The US Department of Energy Releases its Long-Awaited Energy, Economic and Environmental Assessment of US LNG Exports
On December 17, 2024, the U.S. Department of Energy (DOE) released a long-awaited study that is intended to inform its findings as to whether exports of liquefied natural gas (LNG) are in the “public interest” under section 3 of the Natural Gas Act (NGA) (the “2024 Study”) that we anticipate will be challenged by the LNG industry, and may subject to modification by the incoming Trump administration. Exports to countries with which the United States has entered into a free trade agreement (FTA) requiring national treatment for trade in natural gas (FTA countries) are deemed to be required by the public interest, and the DOE must authorize those export applications. Exports to non-FTA countries are merely presumed to be in the public interest, giving the agency some discretion over export authorizations. As the NGA does not define “public interest,” since 2012, the DOE has issued a series of studies to inform its public interest determination, studies focused on the economic, environmental, and greenhouse gas (GHG) impacts of LNG exports.
As explained in a prior Akin alert, in January 2024, DOE announced that it would be pausing all pending LNG export decisions to non-FTA countries until the study process was complete. This includes a public comment period that closes on February 18, 2025, which is 60-days from the date the 2024 Study was published in the Federal Register. While we expect President-elect Trump to lift the pause effective January 20, 2025, the opportunity to comment on the 2024 Study is likely to persist. LNG industry stakeholders will have the opportunity to influence how the 2024 Study is interpreted or applied by the incoming administration and may comment on the study’s findings or the process and methodologies relied upon to arrive at them.
The 2024 Study assesses the impacts of varying levels of U.S. LNG exports on the domestic economy, global energy markets, greenhouse GHG emissions, and local communities. It emphasizes the dramatic increase in LNG exports since the first DOE-authorized LNG exports became operational in 2016, noting that DOE has issued a cumulative total of approximately 48.45 Bcf/d of non-FTA export authorizations as of December 2023, of which 23.7 Bcf/d is attributable to projects that are actively exporting, under construction, or reached a final investment decision (FID) as of December 2023. Coincidentally, in 2023, the U.S. became the world’s largest exporter of LNG, supplying 21% of the world’s LNG exports.
The 2024 Study presents 14 distinct scenarios toggling three fundamental variables: (1) global climate policies (2) emissions mitigation and clean energy technology and (3) U.S. LNG export levels. It employs four models to evaluate these scenarios: (i) the Global Change Analysis Model developed and maintained at the Pacific Northwest National Laboratory’s Joint Global Change Research Institute; (ii) the National Energy Modeling System developed by the U.S. Energy Information Agency and modified for the study by OnLocation; (iii) the Household Energy Impact Distribution Model developed by Industrial Economics, Incorporated; and (iv) the natural gas system life cycle assessment model developed and maintained by the National Energy Technology Laboratory.
The 2024 Study offers a neutral to negative outlook for increased LNG exports, which is a departure from prior DOE-commissioned studies finding that increased LNG exports correlated with positive domestic economic outcomes and reductions in world-wide greenhouse gas emissions. Stopping short of finding additional LNG export approvals to be definitively against the public interest, the study forecasts that under current policies, unconstrained U.S. LNG export supply will raise wholesale energy prices by 30% and household prices by 4%, as well as lead to 0.05% higher global emissions. This outcome assumed U.S. LNG export volumes reach 56.3 Bcf/d by 2050, 7.85 Bcf/d more than what is currently approved for exports as of Dec 2023. It also marks the first time the DOE has combined its macroeconomic analysis and environmental analysis into one study, and is the first time the agency has issued a study that reviewed environmental justice considerations in the context of LNG export.
The DOE’s most recent studies were published in 2018 and 2019. The 2024 Study’s emphasis on community effects related to natural gas production and liquefaction also is more pronounced then the agency’s 2014 environmental analysis, which emphasized an inability to “meaningfully analyze the specific environmental impacts” of natural gas production. While the 2024 Study is careful not to assign any probabilities to the examined scenarios or make overly conclusive statements, the document likely was intended to lay the groundwork for a more robust, case-by-case balancing of environmental and economic harms during the NGA section 3 authorization process. Even in the context of economic security, the 2024 Study seeks to give policymakers pause by pointing to China, as opposed to traditional U.S. allies in Europe and Asia, as being a primary beneficiary of unfettered LNG export authorization.
Recent commentary since the release of the 2024 Study foreshadows expected participation from a range of stakeholders as industry and non-governmental organizations digest the 2024 Study’s outcomes and implications. In responding to similar public commentary to their 2018 macroeconomic study, the DOE addressed an array of industry and environmentalists concerns with the study’s assumptions and methodologies. While the DOE found no evidence to undermine the conclusions of its 2018 study based on those public comments, the change in Presidential administrations from the 2024 Study’s December 17, 2024 release date and the end of the public comment period may lead to a different result here. Indeed, U.S. DOE Secretary Granholm confirmed in a statement released concurrently with the 2024 Study that “decisions about the future of LNG export levels will necessarily by made by future Administrations.”
