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    In Depth

    Detailed Coverage of Senate Energy Committee Hearing on "Future of Liquefied Natural Gas: Siting & Safety"

    (February 15, 2005, updated Feb. 20) -- is pleased to detailed coverage of a Washington, D.C. news story of local interest.

    On Feb. 15, 2005, the Senate Committee on Energy & Natural Resources held a hearing to discuss the future of Liquefied Natural Gas and related safety and siting issues. utilized the Committee's internet audio feed to provide our readers with blitz coverage within hours of the hearing...and we now add written statements and streaming audio coverage allowing readers to hear the significant statements and exchanges that took place involving witnesses and Senators.

    Among those testifying were Thomas Giles, CEO of Sound Energy Solutions, which is proposing to build and operate an LNG facility in the Port of LB; Mark Robinson, Dir. of the Office of Energy Projects for the Federal Energy Regulatory Commission (FERC); and Michael Peevey, president of the CA Public Utilities Commission (CPUC).

    During her opening statement, Sen. Dianne Feinstein (D., CA) said the proposal to build an 80+ million gallon Liquefied Natural Gas (LNG) facility in the Port of LB raises post-9/11 concerns.

    Sen. Feinstein: I had the pleasure yesterday [Feb. 14] of meeting with Mr. [Thomas] Giles who's going to be testifying, of Sound Energy Solutions, the parent company of which is Mitsubishi [which] has at least five terminals in Tokyo.

    This terminal, or California terminals, or additional terminals today, are being built in a post-9/11 world where one of the things that we have to think about are targets in metropolitan areas.

    And as I look at the various proposals on the west coast, it seems to me that out of harbor locations are better locations. Now I could be wrong. Mr. Giles and I debated that yesterday.

    His proposal is in the middle next to a big container facility in the Long Beach Port area. Long Beach-Los Angeles receives 40% of the container traffic coming into our nation.

    So one has to look at this as a potential target, which would have a dramatic impact on the economy of America if it's devastated.

    Now you might say, well the devastation would only be a mile way. Nonetheless, that's considerable.

    And I think for those, the Federal Energy Regulatory Commission that's going to be concerned with siting, I think this is a valid consideration for the first time in this industry in a post-9/11 world.

    Later in the hearing, in response to questions from Senator Lamar Alexander (R, TN) who chaired the hearing, FERC representative Robinson said his agency wants Congress to give it authority over siting LNG facilities under Section 3 of the Natural Gas Act essentially equivalent to what it now possess under Section 7 of the Act for citing pipelines.

    "We currently have, and there's no one that is questioning our authority to site interstate natural gas pipelines. We would ask that the same authority be expressed under Section 3," Mr. Robinson said. "And you've also asked for the right of eminent domain under Section 3 for LNG terminal siting," Senator Alexander noted. "That's correct," Mr. Robinson replied.

    In other salient committee statements:

    • The Mayor of Providence, RI criticized FERC's actions and assumptions in connection with an LNG applicant that could affect his city. "[T]he FERC process has, to date, failed to adequately account for these concerns. The review, to date, has been dangerously, and irresponsibly, insufficient," Mayor David Cicilline said. Of the risks of LNG, including the risks of terrorism, Mayor Cicilline said, "The best way to manage these risks is through remote facility siting. Risks cannot be adequately managed in an urban setting. The risks posed are too numerous. The dangers are simply too great..."

    • The LB LNG project applicant said it was basically caught in the middle of a jurisdictional dispute between FERC and CPUC...and urged Congress to provide greater certainty. "The jurisdictional dispute with California frustrates our ability to proceed with the project and delays important energy and environmental benefits that we can provide to California," said Sound Energy Solutions Exec VP/CEO Tom Giles, and asked Congress to "take action to provide projects like ours with regulatory certainty. Specifically, we ask that you enact legislation that recognizes the important role that states and local governments play in the approval process and confirms FERC's role as the primary authority to site liquefied natural gas terminals onshore and in state waters and the facilities that deliver gas from the LNG terminals to connections with the domestic pipeline network." .

    • The president of CA's Public Utilities Commission said the LB LNG project applicant triggered the dispute by seeking permission from FERC but not CPUC, which now pits FERC vs. CPUC in court and in Congress over who controls siting and safety decision making on LNG facilities. "Any new legislation should reflect concurrent jurisdiction, which includes the states in the siting and safety of LNG facilities within their borders, and promotes cooperative arrangements between the federal government and the states," said CPUC president Michael Peevey. He said the CPUC recommends that "any new legislation or amendments explicitly provide for the states' jurisdiction concurrent with the FERC's jurisdiction."

    Immediately following the hearing (in which he appeared briefly), committee chair Sen. Pete Domenici (R., NM) issued a release supporting "a strong federal role balanced by state input in siting ports for Liquefied Natural Gas," citing a study released the day before the hearing by the American Gas Foundation predicting a doubling of the price of gas over the next 15 years if the U.S. doesn't increase supply and diversify sources of electricity.'s coverage is indexed with hyperlinks below, letting readers jump to portions of the hearing as desired.

    Extended Excerpts of Witnesses' Written Testimony

    Mayor David N. Cicilline, Providence, Rhode Island

    ...[T]hank you for offering me this opportunity to speak to you about the concerns I have -- as a Mayor -- about the current review and approval process used by the Federal Energy Regulatory Commission (FERC) for Liquefied Natural Gas (LNG) projects.

    My concerns about the FERC process arise from my first-hand experience with KeySpan Energy's proposal to convert its current peak-shaving facility in Providence, Rhode Island to a marine delivery terminal.

    The proposal in Providence calls for modifying a thirty-year-old facility that currently receives LNG exclusively through truck deliveries. The facility sits on a small parcel of land, slightly under 16.5 acres, in the midst of industrial and other commercial facilities. Nearby is a residential neighborhood, an interstate highway, schools, hospitals and more. The population of Providence is approximately 175,000, with this number nearly doubling on a typical weekday thanks to commuters, visitors, and students drawn to the City.

    The plans call for marine delivery approximately every five days. The ships will travel up Narragansett Bay and up the Providence River, passing more than twenty-five miles of densely populated coastline. The Providence harbor, where this facility is located, is currently a busy port with heavy commercial and recreational use.

    As Mayor of Providence I have strongly opposed the KeySpan LNG Facility upgrade project. I object because this proposal presents an unacceptable threat to public safety and to the immediate and long-term economic development of Providence.

    I am here before you because the FERC process has, to date, failed to adequately account for these concerns. The review, to date, has been dangerously, and irresponsibly, insufficient.

    Given the debate in the scientific community over some of the assumptions and models employed by FERC, given the recent findings of the Sandia Labs report, and most significantly given post 9/11 homeland security realities it is time for a comprehensive review and reform of the LNG siting approval process.

    The Draft Environmental Impact Statement (EIS) for the Providence proposal reaches the conclusion that "construction and operation of the KeySpan LNG project would result in limited adverse environmental impacts."

    It is my firm belief that this conclusion is wrong.

    The conclusions reached are, in large part, flawed because FERC's current analysis is based on assumptions, analyses, standards, and research that are highly questionable -- particularly in light of the current homeland security environment.

    Two fundamental issues are posed by this proposal and the current FERC process has completely failed in its responsibility to address these issues.

    The first essential question is: Should major LNG facilities, and in particular marine terminals, be located in densely populated urban centers?

