As congressional pushback against the Biden administration’s pause of LNG export permits heats up, EQT Corp. CEO Toby Rice said U.S. producers and exporters already have work ahead to abate the potential damage to project development.
Rice joined a panel of witnesses Tuesday during a House Energy and Commerce subcommittee hearing. It was one of the first public debates between lawmakers and policy experts on the Department of Energy (DOE) decision to review the authorization process for liquefied natural gas exports since the move was announced in late January.
For more than three hours, House members dissected the authorization process and whether DOE’s export curtailment was warranted or a potential attack on the ability to develop domestic LNG projects.
However, Rice, who oversees the largest natural gas producer in the United States, said whether it's an LNG ban or pause, the result is effectively the same. International buyers are confused and asking what could happen next?
“Confusion is going to cause people that have expected energy security from the United States to look elsewhere,” Rice said. “It's a lost opportunity for us, and we’re going to have to assure our allies that we care about their energy security, because it’s also our energy security.”
Defining Public Interest
While the DOE review doesn’t impact currently operating or approved LNG projects, it could pause development for at least 11 proposed facilities in North America awaiting a decision on a non-free trade agreement (FTA) permit, according to NGI calculations. At least seven projects in the United States and Mexico under DOE jurisdiction are considered commercially advanced. That amounts to a combined 9.3 Bcf/d in developing export capacity that may be under increased risk.
DOE Secretary Jennifer Granholm described the pause as temporary, but no timeline has been provided as to how long authorizations may be curtailed. During the freeze, DOE has been directed to update policies on market impacts, national security and climate impact of both new and existing projects when considering a new export authorization.
In the weeks since the decision, opponents have been taking aim at the purpose behind the review. Critics argue that DOE has already established – under multiple presidential administrations – that LNG exports are beneficial to the U.S. economy.
Rep. Jeff Duncan (R-SC), chair of the subcommittee on Energy, Climate and Grid Security, accused the Biden administration of weaponizing the DOE’s review process to achieve a climate agenda. He said the administration was veering away the original intentions of Congress to create an economic safeguard with the U.S. Natural Gas Act (NGA).
“Ironically, Biden and the environmental radicals are going to achieve the opposite because a ban of U.S. LNG exports will increase global emissions,” Duncan said.
The Natural Resources Defence Council’s Gillian Giannetti, senior attorney, testified that a policy update was not only DOE’s duty under the NGA, but it would help codify the process for both public stakeholders and companies.
“DOE has never found a proposed non-FTA gas export to be inconsistent with the public interest, and that brings us to the reason for the pause,” Giannetti said. ”Put simply, DOE’s tools for assessing whether future gas exports are consistent with the public interest are obsolete and inexplicable.”
DOE public interest policy has been reviewed in the past, including during the Obama and Trump administrations. The last policy assessment occurred between 2018-2019, when only two large-scale export facilities were operating in the United States.
“Since then, U.S. LNG exports have more than tripled, making the United States the largest exporter of LNG,” Granholm wrote in a letter to the Washington Post. “Further, we have authorized almost three times more than today's large volumes — in projects that are under construction or awaiting a final investment decision.”
However, Rice said developing more export capacity in the United States has helped create an incentive for U.S. exploration and production (E&P) firms to commit to stable natural gas growth. If regulatory uncertainty were to derail investment, Rice said, it could mean E&Ps pull back production, which could raise domestic prices and derail emission reductions.
“Now is not the time to slow down LNG, now is the time to accelerate it,” Rice said.
As feed gas demand from U.S. export terminals continues to grow into a significant portion of national consumption, E&Ps have moved to tie more of their production to international indexes through direct LNG supply deals.
Based on the tentative agreements signed by EQT to date, the Pittsburgh-based E&P could have direct export exposure for at least 2.5 mmty of natural gas. That amount would be more than 4% of its total production exposure, according to NGI calculations. Two of those agreements are with Commonwealth LNG and Lake Charles LNG, which are impacted by the DOE pause.
Plans Ahead
The unofficial guest star of the committee was House Bill 7176, dubbed the Unlocking Domestic LNG Potential Act, which received several mentions from GOP members.
The House version, introduced by Rep. Austin Pfluger (R-TX), is a part of a Republican plan to remove LNG authorization from DOE completely and transfer responsibility to the Federal Energy Regulatory Commission. A Senate version has also been introduced by Republican Sens. John Kennedy of Louisiana and South Carolina’s Tim Scott.
Both bills essentially carry on the legacy of House Bill 1130, introduced last year by former Ohio Rep. Bill Johnson (R-Ohio). Johnson’s bill gained traction in the House among Republicans after DOE denied an authorization extension for Energy Transfer LP’s Lake Charles LNG project in Louisiana. However, the bill was never voted out of committee.
In the meantime, the Biden administration could also be facing criticism from Democrats too. Sens. Bob Casey and John Fetterman of Pennsylvania issued a joint statement asking DOE to address concerns about the potential impact to their state’s economy from a slowdown in LNG development.
Bipartisan groups from the House and Senate have also issued letters questioning the timing of the review.
On Thursday, the Senate Energy Committee is scheduled to conduct a hearing on the LNG permit pause with DOE Deputy Secretary David Turk.
