A new energy battleground: Insurance for LNG terminals

By Mike Soraghan | 06/05/2023 07:10 AM EDT

Critics of liquefied natural gas are launching a campaign to pressure companies to stop insuring LNG terminals such as Freeport LNG in Texas.

The Freeport LNG facility in Texas is pictured.

The Freeport LNG facility in Texas is pictured. Shelby Webb/POLITICO'S E&E News

Environmentalists have been pushing insurance companies for years to stop writing policies for fossil fuel companies. Now, they’re opening a new front in their fight — natural gas exports.

A coalition led by Public Citizen and Rainforest Action Network is launching a campaign to get insurers to stop covering liquefied natural gas terminals along the Gulf Coast.

Exhibit A for the groups will be Freeport LNG, about 70 miles south of Houston. The facility had an explosion nearly a year ago, and campaigners have obtained an insurance certificate showing that some of the world’s largest insurers have issued policies to the Texas export facility.


While those companies haven’t committed to stop insuring all fossil fuel companies, they do have broad goals for net-zero greenhouse gas emissions. Covering giant LNG export terminals, in the environmentalists’ opinion, violates at least the spirit of those goals.

“Insurers aren’t going to make changes to how they cover fossil fuels, and especially LNG, on their own,” said Kerrina Williams, an organizer with Public Citizen, a consumer advocacy group. “Pressuring the industry to make the changes is vital to slowing climate change.”

The groups want to make it difficult, or at least much more expensive, for LNG exporters to get insurance for the facilities that take natural gas, refrigerate it to temperatures so low it turns into a liquid and load it onto ships. They want insurance companies to stop underwriting new plants and the expansion of existing ones.

The insurers and the exporters themselves defend LNG as a valid — and needed — part of the transition to lower-emissions energy.

AXA SA, which in 2015 became the first multinational underwriter to rule out new investments in the coal industry, insures Freeport LNG. AXA spokesperson Baptiste Denis said the firm doesn’t exclude LNG projects but has ceased underwriting new “greenfield” oil and gas development by companies without sufficient climate transition plans.

“The energy transition cannot be achieved without the energy sector,” Baptiste said in an emailed statement. “The AXA Group’s energy policy aims to exclude activities with high environmental and social risks, while supporting energy sector players on their transition path.”

Daphne Magnuson, spokesperson for the Center for LNG, which represents LNG companies, said LNG is a “net positive” for the environment because it replaces high-emissions fuels such as coal.

“This seems like a desperation move by groups that don’t like natural gas no matter how many benefits it brings to people,” Magnuson said in an emailed response to questions.

Freeport LNG declined to comment on how the environmental groups’ campaign might affect its business. However, it sought to stop publication of the information in its insurance certificate with a cease-and-desist letter from attorney Marnie McCormick to POLITICO’s E&E News.

“The confidentiality of its insurance certificates is an extremely important matter to Freeport LNG,” McCormick wrote.

In response, an attorney for E&E News said in a letter that all of E&E’s reporting on Freeport LNG has proceeded in accordance with the law and that newsgathering on matters of public policy is protected under the First Amendment.

E&E News reached out to each company named in this article prior to publication. Besides AXA, the companies either did not respond or declined to comment.

Like some other environmental groups, the leaders of the new divestment effort reject the idea that LNG exports are helpful in reducing the effects of climate change. They say natural gas, or methane, is a fossil fuel and say it’s driving climate change, not alleviating it.

‘It’s unconscionable’

Methane is a short-lived, but potent, greenhouse gas. In the first 20 years after it is released, it traps over 80 times more heat in the atmosphere than carbon dioxide. Some critics say LNG may be no better for the climate than coal, when leaks from faulty equipment are factored in.

The groups targeting the LNG industry say insurers’ support for natural gas drives profit both by doing business with fossil fuel companies and then benefiting from the increased premiums driven by climate risk.

“It’s unconscionable that insurers are covering the very industries that are causing the climate crisis,” said Mary Lovell, energy finance campaigner at Rainforest Action Network, “then sticking their customers with the consequences in terms of higher premiums and withdrawals of coverage.”

The environmental groups intend to launch pressure campaigns, such as protests at company meetings and other tactics, to force the companies to stop insuring and investing in gas pipelines and export facilities.

Melanie Oldham, who lives a few miles from the Freeport LNG plant and has fought it for years, said local residents want to confront the companies that insure the facility.

“We citizens should have the right to talk to these insurers to tell them about the risks,” said Oldham, a leader of the local group taking on the LNG terminal, Better Brazoria: Clean Air & Water.

