June 14, 2021

LNG proponents say exports could reduce emissions, but critics call it a bridge to nowhere

Hannah Grover/NM Political Report

Touting natural gas as a bridge fuel to help address global climate change, a study released by the Western States and Tribal Nations Natural Gas Initiative (WSTN) states that replacing coal-fired generation in several Asian countries with liquefied natural gas from Rocky Mountain states could reduce net life cycle emissions by 42 to 55 percent, which some groups dispute.

Jason Sandel, the chairman of WSTN, said Rocky Mountain natural gas is a “viable fuel for a fuel switch which will have a positive impact for emissions across the globe.”

This would be done by transporting the natural gas to a facility in the Baja California region of Mexico where it would be liquefied prior to transport to Asian countries.

“I see, really, more opportunities than I do challenges,” Sandel said, although he said he was not surprised by the results of the study.

Sandel described the study as a “first of its kind” in terms of looking at the Rocky Mountain region. He said similar studies examined LNG from other regions, including Canada, and those studies have also shown that it could lead to reduced emissions.

As an organization, Sandel said WSTN is focused on what it can do to reduce global greenhouse gas emissions through the use of natural gas.

But not everyone is as optimistic about LNG exports.

Methane emissions from production of natural gas

The WSTN study was sponsored by organizations that could financially benefit from the sales of LNG to Asia and environmental advocacy groups say it presents an unrealistic and false picture.

Tom Singer, a senior policy advisor with Western Environmental Law Center, said there were several places where the authors “put their finger on the scale.”

One of these areas was looking at methane emissions from natural gas compared to carbon dioxide emissions from coal.

Methane does not last as long in the atmosphere but, in the short term, can have greater climate change potential than carbon dioxide. Additionally, when in the atmosphere, methane can react with oxygen to form carbon dioxide.

Singer said the climate benefits of LNG replacing coal would evaporate if looked at over the next 20 years rather than a longer time period. This is backed up by a Natural Resources Defense Council report released in December.

“They only considered one specific case: that LNG was used to replace coal generation,” said Amanda Levin, policy analyst with NRDC’s climate and clean energy program. “In reality, we know that this is not going to be the case and there is no certainty or ability to track that the only thing that LNG is going to be displacing is coal.”

The NRDC report looked at LNG exports and stated that it is not an effective strategy for mitigating climate change.

If new natural gas facilities displaced renewable or clean energy, Levin said it would be a major setback for the world.

This point was echoed by Clark Williams-Derry, an energy finance analyst for the Institute for Energy Economics and Financial Analysis, who has evaluated exports of LNG from the U.S. to Asia.

“The report contemplates a basic tradeoff: US LNG would directly substitute for Asian coal-fired power,” he wrote in an email to NM Political Report. “But there’s no basis for this assumption. LNG could replace new renewables development. It could boost overall energy consumption. It could be used in new industrial applications, or in new petrochemical plants, or new residential/commercial demand. It could replace pipeline gas. The list goes on.”

He continued that “massive fossil fuel expansion on the off chance that it would directly replace coal in Asia just doesn’t make much sense. It doesn’t even pass the laugh test, really. And without doing a careful economic or policy analysis, it’s unreasonable to suggest that it’s even a realistic outcome.”

Levin also said that the WSTN report used extremely low estimates for methane emissions related to natural gas, highlighting that 3.7 percent of the methane produced in the Permian Basin is emitted into the atmosphere.

“That could even tip the scales for LNG compared to coal,” she said.

Levin said if the WSTN report used the estimates based on what is being documented in scientific literature LNG exports would have a very small benefit compared to coal.

But Sandel said WSTN is working on a certification program that would lead to more responsible production of natural gas. 

“Ultimately what it comes down to is that New Mexico and the Rockies, you know, Colorado, have methane rules either in place or are being put into place,” he said.

Sandel served on the methane advisory panel for New Mexico as the state worked to draft methane waste rules. He said those rules give the Rocky Mountain states a strong position to take the lead on “being some of the cleanest burning fuel in the world.”

Singer said the benefits of the emissions rules in Colorado and New Mexico in reducing methane remains to be seen, This will depend on how the rules are enforced. At the same time, he said Utah and Wyoming do not have anything in the works to regulate methane emissions.

“We can’t expect gas to be clean in the absence of government measures,” Singer said.

Natural gas as a bridge fuel

Asia has been at the center of discussions related to exports of LNG. Levin said the region will have an increased demand for some type of energy and LNG advocates are hopeful that natural gas will fit into that puzzle.

However, she highlighted a recent International Energy Agency report looking at how to get to net-zero emissions by 2050 and said that new LNG and gas plants are not compatible with that vision.

