The U.S. energy industry is expressing significant concerns regarding a new rule that would mandate an increasing percentage of liquefied natural gas (LNG) exports to be transported on U.S.-built vessels. This rule, designed to bolster domestic shipbuilding, is facing pushback due to its potential to negatively impact the competitiveness of U.S. LNG exports, reports Reuters.
Leader LNG Exporter
The United States, currently the world’s leading LNG exporter with $34 billion in annual exports, has seen strong support for the industry from the Trump administration, particularly in its pursuit of energy dominance.
However, a recent decision by the U.S. Trade Representative (USTR) has caused significant concern within the LNG industry. On April 17th, the USTR announced that LNG producers would be required to transport 1% of their exports on U.S.-built ships starting in April 2029. This percentage is set to increase to 15% by April 2047 and remain at that level thereafter.
The American Petroleum Institute (API), representing major energy companies like Exxon Mobil, Chevron, and Cheniere Energy, has expressed strong opposition to this move. In an April 23rd letter to U.S. Energy Secretary Chris Wright and National Energy Dominance Council Chair Doug Burgum, API CEO Mike Sommers argued that this requirement could put the U.S. LNG industry at a competitive disadvantage globally. He cited the lack of sufficient U.S.-built ships to meet the mandate. Burgum is also the U.S. Interior Secretary.
Sommers wrote that this decision “risks counteracting the significant progress the Trump Administration has made towards reducing uncertainty and unleashing U.S. LNG.”
Industry groups have also warned that individual exporters who fail to comply with these requirements could face the loss of their export licenses, even though the percentages apply to the overall industry and to ships that exporters do not own or control.
Crude Oil Exemption
The Center for LNG echoed these concerns, stating to Reuters that U.S. shipyards cannot produce vessels quickly enough to meet the USTR’s deadline. Charlie Riedl, the center’s executive director, emphasized the current absence of such vessels and the decades it would take to build them, rendering compliance impossible for the industry.
API CEO Sommers, in his letter, further detailed the impracticality of the requirement, noting that the 1% mandate by the end of the decade would necessitate as many as five American-built LNG ships. However, with the current capabilities of the two U.S. shipyards possessing docks long enough for such construction, building a single LNG carrier takes up to five years.
Sommers urged the administration to consider an exemption for crude oil and refined product imports and exports, aligning with their existing approach to exclude these products from baseline and reciprocal tariffs
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Source: Reuters
