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The New Balance of Power

Do states have any rights in siting LNG terminals?

Fortnightly Magazine - June 2007

of LNG importation facilities were unenforceable because they were pre-empted under the Supremacy Clause of the United States Constitution and by the Natural Gas Act (NGA), as amended by EPACT. At issue was the proposed construction of an LNG import terminal at Sparrows Point in Baltimore County. The Baltimore County Council amended its zoning regulations to provide “that an LNG terminal can only be constructed with a ‘special exception’ and must be at least 5 miles from residential zones and 500 feet from business zones.” 8 This regulation would have precluded the development of an LNG facility at the Sparrow’s Point location.

Upon motion for declaratory and injunctive relief, the district court ruled that the county zoning regulation was pre-empted by Section 311(e)(1) of EPACT, which states that “[FERC] shall have the exclusive authority to approve or deny an application for the siting, construction, expansion, or operation of an LNG terminal.” The District Court, examining the text, context and legislative history of Section 311, found that Congress intended to pre-empt state and local governments in the area of LNG regulation, and, as such, state and local governments could not enact laws that frustrated FERC’s permitting authority for the siting of LNG facilities. 9 With regard to a state or local government’s role in siting an LNG facility, the court made clear that:

State and local governments have a clearly defined role in providing input to the Federal Energy Regulatory Commission … during the application process for the construction of a liquefied natural-gas facility. That input includes consideration of local environmental requirements and any public opposition. 10

EPACT: The New Federal Power

When EPACT became law in August 2005, it was believed that Congress had ended any controversy between the states and the federal government in the permitting of onshore LNG terminals. EPACT clearly set forth FERC’s and the states’ roles in the permitting process. Stated simply, Section 311(e)(1) of EPACT was explicit that FERC had exclusive authority to grant or deny a permit for an LNG terminal. By the express language of Section 311(e)(1), the states were pre-empted from barring the development or construction of an LNG terminal. From the legislative history of EPACT, it is evident that Congress’ intention was to grant exclusive and final permitting authority to FERC. For example, Congressman Murphy in speaking in support of EPACT stated that “the bill breaks the bureaucratic logjam that has stymied work on approximately 40 liquefied natural-gas facilities nationwide.” 11

The Role for States

Notwithstanding, the role assigned by EPACT to FERC, Congress recognized that a state’s input was critical in connection with the siting of an LNG terminal. In addition to establishing FERC’s permitting authority, EPACT also set out an important role for the states. First, Section 311(d) expressly reaffirmed the state’s authority under the Costal Zone Management Act, the Clean Air Act, and the Federal Water Pollution Control Act. Second, Section 311(3A)(a) of EPACT requires FERC to consult with the agency designated by the state where a terminal is to be sited regarding an application before issuing an order authorizing