LNG As A Maritime Fuel: Prospects and Policy: February 5, 2019

LNG as a Maritime Fuel: Prospects and Policy
February 5, 2019
Congressional Research Service

https://crsreports.congress.gov
R45488
SUMMARY
R45488
February 5, 2019
The combination of growing liquefied natural gas (LNG) supplies and new requirements for less
polluting fuels in the maritime shipping industry has heightened interest in LNG as a maritime Paul W. Parfomak
fuel. The use of LNG as an engine (“bunker”) fuel in shipping is also drawing attention from Specialist in Energy and
federal agencies and is beginning to emerge as an issue of interest in Congress. Infrastructure Policy
In 2008, the International Maritime Organization (IMO) announced a timeline to reduce the
John Frittelli
maximum sulfur content in vessel fuels to 0.5% by January 1, 2020. Annex VI of the
Specialist in
International Convention for the Prevention of Pollution from Ships requires vessels to either use Transportation Policy
fuels containing less than 0.5% sulfur or install exhaust-cleaning systems (“scrubbers”) to limit a
vessel’s airborne emissions of sulfur oxides to an equivalent level. An option for vessel operators
to meet the IMO 2020 standards is to install LNG-fueled engines, which emit only trace amounts Richard K. Lattanzio
of sulfur. Adopting LNG engines requires more investment than installing scrubbers, but LNG- Specialist in Environmental
fueled engines may offset their capital costs with operating cost advantages over conventional Policy
fuels. Savings would depend on the price spread between LNG and fuel oil. Recent trends
suggest that LNG may be cheaper in the long run than conventional fuels. Michael Ratner
Specialist in Energy Policy
LNG bunkering requires specialized infrastructure for supply, storage, and delivery to vessels. To
date, the number of ports worldwide that have developed such infrastructure is limited, although
growth in this area has accelerated. Early adoption of LNG bunkering is occurring in Europe
where the European Union requires a core network of ports to provide LNG bunkering by 2030.
LNG bunkering is also advancing in Asia, led by Singapore, the world’s largest bunkering port. Asian countries, together
with Australia and the United Arab Emirates, have about 10 coastal ports offering LNG bunkering, with another 15 projects
in development.
LNG bunkering in the United States currently takes place in Jacksonville, FL, and Port Fourchon, LA—with a third facility
under development in Tacoma, WA. Bunkering of LNG-fueled cruise ships using barges also is planned for Port Canaveral,
FL. The relative locations of other U.S. ports and operating LNG terminals suggest that LNG bunkering could be within
reach of every port along the Eastern Seaboard and in the Gulf of Mexico. On the West Coast, the ports of Los Angeles and
Long Beach, CA, are near the Costa Azul LNG terminal in Ensenada, MX. Seattle and Tacoma are adjacent to the proposed
Tacoma LNG project. Since 2015, Jones Act coastal ship operators have taken steps to transition their fleets to use cleaner
burning fuels, including LNG. Shippers of dry goods to Alaska, Hawaii, and Puerto Rico have taken delivery or have ordered
LNG-fueled and LNG-capable vessels from U.S. shipyards in Philadelphia, PA, and Brownsville, TX. Another company
operates five LNG-powered offshore supply vessels built in Gulfport, MS.
Depending upon LNG conversions, the global LNG bunker fuel market could grow to several billion dollars by 2030. If U.S.
LNG producers were to supply a significant share of this market—on the strength of comparatively low LNG production
costs—LNG bunkering could increase demand for U.S. natural gas production, transportation, and liquefaction.
Opportunities in LNG-related shipbuilding might be more limited, as most shipbuilding occurs overseas, although
domestically-constructed LNG bunkering barges could be one area of economic growth. Finally, engineering and
construction firms could benefit from new opportunities to develop port infrastructure for LNG storage and transfer.
However, while vessel conversion to LNG fuel may increase demand for U.S.-produced natural gas, it partially could be
offset by reduced demand for U.S.-produced crude oil or refined products. Furthermore, while LNG can reduce direct
emissions from vessels, fugitive emissions and environmental impacts from natural gas production and transportation could
reduce overall emissions benefits. While the LNG industry has experienced few accidents, the Coast Guard has been
developing new standards to address unique safety and security risks associated with LNG in vessel operations.
The overarching consideration about LNG bunkering in the United States is uncertainty about how the global shipping fleet
will adapt to the IMO sulfur standards over time. This uncertainty complicates decisions related to both private investment
and public policy. Although Congress has limited ability to influence global shipping, it could influence the growth of LNG
bunkering through the tax code and regulation, or through policies affecting the LNG industry or domestic shipping industry
as a whole. Evaluating the potential implications of LNG bunkering within the context of broader energy and environmental
policies may become an additional consideration for Congress. If LNG bunkering expands significantly, Congress also may
examine the adequacy of existing measures to ensure the safety and security of LNG vessels, storage, and related facilities.

Contents
Introduction ..................................................................................................................................... 1
IMO Emissions Standards and LNG ............................................................................................... 1
U.S. Obligations Under the IMO .............................................................................................. 2
Emission Control Areas ...................................................................................................... 2
Emissions Control Options for Ship Owners .................................................................................. 2
Low-Sulfur Fuel Oils ................................................................................................................ 3
Scrubbers ................................................................................................................................... 3
LNG-Fueled Engines ................................................................................................................ 4
Jones Act Fleet Choosing LNG-Fueled Engines................................................................. 5
LNG vs. Petroleum-Based Fuel Costs....................................................................................... 6
Building an LNG-Fueled Fleet.................................................................................................. 8
LNG Engines and Greenhouse Gas Emissions ................................................................... 9
Global Developments in LNG Bunkering ..................................................................................... 10
LNG Bunkering Overseas ........................................................................................................ 11
LNG Bunkering in the United States ...................................................................................... 12
Jacksonville, FL ................................................................................................................ 12
Port Fourchon, LA ............................................................................................................ 13
Tacoma, WA ...................................................................................................................... 13
Port Canaveral, FL ............................................................................................................ 14
Other U.S. Ports with Potential for LNG Bunkering .............................................................. 14
U.S. Regulation of LNG Bunkering ........................................................................................ 16
Coast Guard Port Regulations ........................................................................................... 16
FERC Siting Regulations .................................................................................................. 17
Other Federal Agencies ..................................................................................................... 17
Global Development of LNG Supply ............................................................................................ 17
Domestic Considerations ............................................................................................................... 19
U.S. Natural Gas Producers Seek New Markets ..................................................................... 19
Safety of LNG Bunkering in Ports .......................................................................................... 20
Security Risks of LNG Bunkering .................................................................................... 21
Policy Implications ........................................................................................................................ 22
U.S. Opportunities and Challenges ......................................................................................... 22
Considerations for Congress ................................................................................................... 23
Figures
Figure 1. Average Monthly Henry Hub Natural Gas Spot Price ..................................................... 6
Figure 2. Maritime Fuels Cost Comparison .................................................................................... 7
Figure 3. LNG Bunkering Options ................................................................................................ 10
Figure 4. Existing LNG Import and Export Terminals in North America ..................................... 14
Figure 5. Global LNG Supply and Demand 2017-2030 ................................................................ 18
Figure 6. Estimated LNG Prices in Key Global Markets – October 2018 .................................... 20

Tables
Table 1. Top 20 U.S. Container Ports (2017) and Nearby LNG Terminals ................................... 15
Contacts
Author Information....................................................................................................................... 23

Introduction
The combination of growing supplies of liquefied natural gas (LNG) and new requirements for
less polluting fuels in the international maritime shipping industry has heightened interest in LNG
as a maritime fuel. For decades, LNG tanker ships have been capable of burning boil-off gas from
their LNG cargoes as a secondary fuel.1 However, using LNG as a primary fuel is a relatively
new endeavor; the first LNG-powered vessel—a Norwegian ferry—began service in 2000.2
Several aspects of LNG use in shipping may be of congressional interest. LNG as an engine, or
“bunker,” fuel potentially could help the United States reduce harmful air emissions, it could
create a new market for domestic natural gas, and it could create economic opportunities in
domestic shipbuilding.3 However, U.S. ports would need specialized vessels and land-based
infrastructure for LNG “bunkering” (vessel refueling) as well as appropriate regulatory oversight
of the associated shipping and fueling operations. The storage, delivery, and use of LNG in
shipping also has safety implications. These and other aspects of LNG bunkering may become
legislative or oversight issues for Congress. One bill in the 115th Congress, the Waterway LNG
Parity Act of 2017 (S. 505), would have imposed excise taxes on LNG used by marine vessels on
inland waterways.4
This report discusses impending International Maritime Organization (IMO) standards limiting
the maximum sulfur content in shipping fuels, the market conditions in which LNG may compete
to become a common bunker fuel for vessel operators, and the current status of LNG bunkering
globally and in the United States. A broader discussion of oil market implications is outside the
scope of this report.5
IMO Emissions Standards and LNG

The IMO is the United Nations organization that negotiates standards for international shipping.
Its standards limiting sulfur emissions from ships, adopted in 2008, have led vessel operators to
consider alternatives to petroleum-based fuels to power their ships.
In 1973, the IMO adopted the International Convention for the Prevention of Pollution from
Ships (MARPOL).6 Annex VI of the convention, which came into force in 2005, deals with air
pollution from ships. The annex established limits on nitrogen oxide (NOx) emissions and set a
4.5% limit on the allowable sulfur content in vessel fuels.7 In 2008, the IMO announced a
1 Boil-off gas is LNG that regasifies during storage and transportation. LNG is stored at atmospheric pressure at
temperatures of -162 °C (-260 °F). Boil-off gas is allowed to escape in order to prevent the pressure in the tank from
rising. LNG tankers still use high-sulfur fuel oil as their primary fuel. LNG tankers that burn boil-off gas as a secondary
fuel are equipped with dual-fuel engines, which allow them to use both fuel oil and LNG.
2 DNV GL, Highlight Projects in the LNG as Fuel History, fact sheet, 2016, https://www.dnvgl.com/Images/
LNG%20as%20fuel%20highlight%20projects_new_tcm8-6116.pdf.
3 “Bunkers” are a ship’s engine fuel tanks (as distinguished from storage tanks holding liquid cargo).
4 The bill sought to amend the Internal Revenue Code of 1986 to provide for an energy equivalent of a gallon of diesel
in the case of LNG for purposes of the Inland Waterways Trust Fund financing rate. Barge carriers using the inland
waterways system contribute to its funding via payment of a cents-per-gallon fuel tax.
5 For discussion of broader maritime fuel market issues under the new IMO standards, see CRS In Focus IF10945,
Maritime Fuel Regulations, by Robert Pirog.

