Gulf Oil Limited Partnership, which distributes motor fuels to stations across the country, is moving forward with plans to construct a liquefied natural gas (LNG) production facility in northeast Pennsylvania, where Marcellus Shale dry gas production continues to rise, according to FERC filings.

On Thursday, the Federal Energy Regulatory Commission issued an order at Gulf Oil's request that will relieve the company of federal oversight under Section 7 of the Natural Gas Act, under which FERC regulates natural gas pipelines. The Commission found that Gulf Oil's proposal is "based on a desire to reach markets that can only be served by truck." The project, FERC said, would not displace interstate pipeline deliveries because LNG produced at the facility will not be transported at any point by pipeline.

Instead, Gulf plans to distribute the LNG regionally to Marcellus gas producers, truck fleet operators and natural gas utilities in New England.

"While the Commission makes jurisdictional determinations concerning projects, including LNG projects, on a case-by-case basis, the Commission has never asserted Section 7 jurisdiction over facilities that will not be used to liquefy any gas that has already been transported upstream on jurisdictional interstate pipeline facilities," FERC's order said. "Second, as a general rule, the Commission's jurisdiction over the transportation of gas in either gaseous or liquefied state in interstate commerce is limited to transportation by pipeline, i.e., our jurisdiction does not extend to deliveries of natural gas by truck, train, or barge."

According to its filings with FERC, Gulf Oil's plan calls for the construction and operation of a liquefaction facility in Great Bend, PA, in Susquehanna County, which is one of the leading counties for natural gas production in the state. Producers there have also endured midstream constraints that are more severe than those of their counterparts in the southern cores of the Appalachian Basin.

Gulf Oil said the facility would utilize electric compression to produce 100,000-300,000 g/d of LNG. That would require between 8,333 and 25,000 Dth/d of natural gas. Depending on the markets being served, Gulf Oil would also store up to three million gallons of LNG on site.  The company currently estimates that the project will cost $45 million.

In its correspondence with FERC, Gulf Oil said it recently started to expand into natural gas transportation fuels. Rising fuel costs and increased environmental restrictions have some municipal fleets, long-haul transportation firms and consumers considering a switch to either compressed natural gas or LNG. Multiple companies across the country are working to build distribution networks, refueling stations or providing conversion services (see Daily GPI, July 10; April 25).