The big battle brewing over LNG exports

The Biden administration unveiled one of its most significant actions to address climate change last month at the COP28 U.N. climate conference in the United Arab Emirates: new regulations aimed at curtailing methane leaks from oil and gas operations. 

The U.S. Environmental Protection Agency estimates that the rules will prevent 58 million tons of methane — a potent greenhouse gas whose near-term warming power is many times that of carbon dioxide — from escaping wells, pipelines and other industrial equipment between 2024 and 2038. That’s the equivalent of 1.5 billion metric tons of carbon dioxide — almost as much climate pollution as the entire U.S. power sector emitted in 2021.

But while American officials trumpeted the move on the global stage at COP, back home in the U.S. climate activists were ramping up campaigns calling on the Biden administration to halt a trend that could result in huge new streams of methane pollution. 

In the last decade, corporations have invested billions of dollars into a rapid expansion of infrastructure to export liquefied natural gas, or LNG, from the U.S. Since Biden took office, the buildout has accelerated even more. Eight export terminals are already operating, all completed since 2016, and another 23 terminals and expansions are proposed, approved or under construction.

Over the course of its expected operating life, even just one of the largest planned LNG facilities could lead to as much greenhouse gas being emitted as the EPA’s new methane rule is projected to save in total over the next 15 years. 

Natural gas has to be liquefied before it can be transported overseas, an extremely energy-intensive process that means LNG has more greenhouse gas emissions than natural gas that’s moved by pipeline. Once you factor in all the methane that escapes along the entire supply chain — from the well to the ultimate point of end use — by some estimates, LNG is even worse for the climate than coal.

Meeting the Paris Agreement’s most ambitious goal of limiting global warming to 1.5° Celsius will require the world to reduce carbon dioxide emissions by roughly 45% from 2010 levels by 2030 and hit net zero by around 2050. The International Energy Agency estimates that for this to happen, global natural-gas use will have to decline by an average of 5% per year in the 2030s and drop to 55% below 2020 levels by 2050.

Yet under the Biden administration, federal agencies have continued to greenlight new LNG export facilities. The Federal Energy Regulatory Commission is expected early this year to approve the biggest planned terminal of all: Calcasieu Pass 2, known as CP2, in Louisiana. After that, the final decision on CP2 will rest with the U.S. Department of Energy.

In recent months, climate activists have seized on CP2 as a fossil fuel project that must be stopped — the next Keystone XL. New national campaigns have joined established local groups in raising alarm bells about the dangers of allowing more LNG export terminals to be built. On January 9, the movement announced its most high-profile action yet: a three-day sit-in at DOE headquarters in Washington, D.C. from February 6 to 8, with some of the activists preparing to be arrested as they demand that the Biden administration stop approving new export infrastructure.

The current LNG buildout is ​“running in direct contradiction” to the administration’s climate goals, said William Boyd, a professor at the UCLA School of Law and Institute of the Environment and Sustainability. Boyd and many other researchers suspect that the administration’s geopolitical concerns — including Europe’s tremendous need for a reliable source of natural gas after Russia launched its war in Ukraine — are taking precedence over its climate policy.

But allowing major fossil fuel projects to move forward, even for geopolitical reasons, he said, means ​“making it that much harder for future administrations to hit climate targets by midcentury.” Once a plant is operational, it will be tough for any president to force it to close prematurely.

Within the last two years, Secretary of Energy Jennifer Granholm and President Biden have each said that they support expanding U.S. LNG export capacity. But they want the growth to be ​“consistent with, not in conflict with, the net-zero climate goal that we’re shooting for,” as Biden put it shortly after the Ukraine war started.

In reality, it could be impossible for the federal government to continue approving LNG exports without blowing past U.S. climate targets. It may also be unnecessary. Many analysts expect Europe’s natural-gas demand to fall precipitously through the rest of the 2020s as it deploys heat pumps and renewables at record pace. And as Europe weans itself off gas, more and more U.S. LNG will become available to the rest of the world, potentially spurring countries elsewhere to invest in long-lasting LNG import infrastructure — perhaps in lieu of investing in renewables.

“There’s momentum or inertia in the global energy system,” Boyd said. ​“Every time we add more long-lived, expensive assets to the mix, it makes it that much harder to shift in the future, unless we’re willing to devalue a lot of those assets. […] That’s the fundamental challenge of these big LNG terminals.”

