AK Railroad gets LNG approval; capacity may need revisiting

The Alaska Railroad Corp. has approval to be the first railroad in the country to transport liquefied natural gas.

The Federal Railroad Administration granted the Alaska Railroad’s application to haul LNG in a letter dated Oct. 9 to the state-owned rail company.

The Alaska Railroad submitted its request Nov. 14, 2014.

Currently, LNG is not hauled by rail anywhere in the country and the Alaska Railroad is the first state to receive the approval, according to the Federal Railroad Administration.

The letter could spell good news for Alaska Industrial Development and Export Authority’s Interior Energy Project, or IEP, which is searching for the least expensive way to get natural gas to Interior residents and businesses. LNG, like any other bulk commodity, could potentially be transported from Southcentral to the Interior by rail in a much more cost-effective manner than by truck, the other primary option.

AIDEA officials recently selected plans to haul either imported or domestic LNG north by rail as finalists among others in the latest Interior Energy Project effort.

Alaska Railroad spokesman Tim Sullivan said the railroad is “happy about this being a good first step” towards moving LNG on its tracks.

If the Alaska Railroad begins hauling LNG it must report the activity to the Federal Railroad Administration each month.

The railroad is also limited to two LNG trains per week carrying a maximum of eight, 11,000-gallon LNG containers.

The Interior Energy Project proposals all call for producing at least 100,000 gallons of LNG per day to meet eventual projected demand — far exceeding the volume approved for transport.

Fairbanks Natural Gas and its sister companies currently truck a small amount of LNG north from Southcentral to meet the utility’s demand.

The Railroad Administration said in a statement the volume limit was based on the amount the Alaska Railroad requested. That limit may be reevaluated in the future based on demand and the administration’s confidence the LNG is being handled safely.

IEP Manager Bob Shefchik said his team discussed the capacity restriction with the railroad and the next two years — before the approval expires — could be used to prove the safety and reliability of the system through test shipments before a greater volume is possibly requested.

Proposals from Interior Energy Project finalists that include rail transport will be evaluated with that in mind, he said.

First gas for the IEP is hoped for by mid-to-late 2017.

Before Alaska LNG is moved by rail, the Matanuska-Susitna Borough’s 32-mile Port MacKenzie rail spur will likely have to be finished as well. Several companies have pegged Port MacKenzie — across Knik Arm from Anchorage — and the nearby real estate as a prime area for an LNG plant.

However the unfinished rail line connecting the port to the rest of the Railbelt still needs about $120 million to complete it during a time of severe budget tightening for the state.

The lone Interior Energy Project plan remaining to import LNG proposes offloading LNG from British Columbia in Seward, which is the southern tip of the Railbelt.

Elwood Brehmer can be reached at [email protected].

11/24/2016 - 2:40pm