OP-ED On the shore side, however, less work has been done to reconcile sometimes inconsistent and generally unclear jurisdiction over the siting and operations of these plants. The design and siting of a small-to-medium scale LNG facility likely will involve federal, state, and local regulatory oversight which includes a potentially lengthy formal permitting process. The owners and operators of the marine terminals will be experienced in the construction and operations of LNG facilities and these entities have a long history of safety and responsible LNG operations. They do this as a matter of practice and culture, but the enormous liabilities that attach to such operations and regulatory oversight provide additional incentives to “get it right.” To the extent federal regulations impose standards that exceed a reasonable calculation of probable risks and the imposition of redundant or unnecessary requirements, the deployment of these facilities will be constrained and the costs increased. Further complicating the rapid expansion of LNG as a marine and transportation fuel is the lack of longstanding relationships between the marine industry and LNG
suppliers. Fuel oil is readily available in virtually all ports, the supply and distribution infrastructure is well established, and there is not a pattern of long term fuel supply contracts. Conversely, the energy business has historically relied upon long term contracts to support investments in exploration, production, and distribution of energy resources. Thus, there appears to be a disconnect between the two industries as reflected in the seeming reluctance of marine operators which have announced LNG projects, to commit to long term LNG supply contracts; preferring instead to rely on the assumption that LNG supplies will be available when needed, much the same way fuel oil is always available. This is one of those rare moments in our history where we can shape transportation for a generation and produce significant economic and environmental benefits for the country. But if LNG development proceeds in a sporadic and isolated fashion, the risk grows that the road to broad LNG development will be frustrated by a lack of uniform and certain regulations and continuing difficulties in marketing LNG to the marine industry.
Because the “chicken and egg” impediment involves public policy and regulatory issues, as well as market relationships, there is a clear need for a national public-private initiative founded on a shared commitment to LNG for transportation. The domestic use of natural gas for transportation must be a national priority and receive the full support of our government. Likewise, the LNG supply industries and the marine and transportation industries must begin today to enter into the critical dialogue and collaboration that will find the middle ground that enables infrastructure investments to be made, and transportation operators to move forward with LNG conversions. All of the ingredients for this transformation are in this country today; we have the natural gas; we have the technical and operational capabilities and we have a willing market. At this point, however, it is unclear whether we have the national purpose and will to seize this future. ■
John Graykowski is the former Deputy and Acting Maritime Administrator who is now a consultant in the marine industry.
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24 MARINE LOG May 2013
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