```

[Senate Hearing 109-10]
[From the U.S. Government Publishing Office]

                                                         S. Hrg. 109-10

                         LIQUEFIED NATURAL GAS

=======================================================================

                                HEARING

                               before the

                         SUBCOMMITTEE ON ENERGY

                                 of the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                                   TO

  RECEIVE TESTIMONY REGARDING THE PROSPECTS FOR LIQUEFIED NATURAL GAS 
   (LNG) IN THE UNITED STATES AND TO DISCUSS THE SAFETY AND SECURITY 
                   ISSUES RELATED TO LNG DEVELOPMENT

                               __________

                           FEBRUARY 15, 2005

                       Printed for the use of the
               Committee on Energy and Natural Resources

                                 ______

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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                 PETE V. DOMENICI, New Mexico, Chairman
LARRY E. CRAIG, Idaho                JEFF BINGAMAN, New Mexico
CRAIG THOMAS, Wyoming                DANIEL K. AKAKA, Hawaii
LAMAR ALEXANDER, Tennessee           BYRON L. DORGAN, North Dakota
LISA MURKOWSKI, Alaska               RON WYDEN, Oregon
RICHARD M. BURR, North Carolina,     TIM JOHNSON, South Dakota
MEL MARTINEZ, Florida                MARY L. LANDRIEU, Louisiana
JAMES M. TALENT, Missouri            DIANNE FEINSTEIN, California
CONRAD BURNS, Montana                MARIA CANTWELL, Washington
GEORGE ALLEN, Virginia               JON S. CORZINE, New Jersey
GORDON SMITH, Oregon                 KEN SALAZAR, Colorado
JIM BUNNING, Kentucky

                       Alex Flint, Staff Director
                   Judith K. Pensabene, Chief Counsel
               Robert M. Simon, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
                                 ------                                

                         Subcommittee on Energy

                  LAMAR ALEXANDER, Tennessee, Chairman
             RICHARD M. BURR, North Carolina, Vice Chairman

MEL MARTINEZ, Florida                BYRON L. DORGAN, North Dakota
JAMES M. TALENT, Missouri            DANIEL K. AKAKA, Hawaii
GEORGE ALLEN, Virginia               TIM JOHNSON, South Dakota
JIM BUNNING, Kentucky                MARY L. LANDRIEU, Louisiana
LISA MURKOWSKI, Alaska               DIANNE FEINSTEIN, California
LARRY E. CRAIG, Idaho                MARIA CANTWELL, Washington
CRAIG THOMAS, Wyoming                JON S. CORZINE, New Jersey
CONRAD BURNS, Montana                KEN SALAZAR, Colorado

   Pete V. Domenici and Jeff Bingaman are Ex Officio Members of the 
                              Subcommittee

                         Lisa Epifani, Counsel
                   Deborah Estes, Democratic Counsel

                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Alexander, Hon. Lamar, U.S. Senator from Tennessee...............     1
Cicilline, David N., Mayor, City of Providence, RI...............    10
Domenici, Hon. Pete V., U.S. Senator from New Mexico.............    26
Dorgan, Hon. Byron, U.S. Senator from North Dakota...............     7
Feinstein, Hon. Dianne, U.S. Senator from California.............     6
Giles, Thomas E., Executive Vice President and Chief Executive 
  Officer, Sound Energy Solutions, Mitsubishi, Long Beach, CA....    22
Grant, Richard L., President and Chief Executive Officer, 
  Tractabel LNG North America LLC and Distrigas of Massachusetts 
  LLC............................................................    27
Hightower, Mike, Distinguished Member of the Technical Staff, 
  Sandia National Laboratories, Albuquerque, NM..................    59
Kramer, William, Jr., Deputy Director, New Jersey Division of 
  Fire Safety, Trenton, NJ, on Behalf of the National Association 
  of State Fire Marshals.........................................    57
Landrieu, Hon. Mary L., U.S. Senator from Louisiana..............     7
Peevey, Michael R., President, California Public Utilities 
  Commission, San Francisco, CA..................................    17
Reed, Hon. Jack, U.S. Senator from Rhode Island..................     3
Robinson, J. Mark, Director, Office of Energy Projects, Federal 
  Energy Regulatory Commission................................... 32,61
Scott, Captain David L., Chief, Office of Operating and 
  Environmental Standards, U.S. Coast Guard......................    51
Thomas, Hon. Craig, U.S. Senator from Wyoming....................     7

                                APPENDIX

Additional material submitted for the record.....................    69

 
                         LIQUEFIED NATURAL GAS

                              ----------                              

                       TUESDAY, FEBRUARY 15, 2005

                               U.S. Senate,
                            Subcommittee on Energy,
         Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:32 p.m., in 
room SD-366, Dirksen Senate Office Building, Hon. Lamar 
Alexander presiding.

 OPENING STATEMENT OF HON. LAMAR ALEXANDER, U.S. SENATOR FROM 
                           TENNESSEE

    Senator Alexander. The Energy Subcommittee of the Energy 
and Natural Resources Committee will come to order.
    I am going to make a brief opening statement, trying to set 
a good example for brevity, as Chairman Domenici usually does, 
invite Senator Reed to make his statement and introduce the 
mayor, invite Senator Feinstein to make her introduction of 
Mike Peevey, invite Chairman Domenici to say whatever he has to 
say, and then Senator Dorgan, and then we will have the 
testimony from the various witnesses.
    Let me begin it this way. Our subject today is liquefied 
natural gas. We call it LNG. For those who are watching or may 
not be familiar with it, this basically is natural gas that 
might be in Russia or some other country in the world that is 
cooled, put in a tanker, transported to the United States, put 
in a big terminal--we have four of those in the United States--
and then introduced into our pipelines and our energy system to 
heat our homes, operate our businesses, make fertilizer, create 
electric power, all the other things we do with natural gas.
    The reason it is the subject for discussion is because the 
price of natural gas in the United States has become the 
highest in the world, at least for any industrialized country. 
So for many industries, for example, the chemical industry 
which has 1 million manufacturing jobs, if that should persist 
for too long, the possibility might exist they would have to 
move those jobs overseas to a country where the price of 
natural gas is closer to the world market. Or to the farmers 
who use fertilizer, so much of which uses natural gas, those 
are increased costs, or for people who use gas in their 
residences, suddenly they find their home heating bills or 
cooling bills a lot higher. So as U.S. Senators, we are 
concerned about the price of natural gas.
    We had a long roundtable here the other day that was, in a 
way, unusual. Senators did not do most of the talking. We did 
most of the listening. It went on for about 4 hours. It was on 
the subject of gas. Senator Domenici and Senator Bingaman were 
very active in that, and we heard from a lot of people. This is 
a follow-up to that. And our goal is to see whether there are 
provisions that the subcommittee might work on that could be 
suggested to the full committee to be part of an energy bill.
    There are a great many ways to deal with lowering the price 
of natural gas. We heard many of those the other day. One was 
conservation. That is very important. One was alternative 
fuels, for example, the more nuclear power we have, if we can 
create clean coal. Senator Dorgan talked about coal 
gasification in North Dakota. Because that is available, that 
would lower the price of natural gas. We talked about the 
pipeline that the Senate approved from Alaska. We talked about 
new ways to supply natural gas from the reserves we have in the 
United States.
    But today's hearing is about LNG. And the two panels will 
discuss these subjects. The first one is about siting 
terminals. While we only have four terminals today, one of them 
is being considered for expansion. I believe there are 31 
active proposals as of December 1, 2004 for new terminals in 
the United States. So siting will be the first panel and the 
second panel will be safety.
    As far as the schedule goes, we have a vote at 4 o'clock in 
the Senate, and we will try to work around that. But I will try 
to allocate about an hour for the first panel, not more than 
that, and then we will go to the second panel and we will work 
in and out of the vote. Hopefully, we will not have to adjourn 
during that time. We will finish by about 4:30 or 4:40 at the 
latest.
    Now, Senator Reed, let me welcome you to the hearing. If 
you could introduce the mayor, then we will have other 
introductions. I know Senator Feinstein has an introduction. 
Then I will go to Senator Domenici, if he is here, and Senator 
Dorgan for statements.
    Senator Reed.
    [The prepared statement of Senator Alexander follows:]

Prepared Statement of Hon. Lamar Alexander, U.S. Senator From Tennessee

    Our failure to produce an adequate supply of affordable, clean 
energy not only pollutes the air, it is shipping thousands of good jobs 
overseas. In the last four years, we have gone from the lowest gas 
prices in the industrialized world to the highest gas prices in the 
industrialized world. None of the potential solutions to this problem 
are easy and none of the answers are particularly fast. Clearly, in the 
short-term, the role of aggressive conservation can not be 
overemphasized. But we can't conserve our way out of this problem. One 
of the only immediate solutions is more liquefied natural gas (LNG)--
and quickly. There are four LNG facilities existing in the United 
States and 31 more have been proposed. Some of the existing LNG 
facilities would like to see expansion. It appears that most of these 
projects, which are our best short-term supply solution, have 
considerable controversy around them, especially at a local and state 
level.
    Chairman Domenici has asked the Senate Energy Subcommittee to be 
very active in the natural gas issues as the energy bill develops this 
Congress. I am working on legislation to be considered in the energy 
bill, which I intend to introduce in the next several weeks. This is 
our first of several subcommittee hearings on natural gas issues.
    ``The Future of Liquefied Natural Gas: Siting and Safety'' is our 
topic today. Panel one will focus on the prospects for LNG development 
in the United States. Panel two will discuss the safety and security 
related to LNG development.
    Clearly, LNG is needed and especially in the short-term. As with 
all energy facility developments, there are challenges in the siting of 
LNG projects. As a former governor, I'm very interested in making sure 
that state and local concerns are adequately addressed in these 
projects.
    It doesn't appear that all is going well for the siting of these 
critically-needed LNG terminals. Today's hearing promises to be a 
lively hearing as we dive into this very important issue. As of 
December 1, 2004, there were 31 active proposals (in various stages of 
the approval process) for new terminals in the United States. The Gulf 
Coast has been the most receptive region to new siting; on the East and 
West Coast, local response has not been as positive. Two examples from 
the West and East Coast will be presented at the hearing today. On 
panel one, Sound Energy Solutions (a subsidiary of the Mitsubishi 
Corporation) has proposed a LNG terminal in Long Beach, California. As 
a result of that proposal, a jurisdictional battle over siting 
authority between the Federal Energy Regulatory Commission (FERC) and 
the California Public Utilities Commission (PUC) is now pending before 
the 9th Circuit Court of Appeals.
    This court decision could have widespread impacts on the 
development of LNG terminals across the country.
    I'm pleased that we will hear from the president of the California 
PUC, FERC and Sound Energy Solutions today on this important issue.
    On the East Coast, KeySpan LNG and BG LNG plan to upgrade an 
existing KeySpan LNG facility at the mouth of Providence Harbor. The 
application is currently pending before FERC. There has been local 
concern about the plan. Mayor David Cicilline of Providence will be a 
witness on panel one. I'm pleased that Sen. Jack Reed of Rhode Island 
will introduce Mayor Cicilline.
    We will also hear from Rick Grant, President and CEO of Distrigas. 
He will tell us about the Everett LNG facility located in Boston 
Harbor.
    On panel two, we will discuss safety concerns surrounding LNG 
terminals. I am pleased that Mike Hightower, the lead author of the 
December 2004 Sandia National Laboratories' LNG Risk Assessment Report, 
is here with us. In addition, on panel two, we will hear from: Captain 
David Scott, Chief of the Office of Operating and Environmental 
Standards at the U.S. Coast Guard. I hope that Captain Scott can tell 
us more about offshore LNG terminals. There has never been an offshore 
LNG terminal built to date, but I am very interested in discussing 
this. Also on panel two, we will hear from Bill Kramer, Deputy Director 
of the New Jersey Division of Fire Safety and again from Mark Robinson, 
Director of the Office of Energy Projects at the FERC.
    I welcome everyone, and I look forward to hearing your comments on 
this very important topic.

           STATEMENT OF HON. JACK REED, U.S. SENATOR 
                       FROM RHODE ISLAND

    Senator Reed. Thank you very much, Mr. Chairman, members of 
the committee, Senator Dorgan. Thank you for holding this very 
important hearing on safety and security issues regarding LNG 
development.
    It is my pleasure today to welcome Mayor David Cicilline of 
the city of Providence to testify before the subcommittee. He 
brings a unique perspective on the issues that the committee is 
considering today. David is a graduate of Brown University and 
the Georgetown Law School, and he is an extraordinarily 
effective representative of the people of Providence.
    This issue has taken on critical importance for the mayor, 
for myself, for our Attorney General, Patrick Lynch, and for 
all the people of Rhode Island because as we speak, the Federal 
Energy Regulatory Commission is considering proposals to 
establish LNG receiving terminals in Providence, Rhode Island 
and Fall River, Massachusetts. Both of these projects would 
place LNG terminals in urban communities and require LNG 
tankers to pass by 11 Rhode Island towns and cities and more 
than 25 miles of densely populated coastline, literally all the 
way up Narragansett Bay.
    In my written testimony, I have outlined my major concerns 
with FERC's current process for siting LNG terminals. Perhaps 
most important, I believe that FERC is not serving the American 
people well by simply processing LNG proposals submitted by 
energy companies on a first-come/first-serve basis without 
regard to the relative public policy benefits of one site over 
another, particularly in places like New England.
    FERC should, instead, consider a regional approach to LNG 
terminal siting. FERC should step back and take a comprehensive 
look at all the options, including offshore terminals, remote 
facilities that are being built in Canada, and other sites in 
the northeastern United States that are not in the heart of 
densely populated urban communities. Unfortunately, so far FERC 
has rejected our pleas for such an approach.
    Second, major change is needed to be made in the way FERC 
coordinates its permitting process with the Coast Guard safety 
and security reviews. For example, FERC is moving rapidly 
toward finalizing its environmental impact statement on the 
KeySpan project in Providence, yet the Coast Guard has not 
completed its security plan that will answer significant 
questions about the Federal, State, and local resources that 
will be required to protect the 950-foot long LNG tankers that 
will transit the bay up to 100 times per year. With all these 
questions unanswered, the public's opportunity to comment on 
the KeySpan project has already ended.
    I have many other concerns, which I do not have time to go 
into today, such as lack of thermal and vapor exclusion zones 
around LNG ships, the pre-9/11 mind set of DOT and National 
Fire Protection Association standards for LNG terminals, and 
the erosion of States' rights to participate in the permitting 
process. I would like to explore these options with the 
committee in the legislation that they are preparing for the 
energy bill.
    But I am particularly, again, delighted to welcome Mayor 
Cicilline. He will be an articulate and effective spokesperson 
for the city of Providence and the people of Rhode Island.
    Thank you, Mr. Chairman, and thank you, Senator Dorgan, and 
members of the committee.
    [The prepared statement of Senator Reed follows:]

  Prepared Statement of Hon. Jack Reed, U.S. Senator From Rhode Island

    Mr. Chairman, Ranking Member Dorgan, members of the Subcommittee, 
thank you for holding this important hearing on the prospects for 
liquefied natural gas (LNG) in the United States and safety and 
security issues related to LNG development.
    The siting of LNG terminals is an issue that has taken on critical 
importance for me and for the people of Rhode Island in recent months, 
as the Federal Energy Regulatory Commission (FERC) is now considering 
proposals by KeySpan Energy and Weaver's Cove Energy to establish LNG 
marine terminals in Providence, Rhode Island and Fall River, 
Massachusetts, respectively.
    While I recognize that natural gas is an important and growing 
component of New England's energy supply, I am extremely concerned 
about the safety and security risks associated with siting LNG marine 
terminals in urban communities and requiring LNG tankers to pass by 
eleven Rhode Island towns and cities and more than 25 miles of densely 
populated coastline.
    I and my colleagues in the Rhode Island delegation have attempted 
to work with the FERC to identify safer ways to deliver needed LNG to 
our region. Unfortunately, at every turn, FERC has rejected our 
proposals. The Commission refused to consider a regional approach to 
LNG terminal siting, one that would step back and take a comprehensive 
look at all the options, including offshore terminals, remote 
facilities that are being built in Canada, and other sites in the 
northeastern United States that are not in the heart of densely 
populated urban communities.
    Not only did FERC reject these considerations, the Commission even 
denied our request to extend the public comment period on the Draft 
Environmental Impact Statement (EIS) for the KeySpan project, even 
though KeySpan did not object to the extension and the 600-page 
document came out over the holidays.
    FERC's approval process for LNG terminals is deeply flawed and 
leaves too many questions unanswered. We do not know exactly what 
impact the arrival and departure of 100 or more LNG tankers each year 
will have on recreational and commercial traffic on the Bay--or whether 
any of our bridges will need to be closed during transits--because the 
Coast Guard has not completed its safety and security reviews. The 
Coast Guard is working diligently with KeySpan and with its state and 
local partners to complete those reviews, and I commend all the 
participants in the working groups for these ongoing efforts, but the 
Coast Guard has told my office repeatedly that it does not have the 
resources to adequately secure these LNG tankers and marine terminals, 
while fulfilling its other post-9/11 responsibilities. The arrival of 
950-foot long LNG vessels will require a whole new level of personnel 
and infrastructure, yet we have no cost estimate and no guarantee these 
new federal resources will be made available.
    Similarly, a tremendous new burden will be placed on our state and 
local law enforcement and first responder agencies. I recognize 
KeySpan's commitment in its recent filing before FERC to develop a 
mechanism to provide recovery of ``direct transit-related costs'' faced 
by federal, state and local agencies ``on a per-transit basis.'' I 
disagree with KeySpan's assumption, however, that other sources of 
funding will cover the bulk of additional costs associated with the 
security of the proposed KeySpan terminal. As stated above, the 
availability of new Coast Guard resources is very uncertain, 
particularly in the current federal budget climate. In addition, the 
federal grant programs KeySpan offers to help state and local agencies 
pursue are all facing dwindling resources, and at least one mentioned 
in the company's filing, the Urban Area Security Initiative, is not 
available to Rhode Island.
    With all of these questions still unanswered, the public's 
opportunity to comment has now formally ended. It is my understanding 
that FERC may go to print on the KeySpan Final EIS prior to the 
completion of the Coast Guard's safety and security reviews. There is 
no justification for the KeySpan FEIS or the Weaver's Cove FEIS to 
proceed without incorporating the critical resource requirements that 
the Coast Guard will forward to FERC after completing both its 
waterways safety assessments and security workshops, not to mention the 
workshops for consequence management and emergency response planning 
that are just beginning in cooperation with the states of Rhode Island 
and Massachusetts. As the Army Corps of Engineers stated in its January 
24th filing with FERC on the KeySpan project, ``It is essential that 
your FEIS fully evaluate the Coast Guard plan and discuss potential 
navigation impacts and economic consequences both at the facility and 
as ships maneuver through Narragansett Bay.''
    I am also concerned about the underlying safety standards for LNG 
facilities and the KeySpan proposal's compliance with those standards. 
The 1979 Pipeline Safety Act directs the Secretary of Transportation to 
consider the ``need for remote siting'' of LNG terminals, but the 
Department's safety regulations (49 CFR 193) fail to address this 
statutory requirement. Moreover, the National Fire Protection 
Association standards that DOT uses for LNG terminals (NFPA 59A) were 
written prior to September 11, 2001 and do not even mention a terrorist 
attack as one of the possible emergency scenarios. The DOT regulations 
and the NFPA standards do, however, require KeySpan and other LNG plant 
operators to have in place procedures that address an ``uncontrollable 
emergency'' and the ``possible need for evacuation of the public in the 
vicinity of the LNG plant.'' I have asked FERC to identify what 
specific steps KeySpan has taken to comply with 49 CFR 193.2509(3), 
which calls for ``coordinating with appropriate local officials in 
preparation of an emergency evacuation plan, which sets forth the steps 
required to protect the public in the event of an emergency, including 
catastrophic failure of an LNG storage tank.'' I would urge the 
Subcommittee to make a similar inquiry of FERC, and to inquire whether 
the Commission will address such a plan in the FEIS.
    I am particularly concerned that KeySpan's facility, which has 
operated for 30 years under the grandfather provision of the Pipeline 
Safety Act of 1979, may be substantially modified to establish a marine 
terminal without bringing the plant up to current federal safety 
standards. Indeed, FERC's Draft EIS states that ``the current 
proceeding provides the opportunity to re-evaluate the existing 
facility and to raise the level of safety to that required for new LNG 
facilities.'' I am disappointed that KeySpan's response to FERC argues 
that in virtually every area mentioned by the Commission, including 
Thermal Radiation Exclusion Zones, Vapor Dispersion Zones, Impoundment 
Capacity, Seismic Design Requirements, it would not be ``practically or 
economically feasible'' for KeySpan to comply with new construction 
standards.
    I want to emphasize to the members of the Subcommittee that I 
appreciate the important role LNG plays in Rhode Island's energy 
infrastructure, and I look forward to continuing to look for 
alternative means to increase the supply of natural gas to our region. 
It is regrettable that the lingering questions about safety and 
security standards for LNG, as well as FERC's unwillingness to work 
with Rhode Island's congressional delegation on comprehensive, regional 
solutions to our natural gas supply challenges, have brought us to the 
point where I must oppose the proposed KeySpan and Weaver's Cove LNG 
terminals.
    I again want to thank Chairman Alexander and Senator Dorgan for 
holding this hearing, and I look forward to working with the 
Subcommittee to explore a broad list of alternatives--including 
offshore LNG facilities--to bring more natural gas to our region while 
minimizing the risk to our citizens.
    Thank you.

    Senator Alexander. Thank you, Senator Reed. Senator Reed, 
you are certainly welcome to stay, but if you are leaving now, 
we will invite the other witnesses on the first panel to come 
up. Thank you very much.
    I will turn to Senator Feinstein for an introduction of 
Mike Peevey.

       STATEMENT OF HON. DIANNE FEINSTEIN, U.S. SENATOR 
                        FROM CALIFORNIA

    Senator Feinstein. Thank you very much, Mr. Chairman.
    I would like to welcome Michael Peevey, the president of 
the California Public Utilities Commission, to this committee 
and to our hearing today. Mr. Peevey has been president of the 
Commission since December 31, 2002. In his capacity, he has had 
to pick up the pieces after the California energy crisis. So he 
has been working with the California utilities and others to 
see that the lights stay on, and he has a particularly 
difficult challenge coming this summer, when estimates are that 
California could conceivably have problems. He has the added 
responsibility of ensuring reliable power at a reasonable cost. 
Californians pay the highest electricity prices in the 
continental United States. So this too is not an easy task.
    One of the issues relating to reasonably cost power is the 
cost of fuel. Since our State relies mostly on natural gas-
fired power plants, the cost of natural gas plays a large part 
in determining the overall cost of electricity. In order to 
reduce costs, we need to do two things: increase supply and 
reduce demand. So the Commission has been reducing demand for 
natural gas by overseeing the implementation of the State's 
renewable portfolio standard and the State's energy efficiency 
programs.
    Now, increasing supply is more complicated. Importing 
liquefied natural gas is a good option, but one that comes with 
deep concerns over the siting of terminals such as the safety-
related items and national security-related items.
    So I for one very much look forward to the testimony of the 
people today, and I want to welcome Michael Peevey to the 
Energy Committee.
    Mr. Peevey. Thank you very much for being so gracious.
    Senator Alexander. Thank you very much, Senator Feinstein.
    Let me call on Senator Dorgan now. I am going to try to 
follow the Domenici rule. As I recall what he does is he 
invites each Senator to take 5 minutes, then discourages them 
from doing so, so that we can move on to the witnesses.
    [Laughter.]
    Senator Alexander. Senator Dorgan.

         STATEMENT OF HON. BYRON DORGAN, U.S. SENATOR 
                       FROM NORTH DAKOTA

    Senator Dorgan. Mr. Chairman, he does that except for the 
ranking member.
    [Laughter.]
    Senator Alexander. That is true.
    Senator Dorgan. This will be the first of many hearings 
that you and I and members of the subcommittee on the subject 
of energy. This is an important hearing, and I am sure that as 
we begin to try construct the architecture of a new energy bill 
for this Congress, this subcommittee will play an important 
role in trying to understand the dimensions of a wide range of 
issues. Today it is liquefied natural gas, and we have a very 
impressive list of witnesses.
    Let me be mercifully brief as a lesson to others.
    Senator Alexander. Thank you, Senator Dorgan.
    Senator Bingaman. He was here, but he just stepped out.
    Senator Thomas.

         STATEMENT OF HON. CRAIG THOMAS, U.S. SENATOR 
                          FROM WYOMING

    Senator Thomas. Thank you, Mr. Chairman. I too will be 
brief. I appreciate having this hearing. I think this is one of 
the issues that is before us. I certainly hope that we can move 
forward with an energy policy so that we can get some idea of 
where we need to be in the next 10 or 15 years and then move in 
that direction.
    I think when we talk about gas and demand and production, 
we also need to think about the idea that much of it has been 
used in electric generation, and gas may not be our best fuel 
to use in that category. So I hope that we keep that in mind as 
we go.
    So thank you. I will not take longer.
    Senator Alexander. Senator Landrieu.

       STATEMENT OF HON. MARY L. LANDRIEU, U.S. SENATOR 
                         FROM LOUISIANA

    Senator Landrieu. Yes, thank you, Mr. Chairman, and I will 
be try to be brief as well. As you can imagine, this is a very 
important issue for the State of Louisiana, which is a major 
producer of natural gas. I also have a full statement to submit 
to the record.
    I will try to be brief. Let me begin by saying that I am a 
supporter for constructing liquefied natural gas plants and the 
distribution of liquefied natural gas.
    Clearly, the many hearings that this committee has been 
through over many years point to the real lack of supply and 
the need to increase supply. That can be done in a variety of 
different ways, such as more appropriate domestic drilling for 
natural gas, both onshore and offshore, and also, Mr. Chairman, 
as we know, new technologies have given us some opportunities 
to import liquefied natural gas.
    There are a couple of issues that I would like to raise, on 
behalf of my State:
    One, the safety of LNG plants needs to be first and 
foremost. Some of these concerns are legitimate concerns. We 
have had a lot of experience in Louisiana, with a good track 
record with very dangerous types of plants, and we have managed 
that very well, considering the kinds of industries that we 
have--from ammonia plants to chemical plants and to 
petrochemical plants. We would like to share our positive 
experiences. We should not just set aside these safety issues, 
but also address them and speak about them in a very forthright 
way. There are remedies.
    Number two, for the areas of this country that continue to 
be the platforms for exploration, the platforms for generation 
and are also welcoming and friendly hosts to the oil and gas 
industry, whether it is the State of Louisiana or the State of 
Texas or the State of Wyoming or off the shores of some other 
States, should be recognized in a positive way because there 
are some areas of the country that are either hesitant or just 
downright hostile or not inviting for their own reasons. But 
for those parts of this country that have been supportive and 
that continue to be host, I would urge this committee to 
consider some fair options for either the revenue-sharing 
provisions for environmental impacts that may or may not be 
there or just other general impacts in terms of being the host.
    While I do not want to get into the details of the FERC 
oversight, I will say that a regional approach or a national 
approach is most certainly warranted.
    And finally, Mr. Chairman, we know that there is at least 
one other nation in the world, Japan, which has had a very 
successful history in liquefied natural gas, an island not as 
blessed as the United States with natural resources. We do not 
have to look to other countries to get some positive feedback 
about how you go about using liquefied natural gas in a safe 
way that brings down prices, and helps U.S. industries remain 
competitive. We need to just address these issues forthrightly.
    There is more in my statement about this, but I would be 
remiss, Mr. Chairman, if I did not raise the issue of the host 
States' concerns. We are happy to support the industry, but it 
is time for us to have some sort of compensation for continuing 
to be the host in the country.
    [The prepared statement of Senator Landrieu follows:]

    Prepared Statement of Hon. Mary L. Landrieu, U.S. Senator From 
                               Louisiana

    This Committee is well aware that a supply and demand gap has 
created a sharp increase in natural gas prices over the last few years 
affecting industries that rely on natural gas as a feedstock and to run 
their plants. In Louisiana, natural gas is the major source of energy 
that runs our chemical and power plants.
    Without it, industries in my state will continue to lose their 
competitive edge.
    Take for example CF Industries in Donaldsonville, Louisiana. For 
them and other members of the ammonia industry the cost of natural gas 
can represent 70 to 90% of the total cost of manufacturing its 
products. CF Industries has lost 38 people over the last two years.
    This effect is industry-wide. Since 1998, the Louisiana Ammonia 
Producers, who account for approximately 40% of the U.S. production of 
ammonia, have gone from 9 companies employing more than 3,500 employees 
to 3 companies employing less than 1,000. The impact of these lost jobs 
has a spillover effect: for every job lost in a chemical plant another 
4.6 jobs are lost in the parish where that plant is located.
    So, the need for more natural gas is clear, what is not clear is 
how we as a nation plan to meet this demand over the long haul. Our 
focus has turned to increasing the importation of Liquefied Natural Gas 
(LNG) as a means to close the gap between supply and demand.
    However, I would not be serving the people of my state well if I 
did not raise a red flag as to the possible long term consequences of 
this policy.
    In spite of the fact that more gas is needed in every region of the 
country, it does not appear the plan to import LNG is as national in 
scope. Of the 30 LNG plants proposed around the country, the only ones 
that appear to be actually moving forward aggressively are those on and 
off the coasts of Louisiana and Texas. In fact, we will hear testimony 
today about specific projects in Rhode Island and California that have 
run into roadblocks.
    Those of us in the Gulf of Mexico are well aware of what makes us 
so appealing to be the gateway for LNG to the rest of the country. 
First and foremost, we have extensive experience and expertise in the 
production and distribution of natural gas. In addition, and perhaps 
most importantly, we have a ready-made network of 20,000 miles of 
pipeline crisscrossing our state to deliver gas to the markets where it 
is needed.
