US ELECTIONS: US LNG sector to navigate uncertainties with Harris or Trump

The 2024 presidential election carries risks and unknowns for US LNG project development, whether Vice President Kamala Harris is elected or former President Donald Trump returns to the Oval Office.

The Biden administration's decision earlier in 2024 to pause key LNG export permits remains a major issue for both the US industry and for consumer nations. Either candidate is expected to end the pause, but how is unclear. And depending on the path forward, 2025 could see proposed capacity additions advance to construction or fall by the wayside.

“Our expectation is that if Trump is elected, he will start approving projects as soon as he can, and if Harris is elected, it will go back to the way that it was before, with maybe some additional scrutiny or new criteria,” Laurent Ruseckas, executive director of research and analysis at S&P Global Commodity Insights, said in an interview.

Even if Trump wins on Nov. 5 and brings the pause to a speedy end, a second Trump administration carries the risk of trade disputes with the Republican candidate promising to impose tariffs. The US-China trade conflict during Trump’s first term restrained US LNG flows to China's massive end-user market for 13 months and slowed commercial talks supporting US capacity expansions.

On the campaign trail, Trump has floated a 60% tariff on imported Chinese goods and a 10% to 20% tariff on goods imported from all other countries. Trump has also said repeatedly he would rethink the US role in the North Atlantic Treaty Organization if allies do not pay their “fair share.”

Permitting pause

The US Department of Energy in January halted its reviews of applications to export LNG to countries that lack free trade agreements with the US, saying the agency needed time to update the economic and environmental studies it uses to decide whether approving additional exports is in the public interest.

The pause — widely viewed as a political move — has slowed progress on several major US LNG projects. It has created uncertainty about the timing of final investment decisions, along with the longer-term global market share of US supply.

Energy Department officials under the Biden administration have said the pause will be in the rearview mirror by early 2025. The outcome remains unclear, despite the DOE recently issuing its first permit since the pause: a five-year export authorization for a small offshore project.

Harris, who has not addressed the issue, could continue that approach.

Harris expectations

Many industry officials worry that a Democratic administration could slow-walk the process. They also expect the end-result of the review will be a higher bar for export authorizations, which could include new considerations for impacts on disadvantaged communities.

Some expect that Harris could continue the Biden administration’s reluctance to use development finance for fossil fuel infrastructure, such as gas import and distribution facilities overseas.

Harris recently tacked toward the center during a Sept. 10 presidential debate, saying she backs diverse energy investments, promising she will not ban fracking, and touting high levels of oil and gas production during the Biden administration.

But she has not offered a detailed gas policy, leaving observers wondering about her approach.

The CEO of Cheniere, the biggest US LNG exporter, reflected at the recent Gastech conference in Houston on Harris's pivot on fracking.

“We hope cooler heads do prevail, and that maybe she’s sincere about what she’s saying,” Cheniere CEO Jack Fusco said. “I have to trust it, until I don’t.”

The Cheniere chief said he believed both candidates see the benefit of US LNG.

“I don’t really see a big change in what we’re doing either way,” Fusco said. “I think the speed of the transition may be faster with one administration than the other.”

Trump scenario

Trump has already promised to approve LNG projects and end the pause as a “day one” priority. Most observers expect his administration would mean more project approvals.

“There’s both legal and regulatory risk if the administration were to move too quickly to issue licenses,” Joseph Majkut, director of energy security and climate change at the Center for Strategic and International Studies, said in an interview.

The US gas sector also faces increasing requirements in the European market to better track and control methane emissions in the LNG supply chain. Analysts said a Trump rollback of US methane rules could disadvantage US exporters.

The narrative could become that “somehow US gas is getting dirtier,” according to Chris Treanor, executive director of the Partnership to Address Global Emissions. Then, “LNG exporters and marketers have to not just answer but show what’s being done to address methane and any of the environmental concerns that are out there.”

Transition jitters

“Either way, we’re looking at a new administration,” Charlie Reidl, executive director of the Center for Liquefied Natural Gas trade group, said. “Until we can convey accurately what’s going to happen and what it’s going to look like from a regulatory environment here in the United States, it has the potential to delay commercial proceedings for some of these projects that are stuck in non-FTA purgatory right now.”

But while the Biden administration’s pause may be concerning for individual projects affected, buyers of US gas generally have not been "running to other potential suppliers out there to line up volumes," according to Ira Joseph, senior research associate at Columbia’s Center on Global Energy Policy.

“The market isn’t showing us that if these projects don’t go forward, it’s going to be a disaster for LNG balances,” Joseph said.

A new entrant to the field of US LNG developers, Australia's Woodside Energy, said its recent purchase of the Driftwood LNG export project in Louisiana amounts to a long-term investment decision. But “wobbliness” in government support for LNG worries buyers about potential supply disruptions, Woodside CEO Meg O’Neill said.

“I do worry that there's going to be a long, lasting ripple of concern with many of the key LNG buying nations caused by the pause, even if the pause is short lived,” O’Neill said.

The head of Japan's largest power generation company, JERA Chairman and Global CEO Yukio Kani, said his more than three-decade career in LNG means he considers the US permitting debate as a “course of normal life for me” but that it has underscored the importance of building a diverse supply portfolio.

“If you can create a portfolio, you can cope with many uncertainties in the future,” Kani said during Gastech.

Congress and courts

Aside from the executive branch, US courts remain a key wildcard for the fate of additional LNG projects.

Permits for two large projects were invalidated by the US Court of Appeals for the District of Columbia Circuit this summer, with one of them – Rio Grande LNG developer NextDecade – facing the threat of a construction halt on its facility in Texas.

And the administration is appealing a federal district court order lifting its pause.

Congressional action could also upset the status quo. Senate Energy and Natural Resources Committee leaders are trying to pass legislation that would permanently end the pause and put a shot clock on DOE actions.

The risk stemming from opposition to gas projects looms large and could constrain the buildout of US LNG export terminals by creating risk around financing projects, according to Anusha de Silva, director for LNG analytics at Commodity Insights.

“There is overall rising regulatory uncertainty that could impact any project to a greater or lesser degree,” de Silva said.