In a move sure to be closely scrutinized by opposing state and federal regulators squabbling over jurisdiction, Houston-based ConocoPhillips and Mitsubishi’s Sound Energy Solutions (SES) announced late Monday that they signed a memorandum of understanding to work jointly on SES’s proposed liquefied natural gas (LNG) receiving terminal in the Port of Long Beach, CA.

Industry observers on the West Coast have speculated that any LNG facility that is built will be a partnership or consortium of more than one company. San Diego-based Sempra Energy earlier joined with Royal Dutch Shell in a combined effort to build a LNG receiving terminal along the North Baja Pacific Coast at Costa Azul, adjacent to where Shell had a competing proposal for a receiving terminal.

SES has proposed to build a $400 million terminal with 700 MMcf/d of sendout capacity and a peak capacity of up to 1 Bcf/d. The terminal is expected to start operations in 2008, pending final approval from the Federal Energy Regulatory Commission and various state agencies. California and FERC currently are locked in a jurisdictional battle over the project. FERC has asserted exclusive authority over siting LNG terminals, something the courts so far have ratified. California regulators, meanwhile, say the terminal would qualify as a utility company under state law and jurisdiction.

The jurisdictional issue has not deterred ConocoPhillips from taking the preliminary step of signing a MOU.

In a closed session, the California Public Utilities Commission earlier this month decided it will appeal FERC’s decision asserting “exclusive jurisdiction” over the proposed Long Beach LNG receiving terminal. On a related issue, it was unclear if the CPUC had denied a request for rehearing by SES of the state commission’s order that it submit to state regulation as a “utility” under California law.

“We will be filing a petition for review with the U.S. Court of Appeals for the DC Circuit in the near future regarding the LNG matter,” said the CPUC’s chief spokesperson, Terrie Prosper.

The state regulatory commission has 60 days from the June 9 decision to seek an appeal in the federal district court. In the earlier order, the Federal Energy Regulatory Commission denied for a second time the state regulators’ bid to claim sole jurisdiction over the LNG project that SES is planning, which includes a two-mile pipeline to send gasified supplies from the LNG terminal to Southern California Gas Co.’s backbone transmission pipeline system.

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