The California Public Utility Commission (CPUC) Monday filed a protest with FERC of the Mitsubishi Corp. proposal to build a liquefied natural gas (LNG) receiving terminal in Long Beach harbor. As reported in NGI earlier in the month, the CPUC believes it has jurisdiction over the proposed project, whose backers don’t agree.

Traditional state-federal jurisdictional issues underlie the filing and could carry broader implications. As somewhat of an olive branch in its filing, the CPUC offered to hold joint hearings with FERC on the Long Beach LNG application, noting that such hearings were held in the late 1970s when affiliates of Southern California Gas Co. and Pacific Gas and Electric Co. had a joint application (later aborted) to site an LNG receiving terminal 40 miles west of Santa Barbara near Point Conception.

The CPUC’s protest at the Federal Energy Regulatory Commission alleged that Mitsubishi through its U.S. subsidiary, Sound Energy Solutions (SES), has not complied with state law requiring it to apply to the CPUC for a certificate to build the facility. In making this protest, the state regulators are determining that SES is a “public utility,” under the definition found in California law.

Attached to the FERC filing was an Oct. 30, 2003 letter the CPUC’s executive director sent to SES, informing the company that the five-member regulatory panel had voted to assert jurisdiction over the company as a “public utility” under state law. It also acknowledged that the Port of Long Beach had the lead on environmental assessment, but said the CPUC would participate in that process as a “responsible agency.”

Its “assertion of jurisdiction is not a determination on the merits of SES’s proposed LNG project,” the CPUC attorneys said in the FERC filing. “The CPUC has an open mind on the issues and will consider all of the parties’ positions in a hearing on SES’s application.” It cited the recent development of two merchant natural gas underground storage facilities in northern California — Lodi and Wild Goose — in which the developers applied to the CPUC although they operate with market-based rates.

“The CPUC’s protest of SES’s current application is not intended in any way to suggest that the CPUC is opposed to LNG facilities in or near California,” the filing said. There was also a reference to the CPUC’s legal contention that there is no “statutory basis for the FERC jurisdiction over LNG facilities,” especially in the SES case in which the terminal is not planning to connect with an interstate pipeline.

Among other points made by the state regulators are: (1) a warning that safety issues for any LNG project must be “meaningfully” examined, (2) the proposed Long Beach facility raises “market power issues for the Southern California natural gas market,” and (3) for SES to fully comply with state law, the CPUC “must conduct its own proceeding.”

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