You’re out of free articles.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
Sign In or Create an Account.
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Welcome to Heatmap
Thank you for registering with Heatmap. Climate change is one of the greatest challenges of our lives, a force reshaping our economy, our politics, and our culture. We hope to be your trusted, friendly, and insightful guide to that transformation. Please enjoy your free articles. You can check your profile here .
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Subscribe to get unlimited Access
Hey, you are out of free articles but you are only a few clicks away from full access. Subscribe below and take advantage of our introductory offer.
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Create Your Account
Please Enter Your Password
Forgot your password?
Please enter the email address you use for your account so we can send you a link to reset your password:
The full conversation from Shift Key, episode one

This is a transcript of episode one of Shift Key: The Messy Truth About America’s Natural Gas Exports.
Robinson Meyer: Hi. I’m Rob Meyer, I’m the founding executive editor of Heatmap News. And you are listening to the first episode of Shift Key, a new podcast about climate change and the shift away from fossil fuels from Heatmap. My cohost, Jesse Jenkins will join us in a second and we’ll get on with the show, but first, a word from our sponsor.
[AD BREAK]
Meyer: Hello. I’m Robinson Meyer, the founding executive editor of Heatmap News.
Jesse Jenkins: And I’m Jesse Jenkins, an energy systems professor and climate policy expert at Princeton University.
Meyer: And you are listening to the first episode of Shift Key, a new podcast about climate change and the shift away from fossil fuels from Jesse and me, brought to you by Heatmap News. On today’s episode, we are going to talk about the President’s decision last month to pause approvals for new export terminals for liquefied natural gas. I think it’s been the biggest climate story of the past few weeks. It, as you have already heard, is quite complicated. We’re also going to talk about our upshifts and downshifts for the week. So let’s get into it!
Last month, Jesse, the Biden administration temporarily stopped approving new liquefied natural gas export terminals. They said this was going to allow the energy department to study the effects they would have on the climate, that exporting liquefied natural gas would have on the climate, and it was basically taken kind of immediately as a victory for climate activists. The President said in a statement that, “During this period we will take a hard look at the impacts of LNG exports on energy costs, America’s energy security, and our environment. This pause on new LNG approvals sees the climate crisis for what it is: the existential threat of our time.”
You have written about, or you’ve tweeted about, this pause. I have written a little about it. I think it’s kind of worth flagging that there is something weird about this whole policy discussion. The announcement is that the President has decided to pause new approvals from the energy department of new export terminals of liquefied natural gas. It is not clear what terminals exactly we’re talking about. Because there are some terminals that are already operating, there are some that are under construction—those have already been approved, those aren’t affected by this announcement at all. And then there’s like, some number of terminals in the pipeline. What’s even at the heart of this discussion? What did the President actually do, Jesse, and what terminals are we actually talking about? Because I think there’s tons of numbers floating around about the effect that this pause will have or not have—what is the scale of even the export infrastructure that we’re talking about?
Jenkins: Yeah so it’s important to get our heads around the scale of LNG, or liquefied natural gas exports already, which have really surged in just a few years’ time to a pretty significant scale. So already, existing export terminals in the U.S. can export about, or can consume about, 10% of all U.S. natural gas production, as of 2023. So that’s a big chunk. One tenth of all the gas that we’ve produced in the country can be shipped out of these existing export terminals. That’s up from zero as recently as 2016. So this is all very recent construction. And already under construction are another set of terminals that have their permits approved, are unaffected by this recent decision by the President. Those would basically double our current export capacity. They would be able to consume about 11% more of 2023 gas production. And then beyond those ones which already have their financing lined up and are under construction, there’s a bunch of additional terminals that have already been approved as well, but haven’t quite lined up the financing and long-term offtake or buyer agreements they need to turn a shovel and get started. Those, if all completed, and there’s no guarantee that they would finish, but if all completed, that would almost be equivalent to total U.S. current exports again, so another 9% of all U.S. gas production.
So, what we’re talking about here is the next tranche of terminals that are seeking approval now, but haven’t lined up their permits from both the Federal Energy Regulatory Commission and the Department of Energy. They are charged by Congress both with determining the environmental impact and also whether these terminals are in the public interest. Any exports of natural gas have to be approved as “in the public interest.” We’ll come back a bit later to how exactly we think about that term. So what this pause is doing is basically saying, “Hey, we’ve added a ton of terminals very quickly. We’ve got a lot more in the pipeline, coming up soon. And we have yet more terminals asking for approval. Maybe we should pause and rethink whether or not that scale of export is in the public interest.” And the biggest terminal that is at sort of the heart of this debate right now is—I’m going to reveal my lack of Louisiana French here—but, Calcasieu Pass or CP2. So this is the second and very large expansion of an existing terminal in Louisiana on the Gulf Coast near the Texas border. So this is a big terminal that already exists. The new one would be, I think the largest yet. It’s about a 10 billion dollar project. And it itself, that single facility, could consume about 3% of all U.S. gas production today.
Meyer: I think that’s a very important point, just to go back to what you were saying earlier, which is there’s a set of export terminals already operating—today those consume about 10% of U.S. natural gas. We are locked in to roughly double that, to more than double that, without anything related to this decision.
Jenkins: And we could even triple it.
Meyer: And we could even triple it basically if everything that already has approvals is built. And that’s not necessarily likely. When you talk to energy analysts, they’re like, “Projects get approved here that will never actually get built or secure the financing.” But we could triple it. And so to some degree, this whole discussion—maybe this is a very poor way to frame it—but we are talking about an increase in LNG export capacity that is so far down the road. And also, so removed in some ways, from what’s actually concretely going to happen in the economy—like, what is already locked in—that in some ways it just gives perspective to the whole conversation. Because we are not talking about whether there’s going to be more LNG in 2027. The U.S. is going to be exporting a huge amount more—potentially double—the amount of LNG that it’s exporting now in 2027 or in 2030. We are talking about how many additional LNG terminals on top of that that the U.S. builds, which presumably would then be operating for several decades to come, right? Operating through the 2030s, through the 2040s. This is a question almost about where U.S. LNG export capacity is going to top out and not about will we be exporting more gas in 2027 than we are now, because we know that we absolutely will be exporting more gas in 2027.
Jenkins: That’s really important context for this, because if you hear some of the public debate about it, or some of the reaction from the oil industry, or the gas industry or others, they’re trying to pin this as if Biden is saying, “No more LNG. We’re not going to do LNG exports.” As if it were affecting our current exports, or we’re going to cancel projects already under construction. The reality is that that’s not true at all. And I think the way you framed it is good. Really the question isn’t “Are we going to be able to secure our allies in Europe right now during their current effort to shift away from Russian natural gas?” It’s not, “Are we going to be surging exports?” We will. It’s “What do we want the U.S.’s contribution to the global energy supply mix to look like in the 2030s and 2040s, when the facilities that are currently being permitted would be online and operating?” ‘Cause they’re going to operate for at least 20 years to pay back their investors, at least that’s what they want to do if they don’t want to become stranded assets.
Meyer: It’s kind of worth backing up here for a second and giving context about just how much has changed in the world of LNG, even in the past decade. Less than a decade ago, in 2016 was when the U.S. started exporting liquefied natural gas. From that moment, from when we started exporting LNG, to now, we have gone from obviously having no LNG export industry, to having the world’s largest LNG export industry—surpassing Australia and Qatar, which were previously the two biggest LNG exporters worldwide. I wonder if you could just talk a second about how did we even get to this place, where the U.S. is not only exporting liquefied natural gas but determining the world’s supply of liquefied natural gas, and where these export decisions and export approval decisions made by the federal government have an incredibly important role in determining just how much LNG there will be worldwide?
Jenkins: Yeah it’s actually really remarkable. The whole story of the U.S. gas industry over the last couple decades has been as transformative as the story around how cheap solar P.V. and batteries have gotten, for example. When I started studying energy topics, first got turned on to these issues in the mid 2000s, I started researching these topics and the context for LNG at that point was that the U.S.’s supply of natural gas had peaked and was declining. And we were net importers of gas, and were discussing permits and approvals for LNG import terminals around the country, including one proposed for Coos Bay, Oregon, where I was going to school at the University of Oregon. One import terminal is built in Everett, outside of Boston. But other than that terminal, what happened instead is that we didn’t build any of those import terminals, and the ones that had started as import terminals, flipped the script and started to become export terminals instead. What changed between 2005 and 2016 was the shale gas revolution. It was just starting to take off around the time when we were talking about imports, that companies like Mitchell Energy had figured out how to use directional drilling and hydraulic fracturing to unlock all of this natural gas that was stuck in tight pores within shale formations all across the country. That transformed us from a net importer to a net exporter of both natural gas and oil over the course of about a decade. So, huge reversal. From the time President Obama was thinking about these terminals in his administration, when we were mostly thinking about imports, by the end of his administration they were approving the first export terminals that then were built under the Trump administration, and here we are now.
Meyer: I think it’s important because, first of all, this is a kind of forgotten chapter of U.S. energy policy—like the 2006 energy bill which still shapes a ton of energy policy in the U.S., most notably because it revamped how fuel mileage standards worked, but a whole idea, a whole animating idea behind that law was that the U.S. was about to run out of natural gas, which it had had in kind of limitless supply for decades before that, and we had to figure out what we going to do about that. But then I think at the same time, there’s this other point that comes out of that too, which is that in this announcement that’s going to pause export terminal approvals, Secretary of Energy Jennifer Granholm said that the last study of how LNG affects the climate, of how U.S. LNG exports specifically affect the climate, was conducted in 2018. And 2018 is like 5 years ago now, I guess 6 years ago now, which is long enough that it does make sense to go back and study that. But if you think about it being conducted in 2018, and the industry had only really started in 2016, I think it does actually reveal just how outdated that study may be, and just how much has changed in such a short period of time.
Jenkins: Yeah, it’s almost like maybe we want to pause and take stock of how fast this is moving and think about where we want it to go from here. I think that’s one of the most compelling arguments, to take stock of what’s happened. Because this has been a very rapid change in the U.S.’s role in the global energy supply mix, in the certain geopolitical implications of that, in the implications for the American economy, both on the supply side, the role of gas producers and shippers and the revenues that that brings in. But also just as importantly, the impact on U.S. natural gas prices, and the impact on consumers and industries that depend on natural gas here, which have also been all of a sudden dramatically affected by global markets now, because we’re tied to, in a much bigger way, the impacts of global demand for LNG here in the U.S.
