The Energy Markets Podcast

S4E5: The Center for LNG's Charlie Riedl on the Biden administration's 'pause' on export permits for liquefied natural gas

March 08, 2024 Bryan Lee Season 4 Episode 5
S4E5: The Center for LNG's Charlie Riedl on the Biden administration's 'pause' on export permits for liquefied natural gas
The Energy Markets Podcast
More Info
The Energy Markets Podcast
S4E5: The Center for LNG's Charlie Riedl on the Biden administration's 'pause' on export permits for liquefied natural gas
Mar 08, 2024 Season 4 Episode 5
Bryan Lee

The Biden administration in January announced a pause in reviewing export permits for liquefied natural gas (LNG) in order to better understand the impacts that the United States' world-leading LNG exports will have on domestic natural gas prices, climate change, and environmental equity. Could the pause threaten the U.S.'s position as the world's top LNG supplier? 

Charlie Riedl, executive director of the Center for LNG, speaks to the the national security implications of the administration's pause – U.S. LNG was instrumental in Europe's pivot away from Russian gas in the wake of the Ukraine invasion – and says the regulatory action has prompted concerns among European allies and buyers regarding the reliability of the United States as an energy supplier. 

The economic and environmental impacts of LNG exports have been studied and restudied, says Riedl, who sees election-year politics prompting the announced review.  Given today's record-low prices for natural gas in the U.S. and the projected impact of the Environmental Protection Agency's recently finalized methane emissions-monitoring rules, the outcome of the new review should be a net positive for the industry, he suggests.

Support the Show.

Show Notes Transcript

The Biden administration in January announced a pause in reviewing export permits for liquefied natural gas (LNG) in order to better understand the impacts that the United States' world-leading LNG exports will have on domestic natural gas prices, climate change, and environmental equity. Could the pause threaten the U.S.'s position as the world's top LNG supplier? 

Charlie Riedl, executive director of the Center for LNG, speaks to the the national security implications of the administration's pause – U.S. LNG was instrumental in Europe's pivot away from Russian gas in the wake of the Ukraine invasion – and says the regulatory action has prompted concerns among European allies and buyers regarding the reliability of the United States as an energy supplier. 

The economic and environmental impacts of LNG exports have been studied and restudied, says Riedl, who sees election-year politics prompting the announced review.  Given today's record-low prices for natural gas in the U.S. and the projected impact of the Environmental Protection Agency's recently finalized methane emissions-monitoring rules, the outcome of the new review should be a net positive for the industry, he suggests.

Support the Show.

S4E5: Charles Riedl LNG, executive director, Center for Liquefied Natural Gas
(transcript edited for clarity)

EMP: Welcome to the Energy Markets Podcast. I'm Bryan Lee, and today we're going to talk about the LNG permit moratorium the Biden administration announced at the end of January. The Department of Energy has paused regulatory processing for new and pending export permits to countries that are not participating in free-trade agreements. The pause was ordered to update the economic and environmental analyses used in reviewing permit applications. We're going to talk about this today with Charlie Riedl, Executive Director of the Center for Liquefied Natural Gas, an arm of the Natural Gas Supply Association. Charlie, thanks for coming on the podcast.

CR: Thanks for having me, Bryan. Great to be here.

EMP: So this moratorium, this pause, whatever you want to call it, it only affects exports to non-free trade agreement countries. How much of the exports go to free-trade versus non-free trade?

CR: The lion's share of our exports are actually to non-free trade. It's somewhere near 70% of our exports are actually to non-free trade countries. That current free-trade list of countries is a relatively small list of countries, especially then even smaller that are actually energy-importing countries. And so you can look at countries that would seem like logical trade allies and partners – Germany, Italy, some of these places – that we don't have free-trade agreements with that are large – and becoming larger – LNG-importing countries that are heavily reliant on U.S. gas, are going to become increasingly more reliant on U.S. LNG, that we don't have a free trade-agreement with. And so that that creates an additional challenge when you're a project developer. This free-trade authorization is the only way quite frankly, that you're going to reach a final investment decision to build and move forward.

EMP: So putting aside the election-year politics aspect of this for now, it seems there are two – maybe three – primary concerns behind the administration's move here – the pause. One would be the potential impact on climate change and, two, the potential impact on domestic energy costs. There also is an environmental equity concern around the siting of these facilities. So let's dive into the first, shall we, Charlie? The cost issue. LNG opponents since the first export permit was ever issued have raised this issue, saying that shipping domestically produced gas overseas will raise the costs for U.S. consumers of gas. We're now a decade into LNG exports from U.S. ports. The United States is the world's top LNG exporter, correct?

CR: Correct.

