April 12, 2019

President Trump Jumpstarts LNG Development and Transportation

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

On April 11, 2019, President Trump signed an Executive Order on Promoting Energy Infrastructure on Economic Growth which included provisions related to updating regulations linked to facilities which handle liquefied natural gas (LNG) and regulations associated to transporting LNG by rail. As described in prior blog posts, 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, absent a special permit. Although the Association of American Railroads (AAR) filed a petition for rulemaking with the U.S. Department of Transportation, Pipeline and Hazardous Materials Safety Administration (PHMSA) in January 2017 and PHMSA responded on May 7, 2018, there hasn't been much movement on the subject. With this Executive Order, President Trump has ordered the Secretary of Transportation to "propose for notice and comment a rule, no later than 100 days after the date of this order, that would treat LNG the same as other cryogenic liquids and permit LNG to be transported in approved rail tank cars" and further "finalize such rulemaking no later than 13 months after the date of this order." No surprise that sides are already forming about what some are calling "bomb trains" so we can expect a lot of interest in this particular rulemaking.

A second aspect of the Executive Order, which hasn't gotten quite as much press, concerns another topic previously written about the "small scale" LNG. The Executive Order directs the Secretary of Transportation to initiate a rulemaking to update the LNG safety regulations found at 49 C.F.R. Part 193 and finalize such rulemaking no later than 13 months after the date of the order and further directs the Secretary "to use risk-based standards to the maximum extent practicable." The explanatory preface to this requirement implies the regulations haven't been updated in the 40 years since they were originally passed, which is not true but that doesn't mean they are not due for modernization. The Part 193 regulations rely upon and incorporate the 2001 edition of the National Fire Protection Associations, Inc.'s Standard for the Production, Storage and Handling of LNG known as NFPA 59A. NFPA 59A has been revised several times since 2001, yet the Part 193 siting requirements which rely on NFPA 59A have not changed. These siting requirements govern calculations related to thermal radiation protection (49 C.F.R. § 193.2057) and flammable vapor-gas dispersion protection (49 C.F.R. § 193.2059). They are the heart of the safety regulations which will likely be addressed.

PHMSA has dealt with this regulatory background by periodically issuing various "interpretations" of the requirements in an effort to perform risk-based analyses. Some have supported the positions taken by the industry and some have supported the positions taken by the project opponents. Only time will tell what positions will be taken in the rulemaking proceeding, which is sure to garner a lot of interest.

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