Penn LNG, headed by a native Philadelphian, has quietly lined up support to build a $6.4 billion liquefied natural gas export terminal near Philly. The energy project faces many challenges.
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The GWSI warehouse at Front and Lloyd Streets in Chester, which in a previous life was a Ford assembly plant, is said to be a leading candidate for a proposed liquefied natural gas terminal. The owner of the property, Michael Gerace, says it is not for sale.Read moreHEATHER KHALIFA / Staff Photographer
A New York firm headed by a native Philadelphian aims to build a $6.4 billion liquefied natural gas export terminal in Chester City or another waterfront location near Philadelphia, capitalizing on the abundance of Pennsylvania shale gas and soaring worldwide demand for LNG after Russian’s invasion of Ukraine.
Penn LNG, which is affiliated with a company called Penn America Energy, has been quietly lining up support for the massive project, and it has targeted a 60-acre waterfront site in Chester now occupied by a warehouse complex. Chester Mayor Thaddeus Kirkland said his financially stressed city, which is under state receivership, would welcome the tax revenue and job opportunities from a big industrial development.
“Would liquid fuels be a financial boon to the city?” said Kirkland, who has met with Penn LNG officials several times in recent years. “Yes, it would probably put us in a great financial position for decades to come.”
Regional labor leaders, eager to create more construction jobs, also have been rallying political support to build a gas liquefaction plant and export terminal along the Delaware, similar to facilities that have sprouted on the U.S. Gulf Coast and turned the United States into a major natural gas exporter. There are only two East Coast LNG export facilities, the larger of which, in Cove Point, Md., is comparable to the facility Penn LNG proposes.
“This has been in discussion quietly behind the scenes over the last five years,” said Jim Snell, business manager of Steamfitters Local 420, which has 4,600 members in Southeastern Pennsylvania. “Then the crisis started in the Ukraine, and now I think pressure has just ramped up tenfold. This project needs to get finished.”
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Tug boats in April prepare to pull out an LNG tanker at the Cheniere Sabine Pass Liquefaction facility in Cameron, La.,Mark Felix / Bloomberg
LNG projects have attracted strong opposition from environmentalists and community advocates, who say such plants are big polluters, pose a safety risk, and commit the nation to more harmful gas production from hydraulic fracturing when it should be moving away from fossil fuel consumption.
‘Last thing our community needs’
A community activist in Chester said she was unaware of the proposed gas plant in her city.
“We will be vehemently opposed to this LNG plant,” said Zulene Mayfield, founder of Chester Residents Concerned for Quality Living, an environmental justice group that opposed the relicensing of a Chester waste-to-energy incinerator. “An LNG plant is the last thing our community needs.”
Opposition from green advocates has stymied a plan by New Fortress Energy to liquefy natural gas at a proposed plant in northeastern Pennsylvania and transport the fuel by rail to the Repauno marine terminal in Gibbstown, Gloucester County. The Penn LNG proposal differs from the New Fortress plan in that LNG would be manufactured at the marine terminal itself.
Franc James, the founder of Penn LNG, declined to discuss the project in detail when he was reached by phone on Wednesday, citing nondisclosure agreements. He said he was in Harrisburg working on the LNG project. James made an unsuccessful attempt in 2015 to enlist the city of Philadelphia to build a $2.1 billion LNG plant on land adjoining an existing city LNG facility in Port Richmond.
“In the past year, we have made great progress in the most important elements of a project, forming a team and looking to source the cleanest natural gas possible,” Penn LNG said in an email response to questions.
Chesapeake Energy Corp., a large gas producer in the Marcellus Shale region, tagged Penn LNG as an “advanced project” in an LNG market analysis to investors in Dallas on April 6. A spokesperson for the Marcellus Shale Coalition identified Penn LNG as a project the trade group was “keeping a close watch on.”
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Zulene Mayfield, an environmental justice advocate in Chester, said her organization would oppose an LNG plant on the city’s waterfront.Jonathan Wilson
Snell says Penn LNG is keen on a property in Chester at 800 W. Front St., the location of a former Ford assembly plant that shut down in 1961 and was repurposed as a warehouse. The site has a deepwater port and a rail connection, and is close to several large interstate gas pipelines. But pipeline capacity may need enlargement to handle the one billion cubic feet of gas a day, or more than seven million metric tons a year, that the Penn LNG project proposes to export.
No sale
The property’s owner, Michael Gerace, who operates the one million-square-foot GWSI Inc. warehouse on the land, says he is not interested in selling. He said he has not heard from James in several years and was irked that his property is still in discussion.
“Let me just be clear: There’s no agreement, and there will be no agreement for an LNG plant on that site,” Gerace said. ”I have a full business using the site.”
Penn LNG was unspecific about a potential location. “We are evaluating every opportunity along the Delaware River and Chester is viable,” the company said in its email.
James, 59, the founder of Penn LNG, a child of two physicians who grew up in Philadelphia and attended Penn Charter, has been focused on creating an LNG facility in the Philadelphia area for about a decade.
James was a partner with a firm exporting iron ore from India in 2012 when he formed Indo America Energy Group to export LNG to India. In 2015, he founded Penn America Energy and teamed up with former Gov. Tom Ridge to propose to build an LNG export facility next to the Philadelphia Gas Works plant in Port Richmond. The city rejected Penn America’s proposal. Penn America has not built anything to date, though James has continued to press on with the LNG vision.
