Special Online Briefing with Brad Crabtree, Assistant Secretary for the Office of Fossil Energy and Carbon Management, U.S. Department of Energy
U.S. DEPARTMENT OF STATE
For Immediate Release
October 31, 2022
The Brussels Hub
Special Online Briefing with Brad Crabtree, Assistant Secretary for the Office of Fossil Energy and Carbon Management, U.S. Department of Energy
MODERATOR: Good afternoon from the State Department’s Brussels Media Hub. I would like to welcome everyone joining us for today’s virtual press briefing. Today, we’re very honored to be joined by Department of Energy Assistant Secretary Brad Crabtree.
And finally, a reminder that today’s briefing is on the record. With that, let’s get started. Assistant Secretary Crabtree, thank you so much for joining us today. I’ll turn it over to you for your opening remarks.
ASSISTANT SECRETARY CRABTREE: Great. Thank you, Andrea, and thanks to all of you for joining me today. I appreciate the opportunity to share our perspective on the role of U.S. natural gas exports in European energy security, and also on our efforts to decarbonize U.S. domestic – or U.S. domestic and international natural gas supply chain. I’ll start by sharing some observations with you and then I’ll be happy to take your questions.
First, I want to begin by acknowledging that this is an exceptionally challenging time in Europe. As a continent, you’re seeking to reduce sharply your reliance on Russian energy. President Putin has weaponized energy exports for political gain in Ukraine and across the continent, and it’s putting energy security, economies, and the industrial jobs base of European countries at risk.
I also want to take this moment to reiterate the United States and Department of Energy’s continued commitment to helping to ensure the energy security of our European allies as they work to both diversify their energy resources and decarbonize their energy sector.
U.S. exports of liquefied natural gas play a critical role in diversifying that energy supply in the near to medium term, so I will start with liquefied natural gas, or LNG, and then turn to decarbonization.
As European countries find themselves in an urgent search for additional sources of natural gas supply to sustain national economies and maintain social and political stability, the U.S. natural gas and liquefied natural gas industries have stepped up and played a key role in supporting Europe’s energy security. This year, approximately two-thirds of U.S. LNG exports have gone to Europe. Based on our recent LNG export data, three of the five top countries of destination were in the European Union – France, the Netherlands, and Spain – and the United Kingdom is also in the top five countries receiving U.S. natural gas exports.
U.S. LNG exports reached a high of 122 billion cubic meters per year in March, and are expected to reach 132 billion cubic meters by the end of this year, 153 billion cubic meters in 2024, and roughly 204 billion cubic meters by the end of the decade. We are prepared to do everything we can to advance global energy security over the next few years, and so in that context I’d like to clear up what are some misconceptions which have gained attention here in Europe.
First, I represent the Office of Fossil Energy and Carbon Management at the U.S. Department of Energy. We regulate the export of U.S. natural gas. And I want to emphasize that in that capacity, we have not held back on permitting U.S. LNG exports. We have already authorized exports totaling four times U.S. current LNG export levels. That’s 490 billion cubic meters of exports have already been authorized. Most of these permitted projects have not secured a financial investment decision, and therefore they have not begun construction. In the United States, the financing of LNG terminals is a private sector matter and not the responsibility of government. Also, every operating LNG export terminal in the United States is currently able to export at its fully authorized capacity to any country that’s not prohibited by U.S. law or policy. That includes all European countries.
Finally, four recent LNG export applications for U.S. Gulf Coast projects have been approved within the past year, and we just announced completion of environmental reviews for two planned terminals in Mexico that would export U.S. natural gas.
The second, and I would argue more serious, issue is recent allegations in Europe of price gouging by U.S. LNG producers. I want to be absolutely crystal-clear here: These assertions are blatantly false. The vast majority of U.S. LNG is produced and exported subject to long-term contracts, and it’s a matter of public record. Our office publishes these export prices monthly. What the public record shows is that current U.S. LNG export prices remain close to the U.S. domestic price for natural gas – essentially, the benchmark Henry Hub price. Our Henry Hub is the same as TTF in Europe as a benchmark natural gas price. So it’s the Henry Hub price plus the cost of liquefaction of that natural gas. The aggregate price for U.S. LNG in August was just under $15 per million BTUs. That’s only $6 over the Henry Hub average of $8.80 per million BTUs, this at a time when Asian and European import prices have been in the $30 to $40 range.
