Joe Biden’s Parting Shot To Natural Gas

Joe Biden’s Parting Shot To Natural Gas

“Keep It In The Ground” may be the Democratic Party’s energy motto for the next four years.

 

While the Biden administration’s views on energy policy are arguably of rapidly diminishing importance, the study on U.S. exports of liquefied natural gas (LNG) released by the Department of Energy (DOE) on December 17 will define the Democrats’ views on the subject during the coming Trump administration. However, it is neither good policy nor good politics. While it did not conclude that the moratorium on new project approvals should be permanent, it warned against a policy of “unfettered” LNG exports on the grounds that it would increase emissions of greenhouse gases and drive up costs for American consumers. It places the outgoing administration squarely in the corner of the shrill “keep it in the ground” progressive wing of the Democratic Party.

By taking this tack, the Biden administration stuck to the strategy they had pursued when Biden was running for renomination. This aimed to prevent a primary challenge from the Left by pausing new approvals of LNG export projects. However, after handing the nomination over to Kamala Harris and seeing her lose to Donald Trump, they should have been freed of such constraints. There is still no indication in polling data that climate change is even a top issue for American voters, who are much more concerned about jobs and the economy. Opposition to all fossil fuels projects, however, is an important litmus test for a small but influential group of progressive activists.

 

Manmade climate change is real, obviously, and it is rational to support policies for the reduction of greenhouse gases. The question is whether limiting the production and export of natural gas from the United States really serves that goal. The DOE study made a very dubious set of assumptions to support the view that there was a substantial tradeoff between U.S. LNG exports and renewable energy—U.S. LNG would reduce zero-carbon energy development, and a lack of U.S. LNG would increase in it. That assumes that other exports would not become available—very dubious in a world with many stranded gas deposits—and that the LNG is being immediately used for power generation. A lot of gas in power generation is used as “firming capacity” for renewables, a backup for periods of low generation, making renewable use possible without sacrificing grid reliability. It also ignores the fact that, in many cases, LNG offsets coal use, allowing coal plants to be retired. It ignores the fact that in the largest LNG growth market, China, much of the incremental LNG is used for industrial purposes like petrochemical feedstock rather than to generate electricity.

The study also tunes out the geopolitical benefits the United States derives from LNG. When Russia invaded Ukraine, having a flexible supply of American LNG available offset some of Russia’s piped gas, which needed to be embargoed for sanctions purposes. It rightly points out that European gas demand is projected to flatten out in the long term, but that could be impacted now by the recent indications that the grid is becoming less reliable as intermittent renewables approach half of European power generation. With China—a U.S. adversary—the largest growth market, the study implies that we would be fueling the economic rise of a rival. Yet, that ignores the availability of other supplies and the power that the United States gains over China by having them dependent on energy and petrochemical feedstocks, which must come by sea, with the United States still the dominant naval power outside China’s immediate vicinity. Expanding LNG also strengthens the U.S. balance of payments overall and would help to reduce the trade deficit with China.

The study highlights how the Biden administration reverted to using the role of Secretary of Energy as a placement for someone of senior stature who needs a job rather than choosing someone who has a background in energy, big science, or nuclear technology. The Obama administration chose much more qualified secretaries. Energy Secretary Ernest Moniz articulated a much more nuanced and intelligent view of the role of natural gas in the transition to a low-carbon economy, both in and out of government. 

The bottom line is that withholding U.S. LNG would force out other sources of supply and, in some cases, lead to more coal consumption. It makes sense to try to reduce demand for fossil fuels, but limiting U.S. exports is not going to force other countries to adopt the policy changes, which would make the straight tradeoff between LNG and renewables work in the manner that the study suggests it would. Trump’s chest-thumping about “energy dominance” is an exaggeration. Still, Democrats would do better, both politically and in terms of rational policymaking, to quit listening to the tiny sliver of American public opinion that insists on “keeping it in the ground.”

Greg Priddy is a Senior Fellow at the Center for the National Interest and does consulting work related to political risk for the energy sector and financial clients. Previously, he was director of global oil at Eurasia Group and worked at the U.S. Department of Energy.

Image: Andrew Leyden / Shutterstock.com.