Although Wesley Edens is perhaps best known as the co-owner of the National Basketball Association (NBA) team, the Milwaukee Bucks, his company Fortress Investment Group is now taking up a decidedly different sport. Thanks in part to rule changes underway in the Trump administration, Fortress has quietly positioned itself to export liquefied natural gas (LNG) shipped via rail — in refrigerated, high-pressure tank cars — through heavily populated areas in Florida.
A major Democratic donor, Edens founded New Fortress Energy, a subsidiary of Fortress Investment Group. Multiple news reports and documents reviewed by DeSmog confirm that New Fortress Energy formerly owned a rail line and currently owns a planned LNG export terminal which together would send so-called “small-scale” LNG tankers to the Caribbean.
In July Trump's Department of Energy (DOE) crafted a regulation which says all shipments of small-scale LNG export tankers from the U.S. automatically fall within the legal definition of the “public interest” under the Natural Gas Act, expediting their permitting. Similarly, the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) announced just two months earlier in May that it is reviewing a January 17, 2017 petition for rulemaking submitted by the Association of American Railroads (AAR) — just three days before President Donald Trump took office — which would allow shipping LNG by rail across the country.
“Because authorization of LNG for rail transportation is consistent with PHMSA’s existing authorization of other commodities, and because rail is safer than over-the-road transportation for this commodity, and because authorization will facilitate the movement of LNG by rail, AAR requests expedited processing of this petition,” reads the submission by the Association of American Railroads.
The U.S. Department of Transportation, the parent agency of PHMSA, will unveil its proposed regulation on LNG-by-rail on February 25, 2019.
What Is Small-scale LNG?
Small-scale LNG exports refer to the type of tanker used to ship the product, as opposed to the actual amount of gas it carries. This was spelled out by Meg Gentle, President and CEO of the pioneering LNG company Tellurian, in a statement made in March 2017 to an oil and gas industry trade publication (which is no longer available online).
“So people have started talking about small-scale and mid-scale and we’ve sort of chuckled at that. As you would imagine, there is nothing small scale about LNG,” Gentle stated at the time, as reported by DeSmog. “It’s just making the refrigerator component itself a little bit more modular, repeatable and standardized. But we’re still using the largest [General Electric] turbines, the largest storage tanks ever built.”
Under the DOE regulation, small-scale LNG exports now have a de facto permitting process loophole under federal law. Traditionally, LNG export companies must receive permits from both the U.S. Federal Energy Regulatory Commission (FERC) and the DOE to ship the commodity abroad, a process which congressional Republicans have repeatedly tried to undercut via legislative proposals. With a glut of natural gas on the market in the U.S., the growing LNG export boom has offered an attractive outleft for companies drilling for shale gas using hydraulic fracturing (“fracking”) in the U.S.
Florida, all along, has served as the testing grounds for the planned expansion of both LNG-by-rail and small-scale LNG exports. And Edens' Fortress Investment Group sits at the nexus of both.
Building LNG Fortress
New Fortress Energy Marketing LLC incorporated in Florida in December 2015 and owns two LNG export terminals in Florida which have received federal permits.
One of those LNG terminals, known as American LNG, sits in Titusville, Florida, and received a permit from the DOE to export small-scale LNG in March 2015 under the Obama administration. The other one is located in Medley, Florida, near Miami, and received its permit in August the same year, also going by the name American LNG.
Both of the DOE permits given to New Fortress Energy mention that Florida East Coast Railway will be involved in transporting the LNG to the export facilities.
New Fortress' LNG plans, by and large, have mostly centered around deals cut with the Jamaica Public Service Company, the monopoly electricity provider for the island nation. For example, New Fortress plans to ship LNG from Florida to a Jamaica Public Service Company-owned power plant, which is set to open in June 2019 in Jamaica's southern coastal Old Harbor. In total, New Fortress Energy has announced intentions to invest up to $1 billion into making the country's energy grid reliant on natural gas, which it will ship to the island.
“Integration of natural gas-powered generation is a model for countries around the world to seize control of their energy and environmental future,” an executive from the company told the trade publication LNG Industry in November 2015. “It will lead to stable, lower long-term power prices and the bridge to incorporating additional renewable power in the future.”
