Energy, Economic, and Environmental Assessment of U.S. LNG Exports: A Review of the DOE’s New LNG Report

     We all know that with Trump coming into office soon, the Biden LNG permit pause will go away. Even so, this report exploring the reasons for the pause is important to look at, consider, and critique. Thus far, it has drawn the ire of the natural gas industry.

     While the study seems to suggest it was just a normal necessary study to evaluate the effects and trends of increasing U.S, LNG exports, the simple fact that it was borne along with a pause in permitting projects until conclusions could be determined, suggests that it also clearly had a political motive in line with climate politics. I seem to recall an LNG emissions paper or report by activist scientist Robert Howarth, whose interpretations of upstream emissions are considered extreme by most of the scientists involved in such research, preceding the pause by a few weeks or months. In any case, I was happy to see that Howarth’s work was not mentioned or cited in this DOE report.  

     The different scenarios modeled are shown in the table and graph below.

     The key conclusions of the report include that there will be enough natural gas to meet both export and domestic demand in all scenarios. At some point in time that could change as gas fields become depleted, but that is decades to many decades into the future. The forecast that natural gas prices will increase by 31% by 2050 should really be seen as insignificant. Prices have risen that much in the past week or so (winter season prices tend to rise). Indeed, in 2022 prices rose by over 100% due to the Ukraine war. The point is that a potential 31% price increase in 25 years is not much more than an average of 1% per year. The effect on consumers should not be that great. It should also be said that commodities price forecasts have not been historically that predictable, especially long-term. The possibility of paying $10 or $15 more per month in gas and electricity prices 25 years from now does not seem like much of a threat.

     The report concludes that the effects of expanding LNG exports on energy security will likely be minimal, but that there are uncertainties about global natural gas demand.  

     The modeled greenhouse gas emissions derived via life cycle analysis (LCA) for each scenario are shown below as well as the range of possible calculated cumulative social cost of carbon to 2050. The second graph shows GHG emissions for higher export levels.

 

“The cumulative social cost of greenhouse gas emissions (SC-GHG) of the S-7 increase in global emissions across the study scenarios ranges from $3 billion to $170 billion (2.5%) to $13 billion to $500 billion (1.5%) in 2022$”

     Finally, there are some conclusions given about potential environmental and community effects. These include the usual environmental impacts known for upstream, midstream, and downstream natural gas development. LNG facilities will add to local air pollution and water withdrawal. No new or unexpected findings were reported.

     Some LNG market trends from the EIA are given below along with the last graph which shows comparisons to the rest of the world (ROW). They note that U.S. LNG exports will offset gas production from other countries (which may not have comparable environmental controls). It should also perhaps be noted that CCS is still a wildcard in that we do not yet know how successful it will be overall, whether it will cost more than forecasts, and how much or how long government support will be needed.

     The report also mentions the variability in GHG emissions from liquefaction by project. They don’t mention it but some projects like the Freeport LNG terminal use electricity rather than natural gas as the main power source for liquefaction. The report also does not mention anything about so-called certified natural gas, which has been tested along its supply chain and certified to be low emissions.

     Overall, it looks like the report will be inconsequential and shows that a pause was never necessary, as I expected. However, it should also be noted that the effects on future pricing could change if we export too much natural gas and domestic demand rises more than forecasted. Electrification and AI data center buildouts are already increasing domestic and global demand. Core natural gas areas in the shale plays will continue to deplete even as deeper shales and other new sources are tapped. That could put significant upard pressure on future prices, especially if LNG exports end up on the high end. 

 

 

References:

 

Energy, Economic, and Environmental Assessment of U.S. LNG Exports. U.S. Dept. of Energy. Office of Fossil Energy and Carbon Management. December 17, 2024. LNGUpdate_SummaryReport_Dec2024_230pm.pdf