Wed, Feb 12 2025 12 February, 2025

Despite Trump, U.S. LNG legal woes may continue

Trump will issue declarations on his first day in office to support the expansion of U.S. LNG. However, energy analysts see legal challenges continuing to dog the industry.

Venture Global's Calcasieu Pass LNG in Cameron Parish, Louisiana (Photo: Nick Cunningham/Gas Outlook)

Incoming President Donald Trump has vowed to supercharge U.S. LNG exports, but even with a friendly government, the country’s LNG industry still faces legal and regulatory headwinds that could delay new projects, according to a recent report.

During the Biden administration, the U.S. became the largest LNG exporter in the world, and it is on track to double export capacity again by 2028, due to projects that are already under construction.

But his high-profile “pause” on new permitting, issued in January 2024, froze projects that had not yet received their permit to export to countries that don’t have a free-trade agreement with the U.S. (which is most of the world, including the largest LNG importing economies).

That effectively shelved FIDs on new LNG projects in the U.S. over the course of 2024. The Department of Energy (DOE) issued their final analysis on the impacts of exporting additional volumes of LNG in December, and warned that more exports could drive up natural gas prices and also lead to higher greenhouse gas emissions.

President Trump has said he will end Biden’s LNG “pause” on his first day in office. Beyond that, the next steps are a bit unclear. He has signalled that he will greenlight new LNG or somehow rescind the DOE report. But there are risks for the industry if he tries to approve new LNG projects without providing a durable policy framework that can withstand legal challenges. The DOE report from December could provide LNG opponents with legal ammo, as it offers evidence that further LNG exports cause harm to the public. Some of Trump’s own advisors believe he should take a “patient approach,” according to Reuters.

In fact, U.S. LNG projects that will benefit from the scrapping of the permitting “pause” still face numerous obstacles.

“There are several LNG projects with enough commercial momentum to move forward that are stuck in regulatory or legal limbo, but even projects that have reached FID are not safe from legal challenges,” RBN Energy, a Houston-based energy consultancy, wrote in a recent analysis.

Venture Global’s CP2 project, to be built adjacent to its existing Calcasieu Pass facility in southwest Louisiana, may celebrate the lifting of the pause, which could lead to DOE issuing an export permit.

But CP2 still faces lengthy delays over a challenge in federal court over a separate permit, its construction authorisation from the U.S. Federal Energy Regulatory Commission (FERC). DOE regulates the export of natural gas, while FERC regulates the LNG terminal itself.

A federal court in December concluded that FERC’s environmental analysis was too cursory. That could cause further delays to the project. The 20-million-tonne-per-annum (mtpa) CP2 project is massive, and it became the face of the national battle over the future of U.S. LNG.

“The company had hoped to start construction in September 2025 to stay on track for first LNG exports by 2028 but that timeline is looking increasingly dicey,” RBN Energy wrote.

A similar dynamic affected Commonwealth LNG, another LNG project just on the other side of the Calcasieu River from Venture Global’s CP2. It too ran into legal trouble in the summer of 2024, and will need a deeper FERC review before it can move forward.

Meanwhile, Rio Grande LNG in south Texas is “perhaps the biggest cautionary tale,” RBN said. The project received FID in 2023 and is already under construction. As such, it was not impacted by the LNG “pause.”

Nevertheless, a federal court shot down its FERC authorisation last August, which sent a chill through the entire U.S. LNG industry.

FERC said it will redo its analysis, and could issue a new authorisation in late 2025. The extent of delays affecting the project are unknown, ranging from a minor hiccup to something more significant, depending on the outcome of the legal process.

“The battle over Rio Grande could have sweeping implications for future projects. A convoluted regulatory process that is constantly and successfully challenged in court makes LNG a risky investment,” RBN Energy wrote. “These are multibillion-dollar projects and the prospect of losing it all in court after FID is a pretty significant disincentive for the investors needed to support future LNG development.”

“Regulatory and court challenges have made it increasingly difficult for new projects to take FID and, given that court challenges actually happen after projects are approved —sometimes even after FID — it’s a very unsettled world right now.”

Even for projects that do not have regulatory trouble, they are running into problems of their own making.

In 2024, volumes of U.S. LNG exports stayed roughly flat, despite previous forecasts of growth. That was largely due to construction delays at several LNG projects on the Gulf Coast. As Gas Outlook reported, the ExxonMobil and Qatar-backed Golden Pass LNG in Sabine Pass, Texas, saw construction come to a halt for several weeks due to a contentious payment dispute between the project developers and the engineering firm contracted to do the construction. That firm, Zachry Industrial, declared bankruptcy.

Golden Pass suffered billions of dollars in cost overruns and the project may not come online until 2026, a year later than previously expected.

Separately, Venture Global’s Plaquemines LNG in southeastern Louisiana recently started shipping LNG cargoes, but has seen minor delays.

In short, the Trump administration will provide a much easier environment for the expansion of U.S. LNG, but that doesn’t mean LNG projects face a future unencumbered with legal, financial, and regulatory challenges.

However, there is one area where Trump can provide an immediate lifeline to projects that have struggled to move forward.

Trump may alter the existing DOE policy on export license extensions. Current DOE policy on the export permit, which expires after seven years if the project has not reached completion, does not offer an extension unless the project is under construction and can demonstrate extenuating circumstances that make a case for why it needs more time. At the end of the seven-year window, the permit would expire and the project would have to start over in the queue and apply for a permit again.

But Reuters reports that Trump will make it much easier to obtain extensions, which will be a boon for U.S. LNG projects that have not yet reached FID and are having trouble securing contracts with buyers or obtaining financing.

“The move will give them greater certainty and a longer timetable to sell their volumes and raise financing for the project,” Jason Feer, global head of business intelligence at LNG brokerage Poten and Partners, told Reuters.

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