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Can U.S. LNG Cure The World’s Coal Addiction? Toby Rice Thinks So.

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According to a recent report at Bloomberg, coal is in the midst of an unprecedented revival even as global leaders continue to raise alarm about what they refer to as a “climate emergency.” Not only is coal usage in power generation continuing to rise rapidly in China and other parts of Asia, the most polluting fossil fuel is also seeing a renaissance in the West, most obviously in Germany and the United States.

The International Energy Agency (IEA) finds that the world used more coal in power generation during 2021 than ever before, and will consume 2% more than during 2022. The agency’s analysts expect record coal usage levels to remain in place at least through 2024, while IEA head Fatih Birol travels the world reciting his talking points about the energy transition. “All evidence indicates a widening gap between political ambitions and targets on one side and the realities of the current energy system on the other,” the IEA said.

A couple of days before that Bloomberg story was released, the editorial board at the Wall Street Journal published an editorial in which it took Climate Envoy John Kerry to task for some recent attacks on the U.S. natural gas sector. In those remarks, Mr. Kerry, who has no official policymaking portfolio, essentially contradicted President Joe Biden’s own stated ambitions for expansion of U.S. LNG exporting capacity to Europe by giving the industry an ongoing lifespan of no more than 10 years.

“We have to put the industry on notice: You’ve got six years, eight years, no more than 10 years or so, within which you’ve got to come up with a means by which you’re going to capture [emissions], and if you’re not capturing, then we have to deploy alternative sources of energy,” Kerry told Bloomberg TV. “No one should make it easy for the gas interests to be building out 30- or 40-year infrastructure, which we’re then stuck with and you know the fight will be ‘well we can’t close these because of the employment, because of the investors, et cetera.’”

Thus, in a world with a demonstrably increasing appetite for using more and more coal, we see Mr. Kerry trying to slam the brakes on the one truly viable, scalable, cleaner alternative to it: Natural gas. The benefits to the environment of displacing coal with natural gas have already been clearly demonstrated in the U.S., where greenhouse gas emissions have fallen to levels not seen since the early 1990s in recent years.

In a post published on Earth Day, the folks at EnergyInDepth included this graphic – based on U.S. Energy Information Administration (EIA) Data – showing the role U.S. natural gas has played in producing that happy outcome:

That’s all great, but what company is going to want to risk the $10 billion or so required to finance new LNG export facilities with a 7-10 years development timeline in a political and regulatory environment in which a lead presidential spokesman says the company may have only 6 or 8 or 10 years to live? Obviously, something has got to give here. Either the Biden administration wants U.S. LNG to expand so it can fulfill the commitment the President himself made to Europe in early March, or it wants to impede said expansion to conform to Mr. Kerry’s impossible dreams.

This is not a case in which both things are possible. They are in fact directly opposed to one another and cannot be reconciled.

No one understands this conflict in policy messages better than Toby Rice, the CEO of EQT

EQT
Corp., America’s largest producer of natural gas.

“One thing I think that people don’t understand is how much energy demand there is in this world. And when solar and wind aren’t capable of meeting that energy demand, people will turn to their next option, which is coal,” he says.

Rice has a strong foundation for saying that. NPR reported Monday that China is actively promoting more coal use at home and internationally as part of an effort to boost its own sagging economy. A new plan published by the Communist Party envisions boosting production by 300 million tons during 2022, an increase of 7% from its 2021 output of 4.1 billion tons.

Globally, annual emissions from coal are up 500 million tons over the pre-pandemic levels of 2019. “To put that into perspective,” Rice notes, “that completely offsets all of the emission reductions we’ve done from solar and wind here in the United States in the last 15 years.”

Rice’s view is that the best way to put the world on a real path to net-zero by 2050 would be to leverage and incentivize U.S. LNG to be used to displace coal on a global basis. He notes that coal is the source of 48% of current international energy emissions, and that a global effort to use LNG from the U.S. to replace power generation from coal would result in massive emissions reductions, as shown in these slides from his recent presentation:

“U.S. LNG is one of the world’s largest weapons to combat climate change,” Rice says. “Unleashing it would enable the United States to replace up to one-third of international coal in the next 20 years. But equally important, as the recent invasion of Ukraine by Russia highlights, it would allow us to provide energy security to our allies while weakening the energy dominance of our adversaries.”

The plan assumes U.S. LNG export capacity could be increased by 400% by 2030, in line with the commitment to the EU that President Biden made in March, albeit without bothering to consult with anyone who is actually in the U.S. LNG sector. Unfortunately, the President has conspicuously avoided making any corresponding commitment to put approvals for new natural gas export and transportation infrastructure on a permitting fast track, an action that would be absolutely vital to truly implement any such effort.

The potential environmental benefits from such a focused global effort to displace coal with natural gas are immense. As shown on the first slide above, they would be equal to:

  • Electrifying 100% of U.S. passenger vehicles
  • Powering every U.S. home with rooftop solar and battery backup packs, and;
  • Doubling U.S. wind capacity by adding 54,000 industrial scale windmills

Wouldn’t that be worth doing? Rice thinks so, and points out that, unlike ongoing expansions of wind and solar, such an effort could be mounted by the U.S. natural gas production, midstream and production sectors without hundreds of billions of dollars in government subsidies.

But of course, the politics of it are all wrong for this administration. Biden got elected on the back of pledges to punish and try to eliminate new drilling for oil and natural gas in the U.S., and has appointed senior officials who are true believers in that goal. Any overt effort by this administration to dramatically expand the domestic LNG export sector would invoke painful unrest among his party’s most loyal funders and voters.

Such an effort would also dampen Mr. Kerry’s ongoing ability to engage in his myth-making about natural gas, as he flies all over the world in private jets powered by petroleum products, as well as mandating a complete shift in the prevailing narrative surrounding the energy transition, such as it is. Messaging adjustments of such magnitude are, sadly, most likely beyond the ability of the global elites who make all these decisions on humanity’s behalf.

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