Biden’s LNG Exports Pause Leans on Broad Public Interest Statute
January 30, 2024
By Daniel Moore
The broad public interest determination underpinning the Biden administration’s decision to pause new natural gas export approvals while it evaluates climate impacts may come under legal attack, but litigation will depend on how far energy officials go to hamper specific projects, legal experts said.
Developers of liquefied natural gas (LNG) facilities may find limited legal options to challenge the White House announcement last Friday that it will update its economic and environmental analyses on exports to countries that don’t have a Free Trade Agreement (FTA) with the United States.
The Natural Gas Act requires the energy secretary to issue an order approving export applications “unless, after opportunity for hearing, [the secretary] finds that the proposed exportation or importation will not be consistent with the public interest,” the law states.
“Whether DOE has the authority to consider environmental impacts, including potential impacts on climate change, I don’t think is seriously open to question,” said Jim Bowe, a Washington-based partner with King & Spalding who represents LNG developers.
“I don’t think the agency is necessarily precluded from saying that the public interest demands that we consider these additional impacts because they could have such a significant bearing on the public interest back here in the US,” Bowe said. “Public interest is a pretty broad concept. I think, at this point, the question is: How far must or should DOE go in evaluating impacts?”
Uncharted Waters
The White House decision responds to environmental and climate justice activists advocating against the LNG terminals that have proliferated in the last decade along the Gulf Coast. Those activists, from communities in Louisiana and Texas already contending with climate-fueled hurricanes and fossil fuel and petrochemical facilities, made their presence felt at monthly meetings of US energy regulators in Washington.
The Federal Energy Regulatory Commission, an independent arm of the Energy Department responsible for reviewing certificates for the construction and operation of LNG facilities, has approved a wave of LNG terminals over equity concerns and after courts remanded a pair of approvals in Brownsville, Texas, back to the commission on environmental justice grounds. Any changes made by the Energy Department would be separate from policy at FERC, which doesn’t respond to White House directives.
LNG supporters argue the pause will chill pending investments, throwing into jeopardy shipments to US allies trying to wean off Russian natural gas. They say US scrutiny of climate impacts actually undercuts global decarbonization because natural gas is likely replacing dirtier-burning coal in many countries.
“This is clearly an attempt to halt the development of LNG liquefaction infrastructure, which flies in the face of the energy security guarantees that the US has made to its friends and allies, and despite what LNG producers and what projects have done in the US to decarbonize the LNG supply chain,” said Jason Bennett, a partner in Baker Botts’ Houston office.
Previous DOE assessments of its LNG export policy, undertaken during the Obama administration and most recently in 2018 and 2019, focused more on economic analyses: ensuring exports weren’t causing US natural gas price spikes and were consistent with sanctions policy.
The US is now the world’s top exporter of LNG, a dramatic shift from the 2000s when natural gas was in short supply, and it exerts considerable sway over the energy futures of other countries, LNG advocates say.
Considering global policy on climate change as part of public interest determinations “is sort of a tack on to that,” said Bennett. “And it’s unclear to me whether that was ever intended to be part of this.”
Bennett said he was having conversations about legal strategy with his colleagues and clients, but he emphasized action will depend on how long the pause lasts and whether the resulting policy will seek to block terminals or simply require mitigation.
“We’re in kind of uncharted waters here,” Bennett said.
Broad Public Interest
Others argued the White House move is supported by the long arm of public interest determinations that energy officials can adjust over time.
“There’s absolutely no reason climate should not be considered as part of the public interest,” said Max Sarinsky, senior attorney at the New York University School of Law’s Institute for Policy Integrity.
The change is a long overdue update for the 2019 life cycle analysis of greenhouse gas emissions that concluded US LNG exports are likely to reduce global emissions on a per-unit basis because of an assumption that LNG is replacing other fossil fuel sources, Sarinsky said.
“We’re talking about energy systems of the 2030s and the 2040s,” he said. “A proper analysis would consider what are the energy market dynamics at play and how they will be changing over time.”
“We will take a hard look at the impacts of LNG exports on energy costs, America’s energy security and our environment,” President Joe Biden said in a statement Jan. 26. “This pause on new LNG approvals sees the climate crisis for what it is: the existential threat of our time.”
In addition to climate change, gas exports can raise the domestic price of gas, and overbuilding export facilities will cause a glut in the global LNG market, which should be considered in assessing the public interest, according to the Institute for Energy Economics and Financial Analysis.
“I see no reason for excluding climate change from the definition that the Department of Energy develops,” said Suzanne Mattei, an energy policy analyst and expert on the gas industry for the organization. “Climate change has major economic effects.”
The DOE has approved a total of approximately 47 billion cubic feet a day (Bcf/d) of LNG exports to non-FTA countries, and facilities supporting 14 Bcf/d of these exports have been built and placed into operation, according to a post Jan. 26 by lawyers from Van Ness Feldman. DOE has received applications for a total of roughly 62 Bcf/d.
Bowe, of King & Spalding, said an eventual legal question from LNG developers could focus on whether DOE acted “arbitrarily and capriciously” in denying an export authorization on the basis of its climate change impacts.
“It’s correct nobody’s going to freeze next week because of this, but it does inject uncertainty in the international marketplace as to how reliable the US can be as a supplier in later years,” Bowe said.