By By Toyo Kawakami, Japan Senior Advisor (Japan) & Ruth Breech, Senior Campaigner (US)
In August 2024, the U.S. Court of Appeals for the District of Columbia ruled that permits for several proposed methane gas export terminals (LNG) projects along the south Texas coast in the Rio Grande Valley were issued without adequate environmental assessments. Permits issued by the U.S. Federal Energy Regulatory Commission (FERC) for NextDecade’s Rio Grande LNG, Glenfarne’s Texas LNG, and Enbridge’s Rio Bravo pipeline all were canceled. This is a major delay for these megaprojects.
As part of the court proceedings, in 2021 Rio Grande LNG proposed adding a carbon capture and storage (“CCS”) system to its terminal design. CCS for LNG is an unproven and untested technology that attempts to capture carbon dioxide released from fossil fuel processing and inject it into permanent storage underground.
Following the court ruling in August, Rio Grande LNG canceled their CCS proposal, revealing just how flimsy their claims to being “green” are. NextDecade does not have an energy transition plan, and has not provided the public with any further plans on reaching net zero emissions. Japanese megabank, Mitsubishi UFJ Financial Group (MUFG), is a key financier of NextDecade and Rio Grande LNG, providing $2.38 billion USD to the project.
If operational, Rio Grande LNG would release the equivalent to the carbon dioxide emissions of 43 coal powered plants. NextDecade boasts that the $18.4 billion project financing for phase I of the project “is the largest greenfield energy project financing in U.S. history.” By “greenfield”, they mean that they are building it on a pristine stretch of coastal land, one of the last remaining stretches of the U.S. Gulf Coast not industrialized.
A Slow Start to a Dirty Project
NextDecade originally intended to make an final investment decision (FID) on the terminal in 2017 and begin operations in the fourth quarter of 2020. The company has faced repeated delays due to legal challenges, inadequate regulatory proceedings, community pressure, and the unstable oil and gas market.
NextDecade reached a critical milestone in July 2023, when they made a final investment decision on phase 1 of the Rio Grande LNG terminal. This initial phase included three “trains”, or liquefaction plants, that are expected to process 17 million tonnes per annum (MTPA) of gas. Prior to reaching FID, the French bank Société Générale publicly stepped away from the project. The Japanese bank SMBC, which originally served as an advisor to NextDecade, is no longer associated with the project. Several additional banks privately confirmed in 2023 that they would no longer participate in financing Rio Grande LNG.
False Solutions
NextDecade has been actively “greenwashing” the harmful emissions and impacts of their methane export project by falsely presenting an environmentally responsible image. NextDecade announced in October 2020 that it aims to achieve Net-Zero emissions at its proposed Rio Grande LNG facility. The company planned to use CCS technology in an attempt to meet Net-Zero emissions goal by capturing CO2 from gas pre-treatment and post-combustion processes and injecting it into permanent storage underground.
Carbon capture technology has yet to be applied to any methane gas export facilities in the U.S. and has been unsuccessful for other fossil fuel projects. Rio Grande LNG partnered with Mitsubishi Heavy Industries (MHI) for the CCS. However, MHI failed at a previous attempt to capture carbon for coal plants because of cost and technology snafus. MUFG is also a key partner for MHI, both part of the Mitsubishi Group, which was once a zaibatsu, a type of Japanese enterprise group that controlled many business sectors before World War II. It is unclear if dropping the CCS project will impact the relationship with MUFG and NextDecade.
A September 2022 analysis of CCS projects around the world by the Institute for Energy Economics and Financial Analysis found that most CCS projects are failing, are not capturing the CO2 as promised, or are suffering dramatic cost overruns. CCS remains an untested and unproven technology for methane export.
NextDecade claimed that the CCS project at Rio Grande LNG would be “offering CO2 emissions reduction of more than 90 percent via proposed carbon capture and storage” and that it would “permanently store more than 5 million metric tonnes of CO2 per year.” The gas industry routinely focuses only on a narrow segment of the LNG value chain, comparing emissions from power plants burning gas versus coal. Life cycle analysis – looking at methane emissions from extraction to transportation to burning in power plants – dramatically increases the modeled methane emissions from LNG.
The methane gas for Rio Grande LNG export terminal will be extracted through hydraulic fracturing and horizontal drilling from West Texas’ Permian Basin and Eagle Ford shale. Fracking has caused a dramatic increase in atmospheric methane, a critical greenhouse gas, and brings negative impacts to air and water pollution and community health in the U.S. NextDecade claims that the gas processed at the terminal will be “responsibly sourced natural gas” from a “sustainable producer.” A report released in 2023 by Earthworks and Oil Change International raised key questions about the legitimacy of “certified gas,” showing critical failures in “detecting oil and gas pollution in monitors sold by one of the largest certifiers of methane gas, Project Canary.” A group of U.S. Senators are challenging the claims and use of certified gas to the U.S. Federal Trade Commission.
Fracking in upstream pollutes every aspect of our environment causing immense harm to frontline communities and contributing to a global climate catastrophe. In reality, gas certification and CCS at methane gas plants are false solutions to the climate crisis. For example, the proposed CCS project at Rio Grande LNG in the Cameron County region would only capture about 3% of the project’s life-cycle emissions which are calculated both in upstream and downstream.
NextDecade’s claims have been regularly challenged by community leaders, who criticize the company for not sharing detailed plans beyond the simplistic overview on their website. NextDecade also failed to give regulators at the FERC their plans.
In their August ruling, the U.S. Court of Appeals agreed with community leaders that NextDecade needed to share its plans for the CCS before the FERC could assess the environmental impact of the project. NextDecade responded by dropping the CCS proposal, stating that it is “not sufficiently developed to allow FERC review to continue at this time.”
Just as community leaders suspected, the CCS proposal was smoke and mirrors. That NextDecade was so quick to drop the already questionable CCS proposal raises questions about the sincerity of their climate ambitions.
Luckily, the U.S. Court of Appeals anticipated that NextDecade might try to withdraw the proposal. They ruled that even if the CCS is canceled, the FERC “must, at the very least, analyze the proposal as an alternative via a supplemental EIS before reauthorizing the Rio Grande terminal.”
The fate of NextDecade’s engineering services agreement for the CCS with MHI is unknown.
The Rio Grande LNG CCS project was critical to the relationship with French multinational utility company, Engie, who entered into a long-term sale and purchase agreement with Rio Grande LNG, and had previously rejected a similar deal without CCS with NextDecade in 2020. It is unclear what will become of NextDecade’s subsidiary, NEXT Carbon Solutions, the entity that would be implementing the CCS project.
CCS is expensive and steers away investment from renewable energy. Today’s CCS technologies are extraordinarily costly both to build and operate, and are not viable without a very high level of government subsidy. Even at the very high level of subsidy offered today, most projects are still not bankable. The amount of taxpayer money that would be paid towards CCS projects could purchase outright more than five times the amount of wind or solar generating capacity as would be provided by a fossil plant receiving the subsidy.
Banks that are serious about climate and human rights should look past disingenuous greenwashing and focus on financing a more just energy transition.
The communities of the Rio Grande Valley and the Gulf Coast deserve a future free from dirty fossil fuels.