    Building LNG facilities on and off the coast of Louisiana certainly 
would bring some benefits to the State and many benefits to the nation. 
An increase in the supply of gas in the short term could halt the tide 
of further job losses in the chemical industry. Louisiana is now the 
second largest producer of chemicals in the U.S. It is estimated that 
each new LNG terminal could add, on average, 1 billion cubic feet of 
gas to the state's supply. And it would bring down costs.
    While gas prices have hovered near $6 per thousand cubic feet, 
Stephen Brown, the Federal Reserve's chief energy economist for the 
Dallas region, estimates that if a number of these LNG projects are up 
and running, prices could drop as low as $3.25 per thousand cubic feet. 
This additional supply of gas could be the difference between saving 
our industry $398 million a year in gas costs or having them rise $1.1 
billion a year.
    However, as much as Louisiana and the rest of the nation need new 
sources of gas, we must address at least three critical issues as we 
move to meet the rising demand.
    First, states and communities like Louisiana that are asked and in 
some sense required to serve as a platform for the energy needs of the 
nation as a whole should be directly compensated through a revenue 
sharing mechanism that recognizes the impact these facilities will have 
on them.
    Secondly, the safety issues related to siting these facilities in 
one region of the country in order to deliver gas to the other regions 
of the country must be fully considered. As a result of September 2001, 
safety has taken on an even more important role in shoring-up the 
security around our nation's critical infrastructure. The security 
around our LNG facilities such as ships, terminals and storage areas 
will have to be given an even higher priority. I am pleased that the 
recently released Sandia report asserts that the risk arising from both 
intentional and accident events can be significantly reduced and 
managed with appropriate security, planning, prevention, and 
mitigation. In addition, we must also recognize that since 
international LNG shipping began in 1959, tankers have carried 40,000 
LNG cargoes without a serious accident at sea or in port--partly due to 
the double hulled design of tankers.
    Finally, there may be environmental impacts pertaining to the use 
of offshore LNG facilities that need to be addressed. Some conservation 
groups as well as NOAA have raised appropriate concerns about the 
potential impact of offshore facilities on marine life (redfish, 
shrimp, et al.) in the Gulf of Mexico. Perhaps these concerns will 
prove to be unwarranted. However, we cannot ignore them.

                               CONCLUSION

    We have a model for how to use LNG in an efficient and safe manner. 
Japan is the world's largest LNG importer and relies on LNG for about 
97% of its natural gas consumption. Tokyo Bay has 5 LNG terminals which 
receive about 8 large shipments of LNG per week without incident. I 
believe that the Sandia Report together with lessons learned from the 
Japanese experience should provide us with the knowledge needed to move 
forward and use LNG in a safe, responsible and environmentally 
sensitive manner.

    Senator Alexander. Thank you.
    Senator Feinstein, do you have other things you would like 
to say?
    Senator Feinstein. If I might, just one other question.
    I had the pleasure yesterday of meeting with Mr. Giles, who 
is going to be testifying, of Sound Energy Solutions, the 
parent company of which is Mitsubishi who, as Senator Landrieu 
referred, has at least five terminals in Tokyo.
    This terminal or California terminals or additional 
terminals today are being built in a post-9/11 world where one 
of the things that we have to think about are targets in 
metropolitan areas. As I look at the various proposals on the 
west coast, it seems to me that out-of-harbor locations are 
better locations. Now, I could be wrong. Mr. Giles and I 
debated that yesterday because his proposal in the middle next 
to a big container facility in the Long Beach port area. Long 
Beach, Los Angeles receives 40 percent of the container traffic 
coming into our Nation. So one has to look at this as a 
potential target, which would have a dramatic impact on the 
economy of America if it is devastated.
    Now, you might say, well the devastation would only be a 
mile wide. Nonetheless, that is considerable. For the Federal 
Energy Regulatory Commission that is going to be concerned with 
siting, I think this is a valid consideration for the first 
time in this industry in a post-9/11 world.
    Senator Alexander. Thank you, Senator Feinstein.
    Senator Salazar.
    Senator Salazar. I do not have an opening statement. I look 
forward to the hearing.
    Senator Alexander. All of the full opening statements will 
be included in the record.
    We look now forward to the testimony of the first panel. I 
will invite each of you to just go in order. Why do we not go 
with the mayor first and then Mr. Peevey, then Mr. Giles. The 
mayor and Mr. Peevey have been introduced, but let me properly 
introduce Mr. Thomas Giles, executive vice president and chief 
executive officer of Sound Energy Solutions, Mitsubishi. 
Senator Feinstein just mentioned him. Mr. Rick Grant, president 
and chief executive officer of Distrigas, Everett LNG Terminal 
in Boston, Massachusetts. Mr. Mark Robinson, Director of the 
Office of Energy Projects, Federal Energy Regulatory 
Commission. We have invited Mr. Robinson to be on both panels, 
the one about siting and the one about safety.
    May I ask the witnesses if you would summarize your 
comments in, say, 5 minutes. That will produce a better 
exchange between the Senators and you, and we will certainly 
put all of your comments in our record.
    Mayor Cicilline.

            STATEMENT OF DAVID N. CICILLINE, MAYOR, 
                     CITY OF PROVIDENCE, RI

    Mr. Cicilline. Mr. Chairman, Ranking Member Dorgan, members 
of the subcommittee, thank you for offering me this opportunity 
to speak to you about the concerns I have as mayor about the 
current review and approval process used by the Federal Energy 
Regulatory Commission for liquefied natural gas projects. It is 
a great honor to testify before you today about this very 
important subject.
    I want to thank Senator Reed for inviting me to participate 
in this hearing and thank him for his leadership on this issue 
as well.
    I have submitted formal written testimony which the 
committee has, but in the interest of time, I will, of course, 
provide a summary of my remarks.
    My concerns are shared by many, if not all, of the elected 
leaders in Rhode Island. From our congressional delegation, to 
our attorney general, Patrick Lynch, and others, Rhode Island's 
elected officials have expressed grave concern about the 
proposal I am about to speak about and the way that it has been 
evaluated by FERC.
    Given the debate in the scientific community over some of 
the assumptions and models employed by FERC, given the recent 
findings of the Sandia Labs report, given the serious flaws in 
the way FERC administers the EIS process, and most 
significantly, given post-September 11 homeland security 
realities, it is time for a comprehensive review and reform of 
the LNG siting approval process.
    Our experience in Providence with FERC on the KeySpan 
proposal demonstrates clearly the failings of the current 
process. Two fundamental issues are posed by the Providence 
KeySpan proposal and the current FERC process has completely 
failed in its responsibility to address these issues.
    The first essential question is, should major LNG 
facilities and, in particular, marine terminals be located in 
densely populated urban centers? Without a doubt, the answer to 
this question is no.
    The draft EIS, in fact, acknowledges the risks of LNG and, 
in particular, of the threat of terrorism, but states that 
these risks can be ``managed.'' The best way to manage these 
risks is through remote facility siting. Risks cannot be 
adequately managed in an urban setting. The risks posed are too 
numerous. The dangers are simply too great. This is the wrong 
proposal at the wrong place at the wrong time.
    The recent Sandia Labs report raises particular concern, 
and FERC must incorporate the findings of this report into its 
review process and review criteria. The Sandia report defines 
the risk zone for flammable vapor dispersion from an 
intentional attack on an LNG tanker as 1.5 miles. The 1.5-mile 
zone in Providence alone encompasses thousands of permanent 
residences, several hospitals, including the regional trauma 
center, several elementary and middle schools, child care 
centers, college campuses, interstate highways, and most of 
downtown. I have with me on my right for the committee's 
viewing a photograph showing the terminal in Providence and 
what falls within this 1.5-mile zone.
    History has shown that terrorists operating in this country 
seek high-profile targets with the potential for large-scale 
destruction. We should not be in the business of creating 
invitations to our enemies.
    The second fundamental question posed by this proposal is, 
should an LNG facility operating under grandfathered safety 
standards, that is, a facility that does not meet current 
safety standards, expand? I fully agree with the conclusion of 
the draft EIS that ``the proposed project represents a 
significant modification to the design and historical mode of 
operation, providing the opportunity to re-evaluate the 
existing facility and to raise the level of safety to that 
required for new LNG facilities.''
    While the draft EIS makes this statement, FERC does not 
take the logical next step of requiring that the facility be 
brought up to current code. But where FERC hedges, there should 
be no hedging. If this proposal is approved, the entire 
facility must, at the very least, be brought up to current 
safety standards. A facility that could not be permitted for 
construction today must not be expanded. The standards in place 
for the original permitting of the Providence facility did not 
account for the reality of terrorist threats. The current risks 
of terrorist strikes on LNG facilities dictates the end of 
grandfathering.
    But a close review of FERC's current standards reveals they 
are inadequate.
    I fully endorse the analysis and conclusions of Providence 
Fire Chief David Costa who called for major upgrades to FERC's 
safety standards. I have submitted with my written comments a 
copy of the letter sent by Chief Costa to FERC where he details 
his concerns regarding FERC's inadequate safety standards, and 
I would ask that this letter be part of the record.
    Senator Alexander. It will be.
    Mr. Cicilline. Thank you.
    The time has come for FERC to replace current minimum 
safety standards with updated, best-in-class standards. The 
minimum should no longer be tolerated.
    The draft EIS called on KeySpan to conduct a thorough 
review of the measures required to bring the current and 
proposed facility up to present-day safety standards. I 
supported this requirement and called upon FERC to extend the 
comment period to allow for public review and comment on this 
analysis. FERC denied this request, as they denied the request 
for an extension by our entire congressional delegation, 
including Senator Reed.
    KeySpan contends meeting these minimum standards would be 
too costly, too onerous, or that they are essentially close 
enough as it is.
    Senator Alexander. If you could wrap up.
    Mr. Cicilline. Certainly.
    I would also just ask the committee to reference 
particularly the letter I have submitted from the U.S. Army 
Corps of Engineers that talks about very specific concerns 
about this proposal.
    And in conclusion, I would thank the committee for focusing 
its attention on this important issue and ask the committee to 
build reform around the latest science, higher safety 
standards, the reality of the threat of terrorism in the 21st 
century, making sure key decisions are only made after all of 
the necessary facts have been determined, analyzing proposals 
in a comprehensive, regional way, not project by project, 
rationalizing the process for evaluating alternatives, and 
finally ending the dangerous practice of grandfathering.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Cicilline follows:]

    Prepared Statement of David N. Cicilline, Mayor, Providence, RI

    Mr. Chairman, Ranking Member Dorgan, members of the Subcommittee, 
thank you for offering me this opportunity to speak to you about the 
concerns I have--as a Mayor--about the current review and approval 
process used by the Federal Energy Regulatory Commission (FERC) for 
Liquefied Natural Gas (LNG) projects.
    I want to thank Senator Jack Reed for inviting me to participate in 
this hearing. I also thank him for his leadership on this issue. I urge 
members to carefully review Senator Reed's written statement to the 
Subcommittee, in which he highlights many critically important issues 
related to LNG safety.
    My concerns about the FERC process arise from my first-hand 
experience with KeySpan Energy's proposal to convert its current peak-
shaving facility in Providence, Rhode Island to a marine delivery 
terminal.
    The proposal in Providence calls for modifying a thirty-year-old 
facility that currently receives LNG exclusively through truck 
deliveries. The facility sits on a small parcel of land, slightly under 
16.5 acres, in the midst of industrial and other commercial facilities. 
Nearby is a residential neighborhood, an interstate highway, schools, 
hospitals and more. The population of Providence is approximately 
175,000, with this number nearly doubling on a typical weekday thanks 
to commuters, visitors, and students drawn to the City.
    The plans call for marine delivery approximately every five days. 
The ships will travel up Narragansett Bay and up the Providence River, 
passing more than twenty-five miles of densely populated coastline. The 
Providence harbor, where this facility is located, is currently a busy 
port with heavy commercial and recreational use.
    As Mayor of Providence I have strongly opposed the KeySpan LNG 
Facility upgrade project. I object because this proposal presents an 
unacceptable threat to public safety and to the immediate and long-term 
economic development of Providence.
    I am here before you because the FERC process has, to date, failed 
to adequately account for these concerns. The review, to date, has been 
dangerously, and irresponsibly, insufficient.
    Given the debate in the scientific community over some of the 
assumptions and models employed by FERC, given the recent findings of 
the Sandia Labs report, and most significantly given post 9/11 homeland 
security realities it is time for a comprehensive review and reform of 
the LNG siting approval process.
    The Draft Environmental Impact Statement (EIS) for the Providence 
proposal reaches the conclusion that ``construction and operation of 
the KeySpan LNG project would result in limited adverse environmental 
impacts.''
    It is my firm belief that this conclusion is wrong.
    The conclusions reached are, in large part, flawed because FERC's 
current analysis is based on assumptions, analyses, standards, and 
research that are highly questionable--particularly in light of the 
current homeland security environment.
    Two fundamental issues are posed by this proposal and the current 
FERC process has completely failed in its responsibility to address 
these issues.
    The first essential question is: Should major LNG facilities, and 
in particular marine terminals, be located in densely populated urban 
centers?
    Without a doubt, the answer to this question is: No.
    The Draft EIS in fact acknowledges the risks of LNG, and in 
particular of the threat of terrorism, but states these risks can be 
``managed.'' The best way to manage these risks is through remote 
facility siting. Risks cannot be adequately managed in an urban 
setting. The risks posed are too numerous. The dangers are simply too 
great. Given this fundamental truth, this proposal should be rejected.
    Simply put: This is the wrong proposal, at the wrong place, at the 
wrong time.
    For a city facing the potential development of a marine delivery 
terminal, the recent Sandia Labs report raises particular concern. The 
report defines the risk zone for flammable vapor dispersion from an 
intentional attack on an LNG tanker as 1.5 miles. And this is not a 
worst-case scenario.
    In fact, if the U.S. Department of Transportation (DOT) vapor 
dispersion standard of 49 CFR 193 were used, this zone would be 
considerably larger.
    As it is, the 1.5 mile zone in Providence alone encompasses 
thousands of permanent residences, several hospitals (including the 
regional trauma center), several elementary and middle schools, child 
care centers, college campuses, interstate highways, and most of 
downtown Providence.
    I have with me a photograph showing the terminal in Providence and 
what falls within this 1.5 mile zone.
    The scope of what lies within this zone underscores the need for 
FERC to reject siting a marine delivery terminal in a densely populated 
urban center. Indeed, the potential large-scale damage will raise the 
risk level for the Providence facility to an unacceptable level.
    History has shown that terrorists operating in this country seek 
high-profile targets with the potential for large-scale destruction. We 
should not be in the business of creating invitations to our enemies.
    Any further analysis must consider the cascading events which would 
occur in various disaster scenarios at this proposed facility. This is 
particularly important given the other hazardous materials in immediate 
proximity to the KeySpan facility.
    The second fundamental question posed by this proposal is: Should 
an LNG facility operating under grandfathered safety standards expand?
    I fully agree with the conclusion of the Draft EIS that ``the 
proposed project represents a significant modification to the design 
and historical mode of operation, providing the opportunity to re-
evaluate the existing facility and to raise the level of safety to that 
required for new LNG facilities.''
    While the Draft EIS makes this statement, FERC does not take the 
logical next step of requiring that the facility be brought up to 
current code.
    But where FERC hedges, I am adamant: If this proposal is approved, 
the entire facility must--at least--be brought up to current safety 
standards. A facility that could not be permitted for construction 
today must not be expanded.
    Grandfathering is a risky and highly suspect practice, and one that 
has been rejected by other federal regulatory authorities in other 
hazardous material industries. When major safety upgrades were adopted 
for chemical plants in the early 1990s, neither OSHA nor EPA permitted 
grandfathering of existing facilities.
    Grandfathering is particularly inappropriate when there has been a 
major shift in circumstances such as the advent of the war on terror. 
The standards in place for the original permitting of the Providence 
facility had no provisions for terrorism. The current risk of terrorist 
strikes on LNG facilities dictates the end of grandfathering.
    By FERC's own standards, due to the disparity between the siting of 
the plant and current regulations, land and buildings not owned by 
KeySpan fall within FERC's current thermal exclusion zones for the 
existing plant.
    But this analysis does not tell the whole story. A review of the 
data clearly reveals FERC's current standards are inadequate.
    I fully endorse the analysis and conclusions of Providence Fire 
Chief David Costa who has called for major upgrades to FERC's safety 
standards. I have submitted with my written testimony a copy of the 
letter sent by Chief Costa to FERC where he details his concerns over 
FERC's inadequate safety standards and I would ask that this letter be 
part of the record.*
---------------------------------------------------------------------------
    * All attachments have been retained in subcommittee files.
---------------------------------------------------------------------------
    As explained by Chief Costa, we need to re-write a standard which 
allows civilians not employed in the LNG industry in a zone only safe 
for a trained fire professional in protective equipment.
    A standard which calls for sheltering-in-place of, among others, 
school children--ignoring the reality that any incident would prompt 
parents and others to rush to the scene--is dangerously unrealistic and 
should be scrapped.
    The time has come for FERC to replace current minimum safety 
standards with updated, best-in-class standards. The minimum should no 
longer be tolerated.
    The Draft EIS called on KeySpan to conduct a thorough review of the 
measures required to bring the current and proposed facility up to 
present day safety standards.
    I supported this requirement, and called for FERC to extend the 
comment period to allow for public review and comment on this analysis. 
I firmly believe the analysis and findings of this study are simply too 
important to go without such review and comment.
    FERC denied this request.
    The City is reviewing this report, and frankly we are deeply 
troubled by what we have read. To begin with, KeySpan contends--
contrary to logic and contradicting the conclusion of FERC staff--this 
is not a significant modification to the existing facility.
    Putting that debate aside, the bottom line is that KeySpan 
acknowledges they cannot--and KeySpan says they will not--bring this 
facility up to present day minimum safety standards.
    KeySpan contends meeting these minimum standards would be too 
costly, too onerous, or that they already come close enough.
    These answers are unacceptable. Close enough is not good enough. 
KeySpan refuses to bear the cost of safety improvements. You know and I 
know, this means others--the people of Providence--could be the ones to 
pay the price.
    The fact is no Draft EIS should have been published if KeySpan 
could not meet or intend to meet current DOT safety standards. FERC 
knew the KeySpan facility is not in compliance with current safety 
standards. The failure of the Draft EIS to include a thorough 
discussion of this issue is a very serious shortcoming.
    During this process, the City has repeatedly said that the final 
EIS should not be issued until a comprehensive safety and emergency 
response plan has been developed and agreed upon by all parties.
    Absent such a plan, it is not possible for FERC, public officials, 
or the general public to determine the risk and potential impact of 
this proposal. An evaluation without a plan in place is nothing more 
than speculation and conjecture.
    The Draft EIS reaches conclusions about the impact of this proposal 
on safety operations and on the use of Narragansett Bay and Providence 
Harbor, however, the Coast Guard has not concluded its security review 
and has not yet made its security recommendations. Without that 
information it is simply impossible to reach a valid conclusion on the 
risks or the impact of this proposal. But FERC does. This is wrong.
    FERC's isolationism extends to the U.S. Army Corps of Engineers, 
which has significant concerns about the KeySpan proposal. I have 
included with my written testimony, and ask that it be part of the 
record, the letter on the Draft EIS submitted by the Corps.
    This letter is alarming. It clearly reveals that FERC did not 
adequately consult with the Corps--in violation of the Congressional 
intent behind the National Environmental Policy Act which created the 
EIS process and identified the federal agencies which should 
participate.
    The Corps has very serious reservations about this proposal because 
of the impact a ship docked at the port would have on the federal 
navigation channel. The proposal, to quote the letter, ``would cause 
LNG vessels to be completely moored within the limits of our Federal 
project. Such an encroachment is contrary to Corps policy.''
    The Corps, to quote further, has ``serious concerns about the 
permittability due to the potential significant impacts on navigation 
such an encroachment would cause in the Providence river, coupled with 
security zone restrictions'' detailed later in the letter.
    This and the other very serious issues identified by the Corps in 
their letter should have been resolved before FERC issued its Draft 
EIS. The failure of FERC to responsibly address such issues and to 
conduct the EIS process as Congress intended raises the very real 
question of whether Congress should now require review and approval of 
every FERC Draft EIS by at least one other cooperating agency in the 
NEPA process prior to its release.
    Clearly, FERC cannot be trusted to follow Congressional intent on 
its own.
    Critically important issues of safety and security have been 
sacrificed in FERC's rush to judgment.
    There is also a need for FERC to change the methods used to analyze 
alternatives. In the case of the Draft EIS for the KeySpan proposal, 
this section is fundamentally flawed.
    It was a foregone conclusion no alternative would be acceptable 
once FERC used the project's very own goals as criteria to evaluate 
alternatives, including: ``converting the existing KeySpan LNG facility 
to an LNG terminal capable of receiving marine deliveries and 
augmenting the facility's vaporization capability.''
    FERC needs to critically evaluate this project goal, not blindly 
accept it as a premise by which to judge alternatives. With this as a 
requirement, by definition no other proposal could meet all the goals 
or standards for an alternative to be acceptable.
    There should, truthfully, be only one criterion by which to judge 
this proposal and potential alternatives: What is the safest way to 
provide the region's future LNG needs?
    By that criterion, this proposal is far from the best alternative.
    Rejecting this proposal, by FERC's own acknowledgement, will not 
undermine the energy supply to the region.
    To quote from the Draft EIS: ``We believe that the most likely 
result of adopting the no action alternative would be development of 
other LNG facilities or additional pipeline capacity to meet the 
increasing demand for natural gas in the New England region.'' (3-2)
    This is an important point: There is no supply imperative requiring 
approval of this risky proposal.
    The safety criteria used by FERC to evaluate--and dismiss--
alternatives underscore that expanding this grandfathered facility is 
unacceptable.
    To quote from the Draft EIS: ``We consider it preferable to locate 
LNG terminals in areas that are not close to population centers and/or 
residences. We also feel it is preferable for LNG ships to transit far 
from residential and commercially developed shorelines.'' (3-14)
    The KeySpan proposal violates both of these criteria. And yet, the 
Draft EIS endorses the Providence proposal above the alternatives 
considered.
    Additionally, concerning the LNG terminal footprint: ``Based on the 
proposed design and the need to contain the thermal exclusion zone, a 
waterfront site of at least 21 acres would be preferable to accommodate 
the proposed configuration of the LNG unloading, storage and sendout 
facilities An ideal waterfront site available for development would 
include area in excess of the exclusion zone, which would provide an 
additional buffer from development.'' (3-14)
    The Providence facility does not include ``area in excess of the 
exclusion zone.'' In fact it does not include area equal to the 
exclusion zone. The KeySpan facility is located on a mere 16.47 acres, 
well under FERC's minimum 21 acre standard.
    It is patently ridiculous for FERC to set standards by which it 
rejects alternatives, and then ignore the fact that the project under 
consideration is far from meeting these very same standards. The facts 
that led to the rejection of the alternatives, dictate the rejection of 
this proposal.
    Clearly there is something wrong here.
    By one set of standards this project is unacceptable. And yet the 
process moves inexorably forward reaching the conclusion that the 
KeySpan project is the best option possible.
    These conclusions cannot--and should not--be reconciled. This is 
nothing less than bureaucratic schizophrenia.
    The FERC process has also insufficiently accounted for the 
immediate and long-term economic impact the proposal will have on the 
City of Providence.
    In terms of the immediate impact, the real and perceived danger 
presented by this expanded facility will, no doubt, lower property 
values in the surrounding area. This, in turn, will lower the City's 
property tax revenue.
    Ironically, a project that will add to the City's public safety 
duties and expenses, will at the same time lead to a reduction in the 
very resources the City will need. The impact of this burden on 
Providence must be considered by FERC.
    But the greatest impact of this proposal will be its negative 
impact on the proposed redevelopment of the City's waterfront. This 
proposed LNG project is completely at odds with my vision for the 
future of Providence, and in particular with the City's ambitious 
Narragansett Landing plans.
    The Providence waterfront should be one of the City's greatest 
assets. But much of it is now scarred by the declining remains of an 
old economy. We have an exciting vision for Narragansett Landing and 
have hired the internationally recognized urban planning firm of Sasaki 
Associates to develop comprehensive plans to turn an eyesore into an 
economic engine. A new, residential, commercial, recreational 
neighborhood will open new employment opportunities and expand the tax 
base for the benefit of all city residents.
    This project will ultimately encompass the redevelopment of more 
than 250 acres, including 100 acres of waterfront property. We estimate 
this area will be home to more than 6,000 residents. We also envision 
the development of 3 major hotels providing approximately 1,000 much-
needed rooms to our city's capacity. The plans call for 12 new office 
buildings, a park, open space and a 500 boat marina.
    Marine delivery of LNG is wholly incompatible with this vision. The 
KeySpan project will seriously impede the City's ability to attract the 
investment and developer interest required to achieve our goals. The 
proposal will lead to a terrible waste of a major economic opportunity 
for Providence.
    Our plans for opening the waterfront for recreational use will fail 
if this part of the bay receives weekly LNG shipments that will require 
the effective shut down of the water. Boat owners have numerous other 
options for harboring their boats in this area, and surely they will 
find facilities where they will be able to use their boats any time 
they want. Boat owners will not want to dock in a location where they 
will have to constantly monitor the timing of LNG deliveries and the 
size and duration of security zones.
    In closing, I want to thank the Subcommittee for focusing attention 
on this important issue. I believe the process for reviewing and 
approving LNG projects is seriously flawed and needs to be reformed.
    Reform must be built around:

   The latest science
   Higher safety standards
   The reality of the threat of terrorism
   Making sure key decisions are only made after all the 
        necessary facts have been determined
   Analyzing proposals in a comprehensive, regional way, not 
        project-by-project.
   Rationalizing the process for evaluating alternatives
   And, finally, ending the dangerous practice of 
        grandfathering

    Thank you very much.

    Senator Alexander. Thank you, Mayor.
    Mr. Peevey.

 STATEMENT OF MICHAEL R. PEEVEY, PRESIDENT, CALIFORNIA PUBLIC 
            UTILITIES COMMISSION, SAN FRANCISCO, CA

    Mr. Peevey. Mr. Chairman and members of the subcommittee, 
thank you very much for inviting me as a representative of the 
California Public Utilities Commission to participate in these 
hearings.
    We appreciate your willingness to consider the State 
governments' perspective on natural gas matters, which is 
consistent with previous acts of Congress such as the Natural 
Gas Act and the Natural Gas Pipeline Safety Act, where Congress 
recognized the important role of State Commissions in the 
regulation of natural gas. It is also noteworthy that in the 
1970's, when the State of California first considered proposals 
to construct LNG facilities, the Federal Energy Regulatory 
Commission and the U.S. Department of Energy also recognized 
California's important role in deciding siting and safety 
matters for new LNG import facilities. The FERC and the 
California Public Utilities Commission--this is in the 1970's--
concurrently held hearings on the proposed LNG facilities at 
Point Conception, California, including jointly held hearings 
on certain seismic issues. Neither the FERC nor the CPUC 
challenged each other's jurisdiction and both agencies 
ultimately issued certificates of public convenience and 
necessity for the proposed LNG facility. Indeed, because State 
law at that time precluded LNG facilities from being built near 
population centers, the FERC had deferred to State law by 
rejecting the proposed site for LNG facilities at the city of 
Oxnard in favor of the alternative proposal at a more remote 
site, Point Conception.
    The only reason the LNG facilities were not constructed at 
Point Conception was due to market forces. In the early 1980's, 
the price of natural gas domestically produced significantly 
decreased and the project sponsors chose not to go forward.
    The California Public Utilities Commission respectfully 
submits that any new legislation should reflect concurrent 
jurisdiction, which includes the States in the siting and 
safety of LNG facilities within their borders, and promotes 
cooperative arrangements between the Federal Government and the 
States. This type of approach worked well in the 1970's in 
California, currently works well under the Deepwater Ports Act, 
and we believe would work well in the future.
    Now, let there be no mistake. We at the California Public 
Utilities Commission recognize there is a need for additional 
supplies of natural gas from LNG facilities. We agree with the 
FERC that LNG terminals are needed to provide reliable supplies 
of natural gas and help put downward pressure on the already 
high prices of natural gas in North America. In fact, in 
December 2003, the PUC and the California Energy Commission 
jointly sponsored a workshop in San Francisco which extensively 
reviewed data and studies concerning the production of natural 
gas in North America, the forecasts for demand, and the clear 
need for LNG facilities in the future. The FERC participated in 
that program with FERC staff.
    As a result of that workshop, in January 2004, the PUC 
issued a rulemaking proceeding to establish rules to ensure 
reliable, long-term supplies of natural gas to California. One 
of the purposes was to facilitate access for natural gas from 
LNG facilities to the intrastate pipelines on the west coast of 
California, which are pipelines regulated by the California PUC 
and exempt from Federal regulation under sections 1(b) and 1(c) 
of the Natural Gas Act.
    The California PUC has already issued a decision in phase I 
in that rulemaking proceeding wherein our Commission assured 
project sponsors that if they build the LNG facilities to 
supply natural gas to California's public utilities, the 
utilities will interconnect with those facilities. The PUC 
ordered PG&E, Southern California Gas Company, and San Diego 
Gas and Electric to submit nondiscriminatory, open access 
tariffs for all new sources of natural gas supply, including 
potential supplies from LNG facilities.
    Due to the high prices of natural gas, there are presently 
numerous proposals for LNG facilities to be constructed on the 
west coast. According to FERC's web site, there are two 
proposed sites in Federal waters offshore southern California. 
There are two proposed sites in Baja California, and there is 
one proposed site in southern California in an application 
filed with FERC by Mr. Giles' firm.
    To emphasize, we accept and see the need for natural gas 
from LNG facilities in California. We see that as vital for the 
State's economic well-being.
