Kyle Isakower is senior vice president of energy and regulatory policy at the American Council for Capital Formation.
The U.S. is the world’s leading exporter of liquified natural gas, with over 12 billion cubic feet per day shipped overseas so far in 2024. But despite renewables’ strong market share gains, renewables growth simply cannot keep pace with increasing demand. As a result, the world’s demand for natural gas — the lowest carbon-emitting fossil fuel — continues to grow. In fact, industry experts anticipate that the U.S. LNG export market could double by 2030.
This growth is happening despite the difficulties the industry faces in planning, permitting, funding and constructing new facilities. For example, the Golden Pass project had to switch lead contractors after the original contractor declared bankruptcy, and the NextDecade Rio Grande project recently suffered a legal setback when a court threw out a prior regulatory approval. That many more projects are seeking permit approval even in the face of these roadblocks demonstrates the significant demand for U.S. LNG and the strong economic case for more exports.
Nevertheless, making matters even more difficult for the industry, in January of this year, the Biden Administration ordered a “pause” on permit approvals for new U.S. LNG export facilities, citing the need to reevaluate environmental and economic factors associated with permit considerations.
These concerns have been either addressed or debunked, however. On the environmental front, when combusted, natural gas’ carbon emissions are half that of coal, the fuel it most often replaces, and concerns about methane emissions from oil and gas operations have been addressed. Specifically, the Inflation Reduction Act includes a requirement for a waste emissions charge, which is likely to be finalized by the end of this year.
The industry has always had a financial incentive to reduce emissions (methane is the primary component of natural gas, after all), and there are still concerns about how the fee will be implemented, but given the significant financial penalty associated with this methane fee, it is hard to imagine fugitive methane emissions being a long-term concern associated with the development and transport of natural gas.
As for economic impacts, study after study has shown that exporting natural gas is a huge boon to the American economy and a significant producer of U.S. jobs. Here’s the most recent of three Department of Energy-sponsored studies. Like previous analyses, the study shows economic benefits of LNG exports with only a modest impact on the domestic price of natural gas. That is because U.S. gas resources are so vast that the added demand for exports comes nearly exclusively from added production. So exports are not reducing domestic supply and squeezing American ratepayers or power plant operators; exports come from added production and have only a small impact on price. This negligible impact on price result was confirmed in a NERA Consulting study sponsored by the American Council for Capital Formation last year. Current prices bear it out as well. While the U.S. was exporting more natural gas than any other country, July 2024 Henry Hub spot price for natural gas was near historical lows at just $2.07/MMBtu.
So, with both environmental and economic concerns addressed, does the Biden Administration’s “pause” on permit approvals make any sense? The courts don’t think so. On July 1, 2024, U.S. District Judge James Cain threw out the “pause,” noting that the action was “completely without reason or logic.” Just this morning, word broke that the administration has agreed, as the Department of Energy issued a permit for New Fortress Energy’s planned Mexican-based facility to export 1.4 million metric tons a year of LNG to non-free trade agreement countries.
Some may argue that despite the administration’s foot dragging, the U.S. is now the leading LNG exporter in the world, so not much harm has been done. However, this argument fails to look at the future. The U.S. isn’t the only country planning to export LNG on the global market. In fact, there is significant competition for LNG market share. By delaying approval of U.S. LNG export facilities, foreign-based facilities are moving forward to gain market share that may have otherwise gone to U.S. facilities. According to Wood Mackenzie, three U.S. facilities were greenlit in 2023, yet none have reached a positive final investment decision in 2024.
It is certain that nothing will be done before the election, and a Trump victory will just as certainly be followed by an expeditious approval of LNG permits in the DOE queue. But a Harris victory will lead to a powerful test of her approach towards energy and the economy. Will she maintain the slow walk of LNG permit approvals, even though it flies in the face of environmental and economic progress, or will she move expeditiously on approvals and reap the benefits? Vice President Harris recently reversed course on a proposed fracking ban when she saw the error in her policy. She may well have another opportunity in the months ahead to show she has learned a lesson from the administration’s mistaken directive.