    Without a doubt, the answer to this question is: No.

    The Draft EIS in fact acknowledges the risks of LNG, and in particular of the threat of terrorism, but states these risks can be "managed." The best way to manage these risks is through remote facility siting. Risks cannot be adequately managed in an urban setting. The risks posed are too numerous. The dangers are simply too great. Given this fundamental truth, this proposal should be rejected.

    Simply put: This is the wrong proposal, at the wrong place, at the wrong time.

    For a city facing the potential development of a marine delivery terminal, the recent Sandia Labs report raises particular concern. The report defines the risk zone for flammable vapor dispersion from an intentional attack on an LNG tanker as 1.5 miles. And this is not a worst-case scenario.

    In fact, if the U.S. Department of Transportation (DOT) vapor dispersion standard of 49 CFR 193 were used, this zone would be considerably larger.

    As it is, the 1.5 mile zone in Providence alone encompasses thousands of permanent residences, several hospitals (including the regional trauma center), several elementary and middle schools, child care centers, college campuses, interstate highways, and most of downtown Providence.

    I have with me a photograph showing the terminal in Providence and what falls within this 1.5 mile zone.

    The scope of what lies within this zone underscores the need for FERC to reject siting a marine delivery terminal in a densely populated urban center. Indeed, the potential large-scale damage will raise the risk level for the Providence facility to an unacceptable level.

    History has shown that terrorists operating in this country seek high-profile targets with the potential for large-scale destruction. We should not be in the business of creating invitations to our enemies.

    Any further analysis must consider the cascading events which would occur in various disaster scenarios at this proposed facility. This is particularly important given the other hazardous materials in immediate proximity to the KeySpan facility...

    A review of the data clearly reveals FERC's current standards are inadequate.

    I fully endorse the analysis and conclusions of Providence Fire Chief David Costa who has called for major upgrades to FERC's safety standards. I have submitted with my written testimony a copy of the letter sent by Chief Costa to FERC where he details his concerns over FERC's inadequate safety standards and I would ask that this letter be part of the record.

    As explained by Chief Costa, we need to re-write a standard which allows civilians not employed in the LNG industry in a zone only safe for a trained fire professional in protective equipment.

    A standard which calls for sheltering-in-place of, among others, school children -- ignoring the reality that any incident would prompt parents and others to rush to the scene -- is dangerously unrealistic and should be scrapped.

    The time has come for FERC to replace current minimum safety standards with updated, best-in-class standards. The minimum should no longer be tolerated.

    During this process, the City has repeatedly said that the final EIS should not be issued until a comprehensive safety and emergency response plan has been developed and agreed upon by all parties.

    Absent such a plan, it is not possible for FERC, public officials, or the general public to determine the risk and potential impact of this proposal. An evaluation without a plan in place is nothing more than speculation and conjecture.

    The Draft EIS reaches conclusions about the impact of this proposal on safety operations and on the use of Narragansett Bay and Providence Harbor, however, the Coast Guard has not concluded its security review and has not yet made its security recommendations. Without that information it is simply impossible to reach a valid conclusion on the risks or the impact of this proposal. But FERC does. This is wrong.

    FERC's isolationism extends to the US Army Corps of Engineers, which has significant concerns about the KeySpan proposal. I have included with my written testimony, and ask that it be part of the record, the letter on the Draft EIS submitted by the Corps.

    This letter is alarming. It clearly reveals that FERC did not adequately consult with the Corps -- in violation of the Congressional intent behind the National Environmental Policy Act which created the EIS process and identified the federal agencies which should participate.

    The Corps has very serious reservations about this proposal because of the impact a ship docked at the port would have on the federal navigation channel. The proposal, to quote the letter, "would cause LNG vessels to be completely moored within the limits of our Federal project. Such an encroachment is contrary to Corps policy."

    The Corps, to quote further, has "serious concerns about the permittability due to the potential significant impacts on navigation such an encroachment would cause in the Providence river, coupled with security zone restrictions" detailed later in the letter.

    This and the other very serious issues identified by the Corps in their letter should have been resolved before FERC issued its Draft EIS. The failure of FERC to responsibly address such issues and to conduct the EIS process as Congress intended raises the very real question of whether Congress should now require review and approval of every FERC Draft EIS by at least one other cooperating agency in the NEPA process prior to its release.

    Clearly, FERC cannot be trusted to follow Congressional intent on its own.

    Critically important issues of safety and security have been sacrificed in FERC's rush to judgment...

    The FERC process has also insufficiently accounted for the immediate and long-term economic impact the proposal will have on the City of Providence.

    In terms of the immediate impact, the real and perceived danger presented by this expanded facility will, no doubt, lower property values in the surrounding area. This, in turn, will lower the City's property tax revenue.

    Ironically, a project that will add to the City's public safety duties and expenses, will at the same time lead to a reduction in the very resources the City will need. The impact of this burden on Providence must be considered by FERC.

    But the greatest impact of this proposal will be its negative impact on the proposed redevelopment of the City's waterfront. This proposed LNG project is completely at odds with my vision for the future of Providence, and in particular with the City's ambitious Narragansett Landing plans.

    The Providence waterfront should be one of the City's greatest assets. But much of it is now scarred by the declining remains of an old economy. We have an exciting vision for Narragansett Landing and have hired the internationally recognized urban planning firm of Sasaki Associates to develop comprehensive plans to turn an eyesore into an economic engine. A new, residential, commercial, recreational neighborhood will open new employment opportunities and expand the tax base for the benefit of all city residents.

    This project will ultimately encompass the redevelopment of more than 250 acres, including 100 acres of waterfront property. We estimate this area will be home to more than 6,000 residents. We also envision the development of 3 major hotels providing approximately 1,000 much-needed rooms to our city's capacity. The plans call for 12 new office buildings, a park, open space and a 500 boat marina.

    Marine delivery of LNG is wholly incompatible with this vision. The KeySpan project will seriously impede the City's ability to attract the investment and developer interest required to achieve our goals. The proposal will lead to a terrible waste of a major economic opportunity for Providence.

    Our plans for opening the waterfront for recreational use will fail if this part of the bay receives weekly LNG shipments that will require the effective shut down of the water. Boat owners have numerous other options for harboring their boats in this area, and surely they will find facilities where they will be able to use their boats any time they want. Boat owners will not want to dock in a location where they will have to constantly monitor the timing of LNG deliveries and the size and duration of security zones.

    In closing, I want to thank the Subcommittee for focusing attention on this important issue. I believe the process for reviewing and approving LNG projects is seriously flawed and needs to be reformed.

    Reform must be built around:

  • The latest science
  • Higher safety standards
  • The reality of the threat of terrorism
  • Making sure key decisions are only made after all the necessary facts have been determined • Analyzing proposals in a comprehensive, regional way, not project-by-project.
  • Rationalizing the process for evaluating alternatives
  • And, finally, ending the dangerous practice of grandfathering

    Thank you very much.

    Michael R. Peevey, President, CA Public Utilities Commission

    ...We especially appreciate your willingness to consider the state governments' perspective on natural gas matters, which is consistent with previous acts of Congress, the Natural Gas Act and the Natural Gas Pipeline Safety Act, where Congress recognized the important role of state commissions in the regulation of natural gas.

