Energy companies are already eyeing exports to Mexico and other business opportunities after federal officials approved regulatory changes that will allow shipments of liquefied natural gas by rail.
U.S. officials on Friday authorized the use of cryogenic railcars to ship the supercooled fuel from production plants to destinations across the nation.
Liquefied natural gas is used as a fuel to generate electricity at mining operations, drilling sites, industrial operations, farms and industrial facilities in remote areas beyond the reach of the traditional power grid. Shipping LNG by rail was previously prohibited but during an April 2019 visit to Houston, President Donald Trump signed an executive order directing U.S. agencies to take another look at the issue.
“The Department’s new rule carefully lays out key operational safeguards to provide for the safe transportation of LNG by rail to more parts of the country where this energy source is needed,” U.S. Transportation Secretary Elaine Chao said in a statement.
The ruling places liquefied natural gas on par with crude oil, gasoline, diesel, propane and other products but there are some conditions. Under the new rules, trains hauling 20 or more railcars loaded with LNG in a continuous block, or 35 or more LNG tank cars anywhere in the train, must use a higher standard of braking and power systems.
Most LNG is exported from the United States by sea using tankers that can hold 30 million gallons of the supercooled fuel. But over the the past five years, a boutique industry has been created using tanker trucks to haul up to 10,000 gallons of liquefied natural gas to customers in remote areas of the United States and Mexico.
Georgia-based cryogenic gas equipment manufacturer Chart Industries, said the company’s plant in Minnesota makes railcars that can each haul 30,000 gallons. CEO Jill Evanko said LNG by rail can be used to deliver greater volumes and are competitive on price on shipments traveling more than 250 miles.
“Rail typically has a fee per trip per car; highway is a cost per mile,” Evanko said. “Long highway runs often require a sleeper cab and two drivers. So in general our team’s opinion is that LNG by rail is competitive with and more cost-effective than highway on longer distances.”
Houston liquefied natural gas company Stabilis Energy opened a $55 million LNG plant capable of producing 120,000 gallons of LNG a day in the South Texas town of George West in March 2015. The plant initially focused on supplying fuel to portable LNG-powered generators at remote drilling and fracking sites, but it has since added at least 10 Texas frac sand mines, out of reach of pipelines and power grids.
Stabilis also tapped into a growing market south of the border in Mexico where it supplies LNG to a number of industrial customers and greenhouses and bought a competitor to grow in the industrial city of Monterrey.
With the George West plant next to a rail spur, Stabilis CEO Jim Reddinger said the company would add equipment to load LNG into railcars, if it lands enough contracts.
“Railcars can shave delivery time and increase volume but they would work better if you can avoid switching yards,” Reddinger said. “That’s where you lose time.”
Keep on Trucking: 18-wheelers haul LNG exports into Mexico
Caio Zapata, CEO of Mexico City liquefied natural gas company Enestas, said there is solid demand south of the border but Mexico officials must approve rail transport of LNG before exports can happen.
Mexico’s railcar regulations, he said, closely mirror those of the United States but governmental offices are maintaining limited business hours because of the coronvirus pandemic.
“Now the question is how long will it take,” Zapata said.
Environmentalists don’t approve of the changes.
Kelly Martin, director of the Sierra Club’s Beyond Dirty Fuels campaign, said the Trump administration is placing corporations over the safety of people.
“Numerous deadly oil train accidents have made it abundantly clear that shipping dirty fuels by rail is a threat to public safety,” Martin said. “Not only has the Trump administration attacked safety standards meant to protect us from these incidents, now they’re actively courting disaster by allowing even more explosive material to move through our communities.”