U.S. LNG exports increase gas prices, worsen climate change: DOE report

The approval of another wave of U.S. LNG exports could drive up domestic prices and exacerbate climate change, the U.S. Department of Energy concluded in its highly-anticipated LNG review.

The report, released on December 17th, throws a wrench into incoming President Trump’s plans to rapidly approve new LNG export projects, which have been held up since January 2024 after President Biden issued a “pause” in order to review the impacts of additional exports.

The DOE report looked at five scenarios that considered different levels of LNG export volumes. Across all scenarios, U.S. domestic natural gas prices increased due to higher levels of exports.

“The study put forward today finds that unfettered exports of LNG would increase wholesale domestic natural gas prices by over 30%,” U.S. Secretary of Energy Jennifer Granholm wrote in a letter accompanying the report.

She said that LNG exports pose a “triple-cost increase” to U.S. consumers, leading not just to higher natural gas prices directly, but also to higher electricity prices and an increase in the cost of manufactured goods.

In a milestone, the DOE also said that in all scenarios, increased LNG would lead to higher greenhouse gas emissions. This finding is a significant development, marking the first time that the U.S. government has concluded that LNG exports are detrimental for the climate. Prior claims from the gas industry that LNG could lead to lower emissions by displacing coal overseas tended to hold sway in government analyses.

In fact, DOE found that U.S. LNG exports can slow the transition to renewables in some parts of the world, worsening the climate impact. “[T]he study put forward today shows a world in which additional U.S. LNG exports displace more renewables than coal globally,” Granholm said.

Moreover, recent peer-reviewed research indicates that the greenhouse gas impact from LNG may be 33 percent higher than coal, due to high methane emissions up and down the supply chain, and substantial upstream CO2 emissions at drilling sites.

Remarkably, DOE concluded that LNG exports exacerbated climate change even when using “very aggressive assumptions in the model regarding deployment of carbon capture, utilization, and storage.”

Carbon capture has a poor track record, one of exorbitant costs and dismal performance, but it is notable that even a hypothetical best-case scenario of CCS deployment did not tip the climate scale in favour of LNG.

Opponents of new LNG exports said the conclusion of potential harms of excessive exports reflects real-world data and observations, not just assumptions.

“As a resident of Freeport TX, near where Freeport LNG exploded and constantly emits methane and other toxic emissions, we thank the DOE for releasing this report,” Melanie Oldham, Director of Better Brazoria, a Texas-based community organisation, said in a statement. “The report proves what we know, that LNG plants are not in the public interest. LNG harms our Gulf Coast communities in so many ways, as well as our climate.”

The ramp up of U.S. LNG exports in recent years also coincided with extreme price swings for American consumers.

“The sudden and significant expansion of LNG export capacity has dramatically upended domestic energy markets in the United States, pushing prices upward and exposing consumers to more price volatility and higher prices,” Tyson Slocum, director of energy at Public Citizen, a Washington-based consumer advocacy group, told reporters on a press call.

A recent Public Citizen report found that in the state of Pennsylvania alone, consumers and businesses could end up paying an additional $16 billion in higher gas costs in a scenario in which all the current LNG projects affected by the pause are approved and built.

The U.S. is already the world’s largest LNG exporter, and export capacity is expected to double by the end of 2028 from projects that are already approved and under construction. Another tranche of approved projects waiting in the wings would amount to an additional doubling of export capacity into the 2030s.

The DOE report found that much of that will not be needed. “In 4 of 5 modeling scenarios included in today’s study, the amounts that have already been approved will be more than sufficient to meet global demand for U.S. LNG for decades to come,” Granholm said.

DOE report complicates Trump’s options

The American Petroleum Institute CEO Mike Sommers said that “it’s time to lift the pause on new LNG export permits and restore American energy leadership around the world.”

Trump has vowed to lift the LNG “pause” on his first day in office, but the latest DOE analysis will make that strategy much more difficult to achieve in practice. While he may try to direct DOE to approve new LNG projects, those authorizations could face legal challenges in light of the agency’s findings that additional exports have economic and climate harms.

