LNG: Too Close for New England Rails

New England is appropriately deemed “energy hungry,” but we have a lot to choose from on the menu.

Strong resistance to new pipeline construction in New England and downstate New York has been touted as an opportunity to develop a robust LNG-by-rail “virtual pipeline” to bring Marcellus natural gas to “energy starved New England. Despite a 2020 Presidential directive and subsequent USDOT rulemaking to encourage LNG-by-rail to New England, the mode needle has hardly moved on New England natural gas distribution. There are a couple of good reasons for that.

Big Opportunities are Taken

At the recent LDC Gas Forum Northeast, ANRP had the opportunity to ask Jill Evanko, CEO of Chart Industries (a leading producer of gas-compatible tank cars, trailers, and storage facilities) what was holding up LNG-by-Rail growth. Ms. Evanko provided direct and detailed answers to our questions, but they are not hard to sum up for readers’ benefit: 1. There is virtually no call at present for Chart’s LNG-specific DOT-113C120W9 railcars; 2. “Uneven” rail conditions along some of New England’s main lines does not seem to have prevented prospective LNG movements, though improved track conditions may encourage greater interest; 3. LNG availability within the region is already pretty good, so rail faces strong, established competition in the distribution space. 

In Evanko’s opinion, the best regional opportunity for LNG-by-Rail would be from the Everett MA Distrigas facility to pipeline-isolated peak shaving generating plants (e.g., Merrimack Station) and manufacturing plants. Cost competitiveness would be a moving target.

NewEngland LNG Import facilities
Large, regular shipments of LNG from many overseas sources arrive regularly at Everett MA and Saint John PNB. The Northeast Gateway is currently under-utilized.{Northeast Gas Ass’n}

The plain fact is that, there is no meaningful “gas gap” in New England that rail can rush into. LNG is an old friend, arriving by ship from overseas to reliably provide 28% of our winter-day energy. The LNG is received at three long-established, large-capacity maritime importation regional terminals that are well-positioned to feed much of the demand along the Atlantic coast, where the largest proportion of the region’s population lives and works. (Inland, bottled propane serves to gasify most homes and many businesses — and to employ a lot of rail assets to keep it in stock.) {Northeast Gas Ass’n}

New Opportunities are Small

Where LNG makes natural gas a viable alternative to isolated generating plants running on coal or fuel oil, such as municipal utilities or localized peak-shaving operations, storage is limited to keeping DOT-113C120W9 hanging around until the cargo can be drawn out through a regasification process. The cars are expensive to build/own or to pay demurrage on. Besides, fewer than 500 DOT-113 cars are in service across the country, of which, fewer than 100 have the C120 designation. As of Feb.2021, no W9-spec models exist. {Delaware Currents 12.Feb.2021}.

So small-ish LNG shipments move by truck, and often with the necessary regasification apparatus in tow. In an article for Natural Gas Intelligence, LNG expert Jamison Cocklin explains how small-scale distributors are opening localized markets for inland LNG.

“Small-scale LNG and CNG services have continued to gain an edge … Sapphire Gas Solutions CEO Sam Thigpen told NGI that the biggest driver of Northeast growth for his company is peak shaving services during the winter when cold weather stresses the pipeline grid.

Utility LNG storage facilities. Plentiful regional storage eases congestion at major import terminals. Local trucking easily serves most populated areas. {Northeast Gas Ass’n}

“The advantage of small-scale applications has also strengthened over the last year. Prices for propane — long the top choice of remote gas-starved consumers in the Northeast — have jumped sharply with the rise in oil prices. Propane prices are tied to crude oil, which has continued to gain as the world rebounds from the Covid-19 pandemic. Spot market propane … was recently trading above $1.00/gallon. Last year at the same time, it was slightly under 50 cents.

“[There’s] a glut of liquefaction capacity with key import terminals and plants in Massachusetts, New Jersey, Pennsylvania and Quebec. [But] there is a shortage of service companies to move smaller volumes of the super-chilled fuel and vaporize it for consumers. The shortage leaves more room for growth in the space throughout the region [for small-scale service providers]” {Jamison Cocklin, Natural Gas Intelligence, 15.July.2021}.

LNG by Truck
Trucking of LNG is common throughout the country. New England has lots of traffic, but local hauls mitigate any advantage for rail from coastal sources {PHMSA}.

Kiss off, Kind Strangers

For now at least, New England don’t need substantial quantities of (often more expensive) inland gas brought by rail or pipeline. And the existing supply chain is not considered to be at any great risk.

It shouldn’t be too much of a shock to find out that Presidential Orders are typically geared to grind the grandstand more than help the homestead. New England’s churlish attitude toward land pipelines bringing native gas stems less from righteousness than our region’s robust capacity to receive natural gas — liquified and compressed — by sea from foreign lands, and to move it around fairly efficiently through “internal” legacy pipelines and on local truck routes.