Over objections of climate activists, Philadelphia City Council on Thursday approved a deal with a developer who will build a $60 million liquefied natural gas (LNG) plant on city land, generating at least $1.35 million in profits that advocates say will help reduce residential heating bills.
Council, in a 13-4 vote, endorsed the Philadelphia Gas Works’ deal with Liberty Energy Trust, a Conshohocken firm that would build the LNG production unit at PGW’s Passyunk Plant. It will pay the city-owned utility annual fees and profits. PGW and the Gas Commission said the revenue would help reduce the need to raise customer rates.
Environmental groups, including the Clean Air Council and PennEnvironment, opposed the plant, which will be built in an industrial area long used by PGW and now contains an underused LNG storage tank.
The activists said there were unanswered questions about what the new Passyunk Energy Center’s impact on the environment will be. They have also opposed new fossil-fuel infrastructure because it enables the production of more fracked natural gas from Pennsylvania’s Marcellus Shale region, when they say the nation should be investing in renewable energy.
The plant’s advocates say the LNG it produces will likely replace dirtier fuels like diesel and oil. The plant would sell the LNG to private buyers, including some power generators that now rely on oil and some industrial customers whose supplies of natural gas are curtailed during peak winter days, when residential customers get priority for available gas supplies.
The Gas Commission approved the plan in December, but a final Council vote was pushed back until after the May 21 primary election, after environmentalists said they would make the project a political issue. Council unanimously amended the deal last week to add more reporting requirements to verify the city’s share of the profits.
LNG is produced by supercooling natural gas to minus-260 degrees until it becomes a liquid, which can be transported without a pipeline and is in demand as fuel for ships, trucks, trains, and remote power plants. The Passyunk facility would produce 120,000 gallons of LNG a day.
Liberty has shown interest in PGW since it bid unsuccessfully to buy the utility from the city in 2014.
The public-private proposal is less ambitious than a $120 million plan PGW officials envisioned two years ago of expanding their plant in Port Richmond to sell LNG. The private investors will put up all the capital, reducing the risk to PGW and its customers, but also reducing the potential payday for the city.
PGW has produced LNG at Port Richmond for more than 40 years, storing the material in two 120-foot-high, white-domed tanks on Delaware Avenue. LNG is converted back into a gas to supply customers on peak winter days, when the pipelines serving the city would be unable to deliver enough gas to meet demand.
PGW began selling surplus LNG in 2013 to commercial buyers and says it has earned $6 million in three years, which it says helps reduce rates for other customers.
Under its proposal, the private company will build the liquefaction facility and then lease it back to PGW for a nominal fee. PGW will operate the plant and sell LNG production services to the Passyunk Energy Center for a fee. PGW will also store the liquefied gas at the existing insulated storage tank at Passyunk for a fee.
The private company will market the liquefied gas and split revenue evenly with PGW. PGW says it could earn up to $4 million a year in fees and profits.