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Introduction

During the past decade, the United States has become one of the world’s largest suppliers of natural gas. As recently as 2008, the U.S. Energy Information Administration (EIA) had been reporting that all significant domestic reserves of natural gas had been discovered and that the country would soon be importing natural gas in increasingly larger quantities to meet consumption demand.¹ Yet, within 4 years of making this forecast, the same agency was projecting the opposite—that the United States would soon become a major gas exporter. EIA analysts during the 2000s had not foreseen the dramatic effect that development of the country’s shale and other mudstone basins from hydraulic fracturing would have in boosting growth in natural gas production to levels that would quickly surpass growth in domestic demand.²

Although most natural gas is transported domestically over long distances by pipeline, overseas exports are shipped in liquefied gas carriers (LGCs). To reduce its volume for marine shipping, natural gas is supercooled to a liquid state. U.S. overseas exports of liquefied natural gas (LNG), which were nonexistent in 2015, now account for about 13% of all U.S. natural gas production.³ Since 2016, seven new LNG export terminals

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¹ U.S. Energy Information Administration (EIA), “Annual Energy Outlook 2008 with Projections to 2030” (Washington, DC, June 2008), 77, https://www.eia.gov/outlooks/archive/aeo08/pdf/0383(2008).pdf.

² EIA, “Annual Energy Outlook 2012 with Projections to 2035” (Washington, DC, June 2012), 74, https://www.eia.gov/outlooks/aeo/pdf/0383(2012).pdf.

³ Ben Cahill, “U.S. LNG Export Boom: Defining National Interests,” Center for Strategic & International Studies, January 11, 2024, https://www.csis.org/analysis/us-lng-export-boom-defining-national-interests.

have been brought online in the United States, including five on the Gulf Coast and two on the Atlantic Coast.⁴

The other major liquefied gas that is exported in LGCs is liquefied petroleum gas (LPG). There are nine LPG export terminals in the United States, including six on the Gulf Coast and two on the Atlantic Coast. The ninth is located on the West Coast in Ferndale, Washington. Because LPG is derived from natural gas processing and petroleum refining, the same production and demand developments that have driven LNG export growth have driven growth in LPG exports. Before the expansion of hydraulic fracturing, the United States was a net importer of LPG with low export volumes. Today, the primary destinations for LPG exports are Asia, Europe, and Mexico.

Due to these energy export trends, the number of times that LGCs have called on U.S. ports to load product increased more than three-fold from 2013 to 2022.⁵ The arriving LGCs are all foreign-flag vessels that are subject to examination by the U.S. Coast Guard under its Port State Control (PSC) authorities. In performing these examinations, Coast Guard marine inspectors check the fitness of the ship, verify that its safety equipment complies with international standards, and confirm that it is crewed in accordance with international requirements. Inspectors will board the vessel to review the ship’s certifications and observe its condition and the crew’s working environment. A more detailed inspection may be carried out if deficiencies are found or crew members raise complaints.⁶ Vessels with serious deficiencies that cannot be quickly rectified may be detained.

While all foreign cargo vessels are subject to PSC examinations, non-U.S. flag tank vessels carrying liquid bulk hazardous cargoes, such as crude oil or other petroleum products, chemicals, liquefied gas, or compressed gas, must also be certified according to the Certificate of Compliance (COC) program before they can load these liquid bulk hazardous cargoes. LGCs account for a small but growing share of these exams. Led by at least one marine inspector qualified for the cargo which the vessel is authorized to carry, the scope of the COC exam is similar to the PSC exam but with applicable reviews of cargo containment and relevant safety systems, such as

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⁴ EIA, “U.S. LNG Export Capacity to Grow as Three Additional Projects Begin Construction,” Today in Energy, September 6, 2022, https://www.eia.gov/todayinenergy/detail.php?id=53719; Federal Energy Regulatory Commission (FERC), “U.S. LNG Export Terminals—Existing, Approved Not Yet Built, and Proposed,” April 17, 2024, https://cms.ferc.gov/media/us-lng-export-terminals-existing-approved-not-yet-built-and-proposed.

⁵ See Chapters 2 and 3 for the sources for these figures and more details on LNG and LPG export volume trends and forecasts.