Since Biden’s first day in office, his administration has pushed to accelerate the clean energy transition. But its record on fossil fuels has been much more mixed, perhaps nowhere more so than in its approach to LNG. As international emissions-reduction deadlines loom, the most climate-conscious administration in U.S. history has continued to support global dependence on natural gas, a strategy that grows riskier for the planet by the year.

How the U.S. became an LNG powerhouse

Up until the 2010s, it looked like the U.S. would remain a net importer of natural gas, increasingly reliant on other countries much like it already was for fuels such as oil and uranium.

The fracking boom flipped the script, unleashing previously inaccessible U.S. gas reserves and flooding the domestic market. By 2009, prices were declining, and scores of oil and gas companies were going bankrupt. Just a few years after its gas imports peaked, the U.S. passed Russia as the world’s largest natural-gas producer.

Liquefying and shipping natural gas around the world is a costly endeavor, but once U.S. supplies started to outpace national demand, it suddenly made financial sense for companies to export LNG.

Experts worried that increasing the amount of gas sold outside the U.S. would eventually raise prices in the domestic market, said Victor Flatt, a professor of environmental law at Case Western Reserve University. But regulators dismissed that fear because so little export infrastructure existed at the time. ​“It wasn’t anticipated at that point that you could export that much natural gas,” he added.

The Obama administration viewed natural gas as an opportunity to hasten the transition away from coal. Its Clean Power Plan called for pushing electric utilities to pivot from coal to gas in the hope that it would shrink their carbon emissions. Exporting LNG, the thinking went, would encourage the same sort of fuel-switching abroad, while also rescuing floundering U.S. gas companies, injecting some extra revenue into the national economy, and safeguarding European allies’ energy supplies.

In 2014, after Russia invaded Ukraine’s Crimean Peninsula (an ominous sign of things to come), then-President Obama said that exporting LNG to Europe was ​“obviously relevant in today’s geopolitical environment.” He was concerned that restricting the world’s access to U.S. gas would set a bad example as the country pushed others, including China, to make scarce resources like rare earths more available to the rest of the world.

In February 2016, Cheniere Energy’s Sabine Pass terminal, the country’s first LNG export facility outside of Alaska, sent its inaugural tanker of LNG from Louisiana to Brazil. By 2017, when Trump took office, combined pipeline and LNG exports had made the U.S. a net exporter of natural gas.

Trump, who during his presidency rejected the scientific consensus that humans are causing climate change and removed the U.S. from the Paris Agreement, openly favored fossil fuels. He predicted in 2018 that Europe would become a ​“massive buyer” of U.S. LNG and would use it to ​“diversify their energy supply.” His administration began to refer to LNG as ​“freedom gas.”

In 2018, the Department of Energy published an analysis of the economic impacts of LNG exports. It found that increasing LNG exports would indeed push domestic natural-gas prices up, affecting residential customers and many industries. But it determined that higher prices would inject money into powerful companies — enriching their stockholders — and that would benefit the rest of the country.

Thus, the report concluded that while it could slow growth in some sectors, increasing LNG exports would strengthen the national economy, boost consumer well-being and have a positive effect on household income overall.

A year later, the DOE determined in a separate environmental analysis that LNG use in Europe and Asia would emit less carbon than coal in virtually any scenario. Even after it’s liquefied, shipped abroad and regasified, LNG still wins out, the 2019 report indicated, so long as undetected methane leaks remain below the level where they would cancel out those all-important emissions reductions.

With those 2018 and 2019 analyses, the Trump administration affirmed the Obama administration’s belief that natural gas could help the world transition away from coal without harming American consumers. The DOE under the Biden administration has yet to update those studies.

But in recent years, evidence undermining the findings of both analyses has accumulated. Opponents of the LNG buildout are calling on the Biden administration to update the criteria by which the DOE evaluates projects — certain that if it does, the administration will no longer be able to justify its support for LNG. 

In a small sign of progress for those opponents, key members of the Biden administration met earlier this month to begin the process of reevaluating the climate criteria used to assess LNG export projects, according to Politico and Bloomberg. The Department of Energy declined to comment on the news reports.

Reassessing LNG’s impact

The 2019 DOE analysis contained an important caveat: For LNG to be better for the climate than coal, methane leaks need to stay below a certain threshold. The problem is that methane leaks are notoriously difficult to measure. Most regulators rely on estimates, but the emerging consensus among independent researchers is that those estimates vastly undercount the extent of leakage.

