Interpretation Response #PI-10-0025
Below is the interpretation response detail and a list of regulations sections applicable to this response.
Interpretation Response Details
Interpretation # PI-10-0025
Mr. Randall S. Rich
Counsel for Maine Liquid Methane Fuels, LLC
Pierce Atwood LLP
900 17th Street, N.W.
Washington, D.C. 20006
RE: Request for Interpretation of 49 CFR 193.2001
Dear Mr. Rich:
On December 21, 2010, you submitted a request for written interpretation of the minimum federal safety standards for liquefied natural gas (LNG) facilities in 49 CFR Part 193. Specifically, you asked whether a proposed liquefaction and trucking facility in Brewer, Maine, would be subject to those standards under § 193.2001.
The Office of Pipeline Safety (OPS) has concluded that, if constructed as proposed, the LNG facilities described in your request would be used in the transportation of gas by pipeline and do not qualify for any of the exceptions provided in § 193.2001. Accordingly, those facilities would be subject to the minimum federal safety standards in Part 193.
Your client, Maine Liquid Methane Fuels, LLC (Maine LMF or the Company), is planning to build a natural gas liquefaction and trucking facility on a 14-acre site in Brewer, Maine. As described in your letter:
[The Company] will use a multi-step process to treat natural gas received from [the Maritimes & Northeast Pipeline] and manufacture liquid methane on-demand to the specifications of end-use customers and motor fuel retailers. [Maine LMF] will treat natural gas in an amine plant that removes C02 and sulfur compounds from the natural gas stream. The purified natural gas then will be cooled in a heat exchanger and will pass to a separator that removes free water, before passing to a two bed mol sieve dryer that removes the remaining moisture along with C6+ hydrocarbons. The resulting methane gas residue then will pass through refrigeration and a cold box incorporating a nitrogen refrigeration loop with two turbo expander sets to cool the feed gas in stages to a sub-cooled state to limit flash. The cold box also incorporates a fractionation column to remove the appropriate level of C2+ constituents to meet the specific needs of individual customers. The liquid methane will be collected in two 70,000 gallon ASME pressure vessels designed to facilitate transfer to [the Company's] trucks. The transfer is accomplished by pressure differential without penetration(s) in the tank below the liquid level. The plant will run only when offloading of fuel to trucks has been scheduled. The liquid methane manufactured at the plant will meet the needs of a diverse class of customers, including transportation fleets, industrial facilities, and institutional users. [Maine LMF] will transport the liquid methane by truck to these customers located throughout the State of Maine.
Citing these facts, you contend that the Company"s facilities would not be "used in the transportation of gas by pipeline that is subject to the pipeline safety laws (49 U.S.C. 60101 et seq.) and [49 CFR] Part 192." You further contend that even if that is not the case, the Maine LMF facilities would either be "used by ultimate consumers of LNG or natural gas" or "in the course of natural gas treatment or hydrocarbon extraction which do not store LNG." Therefore, those facilities should not be subject to the minimum federal safety standards for LNG facilities in Part 193.
Section 193.2001 states, in relevant part:
§ 193.2001 Scope of part.
(a) This part prescribes safety standards for LNG facilities used in the transportation of gas by pipeline that is subject to the pipeline safety laws (49 U.S.C. 60101 et seq.) and Part 192 of this chapter.
(b) This part does not apply to:
(1) LNG facilities used by ultimate consumers of LNG or natural gas.
(2) LNG facilities used in the course of natural gas treatment or hydrocarbon extraction which do not store LNG.
(3) * * *
Your first contention is that the Maine LMF facilities would not be "used in the transportation of gas by pipeline" under § 193.2001(a). In particular, you state that the Company "will not store in a liquid form gas . . . for treatment and conversion to liquid fuel[,]" that it will not "regasify and reinject gas into . . . any other pipeline[,]" and that "[i]t will not provide a storage service" for the upstream interstate transmission line. You also note that Maine LMF "will treat and convert gas to liquid fuel for sale only on-demand to meet the requirements of individual liquid fuel customers[,]" and that its "on-site tanks are intended only to collect liquid during the brief period between manufacture and truck loading."
In your opinion, these "operations are in stark contrast to an LNG terminal that is designed to liquefy, store and regasify large quantities of LNG for peak shaving by a utility, for wholesale natural gas storage and marketing, or for pipeline balancing or other operational purposes." You believe that "such storage, regasification and reinjection of gas is the essential element of an LNG facility"s "use in the transportation of gas[,]"" and that the act of transportation in this case "ceases when [the Company] receives gas from [the operator of the interstate transmission line]."
