# Presentation: 029911

## Liquefied Natural Gas Imports

- Richard  Foley, Case Manager
- Office of Energy Projects
-  Federal Energy Regulatory Commission

## Views of FERC Staff ONLY

- _NOTICE_ :
-   The views and information discussed herein are only attributable to the author (Richard Foley, FERC Staff), and does not necessarily represent the views or findings of the Commission or its individual members.  This presentation is based on the best information available as of February 28, 2003.

## Existing and Proposed LNG Import Terminals

**1. Hackberry, LA:** 1.5 Bcfd, 2006 (Dynegy/Sempra)
**2. Bahamas:** 0.83 Bcfd, 2005 (AES Ocean Express – U.S.
-     Pipeline Only)
**3. Bahamas:** 0.83 Bcfd, 2005 (Calypso Tractebel – U.S.
-     Pipeline Only)
**Proposed Terminals – Coast Guard**
**4. Port Pelican:** 1 Bcfd, 2005 (Chevron Texaco)
**5. Gulf of Mexico:** 0.5 Bcfd, 2004 (El Paso Global)
**Planned Terminals**
**6. St. John, NB:** 0.5 Bcfd, 2005+(Irving Oil)
**7. Fall River, MA:** 0.4 Bcfd, 2006 (Weaver's Cove Energy)
**8. Belmar, NJ Offshore** **:** N/A, N/A (El Paso Global)
**9. Bahamas:** 0.5 Bcfd, 2005 (El Paso Sea Fare)
**10. Tampa, FL:** 0.5 Bcfd, 2005+(BP)
**11. Freeport, TX:** 0.55 Bcfd, 2005+(Cheniere LNG Partners)
**12. Brownsville, TX:** 0.55 Bcfd, 2006(Cheniere LNG Partners)
**13. Corpus Christi, TX:** 0.55 Bcfd, 2005+(Cheniere LNG Partners)
**14. Altamira, Tamulipas:** 0.5-1 Bcfd, 2004 (El Paso)
**15. S. California Offshore:** 0.5 Bcfd, 2005 (Chevron Texaco)
**16. Baja California:** 0.7 Bcfd, 2005 (El Paso)
**17. Baja California:** 1.0 Bcfd, 2005 (Marathon)
**18. Baja California:** 0.5 Bcfd, 2005 (Chevron Texaco)
**19. Baja California:** 1.0 Bcfd, 2005 (CMS Energy)
**20. Los Angeles Harbor, CA:** N/A, N/A (Mitsubishi)

**Existing Terminals with Expansions**
**A. Everett, MA: **0.715 Bcfd (Tractebel)
**B. Cove Point, MD: **1.0 Bcfd (Dominion)
**C. Elba Island, GA: **1.2 Bcfd (El Paso)
**D. Lake Charles, LA: **1.3 Bcfd (CMS Energy)
**E. Guayanilla Bay, P.R.:** 0.093 Bcfd (Eco Electrica)

**January 2003**

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*** Top 25 ***

## FERC Approval Process – ONSHORE ONLY

**Economic Oversight of LNG Terminal Services:**
-  Market Entry,  Access,  Rate Design,
- Public Need / Public Interest
**LNG Terminal Siting:**
-   Safety, Security, Environment, Plant Design

- Department of Energy – **COMMODITY**

- Authorization to import the LNG commodity
- Based on US energy policy

- Coast Guard – **OFFSHORE  ONLY**** **
- 	 Deepwater Port Act Amended 2002

## FERC

**Public Interest Review**

- Notice of Intent

-      Data Requests
-           Analysis
- Agency Coordination

- Scoping Meetings
- & Site Visit

- Data Requests
-      Analysis

- Interventions
-     Protests

- Notice of Application

- Preliminary Determination
-              (Optional)

**Authorization**

- Tech Conference
-       (Optional)

- Cryogenic Design &
-     Safety Review

- DEIS

- FEIS

**FERC**
**Approval**
**Process**

## Authorizing Projects is a Balancing Act

- Owners
- Customers
- Competitors
- Landowners
- Agencies
- NGOs
- Congress

- NGA
- NEPA/CEQ
- ESA
- NHPA
- CZMA
- DoT

## More Balancing . . .

## Liquefied Natural Gas Imports

- Economic Oversight

## Natural Gas Act

- Sec. 7 gives the Commission jurisdiction over transportation and sale for resale of natural gas in interstate commerce and construction and operation of facilities for that purpose.
- Sec. 3 gives the Commission jurisdiction over siting and construction and operation of facilites for importing and exporting gas, and LNG is natural gas under the law.

**Notes:**
My topic focuses on the jurisdiction the FERC has over the siting of facilities for importing and exporting LNG.  I will also briefly mention how FERC’s role might be affected by some pending legislation.  But that’s the main the subject for Captain Brown from the Coast Guard who follows.  So I’ll leave that topic for him. 
If you are coming to this issue of FERC jurisdiction topic for the first time, it can be confusing. So let me start with a little background.

