Banning the Internal Combustion Engine: Is this the end of Fossil Fuels?

As a general rule I find that most North Americans are unaware that there is a growing movement of countries that are banning new sales of vehicles powered by gasoline or diesel and may also include other fuels such as propane, compressed and LNG (liquid natural gas).

The local news is rife with plans to grow our exploitation of natural resources and build more pipelines for anticipated expansion to new markets such as China. The federal government is in the process of colluding with the petroleum industry to force the construction of a dil-bit pipeline in a densely populated region of Greater Vancouver.  Meanwhile our future markets are vanishing as other governments are phasing out fossil fuels and their engines.

Image #1: A rendering of the Silent Utility Rover Universal Superstructure (SURUS) platform with truck chassis. 

SURUS was designed to form a foundation for a family of commercial vehicle solutions that leverages a single propulsion system integrated into a common chassis. (1)

Fuel cell technology is a key piece of GM’s zero-emission strategy.

General Motors’ Silent Utility Rover Universal Superstructure (SURUS) is an electric vehicle platform with autonomous capabilities powered by a flexible fuel cell. GM displayed it at the fall meeting of the Association of the United States Army, as the commercially designed platform could be adapted for military use.

SURUS leverages GM’s newest Hydrotec fuel cell system, autonomous capability and truck chassis components to deliver high-performance, zero-emission propulsion to minimize logistical burdens and reduce human exposure to harm. Benefits include quiet and odor-free operation, off-road mobility, field configuration, instantaneous high torque, exportable power generation, water generation and quick refueling times. (1)

 

Table 1. List of Countries Banning the ICE & Timeline (2)
Wikipedia Table of Countries Banning the Internal Combustion Engine.png

At an automotive conference in Tianjin, China revealed it was developing plans towards banning fossil fuel-based cars. Though China has not set a 2040 goal like the U.K. and France, it said it was working with other regulators on a time-specific ban.

“The ministry has also started relevant research and will make such a timeline with relevant departments. Those measures will certainly bring profound changes for our car industry’s development,” Xin Guobin, the vice minister of industry and information technology, said.

Both India and Norway have also said they have electric car targets set for the next few decades. India, home to heavily polluted cities, said by 2030 it plans to have vehicles solely powered by electricity. (3)

Final Remarks:

I explain this worldwide movement to the electric vehicle and the impact this will have oil markets, however, most of whom I discuss this issue with are unaware of these vital facts. In addition we are seeing growing alternate forms of power sources for our electrical grid, such as solar, wind, tidal, hydro-electric, geothermal and others.

If you ran a business that called for a major investments in capital for infrastructure, would you make it knowing that your market is non-existent? Maybe it’s time for Canadians and Americans to wake up and smell the coffee.

References:

  1. fuel-cell-electric-truck-platform
  2. List_of_countries_banning_fossil_fuel_vehicles
  3. how-internal-combustion-engine-bans-could-catalyze-big-oil-concerns
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Alberta Energy Production And A Renewable Future

Author:  Duane M. Tilden, P.Eng  (January 14th, 2016)

Abstract:  Energy sources and pricing are hot topics world-wide with the Climate Change agenda leading the way.  Last year at the 2015 Paris Climate Conference long-term goal of emissions neutrality was established to be by as soon as 2050.  Alberta currently produces more atmospheric carbon emissions and other pollutants than any other Province in Canada, and in order to meet clean air objectives the energy sectors which consume & mine the natural resources of the Province will have to shift to non-polluting & renewable energy sources and be more efficient in energy utilization.  To achieve these goals new infrastructure will have to be built which will have the likely consequences of raising energy pricing as well as alter consumption rates and patterns.

Transportation

Transportation is a vital link in modern society, and often a personal vehicle is chosen as the main mode of mobility to work, leisure, & social purposes.  Cars and trucks also provide means of work and commerce & are essential to our way of life.  Most of these vehicles are fueled by gasoline, some by diesel, propane, and more recently the electric vehicle (EV) and hybrids.

