US LNG Supply Chain Suffering from Regulatory Gaps

The LNG supply chain is not evenly covered by existing regulations in the U.S., according to a recent study issued by the Maritime Administration (MARAD). The study examines the options for liquefied natural gas (LNG) bunkering and the necessary infrastructure, safety, regulatory, and training factors of each in supplying LNG to ships as a propulsion fuel in the maritime sector.

DNV GL has identified significant gaps in  operations pertaining to: lightering on-water, bunkering on-water, LNG transfers off or adjacent to water,  and LNG tanks that are on, off, or adjacent to waters. Most of these gaps exist because there are  jurisdictional issues among federal agencies, details in existing regulations that need clarification, and  ambiguity in state and local laws.

Without creating a consistent platform, regulations can vary in how  stringent lightering, bunkering, and LNG transfer regulations are.

Nine areas have been identified that lack regulatory coverage,  four of which would be filled should the draft U.S. Coast Guard Policy Letters be adopted and implemented.

These are:

• Mature LNG metrology, as research is ongoing regarding improved metrology technology for LNG. Once  the technology is accepted, regulations should incorporate such standards, and  the fuel composition needs to be standardized.
• Lightering from an inspected  vessel on a navigable water of  the U.S. Current lightering regulations leave a gap concerning detailed guidelines and requirements specific to LNG. Covering this need (excluding barges), the U.S.  Coast Guard draft Policy Letter 01-14 (Ref. /85/) provides recommendations for  transfer procedures specific to LNG fuel. A gap remains for manned and unmanned non self-propelled barges.
•  LNG tank, standalone or connected to intrastate only pipelines, not on or adjacent to a navigable water of the U.S.
• LNG transfer not on or adjacent to a navigable water of the U.S.
• Lightering from an inspected vessel not on a navigable water of the U.S. These are regulated at the State level, and are outside the jurisdiction of the U.S. Coast Guard. Since not all states have adopted the 2013 version of NFPA 59A, the potential exists for an LNG tank to be sited outside generally accepted industry standards.
•  Bunkering to an uninspected vessel. Some commercial operations use uninspected vessels. This gap would be covered if the U.S. Coast Guard draft Policy Letter 02-14  is adopted;the definition of “waterfront facility” would be broadened to include such vessels.
•  Bunkering from an inspected vessel on a navigable water of the U.S.Existing bunkering regulations leave a gap concerning detailed guidelines and  requirements specific to LNG.
•  Seaside bunkering structure inside a State’s seaward boundary. Existing bulk liquid transfer regulations (33 CFR 154) leave a gap concerning  detailed guidelines and requirements specific to offshore bunkering of LNG.  Issues are clarified by recent U.S. Coast Guard draft Policy Letter 02-14 (Ref. /74/). If adopted, such bunkering structures would need to meet the requirements for “waterfront facilities handling LNG located shoreward of a State’s seaward boundary”.
• LNG tank, standalone or connected to intrastate only pipelines, on or adjacent to a navigable water of the U.S. There is a lack of consistency between the states and often a State-to-State disparity in the level of inspection and proactive enforcement.For shoreside large tanks, these gaps would be filled through adoption and implementation of the draft U.S. Coast Guard Policy Letters.

The study also examines the pros and cons of four bunkering options (truck-to-ship transfer, shore facility-to-ship transfer, ship-to-ship transfer, and transfer of portable tanks) based on factors such as the number and type of vessels to be served, local availability of LNG, port size, congestion and level of activity.

In addition, the study makes recommendations to regulators, port operators, vessel operators and LNG infrastructure owners on ways to address the challenges associated with widespread use of LNG as a marine propulsion fuel and provides information to help them decide which method may be most appropriate for their needs.

Full study is available here.