6 “MARPOL” is short for “marine pollution.”
7 International Maritime Organization, “Prevention of Air Pollution from Ships: MARPOL Annex VI—Proposal to
Initiate a Revision Process,” MEPC 53/4/4, April 15, 2005, p. 2, https://www.epa.gov/sites/production/files/2016-09/
Congressional Research Service R45488 · VERSION 1 · NEW 1

timeline to reduce the maximum sulfur content in vessel fuels from 4.5% to 0.5% by January 1,
2020. Annex VI requires vessel operators to either use fuels containing less than 0.5% sulfur or
install exhaust gas-cleaning systems (“scrubbers”) to limit a vessel’s sulfur oxide (SOx) emissions
to a level equivalent to the required sulfur limit.
U.S. Obligations Under the IMO

MARPOL is implemented in the United States through the Act to Prevent Pollution from Ships
().8 The United States effectively ratified MARPOL Annex VI in 2008 when President Bush
signed the Maritime Pollution Prevention Act (P.L. 110-280).9 The act requires that the U.S. Coast
Guard and the Environmental Protection Agency (EPA) jointly enforce the Annex VI emissions
standards.10 MARPOL’s Annex VI requirements are codified at 40 C.F.R. §1043. They apply to
U.S.-flagged ships wherever located and to foreign-flagged ships operating in U.S. waters.
Emission Control Areas

In addition to its global sulfur standards, MARPOL Annex VI provides for the establishment of
Emissions Control Areas (ECAs), which are waters close to coastlines where more stringent
emissions controls may be imposed. The North American ECA limits the sulfur content of bunker
fuel to 0.1% of total fuel weight, an even lower bar than that set by the IMO 2020 standards.11
This standard is enforced by Coast Guard and EPA in waters up to 200 miles from shore.
Currently, most ships operating in the North American ECA meet the emissions requirements by
switching to low-sulfur fuels once they enter ECA waters. The European Union also has an ECA
with a 0.1% limit on sulfur in bunker fuels,12 and the Chinese government is considering putting
the same standard in place.13
Emissions Control Options for Ship Owners

The IMO 2020 emissions requirement applies to vessels of 400 gross tons and over, which is
estimated to cover about 110,000 vessels worldwide. However, analysts indicate that many of the
smaller vessels in this group already burn low-sulfur fuel. Accounting for these smaller vessels,
one estimate is that about 55,000 vessels currently burn high-sulfur fuel.14 Ship owners have two
main options for meeting the emission requirements with existing engines: burn low-sulfur
documents/marpol-propose-revision-4-05.pdf.
8 33 U.S.C. §§1901-19012.
9
The White House, Office of the Press Secretary, “President Bush Signs H.R. 802 and H.R. 3891 into Law,” press
release, July 21, 2008, https://georgewbush-whitehouse.archives.gov/news/releases/2008/07/20080721-7.html.
10 Bunkerspot, “United States: MARPOL Annex VI Ratified,” 2008, https://www.bunkerspot.com/latest-news/27972-
old-bs-9159.
11 International Maritime Organization, “Information on North American Emission Control Area (ECA) Under
MARPOL Annex VI,” MEPC. 1/Circ. 723, May 13, 2010.

12 European Maritime Safety Agency, “Sulphur Directive,” web page, accessed October 1, 2018,
http://www.emsa.europa.eu/main/air-pollution/sulphur-directive.html.
13 International Bunker Industry Association, “China Announces New Emission Control Areas (ECAs),” December 30,
2015, http://ibia.net/china-announce-new-emission-control-areas-ecas/.
14 Hedi Grati, “Bunker Fuel in 2020,” IHS Markit, web article, November 7, 2017, https://ihsmarkit.com/research-
analysis/imo.html.

conventional fuel (or biofuels) or install scrubbers to clean their exhaust gases. Alternatively, ship
owners may opt to install new LNG-fueled engines to comply with the IMO standard.
Low-Sulfur Fuel Oils

The simplest option for vessel owners to comply with the IMO sulfur standards, and the one that
appears most popular, is switching to low-sulfur fuel oils or distillate fuels. Although switching to
low-sulfur fuels would increase fuel costs compared to conventional, high-sulfur fuels, it would
require little or no upfront capital cost and would allow ocean carriers to use existing
infrastructure to bunker ships at ports. Anticipating widespread adoption of this approach, many
analysts predict that the implementation of the IMO 2020 regulations will drive up demand for
low-sulfur fuel and, therefore, significantly increase its price above current levels. Such a trend
could also reduce demand for high-sulfur fuels, increasing the price spread between low- and
high-sulfur bunkers fuels. Switching to lower-sulfur fuel could increase fuel cost across the
industry by up to $60 billion in 2020 for full compliance with the IMO standards.15 Moreover,
while it may allow vessels to meet the existing IMO sulfur standards, low-sulfur fuel does not
necessarily support compliance with potential future IMO emissions standards, especially with
respect to greenhouse gases (GHGs) such as carbon dioxide (CO2) discussed later in this report.
Biofuels
Another option for vessel owners to comply with the IMO sulfur standards is employing biofuels as an engine fuel.
Biofuels have low sulfur levels and potentially lower lifecycle carbon dioxide emissions, thus they are a technically
viable solution to meeting the IMO emissions standards.
However, in a 2017 overview of the shipping sector, the International Energy Agency (IEA) noted several
challenges to biofuel penetration.16 First, the shipping sector has little knowledge of handling and using biofuels as
part of its fuel supply. Second, a single large ship may consume 25 million gallons in a year, the annual production
from a single medium-sized biofuel facility. Thus, biofuels may be more practical for small vessels in coastal waters
or for use as auxiliary ultra-low sulfur fuel in ports than as a general-purpose bunker fuel. Third, only biodiesel
derived from plant oil or pulping residues and bioethanol are currently produced at levels that can supply
commercially significant volumes of fuel. Plant oil-based fuels are currently used for jet biofuels, and their use in
shipping would lead to competition for feedstocks. Finally, the cost of biofuels is significantly higher than the cost
of fossil fuels, including low-sulfur fuels, and is expected to remain so for the foreseeable future.
IEA outlines several policies that may make biofuels more competitive in the shipping sector, including:
 New government or shipping sector measures to reduce maritime GHG emissions which could increase the
relative costs of conventional fuels compared to biofuels;
 Regulatory or market mechanisms de-linking the price of biofuel from global oil prices, allowing vessel
owners to hedge the cost of fuel in local currency; and
 The ability to “drop in” biofuels as a direct substitute for conventional fuels in existing engines and compatible
with existing fuel refining, blending, and distribution infrastructure.
Scrubbers
Scrubbers are systems which remove sulfur from a vessel’s engine exhaust emissions. A ship with
a scrubber would be capable of meeting the IMO 2020 standard while using conventional high-
15 Jack Jordan and Paul Hickin, “Tackling 2020: The Impact of the IMO and How Shipowners Can Deal with Tighter
Sulfur Limits,” Platts, May 2017, p. 3.
16 International Energy Agency, “Biofuels for the Marine Shipping Sector: An Overview and Analysis of Sector
Infrastructure, Fuel Technologies and Regulations,” IEA Bioenergy, 2017, https://www.ieabioenergy.com/publications/

biofuels-for-the-marine-shipping-sector/.

sulfur fuel. Retrofitting a scrubber on an existing engine can cost several million dollars,
however, before factoring in the lost revenue from taking the ship out of service for a month for
the installation. Therefore, while using a scrubber will allow a ship to continue using (currently)
cheaper high-sulfur fuel, it may take years to recover the initial investment. For example, one
industry study estimates that, in the case of a typical tanker, a scrubber installation could cost $4.2
million with a payback time of approximately 4.8 years.17 Furthermore, scrubbers installed to
capture sulfur emissions might have to be further refitted or replaced to comply with any future
IMO standards for GHG emissions.
The rate of scrubber adoption could affect the financial impacts of installing them in terms of fuel
costs. Scrubbers ultimately offset some or all of their initial costs because they allow vessel
operators to continue using relatively inexpensive high-sulfur fuel. However, the return on
investment for scrubbers depends on the relative prices of high- and low-sulfur bunker fuels. The
demand—and therefore, prices—for low-sulfur and high-sulfur fuels will be affected by how
many vessels use the respective fuels under the IMO standards that take effect in 2020. For
example, limited scrubber adoption could result in more vessels demanding more low-sulfur fuel
oil, creating upward pressure on low-sulfur fuel prices. Under such a scenario, scrubbers would
provide greater fuel cost savings for vessels that installed them. Alternatively, high-sulfur fuel
could become more costly due to refinery production cutbacks (because shippers will not be
allowed to burn it without scrubbers).18 In this case, the economic benefits of scrubbers would be
diminished.
Given the uncertain fuel supply and demand dynamics, it is difficult for vessel operators to know
how big the market distortions from scrubber installation could be or how many other operators
may choose to install scrubbers.19 As of September 2018, there were approximately 660 ships
retrofitted with scrubbers and over 600 ships under construction with plans to install scrubbers.20
By 2020, projecting additional construction orders, some analysts predict about 2,000 vessels
could have scrubbers installed.21 However, even with higher demand for the technology, the
ability of vessel owners to install scrubbers is constrained; analysts estimate that current
maximum capacity for installing scrubbers is be between 300 to 500 ships per year.22
LNG-Fueled Engines
Another option for ship owners to comply with the IMO 2020 sulfur standards is to switch to
engines that burn LNG as a bunker fuel. LNG-fueled vessels emit only trace amounts of sulfur
oxides in their exhaust gases—well below even the 0.1% fuel-equivalent threshold in some of the
ECA zones—so they would be fully compliant with the IMO standards. As a secondary benefit,
using LNG as an engine fuel also would reduce particulate matter (PM) emissions relative to both
high- and low-sulfur marine fuel oils.23 Furthermore, LNG vessels have the potential to emit less
17 Jack Jordan and Paul Hickin, “Tackling 2020: The Impact of the IMO and How Shipowners can Deal with Tighter
Sulfur Limits,” Platts, May 2017, p. 5.
18 Eugene A. Van Rynbach, Karl E. Briers, and Nicholas J. DelGatto, Analysis of Fuel Alternatives for Commercial
Ships in the ECA Era, Revision 6, Herbert Engineering Corp., March 5, 2018, p. 5.
19 Martyn Lasek, “What Does IMO’s 0.50% Sulphur Cap Decision Mean for the Bunker Supply Chain?,” Ship and
Bunker, April 28, 2017.

