Just half an hour's drive from Titusville, Pennsylvania, where the modern oil industry started with Colonel Edwin Drake's first well, midstream company EmKey Energy owner Oivind Risberg has partnered with former Erie Redevelopment Authority executive director John Elliott and local businesswoman Anne Wessell to form North Pier Energy, to kick off the small-scale LNG boom in the region.

North Pier is looking to develop a 50,000 gallons per day (300,000 tonnes per annum) LNG plant about 40km outside the city of Erie in western Pennsylvania to displace more expensive and environmentally unfriendly diesel by selling LNG to operators of high-horse power engines like oil drill rigs, compression rigs and locomotives and isolated industrial users including miners and paper mills.

An interstate pipeline running from Texas to Toronto to Boston runs through Erie County, and North Pier's facility sits right at the point where a gathering system of several hundred miles of pipelines picking up gas from about 6500 wells intersects.

It is from here that North Pier will source its gas to liquefy and distribute.

Elliott told Energy News that just as it took some 20 years for the locomotive industry to convert from coal to diesel in the 1940s, it could take another 20 years from now to make the transition to LNG.

The transition is already underway.

One of the biggest investments in LNG was made by the Florida East Coast Railway, which just built a 100,000 gallon per day LNG plant near North Pier's plant, to fuel its locomotive fleet.

Elliott said converting a locomotive costs "well under $US1 million".

One of North Pier's clients has 32 new locomotives running on natural gas going into Indiana; while dozens of new locomotives are also going into Los Angeles.

The need for domestic gas is great as the US, amazingly, still imports LNG at Boston from the likes of Algeria, the Caribbean and Morocco, and internationally-priced LNG is more expensive than the incredibly cheap gas available in Pennsylvania's gas-saturated market.

One of Elliott's partners has been trucking LNG in New England for the past four years. Needing a reliable regional source of natural gas, they are now looking to liquefy gas at North Pier and put it into rail cars or trucks and into areas in upstate New York and Vermont where they don't have pipelines.

New York voted against the Constitution pipeline, Vermont killed another pipeline project for Tennessee, and another was just shot down in Massachusetts due to environmental concerns.

"The environmental interests are so afraid of pipelines that folks who were waiting for a pipeline are pursuing LNG," Elliott said.

The industrial sector is a huge opportunity for small-scale LNG in the US.

"You can barely meet Tier 4 emissions with diesel. When Tier 5 comes there's almost no way to meet it with diesel," Elliott said.

"So all the big manufacturers, including GE and Caterpillar, and the smaller ones, are looking at how to use LNG."

An international paper mill on the Vermont-New York border is receiving at least 25 truckloads a day of natural gas, representing another significant market for small-scale LNG.

Regionally, the US each year burns just over 40 billion gallons of diesel fuel, with the states around the Great Lakes burning about a quarter of America's diesel fuel due to heavy trucking.

Meanwhile, Elliott said, the rail congestion in Chicago and New York is so bad trains refuel in uncongested areas between those two cities, and regional small-scale LNG fuelling stations are better suited to fill that role.

With energy transport costs are the killer, which is why Elliott believes that in 20 years' time there will be small-scale facilities like his every 200 miles (320km) in the US.

Entrepreneur T Boone Pickens has been building fuelling LNG fuelling stations for container ships, which is where Elliott can also see opportunities.

"A project like ours would never survive if we were 300-400 miles from the US Gulf Coast where the big, world-scale plants are being built," Elliott said.

"That small distributed model is being built out across America. Our supplier has just installed similar installations in North Dakota and Colorado, as they're just taking flared gas, liquefying it and using it as a replacement for diesel fuel.

"It's a quick, easy way to monetise waste to cash."

One company is building a new small two megawatt power plant that will run entirely in LNG in New York, which would take 4-5 truckloads of LNG a week.

In the south, Pickens' Clean Energy Solutions is systematically building compressed natural gas facilities and owns a couple of LNG plants and has contracts with LNG plants across America, but Elliott said they have not developed those in Pennsylvania, New York and New Jersey because the supply quality is very low and the number of suppliers was low.

"The quality of LNG used in factories is different from that used in trucks. None of the producers around here had LNG suitable for trucks, so our plant will be the first for hundreds of miles," he said.

Mining is also a tremendous opportunity for LNG. One of the biggest users of LNG in New England is Omya, which runs 35 trucks.

The primary means of getting the gas to customers will be by trucks, and Elliott also sees opportunities in the shipping industry which need to meet new emissions standards in the early 2020s.

Easy permitting

Another advantage small-scale LNG has over the megaprojects built out in Australia and the US Gulf Coast is the ease of permitting.

Elliott said that while some 17 state and federal agencies regulate LNG, just two are involved in small-scale LNG, with no federal environmental review or no Federal Energy Regulatory Commission approvals needed because North Pier is using domestic gas for domestic use, not export.

With no marine terminal the US Coast Guard or the Army Core of Engineers don't get involved; and when transporting in standard containers, the Federal Highway Administration is happy with the standards, so the state transport departments don't get involved either.

"When your plant storage is under 270,000 gallons, you're not in ‘small projects' as the fire hazards etc are small. You cut 2-4 years off the permitting timeframe," Elliott said.

That said, North Pier is just over halfway through the permitting process, with commissioning due to start late next year or early 2018, depending on when the customers want the LNG.

They are enticed by the ridiculously cheap gas in Pennsylvania compared to that which those in the frac-free New England and New York areas salivate.

Gas is so low as the state can't get the gas out due to opposition to the construction of pipelines.

"You should see the look on my New England customers' faces who pay $14-17/MMBtu for methane. Here it's $1.20," Elliot said.

- Energy News toured Pennsylvania's oil and gas supply chain as a guest of CORE PA, an initiative established to increase the visibility of a 53-county footprint within Pennsylvania to international and domestic investors.