FERC Signals It Wants Eminent Domain Power Over Locating Onshore LNG Plants; Port and City Hall Say...Return To Front Page
(January 28, 2005) -- Referencing a controversy resulting from the Port of Long Beach processing a Mitsubishi subsidiary's application to build and operate an 80+ million gallon Liquefied Natural Gas (LNG) facility -- while the firm seeks permission from the Federal Energy Regulatory Commission (FERC) but not from the CA Public Utilities Commission -- FERC has indicated that it wants Congressional legislation giving FERC unambiguous controlling federal authority -- including the power of eminent domain -- over the siting of onshore Liquefied Natural Gas (LNG) facilities nationwide.
Materials on the U.S. Senate Energy and Natural Resources Committee web site indicate that a January 24 conference took place involving the Senate Committee, FERC, the National Commission on Energy Policy, Dominion Energy. the Center for Liquefied Natural Gas and National Association of Regulatory Utility Commissioners.
The parties appear to have been asked for their views on questions that included: "What should our expectations be regarding imported LNG as a supply source, and what policies should be considered on LNG terminal siting and safety?"
As indicated on the Senate Committee web site document, FERC responded as follows:
The items that appear below represent the issues or themes that should appear in any natural gas bill proposed in the new Congress. These items can be divided into two broad areas - infrastructure and market rules and oversight. Specifically, we propose that Congress enhance the development of our nation's natural gas infrastructure by removing any doubt about the Federal Energy Regulatory Commission's (FERC) exclusive jurisdiction over the siting of onshore LNG import facilities in state waters; authorizing eminent domain for such facilities; and streamlining the review process by providing for a single Federal record. Furthermore, we propose that Congress enhance FERC's authority to discipline and correct harmful behavior by providing for or increasing civil penalty authority under FERC's natural gas statutes.
2. Liquefied Natural Gas
What should our expectations be regarding imported LNG as a supply source, and what policies should be considered on LNG terminal siting and safety?
Imported LNG will become an increasingly important component of U.S. gas supply in the short to mid-term. While still a small part of the U.S. gas supply when compared to traditional domestic gas production and pipeline imports from Canada, the U.S. imported twice as much LNG in 2003 as in 2002, and, in the first three quarters of 2004, the U.S. imported more LNG than in all of 2003. However, this growth will, in time, outpace the capacity of the existing U.S. LNG terminals in the lower-48. It will be necessary to construct and place more LNG terminals in operation. The FERC has been processing requests to site, construct, and operate LNG terminals as quickly as possible under Section 3 of the Natural Gas Act. Nevertheless, FERC is embroiled in a dispute with a state over the jurisdiction for the approval of LNG terminals. This issue is currently before the U.S. Court of Appeals for the Ninth Circuit. Because resolution of the issue could take years through the judicial review process, it would be preferable to resolve the dispute in the near term by enacting legislation to establish one authority for siting LNG terminals, not a state-by-state regime of LNG siting regulations. Without this continuity of regulation, there will a chilling effect upon LNG terminal sponsors who will be hesitant to invest their money and, without the necessary timely investment, there will be difficulty in securing the gas supply that the U.S. will demand in the future. We make the following recommendation.
Section 3 of the Natural Gas Act (NGA) should be modified to make clear and unambiguous that FERC has exclusive authority to site liquefied natural gas (LNG) terminals onshore and in state waters and the facilities that deliver gas from the LNG terminals.
FERC's press office told LBReport.com that the person associated with FERC's views expressed above is FERC chairman Patrick Henry Wood, III.
In a January 24 press release on the Senate Energy & Natural Resources Committee's web site, chairman Pete Domenici (R., New Mexico) said:
Today's conference was the ideal way to begin bipartisan discussion about energy legislation for the 109th Congress. Natural gas is clean, abundant and was, until recently, affordable. There is strong support for this energy that crosses party lines and regional differences. We all agree that we must act proactively address the looming gap between supply and demand. I thank all those who submitted proposals for their thoughtful analysis and creative solutions to this problem. I will follow this conference with a series of bipartisan discussions with my committee colleagues about the surest way to incorporate the best of today’s proposals into energy legislation for consideration by the committee and full Senate.
LB city management was unavailable on our request for comment.
Carl Kemp, PoLB Director of Community Relations and Government Affairs, underscored that he'd have to do additional research to learn details of what's being proposed but offered the following initial response: "I believe that this is something that the Harbor Commission would be very concerned about inasmuch as the idea of eminent domain within our jurisdiction preempts our authority and local control and ability to run the port efficiently."
The City of Long Beach -- via the Port of LB as landlord -- has said that it will have final say in whether an LNG facility is built. However, if the type of legislation indicated by FERC is inserted in this year's Energy Bill (or elsewhere) and passes Congress, FERC would have unambiguous power to approve the LNG proposal...and if the Port of LB didn't agree to it could authorize taking Port land to accommodate the project.
The leading local opponent of the proposed PoLB LNG project, Bry Myown, opined on a local LB listserv:
Long Beach should never forget that the U.S. government took control of our port in wartime and very nearly did so for offshore oil drilling in the 1950s; Eisenhower campaigned in California on leaving the public trust with the state, and Long Beach used to have a huge picture of Eisenhower signing the Submerged Lands Act hanging in the lobby of its city hall.
But legislation...is subject to constant change. The public trust mantra of "commerce, navigation and fisheries (and recreation)" is very close to becoming "commerce, navigation, fisheries and energy." BTW [by the way], the "recreation" was added (and can be subtracted) judicially, as can "energy."
The Port land sits on CA state tidelands (operated by the PoLB as a public trust granted by the state.) As previously reported by LBReport.com, in December 2004 CA Governor Arnold Schwarzenegger's office declined comment on verbiage (not legally binding) inserted in a House/Senate conference committee report (accompanying an omnibus spending bill) that indicated CA's Public Utilities Commission should not have regulatory authority over LNG facilities in CA.
In January 2005, the LB City Council requested a future study session on the appropriateness of locating an LNG facility in the Port of LB. That session is now reportedly expected sometime in early April.
LBReport.com maintains a link on our front page to a compilation of our LNG coverage. To view it, click here.
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