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President Bush Advocates Federal Authority over Siting of LNG Terminals

President Bush unveiled five proposals last Wednesday aimed at increasing the supply of domestic energy, including a proposal spelling out unambiguous authority for federal regulators over the siting of liquefied natural gas (LNG) import terminals. It was the president's second speech on energy policy in a week, signaling the White House's concern over escalating energy prices and their potential impact on the economy. He also addressed energy issues during a prime-time news conference on Thursday.

In a speech to the Small Business Administration's National Small Business Conference in Washington, DC, the president asked Congress to clarify that the Federal Energy Regulatory Commission has undisputed authority over the siting of LNG facilities in order to expedite the construction of new LNG terminals in the United States. There are five existing facilities in the nation -- Massachusetts, Maryland, Georgia, Louisiana and one in the Gulf of Mexico offshore Louisiana -- but Bush believes the ongoing flap over siting jurisdiction is delaying regulatory review of up to 32 proposed LNG projects.

"One of the great sources of energy for the future is liquefied natural gas...We need more terminals to receive [LNG] from around the world," the president said during a nationally televised press conference Thursday evening.

The California Public Utilities Commission (CPUC), which initiated the dispute, is challenging FERC's claim of exclusive jurisdiction over LNG siting in the Ninth Circuit Court of Appeals in San Francisco. It believes states and the federal government have concurrent jurisdiction under the Natural Gas Act to locate LNG terminals. Officials in Rhode Island and Massachusetts also are using the courts to erect barriers to LNG terminals (see NGI, March 14).

Bush's LNG proposal came one week after the House passed omnibus energy legislation (HR 6) that would provide FERC with primary authority over the siting of LNG terminals, as well as give states a "stronger role" in the process (see NGI, April 25). "The White House is advocating a stronger role for the FERC in the siting and permitting of LNG facilities than the House language in HR 6 wound up with," said energy analyst Christine Tezak of the Stanford Washington Research Group.

The president's energy proposals appeared to be directed at the Senate, which still is working on its energy bill. Sen. Pete Domenici (R-NM), chairman of the Senate Energy and Natural Resources Committee, embraced Bush's energy proposals. He said his committee has been working on bipartisan language in the natural gas title of the energy bill that would give FERC exclusive authority over the siting, construction, expansion and operation of new liquefied natural gas (LNG) facilities, which mirrors the president's position.

But in a departure from the president's ideas, Domenici said the committee has been considering locating LNG import terminals on closed coastal military installations. Bush called for the construction of new oil refinery capacity at closed military bases.

The committee "was not at the point where it was looking at specific military installations" to site LNG facilities, said Marnie Funk, a spokeswoman for Domenici. The federal government has closed nearly 100 major military bases since 1988, including bases in the coastal states of California, Texas, New York, Florida, Maryland and Virginia. The Defense Department is expected to announce more base closings in May.

FERC Chairman Patrick Wood, when asked for a reaction to the president's remarks on LNG, let out an enthusiastic "Yay!" He said "that's good, that's important, and as you know, it's one of those issues that, I think, the current law, as we read it [with respect to LNG siting authority]...probably is pretty good, but we just want to make darn sure of it."

The Interstate Natural Gas Association of America (INGAA), which represents gas pipelines, said it supported the president's remarks on LNG siting, noting that FERC needs "clear, preemptive authority" over states and local communities to review, approve and site new LNG import terminals. "In matters of interstate and foreign commerce [such as LNG importing], the national public interest must be the overriding consideration -- not local, parochial interests. We urge the Senate to resolve this conflict over LNG siting jurisdiction" in its energy bill.

But Rep. Edward Markey (D-MA), who tried to block the provision on federal LNG siting authority from being included in the House energy bill, called the president's proposal a "bad idea." There is "no crisis that would warrant preempting the states from participating in decisions affecting public safety and the protection of sensitive coastal areas," he said.

Bush also proposed that the U.S. turn its attention to the construction of new nuclear facilities. "I've asked the Department of Energy to work on changes to existing law that will reduce uncertainty in the nuclear plant licensing process, and also provide federal risk insurance that will protect those building the first four new nuclear plants against delays that are beyond their control."

In addition, Bush called for the construction of new refinery capacity at closed military bases. "I will direct federal agencies to work with states to encourage the building of new refineries on closed military facilities...and to simplify the permitting process for such construction. By easing the regulatory burden, we can refine more gasoline for our citizens here at home."

The president proposed a tax credit for gas-electric hybrid automobiles as well, the Washington Post reported. The credit would provide $2.5 billion in tax incentives over a 10-year period.

Bush further stressed the need for international cooperation to encourage the use of clean coal and nuclear power. "I'm looking forward to going to a G8 meeting in July in Great Britain. And there I'm going to work with developed nations, our friends and allies to help developing nations, countries like China and India, to develop and deploy clean energy technology...[And] we will explore ways we can work with like-minded countries to develop [advanced] nuclear technologies that are safe, clean and protect against proliferation."

White House officials plan to lobby lawmakers to incorporate the president's proposals into comprehensive energy legislation (HR 6) that is now a top priority in Congress.

"I intend to incorporate some of his suggestions into the mark-up of the Senate energy bill we have planned for the second half of May," Sen. Domenici said. "The president has called on Congress to deliver an energy bill to him by Aug. 1. I am working toward that deadline." Bush said last week that he believes Congress will have an energy bill on his desk by the end of summer.

If the Senate energy panel votes out an energy bill in late May, a vote by the full Senate could come in June, to be followed by a House-Senate conference on the measure in July.

Domenici said last week the panel already has begun to consider the five energy proposals advanced by the president, as well as some novel initiatives. He reported that he met with both Republican and Senate members to review the president's energy proposals.

Specifically, panel members have discussed reducing the uncertainty in the licensing of nuclear plants. Domenici noted the committee had not previously considered the president's proposal to expand the tax credits for hybrid vehicles to include clean diesel vehicles, and to locate refineries on closed military bases, Domenici said. Instead, the panel "has been considering siting LNG facilities on closed coastal military installations."

The president's five energy proposals "would make a real difference in our energy supply and our environment," Domenici said. "We have begun committee consideration of some of these proposals. I will promptly discuss with my colleagues other ideas we hadn't thought of before."

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