    It is also noteworthy that in the 1970s, when the State of California first considered proposals to construct LNG facilities, the Federal Energy 189132 2 Regulatory Commission (FERC) and the U.S. Department of Energy also recognized the State of California's important role in deciding the siting and safety matters for new LNG import facilities. The FERC and the California Public Utilities Commission concurrently held hearings on the proposed LNG facilities at Point Conception, California, including jointly held hearings on certain seismic issues.

    Neither the FERC nor the California Public Utilities Commission challenged each others' jurisdiction and both agencies ultimately issued certificates of public convenience and necessity for the proposed LNG facilities. Indeed, because state law at that time precluded LNG facilities from being built near population centers, the FERC had deferred to state law by rejecting the proposed site for LNG facilities at the City of Oxnard, California in favor of the alternative proposal at the more remote site at Point Conception, California.

    The only reason the LNG facilities were never constructed at Point Conception was due to market forces. In the early 1980s, the price of natural gas significantly decreased and the project sponsors chose not to go forward with the LNG project, even though they had complete authorization to do so from the FERC and the California Public Utilities Commission.

    The California Public Utilities Commission respectfully submits that any new legislation should reflect concurrent jurisdiction, which includes the states in the siting and safety of LNG facilities within their borders, and promotes cooperative arrangements between the federal government and the states.

    This type of approach worked well in the 1970s in California, currently works well under the Deepwater Ports Act and we believe would work well in the future.

    I. The Need for LNG Facilities

    The California Public Utilities Commission recognizes that there is a need for additional sources of natural gas supplies from LNG facilities. The California Public Utilities Commission agrees with the Federal Energy Regulatory Commission that LNG terminals are needed to provide reliable supplies of natural gas and help put downward pressure on the already high prices for natural gas in North America...

    ...We therefore see natural gas from LNG facilities, as well as from interstate pipelines and California production, as being vital sources of future supplies of natural gas to California, which are necessary for California's economic growth and well being...

    II. The Role of State Government to Protect the Safety of Its Citizens

    In addition to helping ensure reliable energy supplies at reasonable prices, for more than 80 years, the California Public Utilities Commission has had the responsibility under state law for making sure that intrastate natural gas facilities in California are sited, constructed and operated in a safe manner.

    The state law in California is very clear that the California Public Utilities Commission has jurisdiction over proposed LNG facilities in California...The California Public Utilities Commission has a much better understanding than the FERC of the unique local conditions involving proposed LNG facilities in California, such as seismic issues. In addition, in the CPUC's certificate proceedings, interested parties, including local entities, will sponsor expert witnesses about the local issues and their safety concerns, and the project sponsor must demonstrate its safety in the hearing process.

    Through the inclusion of interested parties in the California Public Utilities Commission's public hearings, we are able to thoroughly explore the disputed issues, especially when parties present expert witnesses which disagree with each other. Through cross-examination and responding testimony, all parties have a fair opportunity to establish which evidence is the strongest on the issues, and the resulting decision by the California Public Utilities Commission will be based upon substantial evidence provided in our record. The process used by the California Public Utilities Commission, which allows parties to participate in evidentiary hearings, helps educate our Commission as well as the general public on the safety issues involved.

    This also results in much more confidence by the public in the California Public Utilities Commission's conclusions, which will result from the hearing on the safety concerns, compared to a process where disputes of material fact are not set for hearing and interested parties are not provided a meaningful opportunity to participate.

    People understand that security measures should not be addressed in public sessions. However, there are many parties that believe that the other safety issues should be addressed in a hearing in California, and the California Public Utilities Commission provides them a forum to address these issues.

    III. The Federal/State Balance in the Regulation of LNG Facilities

    Rather than consider legislation for exclusive federal jurisdiction, Congress should consider legislation for concurrent federal/state jurisdiction and not preempt state government. Instead of exclusiveness, Congress should consider inclusiveness. There is a much greater chance of public acceptance of LNG facilities when the state has decision making authority and is included in the process, and when there is meaningful public participation in the process as well, than when the state and the public are excluded. In order to ensure the safety to the general public, the FERC should work together with the state agencies to combine the expertise of both levels of government, like the FERC and CPUC did in the 1970s and the Coast Guard and States Lands Commission in California currently do as they work together concerning proposed LNG projects in federal waters off the coast of Southern California.

    If the LNG project is proposed in the densely populated area of the state in close proximity to the state's citizens, there is no reason why the state should not also have a say in that decision making process under the Natural Gas Act.

    For these reasons, the California Public Utilities Commission recommends that any new legislation or amendments explicitly provide for the states' jurisdiction concurrent with the FERC's jurisdiction. The states' hearing process will also provide more transparency of our work so that the public can become better informed and more fully participate in the process.

    A better understanding of local communities' concerns allows us to better identify local safety, environmental and public issues and then develop more effective avoidance, protection, and mitigation measures since our ultimate responsibility is to protect the public, the environment, and our economy. The California Public Utilities Commission is confident that sufficient LNG facilities can be safely located and constructed on the West Coast to meet the market's needs. We therefore respectfully urge that Congress not preempt the states' historic police powers to protect the health and safety of their citizens from any potential hazards from intrastate LNG facilities.

    Thomas E. Giles Exec. VP/CEO Sound Energy Solutions

    ...Sound Energy Solutions is a subsidiary of the Mitsubishi Corporation. We are developing an LNG import terminal in the Port of Long Beach. Once completed, the terminal will receive ocean-going LNG tankers carrying supplies from a variety of sources in the Pacific Rim, store the LNG in double-walled, self-contained tankers, and vaporize it for transportation into an interconnecting pipeline. The gas will be delivered, via this pipeline, to the SoCal Gas system, which will in turn, deliver the gas to customers. A portion of the LNG will not be re-gasified, but sold as liquid fuel for LNG vehicles in the Port and other vehicle fleets in the Los Angeles Basin, which suffers from serious air quality problems. The availability of LNG vehicle fuel will facilitate vehicle conversion from less environmentally friendly fuels such as diesel.

    This facility will cost approximately $450 million to construct, and, when operational, will have a gross annual capacity of 5 billion tons of LNG. The project approval process, which involves numerous reviews, permits, and approvals from federal, state, and local agencies, is underway. Barring unexpected delays, we anticipate beginning construction in early 2006.

    Last month, members of the full committee hosted a roundtable discussion on natural gas issues. I have reviewed the testimony of the panelists who participated in the LNG portion of that discussion. It appears that there was consensus from the participants in that proceeding that LNG will play an important role in America's energy future and that Congress should take steps to promote the development of LNG infrastructure to facilitate increased imports. I share those sentiments.

    My testimony will focus on the current regulatory process that we are involved in to construct the SES LNG Import Terminal and offer my suggestions as to how Congress can fairly and effectively encourage development of facilities like this.

    1. Sound Energy Solutions Places a Premium on Safety and Security.

    SES is serious about safety. There are risks inherent in any energy infrastructure project which cannot be treated lightly. The SES Terminal will be constructed in accordance with the highest engineering standards for built-in security and safety designs, and is designed to anticipate every possible natural or man-made disaster. We are subject to the safety guidelines and reviews of the Federal Energy Regulatory Commission, Department of Transportation, U.S. Coast Guard, California Coastal Commission, Port of Long Beach and numerous departments of the City of Long Beach.