20 Marine Log, “Decision Time,” November 2018, p. 30.
21 Libby George and Ahmad Ghaddar, “Shipping’s 2020 Low Sulphur Fuel Rules Explained,” Reuters, May 17, 2018.
22 Ibid.
23 Heather Thomson, James J. Corbett, and James J. Winebrake, “Natural Gas as a Marine Fuel,” Energy Policy, Vol.

CO2 than vessels running on conventional, petroleum-based fuels. However, LNG vessels would
have the potential to result in more fugitive emissions of methane, another GHG, because
methane is the primary component of natural gas, further discussed below.
Installing an LNG-fueled engine can add around $5 million to the cost of a new ship.24
Retrofitting existing ships appears to be less desirable because of the extra space required for the
larger fuel tanks (new ships can be designed with the larger fuel tanks). The costs of retraining
crews to work with LNG engines could also factor into a vessel operator’s decision about
switching to LNG. However, apart from their lower emissions, LNG-fueled engines may offset
their capital costs with fuel cost advantages over engines burning petroleum-derived fuels. These
savings would depend on the price spread between natural gas and fuel oil—which has been
volatile in recent years. The likelihood that switching to LNG will produce long-term fuel costs
savings relative to conventional fuels is, therefore, a critical consideration for many vessel
owners.
Jones Act Fleet Choosing LNG-Fueled Engines

The 1920 Merchant Marine Act (known colloquially as the Jones Act) requires that vessels
engaged in U.S. domestic transport be built domestically.25 Many newly built domestic ships
receive a federal loan guarantee under the Maritime Administration’s so-called “Title XI”
program. In 2014, the program was modified to include the use of “alternative energy
technologies” to power ships as part of the relevant criteria in evaluating a loan application.26 The
Maritime Administration counts LNG-fueled engines as an “alternative energy technology” and
may be more likely to approve loan applications for ships with LNG-capable engines.
Since the North American ECA was established in 2015, Jones Act coastal ship operators have
taken steps to transition their fleets to use cleaner burning fuels, including LNG.27 The three Jones
Act operators that ship dry goods to Alaska, Hawaii, and Puerto Rico have taken delivery or have
ordered LNG-fueled and LNG-capable vessels from U.S. shipyards in Philadelphia, PA, and
Brownsville, TX.28 Harvey Gulf International has put into service five LNG-powered offshore
supply vessels that service offshore oil rigs.29 Some Jones Act tanker operators that have recently
built or ordered vessels have chosen to install LNG-ready engines while other operators have
chosen to install scrubbers on their existing fleet. Ship engines and scrubbers for the Jones Act
fleet do not have to be manufactured in the United States because they are not considered an
integral part of the hull or superstructure of a ship.30
87, 2015, p. 154.

24 Reuters, “New Fuel Rules Push Shipowners to Go Green with LNG,” August 15, 2018.
25 For further discussion of the Jones Act, see CRS Report R44831, Revitalizing Coastal Shipping for Domestic
Commerce, by John Frittelli.

26 U.S. Maritime Administration, Title XI Maritime Guaranteed Loan Program: Proposed Policy: Other Relevant
Criteria for Consideration when Evaluating the Economic Soundness of Applications, Docket no. MARAD-2014-0011,
46 CFR Part 298, March 26, 2014, pp. 10075-10077.
27 In 2009, Congress exempted Jones Act carriers operating exclusively within the Great Lakes from complying with
fuel sulfur standard. See P.L. 111-88 §442.

28 Joseph Bonney, “Matson: Speculative Jones Act Capacity Would Pull Down Rates,” Journal of Commerce, August
1, 2017; Matson, “Matson Christens First Aloha Class Vessel ‘Daniel K. Inouye’ at Philly Shipyard,” press release,
July 2, 2018.
29 “Harvey Gulf Takes Delivery of Fifth LNG-Powered OSV,” LNG World News, February 23, 2018.
30 Coast Guard, National Vessel Documentation Center, U.S. Build Determination Letters; https://www.dco.uscg.mil/
Our-Organization/Deputy-for-Operations-Policy-and-Capabilities-DCO-D/National-Vessel-Documentation-Center/.

Seagoing barges, known as articulated tug barges, are also a significant portion of the domestic
coastal fleet, especially for moving liquid cargoes. However, these vessels traditionally have
burned lower-sulfur fuels and thus the ECA has not prompted fleet conversions. IMO fuel
requirements do not apply to river barges operating on the nation’s inland waterway system,
although this fleet potentially could be a market for LNG as fuel.
Bunkering vessels (small tankers with hoses for refueling ships) in U.S. waters must also be Jones
Act compliant. Barges are the predominant method for bunkering ships in U.S. ports. An LNG
bunkering vessel for the Port of Jacksonville—the first Jones Act-compliant LNG bunkering
vessel to enter service in the United States—was built in 2017 by Conrad Shipyards in Orange,
TX.31
LNG vs. Petroleum-Based Fuel Costs

Recent energy sector trends suggest that LNG may be cheaper in the long-run than petroleum-
based, low-sulfur fuels. However, these price movements are correlated to some extent. Many
existing long-term LNG contracts link LNG prices to oil prices (although such contract terms are
on the decline), even in the spot market.
Starting in 2008, the advent of shale natural gas production dramatically decreased natural gas
prices in the United States. Natural gas spot prices in the United States at the Henry Hub—the
largest U.S. trading hub for natural gas—averaged around $3/MMBtu (million British Thermal
Units) in 2018, about a quarter of the peak in average price a decade before, just prior to the shale
gas boom (Figure 1).32
Figure 1. Average Monthly Henry Hub Natural Gas Spot Price

Dollars per MMBtu
Source: U.S. Energy Information Administration, “Henry Hub Natural Gas Spot Price,” online database,
accessed October 12, 2018, https://www.eia.gov/dnav/ng/hist/rngwhhdM.htm.
Notes: MMBtu = million British thermal units
31 JAX LNG, “LNG Bunker Barge Under Construction,” press release, December 23, 2016, http://jaxlng.com/lng-
bunker-barge/.
32 Energy Information Agency, Henry Hub Natural Gas Spot Price, June 27, 2018, https://www.eia.gov/dnav/ng/hist/
rngwhhdM.htm.”

Liquefying natural gas into LNG adds around $2/MMBtu to the production cost. Including
additional producer charges and service costs would bring the total cost of LNG available at a
U.S. port (based on the 2018 average price in Figure 1) to approximately $6/MMBtu.33
Shipping of LNG from the United States to Asia or Europe adds from $1 to $2/MMBtu, so, based
on the 2018 average cost in Figure 1, LNG delivered to a port overseas would cost on the order
of $7 to $8/MMbtu under long-term contracts, depending upon timing and location.34 Higher or
lower prices could occur for specific long-term contracts and in the LNG spot market (i.e., for
individual cargoes), based on the location and the supply and demand balance at the time. In
general, the U.S. market will have the lowest-priced LNG. Northern Asia will have the highest
LNG prices due to the region’s comparative lack of pipeline gas supplies and its distance from
LNG suppliers.
Figure 2 compares LNG spot market prices in the Japan LNG market—the highest-priced LNG
market—to spot prices for two common petroleum-based bunker fuels, low-sulfur gas oil and
high-sulfur fuel oil. As the figure shows, over the last five years, Japan LNG generally has been
cheaper than low-sulfur fuel and more expensive than high-sulfur fuel on an energy-equivalent
basis (i.e., per MMbtu). However, Japan LNG and high-sulfur fuel prices converged in 2018. As
the figure shows, spot prices for LNG deliveries to the Japan market fell below $6/MMBtu in
2016 from a high above $16/MMBtu in 2013. Likewise, low-sulfur gas oil prices have doubled,
and high-sulfur fuel oil prices have tripled, since 2016.
Figure 2. Maritime Fuels Cost Comparison

Dollars per MMBtu
Source: Bloomberg commodity price data, CRS calculations.

Notes: The values represent the first month futures contract price at the end of each month. They are not
monthly averages. Natural gas prices typically are quoted in $/MMbtu vs. $/metric ton for the other two fuels.
The prices for gas oil and fuel oil are converted to $/MMbtu for direct comparison based on energy content.
33 See an example cost calculation in Chris Pedersen, “LNG Prices and Pricing Mechanisms,” slide presentation, Platts,
February 6, 2017, https://www.platts.com/IM.Platts.Content/ProductsServices/ConferenceandEvents/americas/
liquefied-natural-gas/presentations2017/Chris_Pederson.pdf.
34 Timera Energy, “Deconstructing LNG Shipping Costs,” February 26, 2018, https://timera-energy.com/
deconstructing-lng-shipping-costs/.