Given that nearly all U.S. LNG exports are in long-term contracts at low prices, the enormous margins that are currently being earned in the European LNG market are primarily flowing to non-U.S. international oil companies and energy traders that hold these long-term contracts. These margins are not going to U.S. LNG producers. The U.S. Government is deeply concerned about the impacts of high LNG prices on European consumers and economies. However, it is a matter to be resolved between European countries and the principally non-U.S. companies that are actually doing the trading of American LNG in European markets.
Now I’d like to turn to decarbonization, and I want to underscore that the Biden administration is fully aligned with the goal of the European Union and its member states to reduce the greenhouse gas intensity of natural gas exports and, ultimately, to fully transition to net-zero emissions by mid-century. These priorities are also supported by recent passage of groundbreaking energy and climate change legislation in the United States. We’re actively working to implement a comprehensive approach to responsible and sustainable natural gas production, transport, domestic use, and export. This includes mitigation of methane emissions, deployment of carbon capture and storage, development of a monitoring, measurement, reporting, and verification framework for greenhouse gas emissions, and accelerating the transition to low and zero carbon hydrogen and ammonia production.
Here are some examples of what we’re doing to reduce our carbon footprint. Our office at the Department of Energy is investing directly in the research, development, and demonstration of methane mitigation and monitoring technologies at every point in the value chain. We just announced $32 million in funding this year, and have asked the United States Congress to substantially increase that funding next year. We have also supported a government-wide engagement to assist the European Union in developing the Global Methane Pledge. This was launched at the COP26 conference last year, and over 100 countries have signed on to support the pledge’s target of reducing global methane emissions 30 percent by 2030.
As the EU works to legislate the measuring, reporting, and verification of methane emissions, our office at the Department of Energy is partnering technically with the European Union on both methane emissions quantification and mitigation. We hope to continue working closely with the EU to ensure development of a highly credible and consistent international approach to measuring and monitoring methane emissions.
Most importantly of all, we are getting our own house in order in the U.S. with respect to federal climate policy. Thanks to passage of the bipartisan infrastructure last fall, the Department of Energy has received 62 billion U.S. dollars over five years for energy and climate investments. Of that total, $12 billion has been devoted to the demonstration of carbon management technologies and CO2 transport and storage. This funding will support the deployment of at least six fully commercially scaled carbon capture facilities, two of which must be on natural gas-fired power plants; four regional clean hydrogen hubs, at least one of which will feature large-scale hydrogen production from natural gas with carbon capture; the development of 20 to 40 regional geologic storage hubs over the next decade – each of these storage sites must store a minimum of 50 million metric tons of CO2 over the next 30 years, and many will store much more CO2.
In parallel with the development of geologic storage, we are also establishing a financing authority to provide billions of dollars in low-interest loans and grants to build out regional CO2 transport systems to move the CO2 that we capture from industrial facilities and power plants to where it could be safely stored at geologic storage sites.
Complementing this national infrastructure legislation is the Inflation Reduction Act, which passed just this August. It provides a comprehensive package of several hundred billion dollars in clean energy and industrial tax credits to incentivize private sector investment in projects. In terms of decarbonizing U.S. natural gas production, use, and exports, the impact of the Inflation Reduction Act will be profound. The legislation increases the value of the 45Q tax credit to $85 per ton of CO2 captured from industrial facilities and from power generation, and permanently stored in geologic formations. This will dramatically increase the commercial viability of carbon capture on natural gas processing, liquefaction, natural gas power generation and industrial combustion, and hydrogen and ammonia production from natural gas. The Inflation Reduction Act also establishes a separate tax credit for clean hydrogen production with eligibility for projects producing hydrogen from natural gas with carbon capture.
These new and expanded tax credits will be available for any project that begins construction between now and the end of 2032. That provides 10 years for industry in the United States to plan and invest in projects and begin the process of industrial decarbonization. And there are significant incentives in the legislation for methane mitigation and monitoring as well. These will be implemented by the U.S. Environmental Protection Agency and they include a methane fee and $1.5 billion in funding to support deployment of methane mitigation and monitoring technologies by industry. Our office, the Office of Fossil Energy and Carbon Management, will be providing technical assistance to the EPA as it implements these programs.
