Report: LNG exports don’t lead to increased domestic energy costs

In the wake of the Biden administration announcing it was pausing pending applications for liquified natural gas (LNG) exports, industry reports from Texas challenge the administration’s reasons for doing so.

The administration announced it was implementing a temporary pause on pending decisions on exports of LNG to non-Free Trade Agreement countries until the Department of Energy updates “underlying analyses for authorizations.” Among the several reasons it gave for doing so is because current LNG export authorizations, which are five years old, “no longer adequately account for considerations like potential energy cost increases for American consumers and manufacturers beyond current authorizations or the latest assessment of the impact of greenhouse gas emissions.”

A new report published by the Texas Oil & Gas Association refutes this claim, citing federally-produced energy data. Other industry reports also refute Biden administration claims, which The Center Square is highlighting in a multi-part series on LNG exports.

Contrary to the administration’s claims, LNG exports have spurred production and productivity gains, which have helped drive prices down, TXOGA’s chief economist, Dr. Dean Foreman, says.

“Attributing higher U.S. natural gas prices to LNG exports is inaccurate and risks misguided energy policies that run contrary to the interests of U.S.,” he concludes in the report.

Pointing to federal data, he notes that as U.S. LNG exports have remained at near record-highs, natural gas prices at Henry Hub, Louisiana, fell as low as $1.52 per million btu in mid-February 2024 – the lowest for the month on record since 1994.

After the U.S. became a net exporter of LNG for the first time in February 2016, by January 2024, net exports increased 40 times more compared to the average in 2016. As exports increased in January, “domestic real natural gas prices remained at record low levels for the month,” the report notes, citing U.S. Energy Information Administration data.

“Historically, there has been little to no evidence of a direct or causal relationship between U.S. LNG exports and domestic natural gas prices,” Foreman says. Citing EIA data, he explains that while natural gas prices remained subject to seasonal variation, they generally declined in 2019 through mid-2020. Prices also declined again in late 2022 as U.S. LNG net exports increased.

As U.S. LNG exports tripled in volume since 2019, increased production and exports “motivated U.S. natural gas production growth and productivity,” which, in turn, “exerted downward price pressures to the benefit of American consumers,” Foreman said.

Increased exports also led to the industry improving technology and resource recoveries, which generally added to estimated domestic recoverable gas resources, he said.

“LNG exports have supported steady gas production growth, drilling productivity, and reserve additions in areas like the Haynesville, Eagle Ford, and Permian basins, which are well positioned to support LNG exports in terms of their geography, infrastructure, and state business climates,” the report states.

“Data confirm LNG exports have had no impact on domestic natural gas prices. In fact, the real price of natural gas in America hit its lowest point in 30 years in mid-February while our LNG exports have neared record highs,” TXOGA President Todd Staples said. “The Administration’s decision to pause approvals of new LNG export facilities, citing potential to raise domestic energy prices, is baseless and another ploy to ultimately end American energy production. These decisions squander the American energy leadership that starts in Texas and puts energy security worldwide at risk.”

The United States is the top producer of oil and natural gas, led by Texas. In 2023, the Texas natural gas industry broke multiple records, including natural gas marketed production reaching record highs in seven out of 12 months, The Center Square reported.

Last October, the industry eclipsed one trillion cubic feet in a single month for the first time in history, accounting for nearly 30% of the national production total. Last year, Texas also produced and exported a record amount of natural gas liquids (NGLs) with refineries also using record amounts of NGLs.

Recognizing the importance of the industry, the Texas legislature passed bills to protect it from federal overreach and from local bans on gas-powered engines or stoves. Last November, Texas voters also overwhelmingly passed a constitutional amendment to create a $5 billion Texas Energy Fund.

Texas' oil and natural gas industry is vital to the state, the governor and state comptroller have argued. The industry paid a record $26.3 billion in state and local taxes and state royalties in fiscal 2023, the highest in state history.

The governor and comptroller have also opposed ESG policies promoted by the Biden administration, which they argue are designed to hurt the industry. The comptroller’s office continues to add financial companies to its state divestment list identifying those that boycott the Texas oil and natural gas industry through their ESG policies. Fifteen companies and 353 publicly traded investment funds are on the list, The Center Square has reported.