EMP: And I think domestic natural gas prices today on an inflation-adjusted basis are probably the lowest they've ever been. There's a glut of natural gas and producers are cutting back production. Am I capturing this correctly?

CR: I haven't heard you say anything inaccurate yet. I think that we have seen growth in LNG exports from 2016 to today go from zero from the lower 48 to now just shy of 14 billion cubic feet (Bsf) on a daily basis. When we first started exporting, we were producing on a daily basis in the U.S. about 70 Bcf a day of production. We have grown to right around 100 (Bcf) in response to not only LNG demand, but also related to demand growth for domestic use of gas here in the United States. So as we have seen that increase, what we have also seen is an increase in production, oftentimes to the detriment of, I think, some of the producers as they look at, right now, as you mentioned today, prices are at $1.53. There was an article in the Wall Street Journal a couple of days ago that talked about when you take sort of inflationary numbers into account, we haven't seen gas prices this low since the early ‘90s. And some would argue I think, were arguing in that article, that it's the lowest that we've actually ever seen natural gas prices domestically. So we just haven't seen what those opponents have been suggesting, this sort of upward pressure on domestic gas prices as a result of exports. And I think that it's important to put some of that in context because when we're talking about, you know, a demand pull from U.S. production, it's relatively small comparatively speaking to other demand centers for natural gas domestically. We're talking on a good day maybe 14% of our total production going towards natural gas LNG exports. So when we talk about that overall, we're not talking about this sort of large share of domestic gas. It's a relatively small number in our overall mix of demand for U.S. gas.

EMP: So a lot of this gas is co-produced with oil. So we're now the world's top oil exporter also, correct? 

CR: Correct.

EMP: But the administration hasn't proposed any moratorium on oil exports, has it? 

CR: Well, no, I think we saw congressional action that would make that a really difficult challenge for the administration to impose a moratorium. 

EMP: I'm just trying to get at the double standard here. 

CR: So are we. So are we. I think that you know, there is a lot of questions, a lot of, I think, frustration, especially, you know, if you sort of take a historical snapshot, we have worked very closely with this administration following the invasion of Russia into Ukraine in really in making that effort to help supply our allies with natural gas that they so desperately needed. You know, obviously we saw significant curtailment of Russian gas into Europe and so Europe was desperate and looking for a way to backfill some of that lost supply of natural gas that they were getting from Russia. And the Administration called on industry to help reroute those cargoes to Europe rather than sending them to Asia. The industry responded and really, you know, helped Europe keep the lights and on keep the heat on during winter. And in return, what we've seen is now, this announced pause, which sort of seems to fly in the face of all of the progress that we were making to make sure our trade partners and allies were getting the gas that they needed.

EMP: Are the European countries raising concerns?

CR: Yes, absolutely. We've seen that. We've heard that. We've had conversations, not only with the actual buyers of that gas – oftentimes large utilities – but also with the European Commission expressing concern. You know, we've come to find out that they were given about a day-and-a-half notice from the administration ahead of this announced pause, so very little time to react. I testified before Congress in the Senate a couple of weeks ago, with a colleague from Eurogas who was just talking about all of the concerns that they have over reliability that otherwise had not existed prior to this pause. It has raised, I think, and called into question, what had been sort of bedrock principles of U.S. LNG exports, which was the reliability, the sanctity of our contracts, the idea that the regulatory process here in the U.S. was largely settled. No one was asking questions about how the approval process worked up until this point. And now we're getting these questions wondering about, you know, is U.S. gas as reliable as it had once been perceived to be before this pause?

EMP: Well, let's talk about the international market that our exports are part of. So we're the top provider of LNG globally?

CR: That's right. Yeah. In 2022 we went back and forth between Australia and Qatar and the United States. In 2023, we became the largest exporter and it's expected that with the projects that are currently under construction, we will remain the largest for the foreseeable future. And likely, if this pause is lifted, and we see additional projects approved at some point in the future, we'll continue to hold that title.

EMP: And I guess there are two main sinks for this production. You've got Asia and Europe? 

CR: That's right. 

EMP: And I guess there's competition between these two markets and that's affecting the global price for LNG?

CR: Yeah, it really has. And Europe has had prior to this point was not nearly considered the market that it has become as a result of decisions that the Europeans have made to move away from any and all Russian gas. Now they're still taking Russian LNG. It's sort of the unsaid sort of secret that's currently out there right now that Europe is still importing Russian LNG. They don't really have much of a choice in some ways, however, they're continuing to push to lower that number and so demand out of Europe, given the declining production volumes in Europe are growing. And so we're seeing that demand for LNG grow in Europe. We're seeing demand in Asia, especially out of China and other emerging markets, really ramp up. And so you see this sort of almost on a monthly basis looking at what the price point into these regions, flipping back and forth, over which region is more profitable for cargoes to be moving to.

