FERC Claims LNG Jurisdiction

By Published On: March 28, 2004

The Federal Energy Regulatory Commission claimed the regulatory throne over California?s burgeoning liquefied natural gas development market March 24. ?Regulatory authority for siting and construction of LNG import terminals rests exclusively with the federal government,? the commission ordered. That put the brakes on the California Public Utilities Commission?s claim that it has jurisdiction within the state. The proposed terminal at Long Beach, by Sound Energy Solutions (Mitsubishi), triggered the jurisdictional controversy. FERC did concede in its order that ?cooperation among state and federal authorities is needed to assess the [Long Beach] proposal adequately and to expedite access to LNG supplies to meet our nation?s critical energy needs.? ?FERC did not wait to see what he had to say,? said CPUC attorney Harvey Morris. ?We obviously have different views on the law.? The CPUC had filed its arguments on the case only two days before the FERC vote. Earlier this month, Sound Energy made the unusual move of responding to the CPUC protest. State lawyers argued that the California regulators have authority over the safe siting of the plant because it involves a California LNG terminal that would sell gas inside the state (see <i>Circuit</i>, March 5, 2004). In order to accept Sound Energy?s argument, FERC had to agree to grant it a waiver from its rules that do not allow comments on protests. ?SES mischaracterizes the facts and the CPUC?s position in order to make this case seem to be a much larger precedent with much greater ramification for the rest of the nation, when it is really a unique case involving local matters in California,? states the CPUC?s March 22 brief. It points out it will keep its hands off gas prices and international relations but urges FERC to allow it to site the facility in a remote location as required under the Pipeline Safety Act of 1979. FERC agreed that the LNG plant would not involve interstate commerce, which is the commission’s usual jurisdictional terrain, but said that Congress did not eliminate the agency’s siting authority when it had the chance under the Energy Policy Act. Therefore, FERC retains authority under the Department of Energy and the Natural Gas Act. No one at Sound Energy Solutions was available to comment on the decision. A new branch of FERC devoted to LNG issues was simultaneously announced. In other FERC news, the commission ordered the California Independent System Operator (CAISO) to refund $45 million it owes to generators. The amount is from disputes during the energy crisis. CAISO and large utilities wanted to hold on to the funds while litigation continues on whether some of those same generators have to refund profits from the same time frame. ?[We] find no compelling reason to delay disbursement,? stated the order. Apparently it didn?t send any champagne corks popping, however. According to Gary Ackerman, executive director of the Western Power Trading Forum, $45 million is ?pocket change? in the scheme of things. FERC also finalized an energy crisis?era settlement this week. During the energy crisis, FERC documents showed that the trading arm of BC Hydro, Powerex, had a great deal of activity in the phantom ancillary market, alleged collusion, and responsibility for 40 percent of the ricochet trades in the market. The commission finalized a $1.3 million settlement over the charges.

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