Former dynamite factory with underground caverns being developed for natural gas liquids
From an Article by Andrew Maykuth, Philadelphia Inquirer, June 9, 2019
The ‘hidden’ plan to remake an old dynamite factory near Philadelphia into a major gas export terminal
A New York investment firm is quietly laying the groundwork to build a major storage terminal at a former explosives factory near Philadelphia for exporting liquid fuels from Pennsylvania’s rich natural gas fields in Marcellus Shale to foreign markets.
The plan to revive DuPont’s former Repauno Works in Greenwich Township, a shuttered dynamite factory on the Delaware River that is still contaminated 20 years after it closed, has gathered support from South Jersey elected officials. But environmentalists are mobilizing opposition to the project, alleging it is a stealth effort to export liquefied natural gas (LNG).
The Delaware Riverkeeper Network, in a May 28 letter to federal and state regulators, said the private port’s true purpose is to export LNG produced in northern Pennsylvania. “This looks to us like a deliberate cover-up,” Maya van Rossum, the head of the riverkeeper network, said in a statement.
The emerging battle over an energy project on a largely industrial stretch of the Delaware River pits local officials who envision an economic development opportunity vs. climate activists who see a risky business that perpetuates the nation’s dependence on fossil fuels. The issue also has national political overtones: The Trump administration has championed LNG exports as a means to influence international policy.
“LNG has always ignited the public imagination because it’s so explosive,” said Jeff Tittel, director of the New Jersey Sierra Club, which has denounced the Repauno project as a “threat to the environment and public safety.” Efforts to build LNG import terminals along the Delaware stalled in 2006 after public opposition mounted over fears about dangers.
But the project’s supporters say LNG’s risks are manageable, and the port’s purpose has been well-publicized since the new owners, Delaware River Partners LLC, a subsidiary of Fortress Investment Group, acquired the property in 2016.
“Oh, c’mon, the Riverkeeper knew about this,” said New Jersey Senate President Stephen M. Sweeney, a Democrat who helped secure state support for a port access road that will bypass nearby Gibbstown. “They’re against it. They’re going to grasp for straws and try to claim whatever they can claim. How is it a cover-up?”
>>> Locator map of former DuPont Repauno Works plant, site of a planned gas terminal on the Delaware River
The Delaware River Basin Commission on Thursday conducted a hearing in West Trenton on the company’s application to build a $96 million 1,600-foot-long pier to load tankers at Repauno, also known as the Gibbstown Logistics Center. The commission, which says its review is confined to the impact of dredging and wharf construction, may vote on the proposal as early as Wednesday, June 12th.
LNG is used primarily to store gas in compact liquid form or to ship it to remote customers. Many utilities store LNG to supply customers during peak-demand periods. Philadelphia Gas Works produces and stores LNG in Port Richmond, and Peco Energy operates a plant in West Conshohocken.
LNG is produced by chilling natural gas to minus 260 degrees — so cold that it cannot be transported long distances in pipelines, and can only be stored or shipped in insulated tanks.
The Trump administration is encouraging U.S. producers to export surplus gas produced from the fracking boom as a counterweight to Russian dominance of European gas markets. Energy Department officials recently coined the term freedom gas for LNG exports.
The New Jersey Department of Environmental Protection last year approved an application to modify the property’s land-use permit, which mentioned LNG among several fuel commodities that would be transloaded at Repauno, along with automobiles, perishables, and “other bulk cargo.”
On June 6, 2019, members of the Delaware River Basin Commission, Pamela M. Bush, Steven J. Tambini, and Jeffrey L. Hoffman, listen to the statement of protest by Taylor McFarland, of the Sierra Club, protesting the construction, on the Delaware River, of a dock that would be used for loading fossil fuels on ships in Gloucester County, NJ.
The state agency also issued a waterfront development permit for the project on May 20 but suspended the permit Wednesday after activists complained that public notification was inadequate. The department will reevaluate the application after a new 15-day public comment period.
LNG and natural gas liquids have different properties. Gas liquids — propane, butane and ethane — are “petroleum products,” and can be shipped in pipelines. They can also be exported, without a special permit.
