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Global Infrastructure Partners’ proposed Rio Grande LNG Terminal poses risk to investors

January 5, 2024

Global Infrastructure Partners newest fund (Fund V) is an investor in the proposed Rio Grande LNG Terminal through its $3.5 billion investment. This investment resulted in Global Infrastructure Partners’ at least 46% ownership stake in the proposed LNG terminal– the largest investor after French bank Société Générale pulled support for the project. GIP’s Rio Grande is among several proposed LNG terminals that have been “repeatedly delayed due to rising construction, labor and borrowing costs” and volatile gas prices, according to Reuters.

Liquified Natural Gas or LNG, is created by cooling methane based natural gas in order to transport it across long distances. Although often touted as a cleaner alternative to coal due to lower carbon dioxide emissions at the combustion point, gas leakage due to the fracking and transportation process make LNG just as polluting if not worse than other fossil fuels.

Thus, LNG may not be a pathway to alignment with the 1.5 degree warming targets of the Paris Agreement and could pose a financial risk to institutional investors. Recent studies expect global equity returns to decline by 50% by 2060 if financial funds do not align with Paris Agreement goals.

Future global demand for LNG is also highly uncertain. The IEA forecasts that demand for gas, oil and coal will all peak before 2030, and has noted that demand for gas growth has slowed considerably, leading to concerns about a “glut of LNG.” Sinking millions of dollars into massive gas infrastructure exposes investors to financial and environmental risks.

GIP Fundraising
Global Infrastructure Partners fund V launched in February of 2022 with a $25 billion target, but had raised $22 billion in soft and hard commitments as of June 2023. Pension funds such as the Washington State Investment Board, the Oregon Investment Council, Connecticut Retirement Plans and the Teachers Retirement System of New York City have all committed GIP Fund V. Global Infrastructure Partners may still be seeking commitments to close GIP Fund V.

 Rio Grande LNG Poses Community and Environmental Risks
There is already significant community and legal opposition to this project. If built, the Rio Grande LNG terminal is estimated to emit the equivalent emissions of 44 coal power plants every year, about 163 million tons of carbon dioxide equivalent.  Liquified Natural Gas is often lauded as a cleaner alternative to coal or other fossil fuels, but in a study recently submitted to a peer reviewed journal by a professor at Cornell University, LNG fuels may in fact be worse for the environment and emit more greenhouse gasses than coal due to leakage during the transportation process.

The Rio Grande LNG terminal would be built on sacred land of the Carrizo Comecrudo Tribe of Texas yet Rio Grande LNG, regulatory agencies and banks have all failed to consult with the tribe on local impacts. Additionally, the facilities would significantly degrade local fishing, shrimping and natural tourism industries putting communities’ livelihoods at risk.

Due to these risks, communities across South Texas have opposed Rio Grande LNG. The city of Port Isabel filed a lawsuit against the Federal Energy Regulatory Agency (FERC) alleging the agency had not conducted a sufficient environmental review. The Port Isabel School District rejected a tax abatement offer from Rio Grande LNG. Additionally, the Laguna Vista Town Council and the South Padre Island City Council unanimously adopted resolutions opposing the build out of the Rio Grande LNG terminal.

Investors Must Urge Global Infrastructure Partners to Halt the Buildout of the Rio Grande LNG Terminal
To address the social, ecological and financial concerns associated with the Rio Grande LNG terminal, investors must heed the calls of community groups in asking Global Infrastructure Partners to halt the project. Additionally, current and potential investors should ask GIP about reducing exposure to risk associated with the Rio Grande LNG terminal

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