On its website, New Fortress sells the idea of LNG in the language of human rights and alternative energy, with the company stating that it sees “clean energy as a basic human right.”
“Everyone should have access to clean, affordable, and reliable energy. Yet, too many lack this critical element for quality of life and economic growth,” reads its website. “While clean fuels like natural gas are abundant, there are regions in the world with antiquated infrastructure that prevents the transition to clean and renewable energy.”
Yet both points — natural gas as clean energy and supporting human rights — have faced sharp criticism in light of reports of oil and gas industry treatment of rural frontline communities during the fracking process in the U.S. and scientific accounting pointing to disastrous climate outcomes if the fracking boom becomes a full-scale, global LNG export boom.
Despite that, Edens has expressed his hope of turning Jamaica into a key location for LNG in the Caribbean.
“We want to make Jamaica a hub for LNG for the region, not only for the power and transportation that are on the island, but also transportation that surrounds the island,” he said in April 2018.
Pavel Molchanov, a Senior VP and Equity Research Analyst at Raymond James & Associates, told DeSmog that small-scale LNG has been part of the plan from the outset for exporting fracked gas from the U.S.
“It is worth noting that the LNG value chain has always had a component of small-scale production and usage,” said Molchanov. “There is an opportunity for LNG to replace bunker fuel and/or diesel in small island economies. The Caribbean is a good example of that. Caribbean countries have some of the most expensive electric power in the world.”
Florida East Coast Railway
Florida, unlike Texas and Louisiana, does not have a legacy pipeline network in place to move fossil fuels for export.
Instead, if all goes according to plan, it will transport by rail much of the natural gas slated for export in the form of superchilled LNG. The company best positioned to profit from this arrangement is Florida East Coast Railway, which up until March 2017, was owned by none other than Edens' Fortress Investment Group.
Fortress sold Florida East Coast Railway to the investment company Groupo Mexico for $2.1 billion about three weeks after the rail company was granted authorization from the Federal Railroad Administration to ship LNG by rail.
Even before incorporating, New Fortress stated on its website in October 2015 that it is “currently developing two [LNG] plants in Florida” and that the “plants will be located near a transportation hub and accessible by rail,” according to an archived version of its website reviewed by DeSmog.
On top of moving LNG via rail, Florida East Railway Company has also transitioned to using LNG as a fuel source for its freight trains.
No Slam Dunk
Florida East Coast Railway, however, has not had a free ride, coming under fire from activists and particularly the group Florida Not All Aboard, which opposes the company's plans to ship LNG by rail in the state.
“Bringing [LNG] through a heavily populated area at excessive speeds” is a dangerous proposition, said Frank McCluskey, a Delray Beach, Florida-based activist who works as part of the group's statewide network. “If there's a train wreck in downtown Delray Beach, where do we go? Think about the population in Fort Lauderdale and West Palm Beach, too, and imagine bringing LNG trains through there.”
Nationally, the environmental nonprofit Center for Biological Diversity has also come out against the Association of American Railroads' petition to allow trains to ship LNG.
“PHMSA currently prohibits transporting LNG by rail, and for good reason. Transporting LNG by rail is inherently dangerous, and risks explosions, pool fires that are impossible to put out, and other accidents that can harm public health and the environment,” reads the center's letter opposing the petition. “PHMSA should therefore deny AAR’s request.”
Further, the Treasure Coast Fire Chiefs’ Association stated in an April 2017 letter that the collective does not feel prepared or trained to address a fire-related disaster from an LNG-by-rail explosion. The Treasure Coast is the area surrounding New Fortress Energy's Titusville LNG export terminal and the Florida East Railway Company has a rail line that runs along it.
While Florida East Coast Railway and New Fortress Energy may have grand ambitions for bringing LNG-by-rail and small-scale LNG exports to the Sunshine State, their plans — to bring it back to Edens and the Milwaukee Bucks — are not yet a slam dunk.
Neither Florida East Coast Railway nor New Fortress Energy responded to repeated requests for comment for this story.