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Commission Watch

CPUC questioned historic oversight authority.
Fortnightly Magazine - June 2004

the open access rules and cost-of-service regulation that had previously applied. FERC took this step in recognition of the significant role LNG imports are predicted to play in response to the nation's growing natural gas supply needs, and the need for certainty that these capital-intensive undertakings require.

Despite FERC's support, however, LNG developers still have their work cut out for them if the country is to get the seven to 10 new or expanded terminals needed to respond to the country's growing gas demand. 4 The CPUC protest is just one example of a widespread public skepticism aimed at LNG import projects.

LNG is not new to the United States. There are numerous LNG peak shaving facilities in operation throughout the country that liquefy, store, and deliver regasified LNG to domestic gas markets. Despite the fact that imported LNG has been widely used in Europe and Japan for decades, it has never been a significant part of the fuel mix in the United States. The United States currently has only four operating LNG terminals, plus one in Puerto Rico. Thus, it is not surprising there are concerns about what is essentially a new source of imported gas supplies.

Safety and Terrorism Concerns

The situation also is affected by the significant amount of misinformation in circulation about LNG, particularly as to its safety and security. This complicates and lengthens the review process, and, in some cases, has caused project sponsors to cancel their plans altogether.

For these reasons, it is important for the public and state agencies to know that the FERC review process is rigorous and comprehensive, and each environmental impact statement issued by FERC will address these concerns in detail. Referring to its agreement with DOT and the Coast Guard, FERC attempted to reassure the state commission and the public in the Sound Energy Solutions declaratory order:

We believe the NEPA review, in conjunction with the actions of the other Federal agencies as outlined in the recent agreement, will preclude the authorization of all projects that present imprudent risks to health and safety or are inconsistent with the public interest.

Much more needs to be done, however. FERC considers the safety implications of LNG supplies and has recently commissioned a new security analysis-which should be available in late spring-that is intended to answer some of the safety and terrorism concerns. But the commission also must respond to the conflicting scientific views on the combustibility of LNG vapor clouds and the wildly disparate models being used to evaluate the safety risks of a marine spill. The scientific community must reach a common understanding of how to evaluate such concerns and the results of that evaluation must be publicly available. The only way to respond to public concerns about the safety and security of LNG is through the effective dissemination of the sound science that supports the fact that LNG is a safe and reliable energy source.

A realistic assessment of new LNG projects also should take into account the marked benefits of increased LNG imports, including diversity of supply sources, increased competition,