Russia's War in Ukraine Shakes Up The Status Quo in The Global Energy Market
Before Vladimir Putin’s forces invaded Ukraine, Russia supplied 45% of the European Union’s gas imports.[1] In March 2022, shortly after the fighting commenced, Russia began to cut the flow of gas to Europe.[2] Western sanctions quickly followed, and Europe has turned to countries like the United States and Norway to satisfy the continent’s energy needs.[3] The United States has filled the hole in Europe’s energy consumption needs by shipping liquified natural gas (LNG). Natural gas, a fossil-fuel used to power electric grids and keep homes warm during cold winter months, is typically transported by pipeline, and is cleaner than other energy sources like burning coal.[4] LNG producers use extreme temperatures to liquify the gas and transport it via specialized cargo ships. Since the conflict in Ukraine, American LNG producers have more than doubled their shipments of LNG to Europe.[5]
Amidst this backdrop of European energy uncertainty, both the United States and the European Union (EU) are taking steps to clean up their energy production and consumption. The council of the EU, which represents member states, recently struck a deal to impose methane emissions limits on foreign-made natural gas coming into the continent.[6] If American LNG does not comply with the EU’s emissions limits, exporters in the United States will lose a critical buyer for its gas. Currently, American methane emissions are higher than that of other large producers like Canada or Saudi Arabia—meaning the U.S. may need to clean up its natural gas processes to comply with new EU regulations.[7]
For its part, the United States made energy headlines when President Joe Biden announced a pause on its LNG permitting process.[8] Currently, exporters in the United States must obtain a license from the Department of Energy (DOE); the DOE provides such licenses unless it determines that the project is inconsistent with “the public interest.”[9] The President’s announcement explained that the administration is pausing all reviews while it reevaluates its methodology and considers the role of environmental considerations in its review process.[10]
Thus, it seems that the United States and Europe are aligned on two potentially conflicting policy priorities: battling Russian energy leverage and cleaning up energy consumption and supply. To square this circle, the U.S. needs to elaborate a “public interest” review methodology that transparently states its goals and includes all relevant stakeholders.
Europe, keen on avoiding subjecting itself to Russia’s energy whims, is looking for long-term supply from the United States. As such, the Biden administration should be clear about whether, if at all, future LNG projects are consistent with the public interest. The administration should provide guidance as to what extent fossil-fuel energy projects can align with its environmental goals. Relatedly, President Biden’s DOE needs to explain how their allies’ energy security figures into the calculus. Is “the public interest” global, including geopolitical factors, or is the consideration going to focus largely on domestic ecosystems and communities? Such clarity would give confidence to both the American domestic energy sector and foreign allies that the U.S. has considered all the various interests involved. And, given that this review process concerns exports, the DOE’s process should include consideration of foreign regulations like the EU’s new methane limits. An export license is only valuable if there is a market for shipments, so it is critical that the DOE provides avenues for compliance with regulations like these. By doing so, the DOE can create a cleaner, more efficient market.
William Brody is a staff member of Fordham International Law Journal Volume XLVII.
[1] Matthew Dalton & Eric Sylvers, The Unexpected New Winners in the Global Energy War, Wall St. J. (Sept. 19, 2023), https://www.wsj.com/world/europe/global-energy-europe-russia-africa-gas-ab98af2f.
[2] Id.
[3] Can American Liquefied Natural Gas Rescue Europe?, The Economist (Nov. 10, 2022), https://www.economist.com/business/2022/11/10/can-american-liquefied-natural-gas-rescue-europe.
[4] Editorial Board, Biden’s LNG Decision is a Win for Political Symbolism, Not the Climate, Washington Post (Jan. 29, 2024), https://www.washingtonpost.com/opinions/2024/01/29/biden-lng-natural-gas-exports-europe/.
[5] See Dalton, supra note 1.
[6] Kate Abnett, EU agrees Law to Hit Fossil Fuel Imports with Methane Emissions Limit, Reuters (Nov. 15, 2023), https://www.reuters.com/business/environment/eu-agrees-law-track-reduce-methane-emissions-oil-gas-sector-2023-11-15/.
[7] Id.
[8] White House, Press Release, “Statement from President Joe Biden on Decision to Pause Pending Approvals of Liquefied Natural Gas Exports,” Jan. 26, 2024, available at: https://www.whitehouse.gov/briefing-room/statements-releases/2024/01/26/statement-from-president-joe-biden-on-decision-to-pause-pending-approvals-of-liquefied-natural-gas-exports/#:~:text=During%20this%20period%2C%20we%20will,existential%20threat%20of%20our%20time.
[9] 15 U.S.C. § 717b(a).
[10] See White House, supra note 8.
This is a student blog post and in no way represents the views of the Fordham International Law Journal.