Meyer: Before we move on and talk about what this means broadly, I want to bring up another facet of this discussion, and another facet of this debate. I think the Biden administration decision—one subtext of all of the news about it—is that it caught activists a little bit by surprise. Climate activists had begun campaigning around the LNG export terminal issue, and they had begun lobbying Biden to do it, but he did it very, I think earlier than was expected, and he did it before there was full mobilization around this idea. And that’s quite interesting. I think it’s interesting because it reveals how the Biden administration is thinking about this, and thinking about its relationship with activists. I think it’s interesting because it reveals how eager the administration is to cater to climate activists and to cater to what it sees as interests that particularly motivate young voters. But it also means that some ideas that activists used have just, never went through a cycle of getting talked about or covered. I just want to talk briefly about this idea that I think activists have particularly focused on in campaigning against these terminals, and this is this idea of leakage. The claim that activists have made, and the claim that the left-aligned climate movement has made is that liquified natural gas is not only bad for the climate, it’s actually worse for the climate than coal. When energy experts tend to think about natural gas, they’re like, “Well, it’s bad if it replaces renewables but it’s good if it replaces coal.” And the claim that the climate movement has made is basically, “No no no. It’s actually worse than coal.”
There’s been a lot of citations of this one study by Robert Howarth who is a professor at Cornell. The study has not been peer-reviewed to my knowledge, it has also not been published in a major scientific journal, or in a scientific journal. In fact, the version if you find it online, is basically a PDF. What he claims in the study, which I should say is not what the conventional take on LNG has been, is that if you count up all the leakage, all the places across the natural gas systems—the pipelines, the storage containers, the tankers—if you count all the places where methane leaks out of the system, then natural gas, and especially liquified natural gas, is worse than coal. It’s 30% worse. And if you move LNG across the ocean on particularly old tankers that are very leaky, than natural gas is not only 30% worse than coal, it’s three times worse than coal for the climate. And this set of claims about leakage is interesting because I would say, first of all, it’s a very hard set of claims to reconcile with what the conventional energy accounting is on leakage. But number two, Bill McKibben wrote about it for The New Yorker, it’s kind of permeated the discourse without a lot of interrogation of whether it is true per se. And that isn’t to say that it has to be true for the Biden administration to have made the correct decision here, but it is an extremely important piece of the messaging and the rhetoric around this decision that has not really been interrogated at all yet.
Jenkins: Yeah and there is a wider range of literature on this which Howarth has contributed to over the years in peer-reviewed journals, but is not of course the only one looking at this question and the sort of wider range of literature shows a bit of a different picture. I took a look at the working paper from Howarth. There is a story you can tell if you add it up in a certain way, that there are some shipments of LNG that have very high leakage rates that could be on par with or worse than coal-fired power, that it might displace on the other end. But it is contained to certain circumstances, like you mentioned the really old tankers, that don’t capture the gas that boils off as liquified natural gas is shipped and gets hot enough to start to evaporate, turn back into a gas. We should probably mention, to keep LNG liquid, you have to cool it to minus several hundred degrees in order to keep it in a liquid state and make it dense enough to ship on these tankers. And so that takes a lot of energy, but it also means that some of it boils off, effectively, as it gets above that liquefied point as it ships. Older tankers will vent that to the atmosphere as methane, and methane is a very potent greenhouse gas, particularly on short time horizons. It doesn’t live in the atmosphere as long as CO2, because it’s photodegraded in the atmosphere by sunlight, and breaks down into its constituent parts over time. So the potency of methane relative to CO2 really depends on what time period you’re looking at. So in the scientific literature there’s two shorthands for this that are commonly used. One is the global warming potential over a twenty year period, and the other is the global warming potential over a hundred year period, so GWP20 and GWP100. Basically what that does is tries to integrate the total warming impact that methane emissions or other non-CO2 greenhouse gases have over that time period and then compare it to the amount of impact that a ton of CO2 would have. CO2 is very different from the other greenhouse gases because it’s basically permanent, once it’s up in the atmosphere, it will stay there for centuries, because the processes that pull CO2 out of the atmosphere are very slow. It’s, you know, weathering of rocks on geologic time scales, a little bit of absorption in the oceans each year on net, and so it takes a very long time for CO2 to come out of the atmosphere. For human purposes, it’s effectively permanent.
So if you care a lot about short term impacts, over the next ten or fifteen or twenty years—and you might care a lot about that if you think we’re close to certain irreversible tipping points in the climate system, then you care a lot more about methane than you do about CO2. But if you think that what really matters is the long term total concentration of CO2 in the atmosphere, because that’s what’s going to drive long term equilibrium warming impacts—the flip side of methane not lasting very long, is if we cut it, it will very quickly affect temperature. So it’s a much more direct kind of thermostat knob to turn on than CO2. It’s closer to true that methane is a flow problem and CO2 is a stock problem, so it’s about the cumulative amount of CO2, versus about the annual emissions of methane. Say we focus on CO2 now, and then we cut methane in ten to fifteen years, that will have a very immediate impact on warming circa 2050. Whereas if we focus on methane now and let CO2 accumulate, that’ll have a near-term impact, in the 2030s and 40s, but it will potentially lead to greater warming in the long term. So it’s a really complicated picture. Where you come out on the coal versus gas side of things really hinges a lot on whether you’re looking at this near-term impact or this centuries-scale impact. And whether you’re assuming that we are using very old leaky container ships for LNG shipment, or the more modern ones that don’t let all that energy in that methane get wasted, they capture that methane on board, and use it to power the engines and cooling equipment that keeps the LNG liquid throughout the shipment. And Howarth’s paper actually looks at that too, and shows that for modern tankers, the impact is much smaller than for the worst case scenario.
Meyer: This question about the 20-year versus 100-year horizon, this is the actual disagreement at the heart of the Howarth paper. Is this right, that basically everyone knows that these LNG systems are somewhat leaky—it’s that if you’re looking at a 100-year timescale, you care less about those leaks because the methane that leaks out is degraded by the time you get to year 25 or year 50, and that warming potential that the leaked methane contributed is kind of gone. But if you look at a 20-year timescale, you care a lot because of the greater role that leaky methane plays on short timescales. Is that right?
Jenkins: I think that’s one. I think there’s three things that you have to do in order to come up with the numbers that Howarth does. One is, you have to focus on the 20-year potential. Two is, you have to focus on worst-case leakage scenarios rather than more optimistic scenarios or more forward-looking scenarios that reflect the fact that all of these new exports are going to be carried on modern ships that don’t allow that gas to be wasted. They consume it and use it as their fuel instead of diesel. So that has a much more modest emissions impact. And then also that we’re not going to be significantly reducing methane emissions from the U.S. oil and gas supply chain, which is the current policy of the Biden administration, right? With the methane fee that was established by the Inflation Reduction Act and passed by Congress last session, and methane regulations that were finalized at the EPA under the Biden administration in December, both of which should significantly reduce methane leaks across the U.S. side of that supply chain. So if you look at, say, 2030, when CP2 might be coming online, by that point, if those policies work as intended, U.S. leakage rates should be much lower than they are now, and the modern ships that are built to carry LNG from these new terminals that we’re building now, will avoid those significant shipment-related leakage that gives you the worst case picture.
Those are two big pieces: the 20 year versus 100 year potential, and your pessimism or optimism about leakage. There’s a third piece, which I think we can get into a little bit later, which is what scenarios you assume about what all of that U.S. LNG displaces on the global stage. And if part of that is displacing other people’s natural gas production, which is very likely, then the leakage is very true on both sides of the pond, right? There is leakage in Russia which is actually huge—one of the worst in the world. There’s leakage in other gas producing regions that if we might be displacing, and if you count that on 20-year timescales, it’s also very large. And so the offsetting effect of displacing other production is also quite relevant, and I didn’t see that taken into account in Howarth’s work.
[AD BREAK]
Meyer: Since this news came out, I think there's been a lot of discussion online that says, you know, about whether this is necessarily the optimal choice. Whether this is necessarily, could we be using that gas to do something else? How should we be managing it? And I just want to make a point before we go on that This is literally what climate policy means. There’s a sense I see from some places, which is like, well, “Is cutting off fossil fuel exports at this very arbitrary place, the optimal policy?” And I just want to make the point that like, number one, we are not on an optimal policy pathway at all. And in the absence of a policy that I think both you and I think is very unlikely to pass, which is a globally normalized carbon price that's imposed evenly in all jurisdictions and is priced at a level that we can attain the 1.5C or 1.6C, whatever end temperature goal we want to achieve—
Jenkins: Yeah, I'm going to go ahead and say that's unlikely.
Meyer: Yes, in the absence of a global carbon price that is uniformly enforced across all jurisdictions, we are going to make suboptimal decisions. And not only are we gonna make suboptimal decisions, but we are going to stop investing in fossil fuels below what would be economically optimal if climate change didn't exist. That's literally what climate change means. And at the same time, we are going to invest above what would be economically optimal in all of these fossil fuels if you take climate change into account, because that is the signal failure of global climate policy, is that we keep plowing money into fossil fuels and under-investing in alternatives and in scaling up alternatives. We’ve underinvested in those things for at least twenty years. That’s a different show about whether we’re still doing it or how much we’re still doing it. I just want to get into this whole discussion by saying when we talk about whether we're fiddling knobs in the right way, or enough this way, or enough that way, or whether we're taking all these things into account, we are never going to do this perfectly. And the whole point of climate change is at some point you just have to stop investing in the fossil fuel system.
Jenkins: Yeah, economists call this the second best policy or third best policy. I just call it “the real world.” We’re all just muddling through all the time and that's how we're going to make progress or not is whether we muddled through better or worse. So I agree, it's theoretically helpful to think about what an economically ideal rationalized policy would be. But we're so far from that world that I think the question is, “is this better than the alternative decision you could make about this particular thing right here?” And hopefully, that's the view that the Department of Energy is taking when they think about the public interest here. It's not like, “Well, could we have had some more ideal climate policy that meant we were doing something else over in this other part of the economy instead of doing this?” That's an interesting conversation to have on Twitter, but maybe not the core of the question that the DOE and the Biden administration are grappling with right here.
Meyer: Yeah. So I think at the heart of this whole thing, including at the heart of this question of what’s in the public interest, is this question of trade-offs. Because when we export liquefied natural gas in the U.S., we’re making a series of trade-offs about how the U.S. energy system should work, and how American consumers and Americans living among energy infrastructure should interact with that energy system, and we’re also making a series of trade-offs about how the world should power itself, and what kind of fuels the world should use. At the most basic level there’s this question of, you know, if you export liquefied natural gas and countries burn it instead of coal, that’s good. And if you export liquefied natural gas and countries burn it instead of building renewables, that’s bad. That is the most basic calculation here. But it is actually very, very hard to know which of those two paths you’re taking as you continue to increase LNG export capacity across the U.S. and as you export every additional ton of liquefied natural gas.
