Critics Challenge 'Fundamental Flaws' in Energy Department LNG Export Study Draft

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LNG tanker

The Department of Energy (DOE) missed the mark in its newly published draft Liquefied Natural Gas (LNG) study, ignoring economic costs associated with climate change and the growth of the renewable energy industry, dozens of national and grassroots environmental groups said in public comments filed with the DOE on Friday.

In June, the DOE published a draft study that predicted expanding LNG exports worldwide could double American natural gas prices by 2040 — but that would carry relatively limited costs to the overall economy.

The draft study is deeply flawed, as the authors chose to ignore both climate science and climate action in favor of what appears to be a political imperative over any objective analysis,” Lorne Stockman, Senior Research Analyst with Oil Change International and lead author of the comments said in a statement. “In my experience, this would not stand up to peer review in any academic institution.”

The new comments come the day after DOE Secretary Rick Perry arrived at a ribbon cutting for the Cove Point LNG export facility, now the second in the U.S., where he touted exports of more American fossil fuel to Europe and elsewhere. “We're now exporting natural gas to 30 nations,” Perry said via Twitter.

Earlier this week, the Trump administration also finalized rules that would speed up approvals for “small-scale” LNG projects that would ship American fossil fuel to countries that haven’t signed free trade agreements with the U.S. The new rules, slated to go into effect on August 25, allow the DOE to skip a “public interest review,” replacing that process with the presumption that small export facilites are a postitive for the U.S.

As the shale gas rush has flooded American markets with cheap fracked gas, the U.S. has switched from building LNG import terminals to terminals for exporting super-chilled methane via ocean tanker. In 2016, the U.S. exported 0.5 billion cubic feet (Bcf) of gas per day; last year that figure nearly quadrupled to 1.94 Bcf.

Many more LNG export projects are underway, with the DOE currently considering 25 projects that combined would raise exports to a staggering 21.35 Bcf per day.

That volume is so high that the DOE found it necessary to produce a study assessing the impacts of greenlighting those export projects could be on both America’s gas markets and the nation’s overall economy.

The DOE’s 144-page draft study, entitled Macroeconomic Outcomes of Market Determined Levels of U.S. LNG Exports, is focused on the years 2020 to 2050 and lays out a range of different export possibilities over those three decades. It describes 54 different scenarios, assigns each a probability, and concludes that it’s most likely that LNG exports wouldn’t cause US natural gas prices to rise over roughly $5 to $6.50/mcf in 2040 (more than double the current low domestic prices, but far shy of the over $10/mcf prices at the dawn of the shale gas rush).

The study, drafted by NERA Economic Consulting for the DOE, also claims that the hit to the overall economy from higher gas prices will be offset by increased gas production (and therefore, presumably, the expansion of fracking and other environmentally destructive practices) and international trade benefits.

“For policymakers who are on the fence on whether or not capping LNG exports is a good policy objective, this will tell them it shouldn’t be a priority,” Katie Bays, an analyst at Height Capital Markets, told Bloomberg in June.

Critics charge the DOE’s study essentially writes off the possibility that demand for LNG will drop as countries seek to slash their carbon and methane emissions, which drive climate change. The DOE draft assigns only a 5% likelihood to the scenario that including pollution curbs to make two degrees of climate warming 50 percent less likely, the commenters wrote – essentially refusing to plan for the possibility that the world takes action to prevent climate catastrophe.

This is an entirely subjective and cynical statement,” the environmental organizations, which include Food & Water Watch, Oil Change International, 350.org, the Center for Biological Diversity and dozens more, wrote, “that does not constitute a methodology for assessing the likelihood of international climate change policy affecting the long-term demand for gas outside of the United States.”

The DOE draft also left out the role that fracking bans like those in New York and Maryland could play, improperly accounted for the “considerable economic costs of continuing climate change impacts, including storm damage, loss of essential resources, mass migration and increased social and military conflicts,” and failed “to acknowledge the ongoing and rapidly accelerating transition to renewable energy and storage,” the groups wrote.

The LNG industry argues that by replacing coal as a fuel, it can help keep a lid on carbon pollution and therefore play a role in combatting climate change. A peer-reviewed study published in the journal Energy in December found that the exact opposite is true: LNG exports will exacerbate climate change, causing greenhouse gas pollution to rise.

And not just a little bit, a lot, according to the study's co-author.

[T]he greenhouse gas impacts from exporting U.S. natural gas, if you're really looking at how it impacts things here at home and abroad,” Alex Gilbert, a D.C.-based energy researcher and co-author of that study, told E&E News, “can be very, very bad.”

Environmentalist say that a more complete look at allowing the kind of unlimited LNG exports suggested by the DOE draft would also show economic costs that are very, very bad – expecially once you look at the expense of failing to prevent significant climate change.

Rising sea levels alone could bring a $14 trillion a year pricetag by 2100 if the climate warms more than 2 degrees Celsius, researchers from the UK-based National Oceanographic Centre warned in a peer-reviewed study published earlier this month (though to be sure, LNG exports are only one source among many of climate-changing pollution).

Nonetheless, the DOE study ignored those costs and others like them without good justification, the groups wrote, skewing its projections in favor of the industry.

The world will increasingly reject our gas exports in favor of truly clean, renewable power,” predicted Wenonah Hauter, executive director of Food & Water Watch, which co-authored the comments to DOE, “and as a result the costs of this policy to Americans will skyrocket.”

Related: Read DeSmog's series Finances of Fracking: Shale Industry Drills More Debt Than Profit

Main image: LNG tanker Credit: ShellCC BY-NC-ND 2.0

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