The volatility of the bunker fuel markets and the global LNG market lead to considerable
unpredictability about the relative prices among fuels going forward. LNG may become
increasingly price-competitive versus low-sulfur fuel as the 2020 IMO sulfur standards take
effect. As discussed above, many analysts predict prices for low-sulfur gas oil, which are already
higher than those for high-sulfur fuel oil, to increase significantly after 2020 due to a standards-
driven rise in demand.35
Although fuel prices as shown in Figure 2 indicate favorable economics for LNG versus low-
sulfur fuel, if prices for high-sulfur fuel oils collapse as some expect after the 2020 IMO
regulations enter into force, it is possible that LNG could lose its price advantage over residual
fuel oils. Likewise, the price spread between low-sulfur gasoil and high-sulfur fuel oil would
increase, incentivizing more carriers to install scrubbers to capitalize on the savings in fuel costs
by continuing to burn high-sulfur fuel. An additional complication is the variability of LNG
prices by region. Many shipping lines are global operators seeking low-priced fuel worldwide,
but unlike the global oil market, natural gas markets are regional. Because the price of LNG can
vary significantly by region, the relative economics of LNG versus other bunker fuels would also
vary by region.
Another uncertainty in the market for LNG bunkering is the discrepancy between the spot price
for traded LNG and the price for LNG sold as bunker fuel in ports. Added costs associated with
marketing, storing and transporting LNG in bunkering operations (discussed below) would likely
require ports to charge a rate for LNG bunker fuel above spot market prices. These additional
overhead costs are likely to vary among ports.
Building an LNG-Fueled Fleet

Before factoring in any effect of IMO standards on fuel prices, and assuming a favorable LNG-
fuel oil price spread, it still could take years for the savings generated by using LNG to pay back
the capital costs of switching fuels. Through May 2018, there were 122 LNG-powered vessels in
operation and another 135 ordered or under construction.36 Many of the first LNG vessels
delivered and ordered were Norwegian-flagged vessels, as the Norwegian government has
subsidized LNG-fueled vessels with a “NOx Fund.” The fund provides LNG-operated ships with
an exemption from the country’s tax on NOx emissions.37 As an alternative to committing to LNG
as a fuel, some vessel owners may hedge their bets by opting to install “LNG-ready” engines,
which can burn low-sulfur fuel oil currently, but are designed to make future LNG conversion
easier.
The number of LNG ships that may be in operation by 2030 is difficult to predict. First, as noted
above, growth in LNG powered vessels is likely to be driven primarily by new builds rather than
retrofits.38 However, the shipping industry has experienced nearly a decade of vessel overcapacity
and slow growth. Weak growth in the shipping industry could result in slower growth in vessel
orders overall and, therefore, fewer orders for LNG-powered vessels. Of new vessels ordered, or
35 Martijn Rats and Amy Sergeant, “The Coming Scramble for Middle Distillates—Raising Oil Price Forecast to $90,”
Morgan Stanley, May 15, 2018, p. 1.
36 Mike Corkhill, “Big Boys Join the LNG-Fuelled Fleet,” LNG World Shipping, May 8, 2018.
37 Geir Høibye, “Norwegian NO Fund as a Driving Force for LNG Use,” Business NO Fund, presentation to the
x x
Viking Line Seminar, January 16, 2014, http://www.lngbunkering.org/sites/default/files/
2014%20_The_NOx_Fund__.pdf.
38 Chris N. Le Fevre, “A Review of the Demand Prospects for LNG as a Marine Fuel,” The Oxford Institute for Energy
Studies, Paper NG 133, June 2018, p. 17.

set to be delivered, in 2018 or after, 13.5% (by tonnage) are LNG-fueled—up from 1.4% in
2010.39 If this trend continues, demand for LNG from the shipping industry could still be
relatively high, even if overall growth in the shipping industry remains slow.
Because LNG bunkering infrastructure among global ports is currently limited, vessels that use
large amounts of fuel and travel predictable routes—along which LNG is available—are the most
suitable for LNG fuel. For this reason, cruise ships, vehicle ferries, and container ships initially
may be the most likely vessel types to adopt LNG as bunker fuel. Order books have reflected this
assessment: one quarter of all cruise ships on order by tonnage at the end of 2017 were LNG-
powered.40 Likewise, a major container ship line, CMA CGM, recently announced that it was
ordering nine extra-large container ships powered by LNG.41 The carrier stated that the fuel tanks
will displace space for “just a few containers” and said it intends to refuel these ships just once on
their round trip voyages between Asia and Europe.42
Conversely, LNG fuel adoption may be less likely for oil tankers. Half the global oil tanker fleet
operates on the shipping spot market (also known as the “tramp” market), meaning that ship
owners enter into contracts with cargo owners only for a single voyage.43 In this kind of trade,
many oil tankers lack a consistent route. Having to limit spot contracts only to ports that may
bunker LNG could reduce the arbitrage opportunities of tankers. Dry bulk cargo vessels (carrying
grain, coal, and other commodities) also typically operate in the tramp market.
LNG Engines and Greenhouse Gas Emissions

LNG-powered vessels have lower direct exhaust emissions than comparable vessels using
petroleum-derived fuels. However, the lifecycle—or “well-to-wake”—GHG emissions
(especially of methane) and of volatile organic compound emissions from natural gas production,
transportation, and liquefaction complicates the comparison.44 One study in 2015 concluded,
“performing a [‘well-to-wake’] GHG study on LNG used as a marine fuel is more complex than
previously thought. Further studies are needed ... to investigate this subject.”45 A 2016 study
found that the relative GHG emissions benefits of LNG versus conventional fuel oil on a “well-
to-wake” basis was highly dependent upon fugitive methane emissions in the LNG supply
chain.46 A 2017 study funded by NGVA Europe, an association which promotes the use of natural
gas in vehicles and ships, concluded that LNG as a bunker fuel provides a 21% well-to-wake
reduction in GHG emissions compared to convention fuel oil.47 Evaluating such studies is beyond
39 Ibid, p. 11.
40 Allan E Jordan, “LNG-Powered Cruise Ships Lead the Way,” Maritime Executive, October 30, 2017.
41 Gus Trompiz, “Shipping Firm CMA CGM Chooses LNG to Power New Vessels,” Reuters, November 7, 2017.
42 Energy Monitor Worldwide, “LNG to Go Mainstream Within Container Sector,” November 16, 2018.
43 International Maritime Organization, Studies on the Feasibility and Use of LNG as a Fuel for Shipping, 2016, p. 44.
44 For more discussion about methane and VOC emissions from the natural gas lifecycle, see CRS Report R42986,
Methane and Other Air Pollution Issues in Natural Gas Systems, by Richard K. Lattanzio.
45 Max Kofod and Torsten Mudt, “Well-to-Wake Greenhouse Gas Emissions from LNG in Marine Applications,” MTZ
Industrial, September 2015, p. 70.

46 Sujith Kollamthodi et al., The Role of Natural Gas and Biomethane in the Transport Sector, ED 61479, No. 1,
prepared for Transport and Environment, February 16, 2016, p. 22, https://www.transportenvironment.org/sites/te/files/
publications/2016_02_TE_Natural_Gas_Biomethane_Study_FINAL.pdf.
47 thinkstep AG, Greenhouse Gas Intensity from Natural Gas in Transport, prepared for NGVA Europe, June 2017,
http://ngvemissionsstudy.eu/.

the scope of this report, although they indicate uncertainty about environmental benefits of LNG
fuel, which may require further examination.
Despite concerns over lifecycle emissions from the natural gas supply chain, in the short term,
ships that pair LNG engines with newer vessel designs could reduce onboard GHG emissions.
However, whether these GHG emission reductions would be sufficient to meet the future
standards could become another issue for ship owners. The IMO has set a provisional goal of
reducing GHG emissions from ships by 50% by 2050.48 Depending upon the state of engine
technology, LNG-fueled ships might become less viable if GHG limits were to be established
well before 2050. Concerns about such GHG limits might lead to a decrease in orders of LNG-
powered ships over time. Commercial vessels have a typical lifespan of over 20 years, so firms
ordering new ships have to take into account compliance with potential standards issued decades
in the future. If renewable fuels, such as biodiesel, become more available and cheaper in the
coming decades, renewable fuel-powered ships may take over part of the market that LNG-
powered ships could occupy.
Global Developments in LNG Bunkering

A key requirement for ocean carriers to adopt LNG as an engine fuel is the availability of LNG
bunkering facilities. Because LNG is extremely cold (-260 °F) and volatile, LNG bunkering
requires specialized infrastructure for supply, storage, and fuel delivery to vessels. Depending
upon the specific circumstances, LNG bunkering could require transporting LNG to a port from
an offsite liquefaction facility for temporary storage at the port, or building an LNG liquefaction
terminal on site. Alternatively, LNG could be delivered from offsite facilities directly to vessels in
port via truck or supply vessel (Figure 3). Truck-to-vessel LNG bunkering, in particular, provides
some fueling capabilities without large upfront capital investments. LNG tanker trucks could also
bring LNG to a storage tank built on site at the port, which could then bunker the LNG to arriving
ships via pipeline. Supplying LNG using tanker trucks in this way may face capacity limitations
due to truck size, road limitations, or other logistical constraints, but it has been demonstrated as a
viable approach to LNG bunkering at smaller scales. The predominant method of bunkering today
with high-sulfur fuel is vessel to vessel, either by a tank barge or smaller tanker.
Figure 3. LNG Bunkering Options
Source: Adapted from: Danielle Holden, Liquefied Natural Gas (LNG) Bunkering Study, DNV GL, No. PP087423-4,
Rev. 3, prepared for the U.S. Maritime Administration, September 3, 2014, pp. 15-17.
48International Maritime Organization, “UN Body Adopts Climate Change Strategy for Shipping,” Briefing 06, April
13, 2018, http://www.imo.org/en/MediaCentre/PressBriefings/Pages/06GHGinitialstrategy.aspx.

