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STATE SAFETY CONCERNS AND LNG TERMINALS: THE NEW DESIGNATED STATE AGENCY ROLE

The Energy Act Speaks to “LNG Terminal State and Local Safety Concerns” Enacted this past August, the Domenici-Barton Energy Policy Act of 2005 (109 P.L. 58) added a subsection to the law that governs recently proposed LNG terminals and expansions in the
October 31, 2005

The Energy Act Speaks to “LNG Terminal State and Local Safety Concerns”

Enacted this past August, the Domenici-Barton Energy Policy Act of 2005 (109 P.L. 58) added a subsection to the law that governs recently proposed LNG terminals and expansions in the United States, Section 3 of the Natural Gas Act (15 U.S.C. 717b). The new Section 3A, “State and Local Safety Considerations,” states as follows:

(b) The Governor of a State in which an LNG terminal is proposed to be located shall designate the appropriate State agency for the purposes of consulting with the [Federal Energy Regulatory] Commission regarding an application under section 3. The Commission shall consult with such State agency regarding State and local safety considerations prior to issuing an order pursuant to section 3.1

Further, the designated state agency “may furnish an advisory report on State and local safety considerations to the Commission … no later than 30 days after the application was filed with the Commission.” For terminal applications already in progress when the Energy Policy Act was enacted, the deadline for the state agency report was thirty days after enactment - that is, September 7, 2005.

FERC “Shall Consult”

State-FERC consultation must occur before FERC may authorize an LNG import terminal,2 and Section 3A(c) states that, “Before issuing an order authorizing an applicant to site, construct, expand, or operate an LNG terminal, the Commission shall review and respond specifically to the issues raised by the State agency described in subsection (b) in the advisory report.”

However, neither Section 3A nor its legislative history specifies what form that consultation must take. FERC’s receiving and responding “specifically” to the advisory report may satisfy the statute, although “consult” implies more dialogue. Section 3A does not indicate how much consultation is enough: presumably a state can contest the adequacy of FERC’s response to the advisory report, but the level of communication and involvement with the state appears to be left to FERC.

From a practical standpoint, in order to submit an advisory report within the narrow thirty-day window the state must collect information and begin analysis well before the applicant’s filing. This task is made easier by the new pre-filing requirement, also instituted in the Energy Policy Act, which mandates that an applicant (1) use the pre-filing process and (2) begin it at least six months before filing. As a result of this requirement, the state should have access to project information well in advance of filing. If the state fails to take advantage of these six months, however, it may be unable to assemble a meaningful advisory report within thirty days of the applicant’s filing.

While the state agency may furnish an advisory report within thirty days of the application being filed, it is not clear what FERC’s obligation is if the state fails to do so. If the state files no advisory report, it may be that FERC’s consultation obligation would be fulfilled by the pre-existing public comment structure created by the National Environmental Policy Act. As the coordinating agency for LNG terminal applications, FERC already is required to solicit, consider and address comments from federal and state agencies as well as from the public. The state could still submit comments, but would have waived its right to force FERC to respond to specific security concerns.

The Advisory Report: Case Studies

As no new LNG terminal applications have been filed with FERC since the August 8 enactment, no “clean” model exists for the new consultation process. Multiple terminal applications were in progress on that date, making them subject to the September 7 deadline for the state advisory report. Of these, however, only three dockets received any filing with regard to the new subsection 3A: KeySpan, Weaver’s Cove and Sound Energy Solutions.

KeySpan and Weaver’s Cove

Rhode Island Governor Carcieri filed in two dockets implicating Rhode Island territory: KeySpan’s Providence proposal and nearby Weaver’s Cove in Massachusetts. The Governor designated his own office as the consulting agency under Section 3A, and indicated that his previous and future comments, including the state’s emergency plan, constituted the advisory report. As FERC had issued decisions on both terminal applications, and as the dockets were active only with respect to rehearing requests and potential court appeals, an extensive advisory report appeared unnecessary.

The Governor of Massachusetts did not designate a consulting agency or and the state did not file an advisory report.

Sound Energy Solutions

On September 7, the California Energy Commission filed a thirty-five page safety advisory report on the Sound Energy Solutions terminal, a Mitsubishi-ConocoPhillips joint venture proposed for the Port of Long Beach, California. The report identified specific analyses and mitigation measures FERC should include in the Environmental Impact Statement. Structured around the six topics listed in the new Section 3A, the safety advisory report discussed issues such as:

  • possible causes and consequences of LNG release from the vessels or terminal;
  • oil and chemical storage within 1.6 kilometers of the site;
  • air pollution and port traffic disruption;
  • resources necessary for security and emergency response; and
  • advantages and disadvantages of the terminal site.

FERC’s Draft Environmental Impact Statement, issued one month after the safety advisory report, stated that the California Energy Commission’s filing was “under review” and that FERC would respond, at a later date, to the issues raised (1-17). How much detail FERC will include in its response, whether it addresses state concerns in the Final Environmental Impact Statement or another platform, will provide valuable clues as to FERC’s policy going forward.

With regard to the state’s obligation, it is interesting to note that the bulk of the advisory report seems to have been provided by the City of Long Beach: nearly all of the City’s eighteen pages of comments are included in the state advisory report. The City’s comments are dated August 19, suggesting that drafting began not long after - or perhaps before - the enactment of Section 3A. The state advisory report indicates that other state agencies, including the California Public Utilities Commission and the California Air Resources Board, provided input as well.

Still Too Early to Tell

Filings in the KeySpan, Weaver’s Cove and Sound Energy Solutions dockets cannot provide a detailed “roadmap” for states or applicants hoping to understand the true extent of Section 3A. At its most expansive, the new language could require affirmative effort from FERC regardless of whether the state submits an advisory report. At its least expansive, Section 3A might only require FERC to request the state’s participation in the existing public comment process.

Should the state choose to submit an advisory report, the substantive information is likely to come - as it did in California - from the several agencies and departments directly involved with the projects. Prudent developers already engage these agencies early in order to provide information, obtain guidance and address agency concerns. In light of Section 3A, developers and public organizations should approach the pre-filing process with an eye to the state agency’s advisory role and attempt to ensure the agency secures the necessary information in time to draft its advisory report.


1 The listed state and local safety considerations include: (1) the kind and use of the facility; (2) the existing and project population and demographic characteristics of the location; (3) the existing and proposed land use near the location; (4) the natural and physical aspects of the location; (5) the emergency response capabilities near the facility location; and (6) the need to encourage remote siting.

2 Notably, the new provision does not apply to Section 7 of the Natural Gas Act, under which interstate pipelines are approved.

For more information on this topic, please contact Rebecca Day or David Wochner.

© 2005 Sutherland Asbill & Brennan LLP

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