Jenkins: Yeah that’s right and it’s even more complicated, because what you basically have are similar but counter-acting and opposite effects on both sides of the trade equation. So whatever’s happening abroad in terms of natural gas displacing something there, we’re having the opposite effect here, which is that our natural gas prices go up, and we’re consuming less natural gas, so something is substituting for natural gas here, and is that coal or is that renewables? And it’s sort of the flip-side of the coin. So let’s sort of unpack that. There’s a really useful if simplistic framework for this that you’d learn in a Micro Econ 202 class, which is global trade, or the trade of a fungible good between two different regions—the underpinning of all of the modern economy, one part of the world can produce something cheaper than another part of the world, so it makes sense for the place that has the lower cost of supply to export it to the place with the higher cost of supply. The exporting region wins because it gets to sell more of its product at a higher price, and the importing region wins because it gets to consume more of that product at a lower price than if it tried to produce it domestically. So this is sort of the basic framework for trade, and economists would describe this using these concepts of elasticities of supply and demand, which describes basically what happens when you either change demand to prices, or when you change prices to demand.
The basic concept is: we’re going to be exporting a lot more of our North American natural gas supplies. That effectively acts as a big demand increase in the North American context, in the U.S. Already we’re exporting 10% of all gas production, again it could double or even triple with current permits that are already approved. Alright, so what does economics tell us about what happens when demand increases? Well, if you want to produce more, it’s going to come at a higher price. So if we want to get more supply to meet that demand, prices in North America and the U.S. are going to go up for natural gas to induce some of that new supply. So now, we’re exporting more, but U.S. prices for gas are higher, so what does that do for consumption of natural gas? Well, if prices rise, basic economics will tell us that consumers will want to consume less, all else equal. So we’re going to shift away from natural gas in the U.S. as a response to that higher price.
Meyer: So if we were to build more LNG export terminals domestically, the most likely outcome is we burn less natural gas in the U.S., right?
Jenkins: That’s right. We pay a higher price for gas and therefore we burn less of it here, and so the question is, what substitutes for that demand destruction? Why are we lowering our consumption? And there’s three ingredients to that. One is that we could just use less of it. Our major industries like plastics that consume a lot of natural gas to make ethane and ethaline for plastic—they are just less competitive in the global economy, so they consume less, and that could be one form. The other could be that we switch in the electricity sector where gas is often the marginal supplier and kind of swings back and forth depending on price. We could substitute either coal or renewables in some combination to reduce our use of natural gas in the electricity sector. So some combination of those three things: lower consumption, greater renewable energy supply, and greater coal supply is what’s going to drive down consumption of gas in the U.S. And obviously those three things have very different implications for U.S. emissions. With coal, often having been the direct substitute for gas in electricity markets—and we often see this very direct inverse relationship between gas and coal shares as the gas price goes up or down. So in the near term I would expect, if gas prices go up in the U.S., we would see all else equal, more coal-fired power generation, in the long term maybe more renewables additions, because renewables are also more economically attractive the higher the gas price is. I see that a lot in the long-term modeling we do.
I want to unpack another piece of this which is that because demand for gas declines, the increase in U.S. gas production or supply is not as large as the increase in exports. So that’s important to keep in mind. Say we build this facility, it’s enough to consume 3% of U.S. natural gas supply today—that doesn’t mean that U.S. natural gas supply goes up by 3%, because some of that additional exports is going to come from the reduction in consumption, so freeing up current supply to export. Then some of it, a portion of it, is going to come from increased natural gas production in the U.S. But the sort of ratios there depend on what you assume about how relatively responsive supply and demand are to changes in prices. If you assume they’re equally responsive, then it’s a 50/50 split—basically half of the supply of exports comes from reducing consumption, and half of the new exports comes from increasing supply. Could be some other ratio if you assume, as I think is fair, that supply tends to be more responsive to price than consumers. So that’s interesting because if you care about leakage rates, that’s important. The best case scenario is, the reduction in consumption comes from more renewables, and then the increase in supply is smaller than you thought and therefore has less methane leakage than it would otherwise have if you count it one for one as all new exports are coming from new supply.
So I can easily construct a story here, with very plausible assumptions, where increasing LNG exports in the U.S. is a net increase or decrease in U.S. emissions, depending on which of those scenarios you sort of concoct. And in either case it’s in the order of plus or minus one percentage point of 2005 emissions, if we’re accounting for all of the currently pending permits that could be affected by this decision. So it’s a nontrivial amount, but it’s not huge, so the U.S. picture is ambiguous.
If we look at the rest of the world equation, it’s the exact opposite. We’re going to increase supply in the global stage, so that’s going to lower prices. So how do producers and consumers respond to lower prices? Well, the consumer side is going to increase its consumption, and some of that is going to be new energy consumption that wouldn’t otherwise have been economic—people are just going to consume more energy for industry and heating and overall economic welfare. Some of that is also going to substitute for other energy supply that would’ve been provided. That could be renewables or coal in industry and electricity. And again, whether you think that LNG exports are displacing coal or renewables is a huge factor in the global climate calculus. But those lower prices are also going to disincentivize producers elsewhere in the world, whether it’s in Russia or Algeria or Qatar, to reduce their production of natural gas, too. And the leakage rates that go along with that will also fall—so methane emissions overseas will fall, and that also offsets some of the impact here.
Meyer: In other words, because the U.S. is about to regulate methane emissions, assuming the U.S. does regulate methane emissions—which basically means assuming a Biden administration wins a second term—the U.S. is about to have basically cleaner natural gas than anywhere else.
Jenkins: Anywhere but Qatar and the Middle East.
Meyer: Yeah, and so if the effect of the U.S. exporting some natural gas—exporting more LNG—is that it reduces natural gas extraction in, like, Kazakhstan, which is an extremely leaky system, then that could be good from a leak basis. If what you care about is leaks on a 20-year time frame, you can actually construct a world where the U.S. should export a lot of LNG because we really care about reducing leaks globally.
Jenkins: That’s right, yeah. And so on the global stage, again, I can come up with a story where it’s a net increase or decrease of a few tens of millions of tons of emissions. So it’s just a very ambiguous picture from a climate perspective. It’s not quite as cut and dried as a simple equation would give you.
Meyer: Let me just ask a question right out that I think gets at the discussion we just had, which is that do you think we can say with any confidence that cutting off U.S. LNG exports at a certain point—especially at the point that the Biden administration will have to use at least as a minimum, which is roughly double what our current export capacity is—do you think we can say with any confidence that that is going to increase emissions globally? Or even do you think we can say with any confidence that it’s going to decrease emissions globally? Is there any way to talk confidently about what this will do to greenhouse gas emissions globally as a result?
Jenkins: I think if we look at just the individual facility question, just one incremental increase or decrease in U.S. exports, I don’t think there’s any confidence. I think you can easily say it’s a slight benefit for the global climate, I think you can easily say it’s a slight negative for the global climate, I think my prior is that it’s probably relatively neutral. It’s not very good or very bad. So that’s where I sort of come out, if you’re just thinking about a single facility. But I think the other perspective to keep in mind is, what is the aggregate supply that we’re putting on the global stage mean? And how consistent is that or not consistent with a global effort to reduce greenhouse gas emissions and confront climate change? So remember, ostensibly, the world all agreed at the Paris Climate Summit to try to reduce emissions and keep global warming in aggregate to less than 2C and try to target aspirationally 1.5C. If you believe that the world is committed to that goal, then there’s a great paper on this exact question by Shuting Yang, Sara Hastings-Simon, and Arvind Ravikumar, on whether or not we have enough carbon budget effectively left to export the LNG that we’re planning. What they conclude is that in the near-term, pre-2035, there’s probably a reasonable case that LNG, where it substitutes for coal in, say, Pakistan or India or other LNG-importing countries, is a net benefit for the global climate in the very short term.
What they find, and I’ll just quote the abstract here, “We find that the long-term planned LNG expansion is not compatible with Paris climate targets of 1.5C and 2C. Here the potential for emissions reductions from LNG through coal-to-gas switching is limited by—” the fact that, to paraphrase, if we’re going to be on that 2C world, we’ll have already phased out all of the coal or stopped building new coal that could be displaced by LNG in the later half of the 2030s. So at that point, what we’ll be doing as the U.S. is either stranding a bunch of assets, if the world really is serious about that 2C goal, or we’ll be basically committing to lock in more emissions than we can afford under a 2C world.
They also, though, say that we should keep in mind that we are not on track for a 2C world. So while the world is aspirationally pushing in that direction, the current trajectory is more like a 3C trajectory, where it’s likely that emerging economies will be depending on coal through the 2030s and 2040s. And in that case, they argue that U.S. LNG could be thought of as an insurance policy, to make some incremental progress on emissions, and also we should say improve air quality in emerging economies where coal-fired generation and industry is a huge polluter that causes significant loss of life and health effects. Then in that world it sort of maybe is a net benefit. So I come out of it as sort of like, what world do you think we’re living in and where do you think we’re going? Do you act as if we’re in the world that we observe around us right now? Or do you act as if we’re going to move onto the trajectory that we all say—the world has said we care about, a world where we are desperately trying to reduce emissions to a level that holds climate change below 2C.
Meyer: It’s actually kind of an unusual problem to encounter in climate policy, but one that I wonder if we’re going to keep hitting as we get deeper and deeper into the transition. There’s a lot of things that you can do to fight climate change. They are both the things you should do anyway, and insurance against a 3C or 4C world. Insurance against a catastrophically warming world. What is interesting about LNG export, is that it doesn’t have that quality. Like, build a lot more solar. If you’re considering whether we should just build double, triple, quadruple U.S. current solar capacity, the answer is basically always yes. That’s going to both cut off these extreme catastrophic risks that the world experiences with extremely catastrophic levels of global warming, in line with 3C, 4C warming. And also it’s going to get us closer to accomplishing this 1.5C, 1.6C, at an optimal, or the best-we-can-get world, right?
Jenkins: Yup.
Meyer: LNG does not work like that. There’s a very unusual decision we have to make around it, which is: do you aim for the world we want to hit, which is 1.5C, 1.6C, as close to our current level of warming as possible, get to net zero as soon as we can—a world that the U.N., that the Paris agreement, that all the countries globally have committed to and say they want to hit—but a track that at the same time they’re manifestly not on? Or do you want to say, well actually what we want to do is buy insurance against 3C? But it’s a very weird insurance product, because it says like, “well you won’t—”
Jenkins: It’s sort of an admission of failure.
Meyer: Yeah, exactly. It’s almost like you if you were to buy—
Jenkins: A short!
Meyer: Yeah.
Jenkins: You’re shorting the Paris Agreement, effectively. You’re saying I don’t believe that the world is going to get its act together and cut emissions fast enough to comply with our nominal targets, so I’m going to buy a short, which is that we should export more LNG.
Meyer: It’s like if there were a form of life insurance that required you to amputate a couple fingers or maybe, like, a forearm. Or the way this life insurance works is that you can never be rich. So you know your family won’t be destitute after you die, but at the same time, well enjoy living your life, you know you are losing a forearm right?
Jenkins: That’s a grim analogy!
Meyer: It’s a grim analogy but I think it’s such an unusual decision. It’s really not a kind of decision we encounter a lot in other policy spaces.
