Senate Energy Bill Passes: Promotes Increased Supply of LNG

As part of the national energy debate, policymakers identified the increased importation of liquefied natural gas (LNG) as a key component to addressing America’s future energy demands. With the passage of comprehensive energy legislation by the U.S. Senate on June 28, both the House of Representatives and the Senate have enacted bills that take a substantial step in this direction.

The LNG provisions in the Senate bill facilitate the development of additional LNG import terminals to increase gas supply into the United States. The legislation clarifies the exclusive authority of the Federal Energy Regulatory Commission (FERC) over the siting, construction, and operation of import terminals. It also establishes a streamlined, but comprehensive, regulatory process for the authorization of such terminals.

The House of Representatives passed comprehensive energy legislation earlier this year that contain similar provisions to promote increase LNG supply. The House and Senate will begin meeting in the coming weeks in formal conference negotiations to reconcile the differences between the two bills. Given that both chambers include provisions that promote LNG infrastructure development, a final energy bill that is enacted into law is likely to include language favorable to the LNG industry.

Senate Energy Bill

The Senate-passed energy bill includes the following LNG provisions:

• Confirms that FERC has exclusive authority under Section 3 of the Natural Gas Act (NGA) over siting, construction, expansion, and operation of liquefied natural gas import terminals located onshore or in state waters.
• Reserves the existing rights of the states to review LNG terminals under the Coastal Zone Management Act, Clean Water Act, and the Clean Air Act.
• Preserves state and local permitting authority while allowing FERC to coordinate these proceedings within an appropriate timeframe. If a schedule deadline is not met, the applicant or the state in which the terminal is located may appeal to the President of the United States to issue the necessary authorization or deny the application.
• Codifies the existing FERC “Hackberry” policy that allows owners and operators of LNG import terminals to determine the most viable commercial arrangements for their own facilities. The policy is applied to green field terminals as well as expansions of existing LNG terminals.
• Statutorily confirms FERC’s role as the lead agency for National Environmental Policy Act (NEPA) compliance.
• Requires a study on the cumulative impacts of LNG import terminal operations in the Gulf of Mexico.

House of Representatives Energy Bill

The House-passed energy bill also supports increased supply of LNG, but does differ from the Senate bill. LNG provisions in the House bill are as follows:

• Clarifies FERC’s jurisdiction under the NGA to authorize the siting, construction, expansion, and operation of LNG import terminals, and defines those facilities. Clarifies that FERC’s jurisdiction does not include waterborne tankers, or any pipeline or storage facility subject to FERC jurisdiction under Section 7 of the NGA.
• Authorizes FERC to establish a schedule for federal and state administrative proceedings required under federal law to assure timely completion of the proceedings and accommodate the applicable schedules set by law. If an agency fails to act in a timely manner, and the U.S. Court of Appeals finds that the delay is unreasonable, that approval may be presumed by FERC. This provision does not apply to any approval required to protect navigation, maritime safety, or maritime security.
• Requires FERC to consult with the state commission where the terminal is located regarding state and local safety matters prior to issuing any authorization.
• Establishes procedures for review by FERC of applications, including hearings, and notice to all interested persons, including the state commission where the LNG terminal is located.
• Codifies FERC’s Hackberry policy, but sunsets the provision on January 1, 2011. Like the Senate bill, the policy applies to green field terminals and expansions of existing LNG terminals, subject to the same requirements (i.e., no subsidization, degradation of existing service or undue discrimination).
• Designates FERC as the lead agency for NEPA implementation.
• Requires FERC to maintain a complete consolidated record of all decisions that will be the exclusive record for any appeal. The DC Circuit Court of Appeals is given jurisdiction over appeals.
• Allows state commissions to conduct safety inspections with respect to the terminal, in conformance with federal regulations and guidelines. Enforcement of any safety violation will be carried out by federal officials.