    In addition to helping ensure reliable supplies at 
reasonable prices, the PUC has the responsibility under State 
law for making sure that intrastate natural gas facilities are 
sited, constructed, and operated in a safe manner. The State 
law in California is very clear that the California PUC has 
jurisdiction over proposed LNG facilities in California. The 
PUC obviously does not have jurisdiction over proposed 
terminals in Federal waters, in Baja California, or other 
States.
    In addition, the PUC has been certified by the U.S. 
Department of Transportation pursuant to the Federal Natural 
Gas Pipeline Safety Act to inspect all intrastate natural gas 
facilities within California and to enforce the Federal natural 
gas pipeline safety regulations, including liquefied natural 
gas safety regulations promulgated by the DOT. In order to 
become a certified State agency, in General Order 112-E, the 
PUC adopted the Federal safety regulations as part of our own 
minimum standards. The California Public Utilities Commission 
has a much better understanding in our view than the FERC of 
the local conditions involving proposed LNG facilities in 
California, such as seismic issues, as well as terrorism.
    The process used by the PUC, which allows parties to 
participate in evidentiary hearings, helps educate our 
Commission, as well as the general public, on the safety issues 
involved. This also results in much more confidence by the 
public in the PUC's conclusions, which will result from the 
hearing on the safety concerns, compared to a process where 
disputes of material fact are not set for hearing and 
interested parties are not provided a meaningful opportunity to 
participate.
    Rather than consider legislation for exclusive Federal 
jurisdiction, we would hope that Congress would consider 
legislation for concurrent Federal/State jurisdiction and not 
preempt State government. Instead of exclusiveness, we would 
hope Congress would consider inclusiveness. There is a much 
greater chance of public acceptance of LNG facilities when the 
State has----
    Senator Alexander. I am going to try to keep everybody 
pretty close to 5 minutes so we will have time to question you.
    Mr. Peevey. So I will just sum up.
    For a variety of reasons, I would say that the California 
Public Utilities Commission recommends that any new legislation 
being considered or amendments to the Energy Act explicitly 
provide that the States' jurisdiction be concurrent with the 
Federal Government's jurisdiction.
    Thank you.
    [The prepared statement of Mr. Peevey follows:]

 Prepared Statement of Michael R. Peevey, President, California Public 
                          Utilities Commission

    Mr. Chairman and Members of the Subcommittee. Thank you very much 
for inviting me, as a representative of the California Public Utilities 
Commission, to participate in these hearings concerning the development 
of liquefied natural gas (LNG) facilities, which is a timely and very 
important issue to the nation and to California. It is an honor to 
appear before you to present the California Public Utilities 
Commission's views concerning new LNG facilities along or near the West 
Coast of California.
    We especially appreciate your willingness to consider the state 
governments' perspective on natural gas matters, which is consistent 
with previous acts of Congress, the Natural Gas Act and the Natural Gas 
Pipeline Safety Act, where Congress recognized the important role of 
state Commissions in the regulation of natural gas. It is also 
noteworthy that in the 1970s, when the State of California first 
considered proposals to construct LNG facilities, the Federal Energy 
Regulatory Commission (FERC) and the U.S. Department of Energy also 
recognized the State of California's important role in deciding the 
siting and safety matters for new LNG import facilities. The FERC and 
the California Public Utilities Commission concurrently held hearings 
on the proposed LNG facilities at Point Conception, California, 
including jointly held hearings on certain seismic issues. Neither the 
FERC nor the California Public Utilities Commission challenged each 
others' jurisdiction and both agencies ultimately issued certificates 
of public convenience and necessity for the proposed LNG facilities. 
Indeed, because state law at that time precluded LNG facilities from 
being built near population centers, the FERC had deferred to state law 
by rejecting the proposed site for LNG facilities at the City of 
Oxnard, California in favor of the alternative proposal at the more 
remote site at Point Conception, California. The only reason the LNG 
facilities were never constructed at Point Conception was due to market 
forces. In the early 1980s, the price of natural gas significantly 
decreased and the project sponsors chose not to go forward with the LNG 
project, even though they had complete authorization to do so from the 
FERC and the California Public Utilities Commission.
    The California Public Utilities Commission respectfully submits 
that any new legislation should reflect concurrent jurisdiction, which 
includes the states in the siting and safety of LNG facilities within 
their borders, and promotes cooperative arrangements between the 
federal government and the states. This type of approach worked well in 
the 1970s in California, currently works well under the Deepwater Ports 
Act and we believe would work well in the future.

                     I. THE NEED FOR LNG FACILITIES

    The California Public Utilities Commission recognizes that there is 
a need for additional sources of natural gas supplies from LNG 
facilities. The California Public Utilities Commission agrees with the 
Federal Energy Regulatory Commission that LNG terminals are needed to 
provide reliable supplies of natural gas and help put downward pressure 
on the already high prices for natural gas in North America. In fact, 
in December, 2003, the California Public Utilities Commission and the 
California Energy Commission jointly sponsored a workshop in San 
Francisco, which extensively reviewed data and studies concerning the 
production of natural gas in North America, the forecasts for demand 
for natural gas and the clear need for LNG facilities in the near 
future. We were joined by two members of the Federal Energy Regulatory 
Commission's Staff, who actively participated by asking questions and 
in making a presentation in our workshop. That workshop demonstrated 
not only the need for new LNG terminals on the West Coast, but also how 
well our state agencies and the FERC could work together in addressing 
significant issues involving natural gas supplies and infrastructure.
    As a result of that workshop, in January, 2004, the California 
Public Utilities Commission instituted a rulemaking proceeding to 
establish rules to ensure reliable, long-term supplies of natural gas 
to California. One of its purposes was to facilitate access for natural 
gas from LNG facilities to the intrastate pipelines on the West Coast 
of California, which are pipelines regulated by the California Public 
Utilities Commission and exempt from federal regulation under sections 
(b) and 1(c) of the Natural Gas Act. The California Public Utilities 
Commission has already issued a decision in Phase I in that rulemaking 
proceeding, wherein our Commission assured project sponsors that if 
they build the LNG facilities to supply natural gas into the California 
public utilities' intrastate pipelines, the utilities will interconnect 
with those facilities. The California Public Utilities Commission 
ordered Pacific Gas & Electric Company, Southern California Gas Company 
and San Diego Gas & Electric Company to submit non-discriminatory open 
access tariffs for all new sources of natural gas supply, including 
potential supplies from LNG facilities.
    Due to the high prices of natural gas, there are presently numerous 
proposals for LNG facilities to be constructed along the West Coast, 
which could provide substantial volumes of natural gas to California. 
According to the FERC's website as of February 7, 2005, in pending 
applications filed with MARAD and the Coast Guard, there are two 
proposed sites in federal waters offshore Southern California (i.e., 
BHP Billion for 1.5 Bcfd and Crystal Energy for .5 Bcfd), there are two 
proposed sites in Baja California, Mexico (i.e., Sempra and Shell for 
1.0 Bcfd and Chevron Texaco for 1.4 Bcfd), there is one proposed site 
in Southern California in an application filed with the FERC (i.e., 
Sound Energy Solutions for 0.7 Bcfd) and there is a potential site 
offshore Southern California identified by the project sponsor (i.e., 
Chevron Texaco 0.75 Bcfd). In addition, a new proposal for a floating 
storage and regasification unit (FSRU) offshore of Baja California, 
Mexico was recently announced in an article in the San Diego Union-
Tribune on February 3, 2005. According to the San Diego Union-Tribune's 
article, ``Energy experts say only one or two liquefied natural gas 
receiving terminals are needed to supply the Baja California-Southern 
California region.'' The California Public Utilities Commission has 
made no determination as to how many LNG terminals are needed in this 
region, but suffice it to say that nobody expects all of these projects 
are necessary or will be built.
    We therefore see natural gas from LNG facilities, as well as from 
interstate pipelines and California production, as being vital sources 
of future supplies of natural gas to California, which are necessary 
for California's economic growth and well being. The California Public 
Utilities Commission and the California Energy Commission are 
coordinated under and guided by the State of California's Integrated 
Energy Policy Report that recognizes the need to embrace additional 
sources of natural gas supply, such as from LNG facilities. The 
Integrated Energy Policy Report further recognizes that energy 
efficiency, conservation efforts and renewable energy are also crucial 
to meeting the energy needs of the State of California, and we urge 
Congress to make energy efficiency, conservation and renewable energy 
the top priorities for the entire nation, as well.

 II. THE ROLE OF STATE GOVERNMENT TO PROTECT THE SAFETY OF ITS CITIZENS

    In addition to helping ensure reliable energy supplies at 
reasonable prices, for more than 80 years, the California Public 
Utilities Commission has had the responsibility under state law for 
making sure that intrastate natural gas facilities in California are 
sited, constructed and operated in a safe manner. The state law in 
California is very clear that the California Public Utilities 
Commission has jurisdiction over proposed LNG facilities in California. 
The California Public Utilities Commission obviously does not have 
jurisdiction over proposed LNG terminals in federal waters, Baja 
California, Mexico or other states.
    In addition, the California Public Utilities Commission has been 
certificated by the United States Department of Transportation (DOT), 
pursuant to the federal Natural Gas Pipeline Safety Act, to inspect all 
intrastate natural gas facilities within California and to enforce the 
federal natural gas pipeline safety regulations, including the 
liquefied natural gas safety regulations promulgated by the DOT. In 
order to become a certificated state agency, in General Order 112-E, 
the California Public Utilities Commission adopted the federal safety 
regulations as part of our own minimum safety standards. The California 
Public Utilities Commission has numerous safety experts within our 
Utilities Safety Branch and throughout other parts of our agency, and 
we receive free training from the DOT.
    The California Public Utilities Commission's perspective on these 
federal safety requirements are consistent with and guided by the 
Pipeline Safety Act of 1979, in which Congress required that LNG siting 
safety standards consider factors such as population density, seismic 
issues, and the need to encourage remote siting. In certificate 
proceedings, where the California Public Utilities Commission considers 
siting and safety issues, we require compliance with the requirements 
under the federal safety regulations.
    The California Public Utilities Commission has a much better 
understanding than the FERC of the unique local conditions involving 
proposed LNG facilities in California, such as seismic issues. In 
addition, in the CPUC's certificate proceedings, interested parties, 
including local entities, will sponsor expert witnesses about the local 
issues and their safety concerns, and the project sponsor must 
demonstrate its safety in the hearing process. Through the inclusion of 
interested parties in the California Public Utilities Commission's 
public hearings, we are able to thoroughly explore the disputed issues, 
especially when parties present expert witnesses which disagree with 
each other. Through cross-examination and responding testimony, all 
parties have a fair opportunity to establish which evidence is the 
strongest on the issues, and the resulting decision by the California 
Public Utilities Commission will be based upon substantial evidence 
provided in our record.
    The process used by the California Public Utilities Commission, 
which allows parties to participate in evidentiary hearings, helps 
educate our Commission as well as the general public on the safety 
issues involved. This also results in much more confidence by the 
public in the California Public Utilities Commission's conclusions, 
which will result from the hearing on the safety concerns, compared to 
a process where disputes of material fact are not set for hearing and 
interested parties are not provided a meaningful opportunity to 
participate. People understand that security measures should not be 
addressed in public sessions. However, there are many parties that 
believe that the other safety issues should be addressed in a hearing 
in California, and the California Public Utilities Commission provides 
them a forum to address these issues.

   III. THE FEDERAL/STATE BALANCE IN THE REGULATION OF LNG FACILITIES

    Rather than consider legislation for exclusive federal 
jurisdiction, Congress should consider legislation for concurrent 
federal/state jurisdiction and not preempt state government. Instead of 
exclusiveness, Congress should consider inclusiveness. There is a much 
greater chance of public acceptance of LNG facilities when the state 
has decisionmaking authority and is included in the process, and when 
there is meaningful public participation in the process as well, than 
when the state and the public are excluded. In order to ensure the 
safety to the general public, the FERC should work together with the 
state agencies to combine the expertise of both levels of government, 
like the FERC and CPUC did in the 1970s and the Coast Guard and States 
Lands Commission in California currently do as they work together 
concerning proposed LNG projects in federal waters off the coast of 
Southern California.
    Under the Deepwater Ports Act, even though the proposed LNG 
terminal would be constructed offshore in federal waters beyond the 
three miles of the state's territorial waters, the Governor of each 
state is provided a veto right. Therefore, the state has a right as a 
decisionmaker in the process and has the ability to require necessary 
conditions for the project to be constructed.
    In sharp contrast, if the FERC were to have exclusive jurisdiction 
under amendments to the Natural Gas Act and could preempt state 
regulation, there would be the anomalous result that the state has 
decisionmaking rights for LNG projects proposed for federal waters but 
has no decisionmaking rights for LNG projects proposed in the state's 
own waters or on the state's own land. Therefore, even if the 
scientific evidence were to establish that the LNG terminal in federal 
waters posed no risk to the safety of the state's citizens, because it 
is more than three miles offshore, the state still would have a say in 
the decisionmaking under the Deepwater Ports Act. If the LNG project is 
proposed in the densely populated area of the state in close proximity 
to the state's citizens, there is no reason why the state should not 
also have a say in that decisionmaking process under the Natural Gas 
Act.
    For these reasons, the California Public Utilities Commission 
recommends that any new legislation or amendments explicitly provide 
for the states' jurisdiction concurrent with the FERC's jurisdiction. 
The states' hearing process will also provide more transparency of our 
work so that the public can become better informed and more fully 
participate in the process. A better understanding of local 
communities' concerns allows us to better identify local safety, 
environmental and public issues and then develop more effective 
avoidance, protection, and mitigation measures since our ultimate 
responsibility is to protect the public, the environment, and our 
economy. The California Public Utilities Commission is confident that 
sufficient LNG facilities can be safely located and constructed on the 
West Coast to meet the market's needs. We therefore respectfully urge 
that Congress not preempt the states' historic police powers to protect 
the health and safety of their citizens from any potential hazards from 
intrastate LNG facilities.
    Although I cannot answer questions specific to the merits of safety 
issues concerning Sound Energy Solutions, because the California Public 
Utilities Commission maintains that it has jurisdiction to decide these 
issues and can do so after a hearing, I'd be happy to answer other 
questions. Again, thank you for inviting me to present the California 
Public Utilities Commission's views today on this important topic.

    Senator Alexander. Thank you very much, Mr. Peevey.
    Mr. Giles.

  STATEMENT OF THOMAS E. GILES, EXECUTIVE VICE PRESIDENT AND 
 CHIEF EXECUTIVE OFFICER, SOUND ENERGY SOLUTIONS, MITSUBISHI, 
                         LONG BEACH, CA

    Mr. Giles. Mr. Chairman and members of the subcommittee, 
Sound Energy Solutions is a subsidiary of Mitsubishi 
Corporation, and we are developing an LNG receiving terminal at 
the Port of Long Beach, California. Once completed, this 
terminal will receive ocean-going tankers carrying liquefied 
natural gas from a variety of Pacific Rim countries. The bulk 
of this LNG will be vaporized into natural gas at the terminal 
and transported to the SoCal Gas system. Some of the LNG will 
be sold as a liquid for the use in LNG vehicles, replacing 
diesel fuel and helping to clean up the air quality in the Los 
Angeles Basin.
    The facility will cost approximately $450 million to 
construct and have a gross annual capacity of 5 billion tons of 
LNG. The approval process that we are engaged in involves 
numerous reviews, permits, and approvals by Federal, State, and 
local agencies. Barring unexpected delays, we anticipate 
beginning construction in early 2006.
    My testimony today will focus on the regulatory process 
that we are involved in.
    The approval process began for us in June 2003, well before 
we filed our formal application with FERC in January 2004. The 
Port of Long Beach acts as the lead agency for the State and is 
working with FERC to produce a joint EIR/EIS environmental 
impact statement report document that meets both the 
requirements of the Federal Government and the CEQA 
requirements of the State. A draft is expected this spring.
    Once the EIS/EIR is finalized, the project will require 
FERC approval and authorizations from a number of Federal, 
State, and local agencies. In order for SES to obtain a lease 
for the property at the port, we must receive regulatory 
approvals from the California Coastal Commission and from the 
Port of Long Beach. In short, there is a very long, 
comprehensive regulatory path that involves FERC, California 
agencies, the Port of Long Beach, with many opportunities for 
the public to have their input.
    Our efforts to proceed have been undermined by the decision 
now in litigation before the Ninth Circuit of the California 
Public Utilities Commission to claim jurisdiction over the Long 
Beach LNG terminal. If upheld by the court, SES will have to 
start anew and to apply to the Commission for a certificate of 
public convenience and necessity before starting construction 
of the terminal.
    SES is caught in the middle of a jurisdictional dispute. We 
filed our application with FERC believing that they had 
exclusive authority to approve the siting, construction, and 
operation of onshore import terminals. FERC has exercised this 
authority for over 30 years, and experts in the natural gas 
legal field told us that FERC was the place we should file. 
Until this litigation is settled, the regulatory path for our 
project and for other projects in this country is in limbo.
    The uncertainty created by this litigation has also had a 
dampening effect on LNG project developers elsewhere in the 
United States. This is because the CPUC has argued that FERC 
has no jurisdiction over LNG facilities anywhere.
    What does exclusive FERC jurisdiction mean to the State and 
local role in the siting of onshore LNG import terminals? Let 
me try to explain by describing what it does not mean.
    It does not mean that FERC has eminent domain authority. We 
must receive approvals under California law before we enter 
into a lease for property of the port. As such, we intend to 
continue the work with the State and local authorities to do 
whatever is necessary to obtain the required permits.
    It does not mean that California lacks a central role in 
the siting process. Under the Coastal Zone Management Act, the 
State must determine that the SES project is consistent with 
the State's federally approved coastal management plan. FERC 
cannot authorize a project without this consistency 
determination.
    It does not relieve the project from full compliance with 
any applicable State or Federal law.
    In order to bring this facility into operation in a timely 
manner, we need regulatory certainty. This jurisdictional 
dispute with California frustrates our ability to proceed with 
the project and begin providing important energy and 
environmental benefits to the State.
    The single most important step that Congress can take in 
this regard is to enact legislation that recognizes the 
important role that States and local governments play in the 
approval process, but also confirms that FERC has the primary 
authority to site liquefied natural gas terminals onshore and 
in State waters, as well as the facilities that deliver gas 
from the LNG terminals to the connections with the natural gas 
pipeline system.
    As this committee and the Congress move forward to enact 
national energy policy legislation, we stand ready to offer our 
perspective and assistance in any way that we can.
    Thank you.
    [The prepared statement of Mr. Giles follows:]

Prepared Statement of Thomas E. Giles, Executive Vice President & Chief 
               Executive Officer, Sound Energy Solutions

    Mr. Chairman and Members of the Subcommittee: Thank you for the 
opportunity to appear before you today to discuss the outlook for 
liquefied natural gas in the United States. Given Sound Energy 
Solutions (SES) current effort to construct an LNG terminal in the Port 
of Long Beach in Long Beach, California, I believe that I bring a 
unique perspective to this debate.
    Sound Energy Solutions is a subsidiary of the Mitsubishi 
Corporation. We are developing an LNG import terminal in the Port of 
Long Beach. Once completed, the terminal will receive ocean-going LNG 
tankers carrying supplies from a variety of sources in the Pacific Rim, 
store the LNG in double-walled, self-contained tankers, and vaporize it 
for transportation into an interconnecting pipeline. The gas will be 
delivered, via this pipeline, to the SoCal Gas system, which will in 
turn, deliver the gas to customers. A portion of the LNG will not be 
re-gasified, but sold as liquid fuel for LNG vehicles in the Port and 
other vehicle fleets in the Los Angeles Basin, which suffers from 
serious air quality problems. The availability of LNG vehicle fuel will 
facilitate vehicle conversion from less environmentally friendly fuels 
such as diesel.
    This facility will cost approximately $450 million to construct, 
and, when operational, will have a gross annual capacity of 5 billion 
tons of LNG. The project approval process, which involves numerous 
reviews, permits, and approvals from federal, state, and local 
agencies, is underway. Barring unexpected delays, we anticipate 
beginning construction in early 2006.
    Last month, members of the full committee hosted a roundtable 
discussion on natural gas issues. I have reviewed the testimony of the 
panelists who participated in the LNG portion of that discussion. It 
appears that there was consensus from the participants in that 
proceeding that LNG will play an important role in America's energy 
future and that Congress should take steps to promote the development 
of LNG infrastructure to facilitate increased imports. I share those 
sentiments.
    My testimony will focus on the current regulatory process that we 
are involved in to construct the SES LNG Import Terminal and offer my 
suggestions as to how Congress can fairly and effectively encourage 
development of facilities like this.

   1. SOUND ENERGY SOLUTIONS PLACES A PREMIUM ON SAFETY AND SECURITY

    SES is serious about safety. There are risks inherent in any energy 
infrastructure project, which cannot be treated lightly. The SES 
Terminal will be constructed in accordance with the highest engineering 
standards for built-in security and safety designs, and is designed to 
anticipate every possible natural or man-made disaster. protect against 
earthquakes, contain potential spills and reduce terrorism exposures. 
We are subject to the safety guidelines and reviews of the Federal 
Energy Regulatory Commission, Department of Transportation, U.S. Coast 
Guard, California Coastal Commission, California Lands Commission, Port 
of Long Beach and numerous departments of the City of Long Beach.
    SES's parent, Mitsubishi, has been active in world-wide LNG trade 
for over 40 years, and today supplies over 50% of Japan's natural gas 
supplies. There are five LNG receiving terminals in Tokyo Bay alone, 
with eight tankers arriving each week. These deliveries of LNG in this 
busy, industrial port are vital to Japan's energy security and have 
taken place without significant incident or interruption since 1969.

                       2. CURRENT REGULATORY PATH

    In June 2003, SES requested FERC to allow SES to pursue its request 
for authority to site, construct, and operate the LNG import terminal 
pursuant to the pre-filing process employed by FERC to implement its 
responsibilities as lead agency National Environmental Policy Act 
(NEPA) review. In July 2003, FERC granted SES's request and announced 
that the Port of Long Beach would be the lead agency for review under 
the California Environmental Quality Act (CEQA), and that the two 
agencies would produce a joint Environmental Impact Statement/
Environmental Impact Report (EIS/EIR) to satisfy the requirements of 
NEPA and CEQA. Thus, when SES filed its application with FERC for 
approval of the LNG project under Section 3 of the Natural Gas Act in 
January 2004, the Environmental Report that accompanied the application 
was based on the coordination, cooperation, and consultation among the 
Staff of FERC and the Port of Long Beach, as well as numerous other 
federal, state, and local agencies that participated in the pre-filing 
process. A draft EIS/EIR for the project is expected to be released 
this spring.
    Long before the NEPA/CEQA process began, SES began meeting with 
community leaders and citizen groups to discuss the need for and design 
of the project. Based on these discussions, a suitable site was located 
in the Port of Long Beach. Following the filing of the application at 
FERC, SES has maintained contact with the community and continued its 
public education and outreach efforts. We have had over 200 meetings 
with local groups. When the draft EIS is released we will participate 
in a series of public hearings with the State and Federal agencies 
involved in permitting the project.
    Once the EIS is finalized, we still face a number of regulatory 
requirements prior to moving forward with the project. In addition to 
approval from FERC under Section 3 of the Natural Gas Act to site, 
construct, and operate the LNG terminal, SES will need authorizations 
from numerous other federal, state, and local agencies. In particular, 
for SES to obtain a lease for the property at the port for the site, it 
must receive regulatory approvals from the California Coastal 
Commission and the Port of Long Beach. In short, this is a long, 
comprehensive regulatory path to project completion that involves the 
FERC, California agencies and the Port of Long Beach, with a multitude 
of opportunities for public input at all levels.

          3. THE NEED FOR REGULATORY CERTAINTY--NOT SHORTCUTS

    Our efforts to successfully navigate the State and Federal 
regulatory process and move forward with the project in a timely manner 
have been undermined by the decision--now in litigation pending in the 
U.S. Court of Appeals for the 9th Circuit--of the California Public 
Utility Commission (CPUC) to assert jurisdiction over the SES LNG 
Terminal. If upheld by the Court, this would require SES to apply to 
the CPUC for a Certificate of Public Convenience and Necessity before 
commencing construction of the terminal.
    SES is caught in the middle of this jurisdictional dispute. We 
filed our application at FERC because we believed that FERC had the 
authority to approve the siting, construction and operation of onshore 
LNG import terminals, which includes the SES terminal in Long Beach. 
FERC has exercised this authority for over 30 years, and a wide body of 
experts in the natural gas legal field recognizes FERC's authority. 
Unfortunately, until the current litigation is settled, the regulatory 
path for the SES project remains uncertain.
    The uncertainty created by the assertion of jurisdiction of the 
CPUC has also had a dampening effect on the interest of project 
developers to invest in and construct new onshore LNG import terminals 
elsewhere in the U.S. This is because the CPUC has argued that the FERC 
has no jurisdiction over LNG facilities whatsoever.
    What does primary FERC jurisdiction mean to the state and local 
role in the siting of onshore LNG import terminals? Let me try to 
explain it by describing what it does not mean:

   It does not mean that FERC has eminent domain authority. 
        Section 3 of the Natural Gas Act does not confer eminent domain 
        authority to SES. Instead, SES must obtain whatever rights are 
        needed to secure the site of the proposed LNG terminal and the 
        sendout pipeline from the Port of Long Beach. Following NEPA/
        CEQA review, SES must receive approvals under California law 
        before it may enter into a lease for property at the Port. In 
        our case, eminent domain is not an option. We intend to 
        continue to work with the state and local authorities to do 
        what is necessary to obtain all required permits.
   It does not mean that the State of California lacks a 
        central role in the siting process. Under the Coastal Zone 
        Management Act, for example, the State must determine that the 
        SES project is consistent with the state's federally-approved 
        coastal management plan. FERC cannot authorize a project 
        without such a ``consistency'' determination.
   It does not relieve the project from full compliance with 
        any applicable state or federal environmental law.
   It does not compromise the joint role that the State plays 
        with FERC in the NEPA process.

                        4. WHAT CAN CONGRESS DO?

    SES hopes to build an LNG import terminal at the Port of Long Beach 
in order to provide Californians with a steady supply of natural gas 
and liquid vehicle fuel for the foreseeable future. In order to bring 
this facility into operation in a timely manner, we need regulatory 
certainty. The jurisdictional dispute with California frustrates our 
ability to proceed with the project and delays important energy and 
environmental benefits that we can provide to California.
    SES therefore requests that Congress take action to provide 
projects like ours with regulatory certainty. Specifically, we ask that 
you enact legislation that recognizes the important role that states 
and local governments play in the approval process and confirms FERC's 
role as the primary authority to site liquefied natural gas terminals 
onshore and in state waters and the facilities that deliver gas from 
the LNG terminals to connections with the domestic pipeline network.
    As this Committee and the Congress move forward to enact national 
energy policy legislation, we stand ready to offer our perspective and 
assistance in any way that we can.
    Thank you.

    Senator Alexander. Thank you, Mr. Giles.
    We have been joined by the chairman of the full committee, 
Senator Domenici, and by Senator Murkowski. Senator Domenici, 
we have been operating under the Domenici rule which means that 
most Senators have not said much in their opening statements, 
but you are welcome to say whatever you would like.
    [Laughter.]

       STATEMENT OF HON. PETE V. DOMENICI, U.S. SENATOR 
                        FROM NEW MEXICO

    The Chairman. Well, you note that whenever we have the 
Domenici rule, the chairman always says something, and I guess 
I am going to substitute and be chairman right now.
    [Laughter.]
    The Chairman. First, I want to thank you for all you are 
doing in the area of natural gas and for conducting this 
hearing today as subcommittee chairman. Your commitment has 
truly added to what we are putting together to make us have a 
better grasp so we can get a better feel.
    We had a natural gas conference, everybody should remember. 
Some of you made it. It was a very large group of those that 
have an interest and see problems in that area. One thing that 
came up was LNG. It kept coming up and it was a very 
interesting panel on LNG. We talked together and thought that 
maybe we should get more information about it, and I think that 
is what we are about here today.
    The committee should also know we are moving toward getting 
a major bill with bipartisan support. We are making some real 
headway with Senator Bingaman, and we will bring you all, one 
step at a time, closer to where we are and where we think we 
will end up and what we will do after that as a committee.
    So that brings us to LNG. There is not any question, Mr. 
Chairman, that chart up there shows that during the next 25 
years, there is a big gap. It is going to be filled by 
something. Our experts that are doing analysis say it is going 
to be LNG. If it is, it is a huge amount. It may be; it may not 
be. But clearly, we need to know here as a committee what are 
the impediments to us moving ahead with LNG and what do people 
who are involved think about it.
    I would hope that, if not today, before we are finished, we 
will get before this committee the true safety issues. There is 
always a ``we do not want it because'' or ``do not put it here 
because.'' But I think we have to understand how much of the 
fear is real and how much of it is not, and then we have to 
proceed to figure out how much of a problem in the future can 
be satisfied by providing an opportunity for LNG to fill the 
gap.
    So you are providing a very valuable commitment and you 
will fuel our committee with some very good information about 
this. I thank you for that.
    To the witnesses, thank you. It is not always easy to do 
what you had to do to come here, and we appreciate it.
    Thank you, Mr. Chairman.
    Senator Alexander. Thank you, Mr. Chairman. Senator Dorgan 
and I appreciate the opportunity you have given the 
subcommittee to be active in this.
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman. In the interest 
of time, I will reserve my comments until I have an opportunity 
to question some of the witnesses, but I appreciate the 
opportunity.
    Senator Alexander. Thank you, Senator Murkowski.
    Mr. Grant.

 STATEMENT OF RICHARD L. GRANT, PRESIDENT AND CHIEF EXECUTIVE 
   OFFICER, TRACTABEL LNG NORTH AMERICA LLC AND DISTRIGAS OF 
                       MASSACHUSETTS LLC

    Mr. Grant. Thank you, Mr. Chairman and members of the 
committee to inviting me to present testimony. I will summarize 
the written testimony that I filed.