Jenkins: Yeah, and so I think the question for the U.S. when you’re thinking about what do we do from a climate perspective is, “Do we act in the world over the things that we have influence over?” Right? Which is not what China and India and Pakistan decide to do. Really, we can indirectly influence that. But what we have direct influence over are decisions about U.S. energy production and our economy and U.S. policy. And so the question is, do we use our U.S. policy decisions and the things that we have direct influence over to operate as if the world is going to align itself with our ostensible targets? And with the targets that we've set for the country itself, which is to cut greenhouse gas emissions rapidly and to get on track to net zero by 2050?
Or do we say, you know what, we'll do that for our domestic economy, we'll make sure that we cut our own emissions. But as far as exports go, that's not our responsibility, that's up to the global stage, and what they demand and as long as the world is demanding more gas, or oil or coal from the U.S., we’ll supply it, because that signifies that, you know, they're making decisions that aren't consistent with that world, and we might as well supply it instead of somebody else. I think that's the calculus, right? It’s which world do you operate in? You can easily make the, again, the realist take, which is like, well, what's the point of giving up our exports, especially if they're marginally cleaner than other people's exports, if the demand is still out there, and it's gonna be just satisfied by Russia or by somebody else?
But it also is an admission that we just don't believe that the world is going to do what we are committed to doing. I think you have to ask yourself, like, would we have more influence over the rest of the world if we actually acted as if we believed it? And not just over our domestic emissions, but over our exports? This is particularly relevant for countries like Australia. They talk about this all the time, where their domestic emissions are like one tenth of the amount of emissions that go out the door, or on the ships with their coal and LNG exports. So they're a huge net exporter of energy, you know, and so it's like, a much more central part of the debate in Australia is like, well, what is their responsibility as a global climate actor? Do they only have to meet their domestic climate goals, or do they also have to take some responsibility for their energy exports? We just really haven't been having that conversation at the same level in the US. And maybe that's exactly the point of, you know, forcing this issue right now.
Meyer: There's another side of that though, which is, let's say we bet against the world's ability to hit its own climate targets, we build these export terminals. We are like, “Well, we're going to try to hit our targets. But if you want to buy gas, that's fine.” If the world then hits its targets, if the world keeps to its Paris Agreement goals, then we're the one stuck with the stranded assets!
Jenkins: That's true!
Meyer: Then suddenly, there's all these rusty LNG terminals sitting around the Gulf Coast that didn't need to be built. And that's a hit to our economy. And so I think there's like, to some degree, the view where we say, “We're just going to let the world be the world, and we're going to do the best we can. But if the world wants to buy our natural gas, then we're happy to sell it” is actually not the most selfish way of looking at this. Because if you were to fully, because you have to think about whether there's actually going to be that demand there in order to figure out whether this even makes sense as an investment. Not that I mean, by the way—as a policy question, this isn't really a question about whether this, these makes sense as an investment, because that's presumably up to, because the only thing the government has been asked to do is figure out whether they're in the public interest, that's more a question about investors. Still, I don't think we want all this rusty construction that never got used sitting around in the Gulf Coast, because we bet against the world and we bet wrong.
Jenkins: Yeah. I mean, that's, I think, essentially, the question that the investors have to grapple with. And there's certainly a bear case and a bull case. This is why a lot of these terminals that have been approved, don't yet have enough contracted demand to actually get the banks lined up and go start construction. So I think there is really an open question about whether the demand will even be there for these projects. In the end the case that the folks pushing back on the Biden administration would make right now is, “Well, that's up to the private sector, you shouldn't be meddling with that, you know, if there's demand for it, there's demand for it, let the private sector decide.”
I think that's somewhat fair, because if we aren't putting public money behind these projects, the way we do for, say, for clean energy projects that are getting subsidies from the U.S. for construction, then it's more of a private sector question. On the other hand, at the local level, there is a lot of public support—packages here, there's basically tax abatements for all of these projects to encourage them to site in Louisiana instead of Texas or Mississippi or whatever. So the states sort of fight over it, and at the local level, one of the things I was really struck by in the reporting that Heatmap put up recently talking to residents near CP2 and these other terminals was, just the level of tax abatements that have been provided for existing terminals mean that they're paying nothing into the local economies, public coffers. They don't pay local, local or state taxes. And so the communities that are bearing the toxic and polluting impacts of these facilities in their backyards are not getting any sort of public compensation for that. That is an important question at the local level.
Meyer: I think it's important to bring in this perspective, too, because this is a whole other argument that exists about the whole other way of even understanding this decision, which is that there's an entire set of activists who are engaged on this issue who care about the climate, but that is not actually their main argument they make. What they argue is that “These terminals go into our communities, or people from the Gulf Coast. These terminals go into our communities, they're extremely pollution intensive. They give our kids asthma. Our communities, because of how close they are to fossil fuel extraction, and because of all these different sites, smell like rotten eggs all the time, it smells bad. Cancer rates are very high. We don't want this infrastructure here. And so it's not in our public interest to have it.”
And when you factor in the tax abatements that gets even worse, right? I think this is like a whole other argument against these LNG terminals, that they are extremely pollution intensive. And what I should say is, it’s a very bio-diverse area of the country. You know, people don’t think about the Gulf Coast as being bio-diverse, but by the way, Alabama, Mississippi, Louisiana, some of the most biodiverse areas of the continental United States. Setting aside biodiversity, it’s bad to have a big, cancerous, carcinogenic, hyper-polluting, smelly piece of infrastructure next to your town. And that's a whole other case against these terminals. And that's been a whole other nexus of how people have argued about them to the Biden administration. I think that's totally valid.
I think what's interesting is that that actually suggests another kind of trade-off, right? Because if, and I don't want to be too academic about this, but like, if a country in Sub-Saharan Africa and Southeast Asia is deciding whether to burn coal, or to burn imported U.S. liquid natural gas, and we don't make that liquid natural gas available, so they burn coal instead—that’s like bad for all the people who live around that coal plant. Right? Now they have asthma, now they have heart disease, and they're interacting, not with natural gas air pollution, which is bad but cleaner than coal. They're interacting with coal, which produces one of the worst kinds of power-related air pollution that there is and is responsible for early deaths and stunted births and stunted growth and heart disease and lung disease worldwide, and is the main driver of global air pollution problems. I think what's interesting is like, how do you balance, if you're the Biden administration, these local concerns in the Gulf Coast, around the local air pollution effects and local water pollution effects of an LNG terminal, with this trade off that maybe that means people around the world have to encounter more coal pollution? Conventional toxic air pollution from coal? Ultimately, I think you say, “Well, look, folks in the Gulf Coast, those are Biden's constituents, those are Americans. And so we should rank their desire to avoid pollution higher.” I think that lens is one that if we were to bring to other aspects of foreign policy, or even other aspects of climate policy, would be seen and depicted as really noxious ways to understand foreign policy, and a really bad way to think about the world and an unethical way to think about the world. And that's just like another one of these trade-offs. That's kind of inherent in where you draw the line that I think is really, really difficult. Very interesting.
Jenkins: Yeah. And it all comes back to this question of the public interest, who is the public that you're interested in?
Meyer: Right.
Jenkins: And it's not clear in statute, what that means. So until the Supreme Court overthrows the Chevron Doctrine, which we'll talk about in another podcast, the current law of the land is that the agencies need to interpret what that means and figure out how to decide what's in the public interest. So we'll see what happens. But I think this does raise this big question, right, who is the public that you're interested in here, if you're the Biden administration, or the Department of Energy? And you know what we've seen here is that there are some pretty clear winners and losers domestically. To sum up, the winners are gas producers and owners of LNG pipelines that shipped to the terminals and the terminals that ship this gas overseas. Those are the winners.
They get more money for their product, they sell more of their product, they make more profit. And, you know, if you're just looking at sort of the U.S. national accounts, right, our GDP, like that's on the positive side of the ledger. But of course, we should also keep in mind that there are particular people who benefit from that, right? It's a particular class and group of people in the U.S. that exclusively benefit basically, from that side of the equation.
On the other side of the equation, and I think at the end of the day, this is the part that the Biden administration will lean into, because it's the strongest case and the most broadly popular case against the terminals, if they decide to, you know, justify their decision here more aggressively. And that's that anyone in the U.S., any business or household or industry that consumes natural gas, is going to be paying a higher price if we are going to export more to the world, because that's a big increase in demand for U.S. supply. And when demand goes up, prices go up. Even more concerning, I think, is that the U.S. will see much more volatile natural gas prices, the more we link our markets to the global stage. We see this in the oil markets all the time, right?
We are a net exporter of oil, we are physically energy secure, right? That long-sought goal of energy independence, we've achieved it. If there was a conflict of war that sort of broke out tomorrow, we could meet all of our domestic needs, without any trouble. That said, when a crazy dictator on the other side of the world—thanks Vlad—you know, decides to invade his neighbor right in an unprovoked war, and causes a huge global conflict and disruption of energy supplies, prices at the pump in Princeton, and you know, Des Moines and Denver, that goes up overnight. Because oil is a globally traded fungible commodity. And if demand in Europe spikes, people are willing to pay a huge amount because supply from Russia is disrupted, that's gonna affect the prices that we have to pay even for the gas and oil that we produce here in the United States. And that has not been the case, historically, right? We've been a separate market for gas. While oil has been globally traded, we have been isolated in North America, because gas is so much harder to ship around the world than oil is.
Well with LNG, it's, you know, it costs more to ship but it becomes easy to ship it as a liquid just like oil. And if we are now you know, going to be shipping something like a third of all of our supply overseas, if there's a conflict or weather-related disaster that knocks out supply somewhere around the world, or a big increase in demand, you know, because of a cold weather event, or you know, in the case of Japan, after Fukushima, they shut down all their nuclear plants and had a huge increase in demand for LNG overnight, like any of those kinds of global conflicts or crises that are totally out of our control, will immediately increase natural gas prices across the United States. Not by as much as the global price, there's always going to be a wedge between the two because of shipping costs, but it will drive up prices. And that's exactly what we saw in 2022, when prices in the U.S. tripled, because of the demand for LNG in Europe and Asia and elsewhere. So that's the clear loser side, it's like households trying to heat themselves in the winter, and in a year when there's some conflict on the other side of the world that drives up their heating prices, they have no control over. And any U.S. industries that depend on cheap gas to be globally competitive, and might lose market share, you know, might have to lay off people, you know, might not contribute as much to our economy on that side of the ledger.
Meyer: And this is not like a minor consideration either, right? Like this is actually a significant piece of macroeconomic policymaking. This would have a major effect on the U.S. macroeconomy, because cheap natural gas and cheap electricity are not like rounding errors on how the current U.S. economy is structured. Over the past decade and a half, they have become major traits of the U.S. economy and major determinants of U.S. global competitiveness. And that's not to say, by the way, that it should be cheap forever. I think what's going to happen over time is that we replace that cheap U.S. natural gas as an input into electricity with cheap renewables and cheap zero carbon electricity. But increasing U.S. natural gas costs and increasing U.S. electricity costs is not a minor thing. That is actually a very significant piece of macroeconomic policymaking and would matter quite a bit to a lot of industries that have nothing to do with fossil fuels.
