The market can't handle fast-tracking LNG. Neither can the climate.

The market can't handle fast-tracking LNG. Neither can the climate.

July 26, 2022

The U.S. natural gas lobby and its supporters in Congress have asked the White House to hurry up and approve permits to build more giant liquefied natural gas (LNG) export terminals in coastal states.  

Federal and state regulators have already given the green light to 20 large projects, ten of which are operating or under construction. Together, these projects would give the U.S. the capacity nearly triple its LNG exports over the next few years and supply half of the expected global demand for LNG in 2030.  

Running all of the projects that have already been authorized at full capacity would consume 37 percent of total U.S. natural gas output by 2030 and inflate energy prices for American consumers. All these projects together would also add another 82.6 million tons of carbon dioxide to the atmosphere per year, as much as almost 19 coal-fired power plants. And the LNG boom would swamp the moderate to low-income communities that surround these plants with thousands of tons of air pollutants, including fine particles and smog-forming pollutants harmful to human health.  

With all this in mind, why the rush to fast-track permits for even more LNG terminals?

Twenty U.S. LNG export facilities that regulators have already approved have enough capacity to supply half of projected global needs in 2030.

There are good reasons to believe the market will not bear more. While LNG can help countries with a limited supply of domestic natural gas, processing and shipping costs make it an expensive source of fuel. To be shipped overseas, natural gas must be compressed and cooled to a liquid state under very low temperatures (-260 degrees F), which requires an intensive and expensive use of energy. The Department of Energy explains the process: “In its compact liquid form, natural gas can be shipped in special tankers to terminals around the world. At these terminals, the LNG is returned to its gaseous state and transported by pipeline to distribution companies, industrial consumers, and power plants.” Despite these limitations, analysts expect global consumption of LNG to increase from an estimated 372 million metric tons per annum (mtpa) in 2021 to 575 mtpa by 2030, a 55 percent increase.

But the 20 U.S. LNG export terminal projects that have already secured permit approvals have the capacity to produce 288 mtpa, nearly three times the amount the U.S. is expected to export in 2022, and enough to meet half the world’s need for LNG by 2030. Seven projects with 104.5 million tons of capacity are already fully operating in the U.S. and three more with a potential output of 69.7 million tons are under construction. Ten more projects with permit approvals that have not yet broken ground have a combined total capacity of 114 mtpa.  

To supply half of the expected international demand for LNG by 2030, the US would have to displace foreign competitors that are also ramping up production and in some cases are closer to the countries they serve. For example, Qatar and Australia together supplied about 42 percent of the 372 mtpa of LNG exported worldwide in 2021, and Qatar has announced a major expansion that will add another 33 mtpa to the world market. China, Japan, and South Korea the biggest LNG consumers now and in the long term, and Qatar and Australia are better positioned than the U.S., geographically, to serve this market.

In short, the LNG terminals that are already permitted in the U.S. will have to push aside well-established international competitors to be able to export anything close to their current annual capacity of 288 million metric tons. Even if they succeed, there is simply not enough room to accommodate another 131 mtpa of export capacity from the 12 LNG export projects that are still seeking permits to begin construction.    

Adding the new export terminals proposed in those 12 permit applications to the 20 projects that have already been approved would bring total U.S. capacity to 419 million metric tons a year.  That is enough capacity to meet 73 percent of the estimated global need by 2030, an impossible goal that would require Australia, Qatar, Algeria, and other major suppliers to cut their exports at least 50 percent below 2021 levels.  But as noted above, Qatar and other exporters are not going away and some are already taking steps to boost their own output.

Russia, another major supplier, will find customers in China and other countries that are not boycotting Russian exports in response to the Ukraine crisis.  The loss of pipeline gas from Russia has left Europe scrambling for alternatives, which include increasing U.S. LNG imports. But the U.S. does not need to rush permit approvals for new LNG plants to meet these needs. The Biden Administration and the European Union in March signed an agreement anticipating that the U.S. would increase its supply of LNG by about 37 mtpa through 2030. That would be about 20 percent of the export capacity of the LNG plants that are already operating or under construction in the U.S.  

LNG terminals that already have final permit approvals would -- if built -- consume more than a third of total U.S. natural gas production in 2030.

It takes 48,700 cubic feet of natural gas to produce a single metric ton of LNG. Exporting the 288 mtpa of natural gas that 20 LNG projects are already authorized to produce would consume more than 13,838 billion cubic feet of natural gas (assuming that the terminals are operating at full capacity.) That would be 37 percent of the 37,622 billion cubic feet that the U.S. Energy Information Administration expects all U.S. gas wells to produce in 2030.  Expanding U.S. LNG production by another 131 million tons -- as proposed in permit applications that are still pending -- would consume another 6,380 billion cubic feet, or an additional 17 percent of U.S. natural gas output in 2030. These estimates do not include the amount of natural gas consumed during well extraction, lost to leaks from pipelines or storage facilities, and needed to drive turbines and compressors at LNG terminals.  

