Manning Rollerson turned down a $20,000 offer in 2016 for the land he inherited from his grandmother in the East End, a historically Black neighborhood in Freeport, Texas, designated as a “negro district” in 1930.
After Rollerson refused to sell, Port Freeport, the government body responsible for the town’s harbor on the Gulf Coast of the United States, claimed eminent domain and took over his and other people’s land to expand its facilities. This was in part to accommodate the shipping of liquefied natural gas from the Freeport LNG export terminal that opened nearby in 2019.
LNG is a fossil fuel made by cooling natural gas to reduce its volume and make transportation easier and safer. Like giant seaborne camels, formidable ships fitted with bulging tanks depart from Freeport and four other Gulf Coast terminals to bring LNG to the world, including Japan.
Now, empty plots lie where houses and businesses once stood in the East End. “The city’s dead,” as Rollerson puts it.
Until 2016, the U.S. was sending virtually none of the fuel abroad, but a fracking bonanza, a price spike following Russia’s full-scale invasion of Ukraine and growing demand in Asia are among the factors that have led to a surge in exports. Last year, the U.S. was the biggest supplier of LNG traded internationally, trumping Qatar.
“The value of an LNG cargo trading, say from the U.S. to Asia, went from essentially zero in (mid 2020) to over $200 million” after the start of the Ukraine war, says Sam Reynolds, LNG and gas research lead at the U.S.-based Institute for Energy Economics and Financial Analysis (IEEFA).
Critical to the future of gas is a country that has very little of it. For over half a century, Japan has been a constant and sizable buyer of LNG, and its government, banks and energy companies have played a key role in continued investment in related infrastructure, including along the U.S. Gulf Coast.
That comes even as debate grows over just how big a role gas should play in the energy transition — both globally and in Japan — that is needed to avert far worse impacts of climate change than the world has already witnessed. And more immediately, residents of communities around these U.S. LNG facilities — in Freeport and elsewhere — have complained of the negative impact on their health, livelihoods and environment.
That puts a significant responsibility on Japan’s shoulders.
“Japanese companies have signed contracts to buy from six massive U.S. LNG projects,” including Freeport LNG, says Reynolds. “This may not sound like a big number, but they are really key players in getting this U.S. LNG off the ground.”
A Japan-fueled boom
In January, the frantic U.S. LNG expansion prompted the administration of U.S. President Joe Biden to temporarily pause new export facilities that have not already been approved, giving the Department of Energy time to update its criteria. Legal battles over the pause are ongoing, but in practice the approval of projects covered by the moratorium are not expected in the near term.
The move has been hailed by climate campaigners and decried by Republicans, industry players and countries like Japan, with economy minister Ken Saito expressing concern that the pause could threaten Japan’s energy security.
Gas accounts for about one-fifth of Japan’s energy supply, making it the third-largest source after oil and coal, and it is used for 33% — the biggest share — of electricity generation. Most of this is imported as LNG.
Indeed, Japan is the world’s second-biggest buyer of LNG — surpassed by China only in recent years — and Jera, Japan’s largest power generator, is one of the companies that imports the most LNG globally. Although Australia is Japan’s No. 1 supplier, reliance on the U.S. is growing.
Japan imported 5.5 million metric tons of American LNG last year — only 8% of total purchases, but 34% more than the previous year — and a lot of Japanese public and private money is flooding into this sector. Mitsubishi UFJ Financial Group (MUFG), Mizuho and Sumitomo Mitsui Banking Corp. (SMBC) are the first, second and third biggest financiers of LNG export projects in the U.S., respectively, having each invested anywhere between $10.7 billion and $13.8 billion since 2012.
Furthermore, Japanese companies such as energy firms Jera and Osaka Gas and trading houses Mitsubishi Corp. and Mitsui own shares in U.S. facilities, including Freeport LNG. They also have agreements to purchase large amounts of future LNG output — for example, Jera has signed on to buy 1 million tons of fuel per year from Calcasieu Pass 2, a planned export terminal in Louisiana where Calcasieu Pass LNG already operates.