    At the onset, I wanted to note that LNG can be an important 
part of the answer to the Nation's energy challenges. At the 
same time, it is not and cannot be a substitute for additional 
supplies of North American natural gas. Without question, we 
will be better off if we develop all of the energy supplies 
available to us.
    As part of our group, we have the unusual perspective of 
being an owner-operator and a developer of LNG facilities, and 
I would like to digress just for a little bit on the safety 
side. I know your next panel will hear about the very important 
issues of safety and security. I want to offer two thoughts 
about safety.
    First, the two recent studies conducted by the Government 
have been deficient in important ways. Both studies have 
avoided discussing the probability of a sudden release of a 
massive amount of LNG. While we all have theories about what 
might happen in the event of a breach, we need to understand 
the probability of such breaches. I personally believe it to be 
quite low, and our impressive safety record, that of the 
industry--the Senator referred to Japan as an example of that 
as well--as well as the rigor of the engineering, the 
shipbuilding and the security processes all tend to confirm 
that.
    Second, we live in a world of comparative risk. At the 
Everett terminal, we take in about 60 shipments of LNG a year. 
Next door to us is a gasoline terminal that probably takes in 
just as many. Across the Nation, there are thousands of such 
terminals and tank storage farms next to houses, schools, and 
businesses. We tend to make sure that we are addressing real-
world risks in an appropriate and measured way.
    On the issue of development, let me switch topics for a 
moment and address questions about the development of LNG as an 
important source of energy for the United States. As you know, 
EIA has indicated that LNG might supply as much as 20 percent 
of the natural gas consumed in the United States in the future. 
Additionally, there are dozens of proposed LNG terminals on the 
drawing board right now. While I think we all agree that not 
all these facilities will be built and it is unlikely that LNG 
will supply 20 percent of this Nation's natural gas in the near 
future, it is safe to say that LNG can provide a growing 
fraction of the energy needed to power the world's largest 
economy.
    We at Tractabel are confident in the future of LNG in this 
country. We own and operate the terminal in Everett and have 
done so for 30 years. And a Tractabel LNG North America 
subsidiary sells LNG delivered into the Cove Point and Lake 
Charles. So we make deliveries in Louisiana and at the other 
terminals throughout the United States as well.
    In addition to all of this, yesterday we announced our 
intention to build and operate an offshore deepwater port for 
LNG deliveries off the Boston coast. While the Everett terminal 
is and will continue to be a crucial facility to meet the 
demand for natural gas in the region, the reality is that 
Everett probably cannot expand its throughput much more.
    And just as a matter of facts, 20 percent of all the 
natural gas that comes into the New England area comes through 
the Everett facility. So it is very important to the region's 
needs.
    Without new means of supplying natural gas to the region, 
New England could face a supply gap approaching 500 million 
cubic feet of gas a day before the end of the decade.
    The new project will be able to provide an average of 400 
million cubic feet of natural gas per day to the New England 
market, enough to heat 1.5 million homes. The estimated cost 
for the project, including ships and a connection to the 
pipeline, is approximately $900 million.
    As you might imagine, we are very excited about the 
project. At the same time, we are cautiously optimistic about 
the project's development phase, including formal project 
application review and regulatory and public consultation and 
evaluation. Many energy projects throughout the Nation have 
languished in this stage. We hope that our project, which is 
excellent for consumers and excellent for the environment, will 
not.
    But let me talk for a moment about these processes. Both 
the good and the bad about LNG is that it is a global business. 
This means the product can be and will be transported to places 
where facilities can be located, permitted, and operated in a 
sensible way. I think there are several improvements to the 
process which are reasonable and on which we should be able to 
agree.
    First, I think there needs to be one agency designated as 
the lead agency for permitting and environmental reviews of a 
natural gas project. It seems to me the historical tradition of 
having FERC be the lead agency is wise. Unfortunately, some 
permitting agencies have chosen not to participate in the FERC 
NEPA review process and instead to wait until after FERC makes 
a decision regarding approval of a project before weighing in 
on the permitting question subject to their authority. Let me 
offer our experience in Florida as an example.
    There we have been working diligently to gain the 
appropriate regulatory authority to construct a pipeline 
between the Bahamas and Florida. Last April, FERC approved our 
EIS, the State made its consistency determination, and the 
local governments all approved the project, everybody working 
together. Unfortunately, the Corps of Engineers decided after 
that to raise questions. The Corps representatives had 
participated in the interagency meetings and discussions, but 
they waited until FERC had acted to raise their concerns, some 
of which included very fundamental elements of the process, 
including potential pathways, tunneling, et cetera. Now we find 
ourselves caught between a dramatic design change requested by 
the Corps and the design that was approved by more than 10 
Federal, State, and local agencies.
    I do not think anyone wants to change Federal or State 
agencies' existing authority over the substantive issues now 
entrusted to them. I know I do not. I want Federal and State 
agencies charged with protecting the environment to be 
aggressive and firm. At the same time, I am pretty sure that 
most Americans believe that decisions, one way or the other, 
need to be made in a timely manner.
    Thank you again, Mr. Chairman and members of the committee, 
for inviting me to present our thoughts.
    [The prepared statement of Mr. Grant follows:]

 Prepared Statement of Richard L. Grant, President and Chief Executive 
Officer, Tractabel LNG North America LLC and Distrigas of Massachusetts 
                                  LLC

    Thank you Mr. Chairman and members of the Committee for inviting me 
to present testimony regarding the role of liquefied natural gas (LNG) 
in the energy marketplace.
    Before discussing LNG's place in the market today--and I'd like to 
emphasize that I view LNG as an important energy source in addition to 
other North American natural gas supplies, not a substitute for them--I 
think it might be helpful to put into the record important facts about 
the technology and fuel itself. These include:

   Liquefaction of natural gas provides us with enormous 
        flexibility because it allows us to store and transport the 
        resource--the energy residing in the natural gas--to places 
        that are not or cannot be fully served by natural gas 
        pipelines.
   Liquefaction allows natural gas to be transported and stored 
        efficiently and economically. It can be re-vaporized and sent 
        to customers via pipeline or remain in liquid form for 
        transport by truck to customers with their own storage tanks.
   Currently there are 113 active LNG facilities in the U.S., 
        including marine terminals, storage facilities, and operations 
        involved in niche markets. Worldwide there are approximately 20 
        LNG export terminals, 45 LNG import terminals and 175 specially 
        designed LNG ships.

                                 SAFETY

    Let me address--and hopefully put to rest--the very important 
issues of safety and security.
    I want to note that LNG is as safe, if not safer, to transport and 
store than most other fuels. It is not explosive, corrosive, 
carcinogenic, or toxic. It does not pollute land or water resources. It 
is not transported or stored under pressure. The Government 
Accountability Office (GAO) study being conducted at the request of 
Members of the other body needs to set its foundation on those facts.
    Like other fuels, LNG has risks associated with its improper 
handling; however, LNG has certain characteristics that minimize some 
of the dangers that may result from mishandling. For example, compared 
to other fuels, LNG is less likely to ignite in a well-ventilated area.
    LNG ships, with their double-hull construction, are among the best 
built, most sophisticated, and most robust in the world. According to 
shipping expert Lloyd's Register, there has never been a recorded 
incident of collision, grounding, fire, explosion, or hull failure that 
has caused a breach to a cargo tank of an LNG ship. In fact, over the 
last 40 years there have been approximately 33,000 LNG carrier voyages, 
covering more than 60 million miles without a single major accident or 
safety problem either in port or on the high seas.
    It is also important to note that in the extremely unlikely event 
that an LNG vessel were involved in an incident that ruptured a cargo 
tank, and the LNG vapor released met with an ignition source, the 
likely consequence would be a localized fire, and not an explosion as 
is often feared.
    With respect to the storage of LNG, there has never been a report 
of any off-site injury to persons or damage to property resulting from 
an incident at any of the LNG import terminals currently in operation 
worldwide, including our Distrigas terminal in Everett, Massachusetts. 
This is due to excellent equipment and facility design, excellent 
safety procedures employed in the industry, stringent design and safety 
codes governing design, construction, and operation of storage 
facilities, and a well trained, highly experienced workforce.
    Our company has always had a deep commitment to safety and 
security, but after September 11th, we developed an even greater 
commitment, increasing our already substantial investments in 
personnel, equipment, and varied services. These investments include:

   Private security personnel
   Enhancements to the perimeter of the Everett Terminal
   Municipal police and fire details
   State Police details
   Investment in two high-powered tugboats. These tugs include 
        state-of-the-art fire control equipment to offer unprecedented 
        marine towing and firefighting capabilities to the Port of 
        Boston.
   Development of detailed security plans with deployment based 
        on Homeland Security and USCG threat levels

    In short, Tractabel is a pacesetter in public-private partnerships. 
The LNG carrier Berge Boston, which is under a long-term charter to us, 
is the first vessel in the world to meet the new International Code for 
the Security of Ships and of Port Facilities certification. Other ships 
in the company's portfolio have since received that certification. In 
addition, our work with the U.S. Coast Guard to bring LNG ships into 
the Port of Boston became the model for the Coast Guard's Operation 
Safe Commerce Project, a nationwide effort initiated after September 
11th to enhance transportation safety and security while facilitating 
commerce.
    I want to offer two final notes about safety. First, the two recent 
studies conducted by the federal government have been deficient in 
important ways. Both studies have simply assumed that in the event of 
an incident a hole of a certain size will appear in one of our ships, 
without discussing the mechanisms that would be needed to produce such 
holes or the likelihood of the presence of such mechanisms. While we 
all have theories about what might happen in the event of a breach, we 
need to understand the probability of such breaches. I personally 
believe it to be quite low, and our impressive safety record, as well 
as the rigor of our engineering, shipbuilding, and security processes 
all tend to confirm that. In short, I think we need to examine the 
probability of an incident more thoroughly.
    Second, we live in a world of comparative risk. At Everett, we take 
about 60 shipments of LNG a year. Next door to us is a gasoline 
terminal that probably takes at least as many. Across the Nation there 
are thousands of such terminals and storage tank farms next to houses, 
schools, and businesses. I am not saying that because of this we need 
to pay less attention to the safety and security of LNG shipments. What 
I am saying is that we need to make sure that we are addressing real 
world risks in an appropriate and measured way.

                            LNG DEVELOPMENT

    Let me switch topics for a moment and address questions about the 
development of LNG as an important source of energy for the United 
States. As you know, the Energy Information Administration has 
indicated that LNG might supply as much as 20% of the natural gas 
consumed in the United States in the future. Additionally, there are 
dozens of proposed LNG terminals on the drawing board right now. While 
I think we can all agree that not all of those facilities will be 
built, and it is unlikely that LNG will supply 20% of this Nation's 
natural gas anytime in the near future, it is safe to say that LNG can 
provide a growing fraction of the energy needed to power the world's 
largest economy.
    We at Tractabel are confident in the future of LNG in this country. 
We own and operate the terminal at Everett, and have interests in the 
LNG flowing through both Cove Point and Lake Charles. A Tractabel LNG 
North America subsidiary sells LNG delivered into Cove Point and Lake 
Charles. We are leaders in the worldwide LNG industry and are involved 
in the process from liquefaction through transportation right up to the 
moment the gas is sent into the pipeline.

                      IMPROVEMENTS TO THE PROCESS

    Let me turn for a moment to the regulatory process. I think there 
are several improvements to the process which are reasonable and on 
which we all should be able to agree.
    First, I think there needs to be one agency designated as the lead 
agency for permitting and environmental reviews of natural gas 
projects.
    For decades, it has been accepted that FERC is generally the ``lead 
agency'' for purposes of environmental reviews required under the 
National Environmental Policy Act (NEPA) for an interstate pipeline 
proposed under section 7 of the Natural Gas Act. Under FERC procedures, 
other federal and state agencies with relevant permitting 
responsibilities are solicited to review the proposed pipeline, make 
suggestions for mitigating environmental impacts, and reach agreement 
on permitting decisions. The process is inclusive, and under a recent 
Memorandum of Understanding, relevant federal agencies are encouraged 
to work together, concurrently and cooperatively, to reach decisions in 
a timely manner.
    Unfortunately, some permitting agencies have chosen not to 
participate in the FERC NEPA review process, and instead to wait until 
after FERC makes a decision regarding approval of a project before 
weighing in on the permitting questions subject to their authority. 
Since these permits are a necessary requirement for pipeline 
construction, even projects that have been approved by the FERC can be 
thwarted by such ``last-minute'' objections. This allows a single state 
agency (or the regional office of a federal agency) to block the 
construction of a federally approved, multi-state pipeline.
    Let me offer our experience in Florida as an example. There, we 
have been working diligently to gain the appropriate regulatory 
authority to construct a pipeline between the Bahamas and Florida. Last 
April, FERC approved our EIS, the State gave its determination of 
consistency with respect to the coastal zone, and the local governments 
all approved the project. Unfortunately, the Corps of Engineers decided 
after all that to raise questions. The Corps representatives had 
participated in all the interagency meetings and discussions, but they 
waited until FERC had acted to raise their concerns, some of which 
included very fundamental elements of the process including potential 
pathways, tunneling, etc. Now, we find ourselves caught between a 
dramatic design change requested by the Corps of Engineers and the 
design that was approved by more than ten federal, state, and local 
agencies through the FERC multi-agency permitting process.
    By clarifying what, until recently, was the accepted practice--that 
FERC is the lead agency for NEPA reviews relating to projects seeking 
authority pursuant to sections 3 and 7 of the NGA--Congress could send 
a powerful signal that citizens deserve to have coherent and 
coordinated environmental decisions.
    As part of this, FERC should be given clear authority to establish 
an administrative schedule for the NEPA review and associated 
permitting decisions by all of the relevant federal and state 
authorities. This would ensure a coordinated and comprehensive approach 
for reviewing proposed projects. It would also avoid the current 
duplicative reviews, reduce the unnecessary delays that sometimes 
accompany getting all necessary authorizations to construct such 
projects, and improve the chances that the government will speak with 
one voice on important permitting decisions.
    I don't think anyone wants to change federal or state agencies' 
existing authority over the substantive issues now entrusted to them. I 
know I don't. I want federal and state agencies charged with protecting 
the environment to be aggressive and firm. At the same time, I am 
pretty sure that most Americans believe that decisions--one way or the 
other--need to be made in a timely manner.

                            CURRENT PROBLEMS

    In addition to the very significant issues related to siting new 
facilities, there are also challenges associated with the regulatory 
programs of existing facilities. Let me give a few examples that I know 
about.
    FERC has asked the Everett terminal to consider meeting current 
siting requirements, which cannot be done short of buying much of the 
land in Island End at a cost of hundreds of millions of dollars, or 
building some kind of high wall dike around the tanks at a similar 
cost. Unfortunately, even if done, neither of these would meet current 
siting regulations. This request is an especially bad idea, one that 
clearly constitutes regulatory overreach and is viewed by the operating 
community, investors, and other stakeholders as precisely the sort of 
agency action that may compromise our ability to meet the Nation's 
growing need for energy.
    There is a mismatch between the incident reporting guidelines 
originating from DOT and those included in DOT's requirements. That 
means that we currently have to perform dual analysis of everything 
that might happen. Unfortunately, FERC has taken it to an extreme, 
asking to be notified of events that are essentially routine 
maintenance, including breakdown of equipment valued at $10,000. The 
dollar threshold on these reports is about the same as our daily 
maintenance budget.
    I want to offer one final thought about the regulatory process. 
Both the good and the bad thing about LNG is that it is a global 
business. That means that the product can be (and will be) transported 
to places where facilities can be located, permitted, and operated in a 
sensible way.

                            THE MARKETPLACE

    Before I close I want to address the marketplace dynamics very 
briefly.
    During the oil embargoes of the 1970s, entire countries (including 
the United States), as well as regions within the United States 
(including New England), discovered the wisdom of diversifying fuel 
sources. At the same time, gas-rich countries without the need for 
additional energy resources began thinking about ways to leverage 
stranded gas reserves. For example, today LNG development is especially 
important for countries like Trinidad, Angola, and Nigeria. In some of 
these countries, most of the natural gas that is produced with crude 
oil is flared because there are few alternatives for usage or disposal 
of the excess gas.
    Our situation now, in which natural gas is priced at $6.00 in the 
United States, and at less than $1.00 in many exporting countries, is 
similar. Just as the global trade in oil means that price differences 
are smaller across regions and nations, and therefore prices of oil are 
less important to a nation's competitiveness, so too will a global 
trade in natural gas ensure that price differences are minimized. As we 
continue to use more natural gas, whether from Canada or elsewhere, 
that should be a benefit to the United States. For example, some of our 
chemical manufacturers have shifted production to areas with lower 
natural gas prices, costing perhaps as much as 80,000 jobs in that 
sector in the last four years. In a world in which natural gas is 
transported more frequently across national borders, that would not be 
necessary.
    On a related note, some have suggested concern about replaying our 
experience with OPEC. The advantage of LNG is that much of accessible 
supply is here in this hemisphere. Rather than worrying, we should be 
developing that supply. LNG's exceptional and exclusive ability to 
transport what was once stranded natural gas from places like Trinidad 
and Venezuela can only help. In short, increased access to global 
reserves of energy helps us reduce our dependence on any one source.
    Thank you again, Mr. Chairman and Members of the Committee for 
inviting me to present our thoughts on the role of liquefied natural 
gas in the larger marketplace. I look forward to answering any 
questions you might have and working with the Committee on these very 
important issues.

    Senator Alexander. Thank you, Mr. Grant.
    Mr. Robinson.

   STATEMENT OF J. MARK ROBINSON, DIRECTOR, OFFICE OF ENERGY 
         PROJECTS, FEDERAL ENERGY REGULATORY COMMISSION

    Mr. Robinson. Thank you, Mr. Chairman, Senators. My name is 
Mark Robinson and I am the Director of the Office of Energy 
Projects at the Federal Energy Regulatory Commission. We are 
charged with the responsibility of ensuring the safety and 
adequacy of about 1,600 hydroelectric projects across the 
country, authorizing the construction of natural gas pipelines 
across the country, storage of natural gas as well, and more 
significantly to this group, the authorization of LNG 
facilities and their security and safety during their operating 
life.
    I am tempted to rebut a number of statements that have been 
made about our process, but I would just like to make one 
statement instead of using my time to do that.
    Any criticism that you receive right now on projects that 
are before the Commission are really criticisms of issues that 
have not been resolved yet. Until the Commission acts, the only 
process that we are in is the development of a record that our 
Commission can look at and make a decision on. So it is a 
little premature at this point to talk about what the 
Commission would or would not do or what findings they may 
make. In fact, the issues that have been raised here today 
about certain projects are issues that were raised because of 
our process and made clear to everyone what those issues are 
and what the possible solutions are. We will continue that 
process and ultimately our Commission will make decisions based 
upon that record, not upon decisions that are made before we 
have the analysis complete.
    Having said that, I would like to move on to what our 
process is right now in the review and siting of LNG 
facilities. We have a process that is built on really three 
areas, and I want to mention each of those. It is how we 
interact with the local community, how we interact with the 
States, and how we interact with other Federal agencies. And I 
will start with the local communities.
    When you are dealing with siting--and I have been doing 
that for a long time--of energy infrastructure, really siting 
starts as a local process. All siting is local. All decisions 
concerning siting are local. You have to put it in the 
perspective of other views, but it boils down to what happens 
on the ground on that site. So you cannot ignore the local 
community. In fact, our process is designed with what we call 
the pre-filing process to seek out the local communities and 
the people in them and who would be most affected to make sure 
that we have a record before the Commission that lets our 
Commission know right down to whose fence is going to be moved 
or whose tree is going to be cut down. All of those aspects go 
into our analysis and presentation to the Commission on what 
the impacts of these projects would be.
    We also take advantage of the knowledge and expertise that 
the local communities have in the areas of safety and security. 
When we do workshops on safety and security for LNG facilities, 
we beg, borrow, and steal to make sure that the local entities, 
the fire and police organizations, are involved in those 
workshops to let us know what their concerns are and what may 
need to be done that are specific to their communities, where 
the hospitals are located, what bridges may be impacted by this 
facility that would keep someone from getting to a hospital, 
how we can mitigate for those measures. All of those things are 
done robustly with the local community.
    The State has a somewhat different role. The State provides 
a level of expertise in some areas that complements what we do 
at the Commission and is very much appreciated. The State has a 
role in terms of deciding whether or not a particular project 
will be constructed through their actions under the Coastal 
Zone Management Act, the Clean Water Act, and the Clean Air 
Act. All three of those provisions are dictated by the State 
and they can conclude in any of those that a project is not 
appropriate and the project cannot be constructed.
    We try to incorporate those agencies through the 
cooperative agency process, which we have used in the SES 
project, by the way, with the Port of Long Beach, which is the 
designated lead agency for the State CEQA responsibilities. To 
see how we cooperate with the States, we have delayed our EIS 
on the SES project for 6 months now while the Port of Long 
Beach does studies that they feel are necessary to complete 
their State review.
    On the Federal level, we deal with other Federal agencies, 
and I want to divide those into two groups. One group of those 
agencies that we deal with is on safety, and there we have a 
very common objective and it works very smoothly with them, the 
Coast Guard and the Office of Pipeline Safety. We work very, 
very well with them because we all have that common goal of 
ensuring the public safety.
    Other agencies we work with have other mandates, everything 
from ensuring that we have the least aquatic environmentally 
damaging project to the one that has the least effect on 
migratory birds. But we incorporate all those and try to make 
sure that we provide the record and provide the forum to make 
their decisions at the same time that we have to make ours at 
the Commission.
    Ultimately, all of that is done in a coordinated fashion 
through administrative process. It works where people want it 
to work and it does not where people do not. In some instances, 
people would like to see things held up and they can use that 
process.
    We have made proposals to this committee on how that can be 
modified with a three-pronged approach to siting that calls for 
clear jurisdiction, one Federal record, and immediate appeal to 
the court of appeals upon those actions. I would ask you to 
consider that in any legislative actions that you may take at 
the conclusion of these hearings.
    Thank you very much.
    [The prepared statement of Mr. Robinson follows:]

  Prepared Statement of J. Mark Robinson, Director, Office of Energy 
             Projects, Federal Energy Regulatory Commission

    Good afternoon. My name is J. Mark Robinson and I'm director of the 
Office of Energy Projects (OEP) at the Federal Energy Regulatory 
Commission. I am here as a staff witness and do not speak on behalf of 
any Commissioner. Our office is responsible for non-federal 
hydroelectric licensing, administration, and safety; certification of 
interstate natural gas pipelines and storage facilities; and, more 
significantly for today's session, authorization and oversight over the 
construction, operation, and safety of Liquefied Natural Gas (LNG) 
terminals. Also, we share security responsibilities with the U.S. Coast 
Guard which has primary responsibility under the Maritime Security 
Transport Act of 2002.
    I want to thank you for this opportunity to speak today and to 
specifically address the status of LNG terminals, the siting of new 
terminals, and how we ensure the safety and security of all LNG 
facilities. I will first address the significance of LNG to our 
Nation's current and future energy security. Next, I will discuss the 
comprehensive, inclusive review process through which the Commission, 
with the assistance of federal, state and local authorities and the 
general public, reviews applications for LNG facilities, and ensures 
the safe construction and operation of approved projects. Finally, I 
will describe some modifications to existing law that I believe are 
crucial to the Commission's ability to authorize necessary LNG 
facilities in a timely and efficient manner.

                         THE IMPORTANCE OF LNG

    Natural gas continues to be the economic and environmental fuel of 
choice in the U.S. This growing trend has created a demand that cannot 
be met solely by domestic or Canadian production. About 96 percent of 
the world's proven natural gas reserves are outside of North America. 
At the same time, the U.S. is consuming about 25 percent of the world's 
annual natural gas production. With projected decreases in conventional 
onshore and offshore natural gas production and the projected decline 
in natural gas imports from Canada through to 2025, growth in U.S. 
natural gas supplies will depend on non-conventional domestic 
production, natural gas from Alaska, and imports of LNG. In order for 
the U.S. to meet its increasing demand for natural gas, LNG must become 
an increasingly important part of the U.S. energy mix. In fact, the 
National Petroleum Council's September 2003 report estimates that LNG 
could increase from less than 2 percent now to as much as 12 percent of 
the U.S. gas supply by 2025. Some estimates are even higher.
    In the Energy Information Administration's (EIA) Annual Energy 
Outlook 2005 report, total demand for natural gas is projected to 
increase at an average annual rate of 1.5 percent from 2003 to 2025. 
EIA estimates that LNG could account for as much as 21 percent of the 
total U.S. natural gas supply in 2025. This equates to a daily 
regasification deliverability of about 17.5 Bcf/d.
    Currently, there are 16 facilities under FERC jurisdiction in the 
continental U.S. Twelve of the facilities are land-based, peak-shaving 
plants that liquefy and store LNG during the summer (low demand) months 
for sendout during winter (high demand) months. The remainder are 
baseload LNG import terminals. Recently, there has been a resurgence of 
interest in expanding existing terminals and in developing new import 
projects to meet the growing demand for natural gas in the United 
States.
    The current capacity of the four existing LNG facilities (Everett, 
Massachusetts; Cove Point, Maryland; Elba Island, Georgia; and Lake 
Charles, Louisiana) totals 3.72 Bcf/d of deliverability. Further, the 
Commission has approved additional expansions to the Elba Island and 
Lake Charles LNG facilities totaling 1.34 Bcf/d in deliverability. The 
Commission has approved three LNG facilities (Cameron, Freeport, and 
Sabine) located along the Gulf Coast. There are an additional eight 
applications for LNG facilities filed at the Commission. We are aware 
of other proposals, some of which are currently in the Pre-Filing 
Process
    It is clear that additional LNG facilities are needed to help meet 
U.S. energy demand. As a regulatory agency, the Commission has no 
authority to develop LNG proposals, but rather can only review those 
projects that are developed by others. We do our best to conduct the 
review of LNG applications filed with us in an efficient and inclusive 
manner, such that projects that the Commission approves are truly those 
that meet the public interest test. However, as I will discuss below, 
the current complex legal framework surrounding the consideration of 
LNG proposals does not encourage, or indeed permit, the rapid, sensible 
review that I believe our energy needs require.

                                 SITING

    FERC's current LNG site review process works to ensure the safety 
of the public and environmental resources. The siting and oversight of 
LNG facilities is governed by a comprehensive scheme of federal 
regulation that guarantees that the FERC and other federal agencies 
will work with state and local regulators, as well as the general 
public, to ensure that all public interest considerations are carefully 
studied and weighed before a facility is permitted, and that public 
safety and the environment are given high priority. We are proud of our 
track record of working with states and with all interested 
stakeholders on these projects, and are committed to continuing to be 
responsive and responsible regulators. The comprehensive nature of the 
FERC's LNG program addresses all siting and operational issues with the 
full participation of the federal and state agencies, and attempt to 
ensure the timely development of necessary energy infrastructure.
    The goal of the FERC's LNG Program is to ensure that projects which 
are found to be in the public interest are constructed and operate in a 
safe and secure fashion. As an integral part of this process, FERC 
staff coordinates closely with other agencies and solicits comments and 
recommendations at numerous points in the review process from federal, 
state, and local authorities, and members of the public, in order to 
obtain the broadest possible range of information and views. This 
coordination often includes preparing joint environmental documents 
with the states as we are doing for the Sound Energy Solutions' Long 
Beach LNG Project in Long Beach, California.
    The process of the selection of a suitable site for an LNG import 
terminal begins with the project sponsor. It involves the consideration 
of environmental, engineering, economic, markets, safety, and 
regulatory factors. The basic criteria for any proposed LNG terminal 
must include:

   deepwater access to accommodate LNG ship traffic;
     The applicant must demonstrate coordination with the local 
            pilot's association, port authority, and the U.S. Coast 
            Guard letter of recommendation process to demonstrate 
            navigation suitability of the channel and tanker.
   proximity to natural gas pipeline systems;
     site selection near major intrastate or interstate 
            pipelines reduces the length of interconnecting pipeline 
            and has a bearing on site suitability and economics.
   safe engineering and design of the proposed facility;
     compliance of the plant design with the DOT federal safety 
            standards is essential. FERC's regulations specify filing 
            requirements.
   sufficient land to comply with the exclusion zone 
        requirements.
     The U.S. Department of Transportation's (DOT) has 
            comprehensive regulations, which in conjunction with 
            National Fire Protection Association 59A LNG Standards, set 
            requirements for exclusion (or safety) zones that must be 
            met by a proposed terminal site. In accordance with 
            Sections 193.2057 and 193.2059, thermal radiation and vapor 
            dispersion exclusion zones are calculated by FERC engineers 
            based on spill scenarios and heat flux levels. These zones 
            minimize the possibility that damaging effects of an LNG 
            pool fire or a flammable vapor mixture extend beyond an LNG 
            plant property boundary.

    Alternative sites considered by the applicant as part of the site 
selection process must also be identified, and the applicant must 
provide the environmental characteristics of each site, as well as the 
reasons for rejecting it. Once the applicant decides on a preferred 
site and files its application, the information is analyzed by the FERC 
staff and relevant agencies. As a result of the review process, the 
site may be rejected, reconfigured, moved or expanded. The entirety of 
the site selection and review process is disclosed to the stakeholders 
through an environmental review, which typically begins with the pre-
filing process and offers multiple opportunities for public input.

                         THE PRE-FILING PROCESS

    Prior to a company's filing an LNG-related application, company 
representatives commonly meet with the OEP staff to explain the 
proposal and solicit advice. These meetings provide prospective 
applicants the opportunity for FERC staff to provide guidance on 
resolving potential environmental, safety, and design issues, explain 
the level of design detail and safety analysis required for a complete 
application, and offer suggestions regarding the application and review 
process. These meetings also provide FERC staff with opportunity to 
strongly encourage the applicants to use the formal Pre-Filing Process. 
The Pre-Filing Process allows the FERC staff to begin the environmental 
review process 7 to 9 months prior to the filing of an application. 
