Energy Legislation To Be Enacted into Law: Promotes Increased Supply of LNG

This week, Congress passed a comprehensive energy bill that includes key provisions designed to facilitate increased importation of liquefied natural gas (LNG) to meet growing U.S. energy demand. President Bush is expected to sign the legislation shortly.

H.R. 6, “The Energy Policy Act of 2005,” clarifies the exclusive authority of the Federal Energy Regulatory Commission (FERC) over the siting, construction, and operation of LNG import terminals and establishes a streamlined, but comprehensive, regulatory process for the authorization of terminals.

Key Provisions of the Bill

• Confirms that FERC has exclusive authority under Section 3 of the Natural Gas Act (NGA) over siting, construction, expansion, and operation of LNG import terminals located onshore or in state waters.
• Codifies existing FERC “Hackberry” policy permitting owners and operators of LNG import terminals to determine the most viable commercial arrangements for their facilities. The policy applies to green field terminals and expansions of existing LNG terminals. FERC will apply the Hackberry policy at new or expanded LNG terminals until at least January 1, 2015.
• Confirms existing rights of states to review LNG terminals under the Coastal Zone Management Act (CZMA), Clean Water Act, and the Clean Air Act.
• Confirms FERC’s role as the lead agency for National Environmental Policy Act (NEPA) compliance and for purposes of coordinating all applicable Federal authorizations.
• Directs FERC to issue regulations on the NEPA pre-filing process and requires applicants to begin that process at least 6 months prior to filing an application.
• Preserves state and local permitting authority while allowing FERC to schedule and coordinate these proceedings within an appropriate time frame.
• Requires FERC to hold a hearing on LNG terminal applications, and to maintain a single record for purposes of appeals of FERC’s decision as well as all other Federal authorizations required for the terminal.
• Gives the Court of Appeals where the facility is sited original and exclusive jurisdiction over disputes relating to the issuance, conditioning, or denial of any permits or approvals required under Federal law, other than CZMA.
• Gives the Court of Appeals for the D.C. Circuit exclusive jurisdiction to review any claims of delay by a Federal or state agency acting under Federal law to issue a permit required under Federal law, other than CZMA. The failure of an agency to act in accordance with the FERC schedule shall be considered inconsistent with Federal law.
• Requires FERC to consult on State and local safety considerations with an appropriate state agency, designated by the Governor, prior to issuing any order authorizing a terminal.
• Allows States to provide advisory reports on State and local safety concerns within 30 days of the filing of an application. FERC must review and respond to issues raised in a State advisory report. For applications that have already been filed at FERC, States have 30 days from the date of enactment to file such advisory reports.
• Allows State commissions to perform safety inspections of operating LNG terminals to ensure conformance with Federal regulations and guidelines. Enforcement of any alleged violations, however, is reserved for the appropriate Federal agency.
• Requires terminal operators to develop an Emergency Response Plan in conjunction with the Coast Guard and state agencies. The plan must include a cost sharing plan for security measures, which must be approved by FERC prior to construction of the terminal.
• If an LNG import terminal will affect a military installation, the Department of Defense must concur in FERC’s decision to authorize the facility.
• Requires that the Secretary of Energy, in cooperation and consultation with the Secretary of Transportation, the Secretary of Homeland Security, FERC and the Governors of Coastal states, convene at least three forums on LNG in areas where terminals are under consideration.
• Requires a study on the cumulative environmental impacts associated with the use of open rack vaporization technology at multiple offshore LNG import terminals in the Gulf of Mexico.