EMP: Well, I guess that's a good setup for the second issue, which is contribution to climate change. A lot of the feedback that I've seen from those who object to the moratorium is that providing these cargoes to Europe and Asia, aside from the national security implications of Europe – but particularly in Asia – it's going to allow them a fuel resource that they can use to retire or supplant their dependence on coal-fired generation. And therefore it's a net positive in terms of climate. Do you have any data to support that?

CR: We do. We've got all kinds of data that supports that, including data from this Department of Energy and from EIA (U.S. Energy Information Administration) and from IEA (International Energy Agency) and other sort of well-studied and accredited institutions globally that have looked at the lifecycle analysis of LNG versus that of coal. And consistently the findings show that, when used for either power generation or industrial application where coal would otherwise be the main fuel source, it displaces and improves CO2, NOx – all of these emissions reductions – and you can look sort of no further than what we've seen happen in the U.S. Emissions reductions in the U.S. from coal-to-gas switching has led to some of the lowest emission levels in the U.S. since the late ‘80s, early ‘90s. And that is really a blueprint that these other countries are trying to follow in effort to reduce their reliance on coal, maybe with the exception of China who is still building record amounts of coal-fired generation and looking to continue to grow. But that's just a broader overall demand issue for China as a country on the whole that they're just starving for energy, on the whole, can't get enough gas. I think China is, depending upon the day, either the largest or second-largest gas consumer in the world. And yet they're still building coal. So there is still all of this room to run for natural gas in these markets. If you look at another market like India, the largest population in the world, desperate for power, desperate for clean power, anxious to buy U.S. LNG, anxious to buy LNG and deploy natural gas on the whole from a reliability standpoint. And so there is all of this room from an environmental perspective to transition these countries that are either emerging markets or already established markets that are looking to transition off of coal and deploy, additionally, renewables. And you know, we've seen that play out here in the U.S. For every megawatt of natural gas that we've seen deployed of power gen, we see another almost megawatt of renewables deployed. Because of the reliability of natural gas and intermittency of renewables, you need that firm commitment underneath to help deploy additional renewables. We've seen that work really well here in the U.S. and others looking to adapt that same model.

EMP: Let's touch on what I guess is the third issue that I saw in the White House announcement, which is the environmental justice or the environmental equity of the siting of these facilities. This is not a new issue to LNG. We have it for refineries. We have it for all sorts of petrochemical processing. Do you have an answer for that? 

CR: Well, I think that when we talk about what an LNG project means to a community, and the impact that that has on those communities, we need to be having a real and frank candid conversation not only with the communities, but with the regulators who are involved with the oversight of these facilities and making sure that we have examined all of these points. And what I would sort of offer is, one, the outreach and engagement that happens in the community. The direct and indirect impacts of these facilities on these communities related to the financial and economic impact is significant. It's important to sort of contextualize some of that order of magnitude these projects are $10 billion to $15 billion in construction costs. When we talk about job creation, these are facilities that take upwards of five to six years to build. Right now Golden Pass is in the final stages of completing their project, for example. They have upwards of 10,000 construction jobs on a daily basis at this facility. When you talk to anybody who's in a construction job working on these facilities, if you can say for the next five years, you're showing up at the same facility working on this job, they're going to say that that is a permanent job. They look at that that that kind of continuity from an impact standpoint, is significant. When we talk about the reinvestment in the communities, especially in education and also improvement for first responders. Not to mention the sort of tax income and benefits that happen there – it’s significant. And then when we go to the environmental side and the impact there. I think it's important to also understand that where we're talking about locating these facilities are in locations where there is already significant petrochem or refining facilities in place. So the measurement that's happening where these facilities are being sited and constructed is already really at a very stringent level where we're looking at this from a regulatory standpoint. You can look at the remand that NextDecade is another project that is currently just reached ID (initial decision) and began construction was remanded by FERC to go back and make sure that they considered all of the impacts from an environmental standpoint. It went through the courts. NextDecade went back through and did the sort of validation that FERC was requiring to make sure that the impact of this from an emissions standpoint at the facility was in line with what FERC’s expectations of the construction and siting of the facility looked like. So we're seeing this this sort of strong desire from facilities, you know, things like carbon capture and sequestration being added to these facilities in order to address the environmental footprint of these facilities even further. Freeport, down in Texas, built an all-electric-drive facility in order to reduce emissions coming out of their facility. So when we hear these arguments, it feels a bit disingenuous that, one, that the industry isn't engaging with the local communities, because I can tell you firsthand that I've seen the opposite through open houses, through engagement, through community education and outreach, and also through the community feedback of the jobs that have been created – both direct and indirect – around these facilities. And then also from an environmental measuring standpoint as well. So, you know, I think that it's important that we continue to have these candid conversations and we have transparency for the public to understand the risks associated with these facilities and also the precautions and plans that are in place to make sure that the public is kept safe and their voices are heard throughout this. If we don't do that, we're going to end up having a much harder time with building any additional facilities. And I think that the industry recognizes that and knows that it's really, really important that we get this part right. And so, you know, the commitment from our industry and from our member companies has been, I think, really, a really great example and a bright spot for us to point back to in the way that we've really tried to make sure we're engaging local communities.

