New obstacles loom large for Wyalusing-Gibbstown LNG project

A contentious plan to export liquified natural gas from a Delaware River port faces new political, economic and environmental headwinds that raise questions about its future.

A new White House administration, a global market that was once white-hot that has considerably cooled in the past two years and pandemic-related workforce disruptions cast long shadows over the proposal, which is spearheaded by New Fortress Energy.

A quick recap

The project would start with fracked natural gas being piped via an interconnection with Stagecoach Pipeline from the Marcellus shale region of Pennsylvania to a plant in Wyalusing, Pa., about 50 miles northwest of Scranton.

The plant would liquefy the gas by cooling it to 260 degrees below zero, and then send it by truck and rail roughly 180 miles away to a port in Gibbstown, N.J., which is southwest of Philadelphia.

From the port, the LNG would be shipped via the Delaware River to overseas markets. The project would have an average daily production capacity of 3.6 million gallons.

The company has said in public filings that it expects the $800 million project to be operational in the first quarter of 2022 but work on the Wyalusing site has been on an extended pause.

Maxine Meteer, the secretary-treasurer for Wyalusing Township, said in an email that the municipality had no update about the status of the project.

The company continues to maintain the property “but we have no information about their schedule to proceed,” she wrote.

New political forces at work

On April 10, 2019, President Donald Trump issued Executive Order 13868, “Promoting Energy Infrastructure and Economic Growth,” which directed the federal Department of Transportation to pave the way for a rule allowing LNG for the first time to be transported in rail tankers.

In a separate but related development, on Dec. 5, 2019, the federal Pipeline and Hazardous Materials Safety Administration issued a special permit to a New Fortress-affiliated company, Energy Transportation Solutions, allowing it to transport LNG in specialized rail tank cars – a critical component of the Wyalusing-Gibbstown project.

But now political winds have shifted.

Biden revoked the Trump executive order with his own Executive Order 13990, “Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis.”

Also, the pipeline administration proposed suspending the national authorization to transport LNG by rail pending completion of research and an external review by technical experts.

The pipeline agency said it would review “recent actions that could be obstacles to administration policies promoting public health and safety, the environment, climate change mitigation; and provide an opportunity for stakeholders to contribute their perspectives on rail transportation of LNG.”

The suspension of the national rule is pending a review by a committee of independent experts of the National Academies of Sciences, Engineering and Medicine. A first phase of the committee’s work has been completed and a second phase is scheduled to be completed in mid-2022.

Meanwhile, 15 state attorneys general and five environmental groups had challenged the national rule allowing the transportation of LNG by rail. Those cases, which have since been consolidated, was placed in abeyance in March by a federal judge at the request of the federal Department of Transportation as the LNG-by-rail rules are under review.

The special permit, which expires on Nov. 30, would be up for renewal under a new administration that appears to be taking, at the very least, a much more cautious approach to LNG by rail.

The special permit is not directly affected by whatever happens to the national rule because those two actions emerged through separate regulatory procedures, however critics of LNG-by-rail see them as connected under a single larger issue: Transporting liquified natural gas by rail is hazardous, unsafe and untested.

Tracy Carluccio, deputy director of the Delaware Riverkeeper Network, one of the environmental groups involved in the litigation, said “logically” and “based on policy” the Biden administration should rescind the special permit “for the same public safety reasons they are suspending the federal authorization of LNG by rail.”

Bradley Marshall, a senior attorney with the Florida office of Earthjustice, which is also involved in the court case opposing the rule, said: “If LNG by rail is too dangerous to be transported in the rest of the nation (and it is given our current safety requirements), then it is also too dangerous to be transported in New Jersey and Pennsylvania.”

Representatives of New Fortress Energy did not respond to an email for comment for this article. The PHMSA, citing the lingering litigation, declined to comment.

Notably, one of the documents made public as part of the work by the National Academies was a March 15, 2018, review by the Federal Railroad Administration of the special permit application by Energy Transportation Solutions.

That review was sharply critical of the risk analysis undertaken by the project sponsors. It said the special permit request “has many misstated facts, errors in scientific justifications and incorrect comparisons of hazardous materials to justify the application.”