 

GraphData Gas Price Comparison Canada

Graph #1:  Average Cost Comparison of Gasoline in Major Canadian Cities

In Alberta, using Calgary as a basis for comparison, it is apparent that pricing to consumers for gasoline is below nation-wide market averages when measured Province by Province, as demonstrated in Graph #1 (1). While if you live in Vancouver the cost is considerably higher, due to included carbon taxes and a transit levy among additional charges.  Additional means of moving growing populations efficiently have been seen by the development of LRT mass transit for the rapid movement of citizens to work, school, or social events.

Rapidly moving the large segments of the population in a cost effective manner is important to growth.  Buses are an important link in this mix as are cycling routes, green-ways and parks.  Changes in fuels for trucks, buses and trains by converting from diesel fuel to LNG will also provide for reductions in emissions while providing economic opportunity for utilization of the existing plentiful resource.  While EV’s show promise, the battery technologies for energy storage need further development.

Alberta Electricity Production

Alberta still relies on out-dated coal plants to generate electricity.  According to a CBC article coal provides power to 55% of homes in Alberta, and is the second largest contributor to emissions (2) and GHG’s to the Oil Sands projects.  However, it has been noted that the utility is reluctant to decommission recently constructed coal plants, until they have earned back (or are compensated for) their investment in capital costs.

local-input-wabamun-alberta-march-21-2014-a-giant-drag1

Photo #1:  Highvale coal mine to feed the nearby Sundance power plant (3)  

Photo credit:  John Lucas / Edmonton Journal

There are power purchase agreements in place, which may extend 50 to 60 years from the construction date of the plant (2).  It may be possible that the coal fired power plants could be converted to burn natural gas, which Alberta has in abundance, rather than be decommissioned.  However, this would still require the closure of the coal mines and mining operations currently supplying the existing power plants.  Also, combustion of natural gas will still release GHG’s into the atmosphere, while less than coal, they are not a total elimination of emissions.

Residential Energy Consumption

When comparing monthly residential electrical energy costs across Canada, using data obtained from a survey performed by Manitoba Hydro, we see that Edmonton and Calgary are in the lower middle range of pricing (4).  Variances in all regions will occur based on average home size, building codes and insulation requirements, heating system types and other factors.  Some homes may be heated with electric baseboard which will result in a higher electric bill while other homes may be heated using natural gas as a fuel.  Also household hot water generation can be by electric or gas-fired heater, so consumption of natural gas must be considered with electrical power usage to get a complete picture of energy consumption.

residential_1000kWhresidential_2000kWh

Charts #1 & 2:  Average Monthly Cost For Residential Electricity in Major Canadian Cities For Equivalent Usage in kWh (4)

Inspecting these charts it is proposed that a price increase of 10 to 20% to Alberta electrical energy consumers by a separate tax or fee to pay for a shift in technology would be reasonable when compared to other Canadian Cities.   Additional tariffs on natural gas consumption would also be recommended.  Such an increase would likely have a secondary benefit of creating an incentive for energy efficiency upgrades by home owners such as increased insulation, better windows and heating system upgrades. Such improvements would in turn lead to reduced demand at the source and thus to lower GHG & particulate emissions to the atmosphere.

Climate and the Proposed Energy Code

Energy consumption in populations is normalized in a number of ways, generally defined by habits and patterns.  We observe that in traffic as volumes increase early in the morning as commuters travel to work, and in the opposite direction as they head home in the evening.  Often people will attempt to “beat the traffic”.  This is an admirable goal in energy usage as well, for consumption of electricity will follow other such predictable patterns as people eat meals, shower, and perform other rituals that interface with electrical,  heating,  ventilating, elevators, water supply and disposal systems that form infrastructure and services provided by municipalities and utilities.