EMP: Well, two points. The jobs that the construction of these facilities provide are generally –people come from out of the area to take those jobs, but they're contributing to the economy while they're there. They're renting hotel rooms or they're renting apartments, they're buying food, they’re buying gasoline, so they're contributing to the economy. You mentioned education. I know firsthand from covering a nuclear plant under construction in Texas years ago, when I was starting my journalism career, a phenomenal contribution to the school system there in Palacios, Texas, for a very small, largely a shrimping community, incredible facilities. So is the same dynamic at play here?

CR: Absolutely. Right. I think when you look at not only at the at the actual school, K through 12 kind of engagement, then also you see college scholarships awarded as well coming out of these communities by the project developers in those areas. Absolutely, though. And also, when we talk about some of those jobs that – you're absolutely right, Bryan, because of the workforce required to build these, there's no way that we can rely on just a local community in order to construct and operate these facilities in the time frame that we've got to do so. But what we can also say is the skilled trades commitment to funding skilled trades for local communities to help create jobs, help to teach welding, help to teach the critical skills that we need to build these facilities, large commitments from our project developers and our members who are trying to make sure that the community does have an opportunity to recognize the benefits directly, not just indirectly, as you mentioned, from grocery stores and car dealerships and those kinds of things, but from an educational standpoint, really engagement at the school district is – I've seen sort of the facilities that have been donated, built, stem technology – those kinds of commitments, just making sure that the community has access to the benefits that these companies can bring to bear.

EMP: So the jobs and economic boost from construction, that's temporary, but the long-term impact is on the tax base that contributes to that well-being of the county or whatever municipality that the facility sits in. 

CR: That's right. So that's where we really see when you talk about these projects, and you talk about these facilities, this is not a five-, ten-year kind of operation. This is a 20-plus year, 25-year application and authorization to export. So these facilities will be operational for the long haul in these regions, in these areas, and these communities. That to your point are largely you know, fishing, shrimping communities that have been underprivileged and underserved for a long time by their state and federal regulators. And now all of a sudden the tax revenue generated by these facilities is just enormous. When you think about sort of order of magnitude, facilities shipping 200-plus cargoes from their facility, when cargoes are somewhere in the $80 million to $100 million apiece per cargo in value, you can start to do the math pretty quickly on what kind of tax revenue that generates for a local community.

EMP: And continuing on the environmental justice theme, the emissions from these facilities, how do they compare to a refinery or a petrochemical complex?

CR: Traditionally what we've seen they are lower than what we see from traditional refining and with the technology that we've talked about adding to that as well as with the third-party validation of gas certification and methane monitoring, we're seeing those numbers creep even lower out of LNG facilities. And so when you look at an order of magnitude, it's kind of difficult to make that apples-to-apples comparison just because of the size and scope of some refining facilities relative to the size and scope of an LNG facility. However, what we see is the new technology that's being deployed at LNG facilities is substantially different than what is at refining facilities. Some of those refining facilities are 30, 40, 50 years old. The oldest LNG facilities that we have down there on the Gulf Coast that's exporting is eight years old. And so our ability to continue to deploy new technology to capture carbon coming out of those facilities, to reduce flaring, it continues to sort of evolve and we continue to be able to make improvements to further reduce that overall footprint of those facilities.

EMP: Are you creating hazardous emissions like a like a refinery or petrochemical plant would? 

CR: Yeah, any situation where we're looking at what's being produced at those facilities, you have the liquefaction process that does require additional chemicals in order to help create that liquefaction. And you've got benzene and some of those other sort of products that come off of the refining at those facilities. But in most cases, we're actually able to capture that. In almost every case we're actually able to capture that and then ultimately, sell that as a secondary product into the market for whether it's petrochem or some of these other feedstocks that come off of when we strip the gas of the byproducts that are associated with gas – often like butane and ethane that come off of natural gas when it's comes in via the pipeline.

