Dive Brief:

• The amount of liquified natural gas (LNG) terminal capacity under construction globally has more than doubled in the past year, and is now running headlong into cratering demand due to the worldwide COVID-19 pandemic, according to a new report. 
• Issued by the Global Energy Monitor (GEM) earlier this month, the report highlights the risks associated with large LNG construction projects worldwide, which have fallen out of favor politically amid environmental protests.
• Those challenges come at a time when global fuel prices have plummeted due to plentiful supply and stocked national reserves, just as consumer and industrial demand has tanked during worldwide COVID-19 shutdowns. 

Dive Insight

Titled “Gas Bubble 2020,” the report is the culmination of research from GEM, a nongovernmental organization that tracks fossil and alternative fuel infrastructure globally. The report warns “the future of many of these projects is tenuous due to low gas prices caused by global oversupply, now compounded by the COVID-19 pandemic.”

GEM’s report details a number of headwinds the LNG construction industry has been facing recently, and also helps explain the shuttering, abandonment or further delay of several LNG infrastructure projects this year. 

For instance, on July 6, Duke Energy and Dominion Energy announced they were cancelling the $8 billion Atlantic Coast Pipeline (ACP) project, even though they had won hard-fought court approval just three weeks earlier for one of several permits that would have allowed the project to span 600 miles from West Virginia to North Carolina.

The permit in question gave a green light for the ACP to pass under the Appalachian National Scenic Trail, which runs from Georgia to Maine, but the project still needed approval for several more key environment permits. In its statement about spiking the ACP, Dominion Energy Chairman Thomas Farrell said the decision reflected “increasing legal uncertainty that overhangs large-scale energy and industrial infrastructure development in the United States.”

Other major LNG infrastructure projects have faced roadblocks in recent weeks as well. On July 7, the U.S. Supreme Court upheld a lower court ruling blocking an environmental permit for the $8 billion Keystone XL pipeline. That project had faced numerous setbacks under the Obama administration, but gained new support from the Trump White House. 

Now, in light of the U.S. Supreme Court ruling, Canada-based TC Energy said it will have to delay major sections of the 1,200-mile oil sands pipeline, according to the Associated Press. But the firm also vowed to continue on with the project. 

The ruling came amid intense public debate in Michigan over the Line 5 LNG pipeline and tunnel that runs under the Straits of Mackinac, which connects Lakes Michigan and Huron. Enbridge Energy has proposed a new $500 million replacement of the existing twin pipeline with a single, 30-inch pipeline housed in a new tunnel, according to Michigan Live. 

The proposal originated while former Republican Gov. Rick Snyder was in office, but has faced increasing opposition under the state’s current Democratic administration. Michigan’s Democratic Attorney General Dana Nessel made shutting down the pipeline a major part of her successful election campaign. 

Blowback against these types of construction projects hasn't been limited to just the U.S. For example, GEM’s report points to legendary investor Warren Buffett pulling $4 billion in funding from the proposed LNG terminal project in Quebec, Canada, in March. In that instance, the terminal had encountered protests that quickly grew in scale and scope throughout Canada, with Energie Saguenay, the firm sponsoring the terminal, citing “the current Canadian context” against these types of projects as the reason for Buffett’s reversal on the investment, according to Lethbridge News Now. 

“While many projects face opposition from local communities, the case of the Energie Saguenay LNG Terminal in Quebec shows the potential for a local protest to galvanize a national movement,” the report stated, noting that 13 LNG projects in Canada have been canceled or suspended in recent years.