Hirs: LNG Plan is a Global Fail

The Biden administration just paused approval of new LNG export facilities in the name of reducing the nation’s greenhouse gas emissions. That is the wrong way to look at emissions. On a global basis, cutting LNG exports will only shift emissions from one country to another. And viewing LNG exports solely through the lens of climate is short-sighted at best, ignoring the other financial and strategic benefits reaped by sending U.S. LNG to our allies around the world.

LNG exports are a win-win-win in terms of U.S. economic gain, security gain and emissions gain. 

The U.S. has become the largest producer and exporter of LNG to the global economy in recent years. Fracking opened up the way to develop the nation’s massive natural gas reserves. The importance of this cannot be overstated. For more than a dozen years, fracking has provided a net gain to U.S. consumers of more than $100 billion per year, well over $1.5 trillion in total.  Natural gas has displaced coal, decreasing the nation’s greenhouse gas emissions since 1990 even as the nation’s economy, measured by real GDP, has more than doubled. 

In 2017, the U.S. became a net exporter of natural gas via pipelines and LNG. Most recently, LNG exports climbed to more than 14 Bcf per day, the Btu equivalent of more than 2.3 MMbbl/d.  With LNG exports priced at $7.51/mcf, there is a major economic incentive for our allies to buy LNG instead of oil. As a result, the U.S. trade deficit is reduced by tens of billions of dollars each year. 

But it is not just the economics and emissions at stake in this permitting “pause.” The U.S. has effectively replaced Russia as the critical supplier of gas to Europe. The economic and strategic importance of this is immeasurable. The EU and NATO can no longer be held hostage by Russian controlled natural gas deliveries.

The market for LNG is global. The administration fails to appreciate that, and as a consequence of withholding LNG approvals, our allies will turn to other suppliers and other fuel sources. The likely result won’t be good, either for the U.S. bottom line or for achieving global climate goals.

Climate activists have cheered the administration decision by noting that LNG is not carbon neutral. It’s not, but it’s a far more climate-friendly source of energy than coal. Indeed, the administration should consider easier targets, such as U.S. coal exports.

Even before the Russian invasion, coal consumption across the EU was up as nuclear power plants were retired. Germany has restarted coal power plants that were first commissioned when East Germany was part of the Soviet bloc. India is already the primary destination for U.S. coal exports and has plans to commission more than 13,000 megawatts of new coal power plants this year. China, another destination for U.S. coal, added more than 47,000 megawatts of new coal power plants in 2023. The alternative to coal for India and China is LNG, but neither country will stop expanding their coal power plant fleets if reliable supplies of LNG are not available.  

Only by expanding U.S. LNG output can we provide the certainty that customers require to build new gas power plants. 

A second target the administration should consider is “biomass,” where current policies are at cross purposes. U.S. and EU policies together reward the deforestation of America and the wholesale destruction of the nation’s greatest natural carbon storage resources. Thousands of square miles of old growth forests are reduced to wood pellets and shipped abroad so that policymakers can feel good about burning “green” fuel.

The result? Damage to the environment caused by releasing billions of tons of formerly sequestered carbon into the atmosphere while destroying an already operating carbon reduction system. Where is the net gain?

Until U.S. consumers directly reduce their greenhouse emissions by consuming less oil and gas, the administration’s actions amount to nothing more than offshoring the production of these fuel resources—or worse, encouraging nations to burn more coal. 

These one-off attacks on U.S. domestic suppliers of oil and gas—and LNG—will continue to be ineffective and counterproductive until the global community joins together in a concerted effort to cut greenhouse gas emissions.