CPUC Prepared to Sue over Sound Energy Solutions? LNG Proposal

State energy regulators are prepared for a courtroom battle to ensure that the economic and environmental effects of California?s rush to liquefied natural gas are fully aired before a proposed import terminal is built in Long Beach, said a key state official this week. ?I see this going into court? unless Sound Energy Solutions applies to the California Public Utilities Commission for a certificate of public convenience and necessity, said commissioner Loretta Lynch. Her warning comes just days after the CPUC escalated a high-stakes jurisdictional dispute with the Federal Energy Regulatory Commission by voting last week to require the company to apply for the license (see Circuit , April 23, 2004). The CPUC also petitioned for a rehearing of FERC?s March 24 decision to assert ?exclusive? jurisdiction over approval of the proposed terminal at the Port of Long Beach. ?FERC may think they have [exclusive] authority, but the law is clear they don?t,? said Lynch, who noted that the CPUC petitioned for rehearing to maintain its ability to later also take the federal commission to court in the dispute. The federal order prompted numerous state agencies, including the California Coastal Commission and the South Coast Air Quality Management District, to ask FERC to clarify whether its order is intended to prevent them from issuing a host of permits and findings required under state laws aimed at protecting public health and safety. ?The commission will look at their request for clarification and address it in a future order,? said FERC spokesperson Tamara Young Allen, although she did acknowledge that numerous state and local agencies issued permits for an LNG terminal the federal commission recently approved in Louisiana. SES maintains that FERC?s order will prevent only the CPUC from exercising authority over the proposed terminal, said John Burnes, Jr., an attorney with Van Ness Feldman, who represents the company in the nation?s capital. However, Lynch contends that unless overturned, FERC?s order ultimately may compromise the legal authority of all state and local agencies in California over construction of LNG terminals. Moreover, it may leave the state vulnerable to the instantaneous ?market power? that SES or any other terminal operator would gain once imported gas started to flow. ?When you have that much of your need being supplied by one entity, you have potential market power concerns,? said Lynch. Because some analysts believe that LNG may supply up to 25 percent of Southern California?s gas, she said, the CPUC must facilitate a full debate on the economic effects. California, she said, could eliminate the need to import LNG in the years ahead through a number of alternatives, including repowering existing gas power plants to make them more efficient and embracing Governor Arnold Schwarzenegger?s call to increase use of renewable energy. A recent study by Synapse Energy Economics concluded that future demand for gas could be reduced in California by repowering or retiring inefficient gas power plants, increasing emphasis on energy conservation, and accelerating the state?s renewables portfolio standard program. Repowering alone could save the state 174 billion cubic feet of natural gas a year, according to the report. ?There?s been nothing [at FERC] about emphasizing renewables, efficiency, and conservation,? said Bill Powers, an engineer who is part of the Ratepayers for Affordable Clean Energy coalition, which commissioned the report. ?The feds are among the most partisan on promoting LNG.? Federal authorities also are ill equipped to fully evaluate seismic safety and state environmental issues presented by the SES proposal, said Lynch. ?A full environmental record needs to be developed based on California law and not federal law, because in many cases California law is stricter,? she said. ?The state has specialized knowledge.?

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CPUC Prepared to Sue over Sound Energy Solutions? LNG Proposal

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