Background Press Call on the U.S. and the European Commission's Task Force to Reduce Europe's Dependence on Russian Fossil Fuels

Via Teleconference

10:45 A.M. CET

MODERATOR: Thanks so much for joining us, and I appreciate everyone's flexibility. This call is going to be on background, attributable to "senior administration officials." Not for your reporting but just for your knowledge, on this call we have [senior administration officials].

As we said in invite for this call, this call will be embargoed until the call concludes. And you all have received a factsheet on this earlier in the morning, as well. And as usual, we'll have some time for questions afterwards.

But with that, I will turn it over to [senior administration official].

SENIOR ADMINISTRATION OFFICIAL: Thanks, everybody, for joining. I'm going to say a few things about the energy agreement and then also the new transatlantic data privacy and security agreement as well.

So first, on energy: Today, President Biden and President von der Leyen are ushering in a new era of energy security for Europe.

As you all know, Putin's war has highlighted an urgent need to reduce our dependence, Europe's dependence on Russian fossil fuels. It's very clear that Putin is continuing to use energy as a weapon to coerce and destabilize Europe. The task force we're announcing today will hit hard at his ability to do this in the near term, and we're working toward eliminating his ability to do so in the future.

So, the strategy that we're announcing today to address the near term is to reduce demand for fossil fuels -- natural gas in particular -- and also filling in for natural gas that would have come from Russia in the very near term to avoid people getting cold this winter and next winter before clean energy is deployed at scale.

The President knows, and we've discussed at length, that the true path to energy security runs through clean energy. So that's the second part of this agreement. The first part is getting Europe off Russian gas. The second part is getting Europe off gas altogether. And he's committed to reducing our dependence on fossil fuels and reaping the climate, environmental, economic, and energy security benefits of moving decisively down that path.

With respect to the enhanced Privacy Shield agreement -- you know, this trip has been all about unity. And when you have the unity that's been forged between the U.S. and Europe, it creates a lot of trust and goodwill, and you can settle -- you can settle issues that have been nagging at the relationship. And we did so with the Boeing-Airbus dispute -- resolving that last summer, in June. We did so as well by lifting steel and aluminum tariffs in November. And this is another example of coming together on standards, on writing the rules of the road for data flows between Europe and the U.S. I mean, these data flows underpin the $7 trillion of commerce that takes place between the U.S. and the European Union.

And based on our shared -- the shared importance we place on privacy, data protection, and rule of law, we've come together and we've now settled a dispute that's been going on for over a year. Another example of why unity matters. And it's going to forge our partnership even closer.

I'll turn it over to [senior administration official] to say more about the energy deal.

SENIOR ADMINISTRATION OFFICIAL: Thank you so much. So today we announced a task force that will be led out of the White House and the Office of the President of the European Commission to support the EU's objective to end its dependence on Russian fossil fuels as soon as possible.

[Senior administration official] mentioned the two lines of effort, and I want to underscore that both lines of effort focus on ensuring that the task force is working to ensure European energy security in the near term while also recognizing that a rapid clean-energy transition to renewable energy, and including energy efficiency, are key tools that we will need to avoid these shocks in the future, while advancing our shared climate objectives.

The task force and international partners will target additional LNG volumes to Europe of at least 15 bcm this year, with expected increases going forward.

The task force will also simultaneously focus on reducing overall gas demand, in line with our shared climate and clean energy objectives. This includes engaging with key stakeholders, including from the private sector, to target immediate reductions in gas demand that can be achieved through ramping up energy efficiency measures and accelerating renewable energy development and deployment.

The REPowerEU plan, developed by the European Commission and released on March 8th to phase out of their dependence of Russian fossil fuels well before 2030, estimates that many of these measures can produce even greater savings in the near term.

According to their estimate -- their estimate is that energy savings in homes alone can save at least 15.5 bcm by the end of this year. And they estimate that accelerating wind and solar deployments and by frontloading that can replace about 20 bcm by the end of this year -- with their goal of saving over 170 bcm a year by 2030 through the plans the EU made before the invasion, such as Fit for 55.

So we -- as we support our European partners in the face of Putin's unprovoked and unjustified war of choice, we're also strengthening their ability to meet their long-term objectives.

So with that, we'll turn it over and take some questions.

MODERATOR: With that, why don't we start with Mike Shear with the New York Times.

