Biden’s Commitment For US LNG To Supply Europe Faces Strong Headwinds

President Joe Biden announced an agreement on Friday committing the U.S. liquefied natural gas industry to supply an additional 15 billion cubic tons (bct) of LNG to Europe through the remainder of 2022. The agreement additionally envisions U.S. LNG increasing that supply to Europe to 50 bct through 2030.

While committing the US to help Germany and other European nations wean themselves off of Russian natural gas seems to be a noble goal, there is just one problem: The President apparently didn’t talk the US LNG industry about it before he made the agreement. Reading the quotes from executives at Tellurian in the New York Times article linked here, it is apparent that they were caught off-guard by the President’s announcement. “I have no idea how they are going to do this, but I don’t want to criticize them, because for the first time they are trying to do the right thing,” said Charif Souki, the Times quotes executive chairman of Tellurian as saying.

Like every other industry in the United States, U.S. LNG is a private enterprise made up of an array of competing companies that operate in a capitalist, free market system. Given that reality, we are left to wonder how the President and his senior advisors plan to go about ensuring that the US meets the promises the President made in the agreement with the European Union? Does he plan to order his regulators to streamline permitting processes? Does he plan to somehow order banks and ESG investor groups to stop denying capital to companies in the industry, capital needed to fund their $10 billion LNG export facilities?

Short of invoking executive emergency powers, such as those that exist in the Defense Production Act, no American president has any real authority to order any private industry to conform its business operations to meet a national agenda of any kind. We saw President Donald Trump invoke the DPA during the 2020 COVID-19 pandemic to help speed the manufacture and distribution of critical equipment and medicines, but would President Biden consider taking similar action to help Europe solve its self-created energy crisis?

That seems questionable, especially given that many of the Democratic party’s own constituencies have already signaled they oppose such a move. A Saturday article in the UK Guardian quotes Kelly Sheehan, senior director of energy campaigns at the Sierra Club as saying that “We should be rapidly transitioning to affordable clean energy, not doubling down on fossil fuels. Reducing reliance on fossil fuels is the only way to stop being vulnerable to the whims of greedy industries and geopolitics.” That seems pretty clear and unambiguous.

The group Earthjustice also weighed in in that New York Times article. “There is no way to ramp up U.S. L.N.G. exports and deliver on the imperative climate commitments that the U.S. and E.U. have pledged,” said Abigail Dillen, the president of Earthjustice, said.

“Pushing new toxic export facilities and decades more methane gas is a death sentence for those on the frontlines of the climate emergency, and it won’t solve Europe’s current crisis,” said Kassie Siegel, director of the Center for Biological Diversity’s Climate Law Institute, in a written statement quoted in a Sunday story at Inside Climate News. “Approving more export terminals, pipelines and fossil fuel production only throws fuel on the fire of our burning world.”

Ms. Siegel hits on a key point: In order to dramatically increase its capacity to export more LNG to Europe, the U.S. industry would need to invest billions in additional pipeline and export infrastructure to move and handle the added volumes of natural gas. Over the past 15 months, it has become quite clear to the industry that using the permitting and regulatory processes at the Federal Energy Regulatory Commission (FERC) and other federal agencies to slow and halt pipeline and other oil and gas infrastructure is a central element of the Biden energy and environment policy.

In 2021, EIA data cited by Inside Climate News shows that roughly 75% of U.S. LNG exports flowed under contracts to Asia and other non-European nations. While that mix no doubt shifted somewhat during the 4th quarter as the energy crisis in Europe accelerated, the reality is that, in our system of free enterprise, it is the contractual relationships, not the federal government, that will decide where the LNG flows.

Thus, it seems that the President has made a commitment on behalf of a competitive, capitalist industry that he has no non-emergency authority to fulfill. Additionally, the pattern of the Biden administration to this point would indicate that it has little willingness to take the policy actions it could conceivably take to help facilitate the meeting of the goals set in the agreement with the EU. Piling insult on top of injury, it further seems as if the administration failed to perform needed outreach to the big industry players before making the commitment on their behalf.

Perhaps it will all be worked out in the end, but this particular agreement seems to have gotten off to an inauspicious start.