As these systems need to be energized and maintained, it is desirable to be able to predict and control the consumption and distribution of resources.  The greater of these is the electrical generation and distribution system.   Also, emerging technological advancements in energy efficiency such as CFL, LCD displays, computers, refrigeration, energy storage and more.  Advancements in co-generation, district energy systems, and other end use distribution of energy which provide economies of scale are also possible as strategies to obtain goals.Heating Degree Days - Lower Western Canada

Map #1:  Partial Map of Heating Degree Days for South-Western Canada (5)

Opportunities will exist for building mechanical system enhancements and upgrades as they may provide energy savings and cost reductions to users often calculated with a minimum nominal payback period of 5 to 7 years (and should be determined in every case).   The HDD map can provide a source of information which is used in energy models to determine predicted building energy costs when calculating payback periods to justify system upgrades or design decisions.  Obtaining and monitoring building energy consumption rates and year over year changes are important resources in determining where systems are running at below optimal rates and require replacement.

In new building construction the National Energy Code for Buildings 2011 (NECB) (6) has been adopted by Alberta (7) for all municipalities.  As there are higher HDD values attributed to Calgary and Edmonton as seen in the HDD Map of Western Canada, a requirement for stringent construction methods and materials to higher standards ensure new buildings meet carbon emissions reduction goals.

026

Photo #2:  Construction of Towers in Calgary with High Window to Wall Ratios 

Photo Credit: Duane Tilden P.Eng

Increased requirements in glass U-values and shading coefficients, maximum window to wall ratios (WWR) to reduce undesirable solar heat gain and heat losses, energy consumption and improve occupant comfort.  Buildings with excessive glazing are difficult to heat and cool, requiring sophisticated mechanical systems to offset poor performance by the building envelope.

Code mandated higher insulation values & better materials; moisture and heat control of the envelope through better design.  Higher efficiency requirements for mechanical systems; (fans & ducts, pumps & pipes, and wires & motors), lighting, controls, and other components of the building and it’s envelope.  Energy modeling should be performed of larger significant buildings to optimize operations in the design phase.  Commissioning of the building is integral to ensuring compliance throughout the project to it’s final phases at substantial completion and occupancy.

Renewable Energy

Renewable energy technologies including solar power and wind generation  have been gaining rapid adoption elsewhere in the world, while in Alberta (8) carbon based fuels currently provide over 80% of electrical power generation.   This has not been for a lack of wind and solar resources in Alberta but to be attributed to the large capital investments in fossil fuel resource extraction.  Other renewable technologies such as bio-mass, hydro, and geothermal may also be employed and should be investigated as alternatives to existing thermo-electric power plants.

Alberta Energy Sources - 2015

Table #1:  Installed Electrical Generating Capacity by Fuel Source in Alberta (8)

Currently, Alberta has the third highest installed wind power capacity in Canada behind Ontario and Quebec.  Wind energy not only represents a means to green the power production, it also will contribute jobs and income to the economy.  As one source of electricity and revenues is removed another source will fill the void.

installed_capacity_e-4

Map #2:  Installed Wind Power Capacity by Province in Canada (9)

While significant inroads have been made in Alberta for wind power which is already established as a major power source for the future, there is unrealized potential for the installation of solar power production.  It has been noted that a photo-voltaic installation in Calgary is 52% more efficient than one installed in Berlin, Germany.  Meanwhile, Germany has 18,000 times more solar power generation capacity than installed in Alberta (10).

alberta-germanytiltweb

Map #4:  Solar Resource Comparison for Alberta & Germany (10)

Alberta has significant solar resources, even during the winter when daylight hours are shorter. Lower temperatures improve PV efficiency, and properly tilted south facing panels optimize light capture, while the flat terrain of the prairies provide unobstructed maximum daylight.  Light reflection by snow on the ground would further enhance light intensity during the colder months.  Thus solar represents a relatively untapped potential source of significant electrical power for Alberta and an unrealized economic opportunity for consumers and industry.

hotspots_13

hotspots_leg

Map #5:  Solar Resource Map for Canada With Hotspots (11)

Energy Efficiency, Smart Grid & Technological Advancements

Renewable energy produces electricity from natural resources without generating carbon and particulate emissions.  Another method of controlling emissions is to reduce the amount of energy consumed by being more efficient with the energy we already produce.   We can achieve this by using higher efficiency equipment, changing consumer patterns of use to non-peak periods, use of Smart Meter’s to monitor consumer usage and to alert homeowners when there is a problem with high consumption which could result in higher bills than normal if the problem remained unreported.

