Questions on potential of PGW plant to export gas

Posted: August 24, 2013

A Philadelphia Gas Works consultant said it "may be feasible" to convert the city-owned utility's Port Richmond liquefied natural gas plant to export Marcellus Shale gas by sea.

But the confidential report this year by CH-IV International raised many questions about the practicality of such a venture.

A plant to liquefy gas and an export terminal would cost $1.9 billion - about the value of the utility alone. It would also require the acquisition of the Tioga Marine Terminal.

It might also require PGW to control an "exclusion zone" of up to 4,000 feet around the terminal as a buffer in the event of a release of explosive vapor. The report described this requirement as a "potential fatal flaw," since it would encompass land not controlled by PGW.

The facility would need federal approval to export the gas. And it would also require Coast Guard permits for fuel-laden ships to sail up the Delaware.

The report, dated in January, became public after it was submitted last month to the Philadelphia Gas Commission in response to a data request.

PGW has not proposed to expand its current plant on Delaware Avenue, which was built in 1974 as a peak-shaving storage facility - to store gas until it is needed on the coldest days. But the brokers marketing PGW to prospective private buyers are pitching the potential growth opportunity of LNG.

"There are so many important variables and priorities for us to consider that all PGW has decided is that this is a topic worthy of further consideration," said Barry O'Sullivan, PGW spokesman.

Practical impediments aside, any proposal to export LNG from Philadelphia likely would generate much political opposition.

In 2006, PGW abandoned talks with Hess LNG to build an import facility on the Port Richmond site after the proposal generated protests.

Now, with domestic production soaring because of hydraulic fracturing of shale formations, the industry is looking to export gas rather than import it. More than 20 export facilities have applied to the U.S. Energy Department for licenses. Three have been approved.

PGW's existing LNG plant, which is small compared to an export facility, may be one of the utility's most attractive assets as the city explores privatization.

The facility is sized for a larger city, so PGW needs only about half of the plant's capacity to convert four billion cubic feet of natural gas a year into LNG.

Natural gas is liquefied by cooling the gas to minus-260 degrees. PGW stores the fuel in two large insulated cylindrical storage tanks.

CH-IV, a Maryland consulting firm that specializes in liquefied natural gas, completed the report for PGW under a standing $25,000 annual contract to conduct LNG engineering work for the utility.

The consultants say an export facility could require a much larger buffer zone around the plant than is now under PGW's control.

PGW would also need to acquire the Tioga terminal, the city's primary port facility for importing Chilean fruit. "Without the Tioga Marine Terminal, there is no real option for marine loading of LNG from the existing LNG storage tanks," the report said.

The Coast Guard would need to assess the impact of LNG shipments on commercial river traffic as well as vehicular traffic on bridges.

"This could be a fatal flaw if all marine stakeholders, including New Jersey, Delaware, and Pennsylvania parties, cannot agree to this transit of LNG ships up the Delaware River," the consultants said.

While the export terminal might be a dream, PGW this year has begun turning to more practical alternatives for its LNG plant.

PGW in June began selling excess LNG from its plant to the private market, and expects to earn $7.7 million next year from the venture.

Buyers are loading the LNG on trucks and selling it as motor fuel for long-haul trucks that have converted from diesel.

The fuel is also being sold to drilling companies in the Marcellus Shale region, which are converting diesel-powered drilling equipment to natural gas.

"The income from these sales goes straight to the ratepayers, not only by forestalling potential base rate increases but also by supporting the operation of PGW," O'Sullivan said.


Contact Andrew Maykuth at 215-854-2947, @Maykuth or amaykuth@phillynews.com.

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