Startup delayed for LNG to fuel TOTE ships

  • The Midnight Sun, one of two ships serving Alaska from the Port of Tacoma owned by Totem Ocean Trailer Express, better known as TOTE, will eventually be converted from bunker-C fuel to cleaner LNG but that depends on approval of a marine terminal site that's attracted controversy in Washington State. (Photo/File/AJOC)

While this fall’s big West Coast oil and gas news has been Shell’s multibillion-dollar LNG Canada project in British Columbia, creating thousands of construction jobs toward completion by 2024, a much smaller facility 550 miles to the south plans to start producing the fuel by late 2020.

Puget Sound Energy, the gas and electric utility serving communities on Washington state’s Puget Sound, issued a construction contract two years ago for its gas liquefaction plant, storage tank and marine fueling depot.

It has an anchor customer lined up to take liquefied natural gas as a marine fuel. It has a 25-year tidelands lease on 33 acres in the Port of Tacoma, which will earn the port $212,000 per month after the plant starts-up. It has all its major permits but one.

While construction continues on the $310 million project, the utility is waiting for the final environmental impact statement, or EIS, required for an air quality permit. The permit delay already has pushed back the plant’s anticipated start-up date from 2019 to 2020.

Though the project’s capacity is about 1 percent of the LNG Canada development in Kitimat, British Columbia, and about 1 percent of its $30 billion price tag, it’s anything but a small controversy in the Tacoma area.

The plant has faced strong and constant opposition from community activists, environmentalists and The Puyallup Tribe, prompting a re-do of the environmental report. Critics have questioned the safety of locating the plant in an urban area, in addition to opposing continued reliance on fossil fuels.

Responding to the pressure, the Puget Sound Clean Air Agency, with jurisdiction over four counties and their 4 million residents, ordered the supplemental EIS in January. The agency hired a consultant for an in-depth analysis of the full lifecycle of greenhouse-gas emissions that would be caused by the plant.

While work on the report was underway, the agency issued the utility a notice of violation for starting work on the plant without the air permit but did not order a halt to construction.

The draft report was issued in October, with a Nov. 21 deadline for comments. The final report is expected in February.

The 212-page report said overall greenhouse-gas emissions in the area would be reduced by the liquefaction and LNG storage terminal — if the plant gets all its feed gas from British Columbia.

That detail is so important that the report recommended the source of gas be a “required condition” for the air permit, including a requirement that “compliance … will be demonstrated on a continuous basis.”

The draft report recommended using Canadian gas because British Columbia has adopted “comprehensive drilling and production regulations” to cut methane emissions. Lacking similar regulations, methane emissions from U.S. gas production are “five times higher,” the report said.

Taking gas by pipeline from Canada “won’t be an issue,” David Mills, a senior vice president at Puget Sound Energy, was quoted in news reports. “The vast majority comes from Canada, so we will move forward with the process given that dynamic. … I am fully expecting to have an air permit in hand late winter, early spring,” Mills has said.

The liquefaction plant will have the capacity to turn about 20 million cubic feet of gas into 250,000 gallons of LNG per day, storing up to 8 million gallons in an insulated concrete tank 140 feet in diameter and 150 feet tall at its highest point.

A little less than half the LNG will be used to serve the utility customers’ peak-demand heating needs in cold weather. The super-chilled LNG would be warmed up, returning it to a gaseous state for re-entry into the distribution pipeline system. The rest of the plant’s production would flow as LNG to transportation users — mostly maritime customers, but also trucking and industrial customers.

The anchor marine tenant will be Totem Ocean Trailer Express, better known as TOTE, which plans to convert the two ships it uses for Tacoma-Anchorage freight service to run on LNG. International Maritime Organization regulations require oceangoing ships to significantly reduce sulfur emissions by July 2020, with LNG emerging as one of the preferred options for meeting the new standards.

In May, because of the delayed start-up date for the Tacoma fueling depot, TOTE announced it was delaying conversion of its two ships. The ships now run on marine bunker fuel, a diesel-based mix. Despite the delay, TOTE “is fully committed” to converting the ships to run on LNG, the company said in a notification to customers.

A Puget Sound Clean Air Agency public hearing Oct. 30 on the draft supplemental EIS drew 130 people who testified and many more who protested outside the hearing — mostly critics of the project. Supporters, however, testified that LNG is part of a cleaner future.

“I know all too well what it’s like to live in a dirty, polluted city, and it’s exactly why I support the LNG plant,” said Jenn Adrian, who grew up when the Asarco copper smelter was operating in Tacoma. “LNG is a way forward, a way to move beyond the dirty industrial past.”

“This has been through a very long, years-long public process,” Tara Mattina, the Port of Tacoma’s director of communications said in April. “I just don’t understand this argument that this is somehow harmful to water or air quality. … This is in our mind a clean-air project, to provide a cleaner fuel for shipping, and it reduces the potential for harmful spills in the water,” she told the Seattle Times.

“We get it that it is still a fossil fuel, but there is no cleaner fuel for ships than this.”

Puget Sound Energy serves about 1.1 million electrical customers and 900,000 gas hook-ups in its 6,000-square-mile service area.

Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

11/20/2018 - 10:22am