Jenkins: That's right. And I should say, this was a question that the Obama administration looked at, I think in circa 2016 or 2014, that was looked at under the Trump administration. So they have done these analyses in the past. And the conclusion, which is sort of basic economics is like on net, there are gains from trade here to be had, you know, because we're going to be selling or producing more gas and selling it at a higher price and earning more profits for gas producers that offsets these other negative impacts.
But I think again, it raises the question of who is the public that you care about? Do you just care about the aggregate GDP? Or do you care about more about certain constituents or industries more than others, right? Do you care that about household costs more than you care about, you know, the profit of LNG companies? Or stockholders and gas producers? That's just a subjective question, right? There's no objective answer there. There are winners and losers in every trade decision on both sides of the ledger, right? Both in the importing and exporting countries.
Meyer: And do you care about commodity exports or higher manufacturing exports? There’s a lot here.
Jenkins: Yeah, maybe you might want to pause and think about it. And that's where I come out after spending a week thinking about it myself. It's like, yeah, there's a lot to unpack here. And things are changing rapidly, right? The global geopolitical situation is not at all the same as it was six years ago, or four years ago, the climate situation is not really the same as it was, you know, six years ago or four years ago. And, you know, the U.S. economy is shifting in important ways, too. So maybe you want to pause and think about how far you want to go here. That I think is the best case for the Biden administration's decision. It's just like, Whoa, this is moving real fast. Let's slow down. And think about all of the myriad implications of this decision on consumers, on local populations in Louisiana, on you know, globally competitive businesses and industries that depend on cheap gas and electricity, on our role in the global economy and geopolitics and security as a big exporter of LNG. I mean, these are all relevant pieces of the equation. And there isn't really a clear cut answer here.
[AD BREAK]
Jenkins: All right, Rob. So what has you excited this week? What is your upshift for the week?
Meyer: I think my upshift for the week is unusually vehicle-related. And it is that the EIA came out with a finding this week that hybrids, plug in hybrids, and battery electric vehicles were 16.3% of new car sales last year. That's obviously not where we need to be. But it represents significant growth from last year, or rather from 2020, when hybrids, plug in hybrids and battery vehicles were 12.9% of sales. It continues to grow. I think two interesting things is that hybrids and fully electric vehicles are kind of growing at roughly the same rate, battery electric may be catching up. It's good news for a lot of reasons. I mean, does it reflect that the battery electric market is where we would want it to be? Not necessarily but I think it's good news because it shows that especially as tailpipe regulations as the EPA prepares to regulate greenhouse gas emissions from light duty vehicles, from light duty cars and trucks, that there's a lot of potential there to increase the BEV and hybrid share. And especially that consumers are recognizing that well, if they're not ready to buy an electric vehicle yet they should buy a hybrid, which is something that a lot of consumers I know who bought new cars recently have gone through.
Jenkins: Yeah, I think actually what was surprising there was the hybrid portion of that picture. I think we were all expecting battery electric sales to increase, and you know, the question is how much. I think that it reached about, just pure battery electric vehicles, top 7% of all U.S. sales. But what was surprising is the hybrid share, which was basically flat for the last several years, at around 5% of the market, soared to over 7.5% of the market, over 1.1 million hybrids sold in 2023, about exactly the same amount of total vehicles as battery electric vehicles. So there's been some reporting that like you know, people are choosing hybrids as EV demand slows, but that's actually not the case. It's that instead of just EVs growing, we have EVs growing at a 50% Share, annual increase, and all of a sudden hybrids are back in the game! With the release of a lot of new models that don't really cost any more than the conventional versions. It almost makes me wonder why we even sell the conventional versions of some of these cars.
But I recently saw that the Hyundai Tucson hybrid cost about $600 more than the equivalent trim of the internal combustion version. And it's just a better car, like it's got 50% better fuel economy, it's faster, it's got more horsepower. It's quieter when you're driving around the city, like why do they even sell the other one? And so that's sort of why I think we're seeing hybrid sales go up, it's just if you're gonna buy an internal combustion engine car, the better internal combustion engine car, it happens to be a hybrid now, and it doesn't cost you an arm and a leg more. And it pays itself back in just a matter of months in fuel costs.
Meyer: Jesse, what's your upshift for the week?
Jenkins: So my upshift on a little more personal note, I just began a new teaching semester here at Princeton, and I'm teaching my favorite class, which is the Introduction to the Electricity Sector. We cover engineering, economics and regulation. And it's a really fun class. This is the fifth year I've been teaching it here at Princeton. I helped teach it with my adviser at MIT for several years and kind of adapted it when I got here to Princeton.
And it's really running nice and smoothly now. The fifth time's the charm, right? So this year, it's been fun, it's running smoothly, we have a big excited class. And what I really love about the class is the mix of students in it, we have about half undergraduates and half graduate students. And you know, maybe half of the students are from engineering disciplines. But it really spans the entire university. We've got, you know, engineering students that are interested in the electricity sector, we've got policy students from the School of Public and International Affairs, we have science and humanities and economics and political science students. And so it's just a really interesting mix. And I think it reflects just how inherently interdisciplinary and also inherently important the electricity sector is. You know, I always find it exciting to see students from all these different backgrounds deciding they want to spend this semester with me, learning about electricity regulation, and thermodynamics and microeconomics principles. So it's gonna be a fun one.
Meyer: Yeah, that's sweet. What's your downshift?
Jenkins: So my downshift was news that I read this week, it was broken by the Guardian, that the U.S. oil lobby, the American Petroleum Institute, just took out like an eight figure media buy, to spread the idea that fossil fuels are vital to global energy security—not, you know, coincidental timing around the debates over LNG. So we can expect the airwaves and the paid advertising in the newspaper and everything to just be flooded with ads, making the case that because the world is in crisis, and conflict, and there's a war in the Middle East, and there's war in Ukraine, that that makes U.S. oil and gas supplies so much more important for the global security situation. Obviously they're gonna make the most compelling case they can for their industry, that's their job. But I think the thing that makes me most angry or frustrated about this, the reason that's my downshift, is that it ignores the part of the story where the U.S. is totally vulnerable to these conflicts, too.
We talked about that earlier that, you know, when there's a war, say, Houthis interdite trade through the Suez Canal, and that disrupts all kinds of oil shipments from the Middle East to Europe, like that isn't just contained in Europe, that spills over and infects the price of the pump, and the cost of heating homes right here in the U.S. immediately. So this idea that, you know, the oil and gas industry is so good for security, it may be true for sort of global geopolitics and like helping our allies overseas. But it doesn't mean that the U.S. economy is secure by any means. We are totally vulnerable to these conflicts around the world. And we will be until we sever our reliance on globally traded commodities like oil and LNG.
And the only way to do that, of course, is to accelerate the Clean Energy Transition, to accelerate the growth of EVs, and of heat pumps and renewable energy, that are capital investments. Once you make them, you're no longer dependent on what happens on the other side of the world. And, you know, they're not running the ad campaign making that point.
Meyer: Well, I'm not going to claim that that's an upshift. But I do think that this is kind of interesting in the light of the LNG decision, because my understanding is that that campaign was locked in before the LNG decision was even made. And the Biden administration I have to say while it has presided over, of course, the U.S. drilling more oil and natural gas than it ever has before, in not only U.S. history, but the U.S. is drilling more oil and natural gas than any country ever before has.
Jenkins: Yeah, we’re now the Saudi Arabia of oil.
Meyer: Well, without the ability to control it, but yeah. But I think at the same time, what this shows is that, like, the oil industry isn't gonna give credit for that either. Chevron just this week announced that it was going to expand capacity again this year. And I think that there is this kind of like realpolitik way of looking at this, which is like, “Look, if the oil and gas industry is going to run these giant ad campaigns against Democratic administrations, no matter what Democratic officials actually do, then by all means Democratic administrations should like try to slow the growth of those industries.”
I mean, that's a very, very, like sociopathic way of looking at it. But like, if there is this very tough question, that's like, “Should the U.S. do this? Who would it be bad for, who would it be good for, and the primary beneficiaries of such a policy would be the fossil fuel industry itself and not U.S. consumers? Then why should Biden not pause LNG exports, right?”
My downshift for the week, speaking of capital goods, speaking of big investments, was that Jerome Powell, the Chairman of the Federal Reserve really made it seem like the Fed isn't going to cut rates in March, which is actually quite worrying me at this point. Interest rates are at their highest point in more than 20 years. That's really decreasing investment in renewables and in the kind of big clean electricity and clean energy investments that we need to fight climate change.
Jenkins: It also makes EVs more expensive to lease.
Meyer: Yeah, it’s just bad for the transition all around. I understand the Feds’ desire to make sure that it finishes fighting inflation. But I think inflation has been pretty much under control for the past six months. And I'm worried that although we have this very booming economy right now that like, it's a little unstable, and keeping rates too high could kill it. And I'm also just worried that we're not, that a lot of great investments and a lot of great investment that's already happened from American companies and in technologies and infrastructure that could be built here in the U.S., is not going to happen or companies are going to die because capital is so expensive right now. So, that's my downshift for the week. Y
Jenkins: You heard it here, folks, Robinson Meyer launching his campaign for Fed Chair. You got my vote.
Meyer: Okay. Well, this has been great. And, Jesse, I'll see you here next week. And thanks so much! This was fun.
Jenkins: Okay, That's a wrap.
Meyer: Shift Key is a production of Heatmap News. The podcast was edited by Jillian Goodman, our Editor in Chief is Nico Lauricella, multimedia editing and audio engineering by Jacob Lambert and Nick Woodberry. Our music is by Adam Kromelow. Thanks so much for listening. And see you next week.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
The Bipartisan American Affordability and Jobs Act would remove longstanding roadblocks to expanding the power grid and developing new energy infrastructure. Here’s our guide.
It’s taken two presidential administrations, four years, and who-knows-how-many proposals that never saw the light of the Senate floor. But a long-awaited bipartisan deal to streamline the country’s permitting system is here.
On Tuesday, a bipartisan gang of senators — the leaders of the Environment and Public Works and Energy and Natural Resources committees — released an omnibus legislative package meant to streamline many permitting processes across the country.
Dubbing themselves the “Four Corners,” the lawmakers — Shelley Moore Capito of West Virginia, Martin Heinrich of New Mexico, Mike Lee of Utah, and Sheldon Whitehouse of Rhode Island — framed the deal as a way to lower energy costs, stabilize the energy system, and expand the economy.
The Bipartisan American Affordability and Jobs Act, or BAAJA, aims to address a wide-ranging set of complaints that lawmakers have about the energy and permitting system.
It would streamline the often arduous permitting processes that can ensnarl and delay virtually any kind of federal infrastructure project, rewriting a slew of largely procedural laws that have come to frustrate leaders in both parties. And it would limit executive agencies from hemming specific sectors of the energy industry, as President Donald Trump has done to the wind sector and previous Democratic presidents did to oil and gas.
