Rep. Doug Ose (R-CA), chairman of the House Government Reform Committee’s subcommittee on energy policy, recommended Tuesday that FERC and the U.S. Coast Guard develop a “programmatic template” so that companies interested in developing liquefied natural gas (LNG) projects would know exactly what is required of them to achieve agency approval and swift processing. He also supported the concept of the Commission picking the most preferable sites for the location of onshore LNG facilities.

“I just want to emphasize the concept of a programmatic template both for onshore and offshore facilities that would, I think, in the end…be a dime invested to save $5 worth of processing and resource allocation,” Ose said during a subcommittee hearing exploring the construction and siting of onshore and offshore LNG facilities, the federal-state jurisdictional dispute, and safety and security concerns.

A template, or standardized format for projects, “[would] eliminate a lot of or at least narrow the questions [or] peculiarities about individual” construction projects and sites, the House lawmaker noted. In the end, it “would expedite quite a bit of FERC’s considerations” of LNG projects.

“The more you could use off-the-shelf technology that’s standardized, the faster you can get [these projects] to market,” Ose said. He asked Chairman Pat Wood if FERC was moving in this direction.

Wood said that while the Commission has not developed a template for developers of onshore LNG facilities to follow, he believed the “idea has a lot of merit.” He noted that industry has taken “relatively similar” approaches with respect to LNG cryogenics, vaporization technology and storage facilities. These are “relatively standard,” he told the House subcommittee. But Wood added “there is not a standard…facility design” for onshore LNG facilities.

In processing LNG facilities, Wood said FERC’s time “is not dominated [by] the actual facilities,” but rather by the “other issues that come with environmental review” under the National Environmental Policy Act (NEPA). These issues (water discharges, dredging, air emissions, navigational impacts and safety) are unique to regions, and aren’t easily subject to standardization, he noted.

Ose asked Wood why FERC didn’t do a “programmatic environmental document…that takes 95% of this stuff off the table.”

“Those kinds of things [dredging, water discharges et al] quite frankly are being thought through by all the applicants that we’ve seen come in our door so far,” Wood responded.

“The bulk of what we have to do…is not actually the footprint of the facility itself,” but instead “the surrounding impact of putting that facility on a piece of land,” according to Wood. He believes the best way to streamline the process for approving LNG projects is for developers to engage in the NEPA pre-filing process at the Commission, which brings communities, state officials, resource agencies and others together in a “collaborative roundtable format” to discuss their concerns about the LNG project. The agency’s goal is to get LNG projects who use NEPA pre-filing processed and out the door in 12 months.

Wood noted that “three highly publicized places” where LNG projects were shelved — Maine, Alabama and California — did not take advantage of the Commission’s NEPA pre-filing process.

As for the suggestion that FERC select potential LNG facility sites, Wood said, “I would think that picking a preferred spot was kind of a role that we got away from on gas pipelines.”

The hot-button issue of who has jurisdiction over onshore LNG facilities — FERC or the states — received scant attention at the hearing. Responding to a question by Ose, Wood said the Commission has jurisdiction over the construction and siting of LNG import terminal under the “foreign commerce piece” of Section 3 of the Natural Gas Act (NGA). The issue of whether the regasified LNG would be delivered in intrastate or interstate markets was “irrelevant,” he noted.

Nearly everyone who testified Tuesday — with the exceptions of Joseph Desmond, the deputy secretary for energy at the California Resources Agency, and Louisiana regulator Jack “Jay” Blossman Jr. — agreed that FERC held exclusive jurisdiction. “The Department of Energy [DOE] agrees with FERC’s perspective,” said David Garman, DOE’s acting under secretary.

FERC “has siting authority for LNG terminals” onshore, agreed Rear Admiral Thomas H. Gilmour of the U.S. Coast Guard, while the Coast Guard has authority over offshore LNG facilities under the Deepwater Port Act.

While FERC should continue to be “accommodating and remain respectful of state interests…I believe siting jurisdiction should remain vested in the Federal Energy Regulatory Commission,” said Kenneth D. Schisler, chairman of the Maryland Public Service Commission. However, Blossman said he believes there was a “compelling state interest in regulating the siting of LNG facilities.”

During the hearing, a little known fact emerged — that the DOE has the authority to veto a project approved by FERC or the Coast Guard. “I am a little bit curious” about “the parameters under which the [DOE] secretary can veto a siting or permit decision made by FERC or the Coast Guard,” said Ose.

The DOE’s Garman said the DOE secretary has exercised this authority only once, to move the site of LNG exports in Alaska to the Port of Valdez.

Everyone agreed that LNG will be needed to balance gas supply and demand in the future. Garman said that as “bullish” as he is about technologies to conserve and reduce gas demand, “we will need more gas supply.”

