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States oppose LNG-by-rail transport, citing safety and climate concerns

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States oppose LNG-by-rail transport, citing safety and climate concerns

Attorneys general from 15 states and Washington, D.C., pressed U.S. regulators to withdraw a proposal that would broadly allow transportation of LNG by rail, which some in the natural gas industry have said will lead to safer and less costly shipment of the fuel in states where pipeline shipments are restricted.

The top law enforcement officials of Maryland, New York, Pennsylvania and other states said in comments filed Jan. 13 that the U.S. Pipeline and Hazardous Materials Safety Administration, or PHMSA" should withdraw its proposal pending the completion of safety studies and the development of a detailed environmental impact statement that would include consideration of climate impacts.

Adoption of the rule would be unlikely to spur a wave of LNG-by-rail shipments destined for export, but it would open up the opportunity for these projects, along with other ventures such as refueling stations for LNG-powered locomotives, according to energy analyst Katie Bays, co-founder of research and consulting firm Sandhill Strategy.

PHMSA has proposed finding that the rule allowing the shipments of the LNG in a rail car specially designed to transport cryogenic liquids "will not result in a significant environmental impact." But the attorneys general said PHMSA and the Federal Railroad Administration have not completed safety testing of LNG transport in the rail cars.

"Proceeding with the proposed rule would put the states' residents, first responders and environmental resources at greater risk of catastrophic accidents, a dynamic which PHMSA has failed to adequately analyze just as it has failed to consider the environmental and climate impacts of allowing LNG to be shipped in rail tank cars," the letter from the attorneys general said.

The rulemaking stems from a pair of executive orders issued by President Donald Trump in April 2019 that were designed to smooth the way for energy infrastructure projects, primarily in New England. The directives were an outcome of the Trump administration's long-running criticism of state regulators and other opponents that have delayed or blocked natural gas pipeline development. Other components of the executive orders have 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 such as New York.

The opposition of the attorneys general ratcheted up the tension. "The administration is bending to the will of the fossil fuel industry again, and it puts at risk neighborhoods, towns and cities across our nation," Maryland Attorney General Brian Frosh said in a statement.

The LNG-by-rail proposal has also been criticized by some Democrats in the U.S. House of Representatives.

PHMSA issued the notice of proposed rulemaking Oct. 24, 2019, originally requesting all final comments by Dec. 23, 2019. But PHMSA moved the comment deadline at the request of the New York and Maryland attorneys general. After the public comment period and time for considering the comments, the agency will advance a final draft to the White House for interagency review before a final rule is issued.

The Trump administration's decision to take up the issue was seen by market observers as a nod to New Fortress Energy, a company 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. PHMSA has already granted a special rail permit for this project.

New Fortress subsidiary Energy Transport Solutions LLC received a special permit from PHMSA on Dec. 5, 2019, 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 in-between stops.

Other important permits remain pending for the New Fortress project, including an export permit from the U.S. Department of Energy. But market observers have said it would likely get the federal authorization it needs.

In federal regulatory filings, New Fortress has said it expects the Pennsylvania facility to produce an average 3.6 million gallons of LNG per day. If the cargoes cannot be moved by rail, they could be transported by truck, New Fortress has said.