EMP: It seems like we've gone through those three issues, the domestic price – doesn't seem to be an issue there. Climate change emissions – doesn't seem to be anything but a positive so, and the environmental justice concerns don't seem to be quite as pronounced as they are for other types of facilities. So what we're left with is this is a an election-year thing. The administration has emphasized that it's a pause. It's temporary. So what do you expect to see on the other end of this after November when we can assume an end to this reevaluation? 

CR: My crystal ball is somewhat dusty. So I'm not sure that I'm ready to get into a prediction. 

EMP: Charlie, it must be all those emissions from the LNG export facilities that are clouding your vision.

CR: Yeah, I'll take a stab at this and maybe we can come back and revisit it once it's lifted and sort of see where we wind up, but I think that there are a couple of things that are worth noting. One, I don't have a ton of faith in the administration when we talk about pauses. They introduced the pause or a moratorium however you want to whatever you want to sort of call it on offshore and it took congressional action in order to get them to lift that pause. And so, you know, I wonder if we wind up in the same sort of situation where we keep hearing, it's coming, it's coming and you know, we don't see a result. Two other things that I think are worth sort of highlighting is, one, the Department of Energy has looked at this, has looked at both the macroeconomic impacts and the lifecycle analysis of LNG exports. This will be the third time – I apologize – the fourth time that we've looked at the macroeconomic analysis, and the third time that we've looked at the lifecycle analysis of LNG exports. In each instance, once we had started issuing applications, we did not need to pause in order to do so. So in other words, the Department of Energy was able to walk and chew gum at the same time, as the Secretary likes to say over at DOE. So it leads exactly down to the point that you were making. It begs the question as to why now do we need to pause when in previous studies which, for all intents and purposes, DOE has said they plan on looking at similar methodologies using the same national labs who's looked at these, who's conducted these studies in the past with the Department of Energy. So it just begs the question as to why do we need to pause in order to do that. And then let's just add sort of for additional food for thought that we've just recently passed at EPA the most stringent methane rules anywhere in the world. Not just in the history United States, but anywhere in the world, we’ve just passed the most stringent methane rules anywhere in the world. So it begs the question is, does DOE not think that those methane rules that EPA is going to be enforcing are going to lend better results in the value chain of natural gas production and export? I expect that if they are actually true and honest in this assessment, that the results in theory should be better than what they have been in previous studies because of the new methane rules that are in place, and the reductions that are going to be forced upon the industry to comply with the new methane principles that are in place at EPA. So I think all of these things add up to sort of a bigger question mark that point to this is clearly – it feels very much like election-year politics, that the campaign looked at a key demographic of their reelection success in order to appease them and with that demographic they needed to take some action. When you look at sort of the broader impact of what this pause means, there are four projects that are currently holding their FERC authorizations. So those four projects have full FERC authorization and are waiting on their non-free trade authorization. All said and done those four projects add up to just a little bit under 5 Bcf a day in additional volume. When you talk about overall the things that the administration are saying the reason they need to pause, domestic prices. We don't know on the environmental impact and we want to make sure that we're not going to sort of harm these local communities. These 5 Bcf a day roughly, of additional projects that are immediately pending and could be authorized today by DOE, we're looking like I said at $1.53 gas today – unrealistic that these are going to have any kind of needle-moving impact on domestic gas prices. But what they do have a real impact on is the economic decision to move and build and go forward on these facilities are enormous at local communities. So it's not only that it's calling into question, as we've already talked about, the validity of the regulatory process here in the U.S. on an international stage. And what we've seen as a result is on Sunday Qatar announcing a 20% planned expansion on the back of this announced pause and renewed interest in Qatari LNG, we've seen the Canadian energy minister talk about the window opening for Canadian LNG projects as a result of the U.S. pause. We've seen other regions – you could talk about Africa and Mozambique LNG – some of these projects that otherwise were really on life support now having new life breathed into them as a result of this pause. And uncertainty from U.S. gas supply in 2027 and beyond where these projects would ultimately enter the market that are being impacted by this pause.

EMP: So it has a direct impact already, even though it's temporary, in terms of our market share in this international market?

CR: You bet. And I think that time will tell just how significant it is. We've heard anywhere from eight months to 14 months on the time to complete this study. And then you ultimately have a public comment period that will be open. DOE will have to synthesize all those comments and then figure out what is the ultimate criteria for the new public-interest determination for non-free trade authorizations for exports.

EMP: Well, I noticed the White House on its website posted a number of press releases from environmental groups supporting this action. You talked about the campaign and its analysis of interest groups. Is there anyone besides the environmental groups that would be supportive of this? Are there industrial end-users who are supportive of this? 

