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Kelliher Stresses FERC's Safety Role in Siting LNG Projects

Whether Weaver's Cove LNG is ultimately built now "is up to the courts," FERC Chairman Joseph Kelliher told a GasMart audience in Denver Thursday. FERC has done its job of approving the safety aspects of the project, and "we don't pick and choose winners."

Responding to a question about whether the Federal Energy Regulatory Commission would like to see more projects in the market area or on the West Coast, Kelliher said FERC only decides if a site is safe. If there are 10 projects that can be sited safely on the Gulf Coast, FERC will approve the 10 projects. It will not compromise on safety. Then it is up to the market to decide what projects are built.

Responding on the question of Weaver's Cove, the chairman added that the project faced other problems that were not part of FERC's purview, such as restrictions on removing the bridge to allow tanker access.

As far as helping contain natural gas price volatility, Kelliher said the Commission's role is to encourage the construction of infrastructure to make a "much more robust grid" that will serve as a buffer if there is disruption on parts of it, such as the Gulf of Mexico pipelines damaged by hurricanes.

To this end the Commission is changing the way it is pricing infrastructure projects, particularly storage. While demand has increased since the 1980s, the amount of storage capacity has not risen much. He noted a petition put forward by the major producers and pipeline organizations was under consideration to raise the monetary level of projects that can be approved under a blanket certificate without extensive review. Costs have increased since the level was set in 1992, and the proposal "does have appeal."

Later this year, Kelliher said, the Commission would be acting on the new transparency authority it was given under the Energy Policy Act of 2005. While FERC always has had the authority to collect information from market participants for its own use, it now is authorized to disseminate information to the marketplace itself. The Commission is considering options internally and will be coming out with a strawman for public comment. He noted it can apply to nonjurisdictional entities as well.

Commenting on the Alaska pipeline, Kelliher said "the stakes are very high," for the approval by the state legislature of the governor's agreement with producers for the project. If it is rejected, "it will put the project back a number of years."

Questioned about problems with blending LNG into the interstate pipeline stream, Kelliher said many of the problems were pipeline specific and were dealt with on a complaint basis. It would be hard to craft a national uniform solution. Kelliher noted that if FERC were to set standards on LNG coming into a terminal it would make it more difficult to line up supplies on the world market.

The chairman said the Commission had done its best to keep the public informed following the hurricanes last year as to the loss of supply and the cause of the price run-up. One question from the GasMart audience was whether Kelliher might be able to work the same magic with the Congress to keep it from passing politically-motivated "bad" legislation that would actually harm the industry and in turn the consumers depending on it.

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