There are other advancements in the electrical grid system which are on the horizon which will enable a utility maximize resources by such means as energy storage, micro-grids, demand response to name a few.  Also, property owners and businesses could be able to grid-tie private solar panel (PV) and storage systems to supplement the utilities electrical system with additional power during the day.

Summary

In order to meet the goal of atmospheric emissions neutrality as agreed to at the 2015 Paris Climate Conference Alberta is posed with making decisions on how electricity is to be produced in the future.  Eliminating coal power plants and replacing them with Renewable Energy power sources such as solar and wind power are proven methods to reducing GHG and particulate emissions as these power sources do not involve combustion and discharge of waste gases formed during the combustion process.  Coal combustion is well documented as a major contributor of GHG’s to the atmosphere.

To make the transition will require capital for financing to build new infrastructure.  Funding of these projects should be raised proportionally charged to users with increased rates.  These rate increases will provide further incentives to reducing energy consumption and thus air emissions.  Jobs will shift and employment will be created in new forms as the old is phased out and replaced with new technology.  These new systems will have to be designed, built and maintained while the workforce will require training in new methods.  There will be many new opportunities for growth and advancement resulting from the implementation of these changes to meet Canada’s International commitments.

References:

  1. http://www.nrcan.gc.ca/energy/fuel-prices/4593
  2. http://www.cbc.ca/news/business/coal-compensation-power-alberta-1.3321467
  3. http://edmontonjournal.com/business/local-business/albertas-commitment-to-phase-out-coal-fired-power-sparks-fears-of-job-losses
  4. https://www.hydro.mb.ca/regulatory_affairs/energy_rates/electricity/utility_rate_comp.shtml
  5. http://ftp2.cits.rncan.gc.ca/pub/geott/atlas/archives/english/5thedition/environment/climate/mcr4033.jpg
  6. http://www.nrc-cnrc.gc.ca/eng/publications/codes_centre/necb_2011_adaptation_guidelines.html
  7. http://www.municipalaffairs.alberta.ca/CP_Energy_Codes_Information
  8. http://www.energy.alberta.ca/electricity/682.asp
  9. http://canwea.ca/wind-energy/installed-capacity/
  10. http://www.greenenergyfutures.ca/blog/sunny-days-ahead-solar-alberta
  11. http://pv.nrcan.gc.ca/index.php?lang=e&m=r

 

Natural Gas Sector Gets Congressional Action on LNG Tax Rate Drop

Liquefied natural gas (LNG) as a transportation fuel option is back on the competitive race track, thanks to a part of the temporary (three-month) highway funding bill passed by the U.S. Senate Thursday, according to natural gas vehicle (NGV) advocates. The House-passed version had a similar provision.

Image Source:  www.freightlinertrucks.com

Sourced through Scoop.it from: www.naturalgasintel.com

>” […] At a Congressional hearing last December, the global energy and procurement director for Atlanta-based UPS called for “removing barriers” to NGVs, adding that if Congress really wanted to accelerate the adoption of LNG use in heavy-duty trucks and more use of U.S.-produced natural gas supplies, it needed to eliminate “disproportionate taxing of LNG compared with diesel fuel.”

Noting that President Obama was expected to sign the latest measure, Newport Beach, CA-based Clean Energy Fuels Corp. said the new leveling provision will effectively lower the tax on LNG by 14.1 cents/gal. Twenty-six state legislatures have already taken similar action, a Clean Energy spokesperson told NGI.

Clean Energy CEO Andrew Littlefair said the use of LNG in heavy-duty trucks, locomotives and large marine vessels has been growing steadily in North America, and “anyone who cares about a cleaner environment and energy independence should be very grateful for what the U.S. Congress has done, making LNG much more competitive.”

Executives with America’s Natural Gas Alliance (ANGA), and the NGVAmerica and American Gas Association (AGA) trade associations echoed Littlefair’s sentiments.

