Regulators clearing the tracks for rail shipments of “freedom gas”-FreightWaves

John Gallagher, Washington Correspondent

A relative newcomer to the U.S. energy scene has received a preliminary nod from regulators to use an as-yet untapped transportation resource – rail tank cars – to move liquefied natural gas (LNG).

New Fortress Energy, which was founded in 2014 and went public in January 2019 [NASDAQ: NFE], applied for a special federal permit in 2017 through Energy Transport Solutions LLC (ETS), a logistics subsidiary, to use specialized cryogenic rail cars designed for supercooled liquids. Regulations currently prohibit using these types of railcars to haul LNG.

The Pipeline and Hazardous Materials Safety Administration (PHMSA), an agency within the U.S. Department of Transportation (DOT), published an environmental assessment of the company’s plans on June 6, and did not take issue with the ETS application. A comment period on the assessment expires on July 8.

New Fortress Energy declined to respond to multiple requests for comment. Energy Transport Solutions LLC is listed as a New Fortress subsidiary in company documents filed with the U.S. Securities and Exchange Commission. A draft of the special permit also lists Doral, Florida as ETS’s location, where New Fortress maintains an office.

When not moving via pipeline in gas form, federal regulations allow natural gas in liquid form to move domestically only in tank trucks or in portable containers that can move either by truck or on rail flat cars. According to the environmental assessment, the LNG to be transported in rail tank cars will be destined primarily for foreign markets – recently dubbed “molecules of U.S. freedom” by the Trump Administration.

President Trump’s vision

PHMSA’s assessment of ETS’s rail plans follows an executive order issued by President Donald Trump in April directing DOT to propose a rule, within 100 days, allowing LNG to move in rail tank cars, thereby treating it the same as other cryogenic liquids.

The order also instructs the Transportation and Energy departments to assess, within 180 days, the economic effects of the inability to move sufficient quantities of LNG to states in New England and other regions that have been constrained by pipeline capacity. It would also make it easier for LNG export terminals to receive the necessary federal approvals that can typically take years.

That added flexibility could prove highly valuable for ETS and New Fortress. Founded by Fortress Investment Group co-founder and billionaire Wes Edens, the company is developing natural gas liquefying facilities in the Marcellus shale region of Pennsylvania with the capacity to produce an average of 3.6 million gallons of LNG per day, according to a recent financial document. The facility is scheduled to be completed in early 2021.

In January 2019, New Fortress Energy entered into a fuel handling agreement for services at a Delaware River port – 195 miles from its Marcellus facility – with exclusive rights to deliver and transload LNG from truck or rail to marine vessels.

Efficiency gains

ETS anticipates using up to six sets of trains of loaded or unloaded rail cars at a given time. “One train would be loading in preparation for transportation; one or two, depending on demand, would be in transportation loaded with LNG; one would be unloading; and one or two, depending on demand, would be in transportation but unloaded/empty on a return trip,” according to its application. It anticipates unit trains of 100 rail tank cars, although volumes could also be moved in smaller blocks of rails cars made part of a mixed train manifest, it noted.

“Issuance of the proposed special permit…would result in less fuel use and less emissions. Moving one ton of freight by train would result in approximately 70 percent less fuel than moving the same freight by truck. Therefore, this [assessment] preliminarily finds that rail transportation would reduce the environmental impact of transporting LNG.”

It is also conceivable, according to PHMSA, that approving the permit could result in more business opportunities as a result of efficiencies from moving LNG by rail compared to truck, thereby incentivizing more domestic production.

“Such business opportunities could include end-use applications (such as power plants), export facilities, and the associated loading/unloading facilities that would accommodate such developments,” PHMSA stated.

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