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A French ship, known as the LNG Endeavor, docks next to the Cameron LNG export facility near Hackberry, La., in March.Martha Irvine / AP
Penn Energy’s effort in 2015 wasn’t the region’s first unsuccessful LNG venture. Two companies explored building LNG terminals in Philadelphia and in New Jersey in 2005 — they would have been import terminals since U.S. markets were starved for natural gas at the time. Community activists opposed the plans, primarily on safety grounds, and they were scuttled.
A big challenge
Building a new natural gas liquefaction plant anywhere in the United States is a tall order, requiring huge amounts of capital and years for permitting and construction, during which time the markets might shift dramatically. LNG plants include massive refrigeration units that cool natural gas to minus-260 degrees, the point at which methane gas turns into a liquid. The fuel is stored and transported in insulated tanks and must be reheated into vapor before it is consumed.
Penn LNG is just one of several ventures competing to grab a share of the soaring worldwide LNG market. In Europe, buyers looking for alternatives to Russian energy are paying four times more for natural gas than it sells for in the United States, creating an arbitrage opportunity for anybody able to produce LNG here and transport the liquid fuel overseas. U.S. gas liquefiers are operating nearly at full capacity.
The United States stepped up LNG exports six years ago after domestic natural gas production surged dramatically with the adoption of fracking technology. U.S. LNG producers can liquefy 11.6 billion cubic feet (Bcf) of gas a day, which is expected to reach 13.9 Bcf by the end of this year. By comparison, Russia supplied Europe with about 13 Bcf a day of natural gas through pipelines in 2020, according to a U.S. Energy Information Administration analysis.
Most large liquefaction plants are on the Gulf Coast, close to abundant oil and gas infrastructure and surrounded by a political and regulatory ecosystem that has encouraged fossil fuel development. But resistance is growing even on the Gulf Coast, where organizers have rallied opposition around climate initiatives and environmental justice concerns.
“We’re getting a lot more pushback than we’ve seen historically,” said David E. Dismukes, executive director of the Center for Energy Studies at Louisiana State University.
Dismukes cited the work of Venture Global LNG Inc. as a road map for successful project development. The Virginia firm locked in contracts from overseas buyers, enabling it to accelerate financing, design, and permitting. The company has several large LNG plants under operation or in development in Louisiana, including Plaquemines LNG, which last month announced it had secured $13.2 billion in financing and aims to come online in 2024.
» READ MORE: Mariner East Pipeline has sparked a boom in fracked gas exports from Philly region
“Venture Global is probably a pretty good model for people,” said Dismukes. “And if they’re not doing something like that up in the Mid-Atlantic, then getting this off the ground is going to be just an aspiration.”
A Mid-Atlantic export terminal would be closer to European markets and less vulnerable to hurricanes than Gulf exporters are. It would also have access to Appalachian shale gas producers, who say their production sells at a discount to national prices because they lack sufficient pipeline infrastructure to transport gas to markets.
“We’ve been talking about utilizing the Delaware River port for some time, and it’s a great complement to other avenues that are available to Appalachian shale producers,” David Callahan, president of the Marcellus Shale Coalition, said
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The Philadelphia Gas Works plant in Port Richmond has produced liquefied natural gas since 1973 and stores it in two tall insulated tanks s in the background. The LNG is turned back into gas in the winter for use on peak heating days. A proposed LNG export facility would be much larger.Read moreCLEM MURRAY / Staff Photographer
Appalachian producers are already marketing gas liquids such as ethane and propane overseas from the Marcus Hook Terminal near Chester, which is tied into the shale region through Energy Transfer LP’s controversial Mariner East pipeline system. Gas liquids, which are primarily used as a raw material in petrochemical manufacturing, are different from liquefied natural gas that would be produced at Penn LNG, which is primarily used for electric power generation and home heating.
A big cheerleader for LNG expansion is Toby Rice, chief executive of EQT Corp., the Pittsburgh company that has become the nation’s largest gas producer. Rice last Monday hosted a delegation of diplomats from Europe, Asia, Africa, and the Americas for a bus tour of EQT’s operations in Western Pennsylvania to pitch the benefits of American LNG.
The pitch for LNG
As part of its campaign to accelerate exports, the US LNG Association is presenting an alternative environmental narrative that portrays natural gas as compatible with aims to reduce worldwide carbon emissions. The trade group, which operates as LNG Allies, says that domestic natural gas played a bigger role than renewable energy in reducing the nation’s carbon emissions in the last decade by displacing dirtier fossil fuels such as coal and oil. It says LNG exports can induce more overseas power producers to switch from coal to natural gas, reducing carbon emissions.
Penn LNG, as part of its pitch aimed at potential buyers concerned about the climate, is presenting its terminal as “the greenest and cleanest export facility in the United States,” according to a social media post by Jennifer Stewart, Penn LNG’s chief sustainability officer. The plant would use low-emission production methods and source its gas from producers who take extra steps to reduce their social and environmental impacts in a certified process known as “responsibly sourced gas.”
Chester Mayor Kirkland said he’s aware of the arguments against an LNG terminal. “I have to make sure that this facility is not something that will hurt us environmentally, or hurt us physically, by way of fires or explosions, or what have you,” he said.
But he also said he’s a realist and knows that prosperity is a distant memory for many people in Chester.
“I remember the Ford plant being here,” he said. “I remember Baldt Anchor behind here. Atlantic Steel was right across the street from my house. I remember Sun Shipbuilding & Drydock down at the waterfront. I remember all those industries. You could quit a job and walk a couple blocks down the waterfront area and get another job that same day.”during a recent visit to Philadelphia. “Why not here, an easy access point?”