CR: No, interestingly enough, we've sent a couple of letters, and NAM, the National Association of Manufacturers, have signed on in support of the same argument that we are making that there is not a benefit to this pause. I mean, LNG, really, if you think about it in the domestic market, has a real stabilizing impact on prices because we don't sort of suffer the whims of weather impacts here. We don't suffer seasonality of manufacturing. We typically take what we say we're going to take almost on an everyday basis as a result of the demand and contractual terms of our offtakers from our facilities. They're not signing six-months, you know, spot market purchases off of excess capacity on a pipeline. They're signing firm pipeline capacity commitments. They're taking that volume almost on a daily basis exactly to the to the volume that they signed up for. And so what that gives is a signal to producers who are drilling for natural gas in the U.S., that market signal that, hey, we know pretty much every single day, we need to produce this 14 Bcf of gas to go to these LNG facilities. And if we have excess capacity on our pipe that is down because of either a weather event or up because of a weather event, we know that LNG is going to continue to take that. And so we see industrials and manufacturing continuing to grow their presence in the U.S. – something like $70 billion of planned industrial projects already under construction that will rely on gas between now and the end of the decade. And the reason they're doing so is because of the low-cost feedstock of natural gas. And that price point is not going to adjust, which is why we see those trade associations and groups that are interested in this signing on saying, look, don't put this pause into place, continue to allow these LNG exports to happen, because it helps stabilize U.S. domestic prices.

EMP: Well, I think the whole story of fracking and the economic benefits that it's provided to the United States is huge and it gets, I think, ignored in the environmental concerns associated with that. You know, certainly there are environmental impacts from fracking as we have environmental impacts with any kind of energy resource. But you know, my history with energy goes back to my early days as a reporter in the ‘90s when we had just lifted the wellhead regulation of pricing and the positive impacts we saw from that. There was a so-called “bubble” that existed and that drove very low prices in the ‘90s for natural gas which helped drive a lot of natural gas generation which was, you know, kind of new in those days. It certainly didn't have kind of market share that it has today. But then, in the early part of this century there was concern about our natural gas supply. I was at FERC. And I remember that the advisory group to DOE had issued a very alarming report that the traditional technology for producing natural gas was starting to wane. They weren't being as productive. And there was a report prepared that FERC helped contribute to that raised the concern that we were going to see $20 prices for natural gas if we didn't (laughter) if we didn't have LNG import capacity. 

CR: Right. 

EMP: And so Cheniere and other companies they raced to develop LNG import capacity. Prices got high because there was a demand-supply imbalance. But before Cheniere could even import a single drop, there was an impact from fracking. All of a sudden, Cheniere and these other companies were retooling their facilities to become export facilities.

CR: It's staggering we talked about the onset of this call. We were exactly to your point, right. I mean, I think that interestingly enough, I got my start in this industry working for Aubrey McClendon at Chesapeake Energy. And so I am I am a well-versed disciple of the benefits of horizontal drilling and hydraulic fracturing. Obviously, Aubrey was a pioneer and Chesapeake was a pioneer in this space and really just unlocking these vast supplies of gas that no one saw, to the point that we saw, exactly right, Cheniere and others building these multibillion-dollar import facilities to make sure we had enough gas coming into the United States to satisfy demand. That turnaround in from let's call it 2008-2009 timeframe when we saw sort of that idea that all of a sudden we could potentially get so much gas that we could potentially send that natural gas out of the U.S. and use those facilities that we built these large LNG storage tanks at and add liquefaction capability to these, all of a sudden became a really compelling argument. And we went from zero – legitimately from zero – from the first application in 2011 with Cheniere to their first export in 2016. That was that was day one, right? I mean, we actually just had the eighth anniversary of the first commercial cargo to leave the lower 48. So when you think about that, in eight short years, we went from a number which was zero in export capacity from the United States to now the largest exporter of natural gas and LNG in the world. And so you know, that happened because of American ingenuity, a stable regulatory process across multiple administrations. Those things are critical in guaranteeing that level of success and ingenuity that came along with that. So it was a zero-export country. And now we have seven operational facilities. We have two more under construction. We have others that are just ready to make final investment decisions, another three or four that are pending at the Department of Energy, a couple other large projects that are pending at FERC. So you can continue to see this number grow even further as we reach the tail end of this decade and into the 2030s. And depending upon which market analyst you want to look at that looks at this globally, demand for gas not really reaching peak demand somewhere until the neighborhood of 2050. So it's not as though these projects that are trying to move forward today that haven't even begun turning dirt or started construction here in the U.S. are going to miss out. I mean, there's still plenty of demand out there around the globe for these projects that are being impacted by this pause and even maybe haven't filed yet that could likely still be built that ultimately will serve a purpose and a role in this market for global demand for natural gas.