Q: Hi guys. Thanks for having the call. I guess I wanted to clarify -- I've seen it reported this morning that this is a deal for the U.S. to provide 15 billion bcm to Europe. I just want to clarify, it's not that the U.S. has that amount that it will sell to the EU or ship to the EU, but rather that it's coming from -- it's an effort to find that amount from other countries.

And just as a sort of corollary to that: Isn't it the case that the U.S. and many of the other nations around the world are already running full tilt? And so, how do you find that amount of LNG when the U.S. and many of the other providers don't seem to have that kind of excess volume -- at least right now? How do you find that in the short run? Thank you.

SENIOR ADMINISTRATION OFFICIAL: Hi, Mike. I'm happy to start. [Senior administration official], please feel free to add in.

So, you know, Mike, we have close to doubled our LNG exports to Europe over the past three to four months. But we also arranged, over the course of the winter months, a number of swaps from our partners all over the world, particularly in Asia, to supply more LNG to Europe during its winter, particularly given its low inventory and storage levels this year. And so we're going to continue those efforts throughout 2022 -- that's what we're committing to do -- to hit the 15 bcm target.

And so this will involve a lot of diplomacy. We're confident after talking with our partners, both in Asia but also in other parts of the world, that we can continue to hit that number. Basically, it continues at the rate at which we provided and arranged for LNG to be delivered to Europe through the past few months. So that's a continuation of the effort.

And then, over time, what Europe is doing is it's committing to stable demand for U.S. LNG -- 50 bcm -- basically to execute on its goal of reducing energy dependence on Russia and removing it altogether before the end of this decade. And that will involve a lot of commitments by Europe to build the LNG import infrastructure, the distributional needs, the storage needs in order to transport that LNG to places where they have a real need to have gas. Gas imports rise over time to replace Russian imports. And we're going to do so, as [senior administration official] said, in a way that advances our clean energy goals.

So the LNG import terminals and the pipelines can be built in a way that facilitate the use of renewable energy that could be retrofitted for hydrogen, and that's going to be a big part of the second part of the strategy here -- is getting us off gas altogether, particularly in Europe.

MODERATOR: Thanks. Next, let's go to Kayla Tausche with CNBC.

Kayla, you there? We can't hear you. All right, you know, we will come back to you.

Next, why don't we go to Jarrett Renshaw with Reuters.

Q: Thanks for taking the call. Just -- can you just clarify the additional volume part? Are we talking -- is there an "all in" number here that the U.S. is committing (inaudible), a preexisting number plus the 15? So if we can get some clarification on that, that would be great.

And secondly, on the one hand, you're talking about increased production, more natural gas flowing out of the U.S., and also at same time, looking to stop it flowing and stop the production of natural gas. What incentive do U.S. companies have to build out this infrastructure -- U.S. natural gas companies? Wouldn't they just -- if the policy is to essentially shut them down at some point, what's their incentive, given the length of these supply contracts that are needed to fund the infrastructure?

SENIOR ADMINISTRATION OFFICIAL: Good questions. [Senior administration official], do you want to start on this?

SENIOR ADMINISTRATION OFFICIAL: Sure. Happy to.

So, let me clarify: On -- there is not an aggregate number. Right? This is about -- this is looking at -- the Europeans actually do have an aggregate number, which is to reduce their reliance on Russian gas by the end -- by well before 2030. And so, in the joint statement, they put 27 -- "by 2027" is the target that they want to reduce that by. So that's really their goal. That's about -- 155 bcm total is what they used from Russia in 2021. And so my understanding is that that's their aggregate number, globally, that Europe is looking to aim to do.

And so the U.S. is trying to do our part and contribute to that. And as the President von der Leyen said today, 50 bcm -- and also according to the International Energy Agency -- that's about a third of what they get from Russia today.

Regarding the question about the reducing gas demand, I should clarify that point. So, on that point, what we're talking about are measures to reduce the demand for gas in the European system. Europe has identified things such as smart thermostats, or turning down your -- degree of your home by one degree can save about 10 bcm. They're looking at things like accelerating solar and wind deployment that reduce the demand for gas in the system.

The joint statement that we released today -- we'll be releasing today -- talk about the infrastructure that will be built by the Europeans, on the European side, to be clean and renewable hydrogen-ready. That's an example of where gas continues to move to Europe, but it's done in a way that then contributes clean and renewable hydrogen in the future.

