What Biden's LNG Decision Means for the Markets and the Environment
By Katie Mehnert, founder and CEO, ALLY Energy
President Biden’s decision to pause approvals for liquefied natural gas exports has touched off heated responses. Climate activists hail it as a victory. Former Vice President Al Gore noted that world leaders have agreed to transition away from fossil fuels, and said Biden’s decision “to pause new permits for LNG exports shows that he is taking that pledge seriously.”
But many energy industry leaders assail the decision. Charlie Riedl, executive director of the Center for LNG, called it “a short-sighted and damaging action that weakens U.S. relations with our allies” and “undermines U.S. energy leadership,” without benefiting “our shared climate goals.”
As soon as news of the pause came in, I began hearing from people who want to understand what this decision means for the markets (including natural gas stocks), the economy, and the environment. As a centrist committed to fighting climate change, ensuring adequate energy supplies and strengthening the U.S. economy, I’m all about bringing different sides together to find common ground. It’s in that vein that I oppose this decision, and hope it will not signal a long-term move.
Understanding LNG exports
To anyone who does not follow the ins and outs of LNG exporting, this issue can seem confusing, filled with conflicting studies, claims and predictions. It’s also a relatively new industry, and a very recent success story for the U.S. economy. Last year, the United States became the world leading exporter, surpassing Qatar and Australia.
As the U.S. Energy Information Agency explains, “Natural gas has many qualities that make it an efficient, relatively clean burning, and economical energy source.” It “results in fewer emissions of nearly all types of air pollutants and carbon dioxide than burning coal or petroleum products to produce an equal amount of energy.”
However, it is mostly methane, “a strong greenhouse gas.” Natural gas is not a permanent solution to the world’s energy needs. Many people see it as a “bridge fuel” that can go a long way in meeting the growing global energy demand while reducing emissions.
To be exported, natural gas must be liquefied, which leads to more emissions. Some also escapes along the supply chain. There's brewing controversy over whether these factors make LNG exports potentially even more damaging than coal, Canary Media explains.
Amid this, Biden on Friday announced a pause, during which, “We will take a hard look at the impacts of LNG exports on energy costs, America’s energy security, and our environment.”
The move does not affect applications that were already approved. According to guidance sent out by Morgan Stanley after the decision, “The U.S. remains on track to expand LNG exports by ~85% 2023-29.”
Risks outweigh benefits
But the pause can lead to numerous problems. For starters, U.S. supplies are necessary in today’s geopolitical environment. Many countries, particularly in Europe, are trying to avoid dependence on Russian natural gas. And China has been stepping up its energy production, producing far more carbon dioxide emissions than the United States.
The Biden administration insists that the pause won’t hurt allies, and includes an exemption for national security. But any suggestion that the U.S. might cut LNG exports will inevitably lead nations to look elsewhere for their long-term energy security. It could hand business to other countries -- and, in the long run, negatively impact growth for LNG stocks.
The move also leaves out something crucial: LNG exporters are already working to decrease methane emissions. One Future, a group of companies across the natural gas value chain, recently announced that they have been surpassing their goal to reduce methane each year.
As the world works to achieve net zero, tackling emissions -- including carbon dioxide and methane -- is essential. And despite negative stereotypes of the sector, virtually everyone I know and work with in the energy industry wants to be part of the solution.
Biden should bring all stakeholders to the table to find solutions together, rather than rewarding one side in hopes of a short-term political gain. Work to make LNG exports cleaner without signaling even the possibility of giving up on investments here in the United States.
Climate-focused investors and those with more traditional portfolios both have reason to want U.S. LNG exports to lead the world while also reducing emissions. The more our companies do this, the stronger our future will be, both economically and environmentally.
Katie Mehnert is founder and CEO of ALLY Energy, the award-winning online platform that accelerates connections, jobs and skills to power the energy workforce of the future.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.