“We applaud Congress for including language to equalize the federal highway excise tax on LNG,” said ANGA CEO Marty Durbin. “This provision has garnered strong bipartisan support over the years, and we are thrilled to see it become law.”

Calling the action a “common-sense change” that will mean greater fuel cost savings, NGVAmerica President Matt Godlewski said the passage of the LNG provision is great news for trucking fleets that are looking for clean-burning fuels. His calculation places the excise tax on LNG at 24.3 cents/DGE, compared to its current 41.3 cents/DGE level, Godlewski said.

“Currently, fleets operating LNG-powered trucks are effectively taxed for their fuel at a rate 70% higher than that of diesel fuel,” he said.

An AGA spokesperson clarified the number to point out that the current federal excise tax on both diesel and LNG is 24.3 cents/gallon, but because LNG does not have the same energy content/gallon of fuel, it takes 1.7 gallons of LNG to equal a gallon of diesel. “Since the excise tax is based on volume (gallons) — not energy content — LNG is taxed at 170% of the rate of diesel on an energy equivalent basis,” he said.

“This provision provides the level playing field that natural gas has needed to reach its full potential as a transportation fuel,” said Kathryn Clay, AGA vice president for policy strategy.

Each of the trade groups has been lobbying Congress for some time to take this corrective action on LNG. Under the new provision, the energy equivalent of a diesel gallon of LNG is defined as having a Btu content of 128,700, which AGA said is equal to 6.06 pounds of LNG.

Separately, the new measure defines the energy equivalent of a gallon of compressed natural gas (CNG) as having a Btu content of 115,400, or 5.66 pounds of CNG. […]”<

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China’s Switch to LNG From Coal Will Cut Global Pollution

To many people, natural gas seems to be more of the same, a continuation of the old fossil fuel path that has driven industrialization, air pollution and global warming.

Source: www.vancouversun.com

“> […]  China is currently producing twice the greenhouse gases of the United States. And its emissions are growing rapidly. Its emissions surpassed those of the U.S. in 2006, reached double the U.S. in 2014, and are expected to rise by seven per cent per year for the foreseeable future. China obtains 70 per cent of its electricity from burning coal, by far the worst polluter. China has plans for doubling its use of coal in the next 10 to 15 years. Meanwhile, the emissions from the U.S. have stabilized, partly from a slowing economy, but the biggest effect came from a switch from coal to natural gas. If you replace an old coal power plant with a modern natural gas one, you can cut carbon dioxide emissions by a factor of three.

Natural gas doesn’t cut emissions to zero; it is still a fossil fuel. But it obtains much of its energy from hydrogen, an atom that out numbers the carbon atoms in methane (the key component of natural gas) by 4:1. Natural gas can be burned with much higher efficiency than coal, by use of a combined cycle turbine that harnesses both gas and steam power generation.

China wants to move away from coal, to natural gas, nuclear, and solar. Their chief concern is not global warming, but the horrific air pollution that is killing an estimated 4,000 people per day in China, 1.6 million per year. […]”<

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Russian Energy Producer Rosneft LNG Plant Reported Delayed for Two to Five Years

MOSCOW (Reuters) – Russian energy producer Rosneft may have to delay development of its liquefied natural gas (LNG) plant on the Pacific island of Sakhalin for at least two years, sources said, after prices fell and financing all but dried up due to Western sanctions.

Source: www.reuters.com

>”[…] Rosneft, which has spearheaded President Vladimir Putin’s drive to increase oil and gas output and secure Russia’s energy dominance, signed an agreement with Exxon in 2013 that aimed at starting production of 5 million tonnes per year of LNG from 2018 at Sakhalin.

Russia is the world’s largest exporter of natural gas but mostly exports it by pipeline to customers in Europe. Once liquefied, natural gas can be transported by ship to customers in Asia, helping fulfill the Kremlin’s goal of finding new markets.

Two sources with direct knowledge of the project said the 2018 target was no longer realistic.