And so, again, these are the signals we're trying to send to the marketplace about the role that gas plays going forward in the future. It's not about turning off the gas completely in the near term; it's about making sure that it is low carbon, that the greenhouse gas intensity of the carbon and the gas over time is decreasing, aligned with our net-zero goals.

And if you look at technology that's out there today, as well as we're investing in both at home and overseas -- like carbon capture, utilization, and storage -- these are technologies that help reduce the carbon intensity of gas going forward and into Europe to be aligned with their strategy.

SENIOR ADMINISTRATION OFFICIAL: And just to add on a bit, Jarrett: On the first part of your question, if you look at what Russia currently ships to the EU in terms of LNG, it is about 15 bcm. Now, the pipes gas, as [senior administration official] referenced, is much larger; it's 155 billion cubic meters.

So, in 2022 -- you can think of why 15 -- that's the additional LNG we're going to provide to Europe, and the idea is to get them off of Russian LNG in the very, very short term.

But then over time -- your question was along the lines of, "What are you going to do with the infrastructure that's built to supply additional gas?" And here, the important point to realize: These are not going to be stranded assets. The infrastructure that's built in Europe -- for example, in the distribution and the storage capacity, and even the powering of these LNG import facilities -- the goal here is to build those facilities and build that infrastructure using renewable energy, using pipelines that could be used for hydrogen. And so, these aren't going to be stranded assets; they're going to be used for the clean energy infrastructure (inaudible) over time, well beyond 2030.

MODERATOR: Let's try Kayla with CNBC again.

Q: Hi guys. Can you hear me now?

MODERATOR: Yep, go ahead.

Q: All right. Sorry about that before. If the European demand remains stable, what is your understanding of how your plans to replace the remaining 100 billion-or-so cubic meters that it currently gets from Russia?

And just to put a finer point on it, exactly how much does the administration expect U.S. producers to increase drilling and fracking by, for the next decade, to meet this goal? Thank you.

SENIOR ADMINISTRATION OFFICIAL: Sorry, I couldn't -- I couldn't hear that, Kayla. I don't -- [senior administration official], I don't -- maybe it came through more clearly on your side.

SENIOR ADMINISTRATION OFFICIAL: Kayla, was your question -- I think I caught some of it.

So, in terms of the additional 100 bcm of the 155, I would, you know, sort of direct you to the REPowerEU plan that they put out on March 8th, where they walk through a series of gas diversification measures, how they would electrify Europe, and how they would transform their industry, and to reach that -- that full amount. And they have timeframes for that. And again, 2027, I believe, is their -- is how they're trying to pull that "by 2030" target forward.

But it's everything from boosting biomethane, boosting the hydrogen production that'll take place in (inaudible) by 2030, looking at solar rooftops, heat pump rollouts, frontloading wind and solar, and looking at EUI efforts around energy efficiency. And they did some of that add-up and aggregation to get to those volumes and those numbers. And that's also where you see the European Commission talking about today, looking at an EU mechanism of pooling to ensure that they can fill storage, that they can ensure that they can work with member states around import infrastructure.

You saw Germany announced, I think about two weeks ago, that they're looking to build two more import terminals, and they're looking, I think, at a floating storage regasification unit in the near term for that.

So those are some measures on the hundred that I think that was your question.

In terms of your question regarding what are we asking of U.S. production, I would -- there, I would just take a look at what we have already permitted in the United States, what is already under construction. And this is really about where the market wants to take it. And that's why hearing from the European Union today that they're looking to work with their member states to ensure a stable demand of a specific volume through 2030 is really important to send a signal of where we've already permitted.

There's various numbers out there, but there is a significant amount of volume of new production capacity from the United States that has already been permitted by the Department of Energy and others for build-out. And we also have two active facilities already under construction that'll be probably ready by 2024, 2025.

So when you think about new volumes of production, I'd take a look at what we've already permitted and what's already under construction. Thank you.

SENIOR ADMINISTRATION OFFICIAL: And, you know, in our discussions -- just to add on to [senior administration official]'s answer -- in our discussions with the Europeans, you know, Russian gas has been very cheap for a long time, but it's also quite obvious that it's very risky.

And so, Europe wants to manage its risks in a better way, really with a portfolio approach. The U.S. is now the biggest supplier of LNG, so we'll be a big part of it, but there'll be other suppliers too. And they've been working with producers of LNG across the world.

The point here is to replace an unreliable supplier of LNG with a much more reliable and secure partner in the U.S.

