MONDAY STUDY: LNG Gets Sick From The Virus

Troubled Waters for LNG: The Covid-19 Recession and Overproduction Derail Planned Construction of Liquefied Natural Gas Terminals

October 26, 2020 (Environmental Integrity Project)

Executive Summary

The coronavirus pandemic has sent shockwaves through global energy markets. Last year, the United States became a net exporter of natural gas and one of the largest exporters of liquefied natural gas (LNG) in the world. This year, U.S. LNG exports have fallen by more than half1 and companies are delaying final investment decisions on proposed LNG export terminals amid rock-bottom energy prices and unprecedented declines in energy demand. The result is that six proposed LNG projects that regulators have approved for construction have been postponed by at least one year because companies have failed to make final investment decisions expected by now. On top of these six projects are another four that were significantly delayed before the March 2020 outbreak of the coronavirus. If built, these 10 new terminals and expansions – located in Texas, Louisiana, and Oregon – have permits that would allow them to emit 45.6 million tons of greenhouse gases a year. That’s more climate-warming pollution than from 10 large coal-fired power plants operating around the clock for a year, or from 8.9 million additional cars and trucks on America’s roads.2

LNG is natural gas that has been cooled to a liquid state, allowing it to be exported on tankers to overseas markets that would otherwise be inaccessible through pipeline transport. It is produced using liquefaction units – called “trains” by the industry – which remove impurities and then liquefy or condense the gas at sub-zero temperatures.

The COVID-19 recession came at a time when the world was already swimming in natural gas. In February, before the impacts of the crisis began to take effect, the U.S. Energy Information Administration (EIA) reported that natural gas storage volumes were on track to reach the highest level ever recorded, partially as a result of additional production growth spurred by new and expanding LNG terminals.3

click to enlarge

The LNG industry had been expanding dramatically before the pandemic. On top of the 10 projects with known delays mentioned at the beginning of this report (because companies have failed to make final investment decisions expected by now) are another 7 projects that have received federal or state authorizations within the last 18 months whose status is unclear. In these cases, no construction has begun, but final investment decisions by the companies are not expected until later in 2020 or in future years. If all 17 of these projects become operational, they would have the potential to emit over 67 million tons of greenhouse gases annually. That figure also represents the greenhouse gases that could potentially be avoided if they are never built.

That outcome is looking increasingly likely for many of these projects, with a majority already experiencing documented delays. The COVID-19 recession threatens to compound a situation for the LNG industry that was already tenuous because of overproduction, chronically low energy prices, and waning energy demand. 4

click to enlarge

This report attempts to analyze the scope of the LNG infrastructure buildout that is planned in the U.S., as well as its viability and environmental impact. Our analysis highlights which projects have already been delayed, as well as the emissions that could be avoided if projects that have not been constructed never materialize. The LNG terminals included in our analysis have been approved by the Federal Energy Regulatory Commission5 or have been issued final Clean Air Act construction permits by state agencies.

To better illustrate the emissions impacts associated with the LNG infrastructure buildout, this report also takes into account potential emission increases from new or expanding compressor stations that are related to existing or proposed LNG terminals and their associated pipeline networks, but that have obtained separate major Clean Air Act construction permits.

In addition to greenhouse gases, LNG terminals also release air pollutants that threaten the health of local residents, including tons of sulfur dioxide (which damages the lungs), nitrogen oxides and volatile organic compounds (both of which contribute to smog), microscopic soot or particulate matter (which can trigger asthma and heart attacks), and carbon monoxide (which can inhibit oxygen intake to the heart and brain).

Although the COVID-19 recession is a tragedy, it might also be an opportunity for companies and regulators to re-think projects that might not be necessary, given the glut of gas, the impact on the climate and public health, and the availability of increasingly cheap alternative energy sources. At the core of this issue is the question of what is really “necessary” for America’s future? Is it the Trump Administration’s policy of “energy dominance,” which is a backdrop for growing American LNG exports? Or are there cleaner (and sometimes cheaper) ways to meet our energy needs without compromising public health or fueling global warming?

click to enlarge

Key Findings of this Report

▪ Companies have been authorized to construct, but have yet to break ground on, 12 new LNG terminals and 5 expansions, including additions to plants already operating. Together, these 17 projects have the potential to emit over 67 million tons of greenhouse gases per year. That’s more climate-warming pollution than is released from 16 coal-fired power plants operating around the clock for a year.

▪ Included in these 17 projects are 10 with known delays that have the potential to emit 45.6 million tons of greenhouse gases per year. These delayed projects – six new terminals and four expansions – are expected to add 20 billion cubic feet per day of liquefaction capacity to the U.S. LNG sector by 2026.

▪ In addition to greenhouse gases, LNG terminals also release air pollutants that are hazardous to human health. If all 17 projects that have been authorized for construction by government but not yet built become operational, they could release up to 4,000 tons per year of particulate matter, as well as 17,900 tons of nitrogen oxides, 27,000 tons of volatile organic compounds, 1,200 tons of sulfur dioxide, and 42,300 tons of carbon monoxide.

▪ LNG terminals also are reliant on supporting infrastructure, such as pipelines and compressor stations. Our findings show that compressor stations alone could add more than 8 million tons of greenhouse gases to the LNG sector’s emissions footprint. That’s almost equivalent to the carbon output of two new coal-fired power plants.

click to enlarge

▪ Construction of LNG terminals and their associated pipelines and compressors could harm local air quality by stirring up dust and particulate matter in the short-term and release nearly 11 million tons of greenhouse gases over a period of three to eight years.

▪ Many of these massive projects have been planned in minority or lower-income communities. About 38 percent of the people living within three miles of proposed LNG facilities are people of color and Hispanics or Latinos, and 39 percent are low-income (defined as households earning less than $24,120 annually). 6

▪ Six of the delayed LNG projects, including four new terminals and two expansion projects, have federal Clean Air Act permits that were issued more than three years ago. And two of these projects had permits whose extensions expired this year. In Jefferson County, Texas, the Port Arthur LNG terminal’s permit extension expired on August 17. In Calcasieu Parish, Louisiana, the Magnolia LNG terminal’s extension expired on September 21.

click to enlarge

Policy Recommendations

▪ Several studies have shown that long-term exposure to air pollution increases the risk of illness or death from COVID-19.7 Local and state permitting authorities need to carefully consider the added health risks of proposed projects during this unprecedented public health crisis. Because communities of color and low-income populations are more likely to live near industrial facilities and other major pollution sources, policymakers also need to consider the disproportionate health burden they bear when approving permits.

▪ The natural gas industry has been struggling for years to finance proposed projects as a result of chronic oversupply, depressed energy prices, and public opposition. Despite the challenging economic climate, policymakers have continued to offer tax breaks and government incentives to risky LNG projects that threaten air quality while locking-in future demand for fossil fuels. Regulators need to take market realities into account, and stop allowing oil and gas companies’ volatile financing schedules to dictate project planning.

▪ The Clean Air Act requires facilities to begin construction within a reasonable amount of time after receiving the necessary permit approvals. Six of the planned LNG projects have permits that were issued more than three years ago. Given the significant impacts these projects would have on global warming and local air quality, and the shrinking global demand for LNG, state environmental agencies should consider canceling these permits and deferring approval of any more applications.

Tweet