Biden Administration Should Probably Reverse Course on Pausing LNG Approvals for Climate Reasons, But It is Unlikely to Matter as Enough LNG Has Been Approved

 

     The recent Biden administration announcement to slow approvals of LNG projects over climate impact concerns is probably unnecessary and should probably be reversed. Net impacts of these projects will be less greenhouse gas emissions as LNG replaces coal in the places where it is exported. Climate activists, including those in the Biden administration like John Podesta, encouraged the slowdown and cheered the decision. This is another political nod to the minority climate activist left and validates Joe Manchin’s assertions that Biden is kowtowing to the far left. As Manchin indicates, he would be better off politically giving such nods to the moderates who are more likely to vote for his opponent rather than the leftists who would more likely not vote at all or vote for a third party. While the slowdown is likely to be temporary, it is not necessary. Delaying is the next best thing to banning for radical environmentalists. It likely won't matter as the roughly 27 BCF/day of approved capacity is apparently not part of the pause as I now understand it. That essentially means that the pause will have little if any affect on LNG going forward. 

     The emissions of these LNG projects, while considerable, are far less than those of the coal plants they are helping to replace. This is true of the air pollution and water pollution impacts as well. U.S. natural gas, particularly from the Haynesville Shale and the Appalachian Shales is among the lowest emissions upstream natural gas in the world, and midstream emissions reductions are catching up. These projects also help the American economy by balancing trade in our favor and putting Americans to work.

     The biggest impact could be to the Calcasieu Pass 2 (CP2) LNG project on the Louisiana Gulf Coast which is hoped to export up to 20 million tons of LNG and is the largest proposed project to date. These projects are needed to supply natural gas to Europe, Asia, and South America. Delaying them would simply allow other countries like Qatar to fill the void later when they can.

     According to CNN: “Shaylyn Hynes, a spokesperson for CP2’s owner Venture Global, said the reported plans from the Biden administration would “create uncertainty about whether our allies can rely on US LNG for their energy security” and would “shock the global energy market.” Also, CNN: “That decision would be one we would get behind; these LNG export projects have been rubber stamped up to this point,” said Mahyar Sorour, the director of beyond fossil fuels policy at the Sierra Club. “We’re encouraged.” Thus, we have yet another situation where American companies are unnecessarily harmed, radical environmental groups are unnecessarily appeased, and the environment and the climate would suffer net negative impacts. These projects already must meet stringent emissions requirements, and many are going further than the requirements, throughout the upstream to downstream life cycle.

Less LNG Exports Mean More Coal Exports

     The coal impacts are not only coming from Asia but from the U.S. as well. Reuters reported that during the first eight months of 2023 thermal coal, the kind used in power plants, exports from the U.S. increased to 22.5 million tonnes through August, up from 18.3 million in the same period in 2022. According to Reuters: “In percentage terms, the increase in U.S. exports was the largest among all major thermal coal exporters, surpassing even the 15.7% expansion seen from top coal exporter Indonesia.”

“The strong gains in U.S. coal exports contrast with the declines seen in domestic coal use for power generation, with U.S. coal-fired power production down over 50% since 2010 as part of efforts to reduce national fossil-fuel emissions.”

 Thus, this delay is potentially allowing us to produce and export more coal to be burned for power instead of LNG. This is kind of insane. These environmentalists are apparently not good at math. The answer in terms of emissions reductions is a “no-brainer:” strongly support the development of LNG exports to replace coal as soon as possible instead of increasing coal production and exporting to be burned instead of the much cleaner LNG. This delay simply does not make sense. Now, there are environmental issues with LNG in the U.S. The facilities being built along the Gulf Coast are impacting the local areas and the integrity of the coastline. It would have been better to pipeline more to the U.S. East Coast for export, but public and environmental oppositions make such projects unlikely. Once again these environmentalists have their priorities upside down, blocking cleaner natural gas and supporting dirtier coal. They have done this in so many ways, so many times, costing American companies many billions of dollars in unnecessary litigation, delay, and uncertainty, and unnecessarily increasing carbon emissions and pollutants. In fact, one might argue that these radical environmentalists are a major cause of unnecessary carbon emissions and pollution. This is just another round of that.

     The EIA reports that U.S. coal exports are now accounting for a larger share of the shrinking U.S. coal market. Of course, it is also more emissions-intense to export coal than to burn it here. EIA notes: “We expect that the U.S. electric power sector will consume 73% of U.S. coal in 2024 and 70% in 2025, down from 79% in 2019. In 2019, the U.S. electric power sector consumed 539 MMst of coal, while exports totaled 94 MMst.” These totals also include metallurgical coal but the increases reflect thermal coal as metallurgical coal exports have remained constant

 

 

     If the Biden administration wanted to halt something harmful it should have halted the many tens of millions going to UNRWA in Gaza that was funding Hamas to buy, build, and smuggle weapons and to prepare for and execute their brutal October 7 massacre. Granted, they also provide food and aid to Gazans, so it is perhaps understandable in that sense, but it has long been known that this particular UN group was complicit with the terrorist group.

  

Addendum: Feb, 3, 2024. 

     According to Hart Energy's Gas & Midstream Weekly 32BCF/day of U.S. LNG Export Capacity has been approved but not yet built. They also note that of all the projects in the pipeline to 2030, only 5BCF is being paused by the Biden Administration. Thus, it seems as if this will not be as big a problem as it originally seemed since it is thought that some of the planned LNG projects in the later 2020s may not end up being built anyway. That means that about 27BCF/day has been approved, which would more than triple the current capacity. The amount affected by the pause, 5BCF/day, is just 15.6% of that 32 BCF in planning. (I wonder if that is an error since the graph below shows about 17BCF/day FID'd and/or approved along with the 5% unapproved, and the 32BCF total existing capacity. That would mean 29.4 % of planned capacity was under the pause. Even so, 17BCF/day of additional capacity may be enough.) I am doubtful that even all the approved capacity will be built. Thus, it appears the pause is not nearly as bad as it first appeared to be.

Source: Hart Energy Gas & Midstream Weekly Newsletter

 

References:

 

Biden administration considers overhaul of natural gas export approval process, throwing major Gulf projects into question. Ella Nilsen. January 24, 2024. CNN. Biden administration considers overhaul of natural gas export approval process, throwing major Gulf projects into question (msn.com)

 

US thermal coal exports jump to 5-year highs on Asian demand: Maguire. Gavin Maguire. Reuters. September 26, 2023. US thermal coal exports jump to 5-year highs on Asian demand: Maguire | Reuters

 

U.S. coal exports account for larger share of a shrinking market. Energy Information Administration. January 29, 2024. U.S. coal exports account for larger share of a shrinking market - U.S. Energy Information Administration (EIA)

Hart Energy Gas & Midstream Weekly Newsletter. February 1, 2024.