The type of infrastructure needed to temporarily store (if needed) and deliver LNG within a given
port would depend on the size and location of the port, as well as the types of vessels expected to
bunker LNG. Truck to ship bunkering is best suited for supporting smaller and mid-sized vessels,
such as ferries or offshore supply vessels (OSVs) that support offshore oil platforms. Liquefaction
facilities built on site can provide the greatest capacity of any LNG bunkering option, for
example, to provide fuel for large vessels in transoceanic trade. However, constructing small-
scale liquefaction facilities to produce and deliver LNG on site requires considerable planning
and significant capital investment, in one case on the order of $70 million for a mid-sized port.49
Each LNG bunkering option in Figure 3 may be a viable means to begin LNG bunkering service
in a given port. However, ports may face practical constraints as bunkering increases in scale. For
example, a container port of significant size typically has multiple terminals, so even with an on-
site liquefaction facility, it may need additional infrastructure or supply vessels for moving LNG
to other port locations where a cargo ship might be berthed. There may also be port capacity and
timing constraints upon the movement of LNG bunkering barges trying to refuel multiple large
vessels in various locations around a crowded port. To date, the LNG bunkering operations
already in place or in development are comparatively small, but scale constraints could become a
factor as LNG bunkering grows and might require additional bunkering-related port investments.
LNG Bunkering Overseas

Early adoption of LNG bunkering occurred in Europe, where the first sulfur ECAs were created
in 2006 and 2007. Through Directive 2014/94/EU, the European Union requires that a core
network of marine ports be able to provide LNG bunkering by December 2025 and that a core
network of inland ports provide LNG bunkering by 2030.50 This mandate has been promoted, in
part, with European Commission funds to support LNG bunkering infrastructure development.51
In addition, the European Maritime Safety Agency published regulatory guidance for LNG
bunkering in 2018.52 Over 40 European coastal ports have LNG bunkering capability currently in
operation—primarily at locations on the North Sea and the Baltic Sea, and in Spain, France, and
Turkey. These locations include major port cities such as Rotterdam, Barcelona, Marseilles, and
London. Another 50 LNG bunkering facilities at European ports are in development.53
LNG bunkering is also advancing in Asia, led by Singapore, the world’s largest bunkering port.
Singapore has agreed to provide $4.5 million to subsidize the construction of two LNG bunkering
vessels.54 The Port of Singapore plans to source imported LNG at the adjacent Jurong Island LNG
terminal, loading it into the bunkering vessels for ship-to-ship fueling of vessels in port.
Singapore also has signed a memorandum of understanding with 10 other partners—including a
Japanese Ministry and the Chinese Port of Ningbo-Zhoushan—to create a focus group aimed at
promoting the adoption of LNG bunkering at ports around the world.55 In Japan, one consortium
49 Nicholas Newman, “The World Is Going Big on Small-Scale End-Use LNG Projects,” KNect365 Energy Blog,
December 8, 2017, https://knect365.com/energy/article/7b4f6e2b-f2fc-49eb-823d-f6672b1dcdf0/the-world-is-going-
big-on-small-scale-end-use-lng-projects.
50 European Union, “Directive 2014/94/EU of the European Parliament and of the Council,” Article 6, Sections 1 and 2,
October 22, 2014

51 “EU Approves Investment in LNG-bunkering Studies Across Europe,” LNG World News, April 25, 2017.
52 European Maritime Safety Agency, Guidance on LNG Bunkering to Port Authorities and Administrations, January
31, 2018.
53 DNV GL, “Alternative Fuels Insight,” online mapping system, accessed November 7, 2018, https://afi.dnvgl.com/.
54 “Singapore’s MPA Awards Grant for Two LNG Bunkering Vessels,” LNG World News, June 4, 2018.
55 Maritime and Port Authority of Singapore, LNG Bunkering (Pilot Programme), December 4, 2017,

is implementing plans to begin vessel-to-vessel LNG bunkering at the Port of Keihin in Tokyo
Bay by 2020.56 Japan’s NYK line, a large ship owner, recently announced that it had reached an
agreement with three Japanese utilities to add LNG bunkering to ports in Western Japan.57 Asian
countries, together with Australia and the United Arab Emirates, currently have around 10 coastal
ports offering LNG bunkering, with another 15 projects in development.58
Some LNG bunkering operations in Europe and Asia are associated with existing LNG marine
terminals, which already have LNG storage and port infrastructure in place. However, many
smaller operations—including most of the projects in development—employ trucking, dedicated
bunkering vessels, on-site liquefaction, and other means to extend LNG availability beyond the
ports with major LNG terminals. LNG bunkering is not so advanced in South America, although
with nine operating LNG marine terminals (one for export), and another six in development,
South America also could support significant LNG bunkering operations in the near future.59
LNG Bunkering in the United States

LNG bunkering in the United States currently takes place in two locations—Jacksonville, FL, and
Port Fourchon, LA—with a third bunkering facility under development in Tacoma, WA. The
LNG facilities in these ports serve the relatively small U.S.-flag domestic market. Bunkering of
LNG-fueled cruise ships also is planned for Port Canaveral, FL. However, ports in North America
have significant potential to expand the nation’s LNG bunkering capability.
Jacksonville, FL
Jacksonville is the largest LNG bunkering operation at a U.S. port. One bunkering facility at the
port, developed by JAX LNG, initially began truck-to-ship refueling operations in 2016 for two
LNG-capable container ships. (The LNG is sourced from a liquefaction plant in Macon, GA.60) In
August 2018, upon delivery of the Clean Jacksonville bunker barge, the facility began to replace
truck-to-ship bunkering with ship-to-ship bunkering.61 In the future, the barge plans to source
LNG from a new, small-scale liquefaction plant which JAX LNG is currently constructing at the
port.62 A second facility at Jacksonville’s port, operated by Eagle LNG, provides LNG bunkering
sourced from a liquefaction plant in West Jacksonville.63 Eagle LNG also is constructing an on-
https://www.mpa.gov.sg/web/portal/home/port-of-singapore/services/bunkering/lng-bunkering-pilot-programme. The
other signatories to the MOU are the Antwerp Port Authority; Japan’s Ministry of Land, Infrastructure, Transport, and
Tourism; Norwegian Maritime Authority; Port of Jacksonvillem; Port of Zeebrugge; Port of Rotterdam Authority;
Ulsan Port Authority; Port of Ningbo-Zhoushan; Port of Vancouver; and Port of Marseille.
56 Institute of Energy Economics Japan (IEEJ) and Energy Policy Research Foundation, Inc. (EPRINC), The Future of
Asian LNG 2018, October 2018, p. 32, https://eneken.ieej.or.jp/data/8140.pdf.

57 “NYK, Partners to Explore Commercialization of LNG Bunkering in Western Japan,” World Maritime News, August
3, 2018.
58 DNV GL, “Alternative Fuels Insight,” online mapping system, accessed November 7, 2018, https://afi.dnvgl.com/.
59 Brazilian Ministry of Mines and Energy, International LNG Market: Impacts on Brazil, September 3, 2018, Fig.3.
60 Mike Corkhill, “Jacksonville, the Premier US LNG Bunkering Port, Moves into Higher Gear,” LNG World Shipping,
April 17, 2018.

61 Conrad Industries, “Conrad Industries Announces Delivery of North America’s First LNG Bunker Barge,” press
release, August 20, 2018.

62 JAX LNG, “JAX LNG,” online video, accessed November 7, 2018, http://www.pivotallng.com/Network-of-Assets/
Jacksonville%20-%20FL.
63 Crowley, “New LNG Fuel Depot at JAXPORT Highlights Innovation by Crowley, Eagle LNG,” press release, June
27, 2018.

site liquefaction and vessel bunkering facility in another part of the port, expected to begin
service in 2019.64 Taken together, the JAX LNG and Eagle LNG facilities is expected to establish
Jacksonville as a significant LNG-bunkering location with the capability to serve not only the
domestic fleet but larger international vessels as well.
Port Fourchon, LA
In 2015, Harvey Gulf International Marine (Harvey) began LNG bunkering operations in the Gulf
of Mexico to fuel its small fleet of LNG-powered offshore supply vessels serving offshore oil
rigs.65 Harvey has since constructed a $25 million facility at its existing terminal in Port Fourchon
to store and bunker LNG sourced from liquefaction plants in Alabama and Texas. The facility can
provide truck-to-ship bunkering services for LNG-fueled offshore supply vessels, tank barges,
and other vessels.66 A Harvey subsidiary has ordered two LNG bunkering barges to enable ship-
to-ship fueling in the future.67
Tacoma, WA
Puget Sound Energy has proposed an LNG liquefaction and bunkering facility at the Port of
Tacoma, WA. Vessels traveling between Washington and Alaska typically spend the entire
journey within the 200-mile North America ECA. Consequently, vessel owners operating along
these routes have been interested in LNG as bunker fuel. TOTE Maritime, for example, a ship
owner involved in trade between Alaska and the lower 48 states, has begun the process of
retrofitting the engines of two of its container ships to be LNG-compatible.68
The proposed Tacoma LNG facility would be capable of producing up to 500,000 gallons of LNG
per day and would include an 8 million gallon storage tank. The facility would serve the dual
purposes of providing fuel for LNG-powered vessels and providing peak-period natural gas
supplies for the local gas utility system.69 Its total construction cost reportedly is expected to be
$310 million.70 Community and environmental concerns have slowed the progress of the
proposal, which is still under regulatory review.71 Puget Sound Energy originally planned to put
the LNG facility into service in late 2019; however, permitting issues appear likely to delay its
opening until 2020 or later—if it is eventually approved.72
64 Eagle LNG Partners, “Jacksonville, FL,” web page, accessed November 7, 2018, shttps://www.eaglelng.com/
projects/jacksonville-fl.
65 Harvey Gulf International Marine, press release, February 6, 2015. Harvey’s initial LNG bunker transfer took place
at a shore-based LNG terminal in Pascagoula, MS owned by a Martin Midstream Partners subsidiary.

66 “Harvey Bankruptcy Puts US LNG Bunkering in Focus,” Hellenic Shipping News, March 14, 2018; Harvey Gulf
International Marine, press release, February 14, 2014. (Harvey emerged from Chapter 11 bankruptcy in July 2018.)
67
Jason Jiang, “Harvey Gulf Orders Second LNG Bunkering Vessel at VT Halter,” Asia Shipping Media, August 30,
2018, https://splash247.com/harvey-gulf-orders-second-lng-bunkering-vessel-at-vt-halter/.
68 TOTE Maritime, “Phase 1 of TOTE Maritime Conversion to LNG Complete,” press release, February 25, 2018,
http://www.totemaritime.com/home-news/phase-1-tote-maritime-conversion-lng-complete/.
69 Ecology and Environment, Inc., Proposed Tacoma Liquefied Natural Gas Project: Draft Supplemental
Environmental Impact Statement, prepared for Puget Sound Clean Air Agency, October 8, 2018, p. 1.
70 Derrick Nunnally, “PSE to Discuss LNG Plans at Nov. 21 Convention Center Event,” News Tribune (Tacoma, WA)
November 3, 2016.
71 Debbie Cockrell, “Tacoma and Tideflats’ Future Take Center Stage at LNG Hearing, Council Meeting,” News
Tribune, October 31, 2018.

72 Candice Ruud, “Tacoma LNG Plant Has ‘Potentially Significant’ Permitting Issues. Opening Could Be Delayed,”
News Tribune, May 11, 2018.

