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Fortress forgave huge Trump loan, got federal permits to transport LNG by rail

President Trump touring the Cameron LNG Export Terminal on May 14, 2019, in Hackberry, La. (Official White House Photo by Shealah Craighead)

By Ann Henson Feltgen and Dan Christensen, FloridaBulldog.org

A multi-billion dollar private equity firm whose subsidiary was awarded two special permits by the Trump Administration to haul hazardous liquified natural gas (LNG), including by rail along Florida’s east coast, apparently forgave more than $100 million in debt owed by President Trump.

New York State Attorney General Letitia James filed a petition last month in the New York Supreme Court seeking to compel the Trump Organization to produce documents pertaining to a $130-million loan to Trump from Fortress Credit, part of the $45.5 billion Fortress Investment Group. The AG seeks to determine if the president evaded paying capital gains taxes on a large portion of the 2005 loan that the Attorney General says it has learned was “forgiven.” Trump and his staff have not cooperated in obtaining the loan documentation, the petition said.

Another Fortress subsidiary, publicly traded New Fortress Energy (NASDAQ: NFE), was the beneficiary of two special permits to transport LNG by rail since Trump took office. The permits facilitate Fortress projects costing hundreds of millions of dollars.

The use of rail is an emerging alternative to natural-gas pipelines. In April 2019, President Trump issued an executive order directing the Secretary of Transportation to permit LNG shipment in rail tank cars throughout the country. The order took effect three weeks ago on Aug. 24.

Corridor routes through heavily populated areas such as South Florida are raising safety concerns. LNG is combustible natural gas that has been chilled to a temperature of minus 260 degrees F, which condenses into a liquid allowing more gas to be shipped per load. An uncontrolled release, however, could cause a fire or explosion.

A page from a 2015 ‘vulnerability analysis’ by Martin County Fire Rescue depicting the impact of an LNG rail car explosion at an intersection in Stuart. Authorities estimated that 2,410 people would be affected and nearly 400 would experience life-threatening injuries or death.

The Trump Administration’s first special permit, in 2017, went to Doral’s Energy Transport Solutions LLC, owned by New Fortress Energy. The permit allows Florida East Coast Railway, previously owned by Fortress, to ship LNG in special cryogenic rail cars from its liquefaction plant in Hialeah to ports between Jacksonville and Miami. To date, most shipments have traveled 19 miles from the Hialeah plant to Port Everglades.

22 LNG tank cars = Hiroshima bomb

On Dec. 5, 2019, the U.S. Pipeline and Hazardous Materials Safety Administration issued another special permit to Energy Transport Solutions authorizing the shipment of mixed freight with up to 100 LNG tank cars to make the 175-mile run between Wyalusing, PA and Gibbstown, NJ.

“It would only take 22 tank cars to hold the equivalent energy of the Hiroshima bomb,” said Jordan Luebkemann, an attorney with the nonprofit public interest organization Earthjustice.

A Florida East Coast locomotive with an LNG tender car in 2018.

Wyalusing is where New Fortress is building an $800-million plant to liquefy and supercool locally fracked Marcellus Shale gas. Gibbstown, on the Delaware River, is the site of a proposed, controversial export terminal being developed by Delaware River Partners, a subsidiary of Fortress Transportation and Infrastructure.

New Fortress Energy did not respond to Florida Bulldog requests for a statement or interview.

But opponents of LNG rail transport perceive a connection between the president’s Fortress debts and his backing for Fortress’s LNG plans.

“It appears to me that Trump may have been heavily indebted to affiliates of Fortress Investment Group, and if true, the President’s Executive Order should go a very long way in satisfying any remaining outstanding indebtedness by legalizing rail tank car transport of LNG,” said Cecile T. Schofield, a long-time environmental activist who fought against LNG rail transport in New York and more recently in Florida.

The Trump Administration’s decisions boosting Fortress’s LNG plans are not the only way it has aided the sprawling investment heavyweight, which is itself owned by Japan’s Softbank Group Corp. In March 2020, the Justice Department took sides with Fortress in court against Apple Inc. and Intel Corp. seeking to dismiss their antitrust lawsuit against Fortress.

In early July, the court granted the motion to dismiss, but allowed Apple and Intel to amend their suit, which they did in August. The continuing dispute involves billions of dollar in patent royalties.

Fortress and Trump

The $130-million Fortress Credit loan to the Trump Organization was to help finance construction of the Trump International Hotel and Tower Chicago in 2005, according to a November 2019 story in Mother Jones Magazine.

Chicago’s Trump International Hotel and Tower Photo: Ann Henson Feltgen

According to the magazine, the 2008 financial crisis struck as the project neared completion, saddling Trump with hundreds of millions in debt. In March 2012, Trump reached a deal with Fortress. “At the time, the amount of the outstanding debt, including interest and fees, was approximately $150 million; Fortress accepted $48 million in full satisfaction of the debt – forgiving more than $100 million,” says Attorney General James’s petition. “Here again, the forgiveness of a portion of the debt may have been a taxable event to the borrower.”

