LNG exports will cost consumers and the climate: U.S. Department of Energy

If the U.S. allows unconstrained growth of liquefied natural gas (LNG) exports, there will be significant costs to both consumers and the climate, according to a new government report.

The Department of Energy (DOE) analysis, published Dec. 17, warns that “unfettered exports of LNG would increase wholesale domestic natural gas prices by over 30 per cent” by 2050. More demand for gas to export overseas, it expects, would drive up domestic prices.

Higher natural gas prices will also increase costs for manufacturers, which are then passed on to consumers, and cause electricity price hikes because gas is a key part of the power mix in many regions of the U.S., it noted. While LNG companies and exporters get wealthy, consumers (from households to farmers to heavy industry) will face price hikes: costs for the average American household will increase “well over $100 more per year by 2050,” wrote Energy Secretary Jennifer Granholm.

Granholm’s report dug into the climate impacts of LNG exports exceeding global demand for U.S. LNG.

Natural gas is largely methane, which is responsible for roughly a quarter of global heating. Methane leaks into the atmosphere during gas production and transportation and when the gas is burned it releases plant-warming CO2. 

Gas is less emissions-intensive than coal, and a common industry and political argument for increasing LNG production and export is that it can displace dirtier energy sources, like coal, overseas. Granholm tackles this issue in the analysis, finding that it would be more likely that renewables, rather than coal, would be displaced in the future.

“[T]he study put forward today shows a world in which additional U.S. LNG exports displace more renewables than coal globally,” she wrote.

In four of the five scenarios modelled in the report, currently approved levels of U.S. LNG exports are “already more than enough to meet global demand” and exceeding that demand will have climate impacts.

The DOE’s recent findings mirror the situation in Canada, where industry is pushing hard for major LNG expansion in British Columbia, said Climate Action Network Canada strategist John Young in an emailed statement.

“Asian LNG markets are declining and LNG is headed for massive oversupply by the time LNG from Canada might be ready for market,” Young said.

The U.S. analysis noted demand for LNG imports is high in China and expected to increase, while demand has already peaked in Japan (a key market for Canadian LNG exporters).

The DOE is far from the first organization to flag the pending oversupply of LNG in global markets. The Institute for Energy Economics and Financial Analysis reported Japan’s LNG demand has dropped by 25 per cent in the last decade, and is projected to fall by another 25 per cent by 2030, as nuclear power and renewables displace gas.

An October analysis from U.K.-based Carbon Tracker found global markets for LNG are likely to be oversupplied by the end of the decade, and B.C. LNG production is expected to ramp up at precisely the same time global production plateaus.

“On every front, the case for LNG falls apart in the face of comprehensive economic, human health, energy market and climate analysis,” Young said. “Canada needs to take a big step toward the renewable energy transition and away from LNG.”

The Pembina Institute projects the combined emissions from a suite of LNG projects in B.C. — LNG Canada Phase 1 and 2, Cedar LNG, and Woodfibre LNG — will far exceed the province’s emission reduction target for the oil and gas sector sector.

According to the DOE analysis, every scenario shows increases in LNG exports cause increases in global net emissions despite “very aggressive assumptions” about the use of carbon capture, utilization, and storage technology. 

In the scenario where U.S. LNG exports exceed currently authorized levels, the annual emissions from production, transportation and burning the gas would be a staggering 1.5 gigatons of CO2 equivalent, or just over 25 per cent of the U.S.’s annual greenhouse gas emissions. 

The analysis called the pace of growth of U.S. LNG exports “truly astounding”: exports have already tripled over the past five years, are set to double again by 2030, and could still double again. 

Granholm’s overarching message is that “a business-as-usual approach is neither sustainable nor advisable” and the “public interest" should inform whether future LNG export authorizations go forward.

— With files from John Woodside

Natasha Bulowski / Local Journalism Initiative / Canada’s National Observer