In Seismic Shift, DOE Study Slams LNG
A single LNG plant adds more climate pollution than any of 141 nations
The Department of Energy has issued a 600-page study on the impact of liquified natural gas (LNG) exports on America’s economy and environment. The year-long study was conducted by leading energy experts at DOE’s national laboratories. Secretary of Energy Jennifer Granholm summarized the key takeaways in a Secretarial Statement that is worth a read.
DOE’s study found that expanding US gas exports would benefit oil and gas companies at the expense of US consumers, global climate goals, and the health of fenceline communities that live in the shadow of LNG plants.
Granholm’s bottom line: DOE can no longer sit on the sidelines while “unfettered” LNG expansion harms the economy and climate.
“A business-as-usual approach is neither sustainable nor advisable” - Granholm
I have posted a number of excerpts from Granholm’s statement and the report on Bluesky (here) and X (here).
More Climate Pollution than 141 Countries
DOE makes clear that supercooling methane gas to 260 degrees below zero and shipping it around the world worsens climate change and undermines global efforts to transition to clean energy.
A project the size of the controversial CP2 proposal, the largest US LNG project in history, “would yield more annual greenhouse gas emissions by itself than 141 of the world’s countries each did in 2023,” according to Granholm.
Climate damages from the increase in global emissions caused by US LNG exports could reach $500 billion, based on to DOE’s social cost of greenhouse gas calculations. To put this number in context, the estimated damages from Hurricane Helene ($50 billion) are just one-tenth of the potential LNG damages.
A Seismic Shift
While the climate impacts of LNG are alarming, it’s the economic impacts that have seismically rattled the political ground under the feet of LNG.
"DOE analysis exposes a triple-cost increase to U.S. 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 U.S. power markets), and the increased costs for consumers from the pass-through of higher costs to U.S. manufacturers.” -Granholm
These findings are a sharp departure from studies dating back to President Obama that lauded LNG as an economic boon for oil and gas companies and their shareholders.
The study will also provide new ammunition to Democrats in Congress who have have been dropping out of the LNG fan club in recent years. Citing economic concerns, 95% of House Democrats voted earlier this year to oppose GOP efforts to overturn Biden’s LNG pause.
"Americans would pay more for the gas that heats their homes and keeps their lights on. It is an affront to middle-class families who cannot afford to deal with more fossil fuel price volatility." - Rep. Frank Pallone (D-NJ), Democratic leader of the House Energy & Commerce Committee
Now, Democrats are armed with carefully documented, damning evidence, including:
“Unfettered exports of LNG would increase wholesale domestic natural gas prices by over 30%”
“Unconstrained exports of LNG would increase costs for the average American household by well over $100 more per year by 2050”
“The overall energy costs for the industrial sector would go up $125B, leading to additional potential price increases for a wide range of consumer goods”
A Huge Blow to the LNG Industry
Earlier this year, DOE pumped the brakes on permit approvals while they completed their new assessment. The new studies make a compelling case for denying pending projects, which DOE can only approve if it determines the projects are in the “public interest.”
Secretary Granholm has not said whether she and President Biden will take the logical next step and deny pending permits for pending LNG projects before they leave office.
Even if DOE doesn’t finish the job, the new study is a huge blow to the LNG industry. It marks the first time that DOE has fully pulled back the curtain on LNG, exposing industry talking points as a sham.
Jamie Henn, Director at Fossil Free Media, captured industry’s “Oh S#&!” moment on X:
Trump Can’t Make This Go Away, but He Will Try
In May, Trump gathered wealthy energy barons to a fundraiser, promising to approve LNG projects if they funded his campaign. Last week, Truth doubled down, promising to expedite any project costing more than one billion dollars, a threshold that LNG projects easily clear:
Even though Trump intends to make sure these facilities are approved, Trump can’t make these studies go away.
Most tangibly, the DOE studies will be Exhibit A when the battle moves to the courts. Trump can toss the studies in the trash can, but he can’t hide them from federal judges.
The studies also add a new headache for investors. LNG developers rely on permit approvals to entice banks into providing billions of dollars of up-front financing. The problem: these projects take many years to build and won’t be in operation until after Trump leaves office.
Federal permits have until now been a durable stamp of approval that would survive across administrations. Not anymore. The Natural Gas Act gives DOE broad authority to set and update terms for licenses. Anything Trump does, the next administration could undo.
LNG projects fall into the same risky basket of investments as the Keystone pipeline and Arctic Refuge oil leases, subject to dramatic swings after every election.
With such a clear record that LNG expansion is bad for the economy and the environment, it’s hard to image that future contenders for president won’t be asked to pledge to undo whatever Trump does on LNG.
The China Problem
Adding to the political uncertainty that should chill LNG investment: LNG’s China problem. Pending projects such as the controversial CP2 project are heavily dependent on long-term contracts with China, as I detailed in a Substack here.
According to Granholm:
The People’s Republic of China is already the world’s largest importer. 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 have already signed several contracts with operating or proposed U.S. LNG projects.
In a potential game changer for the industry, Granholm suggests that DOE should use “targeted guardrails” to protect the public interest instead of binary - yes or no - authorizations:
“Any sound and durable approach for considering additional authorizations should consider where those LNG exports are headed, and whether targeted guardrails may be utilized to protect the public interest... Future authorization 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 authorizations.”
Granholm makes these comments specifically in the discussion about China. In short, Granholm is suggesting that DOE might block LNG sales to China or other countries where LNG trade is not in America’s best interest.
This should be bone-chilling for investors, who are now officially on notice that any president can shut off the LNG spigots to US competitors.