The bill would also encourage a build-out of new long-distance power lines, which could help calm surging power prices and unlock more renewable electricity, and weaken the monopoly power of electricity utilities. The proposal also rewrites federal electricity law to ensure that artificial intelligence data centers cannot drive up power rates for American households.
Not all of the provisions will be easy for environmental groups to accept. The bill strips a Clean Water Act provision that had allowed some Democratic governors to block the expansion of natural gas pipelines, for example.
But the bill reflects, above all, the confidence of its coauthors. Negotiators in both parties believe their favored technologies will win in a more open permitting environment. Democrats contend that solar and batteries, which are now often the cheapest source of new electricity on the grid, will triumph once opponents lose tools to fight them. And Republicans hold that a looser permitting environment will deepen fossil fuels’ dominance.
“We’re motivated by one central shared concern. We want to make it easier in America to build things,” Senator Mike Lee of Utah, the Republican chair of the Senate energy committee, said at a press conference announcing the deal.
“This should lower electricity costs measurably for Americans. This should increase clean power significantly for Americans. This should significantly add construction and jobs across the country, and this should contribute to a lift in America’s overall economy,” Senator Sheldon Whitehouse, the Senate environmental committee’s ranking Democrat, said at the event.
The bill is not guaranteed to become law. The Senate will not vote on it until after the midterm elections in early November, when it will require 60 votes to bypass the filibuster. Senate Democrats also said that they were still waiting for key assurances that the Trump administration would end its blockade against permits for wind farms and some other forms of clean energy. “We have had what I would consider to be a very reasonable opening proposal from the Trump administration,” Whitehouse said, but the issue remained “unresolved.”
Heatmap journalists have spent the day digging into one of the biggest bipartisan changes to federal environmental and energy law in years. Here’s our guide to what the bill would do:
Of the many federal statutes that trigger lengthy, arduous, and often duplicative governmental reviews of proposed infrastructure projects, the National Environmental Policy Act is arguably the most notorious. Current federal law requires an environmental review under NEPA for “major federal actions,” a term that is defined broadly to mean any action subject to “substantial federal control and responsibility.”
BAAJA would narrow that definition so that NEPA review would not be required for federal loans, certain grant programs, and repairs of essential infrastructure, among other actions. Geothermal testing, Federal Energy Regulatory Commission permits for transmission projects, and gas pipeline projects within existing rights-of-way would also be excluded.
The bill borrows a number of provisions from the House-passed SPEED Act designed to quicken the environmental review process and constrain litigation. For example, it would allow agencies to skip the environmental review process when a project has already been reviewed by a state or tribal government. It also allows an agency to ignore scientific or technical information that became available after it published its intent to prepare an environmental document, and prohibits the agency from delaying a decision in order to wait for new scientific research to be completed.
NEPA reviews often give rise to years of litigation. The new bill says that cases will skip the district court system and go straight to the relevant court of appeals. It also limits who can bring a lawsuit to stakeholders who submitted substantial comments during the public comment period or who would be directly harmed by the agency action. Those parties will have just 150 days to file a lawsuit after an agency decision is issued.
Ultimately, if the court finds that the government violated NEPA, it will have to remand the environmental review back to the agency to correct — it cannot vacate the authorization altogether.
The bill applies the same 150-day statute of limitations and similar “remand without vacatur” requirements to legal challenges under the National Historic Preservation Act, the Clean Water Act, and the Endangered Species Act. Ultimately, the bill would make it a lot more difficult if not impossible to stop a project altogether via NEPA litigation.
The National Historic Preservation Act has a process analogous to NEPA’s for evaluating the effect of government actions on areas and objects of cultural significance. Any “undertaking” by the federal government must be reviewed for its effect on “historic properties” (which also have to be inventoried and identified as part of a consultation process). Considering the broad spaces and even broader viewsheds energy and transmission projects often take up, permitting them can be exceptionally difficult. (Just ask the developers behind SunZia.)
BAAJA limits both the scope of the NHPA and the process by which the federal government complies with the law. For instance, it limits the definition of “property of traditional religious or cultural importance” to “an identifiable geographic location or feature at which an event of continuing religious or cultural significance to a living community occurred.” It also limits the duration of the NHPA consultation to the time it takes to complete a NEPA review.
There’s also a new definition of federal actions that qualify for NHPA review that mirrors many of the changes to the definition of “major federal action” under NEPA.
The bill also limits what counts as an “adverse effect of the undertaking” to something that is “reasonably foreseeable” — i.e. directly and immediately caused by the action itself — and “directly alters the characteristics of a historic property in a manner that would diminish the integrity … of the historic property.” It also seeks to exclude any “visual, atmospheric or audible element” — i.e. mere sight or noise — that doesn’t “have a direct impact on a historic property that would significantly diminish” it.
BAAJA would also codify several regulatory changes to Section 401 of the Clean Water Act that Trump’s EPA proposed earlier this year to limit state power. Under current law, a federal agency cannot issue a permit to a project that will discharge pollution into a body of water unless the relevant state or tribe issues a water quality certification or waives that right. The permitting bill would give states and Tribes a maximum of one year to review a project or otherwise waive their right to certify. Senators also proposed that if the state or Tribe waives certification, the matter is settled — the federal government cannot then conduct its own water quality review. If the state or Tribe decide to attach conditions to a certification, or to deny the project altogether, the bill would place a much higher burden of proof on them to back up their decision. States would only be allowed to reject a project based on water quality — they could not cite air pollution or climate impacts.
The bill also creates special rules for interstate transmission lines and pipelines, limiting state and Tribal review to direct discharges from these projects into water bodies and barring them from considering more general, indirect water quality impacts.
Another part of the Clean Water Act, Section 404, instructs the Army Corps of Engineers to establish so-called “general permits” for the discharge of dredged material into U.S. waters. Essentially, if a project will have “minimal adverse environmental effects,” the agency can approve it under the relevant general permit rather than conducting an individual review. The permitting bill explicitly limits the scope of what the Army Corps can consider when determining whether a project qualifies for a general permit to water quality impacts — other environmental impacts must be excluded. It also says that any project that affects less than two acres of “navigable water” shall be deemed to have “minimal adverse environmental effect.”
Finally, the bill would limit project review under the Endangered Species Act to 145 days, tops, and require that it be complete by the time any parallel NEPA review is done. The bill would also exclude certain highway and transit projects from ESA review at all if they are within an existing right-of-way, and create a pathway for states to take over ESA review from the federal government for projects within their borders. — Emily Pontecorvo and Matthew Zeitlin
Transmission lines are essential to the energy transition because they connect the cities and suburbs where people use electricity to the places where cheap and zero-carbon electricity is easy to harvest. The Department of Energy has estimated that the country must boost its long-distance transmission capacity by more than half by 2035 just to meet growing energy demand.
But transmission construction in the United States has long lagged goals, and long-distance transmission is disadvantaged compared to natural gas pipelines or railroads used for coal. Since 1938, for instance, developers that want to build a new interstate natural gas pipeline could go to FERC to get their projects approved. Yet anyone who wanted to build a long-distance power line faced a much more arduous task. Instead of applying to a single federal agency that can approve their proposed line, developers must go hat in hand to every state and local government that their project passes through. States and local governments can then kill a project not even by rejecting its permit, but by sitting on it indefinitely. This means that many transmission lines never even get proposed because developers know they will not get built.
The Senate bill would change that. Under BAAJA, developers could bring a transmission project to FERC at the same time that they propose it to local governments. If the states don’t approve the project within a year, then FERC must step in and approve the line if it deems the project to be in the national interest. (The bill lists several factors — including whether a project cuts bills or improves reliability — that set that standard.)
Under the bill, FERC can also approve who should pay for the new lines. The bill sets out a new national formula that lays out how utilities and customers should divvy up the cost of a new line; only customers who benefit from a project, such as by seeing their energy costs go down, are supposed to pay for it. This provision is meant to overcome another big obstacle to building more transmission lines: Developers haven’t even known which projects might make sense to propose because it was so unclear how to divide the costs of a new line. — Robinson Meyer
For the past 20 years, the federal government has tried to encourage neighboring power grids to connect to each other and build more transmission. But its chosen mechanism — asking the Energy Department to declare specific land corridors where it’s easier to build power lines — hasn’t worked, and little has been built.
BAAJA scraps that mechanism for a new one. Under the bill, the country’s regional grid authorities are required to study whether they could improve their system or reduce customer costs by knitting their own grids more closely together or connecting them to their neighbors. The grids have to use the same forecasts and formulas when studying these interregional connections — something that has never happened before.
If grids decide that they need to build new power lines, then the new law says that local utilities don’t have an automatic monopoly or a federal “right of first refusal” to build those lines. Instead, grid authorities can auction off the right to build those lines.
The bill also tries to keep utilities from building the wrong kind of transmission. Over the past several years, even as utilities have failed to build enough long-distance transmission projects, they have constructed many low-voltage “medium-size” transmission projects that allegedly improve the system’s reliability. In 2023, 90% of transmission spending nationwide went to lower-voltage reliability upgrades, according to data from the Brattle Group collected by the energy nonprofit RMI.
It’s been unclear who is allowed to decide whether these projects are worth it. Because the lines are transmission projects, the federal government is in charge, because it has oversight of utility-scale transmission projects. However, because these projects are often built entirely within state lines (and often entirely within a utility’s service area), the federal government can’t make sure a given project is prudent or needed. The new permitting proposal clarifies that states are allowed to regulate these low-voltage, medium-scale projects. It also says that states can call in the feds, so to speak, and ask FERC for oversight or an investigation if local regulators believe a given utility project is out of line.
BAAJA also overhauls the “interconnection queue” process, an arduous process that has kept new sources of zero-carbon energy from entering the grid. Right now, most of the country’s regional grids require any new power plant to get in the “interconnection queue,” a years-long waiting list, before it can hook up to the grid and sell power to customers. Only upon getting to the front of the queue is a power plant told how much it will have to pay to sell energy to the grid. This process has historically penalized solar, wind, and battery facilities more than fossil fuel facilities, because they are often smaller and less able to pay high interconnection costs.
BAAJA would require regional grids to adopt a particular kind of streamlined interconnection queue that is already used in the Great Plains’ power grid. Instead of waiting in line for years for the right to connect to a grid, power plants could pay a fixed fee under the new model, and the local grid operator could plan its transmission expansion and its interconnection queue in tandem. — Robinson Meyer
Many AI data centers use so much energy that if a utility does not build transmission infrastructure specifically to serve them, then the risk of blackouts or brownouts for everyone on the local grid can increase. Under current federal law, a local utility cannot force a data center to pay for the cost of that new infrastructure and the existing powerlines that it already relies on. This means that ratepayers wind up bearing some of the cost of serving the data center — even if the data center developer has agreed to a ratepayer protection pledge.
