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Senate Likely To Put Stamp On Natural Gas Provisions

Posted on: Friday, 1 July 2005, 03:00 CDT

When the Senate passes its version of an energy bill, its natural gas provisions will likely be different than those in the bill the House passed in April. The House bill, which passed on April 21 by a vote of 249-183 - with about 40 Democrats supporting it - addressed natural gas availability mostly through one controversial provision dealing with FERC's authority to approve liquid natural gas (LNG) terminals.

But as the Senate Energy Committee began to work on its energy bill in late May, some members of the committee were pushing natural gas proposals that are both stronger than what is in the House bill, and in some instances are brand new to the energy bill debate, which has dragged out in Congress since early in President Bush's first term.

Leading the natural gas charge in committee is Sen. Lamar Alexander (R-TN), chairman of the Senate Subcommittee on Energy. He sponsored a stand-alone bill called the "Natural Gas Price Reduction Act of 2005 (S. 726)." Sen. Tim Johnson D-SD) who serves on the energy panel with Alexander, is the cosponsor. Their bill includes such new concepts as allowing FERC to approve pipeline construction if other federal and state agencies don't meet a FERC-designated schedule for completing administrative proceedings related to the pipeline's construction. The bill also has an amendment endorsing "natural gas only" leases in off-shore basins. Perhaps more significantly, it redraws the offshore royalty system so that revenues paid by gas companies go only to the states which allow off- shore development. Currently, all states share in off-shore revenues.

In addition, the Alexander/Johnson LNG siting provision trumps the one in the House bill, according to Martin Edwards of INGAA. It says: "The Commission shall have the exclusive authority to approve or disapprove the siting, construction, expansion, or operation of particular facilities (onshore or in state waters) for the import or export of natural gas from a foreign country." Edwards says, "The House LNG provision does not 100% clarify FERC jurisdiction."

"It's often easy for elected officials to set policies that promote increased use of natural gas, such as for reducing greenhouse gas emissions or fueling homes and industries," says David Parker, AGA president and CEO. "The greater challenge is for them to match those good intentions with votes to increase supplies of natural gas to match the new natural gas demand that their policies created. The Alexander bill will help initiate positive discussions about how to achieve that goal."

The Senate Energy Committee was scheduled to start voting on a bill just before recessing for the Memorial Day break. It could take the committee weeks, or even months, to pass a bill, which would then go to the Senate floor.

Alexander says, "This is not a question of tweaking our natural gas policy. It is time to aggressively revamp it. We need aggressive conservation, aggressive use of alternative fuels, aggressive research and development, aggressive production, and for the time being, aggressive imports of LNG."

Bill Wicker, the spokesman for the Energy Committee's senior Democrat, New Mexico Sen. Jeff Bingaman, notes that the LNG provision will have bipartisan support and bipartisan opposition. Senators from coastal states such as Dianne Feinstein (D-CA) and Mel Martinez (R-FL) will probably oppose it. Coastal senators such as Feinstein comprise half of the committee's membership.

However, even some LNG advocates question the reach of an LNG "exclusivity" provision. FERC says it already has sole siting authority for LNG terminals and that the energy bill merely clarifies the law. And even some LNG advocates seemed to play down the need for the LNG provision in the House bill. For example, after the House passed its energy bill, Tom Giles, executive vice president of Sound Energy Solutions, which has proposed the LNG terminal in the Port of Long Beach, said 'the contention that the bill renders state and local officials powerless is "totally incorrect."

That was an argument California officials were using in advance of the House vote.

In a letter to members of Congress, California Public Utility Commission President Michael Peevey wrote that the bill gives "disproportionate" control to federal regulators which, he said, "could have very serious consequences for California."

While FERC may have final authority on siting decisions, Giles said, facilities like the one his company is proposing still must garner permits from the port, the harbor, the South Coast Air Quality Management and other agencies. "It's a local project and the local community deserves to have input," he said. The energy bill, he said, "doesn't really change what we were going to do anyway."

But where FERC primacy appears to be less of an issue in Long Beach, it is clearly an issue in Rhode Island where state Attorney General Patrick Lynch has filed a lawsuit in an effort to block KeySpan LNG LP from expanding its existing terminal in Providence. KeySpan wants to upgrade its 600,000-barrel terminal, which takes deliveries by truck only, to a 525 MMcf/d sendout import facility. Lynch is arguing it would be illegal for KeySpan to create a ship berth without state approval. KeySpan has filed its own lawsuit. - Stephen Barlas

Copyright Oildom Publishing Company of Texas, Inc. Jun 2005

Source: Pipeline & Gas Journal

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