A source at Rosneft, who declined to be named because he was not authorized to speak to the media, said the plant would most probably “be postponed for three to five years because of lack of funds and low fuel prices”.

A second source said it could be delayed for two years.

“This is not a surprise,” the source said. “The year 2018 had never been seen as the final deadline. All the stuff that’s happening – a decline in LNG prices, a slump in demand, the economic crisis – only confirms that.”

A Rosneft company spokesman said there had been no change to the project’s timeline: “Rosneft has not revised the terms for the implementation of the far east LNG project.”

Exxon’s Moscow office declined to comment. A spokesman at Exxon’s headquarters in Texas also declined to comment.

In May 2014, Rosneft and Exxon signed a deal to continue work on the LNG plant, which will be partly fed from gas produced at Sakhalin-1, an oil and gas project in which Exxon is a major investor. […]”<

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Woodfibre LNG Plant: Old Technology, Design Flaws and Environmental Issues

Speakers at a presentation in West Vancouver on the risks associated with the proposed LNG project in Howe Sound voiced concerns, Wednesday, over everything from environmental contamination to the risk of explosions from transporting natural gas.

Source: www.nsnews.com

>”[…] “Canada doesn’t have a whole pile of rules about LNG because it doesn’t have a whole pile of plants,” said Eoin Finn a seasonal resident of Bowyer Island in Howe Sound, and speaker at the event. Finn holds a PhD in physical chemistry and is a close follower of the LNG project.

He said an LNG plant of this size has never before existed in Canada. He has concerns over the country’s lack of environmental regulations in place against this particular resource.

“There are no plants on the West Coast of Canada nor on the U.S. except a tiny one in Alaska but that’s 100 miles from anywhere and it’s about one-tenth (the size of) Woodfibre.”

When it comes to the risks associated with the proposed development, Finn said there are many, including emissions output, the risk of shipping accidents and the plant’s cooling system, which would use seawater.

“One of the big issues is that the plant will be cooled by seawater from the sound. This is pretty old technology that’s been dismissed and refused and abandoned in California and Europe.”

He said that the current proposed cooling system for the plant would suck in 17,000 tonnes of seawater (3.7 million gallons) per hour, and chlorinate it while it circulates through the system, before releasing it back into Howe Sound.

Finn explained that any such practice would be “extremely damaging” to marine life and that similar systems down the coast in California have been banned.

Although the plant will be powered by electricity, Finn said it will still produce emissions, including 140,000 tons of carbon dioxide a year.

Among Finn’s other concerns was tanker traffic associated with the project, which would see between six and eight tankers navigating through the sound per month.

He cited a risk of explosions associated with the ships, which could have potential negative effects on area property values. Large waves generated from those vessels could also be a problem for the area, something Finn compared to the BC Ferries Fast Cat situation years before.  […]

Wade Davis, Bowen Island resident and professor of anthropology, said the issue of whether or not the plant will go in place holds a deeper meaning than simply a local environmental danger.

“This is not simply about a local issue in Howe Sound, this is a metaphor for who we are to be as a people,” he explained to the audience. “If we are actually prepared to invest our lives in this way, the most glorious fjord in the world, what else in our country will be immune to such violations?” he asked.  […]”<

 

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BC LNG Project Final Decision Stalled to June

Malaysia’s Petronas expects to make a final investment decision on an US $11-billion liquefied natural gas (LNG) export terminal in British Columbia by the end of June, after postponing the decision…

Source: business.financialpost.com

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North Dakota Bill Introduced to Minimize Natural Gas Waste from Oil Wells

North Dakota’s Senate is considering legislation that would drastically cut the time oil companies can burn off and waste natural gas from an oil well.

Source: www.pennenergy.com

>”[…] Democratic Sen. Connie Triplett is sponsoring the bill that would require companies to begin paying royalties and taxes on natural gas within 14 days after an oil well begins production. Companies are given a year at present.

Triplett and others told the Senate Energy and Natural Resources Committee on Friday that mineral owners and the state are being shortchanged because revenue on the wasted gas is not immediately being collected.