“We think that this updated public interest analysis is going to make it much harder for Trump to try and quickly approve these pending applications because we’ve got a factual record by the agency that Trump is going to have to counter,” Slocum said.

Trump’s DOE may need to entirely redo the public interest analysis and write a new report, which would take time, delaying his ability to greenlight new LNG.

“Depending on the study’s conclusions, assumptions and methodology, we think the incoming Administration might need anywhere from several months to several calendar quarters to revise or revisit study results,” ClearView Energy Partners, a Washington-based energy consulting firm, wrote in a December 5 note to clients.

The Trump administration may resort to more extreme measures to boost LNG, such as turning to national security or national emergency declarations to evade consumer protection laws, Slocum from Public Citizen warned. Greenlighting new LNG under the guise of national security could get around lengthy environmental or consumer protection reviews, effectively ramming through new permits.

“We are extremely concerned, and we are internally preparing for a full court press strategy to stop any Trump administration efforts to abuse national security designations in order to increase fossil fuel production and export,” Slocum said. “Designating these things as national security in order to evade existing regulations, including the Natural Gas Act, is not going to result in lower domestic prices. It is going to increase the pace of exports, which is going to put upward pressure on prices.”

The underlying logic of an emergency declaration would be that increasing gas exports would help allies in Europe who need energy.

But that narrative belies the current state of play in Europe, which no longer faces an energy crisis. Between 2022 and 2024, Europe’s gas demand declined by 20 percent.

“This has been really driven by the deployment of renewables, energy efficiency measures, lots of policies in place across the continent,” Ana Maria Jaller-Makarewicz, lead energy analyst for Europe at the Institute for Energy Economics and Financial Analysis, said at a media briefing. “And this has a consequence on LNG imports because in the same way that gas consumption has been coming down, LNG imports have done the same.”

Gas demand in Europe is in structural decline, which undercuts claims that new U.S. LNG is needed for Europe. Demand in Japan is also in long-term decline. Much of the new capacity that gets built in the years ahead will instead be geared towards China and southeast Asia.

“If Europe continues on the same path, we don’t need to increase LNG imports,” Jaller-Makarewicz said.

Delays for U.S. LNG

In a sign that U.S. LNG projects may not quickly free themselves of regulatory and legal scrutiny in Trump’s second term, Venture Global’s controversial CP2 project just saw its construction authorisation temporarily suspended, which could impose a significant delay.

In a late November decision, the U.S. Federal Energy Regulatory Commission (FERC) issued an order that set aside Venture Global’s authorisation for its CP2 LNG export terminal in southwest Louisiana over concerns about air quality impacts from the terminal. FERC said it will conduct a supplemental environmental impact analysis, and CP2 cannot proceed with construction until that is completed, which may not be done until the second half of 2025.

Environmental groups and communities near Venture Global’s CP1 (Calcasieu Pass) have sounded the alarm about excessive and lengthy flaring events, and extensive fugitive methane emissions from the site.

In its decision, FERC acknowledged that its past approvals for some LNG export terminals have faced legal blowback in federal court. For instance, Rio Grande LNG and Texas LNG are now facing delays after the U.S. Court of Appeals for the D.C. Circuit rescinded their FERC authorisations last August over similar concerns about air quality. In that decision, the court criticised FERC for not conducting a supplemental analysis.

While these are separate issues from the latest DOE analysis, they add another layer of complexity. Indeed, the Department of Energy said on December 10th that it wouldn’t decide on CP2’s request for a permit to export to countries that don’t have a free-trade agreement with the U.S. (a so-called “non-FTA” permit) until after FERC finished its additional environmental analysis.

In other words, even before the latest DOE findings, federal courts have become increasingly skeptical of FERC approvals that have been issued with inadequate reviews over environmental impacts. The latest DOE report — which concludes that LNG is bad for the climate — could raise that legal bar further.

Taken together, the legal and regulatory landscape remains complicated for U.S. LNG, even though incoming President Trump has promised to scrap all barriers to new projects.

“At the end of the day, the facts and the law require a measured slowdown approach to these pending LNG export authorisations,” Slocum said.