    SES's parent, Mitsubishi, has been active in world-wide LNG trade for over 40 years, and today supplies over 50% of Japan's natural gas supplies. There are five LNG receiving terminals in Tokyo Bay alone, with eight tankers arriving each week. These deliveries of LNG in this busy, industrial port are vital to Japan's energy security and have taken place without significant incident or interruption since 1969.

    2. Current Regulatory Path

    In June, 2003, SES requested FERC to allow SES to pursue its request for authority to site, construct, and operate the LNG import terminal pursuant to the pre-filing process employed by FERC to implement its responsibilities as lead agency National Environmental Policy Act (NEPA) review. In July 2003, FERC granted SES's request and announced that the Port of Long Beach would be the lead agency for review under the California Environmental Quality Act (CEQA), and that the two agencies would produce a joint Environmental Impact Statement/Environmental Impact Report (EIS/EIR) to satisfy the requirements of NEPA and CEQA. Thus, when SES filed its application with FERC for approval of the LNG project under Section 3 of the Natural Gas Act in January, 2004, the Environmental Report that accompanied the application was based on the coordination, cooperation, and consultation among the Staff of FERC and the Port of Long Beach, as well as numerous other federal, state, and local agencies that participated in the pre-filing process. A draft EIS/EIR for the project is expected to be released this spring.

    Long before the NEPA/CEQA process began, SES began meeting with community leaders and citizen groups to discuss the need for and design of the project. Based on these discussions, a suitable site was located in the Port of Long Beach. Following the filing of the application at FERC, SES has maintained contact with the community and continued its public education and outreach efforts. We have had over 200 meetings with local groups. When the draft EIS is released we will participate in a series of public hearings with the State and Federal agencies involved in permitting the project.

    Once the EIS is finalized, we still face a number of regulatory requirements prior to moving forward with the project. In addition to approval from FERC under Section 3 of the Natural Gas Act to site, construct, and operate the LNG terminal, SES will need authorizations from numerous other federal, state, and local agencies. In particular, for SES to obtain a lease for the property at the port for the site, it must receive regulatory approvals from the California Coastal Commission and the Port of Long Beach. In short, this is a long, comprehensive regulatory path to project completion that involves the FERC, California agencies and the Port of Long Beach, with a multitude of opportunities for public input at all levels.

    3. The Need for Regulatory Certainty -- Not Shortcuts

    Our efforts to successfully navigate the State and Federal regulatory process and move forward with the project in a timely manner have been undermined by the decision -- now in litigation pending in the U.S. Court of Appeals for the 9th Circuit -- of the California Public Utility Commission (CPUC) to assert jurisdiction over the SES LNG Terminal. If upheld by the Court, this would require SES to apply to the CPUC for a Certificate of Public Convenience and Necessity before commencing construction of the terminal.

    SES is caught in the middle of this jurisdictional dispute. We filed our application at FERC because we believed that FERC had the authority to approve the siting, construction and operation of onshore LNG import terminals, which includes the SES terminal in Long Beach. FERC has exercised this authority for over 30 years, and a wide body of experts in the natural gas legal field recognizes FERC's authority. Unfortunately, until the current litigation is settled, the regulatory path for the SES project remains uncertain.

    The uncertainty created by the assertion of jurisdiction of the CPUC has also had a dampening effect on the interest of project developers to invest in and construct new onshore LNG import terminals elsewhere in the U.S. This is because the CPUC has argued that the FERC has no jurisdiction over LNG facilities whatsoever.

    What does primary FERC jurisdiction mean to the state and local role in the siting of onshore LNG import terminals? Let me try to explain it by describing what it does not mean:

  • It does not mean that FERC has eminent domain authority. Section 3 of the Natural Gas Act does not confer eminent domain authority to SES. Instead, SES must obtain whatever rights are needed to secure the site of the proposed LNG terminal and the sendout pipeline from the Port of Long Beach. Following NEPA/CEQA review, SES must receive approvals under California law before it may enter into a lease for property at the Port. In our case, eminent domain is not an option. We intend to continue to work with the state and local authorities to do what is necessary to obtain all required permits.

  • It does not mean that the State of California lacks a central role in the siting process. Under the Coastal Zone Management Act, for example, the State must determine that the SES project is consistent with the state's federally approved coastal management plan. FERC cannot authorize a project without such a "consistency" determination.

  • It does not relieve the project from full compliance with any applicable state or federal environmental law.

  • It does not compromise the joint role that the State plays with FERC in the NEPA process.

    4. What Can Congress Do?

    SES hopes to build an LNG import terminal at the Port of Long Beach in order to provide Californians with a steady supply of natural gas and liquid vehicle fuel for the foreseeable future. In order to bring this facility into operation in a timely manner, we need regulatory certainty. The jurisdictional dispute with California frustrates our ability to proceed with the project and delays important energy and environmental benefits that we can provide to California.

    SES therefore requests that Congress take action to provide projects like ours with regulatory certainty. Specifically, we ask that you enact legislation that recognizes the important role that states and local governments play in the approval process and confirms FERC’s role as the primary authority to site liquefied natural gas terminals onshore and in state waters and the facilities that deliver gas from the LNG terminals to connections with the domestic pipeline network.

    As this Committee and the Congress move forward to enact national energy policy legislation, we stand ready to offer our perspective and assistance in any way that we can.

    Thank you.

    Tractebel LNG North America LLC & Distrigas of MA, LLC (Everett, MA LNG operator)

    ...Currently there are 113 active LNG facilities in the U.S., including marine terminals, storage facilities, and operations involved in niche markets. Worldwide there are approximately 20 LNG export terminals, 45 LNG import terminals and 175 specially designed LNG ships.


    Let me address -- and hopefully put to rest -- the very important issues of safety and security.

    I want to note that LNG is as safe, if not safer, to transport and store than most other fuels. It is not explosive, corrosive, carcinogenic, or toxic. It does not pollute land or water resources. It is not transported or stored under pressure. The Government Accountability Office (GAO) study being conducted at the request of Members of the other body needs to set its foundation on those facts.

    Like other fuels, LNG has risks associated with its improper handling; however, LNG has certain characteristics that minimize some of the dangers that may result from mishandling. For example, compared to other fuels, LNG is less likely to ignite in a well-ventilated area.

    LNG ships, with their double-hull construction, are among the best built, most sophisticated, and most robust in the world. According to shipping expert Lloyd's Register, there has never been a recorded incident of collision, grounding, fire, explosion, or hull failure that has caused a breach to a cargo tank of an LNG ship. In fact, over the last 40 years there have been approximately 33,000 LNG carrier voyages, covering more than 60 million miles without a single major accident or safety problem either in port or on the high seas.

    It is also important to note that in the extremely unlikely event that an LNG vessel were involved in an incident that ruptured a cargo tank, and the LNG vapor released met with an ignition source, the likely consequence would be a localized fire, and not an explosion as is often feared.

    With respect to the storage of LNG, there has never been a report of any off-site injury to persons or damage to property resulting from an incident at any of the LNG import terminals currently in operation worldwide, including our Distrigas terminal in Everett, Massachusetts. This is due to excellent equipment and facility design, excellent safety procedures employed in the industry, stringent design and safety codes governing design, construction, and operation of storage facilities, and a well trained, highly experienced workforce.

