U.S. LNG Exports Bring Domestic and Global Stability – Why They Shouldn’t Be Banned

Lem Smith
Posted January 31, 2022

Last year, administration officials explored implementing a ban on American liquefied natural gas (LNG) exports overseas. This prompted Members of Congress from both parties to urge President Biden to reject an export ban and to complete critical U.S. LNG infrastructure projects. These bipartisan requests are not without merit as the U.S. will have the world’s largest LNG export capacity by the end of this year.

While it was encouraging to hear verbal assurances last week that the administration is not moving ahead with a ban, the time is right for the White House to be proactive in promoting and exporting American-made LNG. In fact, right now, more than two dozen U.S. tankers are traveling from the U.S. to Europe, already the recipient of 70% of America’s LNG cargoes, according to the Wall Street Journal.

Below, a cargo vessel tracker from Bloomberg showed LNG ships leaving Gulf Coast export facilities and heading across the Atlantic last month:

Amid historically high inflation, rapidly growing global instability, and a worsening energy crisis in Europe, the most important move federal policymakers can make is to clearly signal that America is well positioned to provide stability amid any disruption of worldwide natural gas supply – and can do so without increasing costs at home or disrupting our own domestic energy markets.

After all, America is the world’s largest producer of natural gas. Given recent geopolitical instability, the administration should say the U.S. will remain a reliable supplier of energy to our European allies. But according to the New York Times it has instead signaled that it is “working with gas and crude oil suppliers from the Middle East, North Africa and Asia to bolster supplies to Europe” ahead of potential conflict between Russia and Ukraine. Even before military buildups in Eastern Europe accelerated, Europe already needed more natural gas, not less. The U.S. can and should send even more. The administration can help by encouraging investment in LNG infrastructure – and by reversing its own orders that could halt federal support for LNG terminals around the world.

Here are three big reasons policymakers should avoid any sort of LNG export ban while dealing with challenges:

• Increased LNG Exports Have Not Led to Higher Domestic Costs: About 10% of all U.S. natural gas is exported overseas as LNG. And during the period of the most rapid growth in LNG exports—the second half of 2019, when exports nearly doubled—U.S. natural gas prices not only did not rise but fell to three-year lows. Meanwhile, over the last several years, U.S. natural gas prices continue to be among the very lowest among major consuming regions and have remained largely flat. Also, Department of Energy studies conducted under the Obama and Trump administrations concluded that rising LNG exports will have a negligible impact on domestic prices. Even the recent price spike in the final quarter of 2021 has returned to previous levels despite increasing disarray overseas. The U.S. natural gas market has rebalanced thanks to surging production and a warmer early winter. This happened while LNG exports increased and made America the world’s largest LNG exporter for December.
• Bad Policy for U.S. Trade and Our Allies: Removing U.S. LNG from the global market could put strain on European allies who are already struggling with geopolitical instability and high prices—five times or more than what we see in the U.S. While U.S. LNG exports are just a small portion of domestic natural gas production, they are about 20% of the global LNG market. These exports strengthen America’s standing and provide allies a reliable energy source in an unstable world. Natural gas is used for residential heating in winter, and it would be nothing short of cruel to suddenly take U.S. LNG off the global market. Russia normally supplies about 40% of Europe’s natural gas, but recently started cutting back. With uncertainty rising about that nation’s intentions in neighboring Ukraine, restricting U.S. LNG would be abysmally bad policy.
• Bad for the Environment: Restricting U.S. LNG exports could hinder natural gas’ global environmental benefits. The U.S. exports gas to more than 35 countries across the world, including some that suffer from acute energy shortages. For Europe, the current energy crunch has meant a return to using coal for power production and a corresponding increase in CO₂ emissions. Increasing U.S. LNG exports can help. John Kerry, the President’s climate envoy, recently noted the benefits of natural gas as a bridge fuel in moving toward a lower-carbon future.

With tensions mounting and overseas energy markets in chaos, federal policymakers would be doing the world a service by encouraging U.S. LNG exports. That’s American energy leadership worthy of support.