The analysis did show that LNG exports were inconsistent with the world’s most ambitious climate goals. But it was ​“very conservative and missed a lot of pieces,” said Jeremy Symons, an energy and environmental consultant, during a November press call on LNG exports.

Since 2019, the growing body of research disputing LNG’s presumed climate benefits ​“has really demonstrated that those numbers are flawed and need to be updated,” Symons said.

One such study, a new examination of LNG’s life-cycle emissions conducted by Robert Howarth, a professor of ecology and environmental biology at Cornell University, determined that LNG results in so much greenhouse gas pollution that it’s actually worse for the climate than coal.

Howarth found that LNG’s total greenhouse gas emissions come out to between 24% and 274% more than coal’s, depending on factors like the age and efficiency of the tankers used to transport it, according to a preprint manuscript.

He concludes that his work demonstrates ​“the need to move away from any use of LNG as a fuel as quickly as possible, and to immediately stop construction of any new LNG infrastructure.”

“Short-term energy needs such as those caused by the Russian invasion of Ukraine,” he argues in the study, ​“are better met by reopening closed coal facilities, on a temporary basis, than by expanding LNG infrastructure.” 

Howarth’s analysis stands in sharp contrast to the conclusions that the Trump DOE reached and that the Biden DOE has continued to rely on.

The estimates that the DOE uses today ​“are based on industry self-reporting, without any independent verification,” Howarth said during the November press call. ​“Maybe that was OK 15 years ago when there were not independent methods and independent data out there, but now there are hundreds and hundreds of studies by independent scientists showing that the industry self-reporting [of emissions] is just plain way too low.”

The 2018 DOE report’s conclusion that LNG exports do not negatively impact American consumers has since been vigorously disputed as well. Most analyses, including the DOE’s, have shown that sending more natural gas overseas will cause prices to rise domestically, but the DOE suggested that those impacts would be offset by broader economic growth.

“It literally says that American consumers don’t have to worry about increased price exposure from exports because Americans derive so much personal income from their ownership of stock in natural gas,” said Tyson Slocum, director of the energy program at Public Citizen, a consumer rights advocacy group. ​“It is a garbage economic study,” he added.

Even the notion that U.S. LNG would displace coal plants in other parts of the world has faltered amid the economic and political realities of the international export market. The companies that ship U.S. LNG overseas decide where it goes, not the U.S. government. The president and federal agencies have no power to guarantee that the countries buying American LNG will use it to replace coal, as the 2018 DOE analysis assumed they would.

“There’s really been no mechanism in place to ensure that [exports] displace dirtier sources and not cleaner sources,” said Max Sarinsky, an adjunct professor at New York University School of Law and an attorney at the embedded think tank Institute for Policy Integrity.

By signing off on more and more LNG exports, the Biden administration isn’t approving a substitute for coal, Symons said. ​“They’re approving competition with wind and solar power.”

Geopolitics vs. the climate

Russia’s invasion of Ukraine in February 2022 catapulted U.S. LNG to a new level of global importance. Most of Europe had come to depend on the cheap, abundant natural gas funneled in by pipeline from Russia. The war put the continent’s fuel supply at risk and forced it to turn to more expensive LNG, much of it originating in the U.S., to fill in huge new gaps in the regional market.

On the rare occasions when top U.S. officials have spoken about LNG since then, they’ve nearly always characterized it as a valuable diplomatic tool. (The DOE did not respond to multiple requests for comment for this story.)

“We know that our liquefied natural gas exports have been a significant help to our allies,” Granholm said during a press conference in January of last year. ​“We are fortunate in that we have an abundance, obviously, of natural gas in this country. Our prices are low,” she continued. ​“But during times of challenge, we want to help our allies as well.”

However, the U.S. LNG market doesn’t operate according to the rules of energy diplomacy. Traders buy the gas from producers or directly from export terminals and then sell it to customers abroad. These intermediaries, for the most part, negotiate long-term, fixed-priced contracts with their buyers, but they have shown a willingness to break their contracts and pay the resulting penalties if they can get a better price for the LNG somewhere else.

When the war in Ukraine began, most U.S. LNG capacity had already been spoken for. But Europeans offered to pay so much that traders rerouted their shipments and sold the LNG to Europe instead, creating gas shortages in Asia. Even running at maximum capacity, existing U.S. LNG export terminals weren’t able to satisfy global demand. 

Before the war, the U.S. LNG buildout looked like it was starting to slow. LNG prices had stabilized. New projects didn’t make much economic sense. Then Russia declared war, LNG prices soared, and the Biden administration voiced its support for shipping U.S. LNG to European allies. Companies sped up the construction timelines of previously approved projects. New export terminals and expansions of existing ones were proposed, primarily along the Gulf Coast.