“In 2009 and all subsequent years, this [Chicago] property was omitted from Mr. Trump’s Statement of Financial Condition, and OAG [Office of Attorney General] has sought information as to the reason for this omission,” James explained to the court in her petition. James added that beginning in April 2020 her office “raised the issue with the Trump Organization” but that the organization has “refused to produce documents or confirm these basic facts.”

Fortress Investment Group is the sprawling asset and investment manager co-founded and co-run by Wesley Edens, who is perhaps better known as co-owner of the Milwaukee Bucks NBA basketball team.

Edens’ modest political contributions skew mostly to Democrats. But in addition to Fortress’s big money loan to Trump, Fortress loaned $57 million in October 2017 to the Kushner Companies, run by Trump’s son-in-law and senior advisor Jared Kushner.

Loans to Kushner

The loan was to help Kushner rehab his troubled New Jersey Towers investment. That same year, Fortress loaned Kushner Companies another $150 million build a Brooklyn high-rise. Fortress also invested in the startup company of Jared Kushner’s brother, according to the online publication medium.com.

Wesley Edens

Edens founded New Fortress Energy in 2014 and has led an effort to grow the company into a global, fully integrated energy infrastructure company with LNG production facilities and terminals operating across North America and the Caribbean, according to the company’s website.

LNG previously was not allowed to be transported by trains because it was deemed too dangerous. Scientists have pointed out that the transporting tanks have never been physically tested, and that shipments of 100 tank cars through congested neighborhoods could kill and seriously injure thousands of people and property if a train were to derail and a tank ruptured. Instead, in a more costly method LNG was trucked to ports for storage and shipment.

That began to change in 2015 under President Obama when the Federal Railroad Administration allowed the Alaska Railroad Corp. to ship 30 multi-modal tanks loaded with LNG mounted on flatbed rail cars every four days between Anchorage and Fairbanks, a 350- mile trip through remote areas.

Early in Trump’s administration the pipeline administration was reviewing a proposal by the Association of American Railroads to allow shipments of LNG by rail across the country. In July 2018, the U.S. Department of Energy drafted a regulation to allow expedited permitting for the export of small-scale LNG by tankers from U.S. ports. The following April, the president ordered the fast-tracking of all LNG production, both small and large scale, and authorized shipment by rail.

The U.S. House passed legislation to write rules regarding LNG by rail transport, including appropriations for studies to determine the best methods. However, none of that legislation produced between 2019 and 2020 went anywhere in the Senate.

State attorneys general sue

Meanwhile, 14 state attorneys general and the District of Columbia filed a petition a month ago in the federal appeals court in Washington, D.C. seeking to vacate the president’s April 2019 Executive Order and the federal rules issued by the Federal Railroad Administration and the pipeline administration implementing it. The petition contends Trump’s Executive Order is unlawful because it circumvents the Administrative Procurement Act, the Hazardous Materials Transportation Act and the National Environmental Policy Act.

The same day, a separate petition opposing Trump’s order largely on safety grounds was filed by a group of environmental organizations including Earthjustice, the Delaware Riverkeeper Network, the Environmental Confederation of Southwest Florida and the Sierra Club. The two lawsuits have since been combined.

Earthjustice attorney Luebkemann said the government has added some minor safety enhancements.

“In the new version of the rule, they added 1/8th of an inch of thickness of the steel for the outer jacket to enhance puncture protection,” he said. “That may protect the tank cars traveling at 20-30 miles per hour, but train speed limit is voluntary and is set at 50 miles per hour.”

Here are some changes the environmentalists want considered:

·A federally approved LNG‐specific tank car design equipped to handle the heightened volatility and risks associated with moving LNG‐by‐rail.

· Rigorous agency testing of LNG tank cars for survivability in derailment conditions, fire impingement and collision forces.

· An evaluation of the railroads’ 100‐car‐tank car business model.

· Safety mandates including protective urban rerouting, notification requirements to first responders and communities through which trains will run, development of LNG spill event response plans, odorization of the cargo and restrictions on train length and speed.

“It’s unbelievably reckless to discard the critical, long-standing safety measures we have in place to protect the public from this dangerous cargo. That’s why we’re filing this challenge,” Luebkemann said.

Puerto Rico fight

In the meantime, Luebkemann has filed a petition on behalf of Earthjustice to intervene in a lawsuit filed by the Federal Energy Regulatory Commission (FERC), which asserts the agency was not consulted about plans to convert a diesel-fired plant in San Juan, Puerto Rico to an LNG liquefaction plant. This plant is another project of New Fortress Energy.

New Fortress’s plans include an import terminal, a revaporization and handling facility and associated pipeline adjacent to the existing plant. The company says the conversion will produce more cost-effective electricity.

FERC said it has authority over all siting, construction, expansion or operation of LNG terminals and noted in its June complaint that it previously approved similar facilities in Puerto Rico.

In July, Puerto Rico Electric Power Authority’s chief executive responded to FERC, saying his company took bids and compared them to other configurations of LNG and compressed natural- gas facilities over which FERC had declined to assert jurisdiction, and decided that authorization would not be required.

Earthjustice and several Puerto Rican entities want to intervene in the case “to protect the safety, security and health of its residents, particularly those that live or work within the impact area of the illegal New Fortress Energy LNG terminal,” according to their filing.

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