This approach stresses the early identification and resolution of 
issues with the local community, increased federal and state government 
and public involvement, and the development of consensus.
    During this Pre-Filing Process, the FERC staff will engage in 
interagency consultation, public scoping, identification of 
alternatives (including, alternate locations) and the collection of 
site-specific data. With the assistance of the FERC staff, state and 
other federal agencies, and other stakeholders, the applicant will 
develop preliminary versions of the required environmental resources 
reports. The resource reports consider the impact of the project on 
geological resources; soils and sediments; water resources; vegetation; 
wildlife and aquatic resources; threatened, endangered and other 
special status species; land use, recreation, and visual resources; 
socioeconomics; cultural resources; air quality and noise; reliability 
and safety; and cumulative impacts. These draft documents are filed 
with the FERC and made available for public review. These reports 
provide the baseline information necessary to begin preparation of the 
draft EIS.
    For new LNG facilities (and major expansions of existing sites) the 
EIS will also include a thorough study of potential impacts to public 
safety. The FERC also develops a separate Cryogenic Design Review, for 
each facility, which includes detailed technical information, as well 
as conclusions and recommendations regarding a proposed project, to 
assure the safe design of the proposed facilities and system 
reliability. Our report, the Cryogenic Design and Inspection Manual, 
summarizes the design, process and equipment proposed at the LNG 
facility and includes the staff's conclusions and recommendations 
concerning the proposed project that ultimately appear as conditions in 
any FERC order approving the project.
    The preparation of the draft EIS is a cooperative effort among FERC 
staff and other federal and state agencies. Typically, cooperating 
agencies would include the U.S. Coast Guard, the Army Corps of 
Engineers, the U.S. Fish and Wildlife Service, NOAA Fisheries, and the 
relevant state agencies responsible for the issuance of permits under 
the Clean Water Act, Clean Air Act, and Coastal Management Zone Act. 
However, many other federal and state agencies, non-governmental 
agencies, and the general public are contacted and consulted throughout 
the process. As an example, our work on the Long Beach project includes 
the Port of Long Beach, the California Energy Commission, and the South 
Coast Air Quality Management District among others.
    Although FERC has jurisdiction over proposed LNG import projects, 
certain permits, approvals, and licenses are the responsibilities of 
other federal and state agencies. There is nothing unusual about an 
energy project simultaneously being subject to various regulatory 
requirements promulgated by different other federal and state 
authorities. To the extent we can, it is our practice to coordinate our 
regulatory requirements so that we accommodate those of other 
authorities. To this end, we hold focused meetings with all relevant 
federal and state agencies to identify concerns and develop mitigation.
    Again, LNG import projects are also subject to the authorities of 
state agencies that have been delegated authority to act pursuant to 
federal law, including state agencies that have been delegated duties 
with respect to the Coastal Zone Management Act, Clean Water Act, and 
Clean Air Act. Our goal is to work cooperatively with state and local 
authorities to protect the safety of residents and to minimize adverse 
environmental impacts. Cooperation among federal, state, and local 
authorities is needed to assess the project proposals adequately and to 
expedite access to LNG supplies to meet the nation's critical energy 
needs. We encourage both federal and state agencies to become 
Cooperating Agencies in the preparation of the environmental documents.
    As I mentioned, the Pre-Filing Process depends on and seeks out 
stakeholder involvement. Therefore, we must ensure that information 
needed for meaningful participation is readily available. We require 
the applicants to provide informational resources to stakeholders by 
way of newsletters, websites, and focused community meetings. 
Similarly, we will send a variety of notices to affected stakeholders 
advising them of how to participate in the FERC process and the 
progress of the environmental review. This cycle continues through the 
life of the review process. A successful Pre-Filing Process results in 
a complete application with the full integration of the issues for all 
state and federal authorities.

                          POST-FILING PROCESS

    Once scoping is complete and the applicant's resource reports have 
been revised to reflect the identified issues, the applicant is ready 
to file its application with the FERC. When the filing is made, 
interested parties are given another opportunity to become involved in 
the FERC's proceeding.
    After FERC staff reviews the information provided by the applicant, 
revising it as necessary to thoroughly consider all relevant issues and 
provide relevant recommendations, the draft EIS is normally issued 
within 4 months of the filing (if the pre-filing process was 
successfully completed). The draft EIS is issued for a 45-day review 
and comment period. We will also hold additional public meetings near 
the site, both to solicit comments on the draft EIS and to further 
address any remaining issues.
    All of comments on the draft EIS are reviewed. Changes to the 
document are made as needed, and a final EIS is produced. The final EIS 
will specifically address all of the comments received during the 
comment period. Our typical schedule provides for completing the final 
EIS approximately 4 months after the issuance of the draft.
    Through this effort, the FERC staff is committed to producing an 
EIS that addresses all the issues and provides for mitigation to avoid 
or reduce impacts. We also strive to develop a record that enables the 
other federal and state agencies to avoid duplicative reviews. And, we 
try to provide for efficient decision making by facilitating the 
issuance of other state and federal permits concurrently with the FERC 
action rather than sequentially.
    Finally, the complete record for the project is presented to the 
FERC Commissioners for a decision. One further opportunity for public 
participation is available after the FERC makes its decision--parties 
to the proceeding may seek rehearing. In total, our process provides at 
least seven formal opportunities for public input, and almost 
continuous opportunities for interaction with FERC staff.

                     POST-AUTHORIZATION MONITORING

    After a project receives FERC approval and meets all pre-
construction conditions required by the order, the terminal owner is 
authorized by a separate document to construct.
    During the construction period, which typically takes 3 years, the 
project sponsor is required to file monthly reports summarizing 
construction activity, the status of any outstanding project permits, 
an updated project schedule, planned activities for the next reporting 
period, and details of compliance with environmental conditions. 
Depending on the phase of construction, OEP staff inspects the project 
site as frequently as needed throughout the entire construction 
process. These inspections allow us to ensure that the approved 
facility design is being followed. In all cases, FERC staff monitors 
the project at regular intervals between site visits with periodic 
photo-documentation of the construction. Staff inspections during 
construction use a checklist to verify compliance with the Commission 
Order; specific recommendations from the cryogenic design review; 
equipment fabrication, inspections and testing; instrumentation, hazard 
detection and hazard control systems; changes in design as the facility 
progresses from the preliminary to final design phase; environmental 
conditions and mitigation measures; and the facility's site-specific 
soil erosion and sedimentation control plan.
    Prior to the commencement of service by a LNG facility, the project 
sponsor must again seek written approval from the Commission. Only 
after complying with all pre-operating conditions listed in the FERC 
order would a company receive approval to begin operation.
    FERC oversight continues after an LNG project goes into operation. 
Each LNG facility under FERC jurisdiction is required to file semi-
annual reports to summarize plant operations, maintenance activity and 
abnormal events for the previous six months. In addition, our staff 
periodically conducts inspections (focusing on equipment, operation, 
safety, and security) of each facility throughout its operational life. 
About half of the total LNG facilities are inspected every year with 
special inspections occurring on an as-needed basis. Following the 
first inspection after the commencement of operations, the facility's 
inspection manual is updated to incorporate any authorized design 
changes or facility modifications since the original manual was 
prepared. This process provides an ``as-built'' manual for use in 
future inspections.
    The inspection manual provides a permanent record documenting the 
operating history of the facility and is continually revised to reflect 
any facility changes and operating problems. The revised document 
includes FERC staff's conclusions and recommendations from the current 
inspection and discusses specific operating problems and facility 
modifications. The company is required to address all recommendations 
and outstanding issues raised by the FERC.

                          SAFETY AND SECURITY

    Safety and security of the terminal at the proposed site is 
essential. Every aspect of the staff's engineering and siting review 
and its coordination with the U.S. DOT and U.S. Coast Guard is geared 
toward assuring that a facility will operate safely and securely. In 
recognition of the importance of the LNG industry as part of the 
nation's energy infrastructure, and the FERC's increased focus on LNG 
safety and security, we formed a new branch within the Office of Energy 
Projects devoted to those issues. The LNG Engineering Branch is 
responsible for managing and enhancing the FERC's existing LNG 
inspection program and ensuring cooperation with other relevant 
agencies. This branch performs a number of significant functions 
including: reviewing the detailed cryogenic design review of proposed 
LNG terminals; conducting the staff's cryogenic technical conference; 
calculating the proposal's compliance with DOT's exclusions zones for 
the site; coordinating the review of marine safety and security issues 
with the U.S. Coast Guard; and conducting construction and operational 
inspections. We continually develop the considerable expertise that 
exists on our staff and to expand our efforts.
    While FERC is the lead Federal federal agency under NEPA to analyze 
the environmental, safety, security and cryogenic design of proposed 
facilities,two other Federal federal agencies (the Coast Guard, and the 
Research and Special Programs Administration of DOT) share 
significantly in the oversight of the safety and security of LNG import 
terminals. The Coast Guard has authority over the safety and security 
of LNG vessels and the marine transfer area, as well as the entire LNG 
facility. The DOT has authority to promulgate and enforce safety 
regulations and standards for the onshore LNG facilities beginning at 
the valve immediately before the LNG storage tanks.
    In February 2004, the FERC, Coast Guard, and DOT entered into an 
Interagency Agreement to assure that they will continue to work in a 
coordinated manner to address the full range of issues regarding safety 
and security at LNG import terminals, including the terminal facilities 
and tanker operations, and to maximize the exchange of information 
related to the safety and security aspects of the LNG facilities and 
related marine operations. The Interagency Agreement ensures a seamless 
safety and security review by the three Federal federal agencies from 
the moment the tankers enter U.S. waters until the vaporized LNG enters 
the pipeline system.
    Overall, the safety record of the industry is commendable. During 
the approximately 30 years of operating history of the four existing 
LNG terminals in the continental U.S., there has never been an LNG 
safety-related incident where LNG was spilled or otherwise mishandled, 
resulting in adverse effects to the public or the environment. 
Similarly, no shipping incidents have occurred during the 50 years of 
operation that resulted in a lost cargo. However, an operational 
accident occurred in 1979 at the Cove Point LNG facility in Lusby, 
Maryland, when a pump seal failed, resulting in gas vapors entering an 
electrical conduit and settling in a confined space. When a worker 
switched off a circuit breaker, the gas vapors ignited, resulting in 
heavy damage to the building and a worker fatality. Lessons learned 
from this accident resulted in changing the national fire codes, with 
the participation of the FERC, to ensure that the situation would not 
occur again. The FERC design review and inspection process contributes 
to the safety record.
    Further, most of you are probably familiar with the explosion that 
occurred at Sonatrach's Skikda, Algeria LNG liquefaction facility in 
January 2004. Findings of the accident investigation suggest that a 
cold hydrocarbon leak occurred and was introduced to the high-pressure 
steam boiler by the combustion air fan. An explosion developed occurred 
inside the boiler fire box which subsequently triggered a larger 
explosion of the hydrocarbon vapors in the immediate vicinity. The 
resulting fire damaged the adjacent liquefaction process and separation 
equipment.
    After the accident, FERC and DOE engineers inspected the site to 
gain first-hand knowledge of the situation. There are major differences 
between the equipment involved in the accident in Algeria and that of 
LNG facilities in the U.S. High-pressure steam boilers that power 
refrigerant compressors are not used at any LNG import facility under 
FERC jurisdiction. However, as a result of the sequence of cascading 
events at Skikda, we began a technical review of the facility design at 
each existing and proposed jurisdictional plant to identify whether 
similar situations are possible and that these areas are adequately 
equipped with hazard detection and emergency shutdown devices. We are 
also reviewing the designs of new LNG plants to determine the potential 
failure modes that may be similar to the events at Skikda. Further, the 
safety section of each EIS includes a recommendation that a technical 
review be conducted by the applicant to identify the proximity of 
combustion/ventilation air intakes to potential hydrocarbon releases, 
and to ensure that adequate detection and shutdown are provided.
    As part of our efforts to enhance the LNG program, the Commission 
contracted with ABS Consulting for the purpose of providing guidance on 
modeling methods to be used by FERC staff in the NEPA review of 
proposed LNG import facilities. The modeling methods we adopted for use 
as a result of the study were selected to provide a measure of 
conservatism, meaning they tend to overestimate the consequences from 
an LNG release. The ``ABSG Report'' was issued for public review in May 
2004, and we made certain changes to the model based on the comments we 
received.
    In December 2004, the DOE issued the Sandia Report which is a 
comprehensive study of potential spills from LNG tankers. I should 
reemphasize that no tanker spills have occurred on water like the ones 
modeled by Sandia. FERC engineering staff provided technical review of 
various drafts leading to the final report, and it now applies the 
results in conjunction with the consequence methodology from FERC's 
ABSG Report to site-specific hazard assessments. The results of the 
Sandia Report also serve to buttress the staff's hazard modeling used 
in FERC's LNG authorization process. While the Sandia experts used 
different methodologies, the hazard ranges in the report are consistent 
with FERC's conservative assumptions.
    Essentially, FERC's model set a foundation upon which to build as 
we go forward. We will continue to study the science regarding LNG 
spills and further refine our work in the future. The A site-specific 
assessment for each LNG import facility is revealed included in our 
EISs. Our model ensures that we are using standardized methodologies as 
we perform site-specific analyses of each facility proposed before the 
Commission. Credible worst-case scenarios, based on the most recent 
information available, will be included in the NEPA documentation 
issued by the Commission. Though the spill analysis is a necessary part 
of our review, our overarching commitment is to ensure that the design 
and operation of each facility is such that the facility will operate 
safely. Refining our model is an example of how we are continuously 
evaluating our review and inspection programs to ensure that the 
highest levels of safety are maintained.
    As part of the detailed cryogenic technical review conducted in 
connection with the environmental analysis, the staff performs a 
careful and detailed evaluation of numerous studies and reports that 
the applicants are required to complete. These include:

   engineering design and safety concepts and the projected 
        operational reliability;
   seismic analyses;
   hazard detection systems;
   fire protection evaluation;
   threat and vulnerability assessments;
   LNG ship transit simulations and channel capacity studies;
   Operation and Maintenance manuals;
   Emergency Response and Evacuation Planning; and
   Security Manual, Transit Operations Manual, and the 
        Emergency Response Manual.

    A significant aspect of the FERC's security review is conducted in 
consultation with the U.S. Coast Guard. Security Assessments of 
individual terminal proposals are being conducted by several Coast 
Guard field units through security workshops with Federal, state and 
local law enforcement and port stakeholders. FERC engineering staff 
provides technical assistance in the workshops on marine spill issues. 
The goal is for initial security measures and resource requirements to 
be identified by the Coast Guard for inclusion in the FEIS.
    The Coast Guard and FERC have agreed that future LNG terminal 
applicants, at the time they begin their Pre-Filing Process, or file 
the application, whichever comes first, must also submit a Letter of 
Intent (navigational suitability review) under 33 CFR Part 127, and 
commence a security assessment of their proposal that includes the 
items required by 33 CFR Part 105 [which implemented the Maritime 
Transportation Security Act of 2002]. Where specific security concerns 
are raised, we have conducted a closed-door detailed technical workshop 
on the site-specific security issue with all relevant stakeholders and 
federal, state and local expert agencies to explore and resolve the 
security concerns. Discussions may include facility security plans, and 
both plant and ship personnel restrictions, limitations and 
supervision.

                    RECOMMENDED LEGISLATIVE CHANGES

    Notwithstanding the inclusive, thorough nature of the Commission's 
LNG review process, timely consideration of LNG projects can be made 
impossible as a result of the complex, inter-related body of law 
governing the participation of federal and state agencies in the 
process. For example, state agencies generally have the authority to 
condition or veto LNG projects under the Clean Water Act, and can also 
preclude a project by making an inconsistency finding under the Coastal 
Zone Management Act. Federal agencies may exercise authority under a 
number of statutes including the Endangered Species Act, and may have 
their own responsibilities under law including the Clean Water Act. 
Thus, Commission consideration of the merits of an LNG project is only 
one of many steps toward obtaining final approval of a proposal. Even 
if the Commission finds a project to be in the public interest, other 
agencies may disagree.
    In addition to this substantive problem, the procedures by which 
state and federal agencies exercise their interlocking authorities can 
be so disparate that, regardless of the merits of a proposed project, 
conflicting regulatory schedules and attendant delays can operate to 
seriously hamper or even kill a project. I discuss below a three-
pronged approach that I believe would go a long way toward 
rationalizing the LNG review process. The legislation underlying the 
FERC's regulations should be amended to allow the following:

Clear Jurisdiction
    The Commission has interpreted section 3 of the Natural Gas Act as 
conferring exclusive jurisdiction on the Commission with respect to the 
siting, construction, operation, and safety of LNG facilities onshore 
and in state water (as distinguished from those offshore facilities 
that are within the Coast Guard's jurisdiction), while recognizing the 
states' authority to implement other federal laws (such as the Clean 
Water Act and the Coastal Zone Management Act) that may relate to the 
approval of LNG projects. There are no legislative, judicial, or 
administrative statements to the contrary, although the U.S. Court 
Appeals for the Ninth Circuit is currently considering a challenge by 
the California Public Utility Commission to the exclusivity of the 
Commission's authority. It would be extremely helpful if Congress were 
to confirm the exclusive nature of the Commission's jurisdiction, in 
order to forestall further debate and judicial review. This would not 
mean that other Federal and state agencies with permitting 
responsibilities (e.g., states acting under CZMA, or Clean Water Act--
Section 401) would lose authority, but rather would be a recognition of 
the Commission's paramount role in this area of foreign commerce, and 
would assist in clarifying that other agencies with roles in the LNG 
siting process should not seek to expand the nature of their 
authorities.

One Federal Record
    Where many agencies have roles to play, the perception by those 
agencies that each needs to conduct its own review process under its 
own schedule and, where necessary, subject to its independent 
environmental review, can lead to inordinate delay. To avoid this 
problem, Congress could make clear that the Commission is the lead 
agency for all environmental reviews required or permitted by federal 
law regarding FERC-jurisdictional LNG projects, and that federal and 
state agencies must, in performing their reviews, cooperate with the 
Commission by following a schedule established by the Commission as 
lead agency. Failure of an agency to take any required action within 
the established time frame would result in the assumed waiver of that 
agency's authority. This measure would add predictability to the LNG 
review process, allowing applicants and other stakeholders more 
certainty as to when they could expect decisions to be rendered. It 
would also prevent agencies from using delay as a tool for obtaining 
substantive concessions with respect to a project.

Unified Judicial Review
    Under current procedure, Commission decisions on LNG projects may 
be appealed only to the U.S. Courts of Appeals. However, related 
decisions by other agencies may be subject to patchwork of review, 
including reviews within state and federal agencies, review by state 
courts (as in appeals of Clean Water Act certifications), and by 
federal courts. This unevenness can not only cause delay, but also 
raises the possibility of different tribunals reaching conflicting 
results regarding one project. To avoid these problems, Congress could 
provide that all appeals regarding agency decisions with respect to an 
LNG project can be appealed, in one consolidated proceeding, to the 
U.S. Courts of Appeals, following final action by the Commission.

                               CONCLUSION

    LNG is a crucial and growing part of the nation's energy mix. The 
FERC's current LNG review process is designed to ensure the safe, 
reliable construction and operation of LNG facilities, based on 
extensive input from all affected parties. I believe that the 
comprehensive and inclusive federal regulation of these facilities, 
coupled with the FERC's commitment to the public interest and to 
cooperation with state and local authorities, is sufficient to ensure 
that the needs of all affected parties are given due consideration. 
With the legislative changes that I have proposed, the Commission and 
other interested entities will be able to review and act on LNG 
proposals in an effective, rational way, so that the United States will 
be able to build the energy infrastructure that it needs.

    Senator Alexander. Thank you very much.
    We will follow a 5-minute rule on questions and answers in 
hopes that we can have more that way.
    Mr. Robinson, is it your position that FERC has exclusive 
jurisdiction over the siting of an LNG terminal or that because 
of the Coastal Zone Management Act, the Clean Water Act, and 
the Clean Air Act, a State may veto your decision about 
locating an LNG terminal?
    Mr. Robinson. I hesitate to use the term ``exclusive 
jurisdiction'' because it implies something that I think is 
sort of the nut of your concern. Yes, I do believe that we have 
exclusive jurisdiction and I hope that the Ninth Circuit 
upholds that. That, however, in no way means that the State 
does not have their role under other Federal statutes to take 
whatever action that they want to protect their coastline. They 
can deny the Coastal Zone Management Act permit, and that 
denies the ability to construct an LNG terminal.
    Senator Alexander. So you are saying that those are 
separate questions, and you did recommend to our roundtable, if 
I remember right, that Senator Domenici hosted that you have 
exclusive authority under section 3 of the Natural Gas Act to 
site onshore LNG terminals. But what you are saying is even if 
you had that, California, for example, or Massachusetts or 
Rhode Island could come along and deny the builder the right to 
go ahead with a terminal because of the State's decision that 
the Coastal Zone Management Act, for example, was not complied 
with. Is that correct?
    Mr. Robinson. Absolutely. When you have distributed 
decisionmaking on the siting process, you end up with no 
decision. We are trying to make sure that we keep the focus on 
the Commission as the siting authority. That does not mean that 
they have exclusive authority to determine whether or not a 
project will be constructed, just that everybody plays in one 
game for the siting process, and that is at FERC.
    Senator Alexander. Mayor Cicilline, let me ask you and the 
case that you are concerned about. Have you been a part of the 
Coastal Zone Management Act process and the Clean Water Act 
section 401 water quality certification, the Clean Air Act, 
which would appear, if the State agreed with you, to deny the 
company a right to build an LNG terminal?
    Mr. Cicilline. It is my understanding, again with respect 
to those State provisions, that this particular proposal, the 
application that was originally filed with DEM in Rhode Island, 
has been withdrawn and FERC is proceeding under a different 
provision. But the issues that would be of concern to the local 
community that I have raised in my testimony remain. That 
ultimate decisionmaking by FERC with a so-called veto authority 
by the State does not respond to the scientific concerns we 
have, the safety concerns that are again raised at the local 
level.
    Senator Alexander. But, Mr. Robinson, that is different 
than what you just said. Is it not?
    Mr. Robinson. I do not believe so, sir. I think what he is 
saying is that even though the State--I think the mayor did 
recognize the State has authority to veto these projects 
through those acts. The concerns of the local community that he 
has expressed are exactly identical to the concerns that we 
have and are analyzed in our process, which is ongoing and 
benefits from the local community expressing those concerns to 
us and pointing out to us where they think we need to do more 
work.
    Senator Alexander. So, Mr. Robinson, would you say that 
while you would like for FERC to have exclusive authority over 
the siting of an LNG terminal, that the question of whether 
there is going to be an LNG terminal in someone's back yard 
cannot be solely determined by FERC because the Coastal Zone 
Management Act, the Clean Water Act, and the Clean Air Act give 
State or local agencies a chance to deny a permit that is a 
necessary permit?
    Mr. Robinson. That is absolutely true under existing law 
and it would be true under the proposal that we have put before 
this committee to modify that law.
    Senator Alexander. So are you saying that in that sense 
would that mean there is a concurrent decision to be made 
between State and local officials about whether there 
ultimately is an LNG terminal at any given place?
    Mr. Robinson. Well, we are trying to get concurrent 
decisions made through the proposals that we have made to this 
body where everybody would have to act in a timeframe set by 
the Commission, but not concurrent siting decisions.
    Senator Alexander. I see.
    Now, let me ask in the half-minute I have left, I notice 
Senator Feinstein was interested--I am interested too--in the 
offshore siting for LNG terminals. There are 31 active 
proposals as of December. Mr. Grant, you mentioned an offshore 
proposal. Can you or others briefly tell us about whether the 
technology exists for that? Are those logical things to 
consider, or is this something far out in the future?
    Mr. Grant. Well, it is a timely question since we filed 
about 8:30 this morning.
    [Laughter.]
    Mr. Grant. I think that they serve different purposes. 
Onshore and offshore terminals serve different purposes. The 
technology in the offshore is being proved up. I think there 
are some good avenues. We believe the technology is sufficient 
to serve the purposes of that offshore terminal. But let me 
differentiate between what happens in Everett, which is an 
onshore terminal, and the offshore.
    One is when I am in Everett, if we have got gas in the 
tank, if there is LNG in the tank, I know I have got LNG in the 
tank to serve my customers. I do not have to worry about 
berthing out there. The supply is in the market area. At our 
Everett terminal, we send out between 10,000 and 15,000 
truckloads of liquid every year. Offshore terminals are not 
going to bring liquid into the market, and there are 50 or so 
LNG tanks in the New England area. The one in Providence is 
actually an active LNG terminal that we truck to today, and 
that is how it gets filled and provides gas supply. So you have 
got secure supply onshore. We tie into different pipelines 
there. We tie into a power plant next door to us which would 
not be available offshore. So that is the mode. It is in the 
market area, a much more reliable supply.
    The offshore can be a supplement to those type of things. 
In tandem with onshore terminals, it can be good. For certain 
applications it can be good.
    Senator Alexander. How far offshore is it?
    Mr. Grant. We are about 10 miles off the coast of Boston. 
This is not an over-the-horizon type of thing. Obviously, the 
discussions we have had preliminary with a abutting communities 
have been we can see your ships and that is a bad thing. So I 
think whether you are onshore or offshore, there are going to 
be issues relating to it. But we believe enough in the 
technology to go forward with the project, but I do not think 
it provides the same things that an onshore does.
    Senator Alexander. Thank you. We can come back to that.
    Mr. Peevey. Do you want some other comments on that?
    Senator Alexander. Well, I would like to but I would like 
to give Senator Landrieu and Senator Murkowski a chance, so I 
will ask for more comments when it comes back to me.
    Senator Landrieu.
    Senator Landrieu. Thank you. I appreciate the chairman's 
line of questioning about the clarification just for the record 
about what FERC's view is of their authority for siting and the 
role of local governments, which is very important whether it 
is a county or whether it is a parish or whether it is a city 
or whether it is a region. I appreciate the chairman pressing 
on that issue because whether you are a supporter or an 
opponent, that is a very important piece of information for us 
to agree because regardless, I believe we should have at least 
a clarity of the regulation. And since I am a proponent of the 
industry, but a proponent hopefully in a balanced approach, to 
be very for environmental concerns and safety concerns, but 
also adding supply, this hearing will help us to get to the 
bottom of that.
    Another thing that this hearing will help us get at the 
bottom of is this question. Just for the record--I am sure 
people who are experts know this, but I need to be reminded--
how many current offshore facilities do we have operating in 
the world today? Offshore.
    Mr. Giles. Zero.
    Senator Landrieu. Zero. Okay. So we are talking about an 
experience of several decades, in which my State has 
participated, of onshore liquefied natural gas. We have a lot 
of experience whether it is in our own country, in Japan, other 
places. But we do not have one offshore terminal operating 
right now.
    So when people raise questions, even though my State is 
most certainly open to the concept--and we actually have some 
permitting processes underway, moving forward--I think we do 
have an obligation to see if the technologies that people are 
speaking to us about, whether it is an open system or closed 
system, the way the water and the cooling processes work for 
the technology required to move gas from a gaseous state to a 
liquid state and back is worth some review whether it is by 
this committee, who are not environmental experts but obviously 
represent constituents that have great concerns, as well as 
industry, that needs some answers so that we can move forward 
and not just be spending our time in court and wasting a lot of 
taxpayers' money.
    So maybe, Mr. Chairman, if any of the panelists here or in 
the next panel could talk about how we assure people that these 
new technologies offshore do not affect our fisheries, coral 
reefs--I do not know. We have lots of treasures everywhere 
besides the need to get these things up and running. We do not 
have many options.
    And let me just put on my producer's hat for a minute. They 
will not let us drill off the coast of Florida for gas that 
sits right off the coast of Florida, but I have to sit here and 
listen to the taxpayers in my State and in Alaska pay to run a 
pipeline from the Bahamas to Florida when you can run a 5-mile 
pipeline right off the coast of Florida and give Florida the 
gas it needs. And I have got to sit here and go back to my 
State and say, by the way, I know everything is expensive, but 
you also now have to pitch in to run a pipeline from the 
Bahamas to Florida.
    Mr. Chairman, I am going to submit for the record--I know I 
am supposed to be asking a question.
    [Laughter.]
    Senator Landrieu. But since I am a senior member now of 
this committee, I am going to submit for the record, just for 
this record, in order of producing States that produce energy 
and consume energy--I am going to lay this down again in this 
record. There are only 11 States that produce more energy than 
they consume. They are Utah, Colorado, Montana, North Dakota, 
Oklahoma, Kentucky, New Mexico, Alaska, West Virginia, 
Louisiana, and Wyoming being the grand prize winner. There are 
five States that continue to consume mountains of energy, huge 
amounts of energy, but refuse to produce it any way. No solar, 
no wind, no oil, no gas, no coal, no nuclear, but expect the 
rest of us to produce it. And they are California at the top of 
the list, New York, Florida, Ohio, and Illinois.
    Now, let me say before these Senators come call on me this 
afternoon----
    [Laughter.]
    Senator Landrieu. I know that all of these States have 
industry and petrochemical corridors and that some of these 
States also are highly populated States. But this is based on 
per capita.
    The other thing I want to submit for the record is this, 
Mr. Chairman, is sort of where the permitting is clustered 
right now. I hope that you can see. You can see my point. It is 
the same places that are doing all of the drilling and 
producing and running the pipelines now.
    Again, we are not saying this to complain. We are trying to 
give the country what it needs to be competitive. My industries 
are suffering the worst. You think I make money just on 
producing, but my industries are hurting, ammonia, 
petrochemicals. We need more gas.
    But let us get about being clear that we do not have a lot 
of experience in offshore, get the science we need, clarify our 
regulations, and then try to do what is the fairest, which is 
to try to get some regional distribution of this and reward, if 
you will, or at least compensate or acknowledge, if reward is 
too strong of a word, the communities that are siting these 
plants at some manageable risk. Maybe, Mr. Mayor, it is not 
your community. I am not saying it should be, but at least 
those that can--more open space, not populations--at least get 
some compensation.
