The U.S. liquefied natural gas (LNG) sector, despite its rapid rise as the world’s largest exporter, is facing increasing challenges that threaten its continued expansion. Legal disputes with activists, contractor issues, and a federal permitting freeze have slowed the development of crucial projects on the Texas Gulf Coast.
Two major LNG terminals under construction, backed by industry giants ExxonMobil and TotalEnergies, encountered significant setbacks this month, potentially leading to delays in bringing new supply to the market. These issues underscore the difficulties of launching large-scale LNG projects, especially in an environment where the Biden administration has paused new export permits, creating uncertainty over future supply growth.
“LNG plants are energy infrastructure — and building energy infrastructure in America today is hard,” remarked Kevin Book, managing director of ClearView Energy Partners.
The U.S. LNG industry has seen substantial growth in recent years, particularly as Europe seeks alternatives to Russian gas following Russia’s invasion of Ukraine. In 2023, the U.S. surpassed Australia as the world’s largest LNG exporter, with daily shipments meeting the combined gas needs of Germany and France. However, bringing new terminals online, each costing tens of billions of dollars, is becoming increasingly difficult.
ExxonMobil and QatarEnergy recently delayed the start of their $11 billion Golden Pass project in Texas by six months after a dispute with lead contractor Zachry Holdings over escalating costs. Zachry, which filed for bankruptcy protection in May, was replaced by a new contractor, allowing construction to continue. Exxon’s finance chief, Kathy Mikells, expressed optimism about the settlement, emphasizing the company’s commitment to completing the project.
Meanwhile, NextDecade’s $18 billion Rio Grande project faced a legal setback when a court overturned a key regulatory approval following a challenge by environmental and community groups. NextDecade, partially owned by France’s TotalEnergies, vowed to pursue all legal and regulatory avenues to keep the project on track, despite its shares plummeting by 40% since the ruling.
“This decision has far-reaching implications beyond this project,” warned Matt Schatzman, NextDecade’s CEO. He cautioned that if the ruling stands, it could set a precedent that makes it difficult for federally permitted infrastructure projects to secure capital investments.
Once operational, the Golden Pass and Rio Grande facilities are expected to contribute up to 5.9 billion cubic feet per day of LNG, nearly half of what the U.S. exported last year. However, delays in these projects could tighten an already constrained market and drive up prices, with the Golden Pass delay alone expected to reduce supply by millions of tonnes in the coming years.
These setbacks come at a time when the U.S. LNG industry is grappling with a slowdown in project approvals. The Biden administration’s freeze on new export permits, enacted in January as part of a Department of Energy review, has stalled the momentum of the sector. Although the moratorium was blocked by a federal judge last month, no new permits have been issued, and industry insiders do not anticipate any changes until after the November presidential election.
Analysts predict that the Energy Department’s review will conclude by March 2025, with potential shifts depending on the outcome of the election. Republican candidate Donald Trump has pledged to resume permit approvals immediately if reelected, while Democratic candidate Kamala Harris is also expected to lift the freeze, albeit facing opposition from environmental groups.
Activists, particularly from the Carrizo/Comecrudo tribe of Texas, continue to oppose LNG developments, arguing that they have caused environmental damage and harmed local communities. The tribe, which was involved in the lawsuit against NextDecade, has vowed to persist in its fight against the project.
The ongoing uncertainty in the U.S. market is prompting some LNG buyers to explore options abroad, a move that could jeopardize domestic projects if key customers seek contracts with more reliable timelines. As Jason Bennett from law firm Baker Botts noted, prolonged delays could have severe implications for the industry’s future: “It’s not good for these projects to be in limbo for a long time.”