So if you take these two laws together, the Bipartisan Infrastructure Law and the Inflation Reduction Act, they represent the most significant U.S. commitment to climate action to date. In fact, we expect the legislation will result in the reduction of U.S. greenhouse gas emissions by 40 percent by 2030. For carbon management specifically, the Clean Air Task Force has commissioned analysis that estimates the combination of federal funding and enhancements to the 45Q tax credit will lead to deployment of carbon capture and storage of 210 to 250 million metric tons annually in the U.S. by 2035.
So in closing, for the first time the United States has a comprehensive and ambitious federal policy framework for addressing climate change in place, and the United States has the opportunity as the world’s largest oil and natural gas producer to provide responsibly sourced, transported, and delivered natural gas domestically and to our allies in the near to medium term, and by mid-century to help achieve decarbonization of natural gas production and the use – and use and the transition to net-zero emissions hydrogen and ammonia production.
So that gives you a bit of an overview of our current LNG policies and what we’re doing to advance the decarbonization of our natural gas supply chain, and I’ll be happy now to take your questions.
MODERATOR: Thank you so much. We’ll now turn to the question and answer portion of today’s briefing. And so our first question is one of our – the questions in the Q&A chat by Llazar Semini from the Associated Press in Albania and Kosovo. And the question is, “The U.S. is investing in LNG projects in Albania, which would help the region and more too. Could you explain why Washington is interested in such projects and some details, figures, total investing money, and more, if possible? Will they be sped up due to the Ukraine war?” And the last question: “Why is Albania chosen – for its geographic or even more geostrategic interests?”
ASSISTANT SECRETARY CRABTREE: Great, thank you for the questions. First of all, in this instance, the U.S. investment is private sector investment. It’s not the United States Government. There are efforts underway to expand natural gas power generation in Albania and also, as noted, the potential for LNG projects. That is clearly in response to the market conditions of the opportunity to supply additional natural gas to Europe, and the need for diversification of natural gas supplies has become acute following the Russian invasion of Ukraine.
So in this case, it’s American private sector investors responding to that market opportunity and investing in companies that are developing these projects. And of course, any efforts that are – can successfully provide additional energy supply to Europe in this moment of need are welcome.
MODERATOR: Thank you very much. Our next question comes from Said Babazade, a correspondent of the – from Azerbaijan, from the Azerbaijani Public Television and APA News Agency. Said asks: “What kind of role can Azerbaijan play in filling the energy gap and need in the EU mainly created after Moscow’s invasion of Ukraine? Does the West consider Baku a reliable partner in the field of energy?”
ASSISTANT SECRETARY CRABTREE: So obviously I represent the United States Government, and we’re in this instance also an energy producer and exporter, but obviously our European allies are looking at many countries to diversify away from Russian oil and gas and to get supplies of energy from countries that they can rely on. And so I think any opportunity that Azerbaijan can play increasing energy supply to Europe will be welcomed by our European allies. And of course, the United States generally speaking is supportive of European countries’ efforts to expand and diversify their energy supplies away from Russia.
MODERATOR: Thank you very much. Our next question comes from Momchil Indjov from Club Z Media Group from Bulgaria, who asks: “Do you see any new threats against critical energy infrastructure in Europe after the sabotage against Nord Stream, and do you think there is a threat against the recently inaugurated Interconnector between Bulgaria and Greece?”
ASSISTANT SECRETARY CRABTREE: So I don’t have information of specific threats, but what I would say is we are very concerned about threats to infrastructure. The question references the sabotage of Nord Stream – the Nord Stream infrastructure. We’ve also all been reading the media reports and – about the drones that have been buzzing offshore oil and gas infrastructure in Norway, and I was just in Norway last week. And the Norwegian Government is very, very concerned about potential threats to their oil and gas production capacity, and of course Norway is playing a vital role right now in supplying natural gas to Europe. So this is a time when all countries need to be very vigilant in taking extra efforts to monitor the security situation with regards to their energy infrastructure. And we’re certainly doing that in our country and we’re certainly supporting the efforts of our allies through the normal channels to try to protect critical infrastructure.
MODERATOR: Thank you very much. Our next question comes from Gilles Sengès from L’Opinion in France, who asks: “What do you answer to the French and German finance ministers, who complained recently on buying the American LNG at a price four times greater than in the U.S.?”