Contrary to your assertions, OPS has consistently found that similar LNG facilities are used in the transportation of gas by pipeline. For example, in a March 10, 1995 letter of interpretation to Northern Eclipse, Inc. (Northern Eclipse), OPS concluded that a liquefaction and trucking facility would be used for such transportation, because it received natural gas from a pipeline subject to the minimum federal safety standards in Part 192.1 Indeed, OPS explained that the arguments presented by Northern Eclipse, i.e., that it "[wa]s merely an end user of a pipeline and . . . producer of a commodity . . . transported by truck," conceived "the jurisdiction of Part 193 too narrowly." OPS further stated that:
Part 193 is not limited to LNG facilities that supply natural gas to pipelines. As stated in § 193.2001(a), Part 193 applies to LNG facilities used in the transportation of gas by pipeline that is subject to the regulations in 49 CFR Part 192. In general, the Part 192 regulations apply to the pipeline transportation of gas between producers and consumers. Because after liquefaction, the gas received by pipeline would still be en route to consumers, the liquefaction facility would come within the range of pipeline transportation under Part 192 and, thus, be subject to Part 193.
Likewise, in a May 16, 1997 letter of interpretation to the Arizona Corporation Commission, OPS determined that a liquefaction, storage, and truck transfer facility associated with a regulated gas transmission line would be subject to the requirements of Part 193. In so doing, OPS stated that:
regardless of who owns or operates different sections of an LNG facility, it is subject to Part 193 in its entirety. Part 193 covers all parts of an LNG facility from the point at which it receives gas from a Part 192 regulated gas transmission pipeline through the liquefaction process, storage, and transfer into a motor carrier vehicle.3
In this case, the Maine LMF facilities would receive natural gas from a regulated interstate transmission line and convert that gas into LNG for sale and delivery to "a diverse class of customers, including transportation fleets, industrial facilities, and institutional users[,] . . . located throughout the State of Maine." Accordingly, as in these prior letters of interpretation, OPS concludes that your client"s facilities would be used in the transportation of gas by pipeline for purposes of § 193.2001(a).
Your second contention is that the Maine LMF facilities would be "used by ultimate consumers of LNG or natural gas" and qualify for the exception provided in § 193.2001(b)(1). In particular, you state that your client"s facilities will only "be used in two ways": (1) by its customers, who will use those facilities "to meet their fuel needs," and by the Company itself, via a "manufacturing process that creates a distinct end-use product, liquid methane, from the natural gas it receives by pipeline." You further state that "[t]he exclusion in § 193.2001(b)(1) appears intended to distinguish facilities such as [Maine LMF"s] plant from an LNG storage facility that stores . . . large quantities of LNG and regasifies the liquid for transmission [i]n a pipeline and resale by multiple sellers."
During the rulemaking that led to the adoption of § 193.2001(b)(1), OPS explained that the intent of that provision was to create an exception for "an LNG facility used by the ultimate consumer of the product."4 Likewise, in responding to a series of questions from a congressional committee, OPS stated that the exception in § 193.2001(b)(1), was designed for "small" facilities which are "generally located in industrial plants . . . [to] serve as a supply of energy or feedstock for the plant."5 Unlike these examples, the Maine LMF facilities would be used to produce LNG for sale and distribution by truck, not solely for onsite consumption. Therefore, OPS concludes that your client"s facilities would not qualify for the end-user exception in § 193.2001(b)(1).
Finally, you contend that the Company"s facilities qualify for the exception in § 193.2001(b)(2) for "LNG facilities used in the course of natural gas treatment or hydrocarbon extraction which do not store LNG." In particular, you state that Maine LMF "is in essence a processor of gas," i.e., "[i]t will treat and purify natural gas and extract a high-quality liquid methane fuel from the gas stream." You further state that the Company "will not store LNG" at the plant, "but will load the liquid fuel a short time after liquefaction into waiting trucks." According to your letter, "there is little difference between [the aforementioned] process and the . . . treat[ment] . . . and cryogenic separat[ion] of propane, butane and other marketable hydrocarbons from natural gas," an activity which, you believe, falls within the § 193.2001(b)(2) exception.
In proposing to adopt § 193.2001(b)(2), OPS explained that this exception was designed for the "large number of refinery-type plants which use lower temperature processes."6 OPS offered a similar explanation in responding to questions from a congressional committee, i.e., that the exception covered facilities "generally located in refinery-type plants near places of hydrocarbon extraction where most processing occurs."7 Your client is not proposing to construct a refinery-type plant in this case, and OPS concluded, in the March 10, 1995 letter of interpretation to Northern Eclipse, that an analogous liquefaction and trucking facility was not involved in natural gas treatment and hydrocarbon extraction. As you have offered no grounds for distinguishing these authorities, OPS concludes that the Maine LMF facilities would not qualify for the exception in § 193.2001(b)(2).
While not among the questions presented in your request, it should be noted in closing that the Maine Public Utilities Commission (MPUC) has a current PHMSA certification to regulate intrastate LNG facilities.8 Thus, if the Maine LMF facilities are not subject to the jurisdiction of the Federal Energy Regulatory Commission,9 the MPUC would be responsible for ensuring that they comply with the minimum federal safety standards in Part 193, as well as any additional state standards established under 49 U.S.C. § 60104(c).
OPS concludes that the Maine LNG facilities would be used in the transportation of gas by pipeline and do not qualify for any of the exceptions provided in § 193.2001. Accordingly, if constructed as proposed, those facilities would be subject to the minimum federal safety standards in Part 193.
John A. Gale
Director, Office of Regulations