MODERATOR: Great. Thank you. Next, let's go to Josh Wingrove from Bloomberg.

Q: Thank you so much for doing this. And, you know, bear with us who -- those of us who've been in the travel pool -- in a fuzzy period of sleep. So, let me just make some clarity on this. Of the 15, how much of that do you think will come from the U.S., number one?

Number two, [senior administration official], you just mentioned the two existing facilities under production. Do you believe the U.S. needs more export facilities on top of that to service this goal and this vision? Or does the existing expansion and plan sort of meet that target?

And of the 15, if we don't know how much is coming from the U.S., can we say how much is coming from Asia, for instance?

And, [senior administration official], we don't really have a factsheet yet on what this data deal is. Can you tell us anything of what the terms of it -- you know, what it'll change for the U.S. or what it will change for Europe? Like, what was the -- what is the deal itself? Thank you.

SENIOR ADMINISTRATION OFFICIAL: [Senior administration official], do you want to take the first, and I'll address the second question from Josh?

SENIOR ADMINISTRATION OFFICIAL: Sure, of course. So, on the 15 -- again, can't speak to exactly where that 15 is coming from. (Inaudible) an active conversation among multiple parties, and again, where the market is looking to move those existing volumes. And so, you know, whether or not it's a U.S. cargo or an Asian cargo, what have you, we don't have those specifics to share with you today.

On your second question around U.S. exports and what's under construction and what's already in production today -- and I'm trying to find the final number, and we'll have to get back to you with it. But by my last check, we already -- you know, again, what's permitted for export terminals for construction today will get us to, I believe -- and again, I don't have the current number -- but it'll certainly be sufficient to meet the 50 demand coming out of Europe today -- or by 2030.

And so, I would say on that: Again, there's a plentiful amount of export capacity looking to come online in the near future. And, really, what they're looking is to reach final investment decision, or FID.

Over to you, [senior administration official].

SENIOR ADMINISTRATION OFFICIAL: Yeah. Thanks, [senior administration official]. On the second question, Josh, I mean, the problem we've been trying to solve for over a year now is that the European Court of Justice invalidated the previous so- called Privacy Shield, which allowed for data flow from Europe to the U.S.

And a couple of the primary concerns that have been raised involved potential surveillance of European consumers by our intelligence agencies. And so, that and a few other issues related to privacy and security were at the crux of the negotiations over the past year.

And without an agreement that dealt with the Court of Justice -- the European Court of Justice's issues with the previous Privacy Shield, it put at risk the data flow that takes place between our two economies. And that's an especially big problem for small businesses and medium-sized businesses that can't easily come up with a contract that provides comfort for those companies that are doing business in Europe.

And it really threatened -- I mean, in today's age, the digital flows between the U.S and Europe are so large that it really threatened a significant chunk of our trading relationship.

And so, we've now come to an agreement on how to deal with Europe's concerns. And it really is based on a shared understanding of what privacy means in terms of data flow, what security should look like, what the rule of law -- how it should operate. And that was really the basis on which we found compromise. And it's a really big deal, especially for small and midsize businesses that were at risk of losing their -- losing their revenue flow from Europe.

MODERATOR: Great. Next, let's go to Tyler Pager with the Washington Post. And this is probably our last question because I think our speakers have to run to some other engagements.

Q: Thank you. And I had to jump on a little late, so I apologize if this question has already been asked. But in the factsheet, it says that, "This will also be done on the understanding that prices should reflect long-term market fundamentals and stability of supply and demand." We had heard from some EU officials some grumbling about how much the European Union will have to pay. Has there been an agreement on pricing, either for this year or moving into the future? Any more detail you can provide on that?

SENIOR ADMINISTRATION OFFICIAL: Yeah. So, I mean -- so the reference there is making the point that spot prices are really high right now. And so, the agreement is not to lock in those spot prices indefinitely, because those prices can change, and ideally they move lower as supplies go up. And so that's why it's referencing long-term supply and demand fundamentals; that we shouldn't just be looking to spot prices to strike a long-term agreement, which is what this is. And so that's the -- that's the intuition.

MODERATOR: Great. Well, thanks again, everyone, for joining today.

Again, this call is on background, attributable to "senior administration officials," and embargoed until the call concludes, which will be momentarily.

Thanks again for joining, everybody. And talk to you all soon.

11:08 A.M. CET