Surging U.S. LNG puts Biden in climate bind

By Carlos Anchondo, Lesley Clark, Miranda Willson | 07/08/2021 07:08 AM EDT

President Biden and Natural gas tanker. Credits: White House (Adam Schultz/Biden); U.S. Coast Guard/Flickr (tanker)

White House (Adam Schultz/Biden); U.S. Coast Guard/Flickr (tanker)

U.S. exports of liquefied natural gas are surging under President Biden, eclipsing prior records and poised to climb higher still.

Even as the administration pledges to tackle climate change in part by distancing the United States from fossil fuels, the country’s LNG exports expanded to a new high this March, according to U.S. Energy Information Administration data.

The uptick highlights a challenge for Biden, who is facing pressure from his party’s left flank and environmental groups for a hard pivot from fossil fuels, even as gas supporters say the fuel would help cut global emissions by shifting countries away from coal.

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Industry representatives worry that mixed messages or lukewarm support at the federal level for LNG could lead overseas buyers to question the United States’ commitment and turn elsewhere for energy imports.

The Biden administration could do a better job of defining how LNG fits into its climate policy goals, said Anna Mikulska, a nonresident fellow in energy studies at Rice University’s Baker Institute.

The administration is still "quite unclear or vague" on that score, Mikulska said. At times, comments from senior officials like Energy Secretary Jennifer Granholm and U.S. climate envoy John Kerry have appeared to conflict with each other, she said.

Kerry set off alarms within the industry in January when he warned in a speech to the World Economic Forum that if the globe continues to build infrastructure for gas, "we’re going to be stuck with stranded assets in 10 or 20 or 30 years."

By contrast, Granholm has said U.S. LNG exports are often sent to "countries that would otherwise be using very carbon-intensive fuels" (Energywire, Jan. 28).

When pressed on the administration’s stance, Granholm and others have mainly talked about working with exporters on reducing emissions — a priority that’s shared by industry, according to trade group officials and some analysts.

During her confirmation hearing in January, for example, Granholm said she wanted to "work with the natural gas providers to see if we could continue to reduce greenhouse gas emissions at the point of production."

The Federal Energy Regulatory Commission, which reviews proposed LNG terminals, has also started to consider greenhouse gas emissions in its environmental analyses for the first time ever.

Industry groups said the sector, under increasing market pressure to tackle its emissions challenges, is already headed in a greener direction. Efforts to cut greenhouse gases vary from carbon capture projects at export terminals to emissions monitoring and reporting initiatives.

Aside from a goal to curb the sector’s emissions, Biden’s approach to LNG stands in stark contrast to the previous two administrations, which outwardly supported exports. Trump-era Energy Secretary Rick Perry dubbed the fuel "freedom gas."

That the Biden administration hasn’t said more about LNG is likely a byproduct of the tension between his climate-conscious agenda and the reality that LNG, while cleaner than coal, is still a fossil fuel, experts said.

"The Biden administration is in a little bit of a bind," said Mikulska, noting that an embrace of natural gas could be seen as undercutting the administration’s climate goals.

Just last week, Biden’s Department of Energy said it would study the emissions footprint of LNG shipments from a proposed export terminal in Alaska as part of an environmental review. That decision prompted concern in the industry and hope from environmentalists that it will lead to increased scrutiny of similar projects (Energywire, July 6).

"We are certainly paying attention to … what this proceeding might tell us about how DOE, under the current administration, thinks about LNG exports more broadly," said Nathan Matthews, a senior attorney with the Sierra Club.

Global upside?

Some in the industry posit that sending the wrong message on exports could have global consequences.

"What we wouldn’t want to do is send any message to our allies around the world that the United States is questioning its role as a major supplier of natural gas," said Dustin Meyer, vice president of natural gas markets at the American Petroleum Institute.

"That would definitely be concerning, but I think so far, the [Biden] administration — some of the key principals — have taken a fairly measured approach here publicly," he added.

Mikulska said more LNG exports fit into Biden’s goals because climate targets aren’t local, but global. On the global scale, she said, U.S. LNG "can provide decarbonization benefits coupled with energy security benefits."

Paul Bledsoe, who served as a DOE consultant under President Obama and worked on climate change in the Clinton administration, said the Biden administration has an opportunity "to prove that U.S. gas can be by far the lowest-emitting in the world."

The Trump administration sought to pitch LNG to U.S. allies as a cleaner alternative to fossil fuels, "but had no credibility when it came to climate and lowering emissions," he said.

Bledsoe, now a strategic adviser for the Progressive Policy Institute, said he expects the current administration to focus on driving emissions from gas lower, noting that Biden has proposed spending $16 billion to reduce venting and flaring and has pledged more stringent regulations around methane, the main component of natural gas.

