Future of Gibbstown-LNG project remains far from certain
A pending federal ruling about LNG by rail is one of numerous puzzle pieces still needed for the project.

A proposal to bring liquified natural gas via rail to a Delaware River port in Gibbstown, N.J., awaits a critical ruling by federal regulators – one of many significant hurdles that could ultimately mean the end of the line for a controversial project that has shown no appreciable momentum for years.

The question before the agency, the Pipeline and Hazardous Materials Safety Administration, is whether to continue to allow bulk transportation of highly volatile LNG by rail. The Trump administration had lifted a ban against LNG by rail but the Biden administration is seeking to end that authorization.

The pending decision could not come at a worse time in terms of political optics and wariness about trains with hazardous materials given last month’s catastrophic derailment and chemical spill in East Palestine, Ohio, which has prompted regulators, watchdogs and Congress to intensely focus on railway safety.

A U.S. Senate committee held a hearing on the derailment on Thursday, the House plans hearings and the National Transportation Safety Board said it was opening a “special investigation” into the organization and safety culture of the rail operator Norfolk-Southern because of the Ohio derailment and a string of other accidents.

[Read more about the Gibbstown LNG project’s history]

Last month, seven Democratic members of Congress from Pennsylvania who represent parts of the Delaware River watershed wrote to Pete Buttigieg, the transportation secretary, urging him and the PHMSA to reconsider the rule that the Trump administration rolled back allowing LNG by rail.

The representatives said the rollback was implemented with a “lack of adequate analysis of safety and environmental risks” and was “coupled with inadequate review of equipment and safe operation protocols.”

All of this comes as New Fortress Energy and its affiliates plan to take fracked gas by pipeline to a proposed liquification plant in Wyalusing, Pa., and then send as much as 3 million gallons of LNG per day by rail — and highway — to a Delaware River port in Gibbstown, N.J. From there, LNG would be shipped overseas. Routes mapped by opponents of the plan show that various rail and highway paths could cut through as many as 18 Pennsylvania and New Jersey counties, 15 of them in the Delaware River watershed.

National rule vs. special permit

In November 2021, PHMSA, with the Federal Railroad Administration, proposed reversing a rule that broadly allowed LNG by rail that was issued in 2020 during the Trump administration. PHMSA said it had received 7,000 comments about reversing the Trump-era rule.

A projected date for PHMSA’s decision was set for this month. However, in a court filing on Monday in a related case, it was revealed that PHMSA would not hit that projected timetable. It was not immediately clear when a decision would be forthcoming. 

Even if the blanket rule allowing LNG by rail is reversed, there is a separate, albeit narrower path, for New Fortress to transport LNG by rail, and that is through the renewal of a special permit it was granted in 2019.

The problem with that, though is twofold: There’s some question about whether the company filed the renewal in a timely manner, and special permit renewals can be granted for up to four years but the time it takes to review them varies. PHMSA said the special permit renewal is still under review.

In other words, the efforts by New Fortress to gain a special LNG-by-rail permit might still be alive but it’s a time-consuming process that would likely face legal challenges.

War in Ukraine seen as opportunity

After Russia’s invasion of Ukraine, there were widespread expectations about how American LNG exports could meet Europe’s energy needs. Four Republican U.S. senators last month introduced the Natural Gas Export Expansion Act, “which would expedite the federal approval process for exporting liquefied natural gas and increase free trade, particularly as European countries are rapidly seeking new sources of clean, reliable energy.”

Despite what some thought would be an opportunity for New Fortress to capitalize on world events, the company has been mum about the Wyalusing project and has instead been focused on completing LNG projects elsewhere, such as Puerto Rico, Brazil and Jamaica.

In an earnings conference call last month, New Fortress executives made no mention of the Gibbstown project.

Ben Nolan, an analyst with Stifel, Nicolaus & Company, who covers New Fortress, wrote in an email about the Gibbstown project: “You might know better than me, but I have not heard anything from NFE about pursuing that project in several years. Unless something has changed, I don’t believe it is part of their plans any longer.”

Wyalusing Township, which would be host to the liquification plant, reported in response to a public records request that it has not heard anything from NFE or its related companies about the project since at least April 2021.

A press representative for New Fortress, which reported spending about $128 million on the Wyalusing plant as of the end of September 2022, did not respond to an email seeking comment.

LNG by highway: Even more dangerous

For the first time, New Fortress seemed to acknowledge the obstacles it faces in its LNG-by-rail plans.

In its recent annual report, after a long recap of the rule-making history of LNG by rail, New Fortress noted: “We have the ability to transport LNG from our Pennsylvania Facility via truck, and this logistical solution is available to us should we be unable to transport by rail.”

