Published
December 19, 2024
Almost a year after announcing a “pause” on LNG export facilities, the Biden Administration has finally released its long-awaited report on LNG exports. The U.S. Chamber—and over 150 state and local Chambers—strongly opposed this “pause” because it jeopardized energy security, undercut commitments to our allies, and hurt our economy.
The Administration’s report, issued by the Department of Energy, seems intended to provide arguments for LNG opponents to use when the next Administration takes office. It contrasts sharply with a new report supported by the Chamber and conducted by the experts at S&P Global Insight that provides an in-depth analysis of the many benefits of LNG exports.
The DOE report should be treated with skepticism. Here’s why.
Rooted in Election-year Politics
The pause and the DOE study accompanying it were never intended to be an objective examination of the issue. It was an overtly political exercise from the beginning. For example, when the White House announced the pause, it signaled its opposition to LNG by publishing a list of statements from more than 80 individuals and organizations opposed to LNG projects, with #StopLNG hashtags and repeated calls to reject all export licenses.
While DOE’s report suffers from fundamental design flaws that result in misleading conclusions, even this flawed approach begrudgingly acknowledges the economic benefits of LNG and paints a mixed picture overall. But the fix was in from the beginning, so Energy Secretary Jennifer Granholm appended a letter to the report dramatizing its findings in an effort to frame U.S. LNG in the worst possible light.
Bloomberg columnist Javier Blas summarized this politicization into three succinct steps:
- “DOE Secretary commissions LNG report hoping for arguments against American gas exports.
- DOE experts produce a rather nuanced 601-page long report that doesn’t meet those hopes.
- Solution? DOE Secretary spins the 601 pages report into 3-page letter to achieve initial objective.”
Price Claims Are “Chicken Little Déjà vu”
The Administration’s pause report claims that expanded exports could spike natural gas prices, but this falls flat considering the long history of similar faulty projections from LNG opponents and even DOE itself. In fact, the same people warning that new export licenses will increase domestic prices were also doing so 15 years ago when the very first LNG terminals were proposed. And in 2012, DOE warned that LNG exports could raise U.S. prices as much as 54 percent.
Just last week DOE itself published an analysis showing that U.S. natural gas prices reached all-time lows in November. This is thanks to America’s enormous natural gas resource base, wherein upstream producers anticipate future demand and respond with additional production. This supply elasticity provides the foundation for a healthy natural gas market and enables a trifecta of benefits: stable prices alongside record-high domestic consumption and record-high gas exports.
The problems with DOE’s price projections are further exposed in a just-released study by the world-class energy consultants at S&P Global. (note: this study was supported by the Chamber). While DOE projects that “unfettered exports” could cost American households $100 per year by 2050, S&P’s modeling concludes that the price impacts are negligible, averaging just 15 cents per million BTU (MMBTU) and translating to 0.7% or $11 per year.
This large discrepancy is at least partially explained by DOE’s thumbs-on-the-scale assumption that all global LNG supply comes from the U.S. As S&P expert Eric Eyberg told E&E News, DOE’s model assumption of 56 BCF per day of exports is “not a realistic scenario” because it “would effectively say that no one else in the rest of the world builds LNG capacity.”
Fails to Consider America's Competitive Advantage on Prices
In providing context for its study, S&P Global notes that “U.S. residential natural gas prices are already among the lowest in the world, driven by competitive wholesale gas prices relative to other developed countries in Europe and Asia.” DOE fails to mention this competitive advantage, instead going to great pains to model scenarios showing LNG exports harm American consumers. The charts below illustrate how exports have grown alongside affordable natural gas prices for U.S. households and industrial consumers.
Buries the Economic Benefits of the LNG Industry
While Secretary Granholm’s broadside scoffs at the economic benefits of LNG, saying it generates “wealth for the owners of export facilities,” DOE’s own analysis projects cumulative GDP contributions of $410 billion through 2050, adding a not-insignificant 0.2% to national GDP (see page 12 of the report summary). S&P’s far more thorough modeling concludes greater benefits, totaling $1.3 trillion in GDP through 2040, nearly 500,000 new jobs, and $166 billion in federal and state tax revenue. Conversely, S&P projects that continuing the Biden Administration Pause would cost the U.S. economy $251 billion in GDP and more than 100,000 jobs.
Downplays Geopolitical Importance of LNG in Supporting Allies' Energy Security
Sadly, Secretary Granholm’s statement not only dismisses the importance of U.S. LNG to the security of American allies, it conflicts with DOE’s own underlying figures. Granholm argues that Europe doesn’t need more U.S. gas to wean itself from Russian dependence, but its own modeling projects the EU demand for Russian pipeline gas will increase between 2025 and 2035 (in contravention of the EU’s commitment to cease all Russian imports) , and remain flat thereafter (page 19 of Appendix A).
Meanwhile, DOE projects that overall Russian gas production and exports decline (by 2 bcf/d and 1.8 bcf/d in 2050, respectively) in a scenario allowing additional U.S. LNG exports– the same LNG that Granholm says is not needed for energy security (pages 108-109 and 147-148 of the Appendix). In other words, less U.S. LNG results in more market share for Russian gas, and Granholm’s claim that blocking U.S. exports won't hurt European efforts to eliminate dependence on Russia is simply false. None of this should be surprising.
Here again, S&P’s robust modeling paints an even clearer picture. S&P finds that if the pause were to remain in place and no additional U.S. export facilities were built, non-U.S. projects in seven other countries would either be built or accelerated, including Russia.
As Dan Yergin told CNBC in response to DOE’s report, "LNG is part of NATO's arsenal, but this pause has caused uncertainty and slowed down six projects." One of those projects—Venture Global’s Calcasieu Pass 2—would be Germany’s largest long-term supplier.
In fact, the German utility left hung out to dry by the pause literally renamed itself SEFE – “Securing Energy For Europe” in response to Russia’s invasion of Ukraine. Just three weeks after the pause was announced, SEFE pledged to maintain a supply contract with Russia through 2040, with its CEO citing the pause as a supply concern for its customers. As highlighted by the Wall Street Journal, this led Pravda to editorialize earlier this year that “Now it is not Russia, but the United States that wants to bring the Germans to their knees.”
Stay tuned for more analysis of DOE’s report as the Chamber continues to unpack it over the coming weeks.
About the authors
Dan Byers
Dan Byers is vice president for policy at the U.S. Chamber of Commerce’s Global Energy Institute with a focus on environmental and regulatory issues, Byers develops and implements strategies in support of the Institutes broader education and advocacy efforts.