"The U.S. is on the road to having incredibly low-emitting natural gas, and they should market that globally," Bledsoe said. "Wean Europe and China off coal. It’s a huge opportunity, and I think they will seize it, ultimately."

Reading the tea leaves

Swirling around the LNG debate is a desire for more details about where Biden stands on the fuel and how it relates to his climate agenda.

While few expect the administration to offer the same full-throated embrace of LNG as former President Trump, industry groups said there have been some positive signs and flagged instances in which administration officials have made remarks that have been interpreted as supportive of LNG. The bulk of those have cropped up through hearings on Capitol Hill.

Those include comments earlier last month by Andrew Light, Biden’s nominee for assistant secretary of international affairs at DOE, who told lawmakers that his job will be "to make sure that U.S. gas is competitive around the world."

"More and more countries are looking for cleaner sources of gas," Light said in response to a question about exports from Sen. James Lankford (R-Okla.). "We’ve got to make sure that ours is cleaner and that ours fills those markets around the world, and that’s what I intend to do."

Republican senators — mostly from states with LNG facilities — have repeatedly pressed Biden administration appointees in recent weeks to detail the president’s position on the fuel.

Sen. John Kennedy (R-La.), whose state handles more than half of U.S. LNG shipments, sought last month to pin Transportation Secretary Pete Buttigieg down on whether he believes the nation will still be exporting LNG in 10 years.

Kennedy asked whether the world would be "better off in terms of the environment" if the United States sold LNG to countries that use coal.

Buttigieg, though, was noncommittal, telling Kennedy, "I think that the sooner the U.S. can get zero emissions in any given industry, the better off the world and the U.S. are going to be."

And Biden himself has been tight-lipped on the subject. A spokesperson for the White House didn’t respond to questions about what the president makes of rising U.S. LNG exports or how they fit into the administration’s climate agenda.

Record-breaking exports are the result of multiple factors, including years of industry investment in LNG export infrastructure and the current global demand for natural gas, analysts and trade groups said.

For her part, Granholm has repeatedly noted DOE’s obligations under the Natural Gas Act to permit facilities (Energywire, March 8).

Matthews, the Sierra Club senior attorney, said the Biden administration could assert that building out more LNG infrastructure is not in the public interest, as it would lock in "use of this very carbon-intensive fuel while we’re facing global warming that is here and now." On those grounds, Biden could direct DOE not to approve any future LNG export authorizations for projects, he said.

On the other hand, industry groups said the Biden administration could help the LNG sector by being more vocal about the role of natural gas in displacing coal, reassuring allies about the continued availability of U.S. natural gas, and ensuring that there’s a full complement of five FERC commissioners so that project reviews can move ahead in an efficient way — a nod to Republican Commissioner Neil Chatterjee’s upcoming departure from the agency.

The administration’s ambiguous stance could overshadow critical spending decisions by other countries and investors, Tim Tarpley, senior vice president of government affairs at the Energy Workforce & Technology Council, said in an interview. The council represents companies that provide the equipment and expertise needed to produce oil and natural gas.

Tarpley said he fears that U.S. allies could reevaluate investments in the infrastructure needed to accept U.S. exports if Biden doesn’t show stronger support.

He pointed to a floating LNG terminal developed in Croatia as a project that was supported by both the Obama and Trump administrations. Croatians felt "comfortable making that investment because they saw support from the United States," Tarpley said.

"We hope and encourage that other countries would make those kinds of investments, and we worry the ambiguity that’s out there now will put kind of a cloud over those kinds of decisions," he said.

A report from Global Energy Monitor last month said that a "combination of oversupply and recessionary concerns related to Covid-19 caused nearly half of projects in the pipeline as of mid-2020 to experience delays" when it came to achieving a final investment decision, or FID.

"For North America-based projects, finance remained tight throughout the year, with only a single project, Costa Azul LNG Terminal on the Pacific coast of Mexico, announcing FID," the report said.

Going green

Charlie Riedl, executive director of the Center for Liquefied Natural Gas (CLNG), said he doesn’t expect the Biden administration to make a big endorsement of LNG exports.

But that may not matter much for an industry that has already surged to record highs under Biden’s tenure, he added.

"I think as long as we continue to hear that there isn’t opposition and that the U.S. is going to continue to deliver LNG in the manner that it has been delivering LNG under the previous two administrations, I think that’s more than enough," said Riedl, whose advocacy group is part of the Natural Gas Supply Association.

Riedl welcomed Granholm’s pledge in January to work with natural gas providers to reduce their emissions and said that for CLNG members, reentering the Paris climate agreement "was not a bad thing."

More and more, industry is turning to technology in a bid to lower its emissions, which could be an area of consensus with the White House.

The administration is shaping up to be a major champion of research into technologies to remove carbon dioxide emissions from fossil fuels.