    That will do for my soapbox. Thank you, Mr. Chairman.
    [Laughter.]
    Senator Alexander. Thank you, Senator Landrieu.
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman, and thank you, 
Senator Landrieu.
    I love being part of a discussion with others from 
producing States that understand what the issues are. I am 
sitting in a State up north that is chock-a-block full with 
natural gas and opportunity to bring energy to the rest of the 
lower 48. And we are trying to figure out now, we are working 
through the FERC, we are making some headway here on a 3,500-
mile pipeline. But we have also got opportunities with LNG. We 
have been providing a very small amount of LNG to Japan for the 
past 30 years. But would it not be nice if we could provide 
some of that to the rest of the United States?
    There is a frustration level I think amongst the producing 
States that we are prepared to help. We want to help. We want 
to help in a big way in Alaska, but we need somebody to receive 
it on the other end. And we have got some challenges up north 
as it might relate to LNG and getting it to the lower 48.
    But my questions this afternoon will be to--if we are able 
to work out the issues, if we are able to provide for LNG to 
come down through a pipe, as our legislation last year would 
allow for, is there an opportunity on the receiving end, the 
west coast end?
    So my question is probably directly to you, Mr. Robinson. 
Are there currently any regasification terminals that are 
located on the west coast that could accept Alaska LNG?
    Mr. Robinson. No, ma'am there is not.
    Senator Murkowski. So there is nothing in the permitting 
process. Nobody is talking about it. There is not an 
opportunity for us if we were able to figure things out on our 
end.
    Mr. Robinson. There are applications pending before the 
Commission that would allow for the construction of terminals 
on the west coast, and there are a couple of proposals that 
have not made it to the Commission yet up in Oregon that people 
are considering as well. But at this point there has not been 
progress made on those terminals to the point where anyone has 
broken ground certainly.
    Mr. Peevey. That is a misstatement I am afraid.
    Senator Alexander. Just a minute, Mr. Peevey.
    Were you finished, Mr. Robinson or Senator Murkowski?
    Mr. Robinson. Yes, sir.
    Senator Murkowski. Before we go to Mr. Peevey to add his 
input there, supposing Oregon, to use your example, would say, 
okay, this is something we want to do. Ball park, how long 
would it take before we would be in a position to actually be 
able to deliver LNG?
    Mr. Robinson. We like to work with an applicant for about 9 
months prior to an application being filed to ensure that the 
local communities and the States are fully integrated into the 
process. Then once the application is filed, if we have had a 
successful pre-filing process, we can usually turn it around in 
about a year. After that authorization, there is usually a 
period of time where contracts have to be advertised and let, 
and let us say another year, 18 months to do that, and then a 
3-year construction period after that.
    Senator Murkowski. So you are talking 5 years?
    Mr. Robinson. You are looking at probably about a 5-year 
period.
    I should mention one thing. When you asked the question, I 
thought you were talking about the U.S. west coast. If you are 
talking about Mexico, there is one project in Mexico by Sempra. 
I think they have broken ground on the road that would lead to 
the project, but there has been no facility construction.
    Senator Murkowski. Right. And do you know where their gas 
supply is coming from?
    Mr. Robinson. Indonesia, BP.
    Senator Murkowski. Mr. Peevey, did you want to jump in 
there?
    Mr. Peevey. Well, I was just going to point out that there 
is a project now under construction by Sempra and Shell in Baja 
California. The California Public Utilities Commission knows 
about that project. We have already approved an interconnection 
agreement for that gas to come in at Otay Mesa into California. 
That is going ahead and we should have gas in the next few 
years from that project. So it is a mischaracterization to 
suggest there is nothing going on.
    On top of that, BHP Billiton, which is one of the world's 
biggest energy companies, an Australian company, has proposed 
an offshore terminal off of California. So is Chevron Texaco 
talking about an offshore facility off both Baja and off 
California. So is another company, Crystal Energy of Houston, 
also talking about offshore California. Those people have faith 
in the technology.
    Now, I am not saying anything one way or another about the 
SES proposal. That is not the purpose here, but I am saying 
that these things are moving ahead.
    While I have the mike, one final point. Under the Federal 
Coastal Zone Management Act, the Secretary of Commerce can 
override a State, and that was not brought out by Mr. Robinson 
of FERC. What FERC is proposing here is to have all the 
authority.
    We worked carefully with FERC in the 1970's. I asked FERC 
repeatedly, Mr. Wood and others, to let us do this in a 
cooperative fashion in California. They spurned all our 
advances. We told Sound Energy Solutions in October 2003, file 
an application with the California Public Utilities Commission. 
They said, forget it, guys. We are going exclusively with FERC. 
That was their decision. That was not my decision. I would have 
been happy to process that. They forced our hand to go into 
court. It was not our choice. We would have been happy to 
consider this in the normal course of events. We did it in the 
1970's. As I said in my statement, we concurrently approved the 
project, and this time, for whatever reasons, FERC has chosen 
to go a different route. It is very, very frustrating. There is 
no comity here.
    Senator Murkowski. Mr. Chairman?
    Senator Alexander. Senator Murkowski.
    Senator Murkowski. I am so focused on energy security for 
this Nation, and I just have a little difficult time 
recognizing that we are now going to be getting Indonesian gas 
going through Mexico to supply California.
    Mr. Peevey. And Russian gas. We would love to have Alaskan 
gas----
    Senator Murkowski. Why are we going through a foreign 
country in order to get our gas?
    Mr. Peevey. We would love to have Alaskan gas under the 
Jones Act in U.S. ships, U.S. union crews bringing that gas to 
California. We would love to have an LNG terminal off the coast 
of California or anywhere in California. We accept the need for 
LNG. We would love to work with you on that topic.
    Senator Landrieu. And ships built in Louisiana. Thank you.
    Mr. Peevey. There you go.
    [Laughter.]
    Senator Murkowski. We will take those ships from Louisiana. 
We have no American hulled ships that are hauling LNG in this 
world.
    Senator Alexander. It sounds like another hearing subject.
    [Laughter.]
    Senator Alexander. Now, I want to do this. I want to give 
several of you a chance to respond to the question I asked 
earlier about offshore facilities because some indicated they 
did, and I want to see if Senator Murkowski or Senator Landrieu 
have other questions. Do you have other questions?
    Senator Landrieu. I am good.
    Senator Alexander. Did you have anything you wanted to say 
about that, Mayor?
    Mr. Cicilline. Mr. Chairman, I just want to clarify an 
answer that I gave to a question you asked about the State 
rights in terms of siting process. As it relates to the KeySpan 
proposal in Providence, the KeySpan permit application to CRMC, 
our Coastal Resources Management Council, was withdrawn last 
December after the Congress included report language in a 
fiscal year 2005 omnibus appropriations bill. And in their 
letter, KeySpan counsel cited the appropriations language and 
said it would reapply under the Federal consistency process 
instead of the normal so-called category B process. So I think 
when the committee looks at this question of States' rights in 
the siting process, it is very important to clarify how those 
rights differ under these two different provisions and limits 
severely really the States' and local communities' ability to 
be heard in that process. So I would just ask the committee 
respectfully to look at that issue as well.
    Senator Alexander. Thank you.
    Mr. Giles.
    Mr. Giles. Yes. With respect to onshore/offshore terminals, 
as we have said before, there are no offshore terminals. So the 
first one that happens will be the first one that happens.
    Senator Alexander. But there are only four onshore.
    Mr. Giles. Yes. In Japan, there are 25. There are five in 
Tokyo Bay. So it is not a new industry in many ways.
    Senator Alexander. There are 25 offshore or onshore in 
Japan?
    Mr. Giles. There are none offshore anywhere in the world.
    I have no doubt personally that it can be done and that it 
can be done safely. But it does not provide all the answers. 
For instance, in southern California, the worst problem in the 
area, other than they had a horrible energy crisis, is the air 
where they have horrible cancer and asthma. Our project is 
intended to keep part of the product in a liquid form and use 
it for LNG buses like they have with the LAX shuttle buses and 
that sort of thing. You cannot get that out of an offshore 
terminal because all of the product is gasified offshore.
    So there are different needs for these terminals in 
different places, and I think a generic solution to how to fix 
the LNG situation is going to end up limiting this country's 
importation of LNG. They need to have site-specific analysis.
    Senator Alexander. Mr. Grant.
    Mr. Grant. If I could add just a couple of comments. Again, 
I was trying to make the distinction there are different uses 
for onshore and offshore. To my colleague's comment, there are 
not any offshore right now, but I think the reality is, as you 
have heard today, it is difficult to permit or expand an 
onshore facility. The benefits of the two are not the same. One 
can be a supplement to the other one.
    But frankly, from our customers' standpoint, the idea of 
moving everything offshore creates other safety and security 
issues. You have got safety and security issues around 
protecting the ships if they are moored offshore. You have got 
safety and security issues about if the gas does not get 
delivered. People not having heat for their homes is as much a 
safety and security issue as the ship transitting the harbor. 
So I think all those things come in.
    I would agree offshore is not the answer to everything 
because if it was, frankly all the fuel terminals could get 
moved offshore and we would have a completely different set of 
issues. I have not heard anybody talk about moving all fuel 
offshore. It tends to just be LNG.
    Senator Alexander. We have our vote at 4 o'clock and I want 
to ask Senators Landrieu and Murkowski, if they have a 
question, and then we will move to the second panel.
    Senator Landrieu?
    Senator Landrieu. No.
    Senator Alexander. Senator Murkowski?
    Senator Murkowski. Mr. Chairman, I am actually going to ask 
two questions on behalf of the chairman, if I may.
    The first is for Mr. Robinson. What is your estimate of the 
LNG projects that have fallen off the planning board due to 
community opposition, and where were those projects generally 
located?
    Mr. Robinson. Oh, my goodness. Well, the ones that come to 
mind almost immediately are Harpswell, Maine; Mobile Bay, 
Alabama; and Humboldt Bay, California, which never got off the 
drawing board because of local opposition to them. There have 
been other projects that have been discussed with us and have 
fallen by the wayside, but those three come to mind first.
    Senator Murkowski. So really, it is all across the country. 
It is not necessarily on the west or on the east.
    Mr. Robinson. No, it is not. A lot of times it has to do 
with the land acquisition, the specifics of how can a proponent 
for an LNG terminal acquire the necessary lands to build that 
project.
    Senator Murkowski. Thank you.
    And this is a question for Mayor Cicilline. In your 
testimony, you are critical about relying on existing safety 
standards or the grandfathering. According to KeySpan's 
representatives, if FERC were to require KeySpan to bring the 
Providence facility up to current safety standards, the KeySpan 
facility, which we understand provides 25 percent of the peak 
winter requirements in Providence, would have to be taken out 
of service, shut down completely for two or three heating 
seasons. If that happened, where would the customers of that 
facility find alternative gas supply during peak winter 
periods?
    Mr. Cicilline. Again, the recommendation of the KeySpan 
proposal and the recognition that they expanded that facility, 
they ought to upgrade it so that it is safe under current 
safety standards. We have a facility right now that does not 
meet current safety standards because of the grandfathering.
    The issue of expanding a facility that does not meet safety 
standards without requiring them to upgrade to meet current 
safety standards I would suggest respectfully makes no sense. 
We can argue whether or not grandfathering makes sense, but to 
allow that facility to be expanded and to increase the safety 
concerns that have been raised without bringing it up to 
current safety standards poses a grave danger to the people of 
Providence.
    Ultimately decisions will have to be made to ensure that 
there is a proper fuel supply.
    But mayors have the responsibility every day to deal with 
the realities of public safety issues that are presented at LNG 
terminals. We are the ones with the responsibility for police, 
fire, rescue personnel. And to say to the people of Providence 
that that facility does not currently meet safety standards and 
we want to expand it without an emergency response plan that 
has been fully developed, without answering the public safety 
concerns that have been raised through the objections of the 
fire department and rescue personnel, and it does not meet 
current safety standards, those are real issues for me as a 
mayor and for mayors all across this country where siting 
proposals are made. And I would suggest respectfully to allow, 
as FERC has suggested, that it can be expanded without meeting 
current safety standards poses a grave danger to the people of 
Providence and to all mayors who have the responsibility of 
ensuring their safety.
    Senator Murkowski. And I appreciate the focus on the 
safety. You do have to attend to that.
    I am not convinced that you answered the chairman's 
question in terms of where do you go if you do have to shut 
down in order to do these safety upgrades? You then have 
another public issue on your hands, which is I do not have any 
gas to heat my home, and it is cold outside. Now what do we do, 
Mr. Mayor? So we have two fronts that we have got to be 
prepared for.
    Mr. Cicilline. And I agree. I think certainly that we have 
to, in an anticipation of a move to upgrade that facility so it 
meets current safety standards, engage in a very careful 
planning process to ensure that there is an appropriate level 
of fuel supply to the city of Providence and its residents. But 
I do think in the context of a discussion about expanding that 
facility, that issue must be raised and addressed by FERC and 
considered by this committee as it looks at legislation.
    Senator Murkowski. It is tough.
    Thank you, Mr. Chairman.
    Senator Alexander. Thank you, Senator.
    Mayor, thank you very much, and Mr. Grant, Mr. Robinson, 
Mr. Giles, Mr. Peevey, some of you have come a long way to 
testify. We are grateful for your comments. If you have 
additional thoughts that you did not get to express, if you 
would like to send them to us within the next few days, we will 
be glad to make them a part of the record.
    I would like to ask the second panel to step up. Mr. 
Robinson, you can stay where you are, and I will introduce them 
in about 60 seconds.
    I will introduce the second panel now. Captain David Scott 
is Chief of the Office of Operating and Environmental Standards 
for the U.S. Coast Guard. If I may say, talk about one of my 
favorite friends and people, Alex Haley, in honor of Black 
History Month, who was a proud member of the U.S. Coast Guard. 
That is where he learned to write. Mr. Bill Kramer, deputy 
director, New Jersey Division of Fire Safety. Mr. Mike 
Hightower, distinguished member of the technical staff, Sandia 
National Laboratories, Albuquerque, New Mexico. And Mr. Mark 
Robinson, who was with us on the first panel, Director of the 
Office of Energy Projects for the Federal Energy Regulatory 
Commission.
    The first panel focused on siting, more or less. We got 
into some other things. This panel is to focus more on safety, 
so we can understand, as Chairman Domenici said when he was 
here, what are the real safety issues that we as a Congress and 
we as a people ought to care about.
    I am going to ask Senator Murkowski if she will chair the 
committee hearing for the next 5 or 10 minutes while I go vote. 
I will be right back. Why do we not start with Captain Scott.
    Senator Murkowski [presiding]. Captain.

STATEMENT OF CAPTAIN DAVID L. SCOTT, CHIEF, OFFICE OF OPERATING 
         AND ENVIRONMENTAL STANDARDS, U.S. COAST GUARD

    Captain Scott. Thank you, Senator Murkowski. Good to see 
you again. I enjoyed the little bit of dialogue we had a couple 
weeks ago at the LNG conference, and I think we can kind of 
expand upon that a little bit today.
    I can tell you I like to write, but I am not in Alex 
Haley's league.
    But let me take a couple of minutes this morning to talk 
about the Coast Guard's role in LNG vessel safety and security 
and how we are interacting with some of the other stakeholder 
agencies in this very important national issue.
    LNG vessels have a very good safety record. Today there are 
approximately 175 LNG vessels operating worldwide, with about 
28 of these being regular callers at our import terminals. We 
ensure LNG vessels calling in the United States meet applicable 
domestic and international safety standards by a combination of 
plan review and onsite examination by Coast Guard marine 
inspectors.
    Over the years the Coast Guard has implemented numerous 
security procedures to address both conventional threats and 
intentional threats to LNG shipping. By conventional threats, I 
mean navigation safety risks such as groundings and collisions. 
To mitigate these conventional threats, we have implemented 
special vessel traffic control measures for LNG transits, 
safety zones around the vessel, escorts by Coast Guard patrol 
craft, and as local conditions warrant, coordination with other 
Federal, State, and local agencies to reduce public safety 
risks. The recent Sandia Labs report indicated that these 
measures had made the risk of an LNG release from groundings 
and collisions ``small and manageable.''
    Tragically, September 11 brought home the need to address 
intentional threats as well. Among other things, we now subject 
LNG vessels to at-sea boardings where Coast Guard personnel 
conduct special security sweeps and ensure positive control of 
the vessel is maintained throughout its port transit. In 
addition, the suite of maritime security regulations developed 
under the Maritime Transportation Security Act of 2002 and the 
parallel international scheme, the International Ship and Port 
Facilities Security Code, require all vessels in international 
service, including LNG carriers, to implement threat-scalable 
security plans and assign a qualified individual to serve as 
the ship's security officer. These security measures came into 
effect July 1, 2004, and we ensure these vessels are in 
compliance through our port State control program. And a 
similar security regime exists for shoreside facilities.
    Without a doubt, the issue of constructing new shoreside 
LNG terminals has been controversial, due in large part to 
public concerns over the safety and security of LNG vessel 
operations. While FERC has siting authority for LNG terminals, 
the Coast Guard plays an important role through our letter of 
recommendation process. Since the implementation of our 
February 2004 interagency agreement with FERC and the Office of 
Pipeline Safety, we have been working vigorously to ensure that 
our letter of recommendation process now integrates seamlessly 
into FERC's environmental impact statement process and also 
addresses today's concerns about intentional security threats. 
In particular, we are ensuring that our waterway evaluation 
includes a risk analysis of the consequences of an LNG release 
on water, taking into account the hazard distances established 
by the spill consequence models described in the recently 
published Sandia report.
    In a few weeks, a joint Coast Guard-FERC team will 
reconvene to refine guidance on conducting security assessments 
for proposed shoreside LNG terminals. This guidance will be 
informed by FERC's site-specific modeling, the concentric 
hazard distances discussed in the Sandia report, as well as 
current MTSA security regulations, existing Coast Guard 
guidance on area maritime security plans, and widely accepted 
risk-based decisionmaking assessment methodologies that have 
been proven effective, such as the model the Coast Guard used 
to evaluate the reopening of the Cove Point facility a couple 
years ago.
    One very important product of this assessment will be to 
identify the resources necessary to ensure the risks of the 
operation can be managed responsibly. This means providing a 
deterrent presence sufficient to reduce the possibility of an 
incident to a level acceptable to Federal, State, and local 
port stakeholders, as well as ensuring sufficient resources are 
available to deal with the consequences of an incident in the 
unlikely event one were to occur. The assessment will identify 
both current resource levels and the resources necessary to 
mitigate the risks to the aforementioned level of 
acceptability. We expect this guidance to be completed and 
distributed later this spring.
    Finally, just a quick word on the LNG deepwater ports. The 
Coast Guard shares the responsibility for licensing LNG 
deepwater ports with MARAD. They process information pertaining 
to the applicant's corporate and financial affairs and actually 
issue the deepwater port license. The Coast Guard ensures that 
the environmental impact statement is complete, and we handle 
all the technical design, fabrication, and operational aspects 
of the project. Under a memorandum of understanding signed last 
May, we interact with over a dozen different agencies that have 
a stakeholder role in LNG deepwater ports.
    Currently we are processing nine deepwater port 
applications. Two have already been licensed, two in the Gulf 
of Mexico. We expect one to begin operation later this spring, 
probably March and April, about 100 miles off the coast of the 
Texas/Louisiana border. And as the gentleman from Tractabel 
pointed out, we are expecting to get their application to the 
Coast Guard probably within the next couple weeks.
    I look forward to answering a lot of questions, some good 
dialog on the LNG deepwater ports. I look to get some good 
questions on that. Thank you, Senator.
    [The prepared statement of Captain Scott follows:]

    Prepared Statement of Captain David L. Scott, Chief, Office of 
        Operating and Environmental Standards, U.S. Coast Guard

                              INTRODUCTION

    Good afternoon Mr. Chairman and distinguished members of the 
Committee. I am Captain Dave Scott, Chief of the Office of Operating 
and Environmental Standards, U.S. Coast Guard Headquarters. It is my 
pleasure to appear before you today to discuss the Coast Guard's role 
in the safety and security of liquefied natural gas (LNG) vessels and 
facilities and how the Coast Guard is cooperating with other federal 
agencies on this important national issue.
    As the Federal Government's lead agency for maritime homeland 
security, the Coast Guard plays a major role in ensuring all facets of 
marine transportation of LNG--including LNG vessels, shoreside 
terminals, and proposed LNG deepwater ports--are operated safely and 
that the risks associated with the marine transportation of LNG are 
managed responsibly. Today, I will briefly review the applicable laws 
and regulations that provide our authority and the requirements for the 
safe and secure operation of the vessels, shoreside terminals, and 
deepwater ports. I will also describe how the Coast Guard is working 
with the other federal entities here today as fellow stakeholders in 
LNG safety and security.

                           LNG VESSEL SAFETY

    LNG vessels have had an enviable safety record over the last 40 
years. According to a recent Congressional Research Service report,\1\ 
since international commercial LNG shipping began in 1959, tankers have 
carried over 33,000 LNG shipments without a serious accident at sea or 
in port. Insurance records and industry sources show that there were 
approximately 30 LNG tanker safety incidents (e.g. leaks, groundings or 
collisions) through 2002. Of these incidents, 12 involved small LNG 
spills which caused some freezing damage, but did not ignite. Two 
incidents caused small vapor vent fires which were quickly 
extinguished.
---------------------------------------------------------------------------
    \1\ CRS Report for Congress: Liquefied Natural Gas (LNG) 
Infrastructure Security: Background and Issues for Congress, September 
9, 2003
---------------------------------------------------------------------------
    Today, there are approximately 175 LNG vessels operating 
worldwide.\2\ While there are no longer any U.S. flag LNG vessels, all 
LNG vessels calling in the United States must meet certain domestic 
regulations in addition to international requirements. Our domestic 
regulations for LNG vessels were developed in the 1970s under the 
authority of the various vessel inspection statutes now codified in 
title 46, United States Code. Relevant laws providing the genesis for 
LNG vessel regulation include the Tank Vessel Act (46 U.S.C. 391a) and 
the Ports and Waterways Safety Act of 1972, as amended by the Port and 
Tanker Safety Act of 1978 (33 U.S.C. 1221, et seq.). Regulations 
codified at title 46, Code of Federal Regulations, pt. 154 (``Safety 
Standards for Self-Propelled Vessels Carrying Bulk Liquefied Gasses'') 
specify requirements for the vessel's design, construction, equipment 
and operation. Our domestic regulations closely parallel the applicable 
international requirements, but are more stringent in the following 
areas: the requirements for enhanced grades of steel for crack 
arresting purposes in certain areas of the hull, specification of 
higher allowable stress factors for certain independent type tanks, and 
prohibiting the use of cargo venting as a means of cargo temperature or 
pressure control.
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    \2\ Maritime Business Strategies, LLC; www.coltoncompany.com
---------------------------------------------------------------------------
    All LNG vessels in international service must comply with the major 
maritime treaties agreed to by the International Maritime Organization 
(IMO), such as the International Convention for the Safety of Life at 
Sea, popularly known as the ``SOLAS Convention'' and the International 
Convention for the Prevention of Pollution from Ships, popularly known 
as the ``MARPOL Convention.'' In addition, LNG vessels must comply with 
the International Code for the Construction and Equipment of Ships 
Carrying Liquefied Gases in Bulk, known as the ``IGC Code.''
    Before being allowed to trade in the United States, operators of 
foreign flag LNG carriers must submit detailed vessel plans and other 
information to the Coast Guard's Marine Safety Center (MSC) to 
establish that the vessels have been constructed to the higher 
standards required by our domestic regulations. Upon the MSC's 
satisfactory plan review and on-site verification by Coast Guard marine 
inspectors, the vessel is issued a Certificate of Compliance. This 
indicates that it has been found in compliance with applicable design, 
construction and outfitting requirements.
    The Certificate of Compliance is valid for a two-year period, 
subject to an annual examination by Coast Guard marine inspectors who 
verify that the vessel remains in compliance with all applicable 
requirements. As required by 46 U.S.C. 3714, this annual examination is 
required of all tank vessels, including LNG carriers.
    The Coast Guard has long recognized the unique safety and security 
challenges posed by transporting millions of gallons of LNG or 
``cryogenic methane.'' Accordingly, LNG vessels typically undergo a 
much more frequent and rigorous examination process than conventional 
crude oil or product tankers. LNG vessels are often boarded by marine 
safety personnel prior to U.S. port entry to verify the proper 
operation of key navigation safety, fire fighting and cargo control 
systems.

                          LNG VESSEL SECURITY

    In addition to undergoing a much more rigorous and frequent 
examination of key operating and safety systems, LNG vessels are 
subject to additional measures of security. Many of the special 
security precautions the Coast Guard has established for LNG vessels 
derived from our analysis of ``conventional'' navigation safety risks, 
such as groundings, collisions, propulsion or steering system failures. 
These precautions pre-dated the September 11, 2001, tragedy and include 
such things as special vessel traffic control measures that are 
implemented when an LNG vessel is transiting the port or its 
approaches, safety zones around the vessel to prevent other vessels 
from approaching nearby, escorts by Coast Guard patrol craft, and, as 
local conditions warrant, coordination with other federal, state and 
local transportation, law enforcement and/or emergency management 
agencies to reduce the risks to, or minimize the interference from, 
other port area infrastructure or activities. These activities are 
conducted under the authority of existing port safety and security 
statutes, such as the Magnuson Act (50 U.S.C. 191 et seq.) and the 
Ports and Waterways Safety Act, as amended.
    Since September 11, 2001, additional security measures have been 
implemented, including the requirement that all vessels calling in the 
United States must provide the Coast Guard with a 96-hour advance 
notice of arrival (increased from 24 hours advance notice pre-9/11). 
This notice includes information on the vessel's last ports of call, 
crew identities, and cargo information. The Coast Guard now subjects 
LNG vessels to at-sea boardings, where Coast Guard personnel conduct 
special ``security sweeps'' of the vessel and ensure ``positive 
control'' of the vessel is maintained throughout its port transit. This 
is in addition to the safety oriented boardings previously described.
    Of course, one of the most important post-9/11 maritime security 
developments has been the passage of the Maritime Transportation 
Security Act of 2002 (MTSA). Under the authority of MTSA, the Coast 
Guard developed a comprehensive new body of security measures 
applicable to vessels, marine facilities and maritime personnel. Our 
domestic maritime security regime is closely aligned with the 
International Ship and Port Facility Security (ISPS) Code. The ISPS 
Code, a mandatory requirement of the SOLAS Convention, was adopted at 
the IMO in December 2002 and came into effect on July 1, 2004. Under 
the ISPS Code, vessels in international service, including LNG vessels, 
must have an International Ship Security Certificate (ISSC). To be 
issued an ISSC by its flag state, the vessel must develop and implement 
a threat-scalable security plan that, among other things, establishes 
access control measures, security measures for cargo handling and 
delivery of ships stores, surveillance and monitoring, security 
communications, security incident procedures, and training and drill 
requirements. The plan must also identify a Ship Security Officer who 
is responsible for ensuring compliance with the ship's security plan. 
The Coast Guard rigorously enforces this international requirement by 
evaluating security compliance as part of our ongoing port state 
control program.

                     SHORESIDE LNG TERMINAL SAFETY

    Presently there are six shoreside LNG terminals in the United 
States and its territories: the export facility in Kenai, AK and import 
terminals in Everett, MA; Cove Point, MD; Elba Island, GA; Lake 
Charles, LA; and Penuelas, PR. Regulations developed under the 
authority of the Ports and Waterways Safety Act assign the Coast Guard 
the responsibility for safety issues within the ``marine transfer 
area'' of LNG terminals. These regulations are codified at 33 C.F.R. 
pt. 127. The ``marine transfer area'' is defined as that part of a 
waterfront facility between the vessel, or where the vessel moors, and 
the first shutoff valve on the pipeline immediately before the 
receiving tanks. The Department of Transportation's Pipeline and 
Hazardous Materials Safety Agency\3\ has jurisdiction from that point 
inland. Safety issues within our purview in the marine transfer area 
include electrical power systems, lighting, communications, transfer 
hoses and piping systems, gas detection systems and alarms, 
firefighting equipment, and operational matters such as approval of the 
terminal's Operations and Emergency Manuals and personnel training.
---------------------------------------------------------------------------
    \3\ Formerly Research and Special Programs Administration's (RSPA) 
Office of Pipeline Safety
---------------------------------------------------------------------------

                    SHORESIDE LNG TERMINAL SECURITY

    New ``Maritime Security Regulations for Facilities'' found at 33 
C.F.R. pt. 105, were developed under the authority of MTSA. These 
regulations require the LNG terminal operator to conduct a facility 
security assessment and develop a threat-scalable security plan that 
addresses the risks identified in the assessment. Much like the 
requirements prescribed for vessels, the facility security plan 
establishes access control measures, security measures for cargo 
handling and delivery of supplies, surveillance and monitoring, 
security communications, security incident procedures, and training and 
drill requirements. The plan must also identify a Facility Security 
Officer who is responsible for ensuring compliance with the facility 
security plan. The six existing U.S. LNG terminals were required to 
submit their security plans to the Coast Guard for review and approval 
last December, and full implementation of the plan was required by July 
1, 2004. These reviews have been completed, and the terminals' 
compliance with the plans have been verified by local Coast Guard port 
security personnel through scheduled on-site examinations. In contrast 
to our safety responsibility, whereby our authority is limited to the 
``marine transfer area,'' our authority regarding the security plan 
can, depending upon the particular layout of the terminal, encompass 
the entire facility.

