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Wood: House Falls Short of Clearing Up Siting Jurisdiction over New LNG Terminals

The provision in the House energy bill clarifying FERC's authority over the siting of liquefied natural gas (LNG) import terminals is laced with ambiguity and could prolong the legal battle over the issue for years to come, Commission Chairman Pat Wood said last Thursday.

"We just wanted regulatory clarity. I don't know that [the House energy measure] really got there," Wood told a group of reporters at a conference sponsored by the Stanford Washington Research Group in Washington, DC. The "ambiguity just means you're stuck in court for four more years."

He said he wants comprehensive energy legislation to read: the Federal Energy Regulatory Commission "has exclusive jurisdiction over the siting of the LNG facilities for imports, and [the] states have what they have today," including their authority under the Coastal Zone Management Act, Clean Water Act and Clean Air Act to block energy projects that they oppose.

The House energy bill doesn't state this "very clearly," Wood said. "We don't need to add new duties to them [the states]."

He conceded that the provision in the House bill is "not bad." In fact, Wood said that if FERC loses the court case in which California regulators are challenging FERC's jurisdiction over the siting of a LNG terminal project planned for Long Beach, CA, the House LNG provision "would definitely be an improvement" over the language in the existing law.

Wood hopes that the Senate in its energy bill will smooth out the "rough edges" with respect to the Commission's siting jurisdiction over LNG facilities.

He said the proposal of Sen. Pete Domenici (R-NM), chairman of the Senate Energy and Natural Resources Committee, to site LNG terminals on closed coastal military bases is a "great idea." The federal government "ought to get a good rental fee from whoever builds it there."

Wood noted that the "ideal scenario" calls for construction of two new LNG terminals on the East Coast, two on the Gulf Coast, two on the West Coast, two in Mexico and two in Canada to disperse the natural gas around the continent. Although he is concerned about the jurisdictional dispute with California, he said, "These [LNG facilities] will get built. We'll get more than enough probably."

Wood said LNG likely is going to be the "swing fuel" in the years ahead. Its will be the "best looking girl at the dance." As for a long-line Alaska natural gas pipeline, he noted that he is "pretty confident" that it will be constructed by 2014. This will have a "beneficial effect" on gas prices, but "I don't think we'll ever see the days of $3 gas again." Wood also said he believes the Mackenzie Pipeline in Canada's Mackenzie Delta will get built eventually, despite the fact that there is a "little hostage taking" going on by the aboriginal groups now.

As for reports that natural gas exporting countries may be considering forming an OPEC-like cartel, Wood told reporters, "I hope it is as magnificently ineffective as the one for oil has been."

Wood, whose term ends on June 30, said he does not plan to stay on at the Commission past that date to help the new chairman get acclimated to his or her job. He noted that he leaves the domestic natural gas market with a greatly expanded infrastructure and "a lot more market certainty with behavioral rules."

The pipeline grid has been "pretty robustly" expanded during his term, Wood said. He noted that FERC has cut the time required to certificate a gas pipeline project in half, to 11 months today from two years in the 1990s.

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