In a decision that was widely anticipated, FERC last Wednesday upheld a March order in which the agency asserted “exclusive jurisdiction” over Sound Energy Solution’s (SES) planned liquefied natural gas (LNG) terminal for the Port of Long Beach, CA.

In the order on rehearing, the Commission denied for a second time the California Public Utilities Commission’s bid to claim sole jurisdiction over the LNG project of Sound Energy, a U.S. subsidiary of Japan’s Mitsubishi Corp. “We’re not surprised by the result,” said CPUC attorney Harvey Morris, but he declined to comment on when or if the state agency would challenge the FERC order in court. “We’re considering our options. I have to talk to our commissioners,” he told NGI.

“To clear away any ambiguity as to whom SES was to present its application, we explained that because importing LNG is a matter of foreign commerce, not intrastate commerce, importing LNG is subject to federal, not state, control. Thus, this Commission, not the CPUC, has exclusive jurisdiction over the proposed import project,” the FERC order said [CP04-58].

“Although this Commission has exclusive jurisdiction over the proposed project, certain permits, approvals and licenses are the responsibility of other federal agencies and state and local authorities. Provided that state and local representatives act under delegated federal authority…and in a manner compatible with our policies and regulations, there will be no jurisdictional conflict,” it noted.

FERC, however, pledged again to “work cooperatively” with the CPUC and other state and local authorities to “protect the safety of residents and minimize adverse environmental impacts” associated with the project. In addition, the agency invited state and local representatives to participate in a FERC technical conference that will address the safety issues involved in the SES project.

In its March declaratory order, FERC said it had jurisdiction under Section 3 of the Natural Gas Act (NGA) and by the authority of the energy secretary over the siting, construction and operation of the import terminal proposed by Sound Energy. The Commission indicated then that its order represented final agency action on the jurisdictional dispute, and set the stage for the issue to be litigated in the courts.

The Commission issued the order after the CPUC challenged its jurisdiction over the Sound Energy LNG project in February. The CPUC argued that it had sole jurisdiction over the siting and construction of the proposed LNG terminal because the gas from the facility would be transported entirely within the state of California.

“The CPUC argues that the Commission’s NGA jurisdiction over interstate commerce does not apply in this case. We do not dispute this — provided none of the imported LNG departs the state, either physically or indirectly through deliveries or by displacement. Further, we acknowledge that SES’ anticipated operations — off-loading LNG, the transfer of LNG into tanks for storage, LNG vaporization and the delivery of regasified volumes into an existing intrastate pipeline — will all occur within California.

We disagree, however, with the CPUC’s assertion that because the proposed facilities will be in California serving California markets, SES will be a California public utility subject to regulation by the CPUC. SES’ proposed facilities, and its receipt, storage, regasification and delivery of natural gas, are subject to our NGA Section 3 foreign commerce jurisdiction. Federal authority over foreign commerce holds priority over state authority over intrastate commerce,” the order said.

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