                     SHORESIDE LNG TERMINAL SITING

    The issue of constructing new shoreside LNG terminals has been 
controversial, due in large part to public concerns over the safety and 
security of LNG vessel operations. The Federal Energy Regulatory 
Commission (FERC) exercises siting authority for LNG terminals, 
primarily pursuant to Natural Gas Act authority that the Department of 
Energy has delegated to FERC However, the Coast Guard plays an 
important role in the siting process. As required by 33 C.F.R. 127.007, 
an owner or operator who intends to build a new LNG facility, or who 
plans new construction on an existing facility, must submit a ``Letter 
of Intent'' to the Coast Guard Captain of the Port (COTP) in whose zone 
the facility is located. This letter must be submitted no later than 60 
days prior to construction and must provide information on: the 
physical location of the facility; a description of the facility; the 
characteristics of the vessels intended to visit the facility and the 
frequency of visits; and charts that show waterway channels and 
identify commercial, industrial, environmentally sensitive, and 
residential areas in and adjacent to the waterway to be used by vessels 
en route to the facility, within 15.5 miles of the facility.
    The COTP reviews the information provided by the applicant and 
makes a determination on the suitability of the waterway for LNG 
vessels. Factors considered include: density and characteristics of 
marine traffic in the waterway; locks, bridges, or other man made 
obstructions in the waterway; the hydrologic features of the waterway 
(e.g., water depth, channel width, currents and tides); natural 
hazards, such as reefs and sand bars; and underwater pipelines and 
cables.
    Both the Coast Guard and the FERC recognize that the ``Letter of 
Intent'' process, which dates from 1988, does not, in its current form, 
adequately take into account the security concerns of our post 9/11 
environment. First, of course, is the fact that a ``60 day prior to 
construction'' deadline to provide information to the local COTP is far 
too late in the game. FERC will have completed the bulk of its National 
Environmental Policy Act (NEPA) Environmental Impact Analysis work 
before the terminal is authorized by the Commission and construction is 
allowed to commence. Thus, ``late-in-the-game'' comments by the Coast 
Guard could be disruptive to an authorized facility. Secondly, and more 
importantly, the existing regulations are focused primarily with 
conventional navigation safety risk management issues such as traffic 
density, hydrologic characteristics of the waterway, etc. They do not 
focus on port security risk management issues, and in particular, they 
do not directly require an analysis of the consequences of an LNG spill 
on water.
    To address this problem, on February 10, 2004, the Coast Guard 
entered into an interagency agreement with FERC and the Pipeline and 
Hazardous Materials Safety Agency to work together in a coordinated 
manner to address issues regarding safety and security at waterfront 
LNG facilities, including terminal facilities and tanker operations, 
avoid duplication of effort, and to maximize the exchange of relevant 
information related to the safety and security aspects of LNG 
facilities and the related maritime concerns.
    Pursuant to this interagency agreement, FERC is now requiring 
terminal applicants to contact the local Coast Guard COTP as soon as 
they commence their ``pre-filing'', or submit their conventional 
application to FERC, and provide the COTP with the information required 
by 33 C.F.R. Sec. 127.007. The Coast Guard has agreed to begin 
evaluating that information upon receipt, and advise FERC of its 
findings in ample time to include this information as part of the 
Environmental Impact Statement (EIS). Upon completion of the 
evaluation, as required by 33 C.F.R. Sec. 127.009, the COTP issues a 
``Letter of Recommendation'' to the owner or operator of the proposed 
facility, and to the state and local government agencies having 
jurisdiction, as to the suitability of the waterway for the proposal.
    The FERC and Coast Guard are also working cooperatively to address 
the port security component of the EIS. In addition to an evaluation of 
conventional navigation safety risks, future EISs will also include a 
security assessment that takes account of the risks of the marine 
transportation component of the proposal, using the hazard distances 
established by the spill consequence models described in the recently 
published Sandia Report.\4\ A joint USCG-FERC Team is now developing 
guidance on conducting security assessments for proposed shore side LNG 
terminals. This guidance will be informed by the FERC's site specific 
modeling, the concentric ``Zones of Risk'' hazard distances discussed 
in the Sandia Report, as well as the current MTSA security regulations 
in title 33, Code of Federal Regulations, existing Coast Guard guidance 
on Area Maritime Security Plans, and widely accepted risk based 
decision making (RBDM) assessment methodologies that have been proven 
effective, such as the model the Coast Guard used to evaluate the re-
opening the Cove Point, MD LNG terminal several years ago. One very 
important product of this assessment will be to identify the level of 
Coast Guard, and other federal, state and local resources necessary to 
ensure the risks of the operation can be managed responsibly. This 
means providing a deterrent presence sufficient to reduce the risks of 
an incident to a level acceptable to federal, state and local port 
stakeholders, as well as ensuring sufficient resources are available to 
deal with the consequences of an incident, in the unlikely event one 
were to occur. The assessment will identify both current resource 
levels and the resources necessary to mitigate the risks to the 
aforementioned level of acceptability. We expect this guidance to be 
completed and distributed by early this spring.
---------------------------------------------------------------------------
    \4\ Guidance on Risk Analysis and Safety Implications of a Large 
Liquefied Natural Gas (LNG) Spill Over Water; Sandia National Labs, 
SAND2004-6258, December 2004
---------------------------------------------------------------------------
    The Coast Guard is also working on the changes necessary to bring 
the existing ``Letter of Intent'' and ``Letter of Recommendation'' 
regulations up to date, specifically by requiring the waterways 
management information to be submitted to the COTP at the time of FERC 
``pre-filing'' or conventional application, and adding specific 
requirements for a port security assessment, in addition to the 
waterways management information, to be presented to the COTP for 
evaluation.
    It is important to note that the Freeport, TX and Sabine Pass, LA 
Final EISs did include an evaluation of the LNG spill consequence 
aspects of the projects, using the spill model FERC developed and 
modified based on a study by ABS Group Consultants.\5\ A security 
assessment is now being conducted for terminals proposed for 
Providence, RI (Key Span) and Fall River, MA (Weavers Cove LNG) using 
the hazard distances established in the Sandia Report, and the Coast 
Guard's Port and Waterways Safety Assessment risk assessment tool. The 
results of these assessments will be provided to the Commission for 
their consideration of these projects.
---------------------------------------------------------------------------
    \5\ Consequence Assessment Methods for Incidents Involving Releases 
from Liquefied Natural Gas Carriers; ABSG Consultants, May 2004
---------------------------------------------------------------------------
        LNG DEEPWATER PORTS: AUTHORITY AND AGENCY RELATIONSHIPS

    The Coast Guard's authority to regulate deepwater ports (DWPs) 
derives from the Deepwater Port Act of 1974 (DWPA) and the regulations 
pertaining to the licensing, design, equipment and operation of DWPs at 
33 C.F.R. pts. 148, 149 and 150. Originally pertaining only to oil, 
MTSA amended the Deepwater Port Act to include natural gas. This Act 
allows for the licensing of deepwater ports in the Exclusive Economic 
Zone along all maritime coasts of the United States. The Secretary of 
Homeland Security and the Secretary of Transportation delegated the 
processing of deepwater port applications to the Coast Guard and the 
Maritime Administration (MARAD), respectively. MARAD is the license 
issuing authority, while the Coast Guard is the lead on the application 
review, and has primary jurisdiction over design, equipment and 
operations. The MTSA amendments to the DWPA established a specific time 
frame of 330 days from the date of publication of a Federal Register 
notice of a ``complete'' application to the date of approval or denial 
of a deepwater port license. Among other requirements, an applicant for 
a DWP license must demonstrate consistency with the Coastal Zone 
Management Plan of the adjacent coastal states.
    The Coast Guard and MARAD, in cooperation with other federal 
agencies, must comply with the requirements of the National 
Environmental Policy Act in processing DWP applications within the 
timeframes prescribed in the Deepwater Port Act. Currently, the Coast 
Guard is processing nine DWP applications, including two that have 
already been licensed: Chevron-Texaco's Port Pelican project and Gulf 
Gateway Energy Bridge LLC (owned by Excelerate) project, both of which 
are located offshore of Louisiana. We are anticipating several more 
applications within the next several months.
    To expedite the application review process, and more efficiently 
coordinate the activities of the numerous stakeholder agencies, the 
Coast Guard entered into a Memorandum of Understanding (MOU), involving 
more than a dozen agencies, including FERC, the National Ocean Service, 
and the Environmental Protection Agency. The MOU obliges the 
participating agencies to work with each other and with other entities 
as appropriate, to ensure that timely decisions are made and that the 
responsibilities of each agency are met. Briefly, these 
responsibilities include: assessing their particular role in the 
environmental review of DWP licenses; identifying agency contacts for 
the proposed project; meeting with prospective applicants and other 
agency representatives to identify areas of potential concern and to 
assess the need for and availability of agency resources to address 
issues related to the proposed project; and identifying environmental 
issues and concerns related to the proposed project that need to be 
addressed in order for the lead agency to meet its obligations.

                LNG DEEPWATER PORTS SAFETY AND SECURITY

    While conventional crude oil DWPs have been in operation around the 
world for many years, LNG DWPs are an emerging concept; currently there 
are none in operation anywhere. There are a variety of different 
designs under development that borrow from designs and technology that 
have been time-tested in the crude oil and the LNG industries. 
Proposals include ship-shaped hull designs similar to existing Floating 
Production, Storage and Offloading units, platform based storage and 
regasification units, gravity based structures, and innovative docking 
structures that attach directly to the LNG carrier as it ties off to a 
single point mooring. Because this is a new concept, the Coast Guard's 
regulations apply a ``design basis'' approach, rather than mandate a 
series of prescriptive requirements. Under a ``design basis'' approach, 
each concept is evaluated on its own technical merits, using relevant 
engineering standards and concepts that have been approved by 
recognized vessel classification societies and other competent 
industrial and technical bodies. In addition, the Coast Guard's DWP 
regulations require that all LNG DWPs develop and implement a security 
plan that addresses the key security plan elements provided in 33 
C.F.R. pt. 106 (``Maritime Security: Outer Continental Shelf 
Facilities'').
    Thank you for giving me this opportunity to discuss the Coast 
Guard's role in LNG safety and security and our relationships with 
other stakeholder agencies. I will be happy to answer any questions you 
may have.

    Senator Murkowski. Thank you, Captain.
    Next we will hear from Mr. Bill Kramer. Welcome.

 STATEMENT OF WILLIAM KRAMER, JR., DEPUTY DIRECTOR, NEW JERSEY 
DIVISION OF FIRE SAFETY, TRENTON, NJ, ON BEHALF OF THE NATIONAL 
               ASSOCIATION OF STATE FIRE MARSHALS

    Mr. Kramer. Good afternoon, Senator. My name is William 
Kramer, Jr. and I am currently the deputy director of the New 
Jersey Division of Fire Safety. I also am the chairman of the 
National Association of State Fire Marshals' Liquefied Natural 
Gas Subcommittee of our Safety Energy Task Force. I am here 
today as a representative of the association, which goes by the 
acronym NASFM.
    In the interest of full disclosure, the association 
receives funding for its LNG-related activities from the Office 
of Pipeline Safety of the U.S. Department of Transportation. 
This work is being conducted in partnership with the Southern 
States Energy Board. The views I will express today, however, 
are solely those of the association.
    Does LNG pose safety and security risks? Yes.
    Are the risks manageable and will public safety officials 
support LNG projects? It depends.
    Each proposed LNG terminal must be evaluated based onsite-
specific criteria because each site offers multiple unique risk 
scenarios, whether it be in California, Louisiana, 
Massachusetts, or New Jersey.
    There are two schools of thought pertaining to risk 
management. The first is emotional, sensational, 
confrontational, and traditional. NASFM subscribes to a second 
more rational school of risk management. It asks three sets of 
questions.
    First, what does the law require? Our safety and security 
laws define the absolute minimum that must be done. Our 
position is that they are the starting point and nothing more.
    Second, what is needed and what is possible? These are 
questions that must be answered through the scientific process 
by qualified, independent experts from industry, government, 
academia, and nongovernmental organizations. These experts 
typically look to us for what we are seeing in the real world 
and what worries us. The combination of science and real-world 
observations produces some important answers.
    The third question ultimately is most important. How much 
risks is the community willing to accept? When I speak of the 
community, I mean the people who have a direct and legitimate 
interest in a proposed project.
    The proposed Crown Landing project in New Jersey is planned 
for a very small community. LNG tankers will travel 70 miles up 
the Delaware River past many communities in New Jersey and 
Delaware, as well as a few in Pennsylvania. Many local 
residents see the enormous economic benefit that will come from 
the project. But last week the State of Delaware formally 
opposed the project on environmental grounds. Others have 
raised several questions including the adequacy of the depth of 
the channel and the presence of large quantities of chlorine 
stored not far from the proposed terminal. These questions 
deserve thoughtful answers.
    Communities vehemently objecting to a project can cause it 
to be withdrawn as fast as it is proposed. When this occurs, 
resources are wasted, local officials get gun-shy, and we never 
get to the facts. So because the public depends on emergency 
responders for advice on these matters, it is crucial that 
public safety officials have our facts right project by project 
and that begins with us having a fundamental understanding of 
the many issues related to LNG safety.
    With support from OPS, our association is compiling 
guidance on LNG safety for use by State and local emergency 
planners and responders. The purpose of our effort is not to 
proclaim LNG safe or unsafe. Rather, we are working to help 
emergency responders understand the risks that LNG poses in 
their community, prepare them to decide if they can manage 
those risks, and ultimately assist them in educating others 
about LNG safety issues.
    This program is being pilot-tested in four locations. Let 
me quickly summarize the basic elements of our project.
    Step one is the production of an education document and 
video outlining LNG safety issues and the development of a 
comprehensive curriculum for use at the State and local levels. 
A draft white paper is now under review by technical experts, 
including experts from DOT, the Department of Homeland 
Security, National Institute of Standards and Technology, and 
the Federal Energy Regulatory Commission. The final draft will 
be shared with NASFM's pipeline safety advisory committees and 
will be the basis for our project's curriculum.
    Step two is a selection of four communities to test the 
curriculum. We have made the selections and they are Cove Point 
in Maryland, Freeport in Texas, and Cameron-Hackberry and 
Trunkline in Louisiana. The Crown Landing project in New Jersey 
is not a pilot community, but its public safety officials are 
receiving special assistance from NASFM at my request.
    Step three will be to identify and prepare the right local 
public safety official in the four pilot sites to take the lead 
on the community projects. This individual will be responsible 
for understanding the intricacies of LNG safety and 
communicating this understanding to others in the community. We 
will equip this individual with training, materials, staff, and 
technical support. We also will provide this individual with 
direct access to the most credible experts on LNG and LNG 
safety.
    Step four is the formation of a local steering committee to 
organize and begin implementing the community projects. With 
our fire safety officials at the lead, we will form local 
steering committees that initially will consist of community 
leaders, experts representing terminal operators, State and 
local government officials, and others who are knowledgeable 
about LNG safety.
    Step five will be briefing the State and local opinion 
leaders and decisionmakers. With a solid foundation in place, 
the local steering committees will be ready to reach out to 
local elected and appointed public officials, community 
organizations, the news media, and business and labor leaders.
    Senator Murkowski. Mr. Kramer, I am going to ask you to 
wrap up.
    Mr. Kramer. Once we have tested the program, it will be 
available to communities where LNG ports are planned.
    LNG projects are not inherently good or bad, safe or 
unsafe. I doubt that emergency responders will support every 
project and they may strongly oppose some. But please know that 
our hope is that we can support many of those projects because 
that will mean that public safety has been served.
    Thank you for holding this timely hearing on this most 
important issue.
    Senator Murkowski. Thank you, Mr. Kramer.
    Next we have Mr. Mike Hightower.

   STATEMENT OF MIKE HIGHTOWER, DISTINGUISHED MEMBER OF THE 
 TECHNICAL STAFF, SANDIA NATIONAL LABORATORIES, ALBUQUERQUE, NM

    Mr. Hightower. Thank you. I am Mike Hightower. I am from 
Sandia National Laboratories in Albuquerque. I am one of the 
major authors of the report that we have been talking about and 
has been referenced several times today. Thank you for the 
opportunity to address you today.
    As you have heard, increasing LNG capacity is important to 
U.S. energy security. The Energy Information Administration 
forecasts that natural gas demand could grow by 35 percent in 
the next decade, and LNG is forecast to meet much of that new 
demand. This represents a 10fold increase in LNG imports over 
2004 levels.
    The question is, how can we transport and handle LNG safely 
at a growing number of LNG terminals and as the frequency of 
imports increase? To address this question, the Department of 
Energy's Office of Fossil Energy requested that Sandia National 
Laboratories develop guidance that could be used by communities 
and agencies to improve the safety and security of marine LNG 
imports.
    Many LNG spill studies have already been conducted. Why 
conduct another study? The purpose of the Sandia study was to 
fill many of the existing knowledge gaps for maritime 
transportation and import of LNG. Many previous studies have 
used simplifying assumptions and modeling to estimate spill 
hazards, which has led to significant variation in hazard 
estimates from the different studies. This wide range of 
results has confused the public and other stakeholders on the 
overall merits and relative safety and security of LNG imports. 
Additionally, the events of September 11 have raised public 
concerns over the security of LNG imports and the consequences 
of an intentional or terrorist attack against an LNG vessel.
    The Sandia study directly addressed these issues, including 
the impact of accidents and terrorist actions on an LNG vessel 
and the size and consequences of possible spills. The study, 
though, does go beyond past consequence analysis and provides 
guidance on the use of modern risk-based management approaches 
to minimize threats to public safety from a possible LNG spill.
    In summary, this study evaluated credible accidental and 
intentional threats to LNG tankers, identified appropriate 
modeling approaches to use for estimating hazards and 
consequences, assessed the possible hazards and consequences 
from an LNG spill, including cascading damage, and identified 
prevention and mitigation strategies that could be implemented 
to reduce the risk from a large LNG spill over water.
    In support of this effort, Sandia consulted with the U.S. 
Coast Guard, LNG industry and ship management agencies, LNG 
shipping consultants, and government intelligence agencies to 
collect information on ship designs, accident and threat 
scenarios, and LNG safety and risk management operations. For 
thoroughness, the study results and conclusions were reviewed 
both by a Federal review panel, including the Coast Guard and 
FERC, and by an external peer review panel prior to completing 
the final report.
    The study recognizes the proven safety record of the LNG 
shipping industry and the safety measures already in place by 
the Coast Guard and concluded that the risks to the public from 
an accidental spill are small and manageable using current 
safety management practices.
    The study concluded that the risks from an intentional 
spill, absent aggressive prevention and mitigation strategies, 
could be much higher than an accidental spill. However, these 
risks can be significantly reduced with appropriate security, 
planning, prevention, and mitigation approaches. The risk 
management measures needed to improve port and transport 
security to adequate levels is site-specific and should be 
identified and implemented in cooperation with appropriate 
stakeholders, including the Coast Guard and public safety and 
public officials.
    Overall, the study findings are consistent with the results 
of several of the more detailed maritime LNG spill studies. The 
safety and risk analysis guidance outlined in the report 
provides a consistent and uniform approach to identifying, 
analyzing, and mitigating threats from a possible LNG spill. We 
hope the guidance provided in the report will become a valuable 
tool for decisionmakers to use in evaluating and reducing the 
risks of an LNG spill and improving the safety and security of 
marine LNG transportation.
    The results of the study are presented in the Sandia report 
guidance on risk analysis and safety implications of a large 
liquefied natural gas spill over water which was released by 
the DOE on their web site in December 2004. Hard copies of that 
report are available through Sandia. The written testimony I 
provided today to the subcommittee is a summary of the 
executive summary of that report.
    Thank you for your time.
    Senator Alexander [presiding]. Mr. Robinson.

   STATEMENT OF J. MARK ROBINSON, DIRECTOR, OFFICE OF ENERGY 
         PROJECTS, FEDERAL ENERGY REGULATORY COMMISSION

    Mr. Robinson. Senator, I think I should start by maybe 
describing a little bit what our office is about and what we do 
when it comes to safety and security.
    We are an office at the Commission that has about 300 
engineers and scientists. They range from botanists, to 
wildlife people, to wetlands, to civil engineers, to cryogenic 
engineers, to electrical engineers. We pretty much cover the 
gamut when it comes to the expertise that we have, but they 
have one thing in common. They all practice their crafts 
through the prism of energy infrastructure, and specifically 
here we are talking about through that prism of LNG. They all 
understand that the No. 1 priority of the Commission, when we 
are dealing with siting and the maintenance and the security 
and the long-term oversight of these facilities, that safety is 
the No. 1 priority of our Commission when it comes to energy 
infrastructure. And that is ingrained into every person that 
works at our office.
    It goes beyond that. They also understand that when it 
comes to safety, it is not just the safety of the people that 
live next door or the people that live downstream, or the ones 
who are near a gas pipeline that is under high pressure, but 
also even the safety of the people that work at those 
facilities. It is not the safety of a large number. It is the 
safety of one. We have to be able to look at everybody that is 
involved with one of our projects and say we consider it to be 
safe. It is a binary system. It is either safe or it is not 
safe, and that is for 1 person, 100 people, or 100,000 people. 
And we have projects that have effects on every one of those 
numbers that I just mentioned to you, from 1 to 100,000. So it 
is a common standard that we apply when it comes to ensuring 
the safety and security of the energy infrastructure that we 
are charged with overseeing.
    I would like to, for just a minute, talk about the record 
of our LNG facilities. For 30 years, we have had operating 
plants and we have never had an LNG spill that resulted in any 
type of consequence at one of these facilities. We have also 
had about 40 or 50 years of LNG transport around the world and 
there has never been a lost cargo. So the LNG community has a 
stellar record, and I think our staff has a very good record of 
overseeing that safety and security of those facilities.
    But it is never enough. We do not stop there. We 
continuously raise the floor. I have given more than one speech 
to the industry telling them, complimenting them, you have a 
wonderful record, and you have spent a lot of money to make 
sure that your projects are safe, but you are going to spend 
more because every time we see something that enhances the 
safety or the security of one of these projects, we are going 
to require it at all projects where it is applicable. And I 
will give you an example.
    When Skikda, the liquefaction plant in Algeria, had the 
accident about a year and a half ago, I sent two engineers to 
Skikda to look at what had happened, to come back and tell us 
what we could do to enhance project safety here.
    Now, the facilities were disparate. They were not the same 
type of facilities. And it really did not apply, what happened 
in Skikda, to what would happen here, but we did pick up a 
couple of things that we have been transferring to our 
facilities that are sort of underlying aspects of what happened 
in Skikda but not the major cause. The relationship of a 
hydrocarbon venting area with an intake area. We now have 
control mechanisms being put in place on our facilities for 
incidents like that.
    What we learned at Skikda, we learned it and we implemented 
it all within about a 3-month period. That is one of the 
benefits of having a Federal safety program in place that 
recognizes how it can move quickly and make things safer.
    Our future efforts are going to involve continuing to do 
research like the research we did with the consequence analysis 
and other aspects of safety in applying those lessons learned 
to the projects that we have currently or projects that would 
be constructed.
    We also have done a number of things within our office to 
make sure that we are never satisfied with the safety and 
security of our plants. We have reorganized to put a focus on a 
group, a branch of people who are engineers who do nothing but 
study and analyze safety. As an example, this week that group 
had a group from Japan come in and talk to us for about 3 hours 
on just safety and security matters at Japanese facilities. 
They have a very long history and we want to make sure we take 
advantage of that and we can apply it elsewhere.
    One other aspect I want to mention about the benefits of 
having a Federal safety program, although we do take advantage 
of State and local interests and concerns and expertise in 
executing this, is that the industry and the FERC oversight of 
the industry cannot be known by the least common denominator. 
Right now, we ensure a floor under all LNG facilities. If that 
was disaggregated in some fashion and safety was transferred to 
other bodies, then that safety floor would be dependent upon 
each of those bodies and the coordination of that would be much 
more difficult. There is a critical mass of projects that you 
need before you can even develop the expertise on safety, and 
that critical mass is not one project in one State. We need to 
make sure that, for purposes of safety, we do not compromise, 
and I think that is exactly what we stand for at the 
Commission. With the help of the Coast Guard and the Department 
of Transportation and FERC oversight as well, I think we can 
ensure that LNG will remain one of the safest forms of energy 
that this country knows.
    Thank you.
    Senator Alexander. Thank you, Mr. Robinson. That reminds me 
of our experience with nuclear power in a way. I was on one of 
our aircraft carriers. I think each of the 10 of them have two 
500-megawatt reactors. I believe that is right. None of them 
has ever had an incident and all of them are regularly docked 
in some places where people would not want a nuclear power 
plant, but they just do not know it is there I guess.
    Excuse me for leaving. I was able to vote and get back.
    Captain Scott, maybe you covered this while I was gone, 
maybe you did not. I am interested in the offshore LNG 
terminals and the technology. Can you describe for me in a 
little more detail the technology involved in offshore LNG 
terminals and how different an offshore terminal would be from 
other deepwater ports?
    Captain Scott. Sure. As I think a number of the Senators 
pointed out and a number of the panelists have pointed out, at 
present there are no LNG deepwater ports currently in operation 
anywhere in the world.
    However, the concept of deepwater ports has existed in many 
locations. Obviously, in the United States, we have the 
Louisiana offshore oil port I think since the mid-1970's.
    Now, the concept of LNG deepwater ports borrows the 
technology that has been proven very, very effective in the LNG 
shipping sphere. For example, many of the proposals use what we 
call a floating storage and regasification unit concept. That 
is essentially a ship-like hull that does not have the 
propulsion components to it but employs the very same storage 
technology that the 175-odd LNG ships that are operating in the 
world use. So that technology exists. It just has not been 
adapted for storage use.
    Similarly, with the regasification process, as you know, 
LNG is transported in its liquid state. It is minus 259 
degrees. In order to be able to introduce it into our pipeline 
transmission system, it has to be warmed up to probably about 
45-50 degrees to put it into our pipeline system. So there are 
a number of technologies that have been used very successfully 
in land-based applications. That, through certain modifications 
to make them more viable and a bit more robust to withstand the 
rigors of the marine environment, salt water vibration, that 
sort of thing, can be adapted and put into a place in the 
offshore environment. So it is somewhat misleading to say that 
we do not have the technology. In fact, we do. We just have to 
adapt it a little bit.
    I will point out that we do expect the first LNG deepwater 
port operation to come into effect. This will be the 
accelerated energy project. It is about 110 miles south of the 
Louisiana-Texas border. That should be coming into operation 
sometime, I would think, probably around April or so. The type 
of technology that we have there is what we call a submerged 
turret loading system. Essentially it is a conventional LNG 
vessel. It looks like just all the other LNG vessels that are 
out there. What is unique about it is it has on-board 
regasification capability and is especially adapted in the bow 
area that can actually plug into a submerged buoy that is 
connected to an LNG pipeline that rests on the seabed floor, so 
it is not a navigation obstruction, and through sophisticated 
navigation electronic equipment, the ship finds where the buoy 
is located. It is raised up to the surface and actually mates 
with the ship, locks in, and then the ship will offload its 
cargo, warm it up through its regasification process, and then 
inject directly into the pipeline. That kind of evolution what 
they are expecting to take about 6 days to offload the cargo--
--
    Senator Alexander. That is like airplanes refueling in the 
air.
    Captain Scott. I would say, but far less complicated.
    [Laughter.]
    Senator Alexander. But it is basically an LNG tanker 
connecting to what looks like another LNG tanker, which has a 
regasification capacity.
    Captain Scott. Well, in this submerged turret buoying 
system, the actual vessel is sort of self-contained. It 
contains both the LNG storage and the regasification apparatus. 
The buoy itself rests on the seabed floor. When the ship comes, 
it floats up to the surface and the ship mates with it. So the 
buoy itself is probably about the size of this little----
    Senator Alexander. Oh, you mean there would be many tankers 
that would have both capacities. Is that what you are saying?
    Captain Scott. Well, this is a special design. It is kind 
of proprietary to this particular company.
    Senator Alexander. So it would not be that you would just 
bring a regular old tanker----
    Captain Scott. No, no. This is a special purpose tanker.
    Senator Alexander. This is a special tanker that would 
have----
    Captain Scott. Special for that type of technology.
    Senator Alexander. It would have the LNG in it and then 
when it gets to the buoy, it would be able to warm it up and 
put it into the pipeline.
    Captain Scott. Exactly right. I think one of our proposals 
uses that. It is called a submerged turret loading concept. One 
proposal right now has that.
    We have five proposals that are what we call gravity-based 
structures. Again, this technology exists up in Alaska for a 
lot of the offshore, the North Slope stuff. Essentially it is 
building an artificial island in somewhat shallower water, 
probably 50- to 100-foot depth water, a large concrete 
structure that provides the foundation. Essentially what you 
are doing with the gravity-based structure is putting a shore-
based industrial facility on a little artificial island that 
you have made in the Gulf of Mexico.
    Senator Alexander. How far out into the Gulf is it? How 
many miles?
    Captain Scott. There are a number of proposals. I think 
anywhere from about 30 to 50 miles. It depends on the water 
depth.
    Senator Alexander. But even something 30 or 50 miles away 
is technologically possible.
    Captain Scott. For the gravity-based structure, the 
controlling technological issue is water depth, and you really 
do not want to have water depth--I think they are talking about 
the maximum water depth for that would be about an 80-foot 
water depth. So that may control how far offshore you are going 
to do it.
    Senator Alexander. But it is so far out, you would not see 
that, would you?
    Captain Scott. Well, certainly we think 30 miles out, you 
are not going to see it from the shore.
    Senator Alexander. And if you did see it, it would just 
look like another ship, more or less, I guess.
    Captain Scott. More or less, yes. If you had eyes good 
enough to see 30 miles out.
    [Laughter.]
    Senator Alexander. Mr. Robinson, to sort of merge the first 
panel and the second panel--well, let me ask Mr. Kramer or Mr. 
Hightower, would either of you want to comment on my question 
about that?
    Mr. Hightower. No.
    Senator Alexander. Mr. Robinson, one of the questions that 
would seem to be in the way of siting an LNG terminal would be 
the question of concurrent jurisdiction. That is not really an 
exact way to put it. A question of whether States and 
communities have the right to say no to a terminal that they 
just do not want.