North Dakota Petroleum Council President Ron Ness says the industry has invested $13 billion to capture the gas. But he says there is still a challenge obtaining permission to place gas pipelines in some areas.”<

 

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The Oil Crash Sours LNG Future, Project Put on Hold

The floating 8 million tonne per annum (mtpa) export plant moored at Lavaca Bay, Texas advanced by Houston-based Excelerate has been put on hold, according to regulatory filings obtained by Reuters.

Source: www.businessinsider.com

>” […] The project was initially due to begin exports in 2018.

Excelerate’s move bodes ill for thirteen other U.S. LNG projects, which have also not signed up enough international buyers, to reach a final investment decision (FID). Only Cheniere’s Sabine Pass and Sempra’s Cameron LNG projects have hit that milestone.

Back when LNG and crude oil prices were riding high in February, Excelerate, founded by Oklahoma billionaire George Kaiser, applied for permits to build the facility.

Eleven months on, its submission to the U.S. Federal Energy Regulatory Commission on Dec. 23 said that uncertainty generated by a steep decrease in oil prices has forced it to conduct a “strategic reconsideration of the economic value of the project” and to suspend all activities until April 1, 2015.

“Due to the recent global market conditions, the company has determined that, at this time, this project no longer meets the financial criteria necessary in order for us to move forward with the capital investment,” a company spokesman told Reuters.

Stiff economic headwinds are making new developments tough going.

Prices that LNG projects can charge for long-term supply are falling from historic highs as new producers crowd the market, which is already oversupplied due to slowing demand and rising output that has seen spot Asian LNG prices halve this year.

At the same time, major consumers from Japan to South Korea and China are seeking to offload some of their long-term LNG supply commitments, contributing to the glut. […]”<

Read more: http://www.businessinsider.com/r-exclusive-oil-price-crash-claims-first-us-lng-project-casualty-2014-12#ixzz3NVGgV68I

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Potential of liquefied natural gas use as a railroad fuel

Source: www.eia.gov

>” […]  Continued growth in domestic natural gas production, along with substantially lower natural gas spot prices compared to crude oil, is reshaping the U.S. energy economy and attracting considerable interest in the potential for fueling freight locomotives with liquefied natural gas (LNG). While there is significant appeal for major U.S. railroads to use LNG as a fuel for locomotives because of its potentially favorable economics compared with diesel fuel, there are also key uncertainties as to whether, and to what extent, the railroads can take advantage of this relatively cheap and abundant fuel.

Freight railroads and the basic economics of fuel choice  Major U.S. railroads, known commonly as Class 1 railroads, are defined as line-haul freight railroads with certain minimum annual operating revenue. Currently, that classification is based on 2011 operating revenue of $433.2 million or more [1]. While there are 561 freight railroads operating in the United States, only seven are defined as Class 1 railroads. The Class 1 railroads account for 94% of total freight rail revenue [2]. They haul large amounts of tonnage over long distances, and in the process they consume significant quantities of diesel fuel. In 2012, the seven Class 1 railroads consumed more than 3.6 billion gallons (gal) of diesel fuel [3], amounting to 10 million gal/day and representing 7% of all diesel fuel consumed in the United States. […]

The large differential between crude oil and natural gas commodity prices translates directly into a significant disparity between projected LNG and diesel fuel prices, even after accounting for natural gas liquefaction costs that exceed refining costs. […]

Given the difference between LNG and diesel fuel prices in the Reference case, railroads that switch locomotive fuels could accrue significant fuel cost savings. Locomotives are used intensively, consume large amounts of fuel, and are kept in service for relatively long periods of time. The net present value of future fuel savings across the Reference case projection for an LNG locomotive compared to a diesel counterpart is well above the roughly $1 million higher cost of the LNG locomotive and tender (Figure IF3-3).  […]

Relatively large changes in assumptions used to evaluate investments in LNG locomotives (such as a significantly shorter payback period or much higher discount rate) or in fuel prices would be required to change LNG fuel economics for railroad use from favorable to unfavorable. […] “<

 

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