Photo Credit: Alexander Hamilton II
As 2022 comes to an end, we have only seven years left to cut global emissions in half for a shot at limiting global warming to 1.5C. With that deadline looming, you might be surprised to hear that liquified methane gas (LNG) export is experiencing a revival in the US with this year marking the 2nd year the US maintained its place as the world’s biggest exporter of gas. The industry continues to plan for an expansion- including 20 proposed LNG terminals in the Gulf Coast- that, if successful, would go far beyond what scientists say we can support in a climate stable world. Ditching LNG expansion has yet to translate to government action and we saw that, in the case of Alaska LNG, a project that is only viable because of government backing. Despite these sorts of “favorable” conditions for LNG, there still seems to be trouble in the water, as many of these projects struggle to achieve full investment. Luckily, there is a growing movement of people fired-up to stop the expansion of methane gas infrastructure and make sure decision-makers act to support communities and the climate.
The LNG Landscape shifted in 2022
Across the country, 2022 has reaffirmed that economic downturns don't hit everyone equally. As the economy rebounded from the COVID-19 shutdowns, many industries have seen record profits, while the average American is struggling with rising prices for food and fuel. Quarter after quarter, oil and gas companies have broken their own profit records. The truth is companies are gaining these profits at the expense of consumers and then funneling their profits to investors via dividends or stock buybacks.
When Russian forces invaded Ukraine in February, it immediately caused many Russian-gas-dependent countries to seek new sources for their fuel needs. Enter US LNG industry, which, for years, had been facing a lack of financing and grappling to stay afloat. Even though many projects had their major permits in hand, they stagnated because they didn’t make financial sense. Unfortunately, the gas industry has used the war in Ukraine to attempt to profit from misfortune. The day after Russia invaded Ukraine, a lobby group, LNG Allies, delivered a wishlist of policy needs to the Biden Administration siting an altruistic desire to support Europe. All of those wishes have been granted and are paving the way for expansion efforts. Long term oil and gas expansion is not what is needed to address short term energy needs.
President Biden’s quick actions to allow the LNG industry to prosper counter his desire to be seen as the “climate president.” The Biden Administration has parroted industry talking points of methane gas as a “bridge fuel” despite its huge contributions to climate warming. Additionally, the administration has formalized dependence on methane gas by committing to supplying LNG to the European Union and Britain. Exporting LNG flies in the face of all of the US climate change commitments. Even more, climate scientists see no path forward for LNG in a world where we stay under 1.5°C of warming. On top of all that, fulfilling the LNG industry's goals to build new export infrastructure risks the health and safety of local communities, going against President Biden’s stated environmental justice intentions.
But, the pre-war stagnation LNG projects experienced doesn’t seem to be going away as quickly as industry would like. The nearly two dozen LNG export projects along the US Gulf Coast have faced significant difficulties staying on track – despite millions of dollars spent on pro-LNG lobbying and government agencies seemingly rubber-stamping their permits. This year, there were eleven projects which stated they would officially decide to move their projects forward (also called making a Final Investment Decision, or FID). However, nine of those projects have yet to complete this key milestone.
The Driftwood LNG project owned by Tellurian is a prime cautionary tale of this failure to reach FID. After persistent delays followed by a failed attempt to raise funds for the project in September, Tellurian’s two contracted customers canceled their agreements to purchase LNG from what they evidently saw as a doomed project. The project risks losing its third and final LNG purchaser if it doesn’t secure financing and begin construction by the end of the 2022.
So why are so many projects struggling to reach FID even as geopolitical winds seem to be blowing in their favor?
Here’s a quick 101 on gas infrastructure funding: there is an innate tie between gas infrastructure and long-term commitments. Projects can not move forward without capital from banks and investors, who evaluate project viability by the volume of long-term (15-25 year) LNG purchasing contracts.
While it is true that Europeans need short-term aid to fill the gap of Russian gas, many climate-sensitive countries are on their way to phasing out fossil fuels. However, in 2022, the EU doubled down on its clean energy targets and vowed to reduce gas consumption rather than committing to contracts that would force both the EU and the US into decades of more fossil fuel dependence.
Beyond opposition to LNG for climate’s sake, there are major timing and infrastructure misalignments with the industry’s desire to expand gas exports. First, none of the proposed plants in the US are expected to be online before 2024. Given EU climate commitments to reduce fossil fuel dependence in the near and long term, this infrastructure would be built for a non-existent problem. Second, there is a lack of import and regasification infrastructure in receiving EU countries. This infrastructure problem is already causing significant delays in importing LNG volumes being sent today. We saw this infrastructure issue come to a head when a large flotilla of LNG ships could not dock in Europe because of delays at the regasification terminal. Moreover, questions arose about the authenticity of the LNG industry's “altruistic” claims to help Europe when evidence emerged that some tankers in these bottlenecks were purposefully waiting to offload for the highest price possible.
There is no question, LNG investors and CEOs reap the benefits of expanded fossil fuel exports that push us closer to climate chaos and harm environmental justice communities. We will not let them get away with it! There is a growing movement led by those on the frontlines and the fencelines of the proposed expansion of the gas industry and with your support we can continue to build that movement. This year, we have already collected over 17,000 letters to the Biden administration calling on them to stop the gas export expansion. Join us in that fight and submit a comment here. Together we can continue to build this movement and push back the gas industry’s expansion plan. Together we can build towards the future we want for our communities and the climate!