Environmentalists are training their sights on LNG as the United States becomes a dominant player in global gas exports. Last year, the United States exported nearly 5 1/2 times as much LNG as the total amount that was exported in 2017, and it is by some measures the world’s largest LNG exporter.

The Biden administration embraced LNG exports after Russia invaded Ukraine, and the United States sought to help Europe wean itself off of Russian gas. The move angered many environmental groups, including those involved with the new divestment campaign, saying Biden was straying from his commitment to fight climate change.

There are eight LNG export terminals operating in the United States right now, and two more are under construction along the Gulf Coast, with Golden Pass expected to begin operation by the end of 2024.

In addition, 13 others have been approved by federal officials and six are going through the approval process of the Federal Energy Regulatory Commission. The consultancy Rystad Energy predicts global demand for LNG will grow 42 percent by 2030.

Freeport LNG has said no employees were injured in the June 2022 explosion on an island off Freeport, Texas, though local residents say some people suffered nosebleeds and were hurt when the blast knocked them down. The explosion has cost the company more than $85 million.

Among the names on the insurance certificate are American International Group Inc., Lloyd’s of London, Liberty Mutual Group and Allianz Group. Marsh USA Inc., part of Marsh & McLennan Cos. Inc., is listed as the broker.

Marsh McLennan declined to comment on the groups’ criticism about covering LNG terminals, as did AIG and Allianz. The other companies providing insurance, according to the certificate, Axis Capital Holdings Ltd., Beazley PLC, Chubb Ltd., Coaction Specialty Insurance Group Inc., Liberty Mutual, Lloyd’s of London, SCOR SE and Starr Insurance Cos., did not respond to requests for comment.

‘Adverse impacts’

Many of the companies on Freeport’s list of insurers have corporate climate and sustainability policies and have opted to stop insuring new coal projects. Some also avoid new projects related to drilling in the Arctic National Wildlife Refuge or oil sands. But the groups targeting LNG say no companies have agreed to shun LNG plants.

Targeting insurance companies has already made it more difficult and expensive for coal companies to get insurance.

Most large insurers across the world have stopped insuring new coal projects, according to Insure Our Future, which pushes underwriters to stop working with fossil fuel companies and is part of the LNG campaign. In its annual “Scorecard,” the coalition said insurance giant AIG in 2022 joined other companies in shunning new coal projects. The company also said last year it would stop providing coverage and investments for new Arctic energy exploration activities.

Insure Our Future has tagged several companies continuing to underwrite new coal projects as “laggards.” Those include Starr and Liberty Mutual, which also both insure Freeport.

In 2018, a coal company scaled back its plans for a massive open-pit coal mine in Australia after an environmental group’s pressure campaign. The developer of the Carmichael mine was forced to self-finance and scale back the scope of the project. It wound up producing less than a fifth of the 60 million metric tons of coal it had aimed to produce each year.

Marsh, Freeport LNG’s broker, was targeted in the Australian campaign, and is now being pressured over its support for a pipeline through Uganda and Tanzania called the East African Crude Oil pipeline.

Major U.S. coal mine operators also are feeling the heat, securities filings show.

“Increasingly, both foreign and domestic banks, insurance companies and large investors are curtailing or ending their financial relationships with fossil fuel-related companies,” Peabody Energy Corp. wrote in a regulatory filing earlier this year. “This has had adverse impacts on the liquidity and operations of coal producers.”

But the strategy has its limits.

Faced with skittish insurers, insiders say large oil and gas companies can self-insure by creating internal “captive” insurance companies. It can also be difficult to figure out which companies to target because oil and gas companies often seek to keep secret the names of their insurers — and governments often let them.

In Canada, the operator of the Trans Mountain oil pipeline sought to hide the names of its underwriters from public filings, and in 2021 Canadian officials granted their request. So, activists targeted a wider group of insurers, and more than 15 companies committed to not insuring the project.

One was Chubb, a major underwriter for oil and gas companies and one of the companies listed as insuring Freeport LNG. It signaled that it wouldn’t insure Trans Mountain after activists brought a 15-foot inflatable of Chubb CEO Evan Greenberg wreathed in flames to the 2021 U.S. Open Tennis Championships, which Chubb had paid to sponsor.

The groups targeting the insurers of LNG insurance got a break recently. A document provided to them with redactions still allowed the groups to see the names of the insurance companies for Freeport LNG.

“Companies will claim that information on which projects they insure is a trade secret,” Public Citizen’s Williams said. “But it’s really about avoiding public scrutiny and accountability for propping up dirty, harmful industries.”