[READ SLIDE]

## NGA Sec. 3 – Imports & Exports

- DOE Reorganization Act - DOE approves imports and exports of the commodity
- FERC approves place of entry or exit, siting, construction and operation of border crossing pipeline and LNG facilities
- FEFC Reaffirms Jurisdictional Challenge
- 	See _Dynegy LNG Production Terminal,_ 97 FERC ¶ 61,231 (2001)
- FERC Jurisdiction is “ Plenary and Elastic”   See _Distrigas Corp. v Federal Power Comm_,495 F.2d 1057 (1974)

**Notes:**
Section 3 of the NGA is the source of the FERC’s jurisdiction over LNG.  It has a long and somewhat circular history, though. 

As written NGA § 3 says no person can import or export natural gas without an order from the commission allowing it to do so.

In 1977 the Dept of Energy Organization Act (§402(f), 42 U.S.C. § 7172(f))  transferred all section 3 functions from the Federal Power Commission to DOE.

But DOE has delegated back to FERC authority to approve the siting, construction, and operation of facilities for import and export, and where the import or export involves construction of new facilities, the place of entry or exit.  DOE Delegation Order No. 0204-112 (1984).   

As a result, DOE retains authority over the import or export of the commodity. The Commission regulates the siting and construction of the facilities. 

Conveniently, you can find this and much more is discussed in a Commission order from last fall.  In the recent Dynegy case, a company challenged the Commission’s jurisdiction over LNG facilities and asked for declaratory order. The Commission issued an order reaffirming it jurisdiction.  That case, cited on the slide, is the latest Commission order addressing the issue. 

[Dynegy claims 1) the Wellhead Decontrol Act deregulated first sales; 2) The Energy Policy Act declared that imports from a NAFTA country and all imports of LNG  were first sales; 3) therefore the Commission does not have jurisdiction over LNG imports.]

## Regulatory Approaches to the Commercial / Economic Function of LNG Terminals

**Foreign Commerce – Section 3**
-  International Proprietary LNG Supply
-   System Model
-  No Cost & Rate Oversight: Product
-   competes with unregulated domestic supply
-  Third Party Access at Operator’s Discretion
-  Certificate/Public Need Policy does not apply

**Interstate Commerce – Section 7 **
-  Customer choice / open access “public
-   utility” system model
-  Traditional Cost-Based Rates or
-   Market-Based Rates
-  Full Open Access Tariff / Open Season
-  Certificate / Public Need Policy applies

**Natural gas users of all sizes, marketers and “public utility” distribution systems**

**Major companies with foreign LNG supplies to sell on open world market**

**LNG**
**Terminal**

## Review of Open Access Policy for LNG

- Docket No. PL02-9, Natural Gas Markets Conference (2002)
-    The Commission recognized that :
- LNG imports will be a key supply source in the U.S.
- It was time to reexamine existing open access policies and regulatory goals in order to remove unnecessary economic regulatory barriers to the development of LNG terminals.
- The Commission ruled in the Hackberry case that it would not exercise cost & rate oversight for the LNG terminal because the delivered LNG product competes with unregulated domestic supply.

## Liquefied Natural Gas Imports

- Siting, Safety, Security,
- and the Environment

## Elements of FERC Site Review

-  Environmental Review under NEPA
-  Cryogenic Design & Technical Review
-  Post-Authorization Inspection Program

## Environmental Document (EA or EIS)

-   Environmental Issues – endangered species, essential fish
-    habitat, wetlands, dredging, air emissions, and coastal
-    zone consistency
-  Safety Exclusion Zones – fires and flammable vapor clouds
-    from design spills
-  Marine Safety – Coast Guard operating plans, vessel traffic
-    congestion
-  Seismic Review – detailed facility analysis in high seismic
-    zones
-  Terrorism and Security – coordination with Coast Guard and
-   Office of Pipeline Safety

## Cryogenic Design & Technical Review

-  Design of plant equipment, instrumentation, and controls.
-  Hazard detection, hazard control, and spill containment.
-  Vapor cloud and radiation exclusion zones.
-  Compliance with Department Of Transportation and National
-   Fire Prevention Association safety requirements.
-  Operational reliability and security.

