Biden Administration's Freeze on LNG Export Permits Causes Project FID Woes

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Researched by Industrial Info Resources (Sugar Land, Texas)--President Joe Biden's pause on reviews of pending liquefied natural gas (LNG) export projects will significantly dampen final investment decisions (FIDs) on a number of LNG projects for the rest of this year, according to Shane Mullins, Industrial Info's vice president of energy products and project development.

That's because the U.S. Department of Energy (DOE) won't be granting license-extension requests for several LNG projects during the election-year pause, which is expected to last at least for several months. In turn, banks are less likely to loan money to such projects during this period, hence a delay in FIDs, Mullins said.

The freeze on LNG permits involves those seeking exports to non-Free Trade Agreement (FTA) countries, which represent most of the global LNG import market. But even projects that already have licenses to export LNG to non-FTA countries could face delays if they are seeking to extend their license deadlines.

In the past, the DOE has given LNG export projects seven years from their export-license approval to commence operations. In general, it was the department's practice to extend the deadline when requested by the project.

But on April 21, 2023, the DOE said it "will allow authorizations to expire on the export commencement deadline originally set forth in the order and will not consider an application for an extension, unless the authorization holder demonstrates both that: it has physically commenced construction on the associated export facility, and its inability to comply with the existing export commencement deadline is the result of extenuating circumstances outside of its control."

This change in policy could affect several LNG export projects that need license extensions.

Industrial Info is tracking six U.S. LNG export projects that have received total approval (most of which are under construction): 12 projects that have received approval from the Federal Energy Regulatory Commission (FERC) and are awaiting FID status or a notice to proceed; and two projects that are still in the permitting stage or are awaiting state economic development resources.

Mullins cautioned that unless the U.S. starts approving LNG export projects again, the impetus for LNG export growth will move elsewhere, such as Canada. Industrial Info is tracking three active LNG export projects in Canada.

In announcing the permit freeze on January 26, Biden said, "During this period, we will take a hard look at the impacts of LNG exports on energy costs, America's energy security, and our environment. This pause on new LNG approvals sees the climate crisis for what it is: the existential threat of our time."

For more information, see January 26, 2024, article - Biden Administration Pauses its Review of Permits for Proposed LNG Export Terminals and January 29, 2024, article - Biden's Permitting Pause Likely to Impact at Least Five Advanced U.S. LNG Projects.

Industrial Info's Vice President of Energy Services Jesus Davis said, "Considering that the DOE deadline for the majority of these projects is before their start-up date, it literally makes it impossible for these projects to initiate construction and beat the start-up deadline."

For example, Davis said, Sempra Energy's (NYSE:SRE) (San Diego, California) 6.75 million-ton-per-annum Train 4 project in Cameron, Louisiana, has a planned startup date in 2028, but the DOE startup deadline is 2026. For more information, subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Production Project and Plant databases can click here for the project report and click here for the related plant profile.

A number of factors play into a massive buildup of pending LNG export projects and the need for project extensions, including delays caused by the COVID-19 pandemic and a shortfall in labor supply, Davis said.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 Trillion (USD).