⁶ The Coast Guard marine inspectors generally conduct inspections on U.S.-flag vessels and examinations on foreign-flag vessels, which are registered in jurisdictions other than the United States. Oversight processes of inspections and examinations differ in scope and depth.

for gas detection and fire protection.⁷ Upon successful completion of the exam, the vessel is issued a COC, which is valid for 2 years. No later than 90 days after the 1-year anniversary of the COC’s issuance, the vessel must undergo another COC exam also led by a gas-qualified inspector. This expectation to conduct an annual exam is required by statute and if missed, the COC can be invalidated. Foreign tank vessels are not allowed to load cargo at an export terminal without a valid COC.

The COC program was created in 1972 by Congress to protect tank vessels and their crews and prevent substandard ships that threaten safety and the marine environment from operating in U.S. waters. Foreign-flag tank vessels were singled out because they transport large volumes of hazardous materials that can pose safety and environmental risks. From when the program was introduced until recently, LNG carriers represented a small portion of COC exams. In 2015, before the first LNG export terminals came online, Coast Guard marine inspectors performed a total 2,151 COC exams, of which only 267 COC exams were for LGCs, and of the LGC COCs, only 11% were for LNG carriers. By 2022, the total number of COC exams performed had grown to 2,696, of which 616 were for LGCs. LNG carriers now accounted for 35% of the LGC COC exams.⁸

By March 2024, the country’s seven operating LNG export terminals had a production capacity of about 14.2 billion cubic feet of LNG per day.⁹ Meanwhile, the Federal Energy Regulatory Commission has approved plans for 18 new or expanded export terminals, 7 of which are already under construction. If all approved facilities are operating and their liquefaction capacity is fully utilized by 2030, total LNG exports could exceed 46 billion cubic feet per day, or more than three times current production capacity. Meanwhile exports of LPG are forecast to double between 2022 and 2030.¹⁰ Given these trends, port calls in 2030 by foreign LGCs may be 2 to 2.5 times higher than in 2022, with a commensurate increase in the demand for COC examinations by gas-qualified inspectors.¹¹

Operators of LGCs and liquefied gas export terminals are concerned that large increases in LGC traffic and the demand for COC exams will tax

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⁷ The vessel must have valid Cargo Ship Safety Construction and Safety Equipment Certificates issued under the provisions of the International Convention for the Safety of Life at Sea, 1974, as amended and, if applicable, an International Maritime Organization Certificate of Fitness and/or an International Pollution Prevention Certificate for the Carriage of Noxious Liquid Substances in Bulk.

⁸ The sources for these inspection data are provided in Chapter 3.

⁹ FERC, “U.S. LNG Export Terminals—Existing, Approved Not Yet Built, and Proposed,” April 17, 2024, https://www.ferc.gov/media/us-lng-export-terminals-existing-approved-not-yet-built-and-proposed.

¹⁰ The sources for these figures and forecasts are provided in Chapter 2.

¹¹ Government Accountability Office (GAO), Coast Guard: Assessment of a Risk-Based Approach for Conducting Gas Carrier Exams Is Needed, GAO-22-105432, January 12, 2022.

the ability of Coast Guard inspectors to conduct examinations in a reliable and timely manner, keeping LGCs from loading cargo and leaving port on schedule. While the Coast Guard appears to be keeping up with the demand for exams, sustained growth in the demand for LGC COC exams could lead to gas-qualified inspectors becoming oversubscribed, which could take attention away from higher-risk vessels.

It is presumably with such concerns in mind that Congress directed the Government Accountability Office (GAO), in the Elijah E. Cummings Coast Guard Authorization Act of 2020, to review gas-qualified inspector staffing levels and how the Coast Guard makes the most efficient and effective use of these inspectors for LGC exams.¹² In its gas carrier report, issued in January 2022, GAO found that the Coast Guard had a shortage of approximately 400 marine inspectors in total, including active-duty and civilian personnel.¹³ For 2023, the Coast Guard reported a shortage of 273 marine inspectors (i.e., it staffed about 75% of the marine inspectors needed to complete its vessel inspections workload). In the Houston-Galveston area—where most LGCs arrive for loading—the inspector workforce was short-staffed by almost 18%.¹⁴ Coast Guard officials reported that their units had shortages of gas-qualified inspectors in particular and that the LGC inspection teams sometimes had to work long hours to complete all required exams. GAO also found that the sectors with the largest demands for LGC exams required assistance from traveling inspectors from the Coast Guard’s Liquefied Gas Carrier National Center of Expertise (LGC NCOE), currently located in Port Arthur, Texas. These LGC NCOE inspectors, or national verifying officers, also educate, train, and assess the performance of the Coast Guard’s gas-qualified workforce.