Port Canaveral, FL
Q-LNG Transport, a company 30% owned by Harvey, has placed orders for two LNG bunkering
barges to provide ship-to-ship LNG fueling as well as “ship-to-shore transfers to small scale
marine distribution infrastructure in the U.S. Gulf of Mexico and abroad.”73 Q-LNG’s first barge
initially is expected to provide fuel to new LNG-fueled cruise ships based in Port Canaveral (and,
potentially, Miami), while service from its second barge is still uncommitted.74 Initial plans are
for the LNG to be sourced from the Elba Island LNG import/export terminal near Savannah,
GA—approximately 230 nautical miles away—although the company may seek to develop an on-
site LNG storage facility in the future.75
Other U.S. Ports with Potential for LNG Bunkering

As noted above, U.S. LNG bunkering activities thus far have been limited to a handful of vessels
in domestic trade and tourism. LNG bunkering for the much larger fleet of foreign-flag ships
carrying U.S. imports and exports is still to be developed. As in Europe and Asia, domestic ports
located near major LNG import or export terminals may serve as anchors for expanded LNG
bunkering operations. Figure 4 shows existing LNG import and export terminals in North
America. LNG can be liquefied from pipeline natural gas (or imported natural gas) and stored in
large quantities at these facilities. The LNG can then be bunkered on site or transported to
bunkering facilities elsewhere in the region by truck, rail, or barge.
Figure 4. Existing LNG Import and Export Terminals in North America
Source: Federal Energy Regulatory Commission, “North American LNG Import/Export Terminals: Existing,”
October 23, 2018, https://www.ferc.gov/industries/gas/indus-act/lng/lng-existing.pdf.
Notes: Two additional LNG import terminals in southern Mexico are not shown.
73 Q-LNG Transport, “Background,” web page, accessed November 9, 2018, http://qlngtransport.com/.

74 Mike Corkhill, “Q-LNG to Order Second Articulated Tug Barge Bunker Vessel,” LNG World Shipping, September
4, 2018.
75 Dave Berman and Wayne T. Price, “LNG Cruise Ship Coming to Port Canaveral Fuels Concerns of Some Local
Residents,” Florida Today, September 14, 2018.

As discussed above, the distance between Port Canaveral and Elba Island in Q-LNG’s bunker
sourcing plan is 230 nautical miles. Taking this distance as a measure of how far away LNG can
be sourced and barged economically, it is possible to extrapolate which U.S. ports are within
reach of a potential supply of LNG for vessel bunkering. Table 1 lists the top 20 U.S. container
shipment ports in the United States and their proximity to existing LNG import/export terminals.
Of these top 20 ports, 12 are less than 230 nautical miles from an operating LNG terminal.
Distances between LNG terminals and the other East Coast ports are not much greater, suggesting
that LNG for vessel bunkering could be within reach of every U.S. port along the Eastern
Seaboard and in the Gulf of Mexico.
Table 1. Top 20 U.S. Container Ports (2017) and Nearby LNG Terminals
Distance to LNG
U.S. Customs Total Trade Closest LNG Terminal
Port (TEUs) Terminal Location (nautical miles)
Los Angeles, CA 6,189,161 Ensenada, MX 145

Long Beach, CA 5,009,490 Ensenada, MX 140
New York, NY 4,767,279 Cove Point, MD 330
Savannah, GA 3,162,898 Savannah, GA In port
Norfolk, VA 2,189,485 Cove Point, MD 100
Houston, TX 2,018,254 Freeport, TX 75
Charleston, SC 1,725,784 Savannah, GA 80
Oakland, CA 1,666,100 Ensenada, MX 490
Tacoma, WA 1,278,298 Ensenada, MX 1,290
Seattle, WA 987,151 Ensenada, MX 1,280
Jacksonville, FL 817,242 Jacksonville, FL In port
Port Everglades, FL 791,849 Jacksonville, FL 280
Miami, FL 768,028 Jacksonville, FL 310
Baltimore, MD 702,897 Cove Point, MD 60
New Orleans, LA 406,439 Pascagoula, MS 80
Philadelphia, PA 362,811 Cove Point, MD 290
Mobile, AL 250,575 Pascagoula, MS 60
San Juan, PR 212,583 Peñuelas, PR 115
Boston, MA 211,193 Everett, MA In port
Wilmington, DE 197,089 Cove Point, MA 270
Sources: Maritime Administration, “U.S. Waterborne Foreign Container Trade by U.S. Customs Ports 2000–
2017,” spreadsheet, 2018, https://www.maritime.dot.gov/data-reports/data-statistics/us-waterborne-foreign-
container-trade-us-customs-ports-2000-%E2%80%93-2017; Google Maps; Sea-Seek—Google Maps Distance
Calculator, https://www.sea-seek.com/tools/tools.php.
Notes: TEU = twenty-foot equivalent unit. These figures include only loaded containers and empty containers
that involve a freight charge. Mileage figures are approximate.
On the West Coast, the ports of Los Angeles and Long Beach—the two largest U.S. ports—are
relatively close to the Costa Azul LNG import terminal in Ensenada, MX. Seattle and Tacoma are
far from Ensenada, but would be served by the proposed Tacoma LNG bunkering project, if

constructed. LNG bunkering for Seattle and Tacoma alternatively could be sourced from an
existing LNG port facility around 100 nautical miles north in Vancouver, BC, which is expanding
to provide LNG bunkering services to international carriers.76 Alaska’s existing LNG export
terminal currently is inactive, but potentially could supply LNG bunker fuel in the Pacific
Northwest as well.77Although existing LNG import or export terminals in North America could
supply LNG for regional bunkering operations, such activities would require additional
investment for infrastructure such as LNG transfer facilities and bunker barges. CRS is not aware
of any public announcements among the LNG terminals above to develop bunkering operations.
However, at least one LNG terminal owner, Cheniere Energy, which operates LNG terminals in
Louisiana and Texas, identifies vessel bunkering as one source of future LNG demand growth
worldwide.78
U.S. Regulation of LNG Bunkering

The IMO adopted safety standards for ships using natural gas as a bunker fuel in 2015.79 The
standards, which took effect in 2017, apply to all new ships and conversions of ships (except
LNG tankers, which have their own standards).80 The IMO standards address engine design, LNG
storage tanks, distribution systems, and electrical systems. They also establish new training
requirements for crews handling LNG and other low flashpoint fuels.81 As is the case for the
sulfur standards, the IMO LNG safety standards apply to all IMO member nations, including the
United States. In addition, a number of U.S. federal agencies, especially the Coast Guard and the
Federal Energy Regulatory Commission, have jurisdiction over specific aspects of domestic LNG
storage infrastructure and bunkering operations.
Coast Guard Port Regulations

The Coast Guard has the most prominent role in LNG bunkering, given its general authority over
port operations and waterborne shipping. In 2015, the Coast Guard issued two guidelines for the
handling of LNG fuel and for waterfront facilities conducting bunkering operations.82 In 2017, the
Coast Guard issued additional guidelines to Captains of the Port, the local Coast Guard officials
76 FortisBC, “Tilbury LNG Expansion Project,” accessed November 14, 2018, https://talkingenergy.ca/project/tilbury-
LNG-expansion-project.
77 “Kenai Calls It a Day,” SIGTTO News, Issue 38, Autumn 2017, http://www.sigtto.org/media/7731/sigtto-newsletter-
38.pdf.
78 Matt Barr, Cheniere Energy, Inc., “LNG Market Outlook,” presentation to National Association of State Energy
Officials annual meeting, September 18, 2017, p. 12, http://annualmeeting2017.naseo.org/Data/Sites/1/events/Annual-

Meeting/2017/presentations/Barr.pdf.
79 International Maritime Organization, “Maritime Safety Committee (MSC), 95th session, 3-12 June 2015,” press
release, June 12, 2015.

80 Gas tankers using boil-off gas from LNG cargos have been in use for decades and were already covered by IMO
regulations in 1986 under the International Gas Carrier code.

81 The Linde Group, Liquefied Natural Gas Material Safety Data Sheet, UN1972, September 22, 2011, p. 6,
http://www.lngbunkering.org/sites/default/files/Linde%20LNG%20Material%20Safety%20Datasheet.pdf. A fuel’s
flashpoint is the lowest temperature at which a vapor will ignite when exposed to a flame near the surface of the fuel.
The flashpoint for LNG is -188°C (-306°F).
82 USCG, Guidelines for Liquefied Natural Gas Fuel Transfer Operations and Training of Personnel of Vessels Using
Natural Gas as Fuel, CG-OES Policy Letter 01-15, 2015; Guidance Related to Vessels and Waterfront Facilities
Conducting Liquefied Natural Gas (LNG) Marine Fuel Transfer (Bunkering) Operations, CG-OES Policy Letter 02-15,
2015. Previous Coast Guard rules dealt with the storage and transfer of LNG cargos aboard LNG tanker ships, not with
ships that use LNG as fuel.

responsible for port areas, for conducting safe LNG bunkering simultaneously with other port
operations. The guidelines advise on quantitative risk assessment of facilities bunkering LNG,
which allows Captains of the Port to assess the risks posed to crews and facilities.
FERC Siting Regulations

The Federal Energy Regulatory Commission (FERC) plays a role in LNG bunkering due to its
jurisdiction over the siting of LNG import and export terminals under the Natural Gas Act of
1938.83 Specifically, FERC asserts approval authority over the place of entry and exit, siting,
construction, and operation of new LNG terminals as well as modifications or extensions of
existing LNG terminals.84 Notwithstanding this siting authority, FERC reportedly does not intend
to assert jurisdiction over the permitting of LNG bunkering facilities, but it may require
amendment of permits it has issued for LNG import or export terminals to account for bunkering
operations added afterwards.85
Other Federal Agencies

In addition to the Coast Guard and FERC, other federal agencies may have jurisdiction over
specific aspects of LNG bunkering operations in U.S. ports under a range of statutory authorities.
For example, the Pipeline and Hazardous Materials Safety Administration within the Department
of Transportation regulates the safety of natural gas pipelines and certain associated LNG storage
facilities (e.g., peak-shaving plants).86 LNG facilities also may need to comply with the
Occupational Safety and Health Administration’s regulations for Process Safety Management of
Highly Hazardous Chemicals.87 Other federal agencies, including the Environmental Protection
Agency, the U.S. Army Corps of Engineers, and the Transportation Security Administration, may
regulate other aspects of LNG bunkering projects.88 CRS is not aware of new regulations to date
among these agencies specifically addressing LNG bunkering.
Global Development of LNG Supply