BAAJA would change the law so that utilities could charge data centers and other energy-hungry facilities for both the new and the old infrastructure. This would enshrine in federal law the idea that customers should not pay for data centers’ electricity demand — and it would write a form of legal discrimination against data centers and other large energy users into the Federal Power Act. The bill would also require data centers, cloud computing facilities, and crypto miners to report their energy use to the federal government every year.
The bill encourages grid operators to expand the grid’s capacity without building any new infrastructure, encouraging — and sometimes requiring — that utilities and regional grids get the most out of the grid that they have. It forces regional grid operators to allow virtual power plants into their markets, for instance. Virtual power plants let households work together to get paid to use solar panels, batteries, flexible EV charging, or other smart technology to flex their energy use up or down as the grid requires.
The bill also forces utilities to study how they can bolster existing lines or use grid-enhancing technologies to avoid building new infrastructure. It requires that they adopt these technologies when the benefits outweigh the costs or risk losing some of their profit. — Robinson Meyer
The bill says that the federal government is no longer allowed “to take any new action that would revoke, rescind, withdraw, terminate, suspend, amend, or alter a federal authorization or permit in effect on or after” September 16 of this year. It also says that agencies may not “take any other action to interfere with or prevent the construction or operation at full capacity of a project that has secured all necessary Federal authorizations and permits.” Crucially, there is a carveout for these steps “if such action is necessary to prevent specific, urgent, substantial, and proximate harm or damage to life, property, national security, or defense that is based on new information.” That justification would be subject to legal challenge.
The legislation would bar federal agencies from taking more than a year to hand down decisions on permitting applications they consider otherwise complete, and prohibits denial or delay that displays a “pattern of disparate treatment” against any specific energy or mineral infrastructure project. It defines this kind of pattern as “a substantial increase” in the previous five calendar years of delay for one “specific type of covered project beyond the applicable timeline” that is “the result of an intentional course of action undertaken by the federal government to create such a pattern.”
This “permitting certainty” provision applies to at least 46 kinds of projects, including all common fuel types, renewables, pipelines, mines, refineries, battery storage, and fossil fuel export terminals. It would also provide relief to project developers if a court found the federal government applied this “pattern of disparate treatment” — damages, including any costs associated with the delay, to be paid out of the same Treasury Department fund used for recent offshore wind settlements buying energy companies out of their leases.
Put together, these provisions sound like a promising remedy to the renewable energy industry’s woes under the Trump administration. Maybe they are! Companies would finally have explicit legal leverage against the president’s permitting pause.
But it’s too soon to tell whether this — or any — permitting deal can really fix everything. The Trump administration has been extraordinarily creative at finding ways to tie up projects with agency reviews and arbitrary requirements, including some on private lands. A good test for whether this bill would truly clear the administrative logjam is whether it ends the Department of Defense’s slowdown for airspace clearances necessary to build new wind turbines. Anything above 200 feet needs federal air approval and almost all wind turbines are that tall. The DOD ground this once-routine process to a halt, and it’s unclear whether the bill would change that.
Wind developers sued DOD and won a judicial injunction on any continued stallout. In response, developers allege the Defense Department simply created a new system for delaying all of these approvals, citing national security — precisely the kind of programmatic extra-legal delay this bill purports to deal with.
On Tuesday, the developers filed a response to the court stating the Trump administration’s willingness to sign off on individual projects as part of permitting talks was evidence that their fight with the administration on this issue stretched the boundaries of what could be decided within the legal system. “If DOD can quickly approve the projects with mitigation agreements awaiting countersignature in a deal on permitting reform legislation, it’s unclear why they can’t quickly approve the projects to comply with the Court’s order staying the freeze,” the filing reads.
Would this deal help the wind companies in this case? It would create a legal remedy developers can pursue should the federal government continue to muck around. And it would give companies a new, clear statute to reference and say to the courts, “See! They’re not following the law!”
The bill would also give the Trump administration room to say, “See! This is precisely the sort of thing we’re allowed to do in the name of national security.” In that light, Energy Secretary Chris Wright’s remarks on the hypothetical risks of drone attacks at Heatmap House last week take on new significance — it’s a quote-unquote new threat.
At the press conference for the bill, Senate Environment and Public Works ranking member Sheldon Whitehouse said there’s still work to be done on this specific part of permitting negotiations and that the four corners in talks will try to resolve this when lawmakers come back after the midterm elections. — Jael Holzman
Any bipartisan energy effort in Washington will touch on geothermal. Long tagged as the energy generation technology most beloved by both Democrats and Republicans due to being a non-greenhouse-gas-emitting, firm power source that borrows techniques and equipment from the oil and gas industry, there are substantial geothermal specific provisions in the BAAJA.
These provisions are largely culled from a series of proposed bipartisan geothermal bills, including the CLEAN Act, HEATS Act, and STEAM Act, that seek to put geothermal on an even playing field with oil and gas development on public lands and to increase the pace and regularity of geothermal leasing.
To the extent geothermal is held back by having a tougher permitting gauntlet than comparable exploration and production activities for oil and gas, these changes would go a long way to eliminating that gap.
The bill sets the stage for excluding some geothermal activities from the most onerous environmental reviews, including carving out a categorical exclusion (which rules out the most onerous forms of environmental review) for “observation test projects,” which essentially means using geothermal technology, including drilling and monitoring, to determine if a geothermal resource is present. Furthermore, so-called “casual use,” which are “activities ordinarily resulting in no or negligible disturbance of public land or resources” and would include activities like mapping or surface surveying, would be excluded from NEPA review entirely.
Other provisions regularize and speed up the leasing process for geothermal projects on public lands, including by mandating that the Department of the Interior hold lease sales ever year for geothermal drilling projects and that cancelled lease sales be promptly filled in by a replacement sale. It also imposes a 30 day deadline for the Secretary of the Interior to act on a request for a geothermal drilling permit by notifying the applicant the request is complete or needs more work and then another 30 day deadline to either issue the permit or deny it, with a final ten day deadline after the applicant has done the requested work.
The bill also junks entirely the need for a federal drilling permit to do geothermal exploration on non-federal land.
For hydropower — another firm, non-emitting source of power popular with Republicans (and some Democrats) — the BAAJA includes a grab bag of encouragement and regulatory relief and certainty. This includes mandating that the Federal Energy Regulatory Commission write a report “describing any market barriers” to the deployment of hydropower.
These provisions are largely based on the FLOWS Act, introduced by Lisa Murkowski and Angus King in the Senate and Nick Langworthy and Kim Schrier in the House.
The bill also waives the necessity of FERC to approve maintenance and other types of work on existing hydropower infrastructure and limits the ability of land management agencies such as the Bureau of Land Management and the Forest Service to impose conditions on hydropower projects to those “reasonably related to the effects of the project.”
For so-called “micro hydrokinetic” projects, i.e. hydropower projects under 5 megawatts, BAAJA lays out a tailored permitting pathway including 10 to 20 year licenses and a new expedited licensing structure.
While we’re talking about energy generation technologies that Republicans like and that don’t emit greenhouse gases, you might be wondering, what about nuclear? The fission and fusion of nuclei get but a few stray mentions. That’s because nuclear has already had its own bipartisan regulatory reform directing the Nuclear Regulatory Commission to make licensing and permitting projects faster and more efficient. The Trump administration is also using its own administrative powers to overhaul the NRC, including by instituting fixed, short deadlines for permitting decisions and reviews. — Matthew Zeitlin
Finally, the bill includes a number of measures aimed at digitizing the permitting process. It gives the key permitting agencies — including FERC, NRC, the Army Corps of Engineers, and the Departments of Energy, Defense, and Interior, among others — a year to create a pilot for a centralized database of ongoing environmental reviews. That includes a single portal where developers can submit documents for review that will become accessible to all the relevant agencies, rather than having to juggle each agency’s review separately. Anyone with access to the portal will be able to see what documents have been submitted, and project statuses and timelines will update automatically. A final version of the portal would be due by December 1, 2028.
That’s easier said than done, so the bill includes a number of interim deadlines for the Council on Environmental Quality, which oversees NEPA compliance, to establish things like shared data standards and “minimum functional requirements” for various digital tools and processes. Notably, it also incorporates artificial intelligence in explicit ways, for instance by requiring automated comment analysis “with artificial intelligence support where appropriate.” It instructs agencies to preserve certain categories of metadata to assist in future AI-assisted analyses.
This all goes further than previous measures designed to digitize the permitting process such as the ePermit Act, though whether any of the deadlines would be enforceable is another matter. It instructs the agencies to undertake these tasks only “to the maximum extent practicable.” — Jillian Goodman
Current conditions: For the first time since 1914, the Atlantic hurricane season may pass without any major hurricanes, per an AccuWeather forecast • From Phoenix to Dallas, flood watches are in effect as the remnants of Hurricane Polo stretch inland from the Pacific through the Southwest • Surigae, now upgraded to a “severe” tropical storm, is set to slam into Japan’s Izu Islands, a partially populated archipelago in the same municipality as Tokyo.
The Department of Energy has ordered the release of 40 million barrels of oil from the Strategic Petroleum Reserve as diesel surpasses $6.50 per gallon and Texas proclaims a statewide “disaster” over soaring prices. The move, which Secretary of Energy Chris Wright said would “stabilize the market,” comes as the Trump administration weighs whether to temporarily ban exports of diesel, a radical step that might only slightly lower American prices while sending Europe’s fuel costs skyrocketing, as the chief executive of the continent’s No. 2 oil company cautioned in a Bloomberg interview this week. The oil is expected to be a loan from the stockpile that would, Wright said, ultimately save Americans more than $3 billion. The transaction follows the same approach the Trump administration has taken since agreeing to distribute 172 million barrels from the Strategic Petroleum Reserve back in March, when the war with Iran began. Had the administration instead sold the barrels through an emergency drawdown instead of a trade, as it did previously, and simultaneously structured the deal to allow it to buy back oil at the lower prices the futures market is trading at presently, the Energy Department could have significantly increased its profits. That’s the finding of a policy memo from the think tank Employ America that I told you about a few weeks ago. The profit could, in turn, be used to invest in America’s fuel stockpile, clearing some of the $230 million backlog of physical repairs needed on the infrastructure that stores the crude. “The choice to deliver more barrels is fraught, but with that decision made, the administration missed an opportunity to set up the SPR for long-term success,” Arnab Datta, Employ America’s managing director of policy implementation, told me in a text message last night. “I hope they consider creative options to do so moving forward.”
Meanwhile, oil is actually flowing through the Strait of Hormuz again. “Iran’s regime has lost control of the Strait of Hormuz,” energy investor Alexander Stahel wrote in a lengthy post on X. The U.S. military’s naval escorts and the United Arab Emirates’ commitment to circumventing Iran’s blockade are returning the critical waterway to “normal,” as my colleague Robinson Meyer wrote. Over text message last night, I asked an energy trader if this meant we were winning. “I’d say we’re losing less than we had been,” they said. “If Iran hadn’t gotten the Houthis to attack Saudi Arabia and seize the Red Sea, we’d definitely be.” Big if!