Meanwhile, some LNG companies have started to invest in expensive technologies like carbon capture and storage, among other steps to cut CO2 pollution.

Globally, the LNG industry is under increasing pressure to "demonstrate its green credentials," said Alex Munton, a Wood Mackenzie principal analyst for LNG research. Coupled with the Biden administration’s push to lower emissions from the sector, that has led to a spate of new initiatives that seek to improve the "carbon profile of U.S. LNG," he said.

Those include a collaboration between Cheniere Energy Inc., gas suppliers and universities to better quantify emissions from production sites (Energywire, May 27).

Carbon-neutral LNG could make up half of the industry by 2030, Ciaran Roe, global director of LNG pricing at S&P Global Platts, said in an interview. Platts recently began publishing data on the cost of offsetting emissions for one of the most-traveled routes in the LNG trade — shipments from Australia to Asia — and plans to expand the service to other sectors, possibly including U.S. exports.

"There’s definitely an appetite for more information on this," Roe said.

Rebekah Hinojosa, an organizer with the Sierra Club’s Beyond Dirty Fuels campaign, took aim at one of those carbon capture projects — slated for NextDecade Corp.’s Rio Grande LNG export facility — at an online conference last month.

"A carbon capture project at the LNG terminal itself is a drop in the bucket of total emissions from the project," said Hinojosa, who went on to dismiss the effort as a "green-washing attempt" at a later event.

A NextDecade spokesperson said Hinojosa "misrepresents facts and does a tremendous disservice to the people of the Rio Grande Valley who support job creation, economic growth, and the opportunity to lead the world as a center of innovation for clean energy and emissions reduction."

The spokesperson added that "advancing technological solutions to voluntarily reduce emissions of a fully permitted LNG facility can hardly be characterized as green washing, especially when these verifiable emissions reductions equate to removing nearly 1 million cars from the road each year."

FERC wild card

Compounding the Biden-era uncertainty around LNG are the changing political dynamics at FERC.

Over the past two decades, the independent energy agency has approved more than 99% of the natural gas pipeline proposals that have come before it, according to the results of a congressional investigation last year. Environmental groups say FERC has a similar track record of rubber-stamping LNG projects.

Under Trump, the commission approved a slew of LNG proposals opposed by environmental and community groups, including the Jordan Cove export terminal in Oregon and the Port Arthur LNG project on the Gulf Coast of Texas (Greenwire, April 19, 2019).

"With LNG terminals, FERC’s position has always been, ‘We’re going to permit these and let the market decide what actually gets built,’" said Susan Jane Brown, a staff attorney at the Western Environmental Law Center.

But FERC’s current chairman, Democrat Richard Glick, has sought to steer things in a different direction.

In March, the commission considered the greenhouse gas emissions and contributions to climate change from a proposed new natural gas pipeline for the first time in its history. The agency still approved the project.

Biden is expected to name a third Democrat to FERC later this year to replace Chatterjee, whose term expired last month. Chatterjee has said he hopes to stay on the commission until a successor can be confirmed — and many analysts expect Biden’s nominee to take a climate-conscious approach to gas projects.

"There’s already speculation about who Biden’s appointees are going to be to replace [Chatterjee], and that will give them a Democratic majority," Samuel Reynolds, an energy finance analyst at the Institute for Energy Economics and Financial Analysis, said at a conference hosted by the group last month. "I think we will start to see greater accounting for greenhouse gas emissions in the FERC process."

This year, FERC also reopened an earlier proceeding concerning whether to consider a wider variety of issues when reviewing gas pipeline applications, such as the impacts of projects on environmental justice communities and whether they align with states’ clean energy policies.

Although the review focuses on pipeline proposals, it could affect LNG facilities, as well, since many terminals are served by pipelines, according to Riedl of the CLNG.

In addition, FERC took the unusual step in February of issuing a "paper briefing" to consider potential public safety issues at a Massachusetts natural gas compressor station that the agency had already approved.

Natural gas groups have claimed that reexamining complaints raised about the Weymouth Compressor Station, which is currently in operation, goes against FERC precedent. The Interstate Natural Gas Association of America is challenging FERC’s briefing order in federal court (Energywire, June 21).

International buyers of natural gas have also been "asking questions" about how the development relating to the compressor station could affect FERC’s consideration of LNG export projects, Riedl said.

"Certainty is vital to the LNG industry and for international buyers, and these actions by FERC create uncertainty for current and future projects," he said.

Nonetheless, some observers say it’s too early to tell whether FERC will begin to reject proposals on environmental and other grounds. And because the agency operates independently from the White House, its decisions may not always align with Biden’s agenda.

"Change is overdue, and it’ll be interesting to see how quickly they change and what that actually looks like," Brown said.

Reporter Mike Lee contributed.

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