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    News

    FERC Says CA Public Utilities Comm'n Has No Power To Regulate Siting & Construction of LNG Facilities


    (March 24, 2004, updated March 25) -- In a rebuff to the CA Public Utilities Commission (CPUC) carrying potential impacts statewide and nationwide, the Federal Energy Regulatory Commission (FERC) has declared that FERC has exclusive regulatory authority over the siting and construction of a proposed Liquefied Natural Gas (LNG) facility in the Port of Long Beach,

    In its March 24 "Declaratory Order Asserting Exclusive Jurisdiction," ERC rejected CPUC's position that CA has jurisdiction over LNG facilities within its borders...and brushed aside CPUC's contention that Mitsubishi subsidiary "Sound Energy Solutions" (currently seeking permission from FERC to construct an LNG import facility in the Port of LB) must file an application with and receive approval from the CPUC.

    In a written release, FERC's press office says the federal agency "expressed its intention to continue to work closely with the CPUC, other California state and local agencies, federal agencies, and the public in reviewing the proposed Long Beach LNG project."

    [update] The full text of FERC's order, posted March 25 on the agency's web site, is hyperlinked below. It states in pertinent part:

    The Commission acknowledges the role the CPUC plays in ensuring safe and reliable utility services for California residents, guarding consumers against market power abuses, and minimizing adverse environmental impacts of energy projects. The Commission further understands the CPUCís efforts to enforce its statutory mandates. Here, the agenciesí regulatory duties are divided: the Commission is concerned with activities that involve foreign and interstate commerce, and the CPUC is responsible for intrastate activities.

    With respect to the proposed SES project, the CPUC and the Commission disagree on jurisdictional bounds; both agencies believe the proposed LNG import terminal to be under their authority. In this order, the Commission asserts exclusive jurisdiction over the proposed project. However, the Commission believes that cooperation among State and Federal authorities is needed to assess the SES proposal adequately and to expedite access to LNG supplies to meet our nationís critical energy needs.††In this declaratory order, we act in advance of our decision on the merits of the SES proposal in order to resolve the State and Federal jurisdictional conflict by providing a vehicle for expedited court review of this determination.

    For the reasons discussed below, we find that SES has properly submitted its request for authorization for its proposed LNG import terminal project to this Commission and that our authorization, if issued, will be sufficient to enable SES to build and operate its proposed project.

    The FERC "Declaratory Order Asserting Exclusive Jurisdiction" can be viewed by clicking here. [further update below]

    The release said FERC staff and the Port of Long Beach "are working on a joint environmental analysis of the project. In addition to potential impact on the environment and cultural resources, the analysis will take into consideration tanker operation, marine facilities, safety and terminal siting construction and operation.

    FERC's release added, "We acknowledge the legitimate concerns of the CPUC regarding matters of safety and security and give our assurance that the evaluation of the proposed project will include thorough and rigorous review of these issues."

    As previously reported by LBReport.com, two other onshore LNG facilities in CA have been dropped by their proponents (Mare Island near Vallejo in Jan. 2003; Eureka in Humboldt County in March 2004)...leaving the Mitsubishi's request to build an LNG receiving facility in part of the nation's busiest Port complex as the only onshore LNG proposal still pending in CA.

    Applications to build an offshore LNG facility off the coast of Ventura County are pending.

    As previously reported by LBReport.com, in February 2004 CPUC filed an objection to SES' FERC application, asserting CPUC has regulatory authority with which SES must comply. CPUC stated in part, "In light of the residential neighborhoods and businesses in the Cities of Long Beach and Los Angeles within approximately two miles of the proposed LNG facilities at the Port of Long Beach, the siting of SES's proposed LNG facilities present significant issues concerning the safety of California citizens and businesses."

    CPUC cited LB neighborhoods, businesses, public facilities, freeways, recreation and tourist attractions and their approximate distances from the proposed LNG facility in a level of detail not seen or heard to date from any government entity of the City of Long Beach.

    As also reported by LBReport.com, SES filed a toughly worded response to CPUC's filing, urging FERC to reject CPUC's asserted regulatory authority.

    FERC's decision, in which it effectively declares its own xclusive regulatory authority over LNG facility siting and construction, came the day after CPUC filed its reply to SES' legal arguments. (To view CPUC's reply, click here.)

    [update] Regarding protecting the physical and economic safety of California residents and businesses, FERC stated:

    The CPUC stresses its regulatory responsibility to ensure the physical and economic safety of California residents and businesses. The Commission has the same regulatory responsibility. [footnote omitted] We are sensitive to safety and security issues, and as an indication of our commitment in this regard, in February the Commission, the U.S. Coast Guard, and DOTís Office of Pipeline Safety signed an interagency agreement. This agreement seeks to ensure that:

    [The agencies will] work in a coordinated manner to address issues regarding safety and security at waterfront LNG facilities, including the terminal facilities and tanker operations, to avoid duplication of effort, and to maximize the exchange of relevant information related to the safety and security aspects of LNG facilities and the related marine concerns. [footnote omitted]

    The interagency agreement describes the roles of DOTís Research and Special Programs Administration (RSPA), the Coast Guard, and the Commission. RSPA promulgates and enforces safety regulations for the transportation and storage of LNG under 49 U.S.C. Ch. 601, including aspects of the siting, design, installation, construction, inspection, and maintenance of LNG facilities. [footnote omitted] The Coast Guard is concerned with navigation safety, vessel engineering, the safety of facilities in or adjacent to navigable waters up to the last valve before the receiving tanks, and the security plan review and siting as it affects vessel traffic in and around LNG facilities.