British Prime Minister Andy Burnham emerged triumphant from the Labour Party’s recent political implosions after he established himself as a pragmatic left-wing populist during his time as mayor of Manchester — drawing frequent comparisons to New York City Mayor Zohran Mamdani. Now Burnham is demonstrating what his brand of “business-friend socialism” means in energy. On Tuesday, Downing Street announced the launch of Great British Grid, a new subsidiary of the state-owned Great British Energy, designed to compete with private companies for investments in the power grid. “We have a cost crisis. We all know it,” Burnham said in a speech, according to The Guardian, which broke news of GB Grid. “The price of energy is crippling for businesses, and British bill payers pay some of the highest energy costs in Europe. We have an energy system where prices are dictated in markets miles away, while families and businesses here shoulder the costs. Once again, the British public has lost control.” His answer? Reverse what he called “40 years of neoliberalism.” Over here on this side of the pond, we are waiting to see what’s in the deal the Senate has brokered to ease federal permitting, one of many hurdles to building new transmission lines in America. The text of the agreement is due out later today.
Down in the South Atlantic, things are heating up in the Falkland Islands, even as temperatures outside remain low. The archipelago has never had a native population — as far as anyone can tell, the longest-lasting settled population has been the mostly British herders and fishers who have voted repeatedly to stay under the British crown. That didn’t stop Argentina, which has claimed what it calls Las Malvinas for centuries, from launching an invasion in 1983, in which the British military won a decisive victory. Now that the sleepy Falklands are preparing to drill oil wells in the offshore economic zone surrounding the islands, Buenos Aires is waging what one Falklander described to the Financial Times as “economic warfare.” Instead of Union Jacked Sea Harriers and Argentinian light cruisers doing the combat, this time Argentina is limiting trade, isolating the Falklands. “We’re just a few thousand people trying not to get blown off a rock,” local radio host Ronnie MacLennan Baird told the newspaper. “We just want to get on with our lives.”

Lots of solar developers are promising to compete with nuclear, geothermal, and hydro plants in generating the type of electricity that matches today’s favored buzzwords of “24/7,” “clean,” and “baseload” by pairing panels with batteries. Few companies, for obvious reasons, actually mean generating solar energy all day and night. Virtus Solis Technology, on the other hand, is promising to pioneer a method for delivering solar power generated from panels affixed to satellites in space, capable of angling at every hour to meet the sun’s rays and beaming wireless power back down to Earth. It’s hardly the only developer reaching for solar in space. But the Troy, Michigan-based startup is the first to get someone to agree to buy that electricity. On Wednesday, the company inked its first power purchase agreement to sell electricity from its debut, 100-megawatt solar satellite to the Chicago-based data center developer Brae Systems over the next 20 years. Virtus Solar called it the “first in a series of commercial offtake agreements” expected in the next several months. As part of the deal, Virtus Solar will build a “dedicated terrestrial receiving station to be constructed in Illinois.” The contract includes an option to increase capacity to 250 megawatts within three years of commercial operations. “Securing a direct 20-year supply of firm, clean power from Virtus Solis ensures our GPU infrastructure operates with predictable power costs and zero carbon emissions, completely insulated from terrestrial grid curtailment,” Brae Systems CEO Vishnu Indukuri said in a statement.
Other frontier energy sources have evolved quickly from plans to deals. Commonwealth Fusion Systems, the current frontrunner in America’s fusion startup race, signed its inaugural power purchase agreement with Google last year. Now the spinout from the Massachusetts Institute of Technology is attracting institutional investors, as my colleague Katie Brigham has written, and inching closer to building out its supply chain. On Wednesday morning, the company announced what it called a “landmark supply agreement” with the Japanese industrial giant Fujikura to buy more than 6,200 miles of high-temperature superconducting tape to help build CFS’ doughnut-shaped ARC fusion reactors.
Sign up to receive Heatmap AM in your inbox every morning:
As of now, the European Union is set to start forcing foreign oil and gas companies to monitor and submit data on their methane emissions or face financial penalties. But Brussels is now considering delaying the methane reporting rules by as much as a year as tight fuel supplies send prices ever higher amid the twin energy shocks from the wars in Iran and Ukraine. On Tuesday, Reuters and OilPrice.com reported that EU Energy Commissioner Dan Jorgensen had confirmed that officials are examining whether to postpone the provisions. The statement came days after Jorgensen made a similar remark to Bloomberg.
Meanwhile, Jorgensen’s native Denmark is heeding the former U.S. Energy Secretary Ernie Moniz’s call to invest more in clean fuels. On Tuesday, Hydrogen Insight reported that the country planned to increase its budget for building a network of dedicated hydrogen pipelines by $850 million.
One of the more memorable moments of the 2024 vice presidential debate came when JD Vance lashed his Democratic rival, Minnesota Governor Tim Walz, for failing to prioritize manufacturing of solar panels in the U.S. The Democrat shot back that such factories were open in his very state. Among them was Heliene, a producer of high-performance solar modules designed for boutique rooftop units. On Tuesday, the company rolled out a new all-American module at a moment when solar buyers are increasingly seeking technology that won’t be subject to President Donald Trump’s tariffs. “The new module brings together American-made polysilicon, ingots, wafers, and solar cells, reconnecting critical stages of the solar supply chain with U.S. manufacturing after more than a decade,” the company said, calling the module “an important step in reshoring U.S. solar manufacturing, bringing more of the upstream silicon supply chain back to America.”
As my colleague Emily Pontecorvo and I reported last month, the Department of Commerce just threw solar manufacturers a lifeline by slapping new import levies and restrictions on foreign polysilicon, the main ingredient in solar panels. But the agency halted enforcement until early December, giving importers the opportunity to stockpile in advance of the new rules taking effect. Last week, the Commerce Department moved to ban stockpiling. “Protecting against stockpiling is critical to ensure a functionally viable remedy from the Section 232 rules,” Matt Card, president of the U.S. cell manufacturer Suniva, told PV Tech.
A quick letter of recommendation to close out this morning’s newsletter. Back in 2018, I received a galley copy of a forthcoming book by a niche left-wing sociologist with a growing focus on climate change. The title — After Geoengineering: Climate Tragedy, Repair, and Restoration — struck me. Geoengineering and its associated technological ideas to adapt to a hotter world, such as carbon dioxide removal, were at that point very taboo in climate policy circles. The technology, assuming it even worked, posed what many saw as a moral hazard, a Pandora’s box that, if opened, would sap humanity’s collective will to do the hard work of mitigating fossil fuel emissions. At least, that was the dominant mode of thinking at the time. So, you can imagine, I found that book title provocative. Over the course of 288 pages, the author, Holly Jean Buck, bounced between dense but readable chapters of nonfiction explanations of the latest science behind various cutting-edge climate technologies and sections of fictional sci-fi vignettes. The stories painted a picture of life in the not-so-distant future. One that has stuck with me over the years is a vision of an Oklahoma rancher earning passive income by letting a state carbon disposal program pump captured CO2 into the geological formations beneath his property. I offer my sincere congratulations to Holly, who yesterday was named among the 20 recipients of this year’s MacArthur Foundation’s prestigious “genius grant.”
Novele is aiming to smooth out power consumption for commercial buildings, saving tenants money and easing grid strain.
Electricity is more expensive in times of peak demand — that’s simply a universal truth. But for many commercial building owners and tenants, their most energy-intensive minutes of the month can have an especially outsized impact on their electricity bill. That’s because of the “demand charge,” a fee based on a building’s single highest burst of power consumption, which can make up over 50% of a customer’s monthly bill. Likewise, shrinking those bursts would not only ease strain on the grid, but could also dramatically lower commercial users’ costs.
Or at least that’s Novele’s pitch. The startup, which makes 2-inch-thick, fire-safe lithium-ion batteries that mount on the interior walls of commercial spaces such as offices, hospitals, and big box retailers, announced Wednesday that it raised an oversubscribed $17 million Series A led by impact-focused investor Boisei Labs. The funding will help the company scale its AI-powered battery system, which networks batteries placed throughout a building and uses software to predict impending spikes in power demand. Just before the peak hits, the system can automatically switch the building from grid power to battery power, helping the customer avoid those costly demand charges.
“We learn how the building consumes power, but we’re also taking into account other considerations, like what day of the week it is, how the building is occupied, when it’s being used, what’s happening with the weather conditions,” Novele’s co-founder and CEO Charles Conwell told me.
Of course, battery storage for commercial customers is nothing new. Tesla, for one, has long sold large batteries like its Megapack, along with software designed to help businesses manage and reduce peak demand. But unlike these larger outdoor systems, Novele designed its thin panels for installation inside occupied spaces like hospital hallways and offices, distributing the batteries throughout a building while operating them as a single, coordinated system.
The systems are custom designed, so Novele told me it couldn’t provide an overall cost estimate. But Conwell told me the batteries typically have a 20- to 40-month payback period, the timeframe in which a customer’s electricity bill savings should eclipse the system’s upfront cost. (The company also offers financing options that allow customers to spread out that cost over time.) And while customers may sign up for the cost savings, there are major decarbonization benefits, too. So-called peak-shaving can reduce the need for peaker plants — natural gas facilities that only fire up when demand is highest. These plants are typically among the grid’s most carbon-intensive assets, as they’re designed to ramp up quickly rather than operate efficiently for long periods.
These automated batteries could also enable commercial buildings to participate in virtual power plant programs, which ease strain on the grid by cutting energy use during periods of high demand or by tapping assets like batteries to send power back to the grid. Using stored energy when needed, Conwell explained, is better than typical demand response initiatives, which often require tenants to change their routines — e.g. when they run the dishwasher or charge an EV — to accommodate the grid. That approach, he said, is either “ineffective or doesn’t make the tenants very happy.”
As the company scales, it also envisions building a portfolio of properties that, if they have “a dense enough footprint,” could work in concert to form their own virtual power plant of sorts, Conwell said.
In the near term, however, Novele plans to use its Series A to expand its team, install more systems, and further develop its software. It’s particularly focused on markets where electricity costs are already high or climbing fast, such as California, New York, New England, and parts of the PJM power market. In PJM in particular, record-high capacity prices — largely driven by data center demand — are pushing electricity bills to new heights.
The company says it has already installed batteries for several Fortune 50 customers, though it’s keeping the identities of these early adopters under wraps. Conwell told me that there’s also “a bunch of installations that are in progress,” and that in the coming year, the company will be working toward making the process of purchasing, installing, and operating Novele’s system as seamless as possible.
Once that foundation is in place, Conwell sees an opportunity to help usher in a more responsive, intelligent future for the built environment. “If you get the infrastructure right, if you bring in the controls — the mechanical controls, the machine learning controls, and the artificial intelligence-driven controls — you start to be able to set the stage for a dynamic, autonomous building of the future.”