Despite Philadelphia City Council's
"unqualified" rejection nine years ago of a terminal for liquefied
natural gas, the city is once again flirting with the money-making allure of
LNG.
Several entrepreneurs are promoting plans to increase LNG
production at the Philadelphia Gas Works plant in Port Richmond, hoping to
capitalize on growing interest in creating an energy hub linked to the
Marcellus Shale natural gas boom.
The most ambitious plan floated publicly is a $2.1
billion proposal to expand the Port Richmond plant's capacity to export LNG to
European markets.
Penn American Energy L.P. says its plan would generate
$150 million a year for PGW, helping the city utility to curb rates, rebuild
its aging distribution system, and increase its $18 million annual fee to
cash-strapped municipal coffers.
No privatization is involved in its plan, Penn Energy
says, avoiding a sensitive issue that doomed Mayor Nutter's proposal last year
to sell PGW for $1.86 billion.
City Council now seems eager to demonstrate that it can
find an alternative to the $424 million pension-fund infusion Nutter said a PGW
sale would have generated.
PGW has produced liquefied natural gas at its Port
Richmond plant for more than 40 years to store gas for distribution on the
coldest winter days.
LNG is produced by chilling natural gas to minus-260
degrees until it turns into a liquid. When the liquid is warmed, it converts
back to gas.
Several partnership proposals are being shopped to city
officials, including one by former PGW bidder Liberty Energy Trust, that would
expand LNG production at Port Richmond on a smaller scale.
These are aimed not at exports, but at a growing domestic
market for LNG as a clean-burning replacement for fuel oil and diesel in
trucking, shipping, and remote power-generation applications.
The Penn Energy plan is more ambitious and would generate
far more potential revenue for the city, based on the greater volumes of
natural gas that would be processed.
The proposal is similar to the 2006 plan to create an LNG
terminal at Port Richmond. That proposal was to build an import terminal, not
an export terminal. But both plans involve moving large ships containing LNG on
the Delaware River, which created queasiness in waterfront neighborhoods in
2006.
"It's not a project we should be considering at
all," State Sen. Mike Stack, now the lieutenant governor, said in 2006
after visiting Boston to witness its LNG traffic.
City Council rejected the plan in 2006 by a 12-2 vote in
a nonbinding resolution declaring its "unqualified opposition to any project
that would create an LNG shipping terminal within the City of
Philadelphia."
Some Council members now seem more receptive.
Councilman David Oh, who was not a member in 2006,
expressed disbelief at a recent hearing that the city turned away Penn Energy's
initial approach in 2012 to build an export terminal because the Nutter
administration had set course to sell the utility.
"I have a great interest that we at least explore
this and put this on the table to voters," Oh said at the March 13
hearing.
The 2006 plan was derailed for a host of reasons,
including public uproar over the perceived dangers of shipping LNG.
There is no shortage of complications that could trip up
a revived plan to build an export terminal, which would attract substantial
activist opposition this time because exports would boost demand for
hydraulically fractured shale gas.
An export terminal would need upgraded pipelines to
deliver up to 700 million cubic feet of gas a day to the LNG plant. The Tioga
Marine Terminal would need to be relocated to accommodate LNG vessels. And the
major bridges linking this area with New Jersey might be closed during the
departure of LNG vessels.
"There are challenges across the board,"
acknowledged Franc James, 52, a Philadelphia native who heads Penn Energy.
"But to generate $150 million in revenue for the city, there are going to
be challenges. It's not an easy project."
A very large hurdle would be obtaining a license to
export LNG. The Department of Energy has approved nine of 35 applications to
export LNG to non-Free Trade Agreement countries, which make up the biggest
market for the fuel. Most industry observers believe only a fraction of the
projects will be built because the export market can absorb only so much LNG.
Philip Rinaldi, chief executive of Philadelphia Energy
Solutions' South Philadelphia oil-refinery complex, belittled the LNG export
business at the recent Council hearing, calling it an "extremely
expensive" way to chase international markets.
"I think that's a crazy business, I have to tell
you," Rinaldi said.
James, the head of Penn Energy, was introduced to the
energy industry via an unorthodox route. He was a partner in India with a firm
exporting iron ore when Indian public officials enlisted him to help find
supplies from the American shale-gas boom.
He formed the Indo America Energy Group in 2012 to export
LNG to India. The company was reborn as Penn America after his Indian partners
found other LNG supplies.
"Franc is an eclectic guy, well-connected,"
said James Seif, a principal at Ridge Global, the risk-management consulting
firm founded by former Gov. Tom Ridge that is working with Penn Energy.
James hopes the Penn Energy proposal would leapfrog other
projects awaiting export licenses because of its municipal support and because
of national-security interests - its target market would be European nations
held hostage by Russian natural gas supplies.
"Our view is that the merits of this project
differentiate it from other projects in the queue," he said.
But first, the city has to sign on, a challenge with the
mayor in his final year in office and Council still exploring a range of PGW
options.
"We don't have anything unless we have the
city," James said.
Source: Philly.com
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