But CP2, as the planned facility is known, has been stalled by the U.S. export freeze, as has Lake Charles LNG in the Louisiana town of the same name, in which Kyushu Electric Power is considering buying a 10% stake, potentially using a government loan.
Japanese public agencies have been instrumental in funding American LNG projects, enticing Japanese corporate buyers and investors and providing them with insurance. For example, the Japan Bank for International Cooperation and Nippon Export and Investment Insurance spent billions to fund the construction of Freeport LNG and Cameron LNG in Louisiana.
Jera, MUFG, Mizuho and SMBC all declined to comment for this article.
Gulf Coast LNG is attractive because it offers an alternative to major suppliers like Australia and Qatar and because U.S. deals offer flexibility where others don’t, says Anne-Sophie Corbeau, global research scholar at Columbia University’s Center on Global Energy Policy. American contracts are not bound by destination restrictions, so the LNG can be used or resold anywhere without profit-sharing arrangements.
Even before Russia’s invasion of Ukraine in 2022, the economy ministry had requested that Japanese companies transact 100 million tons per year of LNG by the fiscal year beginning April 2030 — a target that has already been met, says Masahiro Naka, deputy director of the Energy Resources Development Division at the ministry’s Agency for Natural Resources and Energy.
However, Finance Ministry data shows domestic demand contracted by 8% last year, while it is expected to shrink by one-third by 2030, according to IEEFA. The economy ministry estimates that Japan will import 56 million tons of LNG per year by fiscal 2030 based on its energy strategy — that is, if the government’s targets for nuclear and renewable energy activation are reached, Naka says, hinting that imports could remain higher.
Japan’s choice to buy more LNG than it uses now and in the future is underpinned by the need for a “flexible amount” to respond to fluctuations, Naka says. The fuel not used at home, currently about one-third of the total, is instead sold to South and Southeast Asian countries such as Bangladesh, Thailand and Vietnam.
The Japanese government is strongly promoting gas usage in that region, including through initiatives such as the Asia Zero Emission Community.
“(Japan) have a very large fleet of existing coal and natural gas plants, decades and decades dominating trade in these commodities, technical expertise at all levels,” Reynolds says. “I don't think it's too far of a stretch to say that this strategy is designed to maintain dominance in (these) markets.”
At what cost?
The LNG build-out on the Gulf Coast — in the hydrocarbon heartland of the U.S. — could harm communities that have already suffered the brunt of decades of oil and gas development.
Roishetta Ozane, founder of the Vessel Project of Louisiana, a disaster relief and environmental justice organization, and finance coordinator with the Texas Campaign for the Environment, lives in Lake Charles, Louisiana. She points to vacant grasslands next to giant petrochemical complexes cordoned off for potential future use. A mother of six, she affirms that her children have suffered from ailments ranging from eczema to seizures because of long-term exposure to industrial pollution.
“You cannot separate air and water,” she says — pollution’s impact is felt further and wider than the low-income communities like hers where LNG facilities are located.
“We need to tell a broader story,” Ozane states.
A study from last year found that pollutants from oil and gas production contributed to 7,500 excess deaths and 410,000 asthma attacks in the U.S. in 2016, with Texas and Louisiana among the five worst-affected states.
Communities around LNG plants in these two states have higher-than-average rates of asthma, and also of adult cancer in the case of Louisiana, according to a recent assessment by the Bullard Center for Environmental and Climate Justice at Texas Southern University. The report also states that LNG infrastructure is disproportionately found in low-income communities and communities of color.
Freeport LNG was fined over $150,000 by the Texas environmental regulator for violating state air pollution rules between 2019 and 2021. In addition, a major explosion at the plant in June 2022 resulted in excess emissions of carbon monoxide, nitrous oxides, particulate matter and sulfur dioxide, according to the regulator, while the federal pipeline safety regulator found that it was caused by operational issues and staff fatigue.
