Commission Watch

CPUC questioned historic oversight authority.

To guarantee the continued growth of liquefied natural gas (LNG) importation and use in the United States, the energy industry needs to pay close attention to govern the regulation, siting, and operation of LNG import terminals-issues traditionally overseen by the federal government. States may have a number of reasons for wanting to establish oversight authority over LNG import terminals, but these efforts, no matter how well intentioned, would have the impact of curtailing the development of LNG facilities at a time when the United States is in urgent need of new sources of natural gas.

The latest such effort was launched by the California Public Utilities Commission (CPUC) in February and was rebuffed, quite forcefully, by the Federal Energy Regulatory Commission (FERC). This decision is good news for LNG terminal developers, state agencies, environmentalists, and, most importantly, consumers, because it clarifies and sets forth in decisive language the regulatory path that must be taken if a new terminal is to be built or an existing terminal expanded.

FERC's Decision

On March 24, 2004, FERC issued a declaratory order determining that it has exclusive jurisdiction over the siting, construction, and operation of onshore LNG import terminals. In so doing, FERC reaffirmed its 30-year precedent of reviewing and approving applications for construction and reactivation of LNG import terminals.