On January 26, the Biden administration announced a temporary pause on pending approvals of liquefied natural gas (LNG) exports. If allowed to remain in place the pause will be doubly destructive, punishing U.S. allies who depend on American exports as an alternative to Russia along with American energy producers who increasingly rely on access to foreign markets to sell U.S.-produced oil and gas.
Reaction to President Biden’s announcement was swift. Rep. Cathy McMorris Rodgers (R-WA), chair of the House Energy and Commerce Committee, announced that the House of Representatives will vote on overturning Biden’s LNG freeze. Sen. Tim Scott (R-SC) introduced legislation cosponsored by 16 Senate colleagues, the Unlocking Domestic LNG Potential Act, to transfer approval of LNG exports from the U.S. Department of Energy (DOE) to the Federal Energy Regulatory Commission (FERC). His bill would attempt to remove political pressure from influencing the approval of future LNG exports.
As NTU warned two years ago, Russia will be the main beneficiary of LNG export restrictions. Following Russia’s invasion of Ukraine, European gas prices soared to record highs in 2022 and increased even more in 2023. The continent increasingly turned to U.S. LNG exports to compensate for lower imports from Russia.
Roughly two-thirds of our LNG exports go to our allies in Europe. Other top purchasers include Japan, Korea, and Taiwan. Reversing Biden’s LNG ban would strengthen our allies and our diplomatic ties.
In addition to reversing Biden’s LNG action, the government should prioritize the negotiation of new, mutually beneficial trade agreements with our allies. Under current law, “applications to export LNG to countries with which the United States has a free trade agreement (FTA countries) are deemed automatically in the public interest.”
However, the United States has failed to negotiate and approve a single new market-expanding comprehensive free trade agreement in more than a decade. (This is not to downplay the 2020 U.S.-Mexico-Canada Agreement, but we already had a free trade agreement with Canada and Mexico in place at the time.) As a result, the Biden administration remains free to block new LNG exports to Europe and many of our other biggest export markets based on dubious “public interest” grounds.
Historically, a primary goal of U.S. trade policy has been to secure the elimination of unfair trade barriers that decrease market opportunities for American exports. The United States has been incredibly successful at reducing foreign barriers to our exports. Since Congress approved the North American Free Trade Agreement (NAFTA) and the United States joined the World Trade Organization (WTO), the average tariff rate facing U.S. exports has fallen from 13.4 percent to 5.1 percent. Ironically, Congress now is confronted with export barriers imposed not by hostile foreign governments, but by the White House.
The United States Should Expand Trade With Our Allies
Biden’s destructive LNG export pause should not be considered in a vacuum. His administration continues to view imports of steel and aluminum from Israel, Europe, and elsewhere as a threat to U.S. national security. This is a mind-boggling assertion.
Biden’s hostile trade policy alienates our trading partners, disrupts supply chains, erodes our industrial base in other sectors, and undermines our ability to sustain a balanced defense effort in a national emergency.
Congress should reverse the Biden administration’s costly and antagonistic LNG export freeze.