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Congressional Lawmakers Back CA Regulators in Dispute over LNG Jurisdiction

January 17, 2005
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Congressional Lawmakers Back CA Regulators in Dispute over LNG Jurisdiction

A coalition of 18 congressional members are siding with the California Public Utilities Commission (CPUC) in its challenge to FERC's claim of "exclusive jurisdiction" over Sound Energy Solution's planned liquefied natural gas (LNG) terminal for the Port of Long Beach, CA.

In an amicus brief filed in the U.S. Court of Appeals for the Ninth Circuit in San Francisco last week, lawmakers from Massachusetts, Rhode Island, Connecticut, New York and California argued that the Federal Energy Regulatory Commission "has ignored [the] limits on its jurisdiction under the Natural Gas Act, and greatly exceeded the scope of its delegated authority" by asserting sole jurisdiction over the LNG project of Sound Energy Solution (SES), a U.S. subsidiary of Japan's Mitsubishi Corp.

"The FERC has attempted to usurp the legislative powers of Congress by deciding as policy matters issues involving the siting of SES's LNG facilities, based upon the FERC's views as to what the law should be, instead of relying upon what the actual language explicitly provides in the Natural Gas Act [NGA], " said the lawmakers, who included two senators and 16 U.S. representatives.

Moreover, the lawmakers accused the Commission of flouting the Pipeline Safety Act of 1979 by emphasizing the "uniformity of regulation of LNG facilities over safety concerns raised by the CPUC, which had focused on...the need to consider more remote siting for LNG facilities than at the Port of Long Beach."

To resolve the dispute, FERC has called on Congress to "make clear and unambiguous that FERC has exclusive authority to site [LNG] terminals onshore and in state waters and the facilities that deliver gas from the LNG terminals" under Section 3 of the NGA.

The lawmakers submitted their amicus brief as part of the CPUC's appeal of the FERC orders asserting jurisdiction over the SES LNG terminal. In a declaratory order issued last March, FERC said it had jurisdiction under Section 3 of the NGA and by the authority of the energy secretary over the siting, construction and operation of the proposed import terminal (see NGI, March 29, 2004). The agency held that because importing LNG is a matter of foreign commerce, not intrastate commerce, it is subject to federal, not state, control. The Commission reaffirmed that ruling in June, making it ripe for court review.

California regulators countered that because the proposed LNG facilities would be in California serving California markets, they are considered a California public utility subject to regulation by the CPUC.

The Senate and House lawmakers called on the court to reverse the FERC orders challenged by the CPUC, arguing that the Commission had overstepped the "limited authority" that Congress delegated to the agency under Section 3 of the NGA.

In the 1970s, the Commission authorized LNG facilities to be sited and constructed under Section 7 of the NGA, the lawmakers noted. But since 2002, FERC has relied exclusively on Section 3 when approving LNG terminal facilities and operations.

The agency, however "can point to no language in Section 3 addressing [the construction of] facilities, as opposed to mere importation or exportation" of LNG, according to the brief. In contrast, Section 7 of the NGA "explicitly addresses FERC authority over construction of facilities, the extension of facilities or abandonment of facilities...This distinction between Section 3 and Section 7 does not support FERC having authority over the proposed intrastate LNG facilities based upon Section 3."

For this reason, the FERC orders in the SES case are contrary to law. "The FERC must comply with the requirements under Section 7, not under Section 3, if it exercises jurisdiction over LNG facilities," the lawmakers said.

The lawmakers also dismissed language that was inserted in the omnibus spending bill at the end of 2004, which clarified FERC's jurisdiction over LNG facilities and was intended to "support the FERC in the present case before this court." The language was "inconsistent" with the provisions of the NGA, they said.

The CPUC filed its appeal of the Commission orders in the U.S. Court of Appeals for the District of Columbia last August. At FERC's request, the case was transferred to the Ninth Circuit in September. Oral arguments in the case are expected to be heard next summer or fall, according to an attorney for the CPUC.

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