EIP's New LNG Report Rejects Scientific Consensus on Climate Benefits of Natural Gas
Fri, October 09, 2020
On Monday, the Environmental Integrity Project (EIP) released a new report targeting the US LNG industry. In short, the watchdog organization drafted a wordy report about LNG’s greenhouse gas (GHG) footprint and its current financial constraints, suggesting the United States and the environment would be better off without the ongoing LNG projects on the US East Coast.
However, the report failed to provide a comprehensive analysis of the emissions from US LNG infrastructure projects. Instead, it opted for a biased approach, mischaracterizing the industry’s current financial situation to assert that the overall industry is a hazard.
Here are some key points to remember.
LNG is part of the global climate solution
The first big mistake the report makes is arguing that LNG facilities would pollute more than coal-fired power plants. EIP argues that the 17 LNG projects in the pipeline would “emit over 67 million tons of GHG per year,” emitting more GHG-related emissions than 16 coal-fired plants would in a year.
However, Ed Hirs, energy economics professor at the University of Houston, quickly pointed out that the report's GHG emissions calculations fail to adequately compare certain variables:
“For example, the report does not account for emissions from coal-fired generation that could be avoided by LNG exports. Burning natural gas is less carbon-intensive than using coal.”
Hirs is not alone in defending natural gas’ superior emission-related benefits over coal, particularly for electricity generation. According to the US Energy Information Administration (EIA), natural gas- sourced electricity generates half as much CO2 per unit of energy when compared with coal.
Likewise, the International Energy Agency (IEA) has also praised the benefits of natural gas over coal in drastically reducing CO2 emissions for electricity generation during the last decade both in the Unites States and worldwide:
“Since 2010, coal-to-gas switching has saved around 500 million tonnes of CO2 - an effect equivalent to putting an extra 200 million EVs running on zero-carbon electricity on the road over the same period.”
Ultimately, upcoming US LNG projects would have a positive impact in other regions and countries that are heavily reliant on coal and are looking for cleaner energy sources to sharply reduce their GHG emissions, such as China. As pointed out by Hirs “exporting LNG could reduce the need for a country such as China to build additional coal-fired power plants.”
Pipelines mean lower prices and fewer emissions in other US regions
The EIP report focuses on the additional GHG emissions that would be derived from connecting infrastructure to the LNG terminals, including pipelines and compressors. But again, the report fails to conduct a comprehensive cost-benefit analysis of the benefits the associated infrastructure would bring to rural communities and other less-advantaged communities.
For instance, natural gas has provided affordable and reliable energy for the majority of Americans. According to the US Chamber of Commerce’s Global Energy Institute (GEI), annual electricity prices declined consecutively in 2015 and 2016 as a result of natural gas' increased market share for electricity generation.
Yet, many communities in the United States still cannot afford to pay costly energy tariffs due to the lack of adequate infrastructure. Communities without adequate energy access due to lack of natural gas infrastructure in Texas, Massachusetts and Illinois have been prominently documented by the media.
And even though some of these communities are either located or neighboring natural gas abundant states, they cannot access affordable natural gas due to constrained infrastructure issues or out-of-date standards that halt LNG supply to these areas.
Belt-tightening does not signal the end of the natural gas industry
The effects of COVID-19 on the oil and gas industry’s finances have certainly changed investment priorities, revenue and prospective projects. However, the EIP report hurries to condemn the industry, extrapolating the current crisis by pointing out all the Chapter 11 bankruptcies happening are some sort of sign of an agonizing industry.
To be clear, the pandemic has caused economic harm to the natural gas industry, just as it has for every industry around the world. But EIP’s funereal conclusions are premature, to say the least.
According to Erin Blanton, senior research scholar at Columbia University’s Center for Global Energy Policy, the report dismisses recent trends in the LNG market:
“While demand for U.S. LNG exports has declined since the beginning of the year, it has shown signs of recovery, as existing LNG terminals have seen increased use since July.”
In addition, the IEA’s Gas 2020 report also sees natural gas and LNG trade rebounding by 2021:
“China, India and emerging Asian markets account for most of the growth in future LNG imports, while Europe should return to its pre-2019 levels after reaching record levels as a balancing market.”
If anything, the fact that LNG companies are rethinking their operations – including pausing specific projects, reducing their assets or restructuring their finances – demonstrates that the industry is financially responsible and is planning for the future. Given the emissions benefits of natural gas and the high-paying jobs that energy infrastructure supports, that’s a good thing.