The latest dispute over PJM’s bidding rules has raised the level of uncertainty in organized electricity markets. Efforts at reform have created a market structure so jumbled that it can’t produce...
The New Balance of Power
Do states have any rights in siting LNG terminals?
construction of an LNG facility. FERC is required to consult with the state on a range of issues such as the “demographic characteristics of the location,” the “natural and physical aspects of the location,” and the “emerging response capabilities near the facility location.” Pursuant to Section 311(3A)(a) of EPAct 2005, FERC also must consult with the designated state agency as to the:
(1) Kind and use of the facility;
(2) Existing and projected population and demographic characteristics of the location;
(3) Existing and proposed land use near the location;
(4) Natural and physical aspects of the location;
(5) Emergency response capabilities near the facility location; and
(6) Need to encourage remote siting.
A state also can submit an advisory report to FERC regarding an application for an LNG terminal, and prior to FERC “issuing an order authorizing an applicant to site, construct, expand, or operate an LNG terminal, the commission shall review and respond specifically to the issues raised by the state agency.” 12 For example, on Feb. 7, 2007, only 15 days after the court’s decision in AES Sparrows Point , the state of Maryland filed an 80-page advisory report, State of Maryland Advisory Report: A Response to the Proposed AES Sparrows Point LNG Project . This report stated that the state of Maryland is “adamantly opposed” to the construction of an LNG facility at Sparrows Point because of “very serious concerns regarding the safety of the proposed project, as well as, its impacts to the state’s environment and economy.” The main concern is with the safety issues presented in the unlikely event of a large LNG release, especially since the AES Sparrows Point LNG terminal would be located only one mile from a steel mill, which houses the second-largest blast furnace in the United States, and just south of the ethanol production plant proposed to be constructed.
On March 2, 2007, the chairman of FERC wrote to the governor of Maryland in response to the advisory report. In the letter, the chairman assured the governor that FERC would hold several public meetings in the project area to receive comments on AES’s application; that FERC will be drafting an environmental impact statement concerning the application; and that safety also was FERC’s foremost concern in reviewing an LNG project. The chairman further assured that “state agencies and the public will have multiple opportunities for comment and intervention …. [and that FERC will] continue to consult with state agencies throughout the proceeding.”
FERC’s Conditioning Authority
In addition to the specific role granted by EPACT, FERC welcomes states and stakeholders to raise concerns and provide input when reviewing an application. Also, FERC commonly uses its conditioning authority to address the concerns raised about the siting of a particular LNG terminal. When issuing an order authorizing the construction and development of an LNG terminal, FERC commonly attaches numerous conditions which a permitee must comply with in the construction and development of the LNG facility. Many of these conditions are imposed as a result of environmental and safety concerns voiced by the state.
For example, FERC’s