    Our company has always had a deep commitment to safety and security, but after September 11th, we developed an even greater commitment, increasing our already substantial investments in personnel, equipment, and varied services. These investments include:

  • Private security personnel
  • Enhancements to the perimeter of the Everett Terminal
  • Municipal police and fire details
  • State Police details
  • Investment in two high-powered tugboats. These tugs include state-of-the-art fire control equipment to offer unprecedented marine towing and firefighting capabilities to the Port of Boston.
  • Development of detailed security plans with deployment based on Homeland Security and USCG threat levels

    In short, Tractebel is a pacesetter in public-private partnerships. The LNG carrier Berge Boston, which is under a long-term charter to us, is the first vessel in the world to meet the new International Code for the Security of Ships and of Port Facilities certification. Other ships in the company's portfolio have since received that certification. In addition, our work with the U.S. Coast Guard to bring LNG ships into the Port of Boston became the model for the Coast Guard's Operation Safe Commerce Project, a nationwide effort initiated after September 11th to enhance transportation safety and security while facilitating commerce.

    I want to offer two final notes about safety. First, the two recent studies conducted by the federal government have been deficient in important ways. Both studies have simply assumed that in the event of an incident a hole of a certain size will appear in one of our ships, without discussing the mechanisms that would be needed to produce such holes or the likelihood of the presence of such mechanisms. While we all have theories about what might happen in the event of a breach, we need to understand the probability of such breaches. I personally believe it to be quite low, and our impressive safety record, as well as the rigor of our engineering, shipbuilding, and security processes all tend to confirm that. In short, I think we need to examine the probability of an incident more thoroughly.

    Second, we live in a world of comparative risk. At Everett, we take about 60 shipments of LNG a year. Next door to us is a gasoline terminal that probably takes at least as many. Across the Nation there are thousands of such terminals and storage tank farms next to houses, schools, and businesses. I am not saying that because of this we need to pay less attention to the safety and security of LNG shipments. What I am saying is that we need to make sure that we are addressing real world risks in an appropriate and measured way... Improvements to the Process

    Let me turn for a moment to the regulatory process. I think there are several improvements to the process which are reasonable and on which we all should be able to agree.

    First, I think there needs to be one agency designated as the lead agency for permitting and environmental reviews of natural gas projects.

    For decades, it has been accepted that FERC is generally the "lead agency" for purposes of environmental reviews required under the National Environmental Policy Act (NEPA) for an interstate pipeline proposed under section 7 of the Natural Gas Act. Under FERC procedures, other federal and state agencies with relevant permitting responsibilities are solicited to review the proposed pipeline, make suggestions for mitigating environmental impacts, and reach agreement on permitting decisions. The process is inclusive, and under a recent Memorandum of Understanding, relevant federal agencies are encouraged to work together, concurrently and cooperatively, to reach decisions in a timely manner.

    Unfortunately, some permitting agencies have chosen not to participate in the FERC NEPA review process, and instead to wait until after FERC makes a decision regarding approval of a project before weighing in on the permitting questions subject to their authority. Since these permits are a necessary requirement for pipeline construction, even projects that have been approved by the FERC can be thwarted by such "last-minute" objections. This allows a single state agency (or the regional office of a federal agency) to block the construction of a federally approved, multi-state pipeline.

    Let me offer our experience in Florida as an example. There, we have been working diligently to gain the appropriate regulatory authority to construct a pipeline between the Bahamas and Florida. Last April, FERC approved our EIS, the State gave its determination of consistency with respect to the coastal zone, and the local governments all approved the project. Unfortunately, the Corps of Engineers decided after all that to raise questions. The Corps representatives had participated in all the interagency meetings and discussions, but they waited until FERC had acted to raise their concerns, some of which included very fundamental elements of the process including potential pathways, tunneling, etc. Now, we find ourselves caught between a dramatic design change requested by the Corps of Engineers and the design that was approved by more than ten federal, state, and local agencies through the FERC multi-agency permitting process.

    By clarifying what, until recently, was the accepted practice -- that FERC is the lead agency for NEPA reviews relating to projects seeking authority pursuant to sections 3 and 7 of the NGA -- Congress could send a powerful signal that citizens deserve to have coherent and coordinated environmental decisions.

    As part of this, FERC should be given clear authority to establish an administrative schedule for the NEPA review and associated permitting decisions by all of the relevant federal and state authorities. This would ensure a coordinated and comprehensive approach for reviewing proposed projects. It would also avoid the current duplicative reviews, reduce the unnecessary delays that sometimes accompany getting all necessary authorizations to construct such projects, and improve the chances that the government will speak with one voice on important permitting decisions.

    I don't think anyone wants to change federal or state agencies' existing authority over the substantive issues now entrusted to them. I know I don't. I want federal and state agencies charged with protecting the environment to be aggressive and firm. At the same time, I am pretty sure that most Americans believe that decisions -- one way or the other -- need to be made in a timely manner.

    Current Problems

    In addition to the very significant issues related to siting new facilities, there are also challenges associated with the regulatory programs of existing facilities. Let me give a few examples that I know about.

    FERC has asked the Everett terminal to consider meeting current siting requirements, which cannot be done short of buying much of the land in Island End at a cost of hundreds of millions of dollars, or building some kind of high wall dike around the tanks at a similar cost. Unfortunately, even if done, neither of these would meet current siting regulations. This request is an especially bad idea, one that clearly constitutes regulatory overreach and is viewed by the operating community, investors, and other stakeholders as precisely the sort of agency action that may compromise our ability to meet the Nation's growing need for energy.

    There is a mismatch between the incident reporting guidelines originating from DOT and those included in DOT's requirements. That means that we currently have to perform dual analysis of everything that might happen. Unfortunately, FERC has taken it to an extreme, asking to be notified of events that are essentially routine maintenance, including breakdown of equipment valued at $10,000. The dollar threshold on these reports is about the same as our daily maintenance budget.

    I want to offer one final thought about the regulatory process. Both the good and the bad thing about LNG is that it is a global business. That means that the product can be (and will be) transported to places where facilities can be located, permitted, and operated in a sensible way...

    FERC / J. Mark Robinson Director, Office of Energy Projects

    ...I am here as a staff witness and do not speak on behalf of any Commissioner. Our office is responsible for non-federal hydroelectric licensing, administration, and safety; certification of interstate natural gas pipelines and storage facilities; and, more significantly for today's session, authorization and oversight over the construction, operation, and safety of Liquefied Natural Gas (LNG) terminals.

    Also, we share security responsibilities with the US Coast Guard which has primary responsibility under the Maritime Security Transport Act of 2002...

    The Importance of LNG

    Natural gas continues to be the economic and environmental fuel of choice in the U.S. This growing trend has created a demand that cannot be met solely by domestic or Canadian production. About 96 percent of the world's proven natural gas reserves are outside of North America. At the same time, the U.S. is consuming about 25 percent of the world's annual natural gas production. With projected decreases in conventional onshore and offshore natural gas production and the projected decline in natural gas imports from Canada through to 2025, growth in U.S. natural gas supplies will depend on non-conventional domestic production, natural gas from Alaska, and imports of LNG.

    In order for the U.S. to meet its increasing demand for natural gas, LNG must become an increasingly important part of the U.S. energy mix..

    It is clear that additional LNG facilities are needed to help meet U.S. energy demand. As a regulatory agency, the Commission has no authority to develop LNG proposals, but rather can only review those projects that are developed by others. We do our best to conduct the review of LNG applications filed with us in an efficient and inclusive manner, such that projects that the Commission approves are truly those that meet the public interest test.

