Biden’s aides weigh climate test for natural gas exports

A version of this story originally appeared on Politico Pro on Jan. 8.

The Biden administration is launching a review that could tap the brakes on the booming U.S. natural gas export industry — a move that threatens to pit the president's climate ambitions against his foreign policy agenda.

The outcome of the review could have big implications for the fossil fuel industry, U.S. clout as an energy superpower and the credibility of President Joe Biden's climate pledges — and his reelection hopes in November.

The review being led by the Department of Energy will examine whether regulators should take climate change into account when deciding whether a proposed gas export project meets the national interest, according to two people familiar with the action who were granted anonymity to discuss deliberations that have not yet been publicly acknowledged.

U.S. gas exports have jumped four-fold during the past decade as production has surged, turning the United States into the world's largest natural gas exporter and helping Europe replace Russian shipments after Moscow's invasion of Ukraine. But Biden also faces growing pressure from environmental groups to live up to his pledge to transition away from fossil fuels — something the U.S. also promised to do at last month's climate summit in Dubai.

The possibility of slowing or halting that export growth came as good news to environmental groups even as national security hawks warned against disrupting a trade they say serves America’s geopolitical interests. It comes as the Energy Department is weighing whether to issue a permit for a massive gas export plant in Louisiana known as CP2, which green activists have derided as a "carbon bomb."

Roishetta Ozane, the founder of environmental group Vessel Project of Louisiana, welcomed the news that the Biden administration may be rethinking how it determines whether a proposed project is in the public interest. Ozane is among a group of green activists planning to protest next month at the Energy Department headquarters to pressure the administration to change how it evaluates export proposals.

"We're really hoping that DOE will pause any new permits for industry, because we know that the Biden administration really needs a climate win and in order for them to win” the 2024 election, said Ozane, whose hometown of Sulphur, La., is within an hour's drive of three LNG plants. “If these politicians want to be elected or re-elected in this upcoming presidential election, they're going to have to make some bold choices and some bold moves.”

The Department of Energy, which is responsible for issuing the export permits, will reassess whether it is properly accounting for the climate impacts from proposed projects, as well as the national security and the domestic economic consequences, a senior administration official told POLITICO.

People familiar with the review process said Energy Secretary Jennifer Granholm; Deputy Energy Secretary David Turk; Brad Crabtree, assistant secretary for DOE's Office of Fossil Energy and Carbon Management; White House clean energy adviser John Podesta; and National Climate Adviser Ali Zaidi, among others, were involved in the discussions.

The Energy Department will have to determine what it evaluates as part of making this determination on whether to approve a permit to export liquefied national gas, said the administration official, who requested anonymity to speak about the review. The reevaluation comes as more information on LNG's methane emissions, economic impacts and national security implications have become apparent over the past decade and regulators come to grips with gaps in how they weighed the risks associated with the export projects, the official said.

An Energy Department spokesperson did not respond to multiple email queries. Since 2012, the Energy Department has commissioned three studies on the impact of gas exports. Each of those studies focused on the economics of the trade, however, with little to no mention of its climate impact.

But the new review has the potential to rattle administration officials worried about national security implications. Slamming the door on new export capacity could reduce the United States' ability to help Ukraine beat back the ongoing Russian invasion, another person familiar with the administration's review said.

The person, who requested anonymity to discuss the still-unreleased plan, said the State Department was raising concerns that anything that could reduce U.S. natural gas exports could limit U.S. diplomacy.

Any restrictions in new export capacity “would be a huge foreign policy liability for the White House,” the person added. “Anything that smells like an LNG cap may not make it past Biden, given the war in Ukraine.”

A State Department spokesperson did not offer comment. But national security experts were quick to point out that without gas exports the White House may have not been able to keep European nations united in support of Ukraine after deliveries of Russian gas to the region shriveled in 2022.

“It is now pretty much conventional wisdom that the U.S. LNG industry played a big role helping Europe shift away from Russian gas after the invasion of Ukraine and that helped maintain European solidarity, and in Northeast Asia it's a big part of energy security planning,” said Joseph Majkut, director of the energy security and climate change program at the Center for Strategic and International Studies think tank.

The decades-old Natural Gas Act requires the Energy Department to consider whether a project is in the public interest before granting approval for an application to export natural gas to a country that does not have a free trade agreement with the United States. That export permit is considered a must-have for would-be exporters, who need to raise billions of dollars to build the pipelines and compressors to bring gas to the coast and chill it to minus-259 degrees Fahrenheit to turn it into liquid for transport on ships.

But critics have said DOE has been merely rubber-stamping its approvals. Since it began approving the first export permits in 2012, the department has never rejected any applicant over the “public interest” requirement even as the U.S. gas export industry grew at breakneck speed, accounting for about 20 percent of U.S. gas production by late 2023. There are currently seven export plants operating in the country with another eight approved but still under construction, according to a government count.

Charlie Riedl, head of the Center for Liquefied Natural Gas trade association, said anything that slowed down the approval of new projects could scare away potential customers in allied countries such as Japan and South Korea. He also noted that the DOE's previous reviews had consistently found gas exports benefited the public.

“Every time they do a study on this, the results are the same: Natural gas exports are in the public interest,” Riedl said. “If they decided to study it again, I’d expect the results would be the same.”

LNG industry executives have championed the fuel as a way to help foreign countries reduce the amount of coal they burn to produce power. There’s enough gas under the ground in Pennsylvania, Texas and other states to support both foreign and domestic markets, they argue.

Democrats have been asking the Biden administration for months to consider how shipping massive amounts of natural gas overseas affects greenhouse gas emissions. Sen. Jeff Merkley (D-Ore.) asked Granholm in a letter last year to review how DOE weighs whether a project is in the public interest.

Democratic Minnesota Sen. Tina Smith said it was a mistake to ignore the pollution produced by the LNG sector.

“From a scientific perspective, when you make decisions you should be weighing the risk and rewards and costs and benefits, and to ignore this cost seems really short sighted,” she said.

But Republicans were quick to cite the importance of the LNG shipments in national security. Sen. Kevin Cramer, a North Dakota Republican whose state is a major natural gas producer, said the administration’s timing of a review was concerning.

“The fact [is] you have a war in Ukraine, where natural gas to Europe has been used as a weapon,” Cramer said in an interview. “The Biden administration is always sensitive to what the environmental left is thinking and doing. They ought to tell them to stand down for now.”

The green movement has sought to make Venture Global's CP2 project a litmus test of Biden’s green credibility. The new plant would ship up to 24 million metric tons of gas overseas from a 546-acre site in Louisiana's Cameron Parish.

The export terminal is also awaiting a verdict from the Federal Energy Regulatory Commission, whose permission is needed to build interstate pipelines and LNG facilities after it assesses their environmental impact and determines whether the project is needed by the market. The project has faced several delays at the energy regulator for failing to provide enough data to complete its environmental review.

“American LNG is the best weapon in our arsenal to quickly displace global coal use and combat climate change,” Venture Global spokesperson Shaylyn Hynes said.

Catherine Morehouse and Josh Siegel contributed to this report.