    Under this agreement, the Commission will be the lead agency in conducting National Environmental Policy Act (NEPA) review and be responsible for preparing the environmental analysis of new project proposals. This environmental analysis includes, among other things, consideration of tanker operation, marine facilities, safety and terminal siting, construction and operation, and environmental and cultural impacts. The CPUC is expected to participate in the NEPA review process, along with State and local agencies with specific safety jurisdiction and other interested persons. [footnote omitted] We believe the NEPA review, in conjunction with the actions of the other Federal agencies as outlined in the recent agreement, will preclude the authorization of all projects that present imprudent risks to health and safety or are inconsistent with the public interest.

    The Commission spends considerable resources on LNG safety matters, both site specific as well as the general safety of LNG in the U.S. and abroad. For the proposed SES LNG terminal site, the Commission will perform a detailed review of the plant design, the operating procedures, and the various active and passive safety systems. We apply the Federal siting criteria for exclusion zones around the terminal site and conduct a detailed review of the potential marine hazards of LNG vessel traffic in close cooperation with the Coast Guard and RSPA. Further, we have considered the safety implications of the LNG trade and recently initiated an independent assessment of the hazards of potential cargo releases from LNG vessels. On a more global basis, shortly after the January 2004 incident at the liquefaction terminal in Skikda, Algeria, we focused our attention on the nature of the accident and on the potential safety implications for LNG facilities in the U.S. At the invitation of the Algerian Ministry of Energy and Mines, a team composed of Commission LNG technical staff and DOE headquarters and laboratory personnel visited the site in March 2004 to gain an understanding of the accident and to review the investigation of the accident, which is currently being conducted by the reinsurers in cooperation with Sonatrach.

    On July 11, 2003, the Director of the Commissionís Office of Energy Projects (OEP) issued a letter granting SESí request to use our NEPA Pre-Filing process, during which Commission staff worked in coordination with the Port of Long Beach to prepare a joint Environmental Impact Statement/Environmental Impact Report (EIS/EIR) for the project. The joint document is expected to satisfy the requirements of both NEPA and the California Environmental Quality Act. The Commission serves as the lead Federal agency and the Port of Long Beach serves as the lead State agency. As the lead State agency, the Port of Long Beach will coordinate the review of the EIS/EIR with other responsible and trustee agencies. The EIR/EIS will be made available for public comment.

    The Commission and the Port of Long Beach have worked with SES to develop a public outreach plan for issue identification and stakeholder involvement. On September 4, 2003, both agencies participated in two public workshops in Long Beach to inform State and local agencies and the general public about the project. The workshops provided an opportunity for interested persons to express concerns or ask questions regarding the project in general and the environmental review process. On September 22, 2003, the Commission and the Port of Long Beach issued a public notice of their intent to prepare a joint EIS/EIR. On October 9, 2003, the agencies held a joint public scoping meeting in Long Beach.

    In conjunction with the EIR/EIS assessment, the Commission and the Port of Long Beach will hold technical conferences and will make site visits to identify and evaluate issues of safety and security. The CPUC and other interested parties are invited to participate, make their concerns known, and propose means to resolve issues raised. The Commission is particularly interested in the CPUCís experience in the areas of safety and security and looks forward to the CPUCís input and assistance. The public record for the project contains comments submitted to the Commission and to the Port of Long Beach, and all comments will be considered in the preparing the EIS/EIR. As the EIS/EIR process continues, the Commission and the Port of Long Beach will hold joint public comment meetings in the project area to solicit comments on the document to aid in the decision making in this proceeding.

    In the event the project is approved, prior to commencing operation, SES is required to prepare emergency procedures manuals that provide for: (a) responding to controllable emergencies and recognizing an uncontrollable emergency; (b) taking action to minimize harm to the public including the possible need to evacuate the public; and (c) coordination and cooperation with appropriate local officials. [foonote omitted] We encourage the CPUC and other State and local agencies to participate in the development of these manuals. In addition, if the SES proposal is authorized, we will require that an Emergency Response Plan be developed in coordination with local emergency planning groups, fire departments, State and local and law enforcement agencies, and the Coast Guard. During construction of the facilities, Commission staff will coordinate its inspections with State agencies, including the CPUC. To the extent that the CPUC may have an inspection role during operation of the facility as an agent for the DOT, our staff will coordinate its operation reliability inspections with both DOT and the CPUC. This may include the sharing of information as well as conducting simultaneous site visits. In these ways, the local expertise of the CPUC and others can help to ensure high levels of safety and security.

    [end update]

    On March 24, FERC also announced formation of a new branch within FERCís Office of Energy Projects devoted to LNG issues.

    The LNG Engineering Branch will be responsible for FERC's LNG inspection program and ensuring coordination among other relevant agencies, including the U.S. Coast Guard and the Department of Transportationís Office of Pipeline Safety.

    "Creating the new branch reflects LNGís importance for the nationís energy infrastructure and economy," FERC's release said.

    Notwithstanding FERC's action, the LB Board of Harbor Commissioners (Mayor appointed, Council confirmed) would have to vote to approve the LNG facility before it could be built.


    Related coverage:

  • SES Urges FERC To Reject CA PUC Asserted Regulatory Authority Over Proposed LB LNG Facility

  • (Includes link to complete CPUC filing): Groups, Individuals & CA Public Utilities Comm'n Seek Intervenor Status in LB LNG Proceeding; CPUC Seeks Compliance With CA Law Applicable To Utilities on Safety & Other Matters

  • For a compendium of LBReport.com coverage of the LNG issue, see LBReport.com Coverage of LNG Terminal Proposed in Port of LB


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