Liquefied Natural Gas Reviews: Reforms for Rigorous and Durable Decisionmaking

After a meteoric rise in production over the past decade, the United States has become the largest exporter of liquefied natural gas (LNG) in the world. Yet, the analysis behind LNG terminal and export approvals overlooks climate and environmental justice impacts, despite promises of imminent reform. Policy Integrity’s new report provides a comprehensive look at the Department of Energy’s (DOE) and the Federal Energy Regulatory Commission’s (FERC) past practice in this space and offers recommendations for improving their review of the climate and environmental justice impacts of LNG approvals.

Past Practice

LNG approvals are complicated. Authorizations under the Natural Gas Act (NGA) are divided between FERC, which is charged with authorizing the siting, construction, expansion, and operation of LNG terminals, and DOE, which is responsible for approving export authorization. Both agencies must undertake a public interest analysis before approval, but the parameters of this analysis are unclear, especially when it comes to climate and environmental justice impacts. The climate and environmental justice analysis that does take place often suffers from severe methodological flaws. Moreover, authority over consideration of downstream climate impacts remains a matter of dispute.

When the Biden administration took office, both DOE and FERC seemed poised to reform their environmental review processes for natural gas authorizations. Amid litigation over the Alaska LNG project, DOE decided to develop a new study on the potential climate impacts related to the export authorization request. DOE also began the process to repeal a problematic categorical exclusion rule that exempts LNG export approvals from environmental review. FERC issued new natural gas policy statements covering both its review of environmental justice issues and greenhouse gas emissions from natural gas infrastructure applications.

However, the extent of reform is unclear. While DOE completed a new study, the analysis and conclusions suffer from the same flaws that occurred in previous work. And DOE has yet to repeal its categorical exclusion rule. FERC’s draft policies on environmental justice apply directly only to approvals for interstate pipelines rather than LNG facilities, and the impact of FERC’s greenhouse gas policy statement will largely depend on how it is applied in practice.

Next Steps

Important work remains to be done on these issues, and our report provides recommendations for how both DOE and FERC can improve their assessment of climate impacts, including properly quantifying and assessing the significance of greenhouse gas emissions associated with LNG approvals. It also recommends the agencies conduct a single analysis to ensure that the potential climate impacts of an increase in LNG exports are clear. The report then makes six recommendations to FERC on how it can improve its environmental justice review — for example, by ensuring consistent and transparent reviews and conducting a full environmental justice analysis for all project alternatives.

Finally, the report makes several recommendations for programmatic reform. These are improvements that should be made outside of any individual proceeding to ensure proper review across applications. For example, both agencies should publish updated guidance on how they will review the public interest standard. Troublingly, DOE still uses guidelines published in 1984 for imports to guide its review of export authorizations nearly forty years later. And while FERC’s draft greenhouse gas policy statement will apply to LNG projects under Section 3 of the NGA, the agency has never published separate guidance on how it will undertake the public interest review for these applications. FERC and DOE should also revisit their prior authorizations for LNG terminals and long-term authorizations and consider whether it would be appropriate to modify those authorizations in temporal or geographic scope (or even rescind them) based on findings from a more robust climate and environmental justice impact analysis.

In all, the new report provides a compendium of necessary level-setting information for stakeholders interested in participating in LNG-related proceedings. It also offers recommendations for how DOE and FERC can undertake rigorous and legally durable assessments of climate and environmental justice impacts when reviewing applications.

While some increase in export capacity may potentially be in the public interest given certain strategic and economic benefits, DOE and FERC are obligated to also properly assess and weigh the potential costs of approval before issuing authorizations. The recommendations in this report can help the two agencies conduct a more robust review of the costs and benefits of LNG approvals, improving decisionmaking.

By Laura Figueroa and Sarah Ladin.