    However, as I will discuss below, the current complex legal framework surrounding the consideration of LNG proposals does not encourage, or indeed permit, the rapid, sensible review that I believe our energy needs require.


    FERC's current LNG site review process works to ensure the safety of the public and environmental resources. The siting and oversight of LNG facilities is governed by a comprehensive scheme of federal regulation that guarantees that the FERC and other federal agencies will work with state and local regulators, as well as the general public, to ensure that all public interest considerations are carefully studied and weighed before a facility is permitted, and that public safety and the environment are given high priority. We are proud of our track record of working with states and with all interested stakeholders on these projects, and are committed to continuing to be responsive and responsible regulators. The comprehensive nature of the FERC's LNG program addresses all siting and operational issues with the full participation of the federal and state agencies, and attempt to ensure the timely development of necessary energy infrastructure.

    The goal of the FERC's LNG Program is to ensure that projects which are found to be in the public interest are constructed and operate in a safe and secure fashion. As an integral part of this process, FERC staff coordinates closely with other agencies and solicits comments and recommendations at numerous points in the review process from federal, state, and local authorities, and members of the public, in order to obtain the broadest possible range of information and views.

    This coordination often includes preparing joint environmental documents with the states as we are doing for the Sound Energy Solutions' Long Beach LNG Project in Long Beach, California. The process of the selection of a suitable site for an LNG import terminal begins with the project sponsor. It involves the consideration of environmental, engineering, economic, markets, safety, and regulatory factors. The basic criteria for any proposed LNG terminal must include:

  • deepwater access to accommodate LNG ship traffic; - The applicant must demonstrate coordination with the local pilot's association, port authority, and the US Coast Guard letter of recommendation process to demonstrate navigation suitability of the channel and tanker.
  • proximity to natural gas pipeline systems; - site selection near major intrastate or interstate pipelines reduces the length of interconnecting pipeline and has a bearing on site suitability and economics.
  • safe engineering and design of the proposed facility; - compliance of the plant design with the DOT federal safety standards is essential. FERC's regulations specify filing requirements.
  • sufficient land to comply with the exclusion zone requirements. - The U.S. Department of Transportation's (DOT) has comprehensive regulations, which in conjunction with National Fire Protection Association 59A LNG Standards, set requirements for exclusion (or safety) zones that must be met by a proposed terminal site. In accordance with Sections 193.2057 and 193.2059, thermal radiation and vapor dispersion exclusion zones are calculated by FERC engineers based on spill scenarios and heat flux levels. These zones minimize the possibility that damaging effects of an LNG pool fire or a flammable vapor mixture extend beyond an LNG plant property boundary. Alternative sites considered by the applicant as part of the site selection process must also be identified, and the applicant must provide the environmental characteristics of each site, as well as the reasons for rejecting it. Once the applicant decides on a preferred site and files its application, the information is analyzed by the FERC staff and relevant agencies. As a result of the review process, the site may be rejected, reconfigured, moved or expanded. The entirety of the site selection and review process is disclosed to the stakeholders through an environmental review, which typically begins with the pre-filing process and offers multiple opportunities for public input.

    The Pre-Filing Process

    Prior to a company's filing an LNG-related application, company representatives commonly meet with the OEP staff to explain the proposal and solicit advice. These meetings provide prospective applicants the opportunity for FERC staff to provide guidance on resolving potential environmental, safety, and design issues, explain the level of design detail and safety analysis required for a complete application, and offer suggestions regarding the application and review process. These meetings also provide FERC staff with opportunity to strongly encourage the applicants to use the formal Pre-Filing Process. The Pre-Filing Process allows the FERC staff to begin the environmental review process 7 to 9 months prior to the filing of an application. This approach stresses the early identification and resolution of issues with the local community, increased federal and state government and public involvement, and the development of consensus.

    During this Pre-Filing Process, the FERC staff will engage in interagency consultation, public scoping, identification of alternatives (including, alternate locations) and the collection of site-specific data. With the assistance of the FERC staff, state and other federal agencies, and other stakeholders, the applicant will develop preliminary versions of the required environmental resources reports. The resource reports consider the impact of the project on geological resources; soils and sediments; water resources; vegetation; wildlife and aquatic resources; threatened, endangered and other special status species; land use, recreation, and visual resources; socioeconomics; cultural resources; air quality and noise; reliability and safety; and cumulative impacts. These draft documents are filed with the FERC and made available for public review.

    These reports provide the baseline information necessary to begin preparation of the draft EIS. For new LNG facilities (and major expansions of existing sites) the EIS will also include a thorough study of potential impacts to public safety. The FERC also develops a separate Cryogenic Design Review, for each facility, which includes detailed technical information, as well as conclusions and recommendations regarding a proposed project, to assure the safe design of the proposed facilities and system reliability.

    Our report, the Cryogenic Design and Inspection Manual, summarizes the design, process and equipment proposed at the LNG facility and includes the staff's conclusions and recommendations concerning the proposed project that ultimately appear as conditions in any FERC order approving the project.

    The preparation of the draft EIS is a cooperative effort among FERC staff and other federal and state agencies. Typically, cooperating agencies would include the U.S. Coast Guard, the Army Corps of Engineers, the U.S. Fish and Wildlife Service, NOAA Fisheries, and the relevant state agencies responsible for the issuance of permits under the Clean Water Act, Clean Air Act, and Coastal Management Zone Act.

    However, many other federal and state agencies, non-governmental agencies, and the general public are contacted and consulted throughout the process. As an example, our work on the Long Beach project includes the Port of Long Beach, the California Energy Commission, and the South Coast Air Quality Management District among others. Although FERC has jurisdiction over proposed LNG import projects, certain permits, approvals, and licenses are the responsibilities of other federal and state agencies. There is nothing unusual about an energy project simultaneously being subject to various regulatory requirements promulgated by other federal and state authorities.

    To the extent we can, it is our practice to coordinate our regulatory requirements so that we accommodate those of other authorities. To this end, we hold focused meetings with all relevant federal and state agencies to identify concerns and develop mitigation. Again, LNG import projects are also subject to the authorities of state agencies that have been delegated authority to act pursuant to federal law, including state agencies that have been delegated duties with respect to the Coastal Zone Management Act, Clean Water Act, and Clean Air Act. Our goal is to work cooperatively with state and local authorities to protect the safety of residents and to minimize adverse environmental impacts.

    Cooperation among federal, state, and local authorities is needed to assess the project proposals adequately and to expedite access to LNG supplies to meet the nation's critical energy needs. We encourage both federal and state agencies to become Cooperating Agencies in the preparation of the environmental documents...A successful Pre-Filing Process results in a complete application with the full integration of the issues for all state and federal authorities.

    Post-Filing Process

    Once scoping is complete and the applicant's resource reports have been revised to reflect the identified issues, the applicant is ready to file its application with the FERC. When the filing is made, interested parties are given another opportunity to become involved in the FERC's proceeding.

    After FERC staff reviews the information provided by the applicant, revising it as necessary to thoroughly consider all relevant issues and provide relevant recommendations, the draft EIS is normally issued within 4 months of the filing (if the pre-filing process was successfully completed). The draft EIS is issued for a 45-day review and comment period. We will also hold additional public meetings near the site, both to solicit comments on the draft EIS and to further address any remaining issues. All comments on the draft EIS are reviewed. Changes to the document are made as needed, and a final EIS is produced.