He estimated that U.S. LNG imports rose to 506 Bcf in 2003 from 228 Bcf the previous year. He noted that LNG as a share of total gas imported into the U.S. increased from 5.7% to 12.9% in just one year.

“Even with new supplies from Alaska, we will need to import more LNG,” Garman told the House subcommittee. The Northeast is “perhaps in the most difficult position” because it is located at the end of the interstate pipeline system.

Permits to build new LNG facilities will need to be issued in a “timely and orderly manner,” he said. “We believe a uniform national policy and federal regulation of LNG imports and related facilities [by FERC] best serves this goal.”

FERC in the past year has approved six LNG facilities, two of which are new terminals — Sempra Energy’s Cameron LNG terminal in Hackberry, LA, and Freeport LNG Development’s terminal in Brazoria County, TX. Wood estimated that 13 LNG project applications still are pending before the Commission, and that an additional 20-30 could be potentially built in the U.S. Moreover, he said that eight to 10 LNG projects are being considered in Mexico and Canada.

Wood said the Commission has created a stand-alone office in its Division of Energy Projects to handle the onslaught of projects in an expeditious manner.

Exclusive FERC jurisdiction is critical, he said. “We must not jeopardize our ability to import the LNG we need by complicating the siting authority with a patchwork of regulatory regimes.”

The National Petroleum Council, in its natural gas study last fall, estimated that the United States will probably need nine new terminals and nine expansions by 2025 to balance supply and demand, according to Garman. The DOE’s Energy Information Administration (EIA) expects to see four new terminals in the Atlantic and Gulf regions by 2010, with that possibly expanding to nine to 12 terminals by 2025, he said.

“We’re not going to need all 43 that’s being talked about,” noted Garman, but he estimated that the United States will need between five to 15 terminals in the years ahead.

If the EIA’s projected four new terminals don’t come online, Ose asked what were the prospects that the U.S. could make up the difference through efficiency and conservation measures. Garman doubted that this could be done, but he was unable to prove that to the subcommittee with calculations. Ose directed him to further explore the issue and submit the results to the panel.

The EIA expects supplies from Canada, the largest exporter of gas to the U.S., to peak in 2010, Garman noted. In the meantime, the U.S. is looking to Norway, Peru and a “variety of different countries that don’t necessarily provide us with oil” for natural gas, he said.

The Pacific Rim is a “source of significant supply” of natural gas, but “a lot of the stuff’s being flared off,” noted Ose. “We are behind the curve…and we need that gas.”

He pledged that the Energy Policy Subcommittee “can help you [regulators] expedite permitting on siting decisions, whether they be onshore or offshore” facilities to bring in that natural gas.

By his own calculation, Ose estimated that the difference between having a terminal project approved in a region or not could mean $2 billion in gas costs to consumers.

Since 1959, the Coast Guard’s Gilmour said tankers have carried over 33,000 LNG cargoes without having a serious accident at sea or at port. He noted there have been no major spills, which he credited in part to the double-hull design of the ships.

Before being permitted to trade in the United States, LNG vessels must submit detailed plans to the Coast Guard, Gilmour said. He called the Maritime Transportation Security Act of 2002 (MTSA) the most important post-Sept. 11, 2001 development. Tankers now must have certificates, which he said will be rigorously enforced beginning July 1. The new law also requires operators of LNG facilities to carry out thorough security assessments, he said.

Gilmour noted that the Coast Guard has approved two deepwater LNG ports so far — ChevronTexaco’s Port Pelican project, which is located 36 miles offshore Louisiana, and El Paso’s Energy Bridge project, located 100 miles offshore. Under questioning by Rep. John F. Tierney (D-MA), Gilmour said the Coast Guard had not set a minimum distance for the location of offshore facilities from the shore, but he noted that the closest facility was located 10 miles away.

“We have standards for our offshore structures…and we’re working [with] industry to meet our regulations, and [with] other agencies,” Gilmour said.

As for protection against terrorist attacks, he said the Coast Guard boards LNG vessels offshore, requires tankers to give it 96 hours advance notice of arrival, does security sweeps of vessels and crew members, controls vessels as they come into port, and provides escorts as a safety precaution. In addition, the Coast Guard reviews the security plans of shore-side terminals and offshore facilities, he noted.

Tierney further questioned Gilmour about whether the Coast Guard was responsible for making certain that LNG tankers had fire-resistant insulation. Gilmour said the Coast Guard checks for the “proper type” of insulation, but “I wouldn’t say they have to be fire resistant.”

Tierney directed Gilmour to provide the subcommittee with an analysis done by the Coast Guard with respect to polystyrene insulation used in LNG tankers. “We don’t know if we have an exact report that will address” the insulation-related concerns, Gilmour said, but added that he would look into it.

The subcommittee also questioned him about the use of national fire standards, which were adopted in 1974, in the design of LNG vessels. “We have updated [our] fire fighting and fire protection capability since 1974,” Gilmour assured the panel.

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