FERC Chairman Joseph Kelliher made his case to serve a second term as the country's top energy regulator Thursday in a two-hour hearing before the Democrat-controlled Senate Energy and Natural Resources Commission. Although generally supportive of President Bush's nominee, some senators said they will await more detailed answers before passing Kelliher's nomination to the Senate for a confirmation vote.

Bush in early March announced his intentions to renominate Kelliher, whose term expires June 30, to another five-year term as chair of the Federal Energy Regulatory Commission (FERC). If confirmed by the full Senate, Kelliher's new term would expire in June 2012. Also testifying Thursday was R. Lyle Laverty, who has been nominated to be assistant secretary for Fish and Wildlife and Parks at the Department of the Interior.

The hearing followed concerns voiced by committee Chairman Jeff Bingaman (D-NM), who last month questioned FERC's ability to monitor the natural gas market for abuse. The collapse last year of the hedge fund Amaranth Advisors LLC and "potential anomalies" in the natural gas market appeared to suggest that congressional oversight of FERC is needed, Bingaman said in April (see Daily GPI, April 18).

"We have to have confidence that the public is being protected," said Sen. Robert Menendez (D-NJ) at the hearing. "They have to be convinced."

Kelliher attempted to assuage senators' concerns in the committee hearing. He noted that most of his work as FERC chairman has been dominated by the implementation of the Energy Policy Act of 2005 (EPAct).

"This law represents the most important change in the laws FERC administers since the New Deal, and the largest single grant of regulatory power to the agency in 70 years," Kelliher told the committee. "You gave us the tools we needed to protect the public and strengthen our energy infrastructure, and we are using them in a careful and disciplined manner."

Kelliher noted that "very few of the orders and rules" issued when EPAct was implemented have been challenged in court, "which I take as a sign that stakeholders, while not agreeing with every decision we made, believe we acted fairly and listened to all sides. You wrote a good law and we implemented it efficiently."

FERC also "tightened up" the power market to eliminate abuse and "raised the bar. If it's too high of a market share, we deny the privilege to charge market-based rates. It used to be done on a regular basis, now it's a privilege." He noted that "at least a half dozen companies had surrendered their market-based rate authority" since the California power crisis in 2000 and 2001, and FERC has since "strengthened market reporting requirements."

For Sen. Ron Wyden (D-OR), FERC's liquefied natural gas (LNG) siting authority was a sticking point. Wyden asked why FERC could not state in writing what its statutory authority was to ensure that public safety measures are a priority for two proposed Oregon LNG terminals. Jordan Cover LNG's proposed terminal project is expected to make a formal filing to FERC in June (see Daily GPI, April 20). NorthernStar Natural Gas Co. also is proposing a terminal at Bradwood Landing, OR (see Daily GPI, March 21). Both proposals have come under sharp criticism from state officials and environmental groups.

"The folks at home are concerned about the economic and environmental impact in the FERC provisions in the Energy Policy Act that preempt state siting authority," Wyden said. "I wrote to you about how the agency intends to deal with this, and the answers we got back were not particularly responsive. The general response from [FERC] was that somehow, this would all be covered in the draft environmental impact statements."

"We are primarily a safety regulator," Kelliher responded. "We look only at the safety of the project, and this is the approach we take in Oregon as well. When an LNG project is proposed, the government of the state and FERC are required to consult with that state [energy] agency...Prefiling is a very important process, and we can identify issues very early on in the process. And we will address those issues in Oregon...The draft environmental impact statement is not a conditional document..It is only when we get to the final environmental impact statement when the instrument becomes part of the Commission's decision making."

Wyden, however, was not satisfied.

"That all of this will be dealt with down the road doesn't send a message that {FERC} will be proactive in safety and other issues," Wyden said. He asked Kelliher to review Oregon authorities' requests to address economic and environmental impacts from the proposed terminals as soon as possible -- before the filings are made.

"You will be dealing with some of the most important issues of our time," said Wyden. "There is tremendous concern about energy prices shooting through the roof, LNG authority...I look at the answers we're getting and they are not satisfying. This has not been the most pleasant morning of your lives," he told Kelliher and Laverty. "But our constituents want answers."

Following the hearing, American Gas Association CEO Dave Parker urged Kelliher's confirmation.

"During his years on the Commission, we have found Chairman Kelliher to be a fair and open-minded regulator...," Parker said. "Joe's extensive experience, not only at FERC but also on Capitol Hill and at the U.S. Department of Energy, will continue to be a valuable asset to the Commission as it shapes policies designed to promote infrastructure to bring new supplies to consumers and confidence in energy price information."

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