GAO also reported that Coast Guard officials, cognizant of LGC traffic trends, had considered conducting an assessment of the benefits and risks of selectively reducing the frequency of the COC’s annual interval exam based an individual vessel’s risk factors, such as age, prior exam history, and participation in the Coast Guard’s foreign vessel quality assurance

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¹² National Defense Authorization and Appropriation Act for FY 2021, H.R. 6395, 116th Cong. (2019–2020). https://www.congress.gov/bill/116th-congress/house-bill/6395/text.

¹³ GAO, Coast Guard: Assessment of a Risk-Based Approach for Conducting Gas Carrier Exams Is Needed, GAO-22-105432, January 12, 2022. See also GAO, Coast Guard: Enhancements Needed to Strengthen Marine Inspection Workforce Planning Efforts, GAO-22-104465, January 12, 2022.

¹⁴ See Chapter 3 for the source of these numbers.

program.¹⁵ Modifying COC program implementation in this manner, however, would require statutory changes, and GAO noted that the Coast Guard had acknowledged the need for, but not conducted, the requisite risk–benefit assessment. GAO therefore recommended that the Coast Guard conduct such an assessment. During its study, the Coast Guard informed the committee that it would conduct the risk–benefit assessment once it received the results of this study.

STUDY ORIGINS AND CHARGE

In the same section of the legislation calling on GAO to report on the COC program, Congress directed the Coast Guard to commission this National Academies of Sciences, Engineering, and Medicine (the National Academies) study of the constraints and challenges associated with maintaining COC examination efficiency and effectiveness as LGC traffic increases. Congress asked for the study to consider several specific options focused on the marine inspection workforce and its deployment, and on changes to COC program requirements. Congress also expected the study to consider recommendations in the GAO report. Those recommendations, as noted above, centered on the Coast Guard considering a risk-informed approach for administering COC examinations of LGCs.

To conduct the study, the National Academies appointed an 11-member committee of experts in gas carrier operations, maritime safety regulation, risk assessment, vessel inspection and certification services, and workforce training and management. Presented in Box 1-1, the study’s Statement of Task was developed by the National Academies and the Coast Guard in accordance with the legislative direction and informed by the GAO report. While having discretion to consider the various ways in which the Coast Guard could ensure COC program efficiency and effectiveness, the committee was tasked specifically with examining the following options: (1) creating a specialized gas carrier inspection unit near the Panama Canal; (2) placing all gas-qualified inspectors under the command of a single officer in charge, marine inspection, in each Coast Guard district; (3) extending the assignment durations of gas-qualified inspectors; (4) using more civilians to conduct and support COC exams; (5) deploying more staff from the LGC NCOE to lead COC exams; (6) extending the duration of COCs

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¹⁵ The Quality Shipping for the 21st Century program identifies the companies and vessels that demonstrate a commitment to quality and safety through the highest level of compliance with international standards and U.S. laws. Vessels must be registered to flags that have met all the requirements for full participation in the program. See https://www.dco.uscg.mil/Our-Organization/Assistant-Commandant-for-Prevention-Policy-CG-5P/Inspections-Compliance-CG-5PC-/Commercial-Vessel-Compliance/Foreign-Offshore-Compliance-Division/Port-State-Control/QS21.

for LGCs less than 10 years of age and enrolled in a Coast Guard quality assurance program; and (7) making other changes to the COC program and its implementation on the basis of risk assessments.

STUDY APPROACH

Informed by the GAO report, the committee began its work by reviewing the history of the COC program and then consulting Coast Guard officials from the PSC Division and the LGC NCOE. The committee wanted to learn more about the current policies, practices, and protocols of the COC program and how they are being implemented. The committee then met with officials from associations representing companies that own and operate LGCs and gas terminals to learn about their perspectives on the Coast Guard’s administration of the program today and any concerns they may have about future program challenges as LGC traffic increases.

