The Department of Energy on Tuesday published the results of its long-awaited analysis of the economic and environmental implications of expanding U.S. exports of liquified natural gas. The study was the culmination of a year-long process after President Biden paused approvals of new LNG export terminals in January so that the agency could update the underlying assumptions it uses to determine whether new facilities are in the “public interest.”
Though the resulting assessment stops short of advising against approving new projects, it finds that additional U.S. LNG export terminals beyond what has already been approved would likely raise natural gas prices for U.S. consumers and increase global greenhouse gas emissions.
The main takeaway, according to an accompanying letter penned by the Secretary of Energy Jennifer Granholm, is that “a business-as-usual approach is neither sustainable nor advisable.”
Among its other key findings:
- LNG projects that have already been approved are likely to produce more than enough natural gas to meet global demand. New facilities that are under construction will nearly double exports by 2030, and exports could double again after that if all the facilities that have been approved, but have not yet reached a final investment decision, end up getting built.
- Supporting that is the fact that demand for U.S. LNG has flattened in Europe and peaked in Japan, while South Korea’s demand is expected to plateau by 2030. The DOE’s analysis projects that China will be the largest LNG importer through 2050, and notes that entities there have already signed contracts with U.S. LNG export projects.
- While new LNG terminals will create jobs and revenues, increased exports could also raise wholesale domestic natural gas prices by more than 30% by 2050.
- In all five scenarios the DOE studied, U.S. LNG exports would increase global net emissions.
Environmental groups celebrated the outcome. “DOE’s analysis confirms the facts we’ve known for years,” Moneen Nasmith, a senior attorney at Earthjustice said in a statement. “Rampant LNG exports drive up energy prices, contribute to the catastrophic effects of climate change, and delay the global transition to truly clean energy.”
But the gas industry was quick to criticize the findings. In a statement, Karen Harbert, the president and CEO of the American Gas Association, accused the Biden administration of attempting to “justify” the president’s earlier pause on approvals. “The contribution of U.S. natural gas to driving down emissions in this country and the potential for lowering global emissions is unquestioned,” she said.
The transition from coal-fired power plants to natural gas was a major driver of emission reductions in the United States over the last decade. But renewable energy is increasingly a competitive alternative. An analysis of the climate impacts from expanding LNG exports must look not just at whether the fuel would displace dirtier options like coal and Russian natural gas, but also at whether it would displace cleaner options like renewables. The answer depends on which countries end up buying it, and how their climate commitments evolve.
As such, any estimation of greenhouse gas emissions from LNG exports is based on assumptions. Under the Department of Energy’s “defined policies” scenario, it found that additional U.S. LNG exports could end up displacing more renewable energy in other countries than coal, without even factoring in countries’ stated commitments to decarbonize. Overall in this scenario, additional exports would lead to an increase of 711 million metric tons of carbon dioxide between now and 2050.
The rapid acceleration of U.S. LNG exports has not had a discernible effect on U.S. natural gas prices to date. But the Department of Energy finds that “unfettered” LNG exports in the future would put upward pressure on domestic natural gas prices and potentially increase energy costs for U.S. consumers by more than $100 per year by 2050.
Biden’s pause on new LNG approvals was technically overturned in July, when a federal judge found that the administration had overstepped its authority. But two major projects still hang in the balance, the Calcasieu Pass 2 LNG Terminal and the Commonwealth LNG Terminal, both of which would be built in coastal Louisiana. Both projects require approvals from the Federal Energy Regulatory Commission before the Department of Energy can issue a public interest determination.
Although the report published Tuesday is “final,” the administration is opening it up for public comment for 60 days, starting today, to ensure that alternative analyses are captured in the public record and can inform decisionmaking going forward.
In that, the gas industry sees an opening. “We look forward to working with the incoming administration to rectify the glaring issues with this study during the public comment period,” Harbert said in her statement.
During the call on Tuesday, Granholm acknowledged that the future is in the next administration’s hands. “We hope that they'll take these facts into account to determine whether additional LNG exports are truly in the best interest of the American people and economy,” she said.
Editor’s note: This story has been updated to reflect more information from the finished report as well as the DOE’s Tuesday call with reporters.
International Council on Clean Transportation