Since 2021, the U.S. has consistently exported over 10% of the natural gas it produces. That proportion is expected to rise in the coming years as more export capacity comes online.

Odds are that those additional U.S. LNG exports aren’t going to wind up in Europe, however. Because of the war in Ukraine, the European Union has been having second thoughts about depending on anyone, even an ally, to keep lights on and furnaces chugging along, said Ade Samuel, an LNG policy analyst at the Natural Resources Defense Council.

“Just because you switch from one reliance to another…doesn’t mean that you’re necessarily improving security…across the board,” Samuel said. ​“There’s less geopolitical tensions between Europe and the U.S. than there were between the rest of Europe and Russia, yes. But real energy security comes from having an incredibly diverse, or as diverse as possible, energy mix.”

Clark Williams-Derry, an energy finance analyst at the Institute for Energy Economics and Financial Analysis, a think tank focused on the energy transition, forecasts that Europe’s natural-gas consumption will start to drop off before most of the planned additional U.S. LNG capacity starts operating. Already, he pointed out, household gas use in Europe is well below the 2019–2021 average.

“Demand destruction is real. It’s happening,” Williams-Derry said.

If Europe’s natural-gas consumption falls as quickly as he predicts, all the new U.S. LNG capacity will be available to the rest of the global market almost as soon as it’s built. Williams-Derry sees that as a damning scenario for the climate. The more money that other countries invest in infrastructure to import, transport and burn U.S. LNG, he said, the longer they’ll want to continue using that LNG infrastructure in the future.

“If all we were talking about was building the infrastructure necessary to provide emergency provision of natural gas to Europe during wartime, that’s one thing,” said Adam Orford, an assistant professor at the University of Georgia School of Law. ​“But what we’re talking about is the construction of permanent facilities to export natural gas.” 

Winds of change?

Only in recent months has national attention started to catch up to the LNG industry’s precipitous growth, thanks in large part to the outcry over CP2.

As the Biden administration weighs one of the most significant fossil fuel projects yet to come before it, climate activists and a number of Democratic politicians are turning a spotlight on the buildout’s long-term consequences — and pressuring the administration to stop treating LNG as an exception to its climate commitments.

“This completely undermines U.S. leadership on the global challenge of climate, if we’re greenlighting fossil-fuel project after fossil-fuel project,” Senator Jeff Merkley (D-Oregon) told Canary Media.

DOE officials are ​“providing bad information to their client in the White House, and it’s time for them to fix that,” author and climate activist Bill McKibben, who was a leader in the fight against the Keystone XL pipeline, said during a Canary Media webinar in November. McKibben is hopeful that if the DOE redoes its analysis, as he believes is long overdue, Biden will change his position on LNG.

A reported meeting of federal officials earlier this month to reconsider criteria used in LNG terminal decisions suggests the Biden administration could be moving in this direction. 

Whether the administration actually has the power to halt the buildout of LNG export projects on the grounds of climate impacts is a source of ongoing debate. The Natural Gas Act of 1938 — as amended by the Energy Policy Act of 2005 — delegates regulatory authority over LNG exports to the Federal Energy Regulatory Commission and the DOE. 

Under the law, FERC, an independent agency within the DOE, is in charge of permitting the siting, construction, expansion and operation of LNG facilities. Separately, the DOE’s Office of Fossil Energy and Carbon Management decides whether to grant LNG facilities permission to export to countries with which the U.S. does not have a free-trade agreement. (The office is required to allow exports to countries that are part of a free-trade agreement with the U.S., but most of the 20 countries on that list import very little LNG or none at all.) 

Federal law stipulates that both FERC and the DOE must evaluate whether LNG projects serve the public interest when making their decisions, but it’s vague on what criteria should be used to define public interest.

So far both agencies have taken a narrow view, looking mostly at the economic and environmental-justice impacts of exporting LNG — though taxpayer and environmental advocacy groups have argued that even those analyses are inadequate.

Activists want FERC and the DOE to expand how they determine whether an LNG project really benefits the public. So do 65 members of Congress, who in November sent a letter to Granholm calling on DOE to consider climate change and domestic energy prices when making decisions on LNG exports. 

FERC — which has a long history of approving fossil fuel projects, and which is not directly controlled by the president — is not expected to change course anytime soon.

