While political opposition and market uncertainty continue to mount around the U.S. Department of Energy’s (DOE) pause of LNG export authorizations, Secretary of Energy Jennifer Granholm reassured energy leaders the action was a necessary, but temporary step to better policy making.
During a keynote address Monday in Houston during CERAWeek by S&P Global, Granholm rolled out the Biden administration’s latest plans for encouraging investments in new energy technologies and decarbonization.
While there were fewer details about the DOE’s review of its guidelines for approving new worldwide export permits, Granholm downplayed the potential political backlash from the move as the Biden administration looks toward the November presidential election.
“This study is like other studies we’ve done in the past, assessing where we are, and I can predict... that as we sit here next year, this will be in the rearview mirror,” Granholm said.
DOE has said it will pause new export authorizations while the agency reviews its policies for determining whether a project will be in the public interest. Specifically, the review freezes consideration of permits that would allow liquefied natural gas export project developers to sell U.S. volumes to firms in countries that do not have a free trade agreement (FTA) with the United States.
These permits, referred to as non-FTA, are considered essential for large-scale export projects because of the flexibility in customer base they provide. Exports to FTA nations accounted for only about 20% of the cargoes shipped from the United States from 2016–2023, according to DOE data cited by the Center for Strategic and International Studies.
At least seven projects in the United States and Mexico under DOE jurisdiction – and considered commercially advanced – could be impacted in the near-term, according to an NGI review of pending projects. That amounts to a combined 9.3 Bcf/d in export capacity under increased risk.
The White House and Secretary Granholm have called the pause temporary until the analysis has been completed. However, barring Congressional intervention, the open-ended nature of the action has led several analysts to suggest the pause could last until at least after the November election.
Sempra Infrastructure President Tania Ortiz Mena, also speaking in Houston Monday, said the keyword to remember when looking at the continued buildout of North American exports is “temporary.”
“Energy infrastructure projects take years to develop and more years to build, so we simply continue to advance on our projects…” Ortiz Mena said.
While the non-FTA permit for Port Arthur LNG Phase 2 is still pending DOE review, Sempra management told investors earlier in the month that conversations with potential offtakers and investors have continued.
Chevron Corp.’s Colin Parfitt, president of midstream, used another word to describe the policy review: unhelpful.
“For customers around the world, it creates large uncertainty about the United States as a reliable supplier,” Parfitt said.
That uncertainty, Parfitt added, could derail investments in affordable natural gas that was previously expected to help Asia and developing regions displace coal and meet climate goals.
On the other hand, Trafigura Group Pte. Ltd.’s Richard Holtum, global head of gas, power and renewables, said the policy could be incredibly helpful for certain countries.
“I would say it's not very helpful to the U.S. LNG industry, but since the pause happened, Qatar has announced two more LNG trains,” Holtum said. “The energy will come, it just might not come from” the United States.
State-owned QatarEnergy has been developing twin LNG expansion projects in the country’s massive North Field, backed by some of the world’s largest energy companies. In February, the company disclosed it has been testing the feasibility of a third project, North Field West, that could boost Qatar’s LNG export capacity to 142 million metric tons/year by the end of the decade.
While legislative solutions to end the review and speed up LNG permitting have been stymied in the House and the Senate, the House Committee on Oversight and Accountability has launched an inquiry into the decision. On Monday, committee members published a letter sent to Granholm after demanding a collection of documents from DOE and White House officials.
A coalition of U.S. Chamber of Commerce offices in energy producing states also addressed Granholm in a letter published Monday, requesting an immediate end to the pause and executive action on permitting.
“Creating uncertainty for new LNG exports sends the wrong signals to energy markets and will have a chilling effect on the financing, investment and business environment for the broader natural gas industry,” chamber members wrote.
