The failure of the Army Corps of Engineers to issue a permit more than two years after FERC approved the construction of the Connecticut-to-New York Islander East Pipeline is an “example of duplicative process, wasted resource and the right hand questioning the left hand’s actions” within the federal government, said Sen. Larry Craig of Idaho Monday.

“Now it is a very cold winter. New York City is experiencing record temperatures. And this morning the national news suggested that the consumers of New York will pay a higher energy bill this year than ever before,” the Republican lawmaker said during a natural gas conference sponsored by the Senate Energy and Natural Resources Committee in Washington, DC. He blamed the higher gas prices, in large part, on the lack of pipeline infrastructure serving New York.

“The reality is consumers of New York today are, in fact, paying phenomenally high prices” because “we let our [federal] agencies fall all over each other” when it comes to approving and permitting pipelines, he noted during the more than four-hour conference.

Keith Rattie, the chairman of Questar Corp. who represented the Interstate Natural Gas Association of America (INGAA), said that while spot market gas prices were $6/Mcf in Chicago for Monday flow, they were about $20/Mcf in Transco’s Zone 6 (New York).

“It appears to me we ought to be telling the secretary of defense to get the Army Corp of Engineers off the dime here” on the Islander East Pipeline project, said Sen. Jeff Bingaman of New Mexico, the ranking Democrat on the Senate Energy Committee.

Senate Energy Chairman Pete Domenici (R-NM) indicated he may do some gentle prodding of his own to get some action on the pipeline. “The secretary of defense may have direct authority [over the Army Corps of Engineers]. But my subcommittee appropriates its money…They will probably react much, much more adroitly when we call them in to talk about it,” he said.

The proposed pipeline, which is sponsored by KeySpan and Duke Energy, would cross Long Island Sound to Long Island, NY, where it would ultimately deliver up to 400 MMcf/d of natural gas. The pipeline project has faced a number of difficulties since being approved by FERC in September 2002, including a challenge by the state of Connecticut under the Coastal Zone Management Act (CZMA). Islander East won that appeal in mid-2004. The project, however, still is battling with the Connecticut Department of Environmental Protection to receive a water quality permit.

In order to speed up project approvals, Rattie called on Congress to give the Federal Energy Regulatory Commission the authority to establish a schedule for federal and state agencies to complete their reviews of projects under the National Environmental Policy Act (NEPA).

Mark Robinson, director of FERC’s Office of Energy Projects, supported the proposal. As it stands now, if federal and state agencies like a project, they “play nice” and all goes well, he said. But if one or more agencies oppose a project, the process usually breaks down.

In response to questioning by Bingaman, Robinson said that the Commission was seeking “exclusive” jurisdiction over the siting of liquefied natural gas (LNG) terminals. “The state’s role would be unchanged from what it is right now…The state has the authority [under the] Coastal Zone Management Act to not authorize an LNG facility. The state also has the authority [under] the Clean Water Act to not authorize and, therefore, an LNG facility could not be constructed,” he noted.

“We are not suggesting that that [state] authority be touched in any way shape or form,” he assured Bingaman and other members of the Senate energy panel during the conference.

“We need help with siting” of LNG terminals. “It’s not enough to put LNG [facilities] in the Gulf,” said Robinson, who stressed the need for a “rational” siting policy.

The state of California currently is challenging FERC’s assertion of exclusive jurisdiction over Sound Energy Solutions’ planned LNG terminal for the Port of Long Beach, CA, in the U.S. Court of Appeals for the Ninth Circuit. Given that it’s a federal court, “if it gets decided there, it won’t be determinative for the land,” Domenici said.

“So there would be some reason for us [Congress] to decide…which we think is the best policy” when it comes to federal vs. state jurisdiction over LNG facilities, he noted.

As for LNG’s potential safety and security concerns, Linda Stuntz of the National Commission on Energy Policy said she does not believe that LNG will pose more of a problem than petroleum or its by-products. Most of the opposition to LNG facilities is coming from localities in the Northeast and on the California coast. “I remain concerned that folks in the Northeast and California who need this [LNG] the most still have difficulty” with proposed projects, she noted.

When it comes to natural gas supply, “Time is short. The issues [are] clear. We need to act,” said Larry Downes, CEO of New Jersey Resources and chairman of the Natural Gas Council. He urged Congress to conduct an “objective, dispassionate” analysis of domestic lands that have been restricted to producers, and to streamline the federal permitting process to avert “serious delays” in drilling. Importantly, Downs said that producers were not asking that the current environmental objectives be “relaxed or loosened.”

If policy makers would take action to improve access to onshore and offshore lands, that would be equal to the construction of six new LNG plants, Downes told the committee. In addition, it would prevent the United States from becoming overly dependent on natural gas imports.

Nolty Theriat of the National Ocean Industries Association, which represents offshore producers and other interests, estimated that approximately 80% of the offshore was off limits to oil or gas development, or approximately 79 Tcf.

He also recommended that all Outer Continental Shelf (OCS) areas be assessed for their potential oil and natural gas resources. He believes Congress should address the states’ use of the CZMA to hold up offshore development, as well as infrastructure projects. In addition, it should set a timetable for the Commerce Department to rule on appeals by states under the CZMA.

The American Public Gas Association’s “No. 1 priority is to bring natural gas prices back to an affordable level,” said President and CEO Bert Kalisch. He noted a critical step forward is the State Enhanced Authority for Coastal and Offshore Resources (SEACOR) program, which he said could provide access to more than 145 Tcf of natural gas for potential development.

Kalisch said SEACOR would require the current offshore moratoria to be set aside, and provides coastal sates with greater authority and financial incentives to bear the risks and impact of offshore drilling activity.

The solution to the natural gas supply problem is “access, access and access,” an official with the New Mexico Oil & Gas Association said. He also noted that the Endangered Species Act, which hinders gas development, “is broken and needs [to be] fixed.” And he called for the federal government to establish a 45-day limit for awarding permits.

An official with the U.S. Geological Survey estimated that there are 600 Tcf of natural gas undiscovered, of which approximately half is conventional resources. An additional 400 Tcf of undiscovered gas resources is located offshore.

Off the 400 Tcf offshore undiscovered gas, it was estimated that 232 Tcf was located in the central and western portions of the Gulf of Mexico, 122 Tcf in Alaska, 33 Tcf off the Atlantic Coast and 18 Tcf off the Pacific Coast.

But a significant amount of the resources are off limits due to moratoria. The majority of officials at the Senate conference said they were unaware of any other country, including Canada, that restricts natural gas drilling to the degree that the United States does.

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