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The Effect of the LNG Pause on Texas Energy

By Griffin Saltron, Februrary 22, 2024


In late January, President Joe Biden released a statement on his administration’s temporary—or more accurately, indefinite—pause on pending approvals of liquified natural gas (LNG) exports. LNG exports are natural gas that has been liquified for transport via tanker to foreign nations. While the pause does not affect ongoing or previously approved LNG export projects, it does halt the creation of new ones, effectively weaponizing the bureaucratic process to stymie economic growth. The pause specifically impedes projects exporting LNG to non-FTA (Free Trade Agreement) countries. This means that—in theory—projects designated specifically to export LNG to FTA countries are not directly affected. The production of natural gas and LNG does not, however, occur in a vacuum. The CEO of Shell, Wael Sawan, accurately points out that this pause “erodes confidence [in LNG] in the longer term” and “raise[s] more questions on the stability and security of LNG from the US.” Some LNG buyers are already looking at suppliers outside of the U.S., according to Bloomberg.

 

A reduction in confidence in the U.S. LNG market will not only put future investment in LNG in jeopardy, but also investment in natural gas generally. U.S. Energy Information Administration (EIA) projects that U.S. natural gas production will increase by 15% by 2050 with the production growth being “largely driven by U.S. LNG exports.” This projection was made in 2022, well before the pause. If updated, it would likely show a negative impact as investors, both foreign and domestic, reconsider their exorbitantly expensive projects that have been indefinity halted.

 

Texas will be severely impacted by the pause, as the state is the cornerstone of U.S. natural gas production and LNG exports. Texas holds nearly 25% of the nation’s natural gas reserves, represents 30% of the country's 100 largest natural gas fields, and produces 25.4% of all U.S. natural gas. In terms of LNG exports, Texas maintains two of the nine export facilities nationally, with plans “for eight additional LNG export facilities to be constructed in the future.” The state also outperforms other states in LNG exports averaging 27.42% of the country’s exports over the last 40 years and 41.49% of exports over the last 10 years. This shows that not only is Texas dominant in the LNG market, but it is a market with exceptional growth.

 

 

This growth has been diminished and some of the aforementioned projects have been halted as a result of the Biden administration’s actions. The projects left in limbo include but are not limited to an expansion of Port Arthur LNG and the development of—Houston-based—Commonwealth LNG’s project in Louisiana. These entities, like all other LNG exporters, have already had to endure a laborious and complex regulatory process where according to the Texas A&M Transportation Institute:

 

“[The Federal Energy Regulatory Commission (FERC)] must approve not only the construction of the liquefaction facilities or the expansion of existing LNG terminals, but also the storage tanks, compressors, piping, and other equipment used in the export of LNG. The permit approval is also subject to environmental review. Given the complexity and the number of federal agencies that can be involved, receiving permit approvals for the infrastructure required for LNG exports can be a lengthy process.”

 

Commonwealth LNG laments that the Department of Energy (DOE) “has already had [their] permit application under review for an unprecedented period of four years,” underscoring the point that the pause is simply a formalization of an ongoing bureaucratic policy that has been used to hinder development for years, in pursuit of the what the President terms “environmental justice for all.”

 

This is a classic example of malformed executive action impeding the free market. The stated reason for the pause is to examine “the impacts of LNG exports on energy costs, America’s energy security, and [the] environment.” The statement released by the Administration clearly identifies environmental impacts as the primary motivator for the pause with persistent allusions to climate change. However, this decision will likely not only have a negative impact on the Texas economy and the United States at large, but, also on the environment.

 

According to Reuters, in terms of environmental impact, “U.S. allies in Asia … covet LNG as they seek to slow coal consumption,” meaning a reduction in faith in U.S. LNG exports means a long-term increase in coal consumption globally. Essentially, the shortsighted decision by the Biden administration will disrupt the environmental progress so prized by the White House, all at the expense of the Texas natural gas sector.

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