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States, Developers Seek Adjustments to FERC's Proposed LNG Rule

States and developers of liquefied natural gas (LNG) terminals have called on FERC to make changes to a proposed rule that would require new import terminal projects and associated pipeline facilities, as well as proposed expansions in some cases, to initiate pre-filing procedures at least six months before filing a formal application with the agency.

The Federal Energy Regulatory Commission released the proposed rule in late August in response to the newly enacted Energy Policy Act of 2005, which required the agency to issue within 60 days of enactment of the bill regulations implementing a mandatory pre-filing process for LNG facility authorizations (see NGI, Sept. 5). FERC plans to come out with a final rule by Oct. 7 [RM05-31].

The Commission has used National Environmental Policy Act (NEPA) pre-filing procedures for several years as a voluntary option with all potential applicants, including developers of pipeline, storage and LNG terminal projects, in an effort to identify problems with projects in advance of companies filing their formal applications with the agency. Many of the projects filed in recent years have used the pre-filing process because the advance research can speed the formal application process.

FERC's notice of proposed rulemaking (NOPR) would establish mandatory pre-filing procedures for all applicants seeking to site, construct and operate new LNG terminals and related facilities, such as pipelines, that would transport the revaporized LNG to markets, as well as applicants seeking to expand existing LNG facilities in certain circumstances, the agency said.

The California Public Utilities Commission (CPUC) was highly critical of the proposed rule, saying it does little to promote cooperation with state and local officials as is required by the energy bill. Instead, state regulators claim the proposed rule focuses on FERC staff obtaining "timely" information from potential LNG terminal applicants.

"The only reference in the proposed regulations to state and local officials is simply a requirement...that the prospective applicant provide a list of relevant and state agencies in the project areas with permitting requirements and a statement indicating whether these agencies are aware of the prospective applicant's intent to use the pre-filing process and whether these agencies have agreed to participate in the process."

The CPUC noted that the energy bill requires the governor of a state where an LNG facility is planned to designate a state agency to consult with FERC regarding state and local safety considerations. The governor-designated agency has 30 days after a formal application is filed to submit an advisory report on state and local safety concerns, "which means that the state agency must receive information during the pre-filing process," the California agency said.

In view of this, "FERC should [specify] in its regulations that prospective applicants must provide state commissions and governor-designated state agencies [not just] notice of the pre-filing process," but access to "all information provided to FERC during that process," the CPUC said.

Alan B. Stearns, senior policy advisor for Maine Gov. John Baldacci, expressed similar sentiments. "FERC's assigned goal to improve cooperation with state and local governments at the same time that federal [jurisdictional] exclusivity remains on the table creates a tension which is inadequately addressed in the pending NOPR...We urge FERC to restate its intent to require applicant cooperation with state jurisdictions," he said.

"While the Commission has indicated that the proposed regulations are designed to encourage the necessary cooperation and coordination, we believe that some changes to the proposed rules are needed to ensure that the pre-filing review process complements the important roles and well serves the information needs of states and local communities in reviewing and approving LNG terminals and assists them in the exercise of these important roles."

Cheniere LNG Inc., a major developer of new LNG projects, urged FERC to modify its proposed rule such that expansions of existing LNG terminals and related pipeline facilities are excluded from the mandatory pre-filing process. The Energy Policy Act "specifically addresses applications for authorization to construct an LNG terminal and is silent with regard to modifications to existing LNG terminals and related facilities," the company said. What FERC is proposing "is not legislatively mandated."

Cheniere also urged FERC to consider a "more flexible timeline" for filing terminal project applications, which the NOPR sets at 180 days after the start of an applicant's pre-filing process. "For projects that have conducted preparatory work in advance of the pre-filing process, such a limitation would unnecessarily extend the review process," it said.

Similarly, ExxonMobil Corp. argued that the mandatory pre-filing process as proposed in the NOPR was far more broad than Congress intended in the energy legislation. The bill "plainly intends that the mandatory procedures would be required for 'new' proposals to site, construct and operate LNG terminals. The act does not, on its face, require the mandatory procedure for modifications to existing or approved LNG terminals," it noted.

"The NOPR, as written, may unnecessarily interfere with the timely expansion of LNG project capacity. Under the proposed regulations, if a developer of an existing or approved LNG terminal sought to modify the terminal facilities, [the rule] could delay construction by prohibiting the developer from filing the application to amend its authorization until at least 180 days after commencement of the pre-filing process."

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