To gain a better understanding of expected developments in liquefied gas exports, the committee invited experts in global energy markets to provide forecasts of export demand trajectories. They explained the dynamics of export markets and the implications of planned and approved U.S. export terminals coming online over the next several years. They also provided forecasts of the LGC fleet given existing vessel orders and anticipated growth in exports. The information gleaned from these consultations and briefings proved helpful to the committee in taking a prospective view of the COC program and the pressures the Coast Guard may face in ensuring the program’s continued efficiency and effectiveness over the near term (2 to 4 years) to longer term (10 or more years).

For firsthand insight about the functioning of the COC program, the committee visited Coast Guard District 8’s Sector Houston-Galveston headquarters, meeting with the sector commander and other Coast Guard officials in this major center for liquefied gas export activity. The committee also visited the LGC NCOE in Port Arthur, Texas, meeting with gas-qualified inspectors and trainers. During this visit, the committee also toured an LNG export terminal in Cameron, Louisiana, where terminal and carrier operators explained how COC exams are scheduled and conducted. The Gulf Coast location also provided an opportunity for the committee to meet with other gas shippers, carriers, and interested parties, including LPG shippers; officials from the Houston Pilots Association and Harbor Safety Committee; and representatives of ship classification societies and other flag states for LGCs. The Acknowledgments section of this report lists the many individuals the committee met with during this visit and at other times during the study.

Having benefited from the information and insights gained from these consultations and tours, the committee was in a better position to assess

the need for making changes to the COC program and its implementation. Indeed, the committee concluded that anticipated growth in LGC traffic volumes and constraints on the Coast Guard’s marine inspection workforce warrant a closer examination of potential changes to the COC program to ensure its continued efficient implementation and effectiveness for safety assurance. Accordingly, the committee proceeded to the deliberative stages of the study by undertaking a review of the specific options proposed in the legislative request for the study and Statement of Task, while also considering other possible reforms based on the committee’s expert judgment.

This study approach is reflected in the organization of this report, which begins by examining trends and developments in gas export markets and the Coast Guard’s capacity to conduct exams to establish whether a need for program reforms exists. The report then turns to a review of the reform options and concludes with recommendations for options deserving priority consideration by Congress and the Coast Guard.

REPORT ORGANIZATION

The remainder of this report is organized into four chapters:

• Chapter 2 provides background on LNG and LPG ocean shipping, the two main uses of the foreign LGCs subject to the requirements of the COC program. Although LNG export trends have been driving the increased demand for COC examinations—and are expected to continue to do so for the next several years—LPG export activity is also increasing, and LGCs require time and resources from Coast Guard inspectors. The first half of the chapter thus focuses on LNG and the second half on LPG. In each case, the product and its physical and hazard characteristics are described, followed by descriptions of their LGC fleets, the terminal facilities where they are loaded, and the basic logistics and economics of their respective export markets. Recent trends in export traffic activity are described, followed by forecasts for the coming decade.
• Chapter 3 provides more background on LGC examinations and the requirements and protocols of the COC program. The chapter begins by introducing the current international safety framework for gas carriers and describes how COC examinations are part of a broader regime for verifying compliance with U.S. and international safety assurance standards and requirements. Next, the chapter describes the Coast Guard’s role in conducting vessel inspections, starting with a description of its responsibilities for inspecting U.S.flag commercial vessels and conducting PSC inspections of foreign-flag vessels. As part of this background, the Coast Guard marine

• inspection workforce and its structure, geographic deployment, and career paths are discussed. The chapter also discusses the Coast Guard’s gas-qualified inspector workforce, the purpose and role of the LGC NCOE, and the history and current requirements of the COC program for foreign-flag gas carriers. The chapter concludes with data on projections of COC exams for LGC arrivals.
• Chapter 4 provides the committee’s assessment of whether reforms to the COC program and its implementation will be needed as a result of increased LGC traffic activity and constraints on the marine inspector workforce. The chapter then discusses the options for change that are presented in the Statement of Task, discussing their respective advantages and challenges. Based on this review, the committee assesses the near- and longer-term potential impacts of the reform options, which provides for a recommended course of action.
• Chapter 5 reviews the study charge, approach, and key findings and summarizes the committee’s main conclusions about the need for reforms to the COC program. The chapter concludes with recommendations for reforms that, in the committee’s view, will improve efficiency of the program and preserve—and potentially enhance—its effectiveness as a safety assurance program.

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