In order to serve continuing gas demand growth in the already constrained New York City area, the state and city must reconsider current regulatory obstacles to the expanded use of liquefied natural gas (LNG), according to a new report by the Center for Management Analysis (CMA) at the C.W. Post Campus of Long Island University in Brookville, NY.
LNG will play an increasingly important role in providing gas supply to the nation, but no LNG import terminals are currently located in New York, the fourth largest gas consuming state in the nation and the third largest for residential gas consumption. Spot gas prices last winter reached record levels in the state, higher than $70/MMBtu. If the state and metropolitan New York City expect to benefit from LNG, the rules and regulations governing the fuel will have to be revised, according to CMA.
In New York, the Public Service Commission (PSC), the Department of Environmental Conservation, the state Department of Transportation and the Department of State all have regulatory oversight of LNG operations in addition to the four or more federal agencies that oversee LNG.
“The [state] regulations in place often overlap with federal regulations and do not provide for the one stop licensing of new facilities, expanding existing ones or establishing transportation routes,” CMA stated in its report. In addition to the state, New York City has its own set of regulations pertaining to LNG operation and facilities within the city.
“In spite of the positive operating experience of New York State’s 3 existing LNG [peak shaving] facilities, the state has been hesitant to aggressively embrace the expanded use of LNG unlike other parts of the country,” according to the report. “In fact a moratorium on the siting of new LNG facilities and the establishment of intrastate transportation route was in place from 1973 to 1999.”
The moratorium was put in place after an accidental fire at Texas Eastern Transmission’s LNG facility on Staten Island. CMA said investigations revealed that cleaning agents rather than LNG were the cause of the fire.
While the moratorium was allowed to expire, New York City (NYC) regulations, which apply to KeySpan’s Brooklyn LNG site and ConEdison’s Queens site, still restrict the use and transportation of LNG within the city.
LNG is “no more dangerous — and in many cases less so — than other commonly stored and transported fuels like gasoline, diesel fuel and propane,” said Matthew C. Cordaro, director of the CMA. “The recent destruction caused by the home heating oil tanker crash in Connecticut illustrates this point.”
The state should streamline its regulations, “possibly in a fashion similar to the Article X process that was in place for electric generation, for one-stop licensing of new LNG facilities in compliance with applicable federal codes and standards,” he said. “It should also develop a policy, based on federal [Department of Transportation] regulations, to facilitate the intra- and interstate trucking of LNG.
“In addition, NYC should establish rules to facilitate the necessary upgrades of the existing sites, allow the construction of new LNG facilities and create transportation routes with the proper safeguards for the routine transport of LNG.”
Over the long term, he said, the city and state should jointly study the viability of either establishing LNG terminals within the state or pursuing other alternatives to gain access to an emerging LNG market.
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