Growing environmental opposition and political headwinds could combine to be one of this year’s biggest challenges for U.S. LNG projects working to advance.
International environmental organizations, along with grassroots groups, social media influencers and some Democrats, are stepping up their efforts to stop the expansion of U.S. gas exports that’s accelerated in recent years.
The offensive comes in an election year, as President Biden looks to rebuild his support among disenchanted voters concerned about climate change.
“It’s the biggest underappreciated risk in global LNG at the moment,” said Alex Munton, director of Rapidan Energy Group’s global gas service. “It’s getting to the point that there is concern this may become the next Keystone pipeline.”
Biden took office on a promise to scale back fossil fuels, rejoining the Paris climate accord and canceling a permit for the Keystone XL Pipeline on his first day in office.
Since then, however, the administration has grappled with rising fuel costs and energy security issues in Europe that forced it to endorse more liquefied natural gas shipments. Biden also allowed leasing on federal lands and approved the Willow oil project in Alaska to the dismay of environmentalists.
During his time in office, the United States has become the world’s largest LNG producer. There are now seven export facilities operating with capacity to churn out 14 Bcf/d of the super-chilled fuel. Five more plants are under construction that would add another 10.7 Bcf/d by the end of the decade.
More than 20 other projects have been proposed that would need federal approvals to move ahead. There is already a backlog of projects waiting for key non-free trade agreement (FTA) export licenses at the U.S. Department of Energy (DOE). The Biden administration has never issued one of those licenses.
On The Offensive
After years of playing defense, Rapidan said, environmentalists are now on the attack to ensure non-FTA licenses remain in limbo.
“Sierra Club is committed to stopping the proposed industry expansion of oil and gas export facilities on behalf of local communities overburdened by industrial pollution, the environment and domestic energy consumers,” said Cathy Collentine, director of the group’s Beyond Dirty Fuels campaign.
Environmental groups, Munton told NGI, are waging an “unusually well-coordinated and targeted campaign” aimed at stopping U.S. export projects, particularly Venture Global LNG Inc.’s CP2 project. The organizations, he said, understand that the proposed facility is “the most likely of any large-scale planned U.S. LNG project to reach final investment decision (FID) once permits have been granted.”
CP2, which has sold more than 90% of its planned capacity, is still awaiting both FERC approval and a non-FTA license from the DOE.
“As CP2 continues to rise in notoriety, both among the greens and their allies in Congress, the prospects for its approval, as well as other pending LNG projects continue to fall,” Rapidan said in a recent note to clients. “Should CP2 become a cause célèbre on par with Mountain Valley Pipeline, the Dakota Access Pipeline, or especially the Keystone XL Pipeline, the risk of outright rejection would rise as well.”
LNG Allies CEO Fred Hutchison, whose organization represents U.S. LNG exporters, said environmental groups have always challenged the industry. But since Lower 48 exports started in 2016, he said the groups have gained resources that have allowed them to help fund more grassroots opposition.
Environmentalists have never successfully challenged an LNG project at either DOE or the Federal Energy Regulatory Commission, which have been accused of rubber stamping projects. But Hutchison said the groups succeeded in prolonging the regulatory process by turning smaller matters, such as requests for capacity increases, into larger issues.
Such challenges have created an additional layer of regulatory uncertainty that has slowed projects down. For example, FERC took nearly two years to reaffirm its approvals for the Rio Grande and Texas LNG export projects after environmental groups tried to stop them over their climate impacts. NextDecade Corp. was able to reach FID on Rio Grande last year a few months after FERC finally reached a decision, but the Sierra Club and others have pledged to continue fighting the projects.
“The environmentalists have taken advantage of every opportunity to oppose FERC and DOE decisions, and that requires more agency bandwidth to deal with the onslaught,” Hutchison told NGI. “U.S. LNG will be a big issue in 2024. The environmentalists will make sure of that.”
Since November, more than 200 environmental groups have written to DOE Secretary Jennifer Granholm asking the agency to deny CP2 authorization. More than 160 scientists also signed a letter to Biden urging the administration to find the project is not in the public interest.
Meanwhile, leading climate activists such as Bill McKibben have waged a public campaign cautioning against the U.S. LNG buildout. They have called for a three day sit-in at the DOE in February aimed at stopping new LNG export licenses.
Moreover, Congressional Democrats asked Granholm in November to review how the DOE determines LNG projects are in the public interest and raised concerns about the impact exports are having on domestic natural gas prices.
‘Bid For Young Voters’
Politico recently reported that the Biden administration is currently reviewing how it approves LNG projects and examining whether the DOE should consider climate change during that process.
With so many U.S. export projects advancing, the agency has already taken a harder line in how it handles export licenses.
Early last year, DOE issued a policy statement outlining its expectations that LNG projects in the United States, and others in Mexico that would rely on American feed gas, should be able to start exporting the super-chilled fuel to non-FTA countries within seven years of receiving export authorization.
DOE also said it would not consider applications for extending the seven-year deadline unless a project has both started construction and can demonstrate that “extenuating circumstances outside of its control” are to blame for delays.
The DOE’s stance forced both the Lake Charles and Magnolia LNG projects to refile for time-consuming export authorizations.
Nine other LNG export projects that would utilize U.S. feed gas that have yet to be sanctioned or start construction are all facing deadlines to start operations within the next four years. The Delfin LNG project offshore Louisiana is facing the next deadline in July.
Rapidan said it’s unlikely the Biden administration would act on any non-FTA export licenses before the 2024 election given that there is no political advantage to do so.
“LNG exports are inconsistent with President Biden's stated climate goals and the recent global commitment to phase out fossil fuels made at” the Dubai climate summit, Collentine told NGI. “We cannot avert the worst effects of the climate crisis with the continued expansion of LNG exports.”
ClearView Energy Partners LLC said any further study on DOE’s approval process or any sort of regulatory proceeding to modify it would be a “bid for young voters and a bet on political continuity.” If Biden is reelected, however, the firm said it could allow the administration to clear some of the non-FTA backlog for LNG projects as it focuses on other climate action during a second term.
“There are a lot of sensible heads in the room,” Hutchison said of the Biden administration. “There are a lot of officials who understand the United States has gained a lot of geopolitical influence because of what we’re able to do with U.S. LNG. That’s something to be proud of and not turn your back on. They know that."