ASSISTANT SECRETARY CRABTREE: Well, so I think my remarks actually anticipated that question, but let me – let me just underscore this again. First of all, we completely understand the sensitivity of elected officials in Europe right now with regards to energy prices. They are creating enormous burdens and risks for European economies, and we want to work with our European allies to do everything we can to bring down energy prices.
But this is categorically a situation where the United States Government and even United States industry is not responsible for these high prices. In this instance – and I’ll just say it again – the vast majority of U.S. LNG exports are tied to long-term contracts. For example, our largest LNG producer, Cheniere, 90 percent of their LNG production is in long-term export – or long-term contracts.
These long-term contracts are not with U.S. companies. They are with principally European-based international oil companies and European-based international energy traders. They are the ones that hold these long-term contracts who are purchasing LNG in their contracts, as I said, at very low prices. Again, the price in August in the United States was roughly $14 per million BTUs.
They are turning around then and charging two, as much as three times as much as their contract price in the European market. It’s their right to do that under their contract, but it’s not something that the United States Government or U.S. industry has any control over whatsoever. To the extent that this situation is to be addressed, it has to be addressed by European governments in the context of these companies and these private contracts that they are – that they own, and that’s outside the jurisdiction of the United States.
We are doing everything we can as a government in concert with our European allies to bring energy costs down, not to profit from the misfortune in Europe that’s resulted from this horrible war in Ukraine.
MODERATOR: Thank you very much. Our next question goes back to Bulgaria and to Raya Lecheva from 3eNews in Bulgaria, who just would like you to repeat some of the details about the LNG exports to Europe and your expectations for growth, and what would be the cost for Europe and Bulgaria?
ASSISTANT SECRETARY CRABTREE: Okay, so let me start with our estimates for production, and these are based on – for greater context, these are based on exports that we have permitted and projects that are now under construction. And so this spring we reached the highest level of exports ever in the United States, 122 billion cubic meters per year. That was in March. We had an LNG facility had a fire, the Freeport facility, so they came offline. So production is now down a bit, but it will go back up in November. And by the end of this year we are estimating production and exports of 132 billion cubic meters per year; by the end of 2024, early ’25 perhaps, 153 billion cubic meters. And then by the end of this decade, roughly around 2030, we’re anticipating around 204 billion cubic meters of exports from the United States.
It takes a long time to plan, design, permit, finance, and construct a liquefied natural gas terminal. Our terminals are onshore. They’re not offshore such as the ones being put in place in Europe. So it takes many years for that export capacity to grow.
And then there was another part, Andrea, to the question? I apologize.
MODERATOR: Let’s see, what would be the cost for Europe and Bulgaria?
ASSISTANT SECRETARY CRABTREE: Well, so one of the things that we’re encouraging our European allies and the European Union to consider is to be more open to long-term contracts, because in the United States LNG terminals and LNG production is something that is financed by the private sector. The government, U.S. Government, does not play a role, and the way that these facilities get financed is through – by offering long-term contracts. And up until now, many European countries have not been willing to purchase LNG on longer-term contracts.
And so what that means is that Europe remains vulnerable to the spot market or the short-term market, and so traders that have purchased long-term contracts are now turning around and charging European consumers much, much more for this LNG than the United States companies are selling it to them for. And so if Europe wants to make this future LNG capacity cheaper, then they will need to enter into more long-term contracts to get those lower prices, otherwise Europe will remain at the mercy of international traders.
MODERATOR: Thank you very much for that explanation. I believe that’s all the – those are all the questions that we have today, and so I’d like to wrap up our call. I’d like to thank all of our journalists for your questions and thank you, Assistant Secretary Crabtree, for joining us. Shortly we’ll —
ASSISTANT SECRETARY CRABTREE: Thank you.
MODERATOR: Go ahead.
ASSISTANT SECRETARY CRABTREE: I was going thank you, Andrea, and I really appreciate the journalists taking the time to join us today. Thank you very much.
MODERATOR: Thank you. Shortly we’ll send an audio recording of the briefing to all participating journalist and we’ll provide a transcript as soon as it’s available. We’d also love to hear your feedback, and you can contact us at any time at TheBrusselsHub@state.gov. Thank you again for your participation and we hope you can join us for another press briefing soon. This ends today’s briefing.