So the final decision about the fate of CP2 — and of other LNG projects currently in the planning process — will fall to the DOE. In the past, officials there have always gone along with FERC. But experts say the agency could choose to consider new LNG projects through a much wider lens.

“DOE has very broad authority, and they’ve considered all kinds of factors before,” NYU’s Sarinsky said. ​“They’ve looked at effects on the energy system; they’ve looked at effects on international security and trade. DOE has always looked at a lot of broad factors in its public-interest consideration. There’s absolutely no reason why climate change should not be one of them.”

The DOE acknowledged last summer that the Natural Gas Act gives it ​“broad discretion” and ​“flexibility” to interpret what qualifies as being consistent with the public interest, in a response to a petition from the Sierra Club and several other environmental groups asking the department to update its criteria for evaluating LNG exports. But the DOE still defended its long-held position that, except in the case of domestic shortages, ​“the market is the most efficient means of allocating natural gas supplies.”

The Biden administration could be about to change course on that, though, if the recent news reports are correct. Environmental activists are hopeful that it will make climate change one of the factors that DOE considers when it reviews LNG proposals. 

“By recognizing that gas exports are not in the public interest, President Biden has an opportunity to make good on his climate commitments, ease energy prices for American families, and bolster our national security,” Sierra Club Executive Director Ben Jealous said in a Jan. 9 statement, released after the Politico and Bloomberg articles were published. ​“We are encouraged that the administration plans to act to protect the planet, communities, and our pocketbooks.”

The DOE hasn’t issued an export decision for a new project since last April, when it reauthorized exports from a $40 billion planned LNG export facility in Alaska.

Since then, the Biden administration has, in a low-profile way, started showing some reluctance to let LNG facilities proceed with minimal scrutiny. LNG export terminals have seven years to start operating once they receive authorization from the DOE. If exports don’t begin within that timeframe, companies have to reapply for approval unless the DOE grants them an extension (as it consistently has in the past). The agency reaffirmed in April that it would enforce the seven-year deadline. 

And on Dec. 4, the DOE declined to extend the export license it had previously issued to Magnolia LNG, an export project in Louisiana. That will force the developer to reapply for an export license and could deal a fatal blow to the already-delayed project. Several more LNG projects could find themselves in a similar position this year.

“We are glad to see the Department of Energy taking a stance, refusing to rubber-stamp yet another extension request, and adhering to its principles,” Lisa Diaz, an associate attorney at the Sierra Club, responded in a statement after that Dec. 4 decision. ​“But the reality is that much more needs to be done to stop the Department of Energy’s dated and systematic approval of LNG export authorizations.”

Flatt, of Case Western, sees the DOE’s decision to enforce the seven-year deadline as a first step — but one that’s nowhere near big enough. ​“I think they’re hoping that kind of separates the wheat from the chaff, and it means the better ones will go forward,” he said. ​“I think that’s foolish thinking. But that way they don’t have to deal with…saying it’s about climate” and risk losing that argument in court.

Environmental groups and many experts believe that the DOE has the leeway to bring LNG into line with the rest of the Biden administration’s climate commitments without overstepping its statutory bounds. ​“I think the administration could use climate change and greenhouse gas emissions, and the embedded or committed emissions associated with a particular project, as a rationale for denying permits if they wanted to,” UCLA’s Boyd said.

“They might get sued,” he added, ​“and…with the current Supreme Court and all of that and how long this takes to litigate, it’s really hard to say how this would play out. But I don’t think that that’s an excuse for not taking bold climate action across the board.”

Meanwhile, the LNG export facilities already in the pipeline threaten to run up against the country’s commitments to reduce emissions in a matter of years.

“As far as I can tell, the commitment to LNG exports is only consistent with climate goals if it is coupled in some way with extreme advances in carbon capture,” said Orford of the University of Georgia. He, like many others paying close attention to emerging energy technologies, is skeptical those advances will materialize — or be adopted at scale around the world — at the pace that would be required.

Fatih Birol, executive director of the International Energy Agency, called on the oil and gas industry in November to “[let] go of the illusion that implausibly large amounts of carbon capture are the solution” to climate change.

U.S. LNG exports will have to cease before midcentury for the country to have any hope of meeting its climate targets, Orford said, unless carbon capture experiences ​“some sort of a real phase change” in the near future. 

Expanding LNG exports and meeting climate goals ​“are entirely inconsistent,” he added. ​“We can’t hit net-zero 2050 with a natural-gas-fired electric power system.”