## Biennial LNG Site Inspections

-  Physically _inspect_ the condition of all major plant equipment
-  Review plant operations, maintenance, and problems
-   identified in _semi-annual reports_ for prior 2 years
-  Inspect _changes_ in plant design, operations, and safety
-   systems
-  Inspect plant security measures
-  Document findings in standard *Cryogenic Design and*
-   *Inspection* *Manual*
-  Investigate plant accidents

## Liquefied Natural Gas Imports

- What’s  Getting  Built

## Four Countries – Planned, Filed, Approved, Financed, Built * Top 25

- United States  16 projects
- FERC for onshore  (12 projects)
- Coast Guard offshore (4 projects)
- Mexico   5 projects
- Bahamas  3 projects
- Canada  1 project

## Remote Siting vs. Market Area Locations

- What is the Market and Where ?
-   Winter heating load
-   Summer cooling load
-   New combined cycle power plants
-   Replace Gulf Coast pipeline supply
- Obstacles to Market-area siting :
-   Greenfield sites – availability; land use/environmental
-     compatibility; public concerns
-    Brownfield sites – site and dredge spoil contamination;
-     vessel traffic congestion
-    Offshore sites – technology; pipeline landfall; now under
-     Deepwater Ports Act amendments – Coast Guard

## Onshore Mainland  LNG  Capacity 

- Existing LNG Terminals		    530 Bcf/yr
-  (In service as of 2002)
- Existing & Under Construction	 _+  360     _
-  (Work progressing in 2003)		    890 Bcf/yr
- Existing, Under Construction,
-  inc. Preliminary Determinations	 _+  655_
-  (Final FERC action pending 2004 -05)	 1,545 Bcf/yr

## ONE  GUY's  Projection  of  LNG's  Future  in  North  America 

- 	   (How to fill-up on LNG by 2012 – Tcf/yr)
- _ __Year _		_Capacity_		_Imports_
-  2001-02		    .530		    .238
-  2004-05		  1.0			  1.0
-  2008-10		  2.7		  	  2.5  *
-  2012-15	 	  3.7			  3.5  *
- * Given positive world energy / LNG price and supply assumptions.

##  DETAIL’s For ONE  GUY's  Projection  of  LNG's  Future  in  North  America  ( by Richard Foley, FERC/OEP Staff )
     25  to  30 Tcf Market  *   Optimistic / Realistic LNG share of market = 3 Tcf  

Project	Existing	Include Capacity   Include Planned        2001	 2004	 2008	 2012
(Bcf/yr) 	Capacity	Pending at FERC      Capacity             Volumes 	Volumes	 Volumes	 Volumes

Distrigas	   90 - 100	    90 - 100	           90 - 100	 90	100	100	100

Cove Point	     - 0 - 	      270	            365 		- 0 -	270	270 - 365	365

Elba Island	     160	      290	            290	   	 2.5	290	290	290

Lake Charles	     270	      360	            360	  	146	360	360	360

Hackberry		      525	            525	 	 - 0 -	- 0 -	525	525

Onshore Gulf			            200	 	 - 0 -	- 0 -	200	200

Bahamas		   200 - 400	         200 - 400	 - 0 -	- 0 -	200 - 400	200 - 400

Offshore Gulf			         350 - 600	 - 0 -	- 0 -	350 - 600	350 - 600

Baja Mexico			         365 - 500	 - 0 -	- 0 -	365 - 500	365 - 500

Other			             365		 - 0 -	- 0 -	- 0 -	365	
T O T A L S	  520 - 530	  1.7 - 1.9	         3.1 - 3.7	238.5	1.0  	2.7-3.3	3.1-3.7
(Tcf/yr)

EcoElectrica	   65 -130	  65 -130	          65 -130	   22	  50	  75	  75
Kenai/Cook Inlet  ( 65 )	     ( 65 )	           ( 65 )	 	 ( 65 )	( 65 )	( 65 )	( 65 )

-      25  to  30 Tcf Market  *   Optimistic / Realistic LNG share of market = 3 Tcf
**Project****	****Existing****	****Include Capacity   Include Planned        2001****	**** 2004****	**** 2008****	**** 2012**
**(Bcf/yr) ****	****Capacity****	****Pending at FERC      Capacity             Volumes ****	****Volumes****	**** Volumes****	**** Volumes**
- Distrigas	   90 - 100	    90 - 100	           90 - 100	 90	100	100	100
- Cove Point	     - 0 - 	      270	            365 		- 0 -	270	270 - 365	365
- Elba Island	     160	      290	            290	   	 2.5	290	290	290
- Lake Charles	     270	      360	            360	  	146	360	360	360
- Hackberry		      525	            525	 	 - 0 -	- 0 -	525	525
- Onshore Gulf			            200	 	 - 0 -	- 0 -	200	200
- Bahamas		   200 - 400	         200 - 400	 - 0 -	- 0 -	200 - 400	200 - 400
- Offshore Gulf			         350 - 600	 - 0 -	- 0 -	350 - 600	350 - 600
- Baja Mexico			         365 - 500	 - 0 -	- 0 -	365 - 500	365 - 500
- Other			             365		 - 0 -	- 0 -	- 0 -	365
**T O T A L S**	  **520 - 530**	  **1.7 - 1.9****	****         3.1 - 3.7**	**238.5**	**1.0  **	**2.7-3.3**	**3.1-3.7**
- (Tcf/yr)
- EcoElectrica	   65 -130	  65 -130	          65 -130	   22	  50	  75	  75
- Kenai/Cook Inlet  ( 65 )	     ( 65 )	           ( 65 )	 	 ( 65 )	( 65 )	( 65 )	( 65 )