On January 26, 2024, the Biden Administration announced a temporary pause on all pending applications seeking authorization under Section 3 of the Natural Gas Act to export liquefied natural gas (LNG) to non-Free Trade Agreement (non-FTA) countries (i.e., countries with whom the US has not entered into a free trade agreement that requires national treatment for trade in natural gas), until the US Department of Energy (DOE) updates its underlying economic and environmental analyses therefor.
DOE issued a concurrent statement explaining that this "temporary pause on pending applications will not affect already authorized exports" or the United States' "ability to supply our allies in Europe, Asia or other recipients of already authorized U.S. exports."
While neither announcement details precisely what such updates will consist of or how long such pause will last, the Biden Administration explained that the "current economic and environmental analyses DOE uses to underpin its LNG export authorizations are roughly five years old and no longer adequately account for considerations like potential energy costs increases for American consumers and manufacturers beyond current authorizations or the latest assessment of the impact of greenhouse gas emissions."
Based on these limited statements (and DOE past practice), it is reasonably likely that DOE intends to conduct updates similar to those carried out in 2018 (for its economic analysis) and in 2019 (for its environmental analysis).
- The 2018 economic update found that higher levels of LNG were likely to generate higher overall economic performance than lower export levels (meaning increased LNG exports are likely to have a positive macroeconomic effect for the US).
- The 2019 environmental update found that "the use of U.S. LNG exports for power production in European and Asian markets will not increase GHG emissions from a life cycle perspective, when compared to regional coal extraction and consumption for power production."
These updates expanded the scenarios and inputs that DOE had previously evaluated in its prior economic and environmental studies, and it is possible that DOE may elect to further expand the scope of such studies here as part of these updates. However, it is still too early to speculate – let alone definitively conclude – as to the precise contours of these upcoming updates (let alone the results thereof).
In terms of timing, DOE took approximately 11 months from when it announced the previous round of updates to its economic and environmental analyses to when it finalized such updates. Specifically, the 2018 economic update took 8 months to complete and publish for comment, followed by an additional 3 months to review and respond to such comments and formally implement the same, whereas the 2019 environmental update took 9 months and 2.5 months at each stage, respectively. It is worth noting that both prior updates were initiated and conducted by the Trump Administration, which did not announce a similar pause on pending applications and instituted relatively short comment periods for both updates.
As discussed in our prior client alert, following the 2018 and 2019 updates, DOE then issued a Final Policy Statement in July 2020 implementing an extension (to 30-year terms) for all long-term non-FTA export authorizations.
With regard to the projected timeframe of the Biden Administration's pause on LNG export authorizations to non-FTA countries, the comment period soliciting stakeholder and industry input may further contribute to the delay and uncertainty sweeping the LNG industry in light of these announcements. In addition to the time necessary to conduct such updates and notice them for public comment, DOE will then be required to review, consider, and respond to comments submitted thereon before such updates can be deemed finalized and then incorporated into any pending applications for non-FTA export authorization impacted by the Biden Administration's pause. Environmental groups and other opponents of increased LNG exports will likely attempt to prolong the DOE update process and undermine any LNG-favorable outcomes resulting from such updates, through the submission of comments and studies opposing such outcomes and/or such updates, and may seek to further delay the same through litigation. Further adding to the uncertainty here is the upcoming US federal elections occurring in the fall of 2024, which will determine control of both the US presidency (and by extension DOE) as well as the US Congress. The outcome of such elections could very much affect what impact such pause and updates may have, as some domestic opposition to the proposed pause has already emerged along partisan lines in the US, due to a perception that this pause and these updates may represent an effort by the Biden Administration to undermine — not strengthen — two rounds of analyses that resoundingly support increasing LNG exports to non-FTA countries on both economic and environmental grounds.
Accordingly, based on the limited facts available so far and the timing associated with the previous round of updates, it is reasonable to anticipate that the Biden Administration's pause on DOE review of non-FTA export applications could last at least 12 months (i.e., until February 2025) and may run even longer depending on the scope and results thereof. DOE would then need to incorporate those updates into all pending non-FTA export applications once such pause has been lifted, which could result in further delays before DOE is in a position to resume its review of and act on pending non-FTA export applications (as that review has now been formally paused by the Biden Administration). As a result, LNG projects that have not yet obtained non-FTA export authorization from DOE could find their ability to take final investment decision (FID) delayed to a degree. However, this pause in and of itself is not likely to halt the overall development process for any affected US LNG projects, because many have substantial resources and commitments supporting them already. It is therefore more reasonably likely that such projects will modify their development timelines to take into account both the delay and the uncertainty injected by this pause and these updates.
The White & Case team continues to actively monitor this developing situation and the potential impacts thereof on behalf of our clients. We stand ready to leverage our unparalleled expertise and experience in these matters to help our clients successfully navigate any potential or actual challenges that may arise as a result of the Biden Administration's pause on pending applications for long-term non-FTA export authorization, as well as the forthcoming economic and environmental updates by DOE.
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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
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