World production of LNG has been rising rapidly over the last few years, driven by growth in the
natural gas sector in new regions—especially Australia and the United States. According to one
industry analysis (Figure 5), global LNG supply is expected to increase from 300 to 400 million
metric tons per annum (MMtpa) from 2017 to 2021 based on new LNG liquefaction projects
already operating or under development.89 An additional 150 MMtpa appears likely to come
83 FERC exercises LNG siting regulation under its Section 3 authority, which authorizes FERC to approve the import
and export of natural gas (15 U.S.C. §717b).
84 See 18 C.F.R. §153.
85 American Bureau of Shipping, Bunkering of Liquefied Natural Gas-Fueled Marine Vessels in North America, 2nd ed.,
2015, p. 75.
86 PHMSA regulations for LNG facilities are found at 49 C.F.R. Part 193. See also Pipeline and Hazardous Materials
Safety Administration, “LNG Plant Requirements: Frequently Asked Questions,” web page, July 25, 2018,
https://www.phmsa.dot.gov/pipeline/liquified-natural-gas/lng-plant-requirements-frequently-asked-questions.
87 29 C.F.R. Part 1910.119.
88 For a complete list of federal agencies that regulate at least one aspect of the LNG bunkering process, see Danielle
Holden, Liquefied Natural Gas (LNG) Bunkering Study, DNV GL, No. PP087423-4, Rev. 3, prepared for the U.S.
Maritime Administration, September 3, 2014, p. 87.
89 One metric ton is equivalent to 1,000 kg or approximately 2,205 lbs. One billion cubic meters of natural gas is
equivalent to 0.74 metric tons of LNG. Natural gas is measured using different units in different contexts. Gas

online after that. Collectively, LNG supply from these new liquefaction projects could exceed
projections of demand, which would put downward pressure on LNG prices. While increases in
the global supply of LNG do not necessarily translate directly into an increase in LNG available
for bunkering, such increases could provide options for LNG bunkering in more ports.
Figure 5. Global LNG Supply and Demand 2017-2030

Million Metric Tons Per Annum (MMtpa)
Source: Courtesy of BloombergNEF, “Asia to Dominate Long-Term LNG Demand Growth,” September 12,
2018, https://about.bnef.com/blog/asia-dominate-long-term-lng-demand-growth/. The use of this content was
authorized in advance.
Notes: FID = Final Investment Decision.
Estimating potential demand for LNG in the maritime sector is complicated and uncertain. One
study of future LNG demand for bunkering, specifically, projects that LNG-powered vessels in
operation and under construction as of June 2018 will require between 1.2 and 3.0 MMt of LNG
per year. The study’s review of several LNG consumption forecasts in the maritime sector shows
a consensus projection between 20 to 30 MMt per year by 2030.90 This level of demand growth
implies an increase in LNG-powered vessel construction from the current rate of around 120
ships per year to between 400 and 600 new builds per year.
If these levels were reached, they could create a significant new market for LNG suppliers.
Assuming a Henry Hub spot market price of $4/MMBtu in 2030, the annual market for LNG in
shipping could be worth $2.9 billion to $5.8 billion, before accounting for liquefaction and
transportation charges. Some studies have projected the LNG bunkering market to be even larger
and to grow more quickly.91 However, key variables—such as the prices of Henry Hub natural gas
and crude oil, the number of new vessel orders, and the future costs of emissions technology—are
notoriously hard to predict with accuracy. Thus, it is not assured that natural gas consumption in
production (i.e., gas at the wellhead) typically is measured as a volume of gas (cubic feet or cubic meters) whereas
quantities of LNG may be measured by weight (metric tons) or a volume of liquid. Heat content (British thermal units)
is typically the unit used for natural gas prices as in Figures 2 and 3.
90 Chris N. Le Fevre, “A Review of the Demand Prospects for LNG as a Marine Fuel,” The Oxford Institute for Energy
Studies, Paper NG 133, June 2018, pp. 17-18.

91 Zion Market Research, LNG Bunkering Market by Vessel … Comprehensive Analysis and Forecast, 2017–2024,
August 1, 2018, https://www.zionmarketresearch.com/report/lng-bunkering-market.

the maritime sector will absorb more than a small amount of the global liquefaction capacity in
development.
Domestic Considerations
The IMO sulfur standards apply to ship owners globally, as does the development of new LNG
supply and bunkering infrastructure. In addition to these factors, domestic LNG bunkering also
may be influenced by considerations more specific to the United States. These considerations
include growth of the U.S. natural gas supply, domestic shipbuilding opportunities, and LNG
safety and security.
U.S. Natural Gas Producers Seek New Markets

Because of its leading role in global natural gas production, the United States has a particular
interest in any new source of natural gas demand. According to the Energy Information
Administration, the United States has been the world’s top producer of natural gas since 2009,
when it surpassed Russia.92 In 2017, increases in production outstripped increases in domestic gas
consumption, leading to the United States becoming a net exporter of natural gas for the first time
in nearly 60 years.93
As discussed above, North America (primarily the United States) is expected to add the most new
LNG production capacity through 2030 when including projects that are operating, under
construction, and likely (according to investment analysts). Past increases in U.S. LNG exports
were driven by greater throughput at the Sabine Pass LNG export terminal—the only operating
U.S. LNG export terminal in 2017. In March 2018, the Cove Point terminal in Maryland became
the second operating U.S. LNG export terminal. Four additional projects under construction or
commissioning are set to nearly triple U.S. liquefaction by the end of 2019.94 This increase in
liquefaction capacity likely will motivate LNG producers to secure new buyers.
92 Energy Information Administration, “United States Remains the World’s Top Producer of Petroleum and Natural
Gas Hydrocarbons,” May 21, 2018.
93 Energy Information Administration, “The United States Exported More Natural Gas Than It Imported in 2017,”
March 19, 2018.

94 Energy Information Administration, March 19, 2018. For more discussion of increased U.S. LNG exports see CRS In
Focus IF10878, U.S. LNG Trade Rising, But No Domestic Shipping, by Michael Ratner and John Frittelli.

Figure 6. Estimated LNG Prices in Key Global Markets – October 2018

Dollars per MMBtu
Source: Courtesy of IHS Markit. Copyright 2018. All rights reserved. The use of this content was authorized in
advance. Any further use or redistribution of this content is strictly prohibited without prior written permission
by IHS Markit.
Notes: Prices are the monthly average of the weekly landed prices which includes commodity cost, shipping
costs, insurance, duties, and other charges incurred for shipment. The Sabine Pass terminal is located near the
Lake Charles terminal shown on the map.
Figure 6 shows estimated LNG prices for various locations around the world as of October 2018.
As the figure shows, LNG prices are substantially lower in North America than in Asia, Europe,
and South America. Even after adding $1.00 to $2.00/MMBtu to transport the LNG to overseas
ports, LNG produced in the United States is globally competitive at these prices. If LNG from the
new liquefaction capacity coming online can be produced and delivered with similar economics,
the cost advantage may create an opportunity for U.S. LNG in bunker supply. There are over 400
petroleum fuel bunkering ports in the world, but 60% of bunkering in recent years has happened
in six countries: Singapore, the United States, China, the United Arab Emirates, South Korea, and
the Netherlands.95 Of these countries, only the United States is a significant LNG producer.
Therefore, the United States could be a favorable source of LNG for domestic bunkering and for
bunkering at the other major ports.
Safety of LNG Bunkering in Ports

While the LNG industry historically has had a good safety record, there are unique safety risks
associated with LNG in vessel operations. Leakage of LNG during LNG shipping or bunkering
can pose several hazards. LNG is stored at temperatures below -162 °C (-260 °F), far below
the -20°C at which the carbon steels typically used in shipbuilding become brittle.96
Consequently, extreme care must be taken to ensure that LNG does not drip or spill onto ship
hulls or decking because it could lead to brittle fracture, seriously damaging a ship or bunkering
barge.
LNG spilled onto water can pose a more serious hazard as it will rapidly and continuously
vaporize into natural gas, which could ignite. The resulting “pool fire” would spread as the LNG
95Organization of the Petroleum Exporting Countries (OPEC), World Oil Outlook 2015, p. 127.
96Society for Gas as a Marine Fuel, Gas as a Marine Fuel: An Introductory Guide, September 2017, p. 26,
https://www.sgmf.info/assets/docs/sgmf-guide.pdf.

spill expands away from its source and continues evaporating. A pool fire is intense, far hotter and
burning far more rapidly than oil or gasoline fires, and it cannot be extinguished; all the LNG
must be consumed before it goes out. Because an LNG pool fire is so hot, its thermal radiation
may injure people and damage vessels or property a considerable distance from the fire itself.
Many experts agree that a large pool fire, especially on water, is the most serious LNG hazard.97
Leaks of boil-off gas (the small amount of LNG that vaporizes in storage) can also release natural
gas into a port area and cause fires or explosions. Major releases of LNG from large LNG carriers
would be most dangerous within 500 meters of the spill and would pose some risk at distances up
to 1,600 meters from the spill.98 While a bunkering barge or a vessel using LNG for fuel contains
far less LNG than large LNG carriers, LNG spills in bunkering operations could still be a
significant concern.
Risks associated with bunkering LNG are complicated in ports seeking to engage in
“simultaneous operations” during the bunkering process. Simultaneous operations entail loading
and unloading cargo and personnel from a ship, maintenance, and other logistical operations
performed while a ship is bunkering. Accidents that occur during such operations (for example,
the operation of heavy machinery near pipes transporting LNG) can result in a spill of LNG
which can threaten workers positioned near the site of operations.
Security Risks of LNG Bunkering

