worse, Friday’s announcement is not a step toward shutting down the fossil fuel industry.
But perhaps the strangest thing about pundits and industry lobbyists’ hand-wringing this week is how little confidence LNG’s boosters seem to have in their own claims about its benefits. Lost amid their cries about Biden’s announcement endangering everything from U.S. energy security to the well-being of our European allies and even the fight against climate change—they argue, dubiously, that gas flows are essential to replace coal in emerging economies—is perhaps the most salient detail about Friday’s announcement: All the White House has pledged to do is take a bit of time to—for the first time in six years—re-evaluate its framework for assessing whether LNG export projects serve the public interest. National laboratories will invite comments from all sides to inform an updated analysis of their effects on “energy costs, America’s energy security, and our environment,” per the White House’s press release. If the case for a doubling or tripling of LNG export capacity is so ironclad, then what are gas’s champions so afraid of?