The special permit was granted 13 months later.

Market forces pose other challenges

Global Energy Monitor, a nonprofit organization financially supported by foundations, which tracks data about fossil fuels and energy alternatives, recently published a report, “Nervous Money: Global LNG Terminals Update 2021,” that painted a gloomy outlook for the LNG market.

The report noted that “the go-go atmosphere that characterized the LNG sector just two years ago now lies in what seems like the distant past.”

An August 2020 report by the trade publication, Natural Gas Intelligence, echoed that view.

It said: “The global gas supply glut and the coronavirus have combined to complicate the sanctioning and funding of newbuild LNG projects and expansions as financial institutions have been squeezed in the down economy. As a result, many projects have been delayed or canceled this year.”

Ted Nace, the executive director of Global Energy Monitor, said the United States, which began overseas shipments of LNG in 2016, is a relative late-comer to exporting LNG and trying to “muscle in” on the global market.

Countries like Qatar, the world’s largest LNG producer, and Russia, with a large natural gas supply, have access to vast inexpensive fields that give it huge competitive advantages over newcomers like the United States.

“Most of the projects in the U.S. that have been queued up – they’re not going to happen,” Nace said. “A whole bunch of these projects are no longer likely.”

He allowed that the Wyalusing/Gibbstown project could be small enough to survive. “The advantage they have is they’re not super, super huge, so maybe they have their market figured out,” he said.

The Global Energy Monitor report also noted there’s been a shift in attitudes about LNG in the face of climate change and environmental concerns.

“From the wellhead to the end user, the gas supply chain results in leakage of methane, a highly potent greenhouse gas,” it said. “Due to mounting evidence that the magnitude of methane emissions is far greater than previously assumed, gas has shifted from the ‘solution’ side of the climate ledger to the ‘problem’ side.”

On July 6, New Fortress announced that it had secured an agreement for the LNG supply to cover its natural gas and electricity businesses through the end of 2027.

“With this gas supply in place, NFE will have purchased LNG volumes equal to approximately 100 percent of its expected needs for its current portfolio of five terminals and assets across the Caribbean, Mexico and Central America for the next six years,” the company said. “The company anticipates securing additional LNG supply volumes later in 2021 to support NFE’s four terminals in Brazil, which are all expected to be operational in 2022.”

It was not clear where – or if at all – the Wyalusing/Gibbstown project fit in to this announcement.

Other developments

There have been some bright spots for the New Fortress Energy project: In March, an affiliated company, Bradford County LNG Marketing, gained needed U.S. Department of Energy authorization to export LNG to Free Trade Nations under the Natural Gas Act. That authorization is good until 2050.

And a New Jersey appeals court rejected a challenge to the New Jersey

Department of Environmental Protection issuing a waterfront development permit and

water quality certificate to Delaware River Partners, another New Fortress Energy-related company, for what is known as Dock 2 at the Gibbstown port.

But other obstacles await.

The Delaware Riverkeeper Network has gone to court to overturn a Delaware River Basin Commission ruling that helped paved the way for the project, and its case against the U.S. Army Corps of Engineers, challenging a permit issued in February 2020 allowing the construction of the proposed new docking facilities remains pending.

Looming even larger are two other potentially more daunting issues:

The company and opponents are awaiting decisions by the Federal Energy Regulatory Commission on whether it will assert jurisdiction over the project. If it does, that could set off environmental assessments that could consider the ecological, cultural and human impacts of the project.

That, in turn, could also mean opportunities for litigation to challenge the quality and thoroughness of those reviews – all of which could amount to added time, scrutiny and chances for the project to be delayed or derailed.

In what some interpreted as a signal about the way the commission might rule on the Wyalusing/Gibbstown project, FERC said in March that it had jurisdiction of an unrelated LNG facility in Puerto Rico run by New Fortress Energy.

The other issue facing the company is logistical.

As Delaware Currents has previously reported, too few of the specialized rail tankers that New Fortress would depend on to transport LNG exist, there is little interest among manufacturers to build them and they can cost as much as $750,000 per tanker to build – all of which raises questions about how likely the company is to hit its 2022 start-up goal.