Opinion

Something Smells Off About Pruitt’s Ties to Liquefied Natural Gas

By the time you finish reading this, there very well may be yet more links exposed between U.S. Environmental Protection Agency Administrator Scott Pruitt and industry lobbyists.

The news about how Trump administration officials have prioritized – and perhaps profited from — industry connections keeps wafting in, even in the face of firings and pointed questions from Congress like those Pruitt received about his extravagant spending, possible agency mismanagement and lobbyist ties. The coziness Trump officials share with lobbyists raises questions about industry influence over administration policy. But Pruitt’s ties to the natural gas industry, and particularly liquefied natural gas exporters, light the swamp gas on fire.

To begin with, something smells off about the Trump administration’s LNG sales pitch; it simply does not match the facts. Exporting LNG from the United States appears, at first, to make simple business sense. Domestic natural gas production has skyrocketed in recent years; foreign demand has grown; and U.S. companies have responded by proposing new LNG export facilities along the Gulf, Atlantic and Pacific coasts.

Still, potential LNG trade growth does not explain the Trump administration’s over-eagerness to export it, particularly to distant and increasingly competitive markets like China.

Commerce Secretary Wilbur Ross recently argued that the proposition is part of the “simplest” solution to rebalance the U.S.-China trade deficit.

Ross’ bullish proposal does not reflect the fact that China already imports natural gas from 26 nations, most of whom sell cheaper gas than U.S. exporters. Chinese natural gas demand is growing in response to policy reforms but may diminish if China overcomes challenges and increases its domestic production.

High transport costs to China from the U.S. Gulf or Atlantic coasts, where the only two operating LNG terminals exist, cede a substantial edge to closer competitors like Australia and Qatar. On a 2017 trade junket to Beijing, President Donald Trump announced $250 billion in deals, including several involving natural gas, but hawking these goods to China overstates the real business opportunities.

One such “deal” resurrects a struggling proposal to bring Alaskan North Slope gas to market – including any gas that would come from the Trump administration’s efforts to drill the Arctic National Wildlife Refuge. This proposal has struggled for years, most recently due to falling prices in the lower 48 states.

These bad economics led to the only existing Alaskan LNG terminal getting mothballed. But Chinese oil company Sinopec’s likely majority stake and involvement in pipeline construction may help the proposal this time. And if, in fact, Chinese state financing for the Alaskan project enables the pipeline to be built, that means a majority of Alaska’s North Slope gas – including U.S. taxpayer-owned gas extracted from the sellout of the Arctic National Wildlife Refuge – would be shipped to China.

Another deal championed by the Trump administration smells even worse. In February, U.S. LNG exporter Cheniere Energy signed a 25-year contract with China National Petroleum Corp. Given the challenging business proposition of exporting LNG to China, how did they make this work? And whom in the U.S. and China does it benefit?

The connections between Cheniere and Pruitt identify some potential answers. Not only did Pruitt travel to Morocco in 2017 to promote LNG sales — a role outside the mission of the U.S. environmental regulator — but he did so at a time when Cheniere was the sole operating exporter. Richard Smotkin, a longtime Pruitt friend and lobbyist hired by the Moroccan government, helped organize the trip. Later, reports connected a special low-rate condominium rented by Pruitt to J. Steven Hart, Cheniere’s lobbyist.

But perhaps most importantly, Cheniere’s majority shareholder, billionaire Carl Icahn, championed Pruitt to become EPA administrator while advising Trump on cabinet picks and regulatory rollbacks. In 2015, Icahn had staged a hostile takeover of Cheniere, ousted its then-chief executive, and expedited construction of its LNG export facility. He later supported Trump’s candidacy and network of political organizations with hundreds of millions in super PAC dollars. Pruitt’s ties to the natural gas industry and Cheniere seem rotten, particularly given his responsibility to regulate pollution they cause.

As members of Congress continue investigating Pruitt’s ethics, observers may want to ask: Which companies does the Trump administration’s push to sell LNG to China benefit? What political trade-offs are sweetening the deals for China? Who will end up bearing the costs? And do these deals smell like corruption?

 

Luke H. Bassett is the associate director of domestic energy policy at the Center for American Progress.

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