LNG tankers, bunkering vessels, and land-based facilities could be vulnerable to terrorism.
Bunkering tanks or vessels might be physically attacked to destroy the LNG they hold—and
vessels might be commandeered for use as weapons against port or coastal targets. Potential
terrorist attacks on LNG terminals or tankers in the United States have long been a key concern of
the public and policymakers in the context of large scale LNG imports or exports because such
attacks could cause catastrophic fires in ports and nearby populated areas. For example, a 2007
report by the Government Accountability Office stated that, “the ship-based supply chain for
energy commodities,” specifically including LNG, “remains threatened and vulnerable, and
appropriate security throughout the chain is essential to ensure safe and efficient delivery.”99
Affected communities and federal officials continue to express concern about the security risks of
LNG.100 The potential risks from terrorism to LNG bunkering infrastructure may be different than
those of larger LNG import or export operations due to smaller quantities of LNG involved, but
the risks may become more widespread if LNG bunkering operations are established in more
locations.
The Maritime Transportation Security Act (MTSA, P.L. 107-295) and the International Ship and
Port Facility Security Code give the Coast Guard far-ranging authority over the security of
hazardous materials in maritime shipping. The Coast Guard has developed port security plans
addressing how to deploy federal, state, and local resources to prevent terrorist attacks. Under the
MTSA, the Coast Guard has assessed the overall vulnerability of marine vessels, their potential to
97 Anay Luketa, M. Michael Hightower, and Steve Attaway, Breach and Safety Analysis of Spills Over Water from
Large Liquefied Natural Gas Carriers, Sandia National Laboratories, SAND2008-3153, May 2008.
98 Anay Luketa et al., May 2008, p. 23.
99 Government Accountability Office (GAO). “Maritime Security: Federal Efforts Needed to Address Challenges in
Preventing and Responding to Terrorist Attacks on Energy Commodity Tankers,” GAO-08-141, December 10, 2007,
p.77.
100 See, for example: Anne Meador, “Cove Point Residents Unnerved by LNG Tanker ‘Backing Up Right Onto Our
Beach’,” DC Media Group, February 28, 2018, https://www.dcmediagroup.us/2018/02/28/cove-point-residents-

unnerved-lng-tanker/.

transport terrorists or terror materials, and their use as potential weapons. The Coast Guard has
employed these assessments to augment port security as necessary and to develop maritime
security standards for LNG port facilities.101
Policy Implications
The IMO’s overall framework for controlling vessels emissions (MARPOL Annex VI) has been
in place since 2005. While the United States, as an IMO member, is subject to the IMO’s 2020
sulfur standards, the international standards apply equally to all parties and all vessels. The
impacts of sulfur standards on bunker fuel have been an important consideration, but IMO
member nations have agreed to the standards independent of any particular energy policies.
Moreover, MARPOL Annex VI preceded the U.S. shale gas boom, so commitment to that initial
IMO framework could not have anticipated United States’ current role as a dominant energy
producer. Any changes within the international shipping fleet to install sulfur scrubbers, fuel
engines with LNG, or switch to other low sulfur fuels, are being driven primarily by market
forces in fuel supply, shipbuilding, and shipping—not by any particular push to favor one fuel
over another. Nonetheless, given its particular status, the question arises whether the standards
may create an economic opportunity for the United States, in energy or otherwise. More
specifically, could international adoption of LNG as a bunker fuel create an important new market
for U.S. natural gas producers, shipbuilders, or infrastructure developers?
U.S. Opportunities and Challenges

As discussed above, depending upon the adoption of LNG bunkering in the global fleet, the LNG
bunker fuel market could grow to several billion dollars by 2030. If U.S. LNG producers were to
supply a significant share of this market—on the strength of comparatively low LNG production
costs—LNG bunkering could increase demand for U.S. natural gas production, transportation,
and liquefaction. Opportunities in LNG-related shipbuilding might be more limited, as most of
this occurs overseas, with the exception of Jones Act vessels. In the latter case, demand for
domestically-constructed LNG bunkering barges could be one significant area of economic
growth. Engineering and construction firms could benefit from new opportunities to develop new
port infrastructure for LNG storage and transfer. While likely limited in number, such port
facilities could be complex, high value projects costing tens or hundreds of millions of dollars to
complete. Such projects could create jobs in engineering, construction, and operation, which
could be important to local communities.
Although LNG bunkering could present the United States with new economic opportunities, it
may pose challenges as well. Rising demand for LNG in the maritime sector could increase
natural gas prices for domestic consumers. In addition to being the world’s largest natural gas
producer, as of 2018, the United States is also the world’s largest producer of crude oil and the
second largest bunkering hub.102 Consequently, while vessel conversion to LNG bunkering may
increase demand for U.S.-produced natural gas, it could be partially offset by reduced demand for
U.S.-produced crude oil or refined products. Exactly how changing demand in one sector could
affect the other is unclear. Furthermore, while LNG can reduce pollutant emissions from vessels,
emissions and environmental impacts from increased natural gas production and transportation
101 For details about the Coast Guard’s security regulations in the context of LNG bunkering, see Federal Energy
Regulatory Commission, Draft Environmental Impact Statement for Eagle LNG Partners Jacksonville, LLC
Jacksonville Project, Docket No. CP17-41-000, FERC/EIS-0289D, Section 4.12.
102 U.S. Energy Information Administration, The United States is now the Largest Global Crude Oil Producer,
September 12, 2018, https://www.eia.gov/todayinenergy/detail.php?id=37053.

could increase overall emissions. Much of the net environmental impact depends upon practices
in the natural gas industry, which are the subject of ongoing study and debate. Although new
LNG bunkering infrastructure can create jobs, as the Tacoma LNG projects shows, the
construction of such port facilities can be controversial for reasons of safety, security, and
environmental impact.
Overarching the considerations above is uncertainty about how the global shipping fleet will
adapt to the IMO sulfur standards over time. This uncertainty complicates decisions related to
both private investment and public policy. LNG-fueled ships still account for only a fraction of
the U.S. and global fleets, and it may take several decades for significant benefits of LNG-
powered vessels to be realized. It is also possible that alternative ship fuels, including biofuels,
electric engines, and hybrid engines, will become more economically viable in coming years.
Given the uncertainty surrounding the future of LNG as a ship fuel, it is hard to predict the
potential benefits or costs that LNG bunkering may provide to the United States.
Considerations for Congress

Until now, the private sector has added LNG-fueled vessels to fleets in the United States in a
piecemeal manner under existing federal statutes and regulation. Congress could encourage the
growth of LNG bunkering by various means, such as providing tax incentives to support the
construction of LNG bunkering facilities and vessels, addressing any statutory or regulatory
barriers to bunkering facility siting or operations, and providing funding for technical support to
domestic carriers seeking to adopt LNG technology. Alternatively, Congress could seek to
encourage competing bunker fuel options, such as biofuels, by incentivizing them in similar
ways. In addition, Congress could also affect growth in LNG bunkering through policies affecting
the LNG industry or domestic shipping industry as a whole. Changes in federal regulation related
to natural gas production, or changes to the Jones Act, for example, while not directed at LNG
bunkering, could nonetheless affect its economics. Therefore, evaluating the potential
implications on LNG bunkering of broader energy, environmental, or economic objectives may
become an additional consideration in congressional oversight and legislative initiatives. If LNG
bunkering expands significantly in U.S. ports, Congress also may examine the adequacy of
existing measures to ensure the safety and security of LNG vessels, storage, and related facilities.
Author Information
Paul W. Parfomak Richard K. Lattanzio

Specialist in Energy and Infrastructure Policy Specialist in Environmental Policy
John Frittelli Michael Ratner

Specialist in Transportation Policy Specialist in Energy Policy
Disclaimer

This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
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LNG as a Maritime Fuel: Prospects and Policy

Congressional Research Service

Congressional Research Service

Congressional Research Service

Congressional Research Service

IMO Emissions Standards and LNG

Maritime Fuel Regulations, by Robert Pirog.

Initiate a Revision Process,” MEPC 53/4/4, April 15, 2005, p. 2, https://www.epa.gov/sites/production/files/2016-09/

Congressional Research Service R45488 · VERSION 1 · NEW 1

U.S. Obligations Under the IMO

Emission Control Areas

Emissions Control Options for Ship Owners

MARPOL Annex VI,” MEPC. 1/Circ. 723, May 13, 2010.

Congressional Research Service R45488 · VERSION 1 · NEW 2

Low-Sulfur Fuel Oils

Infrastructure, Fuel Technologies and Regulations,” IEA Bioenergy, 2017, https://www.ieabioenergy.com/publications/

Congressional Research Service R45488 · VERSION 1 · NEW 3

Bunker, April 28, 2017.

Congressional Research Service R45488 · VERSION 1 · NEW 4

Jones Act Fleet Choosing LNG-Fueled Engines

87, 2015, p. 154.

Commerce, by John Frittelli.

fuel sulfur standard. See P.L. 111-88 §442.

Congressional Research Service R45488 · VERSION 1 · NEW 5

LNG vs. Petroleum-Based Fuel Costs

Figure 1. Average Monthly Henry Hub Natural Gas Spot Price

Congressional Research Service R45488 · VERSION 1 · NEW 6

Figure 2. Maritime Fuels Cost Comparison

Source: Bloomberg commodity price data, CRS calculations.

Congressional Research Service R45488 · VERSION 1 · NEW 7

Building an LNG-Fueled Fleet

Studies, Paper NG 133, June 2018, p. 17.

Congressional Research Service R45488 · VERSION 1 · NEW 8

LNG Engines and Greenhouse Gas Emissions

Industrial, September 2015, p. 70.

Congressional Research Service R45488 · VERSION 1 · NEW 9

Global Developments in LNG Bunkering

Figure 3. LNG Bunkering Options

Congressional Research Service R45488 · VERSION 1 · NEW 10

LNG Bunkering Overseas

October 22, 2014

Congressional Research Service R45488 · VERSION 1 · NEW 11

LNG Bunkering in the United States

Asian LNG 2018, October 2018, p. 32, https://eneken.ieej.or.jp/data/8140.pdf.

April 17, 2018.

release, August 20, 2018.

Congressional Research Service R45488 · VERSION 1 · NEW 12

at a shore-based LNG terminal in Pascagoula, MS owned by a Martin Midstream Partners subsidiary.

Tribune, October 31, 2018.

News Tribune, May 11, 2018.

Congressional Research Service R45488 · VERSION 1 · NEW 13

Other U.S. Ports with Potential for LNG Bunkering

Figure 4. Existing LNG Import and Export Terminals in North America

73 Q-LNG Transport, “Background,” web page, accessed November 9, 2018, http://qlngtransport.com/.

Residents,” Florida Today, September 14, 2018.

Congressional Research Service R45488 · VERSION 1 · NEW 14

Los Angeles, CA 6,189,161 Ensenada, MX 145

Congressional Research Service R45488 · VERSION 1 · NEW 15

U.S. Regulation of LNG Bunkering