March 13, 2018

Is LNG by Rail Coming to New England?

Holland & Knight Energy and Natural Resources Blog
Dianne R. Phillips

A recent Boston Globe editorial entitled “Gas-by-train? Beacon Hill Opens The Door” suggests that liquefied natural gas (LNG) may be arriving by train to New England from the shale gas region in Pennsylvania in the future. While the point of the editorial seems to be focused on criticizing Massachusetts political leaders for their “abstention” approach to fossil fuels and historic efforts to block pipeline expansion (a point also supported by a recent Wall Street Journal op-ed article), it also takes aim at both the railroad industry and the LNG industry in one fell swoop citing both safety concerns and greenhouse gas emissions.

This comes as news of ISO New England Inc.’s response to the Jan. 8, 2018 order from the Federal Energy Regulatory Commission (FERC) suggests that fuel security (the assurance that power plants will have or be able to obtain the fuel they need to run, especially during the winter) is the biggest risk to the electric grid in New England. Relying upon its Jan. 17, 2018 Operational Fuel-Security Analysis, which modeled a wide range of hypothetical power system combinations including potential outages, ISO New England told FERC that energy shortfalls due to inadequate fuel supply would occur with almost every fuel-mix scenario in the winter of 2024/2025, requiring frequent use of emergency actions to fully meet demand or protect the grid. Specifically, in 19 of the 23 hypothetical resource combinations, some level of load shedding (the process of deliberately removing preselected customers) was required to maintain system balance. This ominous conclusion was tempered by the finding that increasing the resource mix with higher levels of LNG, natural gas imports from neighboring systems, and renewables could help minimize system stress and maintain reliability.

While transporting LNG by rail might play a role in the future, regulatory changes are needed before LNG can be transported by rail tanker cars under applicable Hazardous Materials and Carriage by Rail regulations, 49 C.F.R Parts 172, 173 and 174. As noted in the Globe editorial, the Association of American Railroads filed a petition for rulemaking with the U.S. Department of Transportation, Pipeline and Hazardous Materials Safety Administration (PHMSA) in Jan. 2017, which was docketed as PHMSA-2017-0020. The petition sought revisions of Sections 172.101 and 173.319 of Title 49 to allow LNG to be treated the same as other cryogenic liquids transported in tank cars under the Hazardous Materials regulations. Besides acknowledging receipt of the petition, PHMSA has not taken any formal action on the petition.

However, the Federal Railroad Administration (FRA) has been working on the subject in connection with both LNG shipments by rail and the use of LNG as locomotive fuel. It authorized the Alaska Railroad Corp., pursuant to its authority under 49 C.F.R. § 174.63, to transport LNG in bulk packaging (ISO-certified tankers atop flatcars) back in 2015. In addition, FRA has established a process for evaluating requests by railroads to use alternative fuels including compressed natural gas (CNG) and LNG for locomotives, which some railroads have begun using. It also commissioned Sandia National Laboratories, the U.S. Department of Energy entity which prepared the consequence studies for LNG shipping post-9/11, to create a report detailing LNG Safety Assessment Evaluation Methods for use in considering the safety of using natural gas as a locomotive fuel.

Despite these advances, it does not appear that LNG will be arriving in New England by train any time soon.

Related Insights