Pipelines remain the safest way to transport natural gas, but demands of consumers will force it to be delivered as LNG by rail if pipelines cannot be built.
Natural gas pipelines are having a hard time getting built in the United States despite the advantages that natural gas provides to the public in terms of cost, environmental benefits, and efficiency. Environmentalists and some state politicians, such as Governor Cuomo in New York, are effectively banning natural gas pipelines, which has resulted in moratoria on new gas hookups in parts of New York and Massachusetts.
As a first step to deal with this issue, President Trump signed executive orders that direct federal agencies to make changes to remove bottlenecks to natural gas transport in the Northeast and also to streamline federal reviews of border-crossing pipelines and other infrastructure. And, more recently, he started the process to allow natural gas to be shipped in railroad cars that would open new markets for natural gas. When pipeline protestors stopped or delayed oil pipelines (e.g. Keystone XL) from being built, rail became an important additional mode of shipment for oil.
Recently, President Trump ordered the Transportation Department to write a new rule permitting liquefied natural gas to be shipped in tank cars. If rail can be used to ship natural gas, customers in the Northeast, where there are not enough pipelines, will be able to get natural gas hookups. It would also make it possible to use natural gas to power ships and trains and help the railroad industry to offset lost revenues from declining rail shipments of coal. However, it could take more than a year for the Transportation Department to write new rules governing the shipment of liquefied natural gas in tank cars.
Executive Order on Infrastructure
President Donald Trump recently issued two executive orders to promote energy infrastructure, including projects like the long-stalled Constitution Pipeline and a natural gas pipeline in New York. Developers have been trying for six years to build a 124-mile natural gas pipeline from Pennsylvania to New York upon winning federal approval in 2014. But, regulators in New York have denied the pipeline a permit, invoking state powers under the Clean Water Act to reject projects if they believe that they are a threat to water supplies and the environment. Because the state is blocking pipelines that would provide gas service to the Northeast, New York is not only impacting its own natural gas supply, but that of the entire Northeast.
Properties of Liquefied Natural Gas
Liquefied natural gas (LNG) is natural gas that has been chilled to minus 260 degrees Fahrenheit (minus 167 Celsius) in a process that removes water, carbon dioxide and other compounds, leaving a fluid that takes up less than 1/600th the space it previously occupied as a gas. It is shipped across oceans around the globe, carried by trucks across the United States and stored in tanks to ensure availability when demand increases.
Trains already move some liquefied natural gas in North America and are statistically safer than transporting LNG in trucks. The Obama administration in 2015 authorized the Alaska Railroad Corp. to ship LNG using portable containers on flatcars. The Florida East Coast Railway, which is powered by LNG, also ships the fuel from a liquefaction plant to ports in the state under a government waiver. And Canada’s transportation department allows LNG to be shipped in tank cars.
LNG does not burn on its own and it does not ignite in its liquefied state. Natural gas dissipates rapidly and is only able to ignite when mixed with air at a ratio of about 5 to 15 percent, unlike other flammable materials carried by rail. LNG does not dissolve in water and, if spilled, generally evaporates, leaving no residue behind. LNG has similar properties to other materials that are currently authorized to be transported by rail such as crude oil, hydrogen chloride and other liquefied gases.
Existing and New Markets
Trump’s plan to move natural gas by rail would allow companies to get products to market quicker thereby expanding existing natural gas markets and opening up new ones. New England is a prime example due to its high winter natural gas demand and limited pipeline capacity, which have caused prices to spike and LNG to be imported from Russia. Instead, LNG could be shipped by rail from the Marcellus Shale formation in Pennsylvania to New England.
Rail shipments could out-compete other LNG sources in the region, factoring in the added costs to liquefy natural gas and transport it in tank cars. New England imported six cargoes of LNG at an average price of $8.88 per million Btu in January, even though the same quantity of Appalachian natural gas traded at $3.25 per million Btu. Liquefaction and transport costs of over $5 would still make it economic to liquefy U.S. natural gas and ship it by rail to New England.
Rail transport could similarly ease bottlenecks getting natural gas from the Permian Basin in West Texas and New Mexico to the U.S. Gulf Coast.
Rail transport would also help natural gas to be used as a maritime fuel, given international restrictions on high-sulfur diesel that come into effect in 2020. Rail shipments of LNG could enable the creation of new fueling locations at ports in Florida and the U.S. West Coast, without requiring expensive new liquefaction infrastructure.
Shipping natural gas in the form of LNG by rail is one way to maneuver around bans and delays on gas pipeline construction that has occurred in some U.S. states. President Trump recently asked the Department of Transportation to write rules to accomplish it, which can take over a year to develop.
LNG shipped by rail to markets in the Northeast will help with price spikes during winter months when demand is high and with moratoria on gas hookups in Massachusetts and New York that are not allowing the purchase of affordable, efficient and reliable natural gas for home heating and other uses of the fuel.
Natural gas may soon be riding the rails in the form of LNG because of deliberate obstruction by some elected officials of natural gas pipelines.