Freeport LNG did not respond to a request for comment.
The LNG terminal remained offline for eight months following the explosion, causing a spike in global LNG prices and significant economic losses for contractors including Jera and Osaka Gas.
Overall, Freeport and other Gulf Coast communities say they have seen few benefits from the LNG boom in their backyard. Several local fishers and shrimpers say they have lost their livelihoods without any compensation, and many residents agree that LNG facilities mainly employ nonlocals, despite plant owners receiving generous tax breaks for job creation.
“We’re building a whole lot of this on the Gulf Coast to supply the world. But... it’s not helping the citizens that live in these communities,” Rollerson says.
Climate friend or foe?
There are also concerns about how the natural gas boom could affect the climate.
The U.S. LNG moratorium “is a recognition that LNG exports result in greenhouse gas emissions — CO2 (carbon dioxide) and methane — and we must have the best information to fully understand and evaluate its effects,” in the words of the Department of Energy.
Natural gas emits less carbon dioxide than other fossil fuels when burned, including half as much as coal. Thus, many consider it to be a “transition” fuel to keep our lights on and air conditioners running as we gradually switch away from oil and coal toward cleaner, renewable sources. That’s a view shared by the Japan Bank for International Cooperation, which said in an interview that it encourages “a diverse and realistic transition using all kinds of energy resources” for Asia.
However, natural gas is largely composed of methane, a greenhouse gas with a warming potential significantly higher than carbon dioxide’s, and which is released into the environment through leakages. For example, high potential leakage rates in the Permian Basin in the southern U.S. mean that “the emissions impact of LNG is even greater than that of coal,” says Reynolds.
While there is disagreement about whether gas is truly worse than coal, Naka says that tackling methane emissions is the first, necessary and low-cost step to lower emissions from LNG.
Whether gas will displace coal, especially in Asia, is also an open question. A bridge fuel needs to be “affordable, reliable, flexible and clean,” but LNG doesn't fit the bill for a lot of countries, says Reynolds.
More investments in gas could also “crowd out” those in renewables: The LNG industry is based on long-term contracts that oblige buyers to pay for volumes whether they use them or not, with the risk of locking in fossil fuel infrastructure, Reynolds says.
Indeed, bullish future predictions of LNG output abound: Today, it accounts for just 3% of the world’s energy needs, according to an industry estimate, but the International Energy Agency predicts that an "unprecedented surge" in LNG projects will lead to an increased capacity equal to almost half of today’s supply by the end of the decade.
On the Gulf Coast alone, if all LNG facilities under construction, planned or seeking approval go online, these could jump from five to around 20 in just a few years. That would see 300 million tons of new LNG capacity possibly added by the end of the decade, a 70% spike from today.
Japan has played a pivotal role in the development of LNG and other fossil fuels, and will continue to do so. At the same time, it has the potential to meet its current electricity demand six times over by using just renewable sources, according to the Renewable Energy Institute, a Tokyo-based think tank.
While Japan faces tough choices about its energy future, it has agency over this trajectory, says Ayumi Fukakusa, deputy executive director of Friends of the Earth Japan’s fossil fuels and climate campaign.
“We need strong leadership in the government. And also to nurture our domestic renewable energy companies,” she says.
Even for analysts thinking about gas markets every day, such as Corbeau of Columbia University, “the future is very hard to predict.”
One source of uncertainty is the impact of the U.S. presidential election on the LNG export pause. An even more central question is whether, globally, the days of natural gas, however profitable, are numbered — as the agreement at last year’s COP28 climate conference, which calls for a “transitioning away from fossil fuels,” would suggest.
Will we stop using gas and LNG at some point?
“In a very long time because, let’s be absolutely honest, we are not right now on the net zero pathway,” Corbeau says.