Activists argue that natural gas exports contribute to climate change and enable additional fracking. They say LNG is more dangerous than propane and butane, which are also derived from natural gas drilling. While speculation about LNG picks up steam, propane and butane are likely to be the early focus for the Repauno site.
A $450 million project under development
The former DuPont factory contains a valuable underground cavern carved out of granite that can store up to 186,000 barrels — 7.8 million gallons — of propane and butane (caverns are not suitable for storing LNG).
The new owners say they want to enlarge the underground cavern to three million barrels, which would transform the site into the largest underground fuel storage facility on the East Coast. But New Jersey does not have regulations governing new cavern construction, and has launched a process to establish rules for underground storage operations, said Brendon Shank, a DEP spokesperson.
Delaware River Partners’ immediate parent company, Fortress Transportation and Infrastructure Investors LLC, has told investment analysts that it plans to spend $450 million to develop a Repauno rail and port terminal, including the expanded underground storage cavern and a rail-unloading facility. The new wharf, which can berth up to two 966-foot tankers simultaneously, supplements a smaller $60 million pier that was built last year.
Fortress Transportation executives have told investment analysts there is big demand from European petrochemical manufacturers for Marcellus propane as a raw material in plastics production.
They hope to piggyback on the same markets served by the Marcus Hook Industrial Complex, the former Sunoco refinery where Energy Transfer Partners is exporting large volumes of ethane and propane that are delivered through its Mariner East pipelines. (The Marcus Hook property also has about 2 million barrels of underground cavern storage built more than 45 years ago.)
Ocean going vessels are loaded with propane and butane at the Marcus Hook Industrial Complex in Marcus Hook. Similar ships would be loaded at a proposed pier in Greenwich Township, N.J., at the former DuPont Repauno Works property.
Fortress Transportation expects to clear $25 million or more in operating income annually from Repauno in 2020 and 2021, increasing to $150 million annually after the expanded underground storage is completed in 2022. “That’s kind of the trajectory of that business that we feel pretty good about,” Joseph P. Adams Jr., chief executive of Fortress Transportation, told investors in a quarterly conference call in November.
The port operator has been circumspect about the prospects for LNG exports, which are unmentioned in its conference calls with analysts. Three years ago it publicly distanced itself from LNG after environmentalists protested. Now it will say only that LNG is an option, and will not comment on potential customers.
But environmentalists and industry analysts have connected the dots between the Repauno site and another affiliated company, New Fortress Energy LLC, which became a publicly traded company this year and spelled out ambitious plans to build a natural gas liquefaction plant in Wyalusing, Pa.
That $800 million plant in Bradford County would produce 3.6 million gallons of LNG a day directly from Marcellus Shale gas producers; it anticipates expanding production if its business model proves profitable. The plant would be 30 times bigger than a private LNG plant proposed at PGW’s Passyunk Avenue property in Philadelphia, which has attracted protests from activists.
New Fortress, according to its federal securities filings, aims to export much of its LNG to power plants and terminals it controls in the Caribbean, where the fuel would displace dirtier, and more expensive, diesel in power production. It says the LNG would be shipped through an unidentified Delaware River port, 195 miles from its production plant in northern Pennsylvania, which seems to match the Repauno site in description.
In its annual report, New Fortress said it had entered into an agreement in January with a company managed by an affiliate and obtained “exclusive rights to deliver and transload LNG” from its Delaware River port. The LNG would be loaded directly from trucks or trains to ships “allowing for simultaneous and continuous operations.”
A New Fortress spokesperson, Jake Suski, confirmed in an email last week the company is “a potential customer of the Gibbstown Logistics Center in Repauno.”
The affiliated companies are all linked to Wesley R. Edens, a 57-year-old former investment banker who cofounded Fortress Investment Group, the private equity and hedge fund firm that he and his partners sold in 2017 to Japan’s SoftBank Group Corp. for $3.3 billion. The founders continue to operate Fortress Investment Group independently from SoftBank.
Edens is also co-owner of the Milwaukee Bucks and Aston Villa Football Club in England.
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