US LNG export study sees higher economic, environmental costs
The US Department of Energy (DoE) released its long-awaited review of LNG exports on December 17 in which it highlights higher costs to all gas users and increasing emissions if US LNG exports are allowed to grow.
The study, released as a 51-page summary and four appendices totaling 509 pages, outlines the public interest impacts of future LNG exports to countries with which the US does not have a free trade agreement. The report will be subject to a 60-day comment period which will inform how the DoE handles its assessment of the public interest impacts of new export applications.
The 60-day comment period will take the study into the new administration of President-elect Donald Trump, who vowed during his campaign to halt the review and presumably can be expected to throw it out soon after his January 20, 2025 inauguration.
Energy Secretary Jennifer Granholm, however, released a statement outlining her department’s perspective on the study, which she said highlights five key findings she believes will be relevant to how future administrations deal with exports and the impact of those exports on consumers and the environment.
Firstly, she said, the study shows that US LNG exports have grown at an “astounding” rate in recent years, and points to analysis that suggests continued growth on the same trajectory will “quickly outpace” global demand for the fuel. In four out of five scenarios studied by the DoE, she said, exports that have already been approved are “more than sufficient” to meet global demand for US LNG “for decades to come.”
While those exports generate wealth for the owners of export facilities and create jobs across the natural gas value chain, Granholm said determining the public interest of those exports requires a “comprehensive analysis” of what that growth means.
Unfettered exports of LNG would increase wholesale domestic natural gas prices by over 30%, she said, while unconstrained exports would increase costs for the average American household by “well over” $100/year more by 2050.
“In fact, DoE analysis exposes a triple-cost increase to US consumers from increasing LNG exports – the increasing domestic price of the natural gas itself, increases in electricity prices (natural gas being a key input in many US power markets), and the increased costs for consumers from the pass-through of higher costs to US manufacturers,” she said. “On the latter point, the new study finds that from 2020 to 2050, the overall energy costs for the industrial sector would go up $125bn, leading to additional potential price increases for a wide range of consumer goods.”
But David Holt, president of the Consumer Energy Alliance, said that is a “tired argument”, first trotted out to push back against US oil exports.
“That argument was refuted when domestic producers responded to demand by increasing supply, an ironclad economic law that applies here,” he said. “LNG exports have bipartisan support because they help American families and businesses, support our nation’s allies, create domestic jobs and ensure the world can enjoy continually lower emissions with reliable power.”
The study also found that US LNG exports – concentrated largely along the Gulf Coasts of Texas and Louisiana – have a disproportionate impact on communities already bearing the environmental burdens of refining, petrochemical and other industries located in their area.
“Pollutants such as methane, volatile organic compounds, particulate matter, nitrogen oxides, and others lead to higher mortality rates in communities where oil and gas are extracted and processed – a problem that, absent regulatory intervention, will only get worse, if volumes of LNG exports continue to dramatically increase,” Granholm said.
Beyond the local environmental impacts associated with unchecked LNG growth, she said, are the impacts of those exports on the global environment, “especially in a world that needs to quickly reduce greenhouse gas emissions” to meet global warming commitments.
“While some tout LNG as a means to reduce the use of coal overseas (and to date that has been the case with some importing countries), the study put forward today shows a world in which additional US LNG exports displace more renewables than coal globally,” Granholm said.
Under four of five scenarios, existing permitted exports, she said, are enough to meet future global demand. Under the fifth scenario, in which US exports exceed currently authorised levels, annual direct emissions associated with exports in 2050 would be some 1.5 gigatons of CO2-equivalent – just over 25% of current annual US greenhouse gas emissions.
Finally, Granholm said, any approach for considering additional LNG export authorisations should consider where those exports are going and whether “targeted guardrails” can be used to protect the public interest.
Over the past few years, she said, increased US exports of LNG have helped its European allies wean themselves from Russian gas. But demand growth there has flattened, her statement said, and LNG demand has already peaked in Japan and is expected to flatten in South Korea by 2030.
“On the other hand, based on current global demand for LNG, the People’s Republic of China (PRC) is already the world’s largest importer,” Granholm said. “Looking ahead, China’s LNG exports are expected to nearly double between now and 2030, and China’s LNG imports are expected to be the highest of any country through 2050.”
PRC entities, she said, have already signed several offtake agreements with operating or proposed US LNG facilities.
“Future authorisation decisions of what is in the “public interest” need not be made solely on a binary – yes or no – basis but could be undertaken using a broader framework of requirements for all authorisations.”