EMP: And we have vast reserves of natural gas.

CR: Every time that the potential gas committee looks at this, they revise the number for our reserves upward. (laughter) So you know we continue to see this number (grow) because of the ability to improve the technology that we're deploying for horizontal drilling and fracking and where we're finding reserves and our ability to actually to tap those reserves and access them.  I think about when I first started in 2006 in this space, there were areas where we knew there were gas reserves that we knew we just couldn't – we didn't have the technology and the ability to hit the depth and the laterals that were needed to reach those areas or those spots where the gas reserves were located. And now, we continue to sort of refine that process and improve that process. So I think that we'll continue to see the potential gas committee that looks at sort of the overall amount of gas that's technically recoverable go up.

EMP: LNG export facilities are kind of at the end of the pipeline system. We've got a situation in New England where that market is at the end of the pipeline system. We still have an operational import facility there. Although that is being subsidized, I guess, in some way to remain open. And do we have any other import facilities?

CR: Interestingly enough, I mean, the other facilities, such as Sempra, and Cheniere and Freeport, they all have the ability to actually still import natural gas. They don't, obviously, but they do exist. Those facilities that were the original sort of four or five import facilities that were as they were, as they were originally constructed, theoretically could still take LNG imports in.

EMP: Being at the end of the pipeline system, the FERC pipeline certification process is, I believe, very important to this industry.

CR: Very

EMP: Now I know when I was at FERC, and the fracking boom was just beginning, there was a real concerted effort to certificate pipelines to allow the fracked gas to reach market. I remember the Projects Office being very, very proud at one time when a pipeline was certificated, it started operating and the price differential in the Rockies where there was stranded gas levelized with the rest of the market, because that gas was no longer stranded. There's clear economic benefits to producing gas and to making sure that it's transported to where it needs to be used. Are we developing enough pipelines today to maintain the demand that we see here?

CR: The short answer is no, unfortunately. I wish that wasn't the answer. But the short answer is no. I mean, when you look at – and interesting that you brought up Everett and the terminal outside of Boston and what that means. You're bringing LNG in from places like Trinidad and Tobago and other places because of an archaic shipping law on the books called the Jones Act that doesn't allow us to bring an LNG tanker from, you know, Cheniere or Freeport or any of those Gulf Coast facilities or even Cove Point in Maryland, or Elba Island down in Georgia, up to those regions because they have to be American-flagged and American-crewed boats. We don't have any LNG tankers of order of magnitude operating in the U.S. So therefore, the Northeast is subject to the whims of global gas prices as a result because they can't get a pipeline built to the largest single producing gas field in the world, which is the Marcellus, they can't build a pipeline to get there. And so if you can't get a pipeline built, then all of a sudden your consumers and residents in that region are now subject to a market that makes no sense. If you just want to sort of boil it down into the simplest terms. And then ultimately, when you’ve got takeaway production in places like the Permian, where there's this large amount of associated gas, we've seen some alleviation happen there because it's just pipelines built within Texas. But if you look at sort of the Permian on the whole, if you can't build LNG facilities, and you can't get a pipeline permitted on a federal level to do so, you're going to wind up flaring that gas. Because to your earlier comment, we're the largest oil producer and exporter and that's not stopping. Oil is far more valuable than $1.53 natural gas. It's a no brainer for a producer to flare that gas and keep producing oil. And now there's regulations in place that are going to make that more challenging with the methane rules. Which I think is a fine rule, quite frankly. Our LNG folks are okay with that because what it ultimately means in theory is FERC should be permitting more pipelines because they're commercially viable for export and so we're not doing that we're not going to be able to get pipelines built, which ultimately means we're not going to be able to serve the markets where gas demand is growing. And that's an unfortunate situation that is still a very real problem here today.

EMP: So the Jones Act is a problem for LNG as well as offshore wind. 

CR: Yeah, absolutely. 

EMP: Is there any discussion about trying to amend the law?

CR: There's always discussion. There has never been success. So, what I would say is there would be a strong desire from the industry. Anytime that that subject has been broached, it has met with extremely stiff resistance domestically here from the shipbuilding industry.

EMP: What we have left of one, I guess.

CR: Yeah, that's true. Very true. 

EMP: Climate change, is it real? 

CR: Very. 

EMP: Do we need to act? 

CR: Absolutely. 

EMP: Is there a role for gas?

CR: Without question.

EMP: What is it?

