U.S. regulators are getting closer to the release of a rule that would broadly allow transportation of LNG by rail, which some in the natural gas industry hope will result in safer and less costly movement of the fuel in parts of the country where pipeline shipments are restricted.
Adoption of the broad rule would be unlikely to spur a wave of LNG-by-rail shipments destined for export, but it could bring such projects into the realm of possibility, along with other ventures such as refueling stations for LNG-powered locomotives, said energy analyst Katie Bays, co-founder of research and consulting firm Sandhill Strategy.
The fact that the federal government took up the issue was a nod to one company, New Fortress Energy. The company is developing a project to move LNG by rail from a proposed liquefaction plant in the Marcellus Shale region in Pennsylvania to a small export facility on the East Coast, and the Pipeline and Hazardous Materials Safety Administration has already granted a special rail permit for this project.
PHMSA's broader rulemaking stems from a pair of executive orders issued by President Donald Trump in April 2019. The executive orders, an outcome of the Trump administration's long-running criticism of state regulators and other opponents who have delayed or blocked natural gas pipeline development, were designed to smooth the way for energy infrastructure projects, primarily in New England.
PHMSA issued the notice of proposed rulemaking on Oct. 24, 2019, originally requesting all final comments by Dec. 23, 2019. However, after getting a comment period extension request from the New York and Maryland the attorneys general, PHMSA moved the comment deadline to Jan. 13. After the public comment period, the agency will advance a final draft of the rule to the White House for interagency review before a final rule is issued.
On Dec. 5, 2019, PHMSA issued a special permit to New Fortress subsidiary Energy Transport Solutions LLC that will allow the company to move up to 100 rail cars of LNG a day from a plant in Wyalusing, Pa., to a marine facility in Gibbstown, N.J., subject to certain operational controls. The LNG will travel in double-walled insulated tank cars designed for cryogenic materials. PHMSA did not dictate a specific route in the special permit, but it restricted the shipments to between Wyalusing and Gibbstown and prohibited intermittent stops.
Other important permits remain pending for the New Fortress project, including an export permit from the U.S. Department of Energy. But New Fortress will likely obtain the federal authorization that it needs, Bays said.
New Fortress has said in federal regulatory filings that it expects the Pennsylvania facility to produce an average 3.6 million gallons of LNG per day. If not shipped by rail, New Fortress has said the cargoes could be transported by truck.
Getting the PHMSA permit could help New Fortress sell investors on its business concept, Bays said.
"The more complex the transportation is, the more investors are fatigued," Bays said. "Simplifying LNG transportation down to a unit train just makes the project easier to model, easier to conceptualize, and easier to get comfortable with. That is probably helpful with investors and buyers."
A final environmental assessment related to the New Fortress permit application noted that environmental groups such as the Sierra Club and the Center for Biological Diversity had concerns that LNG tank cars could pose safety and environmental risks. But PHMSA said it was limiting the shipments to special tank cars between two locations, even as the agency considers allowing broader rail transportation of LNG.
"This analysis did not identify any significant environmental impacts resulting from the issuance of this special permit," PHMSA said.
Other components of Trump's executive orders drew more attention than the LNG-by-rail measures because they targeted higher-profile issues, such as water quality certifications under Section 401 of the Clean Water Act, which have halted the advancement of pipelines in places like New York.
But the broader PHMSA rulemaking could nonetheless draw scrutiny from some Democrats in the House of Representatives who have argued that LNG-by-rail shipments could risk the safety of people and the environment. House Committee on Transportation and Infrastructure Chair Peter DeFazio, D-Ore., and fellow Democrat Tom Malinowski of New Jersey asked PHMSA in an Aug. 7, 2019, letter to make the draft permit public before any final action.