The LNG industry’s gargantuan appetite for US natural gas is obviously not sustainable. Diverting the amounts needed to open LNG terminals at levels even close to their permitted capacity would divert much gas from the domestic supplies that would otherwise be available to American consumers would inevitably increase U.S. energy costs and drive inflation upward. In May of 2022, the Industrial Energy Consumers of America trade group (representing U.S. manufacturers) called out U.S. LNG export growth as a "key factor behind elevated natural gas prices.”

Ten projects that already have final permits in U.S. have yet to begin construction.    

Some of the project developers that are sitting on permits to build and operate LNG terminals in the U.S. have yet to begin construction.  Permits for seven of these ten projects were issued anywhere from three to more than six years ago. Now that plants already operating or under construction have the capacity to export nearly 175 million tons of LNG, investors may be wondering whether there is enough room in the marketplace for another wave of export terminals. Whatever the reason, why should regulators turn themselves inside out to rush through permits for another batch of LNG projects, when so many projects they approved years ago have yet to begin construction?

A thorough permit review process for LNG terminals helps to protect the climate and public health.

Shortly after Russia invaded Ukraine, the Federal Energy Regulatory Commission (FERC) delayed implementation of a new greenhouse gas policy that would have required FERC to consider climate-warming pollution and environmental justice concerns before approving new LNG projects and natural gas pipelines.

This was unwise.  There is no need to short-circuit the U.S. permit approval process, which provides important safeguards for the health of local communities and the global climate. Rushing environmental reviews and permitting would also only increase risks for investors. Regulators should stay firm and carefully consider these projects’ significant climate impacts, and if these projects are aligned with long term climate and environmental justice goals.

The greenhouse gas footprint of LNG is expected to be significant.  As mentioned earlier, the 20 LNG export terminals already operating or approved for construction could emit more than 82million tons of greenhouse gas a year – more than 19 new coal-fired powerplants running around the clock for one year.

The threats to local communities should not be ignored.

While producing and shipping LNG releases tens of millions of tons of greenhouse gases, the export terminals are also a major source of air pollutants that trigger asthma attacks and contribute to lung and heart diseases.  For example, the twenty LNG operations already permitted for construction in the U.S. are authorized to emit a combined total of 5,635 tons of fine particles, pollutants dangerous enough to contribute to premature death.  While no comparable studies are available for LNG terminals, EPA has estimated that each ton of fine particle pollution released by the average refinery costs the public about $338,000 in higher health care costs, lost workdays, or mortality.

Together, these 20 projects are also authorized to emit nearly 62,000 tons of nitrogen oxide and volatile organic compounds, pollutants that contribute to smog and to the secondary formation of fine particles.  Many of the communities that surround these big projects are low income, disproportionately African-American or Latino, and lack access to reliable health care. 

Despite these health threats, the existing LNG export terminals in the U.S. continue to ramp up production—with potentially dangerous consequences. For example, a fire erupted on June 8 at the Freeport LNG terminal outside of Houston, a facility with a history of safety problems. After the explosion, the Pipeline Hazardous Materials Safety Administration determined that the conditions at the facility posed a threat to public safety and the environment and ordered Freeport LNG to shut down while they address the potential dangers. 

Now, Cheniere Energy – the company developing the Corpus Christi LNG terminal in south Texas – is asking the Biden EPA to exempt it from emissions limits for hazardous air pollutants. The company is arguing that meeting national emissions standards would impose significant costs and lead to operational disruptions that “endanger the country's efforts to ramp up supplies to Europe,” according to Reuters.

The Texas Commission on Environmental Quality has already raised emissions limits for the Corpus Christi terminal twice, doubling annual emissions of volatile organic compounds and increasing emissions of other health damaging “criteria” air pollutants anywhere between 44 and 60 percent above those set out in its initial air permit. The company is also trying to lock-in tax breaks to expand the Corpus Christi terminal, which it does not plan to complete for another twenty years.

Regulators need to ramp up enforcement efforts to ensure that these large polluters don’t emit over their permit limits, and to hold polluters accountable when they violate their Clean Air Act permits.  

The bottom line is that there is no need for the U.S. to accelerate or rubber stamp a permit approval process for yet more LNG terminals, when the market will not bear a glut of liquefied gas and the health of local communities and the global climate are at risk.

Alexandra Shaykevich
Oil & Gas Research Manager

Alexandra joined Environmental Integrity Project in 2019 and primarily supports our Oil and Gas program, including managing the Oil and Gas Watch database.

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The market can't handle fast-tracking LNG. Neither can the climate.

The market can't handle fast-tracking LNG. Neither can the climate.

July 26, 2022
Alexandra Shaykevich
Oil & Gas Research Manager

Alexandra joined Environmental Integrity Project in 2019 and primarily supports our Oil and Gas program, including managing the Oil and Gas Watch database.

Other posts
See all posts
No items found.