CR: If you want to talk about the sort of partnership that natural gas has with renewables. What we've seen is by having the reliability of natural gas underpin renewables, it derisks the intermittency of renewables. And so when you talk about having a clean and reliable fuel source, produced in a responsible manner that is highly regulated, coming out of the United States, there is no better partner for renewable deployment than natural gas. And so that role of natural gas is not one of, I think, competition with renewables. I think it's a complementary partnership with renewables. As renewable technology grows, there are plenty of places around the world that will look to natural gas because of the cost of renewables. Until renewable costs come down for those emerging markets, for those countries that are burning trees and dung and other sorts of sources for energy, home heating, and to respond to reliability issues – lifting people out of energy poverty – natural gas is a really cheap feedstock comparatively speaking to renewables. It doesn't mean that renewables won’t ultimately win the day. Any transition, regardless, take energy out of the equation, any transition over time is never one that is a light switch, right? It's never a sort of a binary on or off where we go from 100% fossil fuel use to 100% renewable use. It's a transition. And so when we talk about that transition over time, the role and partnership that natural gas will play with renewables – we've seen it playing out here in the U.S., and we're seeing it play out in Europe – there is not a cleaner reliable fuel source from an intermittency standpoint right now outside of nuclear than natural gas. And so they each have an important role to play in filling an energy mix. And so if we're going to have a real conversation about how we get to emissions reduction, natural gas is going to play and continue to play a critical role for the foreseeable future in that space.

EMP: There's been a considerable controversy around FERC’s effort to revamp its pipeline certification process to take into account climate change. Rich Glick is probably no longer chairman today because his efforts in that regard, which were reasonable, I think, ran afoul of Senator Manchin and he just wasn't going to get renominated. What's happening in that regard? Has it been put on a, you'll pardon this pun, but is it on a permanent cold back burner? Or is that something to keep watching for?

CR: We keep close watch on anything that FERC does these days. It is still at this point, a draft. They had introduced that draft, the resistance was fierce and swift from, not just our industry, but many other industries who rely on pipeline gas supply to make sure that, you know, we were continuing to look at this. Obviously, Senator Manchin stepped up and really forced Chairman Glick’s hand in that space, and they had to rescind that to sort of draft. We haven't seen Chairman Phillips really take a look at this any further. But there's no indication that it is no longer being considered. And so I think that there is always a threat that there could be something that could come along from a regulatory process standpoint, that could, you know, really sort of turn the industry on its head and ultimately create a whole set of new challenges that we just today are impossible to predict if and when that might come.

EMP: Is it regulatory paralysis, or is it nimbyism, that's preventing us from building the pipelines that we need today?

CR: They might hold an equal share in that. I think that there is some very stiff resistance from NGOs who are fundamentally opposed to anything with fossil fuels. And you know that I think that you get into sort of the regulatory paralysis by analysis that is uncertain on which formula is the right formula to use for calculation of impact on climate and the challenge that that brings in the courts. It just gridlocks things. I don't know that one is more important than the other. I think both are unfortunate that it continues to slow the progress of what customers are asking for ultimately in the market.

EMP: Well, at least you guys have eminent domain. We don't have anything near that on the electricity side. 

CR: That's been working out not so great lately. So we'll see how that continues to play out. I think that that even becomes increasingly more challenging as we've seen through the courts. Although MVP has really helped to set some new precedent there on some of the eminent domain issues. So it doesn't mean that those challenges aren't there. And I think what we've seen is the playbook on using eminent domain through court challenges has made the cost of a pipeline so exorbitantly high that project developers have had to abandon that because of the ongoing legal challenges being mounted and brought forward.

EMP: Well given the paralysis in terms of pipeline development, and the necessary transmission infrastructure we need to electrify, is there any prospect for permit reform, as Senator Manchin had tried? 

CR: I mean, we sure hope so. We think that, you know, the first sort of round was a really good start and sure think that there is additional room to run with permitting reform. You know, obviously, I think that on the whole folks are, from at least from my perspective on our side, are sad to see someone like Senator Manchin retiring only because a pragmatic voice in a discussion that is oftentimes lacking pragmatic thought is going to be sorely missed when we get to things like revisiting permitting reform further. I know that he is still working to try to figure out a bipartisan path forward on additional reform. Days are numbered as we sort of look at when this Congress adjourns at the end of this year and he steps away. I'm hopeful that we can continue to see bipartisan efforts within Congress to really work towards further permitting reform.

EMP: Interesting that a climate change denier is pragmatic. Well, Charlie, anything else that we haven't discussed that is important for the good of the order here before we sign off? 

CR: No, I’ve enjoyed it, Bryan has been working so we should revisit this once the pause is lifted and sort of see where we're at.

EMP: Alright, it's a date.

CR: Sounds good. 

EMP:  Charlie Riedl, executive director of the Center for LNG, thank you very much. 

CR: Thanks, Bryan. Appreciate it.

# # #