“The thing about gas plants and LNG terminals and all kinds of gas infrastructure is it is designed to last for 40 to 50 years,” she said.

She said it makes no sense to invest in new natural gas infrastructure while working toward the net-zero emissions goal.

Singer also pointed out that building new infrastructure means locking in the investments for 20 to 30 years “while the world is waking up to the reality that we don’t have that long.”

“We can’t be locking in massive commitments to produce and combust natural gas,” Singer said. “We need to go straight to renewables plus storage.”

Additionally, Levin said the concept of a natural gas bridge is outdated as wind and solar is less expensive to operate and energy storage systems such as battery and pumped storage can help provide power when the wind isn’t blowing and the sun isn’t shining.

Sandel disagreed with the argument that batteries could replace natural gas. He said the current battery technology is not at the level that would be needed for that to happen and there is a debate over where the rare earth minerals will come from that are needed for batteries. Sandel said not all countries will produce rare earth minerals in a responsible way.

But Levin said climate change requires immediate action.

“I think the concept of a bridge misses what has happened both on the technological side as well as the climate imperative over the last twenty years,” Levin said. “We had time for gas to be a bridge. It is no longer a bridge. Rather it is a bridge to nowhere.”

But that doesn’t mean Levin supports ending all natural gas use immediately. Instead, she said no new natural gas should be brought online.

Williams-Derry also mentioned the IEA “net zero by 2050 report” and said LNG exports to Asia do not help in achieving that goal. He said even if the market analysis is correct and the methane emissions estimates are accurate, using LNG to offset coal would make it hard to meet the emissions reductions needed.

“Even if the study is correct on these issues, it still contemplates a long-term CO2 reduction that’s much too small to reach the targets that IEA and climate scientists argue are necessary to prevent the worst impacts of climate change,” he wrote. “And it’s likely that the same effects could be achieved more cost- effectively with investments in renewables, where costs have fallen dramatically.”

New Mexico’s role in WSTN

New Mexico is one of the members of WSTN. Gov. Michelle Lujan Grisham signed a memorandum of understanding to join the group in 2019.

This has been met with backlash from some in the environmental community and, following the release of the LNG export report, Singer said the governor is a “self-styled” climate champion. He said Western Environmental Law Center is distraught that Lujan Grisham signed the MOU to join WSTN.

“The governor can’t have it both ways. She can’t be a booster for natural gas production and export and also be a climate champion,” Singer said.

Tripp Stelnicki, a spokesperson for the governor’s office, told NM Political Report in an email that the governor signed the MOU in an effort to “bring economic opportunities to the state, particularly the San Juan Basin.”

“There are very few markets for the gas that is produced in the San Juan Basin, and that causes depressed commodity pricing,” he wrote. “In the Permian basin there is a lack of infrastructure and market to capture and sell the gas, and finding additional markets could help the state further its methane reduction goals.”

He added that the administration is “committed to ensuring that all production happens responsibly.”

Sandel said exports of LNG from New Mexico to Asia could provide a consistency in consumption that would help with the typical boom and bust cycle associated with natural gas extraction.

“It really is about supply versus demand. We know that we’ve got supplies, so it’s a matter of creating demand,” he said.

IEEFA report highlights challenges facing LNG exports

But exporting LNG to Asia is not as simple as it seems, according to an IEEFA report released on June 7 that highlighted four “headwinds” the U.S. will face if it hopes to export LNG.

The report, written by Williams-Derry, highlighted Qatar’s controlling influence in the LNG market and, in 2020, Australia emerged as the largest exporter of LNG. Additionally, China has a share in a Russian LNG facility. Additionally, there are already surplus supplies of LNG that existing exporters can sell.

In addition to competition with other countries, Williams-Derry’s report identifies the rising cost of U.S. LNG and fickle international demand as “headwinds” that the U.S. would face if it hopes to export LNG.

Williams-Derry read over the WSTN report after it was published and provided some comments to NM Political Report in an email, although he said he could not fully critique it without access to the methods, data and assumptions.

He highlighted a section of the WSTN report that states if all the exported LNG was to go to South Korea and Japan, it could reduce the emissions from coal by 33.3 percent for and 24.1 percent respectively.

But, Williams-Derry said, that idea is unrealistic given current market trends. For example, Japan already has enough supply of LNG and is experiencing decreasing demand for it and, even before the pandemic hit, the South Korean demand for LNG had slowed.

He referenced a column that ran in Reuters on June 11 and said the increasing cost of coal and LNG is helping spur more interest in renewable energy in Asia, including in solar, wind and battery storage.

“We’re already starting to see hints of renewables replacing gas-fired power in (the) US — and that’s at US gas prices, which are just a fraction of the cost of liquefying the gas and shipping it to Asia,” he wrote.