    The final EIS will specifically address all of the comments received during the comment period. Our typical schedule provides for completing the final EIS approximately 4 months after the issuance of the draft.

    Through this effort, the FERC staff is committed to producing an EIS that addresses all the issues and provides for mitigation to avoid or reduce impacts. We also strive to develop a record that enables the other federal and state agencies to avoid duplicative reviews. And, we try to provide for efficient decision making by facilitating the issuance of other state and federal permits concurrently with the FERC action rather than sequentially.

    Finally, the complete record for the project is presented to the FERC Commissioners for a decision. One further opportunity for public participation is available after the FERC makes its decision -- parties to the proceeding may seek rehearing.

    In total, our process provides at least seven formal opportunities for public input, and almost continuous opportunities for interaction with FERC staff.

    Post-Authorization Monitoring

    After a project receives FERC approval and meets all pre-construction conditions required by the order, the terminal owner is authorized by a separate document to construct. During the construction period, which typically takes 3 years, the project sponsor is required to file monthly reports summarizing construction activity, the status of any outstanding project permits, an updated project schedule, planned activities for the next reporting period, and details of compliance with environmental conditions.

    Depending on the phase of construction, OEP staff inspects the project site as frequently as needed throughout the entire construction process...

    Prior to the commencement of service by a LNG facility, the project sponsor must again seek written approval from the FERC. Only after complying with all pre-operating conditions listed in the FERC order would a company receive approval to begin operation.

    FERC oversight continues after an LNG project goes into operation. Each LNG facility under FERC jurisdiction is required to file semi-annual reports to summarize plant operations, maintenance activity and abnormal events for the previous six months. In addition, our staff periodically conducts inspections (focusing on equipment, operation, safety, and security) of each facility throughout its operational life.

    About half of the total LNG facilities are inspected every year with special inspections occurring on an as-needed basis. Following the first inspection after the commencement of operations, the facility's inspection manual is updated to incorporate any authorized design changes or facility modifications since the original manual was prepared...

    Safety and Security

    Safety and security of the terminal at the proposed site is essential. Every aspect of the staff's engineering and siting review and its coordination with the U.S. DOT and U.S. Coast Guard is geared toward assuring that a facility will operate safely and securely. In recognition of the importance of the LNG industry as part of the nation's energy infrastructure, and the FERC's increased focus on LNG safety and security, we formed a new branch within the Office of Energy Projects devoted to those issues.

    The LNG Engineering Branch is responsible for managing and enhancing the FERC's existing LNG inspection program and ensuring cooperation with other relevant agencies. This branch performs a number of significant functions including: reviewing the detailed cryogenic design review of proposed LNG terminals; conducting the staff's cryogenic technical conference; calculating the proposal's compliance with DOT's exclusions zones for the site; coordinating the review of marine safety and security issues with the US Coast Guard; and conducting construction and operational inspections.

    We continually develop the considerable expertise that exists on our staff and to expand our efforts. While FERC is the lead federal agency under NEPA to analyze the environmental, safety, security and cryogenic design of proposed facilities, two other federal agencies (the Coast Guard, and the Research and Special Programs Administration of DOT) share significantly in the oversight of the safety and security of LNG import terminals. The Coast Guard has authority over the safety and security of LNG vessels and the marine transfer area, as well as the entire LNG facility. The DOT has authority to promulgate and enforce safety regulations and standards for the onshore LNG facilities beginning at the valve immediately before the LNG storage tanks.

    In February 2004, the FERC, Coast Guard, and DOT entered into an Interagency Agreement to assure that they will continue to work in a coordinated manner to address the full range of issues regarding safety and security at LNG import terminals, including the terminal facilities and tanker operations, and to maximize the exchange of information related to the safety and security aspects of the LNG facilities and related marine operations.

    The Interagency Agreement ensures a seamless safety and security review by the three federal agencies from the moment the tankers enter U.S. waters until the vaporized LNG enters the pipeline system.

    Overall, the safety record of the industry is commendable. During the approximately 30 years of operating history of the four existing LNG terminals in the continental U.S., there has never been an LNG safety-related incident where LNG was spilled or otherwise mishandled, resulting in adverse effects to the public or the environment. Similarly, no shipping incidents have occurred during the 50 years of operation that resulted in a lost cargo.

    However, an operational accident occurred in 1979 at the Cove Point LNG facility in Lusby, Maryland, when a pump seal failed, resulting in gas vapors entering an electrical conduit and settling in a confined space. When a worker switched off a circuit breaker, the gas vapors ignited, resulting in heavy damage to the building and a worker fatality. Lessons learned from this accident resulted in changing the national fire codes, with the participation of the FERC, to ensure that the situation would not occur again. The FERC design review and inspection process contributes to the safety record.

    Further, most of you are probably familiar with the explosion that occurred at Sonatrach's Skikda, Algeria LNG liquefaction facility in January 2004. Findings of the accident investigation suggest that a cold hydrocarbon leak occurred and was introduced to the high-pressure steam boiler by the combustion air fan. An explosion occurred inside the boiler fire box which subsequently triggered a larger explosion of the hydrocarbon vapors in the immediate vicinity. The resulting fire damaged the adjacent liquefaction process and separation equipment.

    After the accident, FERC and DOE engineers inspected the site to gain first-hand knowledge of the situation. There are major differences between the equipment involved in the accident in Algeria and that of LNG facilities in the U.S. High-pressure steam boilers that power refrigerant compressors are not used at any LNG import facility under FERC jurisdiction. However, as a result of the sequence of cascading events at Skikda, we began a technical review of the facility design at each existing and proposed jurisdictional plant to identify whether similar situations are possible and that these areas are adequately equipped with hazard detection and emergency shutdown devices.

    We are also reviewing the designs of new LNG plants to determine the potential failure modes that may be similar to the events at Skikda. Further, the safety section of each EIS includes a recommendation that a technical review be conducted by the applicant to identify the proximity of combustion/ventilation air intakes to potential hydrocarbon releases, and to ensure that adequate detection and shutdown are provided.

    As part of our efforts to enhance the LNG program, the Commission contracted with ABS Consulting for the purpose of providing guidance on modeling methods to be used by FERC staff in the NEPA review of proposed LNG import facilities. The modeling methods we adopted for use as a result of the study were selected to provide a measure of conservatism, meaning they tend to overestimate the consequences from an LNG release.

    The "ABSG Report" was issued for public review in May 2004, and we made certain changes to the model based on the comments we received. In December 2004, the DOE issued the Sandia Report which is a comprehensive study of potential spills from LNG tankers. I should reemphasize that no tanker spills have occurred on water like the ones modeled by Sandia. FERC engineering staff provided technical review of various drafts leading to the final report, and it now applies the results in conjunction with the consequence methodology from FERC's ABSG Report to site-specific hazard assessments.

    The results of the Sandia Report also serve to buttress the staff's hazard modeling used in FERC's LNG authorization process. While the Sandia experts used different methodologies, the hazard ranges in the report are consistent with FERC's conservative assumptions. Essentially, FERC's model set a foundation upon which to build as we go forward.

