Congress Hears FERC Quest for Power; Others Seek More Gas Drilling

By Published On: January 29, 2005

Increasing the Federal Energy Regulatory Commission?s authority over siting liquefied natural gas terminals and easing drilling restrictions on Western public lands will help boost dwindling supplies of natural gas, regulatory staff and fossil-fuel proponents told the U.S. Senate Committee on Energy and Natural Resources. At a January 24 hearing, Mark Robinson, FERC?s director of energy projects, urged the committee to expand the agency?s eminent domain authority to allow it to approve liquefied natural gas (LNG) terminals that face local opposition. Congress heard testimony on LNG problems related to reliance on foreign fuel sources along with volatile prices. Another expected constraint on LNG imports is a limited number of vessels?there are 160 LNG vessels, none of which are American-flagged. The slowly expanding international fleet is estimated to be able to meet U.S. demand over the next three to four years, according to the U.S. Coast Guard. However, the lack of American ships means that gas supplies from Alaska cannot be shipped to the lower states, warned Senator Lisa Murkowski (R-Alaska). Sempra hopes to tap into some North Slope supplies. In addition to LNG supplies, the US Senate Committee heard from nearly three dozen speakers on ways to bolster the nation?s energy supply over the next two decades, including possible methods to take advantage of on- and offshore domestic supplies?including those not available given current technology. While the Department of Energy?s Energy Information Administration estimates that the U.S. will be able to meet only 70 percent of its gas needs by 2025, witnesses noted that developing technology to create less polluting power?in particular ?clean? coal gasification and trapping the carbon dioxide emissions, along with boosting nuclear power?could alleviate the growing supply crunch. Conservation, efficiency, and renewables were mostly left in the wings at this week?s hearing. Despite last year?s jump in the number of gas drilling permits issued by the Bureau of Land Management (BLM), the gas development industry continued its push for increased access to public lands at the hearing. Industry representatives also called for public money and tax credits to support research into advanced technologies to tap into difficult and/or unconventional sources of gas to reduce demand for foreign imports. One of the few environmentalists to testify, David Albersworth, the Wilderness Society?s director of BLM programs, refuted the notion that safeguards have created drilling impediments. He noted that 88 percent of natural gas on public lands is available, and 12 million acres of BLM?s 42 million acres are under lease. Current public land policy favors extraction at the expense of environmental integrity, and attempts to weaken environmental safeguards will not lead to any more supplies, he said. This week, the BLM agreed to open up 2 million acres in New Mexico?s Otera Mesa to drilling. Marilyn Showalter, president of the National Association of Regulatory Utility Commissioners, and others, warned the committee against the nation becoming overly dependent on gas. ?What makes the most sense for any state utility is going to vary,? Showalter said. While the federal hearing featured pro-drilling and pro-LNG-importing witnesses, California remains adamantly against expanding federal regulatory authority in order to expand gas supplies. Broadening FERC?s authority could wreak havoc on one of the most important state powers: the ability to protect the health and safety of its citizens, said Harvey Morris, California Public Utilities Commission attorney. ?FERC is 2,400 miles away from California, and it doesn?t know about local conditions.? Federal regulators? efforts to seek language giving them sole say on LNG siting is proof there is ?no basis? for their claim of exclusive authority in the Long Beach project, Harvey said, adding, ?the issue is not the need for LNG but siting it in a safe location.? If FERC?s LNG permitting authority were to be expanded, it could undermine California?s challenge to the federal regulators? claim of exclusive jurisdiction over the siting of the import terminal in Long Beach. The CPUC recently asserted that Section 3 of the Natural Gas Act gives it permitting authority over Sound Energy Solutions? proposal for a Long Beach terminal because the gas involved would feed into state pipelines and be sold within the state (<i>Circuit</i>, Jan. 7, 2005). Senator Jeff Bingaman (D-New Mexico) asked FERC?s Robinson about the impact of expanded federal condemnation power on states? authority under the federal Coastal Zone Management Act and Clean Water Act. Robinson said he was ?not suggesting that be changed in any shape or form,? adding that states still could object to LNG projects. If that is so, Morris wants to know why FERC is seeking exclusive power over LNG siting. He asserts that FERC is attempting to use a different section of the Natural Gas Act to broaden its existing eminent-domain authority over LNG permitting to get around consumer protection requirements, including prohibitions on undue discrimination and open-access mandates in Section 3. This claim was also asserted by 18 members of Congress in their brief filed earlier this month supporting the CPUC?s petition. <b>Professional Risk Takers Call for Improved Gas Reporting</b> Bob Anderson, executive director of the Committee of Chief Risk Officers?an organization that works with energy traders?proposed creating a voluntary energy data hub to a congressional committee this week. The hub would be the repository of transactions from market participants. He told the U.S. Senate Committee on Energy and Natural Resources that this would allow for ?more complete and detailed information? from buyers, sellers, and brokers. There were also calls for the Department of Energy?s Energy Information Administration to expand its weekly storage data and to double-check its forecasts prior to releasing them to avoid errors that shake up the market. Late last year, EIA reported faulty data indicating that huge storage withdrawals were made. That fallacy cascaded into a market frenzy, causing an increase in prices of more than 10 percent (<i>Circuit</i>, Nov. 29, 2004).

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