Apart from the regulations, another hurdle of transporting LNG by rail is the time and cost of finding enough of the cryogenic rail tankers needed to run a 100-car train under a special permit, should it be granted.

[Read more about the specialized rail cars needed to transport LNG]

A lead time of up to two years would be needed to build the necessary rail tankers (the models of which have already been approved and could be run under a special permit), said Wendy J. Buckley, president and chief executive officer of Specialty Transportation and Regulatory Services, a consulting firm that specializes in the transportation of hazardous materials.

The kinds of improved, more robust cryogenic tank cars that the federal government would require for LNG under a national rule have not even been built and would be extremely costly and even more time-consuming, she said.

There had been a boom in tank cars in general in the mid-2010s during peak demand to ship crude oil. That demand subsided and then came the pandemic, meaning construction was severely curtailed and some of those tankers – even new ones that were never put into service — were scrapped.

Shop space to build cryogenic tankers for LNG would be hard to come by, she said.

The PHMSA concurred, noting: “We are unaware of any concrete commercial interest in building the type of DOT-113C120W9 tank cars that are permitted to transport LNG by rail under the 2020 rule — and currently, no LNG by rail cars are being transported subject to the 2020 rule.”

Rail tankers do have a proven history of safety and performance, Buckley said, but the East Palestine derailment was an “industry-changing event” that will trigger a wave of enforcement crackdowns.

She said she fully expects PHMSA to roll back the national rule allowing LNG by rail. When it’s kept at a constant cooled temperature, LNG is very safe but if the container is somehow compromised and LNG crosses above a certain temperature, the gas can turn into a volatile vapor, leading to a catastrophic explosion.

“One tank car of LNG could theoretically take out an entire town,” she said.

[Read more about past catastrophes involving the storage and transportation of LNG]

Transporting LNG by rail would be cost-effective and safer than having it on highways, where trucks would be subjected to careless car drivers, traffic and weather, Buckley said.

Whether NFE could make the project financially work solely by relying on highway tankers is a question, given the difference in volume of rail vs. trucks. It would take an ant farm of highway tankers, each carrying 10,000 gallons of LNG, to equal trains of 100 tankers, each carrying 30,000 gallons of LNG per tanker.

What’s more, if NFE takes to transporting LNG by highway, it “is not where you want to be,” Buckley said.

As Delaware Currents has previously reported, the project could send as many as 400 trucks per day, traveling about 175 miles to Gibbstown. The trucks would crisscross Pennsylvania and New Jersey roadways and pass through or near cities, including Philadelphia.

From 1994 through 2005, hazardous materials released in railroad accidents resulted in 14 deaths, Joseph H. Boardman, who was then the administrator of the Federal Railroad Administration, testified in 2006. By comparison, hazardous materials released in highway accidents during the same period resulted in more than eight times as many deaths, he said.

Reaching the finish line proving elusive

For NFE, it’s a game of Whac-A-Mole: As it knocks down one problem, another pops up:

A pending ruling by the Federal Energy Regulatory Commission about whether it could assert jurisdiction over the Wyalusing plant could mean even more environmental rules and delays. The Repauno port gained a permit to do needed rail work to allow a mile-long train to be fully accommodated at the site but the Delaware Riverkeeper Network has appealed it.

Meanwhile, the clock is ticking: A three-year extension to complete the dock work issued by the Delaware River Basin Commission expires in June 2025. And the permit is limited seasonally between Sept. 15 and March 15, which means the developers will have to wait until the fall at the earliest to begin work.

Justin Mikulka, the author of the book “Bomb Trains: How Industry Greed and Regulatory Failure Put the Public at Risk,” said the Biden administration should ban LNG by rail.

“The dangers are far too great especially when it would be transported by the current rail carriers who have clearly demonstrated that they will aways choose profits over safety,” he said. “That said, the short-term prospects of LNG-by-rail aren’t good. The industry hasn’t invested in the rail cars and the economics likely aren’t favorable.”

Despite all of the spike strips seemingly put down in the path of the project, Tracy Carluccio, deputy director for the Delaware Riverkeeper Network, insisted the Wyalusing-to-Gibbstown project is “far from dead.”

She said the project sponsor has spent a lot of money to defend permits even if there’s been little progress. If the door closes on transporting LNG by rail, NFE could still move it by highway tanker, which would be just as bad or worse, she said.

If the project does die, it will not necessarily mean an end to interest generally in exporting LNG, Buckley noted.

“The international demand for LNG is massive and that’s not going to stop, either,” she said. “It’s not going to stop people from shipping it. It’s too valuable.”