    We will continue to study the science regarding LNG spills and further refine our work in the future. A site-specific assessment for each LNG import facility is included in our EISs. Our model ensures that we are using standardized methodologies as we perform site-specific analyses of each facility proposed before the Commission. Credible worst-case scenarios, based on the most recent information available, will be included in the NEPA documentation issued by the Commission.

    Though the spill analysis is a necessary part of our review, our overarching commitment is to ensure that the design and operation of each facility is such that the facility will operate safely. Refining our model is an example of how we are continuously evaluating our review and inspection programs to ensure that the highest levels of safety are maintained. As part of the detailed cryogenic technical review conducted in connection with the environmental analysis, the staff performs a careful and detailed evaluation of numerous studies and reports that the applicants are required to complete.

    These include:

  • engineering design and safety concepts and the projected operational reliability;
  • seismic analyses;
  • hazard detection systems;
  • fire protection evaluation;
  • threat and vulnerability assessments;
  • LNG ship transit simulations and channel capacity studies;
  • Operation and Maintenance manuals;
  • Emergency Response and Evacuation Planning; and Security Manual, Transit Operations Manual, and the Emergency Response Manual.

    A significant aspect of the FERC's security review is conducted in consultation with the US Coast Guard. Security Assessments of individual terminal proposals are being conducted by several Coast Guard field units through security workshops with Federal, state and local law enforcement and port stakeholders. FERC engineering staff provides technical assistance in the workshops on marine spill issues. The goal is for initial security measures and resource requirements to be identified by the Coast Guard for inclusion in the FEIS.

    The Coast Guard and FERC have agreed that future LNG terminal applicants, at the time they begin their Pre-Filing Process, or file the application, whichever comes first, must also submit a Letter of Intent (navigational suitability review) under 33 CFR Part 127, and commence a security assessment of their proposal that includes the items required by 33 CFR Part 105 [which implemented the Maritime Transportation Security Act of 2002].

    Where specific security concerns are raised, we have conducted a closed-door detailed technical workshop on the site-specific security issue with all relevant stakeholders and federal, state and local expert agencies to explore and resolve security concerns. Discussions may include facility security plans, and both plant and ship personnel restrictions, limitations and supervision.

    Recommended Legislative Changes

    Notwithstanding the inclusive, thorough nature of the Commission's LNG review process, timely consideration of LNG projects can be made impossible as a result of the complex, inter-related body of law governing the participation of federal and state agencies in the process.

    For example, state agencies generally have the authority to condition or veto LNG projects under the Clean Water Act, and can also preclude a project by making an inconsistency finding under the Coastal Zone Management Act. Federal agencies may exercise authority under a number of statutes including the Endangered Species Act, and may have their own responsibilities under law including the Clean Water Act. Thus, Commission consideration of the merits of an LNG project is only one of many steps toward obtaining final approval of a proposal.

    Even if the Commission finds a project to be in the public interest, other agencies may disagree. In addition to this substantive problem, the procedures by which state and federal agencies exercise their interlocking authorities can be so disparate that, regardless of the merits of a proposed project, conflicting regulatory schedules and attendant delays can operate to seriously hamper or even kill a project.

    I discuss below a three-pronged approach that I believe would go a long way toward rationalizing the LNG review process. The legislation underlying the FERC's regulations should be amended to allow the following:

  • Clear Jurisdiction: The Commission has interpreted section 3 of the Natural Gas Act as conferring exclusive jurisdiction on the Commission with respect to the siting, construction, operation, and safety of LNG facilities onshore and in state water (as distinguished from those offshore facilities that are within the Coast Guard's jurisdiction), while recognizing the states's authority to implement other federal laws (such as the Clean Water Act and the Coastal Zone Management Act) that may relate to the approval of LNG projects. There are no legislative, judicial, or administrative statements to the contrary, although the U.S. Court Appeals for the Ninth Circuit is currently considering a challenge by the California Public Utility Commission to the exclusivity of the Commission's authority. It would be extremely helpful if Congress were to confirm the exclusive nature of the Commission's jurisdiction, in order to forestall further debate and judicial review.

    This would not mean that other Federal and state agencies with permitting responsibilities (e.g., states acting under CZMA, or Clean Water Act--Section 401) would lose authority, but rather would be a recognition of the Commission's paramount role in this area of foreign commerce, and would assist in clarifying that other agencies with roles in the LNG siting process should not seek to expand the nature of their authorities.

  • One Federal Record: Where many agencies have roles to play, the perception by those agencies that each needs to conduct its own review process under its own schedule and, where necessary, subject to its independent environmental review, can lead to inordinate delay.

    To avoid this problem, Congress could make clear that the Commission is the lead agency for all environmental reviews required or permitted by federal law regarding FERC-jurisdictional LNG projects, and that federal and state agencies must, in performing their reviews, cooperate with the Commission by following a schedule established by the Commission as lead agency. Failure of an agency to take any required action within the established time frame would result in the assumed waiver of that agency's authority. This measure would add predictability to the LNG review process, allowing applicants and other stakeholders more certainty as to when they could expect decisions to be rendered. It would also prevent agencies from using delay as a tool for obtaining substantive concessions with respect to a project.

  • Unified Judicial Review: Under current procedure, Commission decisions on LNG projects may be appealed only to the U.S. Courts of Appeals. However, related decisions by other agencies may be subject to patchwork of review, including reviews within state and federal agencies, review by state courts (as in appeals of Clean Water Act certifications), and by federal courts. This unevenness can not only cause delay, but also raises the possibility of different tribunals reaching conflicting results regarding one project. To avoid these problems, Congress could provide that all appeals regarding agency decisions with respect to an LNG project can be appealed, in one consolidated proceeding, to the U.S. Courts of Appeals, following final action by the Commission.

    Conclusion LNG is a crucial and growing part of the nation's energy mix. The FERC's current LNG review process is designed to ensure the safe, reliable construction and operation of LNG facilities, based on extensive input from all affected parties. I believe that the comprehensive and inclusive federal regulation of these facilities, coupled with the FERC's commitment to the public interest and to cooperation with state and local authorities, helps to ensure that the needs of all affected parties are given due consideration. With the legislative changes that I have proposed, the Commission and other interested entities will be able to review and act on LNG proposals in an effective, rational way, so that the United States will be able to build the energy infrastructure that it needs.

    Post-hearing written statement released by Energy & Natural Resources Committee chair Sen. Pete Domenici (R, NM)

    I respect the challenges we face around the country regarding the siting of LNG ports. I have my own reservations about increasing our reliance on foreign natural gas. I have seen what our heavy reliance on foreign oil has done to our economy, our self-reliance and our national security.

    But we have some difficult choices ahead that require federal leadership. The Energy Information Agency tells us we must increase our importation of LNG nearly 30-fold by 2025 to meet domestic demand. The American Gas Foundation yesterday warned that natural gas prices could double in the next 15 years if we don't increase domestic production, build LNG ports and diversify our sources of electricity.

    I am deeply concerned by these warnings. I do not want to wait until this economy is in a recession driven by high energy prices before we act. The federal government must take the lead in educating the public on the facts of LNG. We must take the lead in educating special interest groups who complain about any new energy production. We must take the lead in crafting a procedure for siting LNG ports that appropriately balances state and local input with national interests.

  • Related coverage: maintains a link on our front page to a compilation of our LNG coverage. To view it, click here.

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