    And the other question would be, I guess, partially to 
reduce the possibility that one might--it is very appealing at 
first thought to say that this terminal is going to be 50 miles 
off-coast. You will not see it. Even if you did, it would not 
look much like anything different.
    From your point of view, if you have 31 applications--or 
you did in December--why would working with State and local 
governments in a concurrent way to locate terminals offshore 
not be the easiest solution? Are there some flaws with that 
approach?
    Mr. Robinson. I would not say flaws, but I think you go 
back to there has never been an offshore facility constructed 
and operating.
    There are really two types of offshore technologies that we 
are talking about. The one that may come into operation in 
April is the submerged turret design. That has the difficulty 
associated with it that it does not have any storage 
associated. It is just gas straight into the system.
    One of the benefits of an LNG terminal that is provided to 
the gas delivery system is that it does allow for the storage 
of LNG onshore in tanks for delivery over a week period of 
time, let us say, after the tanker is long gone. Tanker 
movement is dictated by a number of things, including weather, 
and if you are relying upon gas delivery, then you may want to 
contemplate having that storage in a place where you can wait 
for the tanker to show up the next time.
    So those two technologies. One of them has that storage 
aspect associated with it that does not really allow it to 
substitute for onshore facilities. The other with the gravity-
based structures, those are massive structures. You probably 
have never been to the FERC building at 888 North Capitol, but 
those gravity structures are sometimes about the size of that 
building, large concrete structures, that have to be 
constructed in near-shore areas.
    There are impacts associated with offshore facilities that 
the captain knows much better than I do that do not make them a 
slam dunk. It is fine for somebody onshore to say, well, let us 
just put them offshore because it is sort of an amorphous type 
of a concept. Let us just get them offshore and they will be 
away from us.
    But again, it goes back to all siting is local, and once 
you get to the actual facility and you try to site it, that is 
when the problems start to come up. There are no sites that 
everybody just says are fine. As the Senator from Louisiana was 
alluding to, there are concerns with offshore facilities in 
terms of the vaporization process and the effects it would have 
on the fishery resources of the Gulf of Mexico. Every project 
has concerns associated with it. I think Captain Scott and I 
both feel that pain equally.
    Senator Alexander. Mr. Hightower, would you walk us through 
a worst case intentional spill scenario, what the size of the 
hole would be, what the leak would be like, what the hazard 
zone would be like, what it might look like? Some have said an 
LNG incident would be like a bomb explosion. Is that true?
    Mr. Hightower. It is very difficult to take a worst case 
because as soon as you take a case, someone will say, you know, 
I can make a case that is worse than that and they will do 
that. If I say, okay, we can damage one tank in an LNG ship, 
someone will say I will figure out a way to damage two. So if 
we start talking about worst case, we can get down a very 
slippery slope in a hurry.
    But I think maybe to get to the gist of your question, what 
may be possible and could be possible--and I think we have to 
look at those. If you look at the threats that we are looking 
at through the intelligence communities, we believe that the 
size of the potential damage that you might see under a number 
of different scenarios range from 2 to 3 square meters, a meter 
or 2 in diameter, up to 3 to 4 meters in diameter. That is the 
hole sizes that we are looking at.
    It is possible, depending upon the types of threats that 
you would be looking at, that you might have what we term 
cascading damage, more than one tank damaged at a time. I 
cannot get into the types of threats that would provide that. 
That is classified. We have a classified report to go along 
with our unclassified report.
    But we believe that in general, spills of two or three 
tanks at a time probably, what you might consider worst case, 
even though I do not want to use that term, would be 
potentially possible or possible. Our report does take those 
types of range of events, whether they are intentional or 
accidental, and tries to provide some information in a general 
format as to where we think the consequences and the hazard 
distances are for that.
    Those can be modified by improving your risk management 
approaches, by having additional safety, by having additional 
security, by working with the Coast Guard, how you site your 
facility, your environmental conditions at the site. All of 
those things need to be taken into consideration. We believe 
that there is a range of possibilities that you need to look at 
and we have looked at that in our report.
    Does that answer your question?
    Senator Alexander. Yes. That is a big help.
    I just have a couple more questions. I want to, while I 
have got Mr. Robinson here, make sure I understand this 
jurisdictional question. Would you tell us how the 
jurisdictional changes to section 3 of the Natural Gas Act that 
you have recommended would compare with the other authority 
that FERC currently has for siting pipeline infrastructure?
    Mr. Robinson. It would essentially make it equivalent. We 
currently have--and there is no one that is questioning our 
authority to site interstate natural gas pipelines. We would 
ask that the same authority be expressed under section 3.
    Senator Alexander. And you have also asked for the right of 
eminent domain under section 3 for LNG terminal siting. Is that 
correct?
    Mr. Robinson. That is correct.
    Senator Alexander. Now, you had said earlier that while you 
felt that FERC ought to have exclusive siting, that there were 
other issues that came up, for example, with the Coastal Zone 
Management Act, the Clean Water Act, the Clean Air Act that 
permitted the State to make a decision that, for reasons under 
those acts, it did not want an LNG terminal and that that would 
stop the location of the terminal. Did I understand you 
correctly?
    Mr. Robinson. Yes, sir, you did.
    Senator Alexander. Now, someone said, though, that the 
Coastal Zone Management Act decision by a State could be 
overridden by the Department of Commerce. Is that true?
    Mr. Robinson. Yes, it is. If the State denies a CZMA, it 
can be appealed to the Department of Commerce and the Secretary 
of Commerce can overturn that if it meets certain criteria. 
Some of those criteria include in the national interest, things 
of that sort.
    Senator Alexander. Has that ever happened?
    Mr. Robinson. We have two pipeline projects where they went 
to the Secretary of Commerce--I will confuse the two, but I 
think it was Millennium and Islander East. In one instance, the 
Secretary of Commerce upheld the State; in the other instance, 
the Secretary of Commerce overturned the State.
    Senator Alexander. So it would be fair to say that under 
the Coastal Zone Management Act, in the end the State does not 
have the clear authority to stop an LNG terminal because that 
might be overruled by an agency of the Federal Government.
    Mr. Robinson. With a very high standard for the Secretary 
of Commerce to meet.
    Senator Alexander. But that still leaves the Clean Water 
Act and the Clean Air Act.
    Mr. Robinson. That is correct.
    Senator Alexander. If the State determines that there is no 
State water quality certificate under--I guess this is its 
delegated authority under the Federal Clean Water Act.
    Mr. Robinson. That is correct.
    Senator Alexander. The State has been delegated the 
authority to make decisions about clean water, and if the State 
of California, for example, refused to issue a State water 
quality certification in connection with an LNG terminal, would 
that stop it even though you had approved it?
    Mr. Robinson. There is no administrative review at the 
Federal level of the 401 denial. You can take that to the State 
court and appeal it to the State court, and the State court 
could overturn it just like the Federal court could overturn 
the decision of the Secretary of Commerce on the overturning of 
the denial of the CZMA. So you always get to the courts 
somehow.
    Senator Alexander. But that is a State issue.
    Mr. Robinson. But it is a State issue.
    Senator Alexander. That is not a Federal agency overturning 
a State decision.
    Mr. Robinson. It is a State issue.
    Senator Alexander. And on the Clean Air Act, does the same 
apply?
    Mr. Robinson. Same thing as the 401.
    Senator Alexander. Well, I want to thank each of you for 
taking time to be with us today. This is a very important 
hearing, and it is one which the Senate takes very seriously.
    I will end where we started. We are here today discussing 
liquefied natural gas because the price of natural gas in the 
United States is higher than in any other industrial country in 
the world. And while there are a variety of policy approaches 
we can take to try to lower the price, that range from 
conservation and alternative sources of energy, one of the most 
obvious ways to increase the supply and one of the most 
immediate ways to increase the supply is liquefied natural gas. 
And siting and safety of terminals for LNG is the key to that.
    So you have helped us a great deal. We will make this a 
part of our record as we work on an energy bill, and I thank 
you for coming. The hearing is adjourned.
    [Whereupon, at 4:36 p.m., the hearing was adjourned.]

                                APPENDIX

              Additional Material Submitted for the Record

                              ----------                              

                                       City of Warwick, RI,
                                    Warwick, RI, February 11, 2005.
Hon. Lamar Alexander,
Chairman, Subcommittee on Energy, Committee on Energy and Natural 
        Resources, U.S. Senate, Washington, DC.
    Dear Senator Alexander: I would like to thank you for allowing the 
City of Warwick the opportunity to enter into the record its comments 
regarding the proposed siting of the KeySpan Liquid Natural Gas (LNG) 
marine terminal in Providence, Rhode Island. I appreciate the 
opportunity to add, on behalf of the City of Warwick's nearly 90,000 
residents, my administration's strong and adamant opposition to this 
proposal. I join many of Rhode Island's leaders, Save the Bay and 
numerous others who have expressed firm opposition to this proposal 
based on public safety and economic concerns.

                             PUBLIC SAFETY

    The City of Warwick is a community that enjoys 39 miles of 
coastline along Narragansett Bay and the Providence River and is 
characterized by high-density residential neighborhoods. It is my 
belief that construction and/or operation of an LNG terminal would 
unnecessarily endanger our residents and could potentially decimate the 
quality of life that Rhode Islanders have long enjoyed. I am very 
concerned about the safety and security risks associated with the 
presence of LNG tankers transiting Warwick's highly populated coastal 
neighborhoods. The City of Warwick is not willing to support the 
expansion of such a dangerous industrial enterprise in a neighboring 
community since this enterprise will jeopardize the public health, 
safety and welfare of our residents.
    As you are aware, the Federal Energy Regulatory Commission (FERC) 
concluded (May 2004) that a leak from an LNG tanker could catch fire 
and endanger people up to nearly a mile away; additional studies have 
shown that fire from LNG will burn hotter and faster than oil or 
gasoline, and the fire cannot be extinguished until all of the fuel is 
consumed. Other LNG scientists indicate that the loss of an entire 
tanker could produce a fire a mile wide and result in second-degree 
burns two miles away. Should an accident occur along Warwick's densely 
populated coastline, the resulting vapor cloud or pool fire could 
potentially cause extensive, catastrophic damage to life and property.
    A Sandia National Laboratories and Department of Energy Report 
found that a terrorist attack on a tanker could, in theory, cause a 
thermal blast that would cause major injuries and buildings to catch 
fire more than a third of a mile away, and cause second-degree burns on 
exposed skin for up to a mile. The report also concluded that foam 
insulation used on many LNG tankers would likely decompose under the 
searing heat from a fire, which ``could lead to rupture or collapse'' 
of adjacent tanks, leading to more intense fires of longer duration.
    Additionally, studies have also shown that spilled LNG would 
disperse faster on the water than on land, because water spills provide 
very limited opportunity for containment. LNG vaporizes more quickly on 
water since the ocean provides an enormous heat source. Accordingly, 
most analysts conclude that the risks associated with shipping, 
loading, and off-loading LNG are much greater than those associated 
with land-based storage facilities. Therefore, Warwick would be one of 
several communities to be considered in the highest risk category 
during the transit of a fully laden LNG tanker.
    The City is also very concerned with the potential for a terrorist 
attack, and potential shipping-related events that could result in LNG 
spills, such as collisions, groundings, navigational errors, and 
mechanical failures. Navigation of these tankers is very difficult in 
confined waterways and these types of accidents are a very real 
possibility. In addition, according to Senator Jack Reed (D-RI), the 
Coast Guard ``does not have the resources to adequately secure LNG 
tankers.'' Without proper resources the risk factor of transiting 
tankers increases to an even greater level.
    Land-based events that could result in an LNG spill include 
equipment failure and site-specific events such as earthquakes. 
Terrorist attacks against LNG ships or storage tanks could release a 
large amount of LNG at once. According to Gal Luft, director of the 
Institute for the Analysis of Global Security in Washington, locating 
LNG terminals in close proximity to residential or urban areas results 
in them becoming a major terrorist target--not just the terminals, but 
the whole LNG infrastructure, from tanker, to the terminal, to the 
truck.
    The preponderance of evidence clearly illustrates that there are 
numerous public safety risks associated with the transportation of 
liquid natural gas. To expand such a facility in a highly populated, 
urban area and risk exposing tens of thousands of residents to the 
dangers of an explosion constitutes a potentially tragic and 
preventable hazard.

                                ECONOMY

    The security buffer that would likely be required could have a 
substantial negative impact on the commercial and recreational 
resources of Greenwich Bay and all of the city's waterways. The Energy 
Information Administration estimates that demand for LNG will nearly 
double over the next two decades. Increased demand will undoubtedly 
lead to an ever-increasing number of ships transiting our waterways, 
exponentially affecting our safety, economy and enjoyment of our 
natural resources. From a purely economical standpoint, closure of 
Greenwich Bay and the waters from Warwick Point north to Conimicut will 
have a significant disruptive and adverse impact on the local 
recreational and commercial shellfishing industry. Greenwich Bay alone 
is home to over 4,000 recreational boats and also contains a commercial 
shellfishing fleet that would be devastated by additional closures due 
to transiting LNG tankers. Accidental groundings, navigational errors 
and mechanical failures would also greatly exacerbate the potentially 
adverse impact on the local economy. The negative socioeconomic impacts 
stemming from LNG ship deliveries will constitute a significant 
degradation of Warwick's public and natural resources.

                   FIRST RESPONDER AND TRANSIT COSTS

    In addition to the potential environmental and safety concerns, 
Warwick and other coastal communities would be in a danger zone and 
would have emergency ``first responder'' obligations without being 
provided a source of funding for necessary training and equipment. 
Warwick would undoubtedly incur direct ``transit-related costs'' each 
time a tanker passes by its waters. Transiting LNG tankers will place a 
heavy burden on our local Law Enforcement, Fire and Harbormaster 
Departments. There is no indication that these city departments will be 
provided training, equipment and financial resources for any of these 
costs. There is also no indication as to what public safety and 
security impacts are associated with such a disaster. Transiting LNG 
tankers will place an undue economic burden on the City of Warwick's 
financial resources.
    It is my firm belief that LNG facilities should be located in 
offshore terminals or in remote areas where they pose no threat to 
population centers. For all of these reasons, the City of Warwick is 
hereby on the record as being adamantly opposed to the proposed KeySpan 
marine terminal for Providence, RI. Approval of this proposal would 
jeopardize the lives and properties of tens of thousands of Rhode 
Islanders.
    Once again, thank you for the opportunity to provide testimony on 
this very important matter. Sincerely,
            Sincerely,
                                           Scott Avedisian,
                                                             Mayor.
                                 ______
                                 
                    Statement of Patrick C. Lynch, 
             Attorney General of the State of Rhode Island

    Q: Please state your name and business address for the record.
    A: My name is Patrick C. Lynch and my address is 150 South Main 
Street, Providence, Rhode Island 02903.
    Q: In what capacity are you testifying?
    A: As the Attorney General of Rhode Island, on behalf of the more 
than one million citizens that I was elected to represent and defend.
    Q: What is the purpose of your testimony?
    A: My testimony is intended to focus on the inadequacies of the 
current LNG terminal licensing process that is vested in the Federal 
Energy Regulatory Commission pursuant to the Natural Gas Act.
    Q: Do you have any opening remarks at this time?
    A: Yes I do. First, I am grateful for this committee taking the 
time to closely examine the environmental and public safety threats 
associated with the proposals to have LNG supertankers ply the precious 
coastal waterways of Rhode Island and Massachusetts, which are situated 
along some of the most densely populated areas in the United States.
    I am also compelled to state that the composition of the panels 
that will field questions by the Subcommittee members is clearly 
unbalanced in that it heavily favors industry, as well as some of the 
very federal agencies that have thus far demonstrated that they have 
not been able to discharge their duties in a manner that will 
adequately protect the safety of citizens of densely populated cities 
and communities. These citizens will be forced to live in close 
proximity to either the LNG terminal or LNG supertanker operations 
proposed for Fall River, Massachusetts, and Providence, Rhode Island. 
Although my office made a number of attempts to be given the chance to 
participate on the panels before you, and were denied that chance, I 
appreciate this moment to share my serious concerns about the way in 
which our Federal Government determines where to site LNG terminals.
    Q: Please explain why LNG terminal siting issues are important to 
Rhode Island.
    A: As I mentioned a moment ago, there are currently two proposals 
for LNG terminals in the southeastern New England area that will 
significantly and detrimentally affect the interests of Rhode Island 
citizens. One is the proposal by Weaver's Cove Energy and Hess Amerada 
to establish a LNG terminal in Fall River, and the second is a proposal 
by KeySpan Corporation to convert an existing 30-year-old storage tank 
in Providence into a terminal capable of receiving marine shipments of 
LNG.
    Q: Please explain how these proposals affect Rhode Island.
    A: Both LNG terminals, if licensed by FERC, would necessitate LNG 
supertankers traveling many miles through narrow waterways in order to 
reach their respective destination points in Fall River, Massachusetts, 
and Providence, Rhode Island.
    Much of the coastal waterway comprises Narragansett Bay, which is 
Rhode Island's greatest natural and recreational resource. Narragansett 
Bay is one of the few estuaries in the country that remains relatively 
free of heavy industry. The Bay and its tributaries support not only a 
significant commercial fishing industry, but also form the backbone of 
Rhode Island's multi-billion-dollar tourism industry.
    For the Fall River terminal, LNG supertankers would have to 
navigate up the narrow ``East Passage'' of Narragansett Bay and then 
through the Mount Hope Bay, 60 percent of which is in Rhode Island 
territory. The navigation route to Fall River requires the LNG 
supertankers to travel under four separate bridges, two of which are in 
Rhode Island--the Newport/Pell Bridge and the Mount Hope Bridge. The 
total trip is approximately 26 miles from the entrance of Narragansett 
Bay to the proposed terminal location in Fall River.
    LNG supertankers destined for the Providence terminal would travel 
up the narrow East Passage of Narragansett Bay before entering the 
Providence River in order to reach the Port of Providence. The length 
of trip from the entrance of Narragansett Bay to the Port of Providence 
is approximately 29 miles.
    This past Thursday--February 10, 2005--a 350-foot tanker ran 
aground in Newport, at the opening of Narragansett Bay, which is where 
these gargantuan, 900-foot-long LNG supertankers are also expected to 
travel. It stands as the latest of many groundings that have occurred 
over the years, and will continue to occur in the future, because of 
the difficult, site-specific conditions that exist along the navigation 
route. This recent grounding highlights the fact that the narrow 
federal channel along East Passage of Narragansett Bay is the wrong 
place to supertankers, which are as long as three football fields and 
carrying an extremely dangerous and volatile product.
    I can not emphasize enough that all along the navigation routes 
whether to Fall River or Providence, there are many densely populated 
communities that clearly fall with the deadly thermal radiation zones 
that would emanate from a LNG pool fire. These affected communities 
include the cities of Providence, East Providence, Fall River, Warwick, 
and Cranston; and the towns of Bristol, Barrington, Tiverton, Warren, 
Middletown, Portsmouth, Newport, and Jamestown.
    Last, both proposals stand to substantially interfere with the 
recreational uses of Narragansett Bay, disrupt other commercial 
operations and industries, and obstruct the multi-billion-dollar urban 
revitalization efforts that are unfolding along the shores of 
Providence and East Providence (see attached graphic depicting planned 
development in areas adjacent to the KeySpan site).
    Q: Have you evaluated the environmental and socioeconomic impacts 
stemming from the proposals to establish marine terminals in both Fall 
River and Providence?
    A: Yes. As a formal intervener in both licensing cases, I have 
attempted to guide the FERC environmental staff to conduct an 
environmental assessment of both projects that will comply with the 
legal mandate of the National Environmental Policy Act (NEPA). 
Specifically, I have strongly argued that any environmental assessment 
must address in detail the following issues:

    (1) the impact of safety and security protocols that will be 
established by the United States Coast Guard for LNG supertanker 
operations;
    (2) the impact on commercial and recreational resources along 
Narragansett and Mount Hope Bays, as well as the Port of Providence;
    (3) the long-overdue need for the development of marine exclusions 
zones as it pertains to LNG supertanker operations along densely 
populated coastal communities;
    (4) the need for truthful consideration of the risks stemming from 
an accidental or intentional release of LNG from a marine carrier;
    (5) the need for consideration of the consequences of an accidental 
or deliberate release of LNG from a supertanker as it relates to public 
safety impacts;
    (6) the economic impact of the yet-to-be-announced security 
protocols that the Coast Guard will establish, with specific detail on 
site conditions, available intelligence, threat assessments, as well as 
the scope and nature of safety and security operations;
    (7) the consideration and analysis of the impacts to public safety 
and property that exist within the dangerous thermal radiation zones 
under any credible scenario described in the recently released study by 
the Sandia National Laboratory;
    (8) the consideration and analysis of the impacts to public safety 
and property that would occur in the event of delayed ignition of LNG 
vapor clouds; and
    (9) a real alternatives analysis that includes the economic impacts 
of each of the above considerations.

    Q: Have you included any documents that demonstrate the importance 
of considering the above issues as part of the environmental impact 
analysis?
    A: Yes. Included within the attachments are graphics that depict 
thermal radiation zones where Rhode Islanders risk being injured or 
killed in the event of an accident or intentional act. Around the 
proposed KeySpan facility, we have produced an image that shows a 
number of schools, universities, hospitals (including the state's 
primary trauma center), chlorine manufacturing facilities, and other 
critical energy infrastructure that would be damaged or destroyed in 
the event of a catastrophic breach of the LNG supertanker's contents.
    Focusing solely on the KeySpan proposal, the consequences of an 
intentional release of LNG from a supertanker as a result of an act of 
terrorism are extraordinary. Furthermore, as articulated in the report 
by Dr. Jerry Havens, a nationally respected expert on thermal radiation 
zones and the consequences of LNG releases, there is great cause for 
concern stemming from the proposals to introduce vast quantities of LNG 
into population centers when the means of transportation is by marine 
carrier.
    Q: How has the Federal Energy Regulatory Commission reacted to the 
concerns you have raised?
    A: FERC has simply ignored these most important issues. My office 
has painstakingly tried to get FERC to adequately analyze the public 
safety implications of introducing LNG supertankers into Rhode Island's 
waterways, but FERC steadfastly characterizes the risks as 
``manageable'' and ``acceptable'' without any substantive analysis or 
explanation. Without even conducting an independent threat analysis, 
FERC simply chooses to rely on the past safety re,cord of the LNG 
marine carrier industry without any apparent concern about the real 
threat posed by terrorism in the United States, particularly in the 
post 9/11 world.
    Q: What evidence have you seen about the potential for an act of 
terrorism on a LNG supertanker?
    A: There are a number of developments that cause me concern as the 
State's chief law enforcement official. First, the threat of Al Qaeda 
terrorists is real, and it remains unclear how long it will continue. 
Clearly, we have already witnessed the use of aircraft as weapons of 
mass destruction. Certainly, a saboteur or terrorist, if able to access 
any type of aircraft laden with explosives, could use the aircraft to 
attack an LNG supertanker. Such an attack would likely cause the 
horrific consequences described in the Sandia Report.
    From a threat standpoint, it has recently been identified that Al 
Qaeda members have established contact with violent gangs in this 
country, including a gang called ``MS-13.'' This gang has a presence in 
the Boston area. Moreover, there are also radical groups that have 
recently attacked critical energy infrastructure, such as the recent 
detonation of explosives at the base of 540 kV Hydro-Quebec 
transmission structure in Canada along the border with the United 
States. The group, called the Initiative de Resistance 
Internationaliste, claimed responsibility and specifically cited Iraq 
and the Israeli/Palestinian conflict as causes for the attack. 
Although, surprisingly, there has been little or no mention of this 
event in the American media, I believe that all of these threats should 
lead our nation to do what Congress envisioned when it passed the 
Homeland Security Act--to secure the homeland. Because FERC has failed 
to adequately analyze these threats and, unfortunately, seems ill 
equipped and uninterested in doing the task, the citizens of Rhode 
Island and nearby Massachusetts need intervention at the highest 
possible level--the United States Congress.
    I believe that the Draft Environmental Impact Statements for both 
the Fall River and Providence terminals make it clear that the most 
important environmental issue raised in the proceedings (the threat of 
terrorism and the public safety consequences) has been glossed over in 
the most superficial manner.
    Q: What steps have you taken as a result of FERC's failure to 
adequately address the threat issue?
    A: My office has retained Richard Clarke, the nation's foremost 
expert on counter-terrorism, to conduct an independent threat analysis. 
Although we asked FERC to extend the deadline for comments on the DEIS 
in the KeySpan case to allow us to submit the completed threat 
analysis, FERC rejected our request, and I note that it did so despite 
KeySpan having raised no objection. In my experience, FERC's failure to 
grant a highly interested party additional time, even when the 
applicant itself raised no objection, further demonstrates that FERC 
intends to rush to judgment and approve KeySpan's project and, in the 
process, trample the sovereign rights of Rhode Islanders.
    Q: What other actions have you taken in order to see that the 
public interest is adequately protected?
    A: In addition to the many letters that I or my staff have written 
regarding these matters, I have also submitted a joint petition with 
Massachusetts Attorney General Tom Reilly requesting the United State 
Department of Transportation to promulgate regulations that comply with 
the spirit and letter of the Pipeline Safety Act of 1979. This law 
specifically encourages the remote siting of LNG terminals. 
Additionally, I have submitted comments supporting the promulgation of 
exclusion zones for LNG marine carriers so that protections are finally 
available to citizens who live along the navigation routes of LNG 
supertankers. All of these actions are documented in the attached 
packet of materials that I strongly encourage Committee members to 
examine.
    Q: Do you have any closing comments?
    A: I ask the Subcommittee on Energy to diligently investigate and 
seek measures that resolve the inadequacies of the current FERC 
licensing process. I encourage the Subcommittee to ensure that the 
energy needs of New England are satisfied through the remote siting of 
LNG terminals so that the health and safety of our citizens are not 
unnecessarily jeopardized. Last, and again, I extend my appreciation to 
the Subcommittee for taking the time to consider my testimony and the 
attached materials.
    Q: Does this conclude your testimony?
    A: Yes.
    [Note: The following attachments to Mr. Lynch's statement have been 
retained in subcommittee files:]

   Correspondence from Attorney General Patrick C. Lynch to the 
        USCG regarding Marine Exclusion Regulations;
   Joint Petition of the Rhode Island and Massachusetts 
        Attorneys General for rulemaking by USDOT;
   Correspondence from Attorney General Patrick C. Lynch to 
        Senator Domenici;
   Graphic image showing areas within thermal radiation and 
        vapor dispersion of LNG in the event of a deliberate attack on 
        LNG supertankers along the navigation route up Narragansett 
        Bay;
   Graphic image showing Consequence Assessment of Intentional 
        Breach of LNG supertankers while vessel is berthed at the 
        KeySpan facility in Providence, Rhode Island;
   Graphic image showing ongoing revitalization efforts along 
        the waterfronts of Providence and East Providence, Rhode 
        Island;
   Graphic image showing thermal radiation zones that would 
        exist for an Offshore LNG Terminal in federal waters off the 
        coast of Massachusetts;
   Correspondence from Attorney General Patrick C. Lynch to the 
        Honorable Patrick Henry Wood, III, Federal Energy Regulatory 
        Commission;
   Two-Part Report prepared by Dr. Jerry Havens containing an 
        Analysis of the DEIS for the KeySpan LNG Facility Upgrade 
        Project and Recommendations for Requirement of Exclusion Zones 
        to Protect the Public from Marine Releases of LNG;
   Comments of Attorney General Patrick C. Lynch on the Draft 
        Environmental Impact Statement for the Proposed KeySpan 
        Liquefied Natural Gas (LNG) facility Upgrade Project in 
        Providence, Rhode Island.
                                 ______
                                 
                                    City of Fall River, MA,
                                 Fall River, MA, February 25, 2005.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Senator Domenici: I would like to thank you for this 
opportunity to submit comments to your committee as it relates to the 
hearing that was held on February 15, 2005 on siting issues for LNG 
import terminals. I would like to offer a few ideas, which could make 
the current process less contentious:

    1) Funding for companies that develop offshore terminals: The 
government should offer financial incentives to those energy companies 
that agree to develop offshore LNG import terminals. It could be argued 
that the monetary costs related to safety and security measures that 
federal, state and local authorities have to bear as it relates to the 
transport of LNG via tanker ship are less when it comes to offshore 
facilities. Quite simply, onshore terminals and the safeguarding of 
such can cost more, the difference or the savings in safety and 
security costs for offshore terminals should be passed on to those 
companies that pursue the development of such facilities.
    2) The necessity of developing a comprehensive needs analysis: The 
appropriate time for FERC to conduct a comprehensive needs analysis of 
supply/demand issues has long passed. It should have been done already. 
Undoubtedly, studies have been done or the issue has been examined in 
some way by FERC or other entities, but I am unaware of any 
comprehensive study and planning process having been done on this 
issue. The Department of Energy Commissioned Sandia National Laboratory 
to do a comprehensive study of issues relating to the transport of LNG 
via tanker ships and I would suggest that another governmental agency, 
perhaps FERC, should Commission an entity to do a comprehensive needs 
analysis. How much LNG does the United States actually need? Also, when 
do we have too much LNG, assuming we can reach such a point? It is a 
legitimate question. The U.S. if often criticized for having an overly 
heavy reliance on foreign governments for our oil supply. LNG is also 
shipped to the United States from foreign producers of this substance. 
In my opinion, we do not want to create a situation where we depend 
heavily on foreign governments for our gas, similar to the situation 
that exists now with oil. A comprehensive U.S. energy policy should 
include a mix of clean coal, oil, gas, and maybe even nuclear power in 
addition to enhanced or greater efforts to conserve and a focus on 
renewable energy like solar and wind power. We should also begin to 
think about other alternatives that we may not have focused in on 
previously. I note that President Bush in several past speeches has 
discussed the potential for hydrogen to be a fuel of the future.
    (There are 4 existing LNG import terminals in the continental 
United States. Another 7 have been approved by FERC thus far and 
another 3 by the Coast Guard/MARAD for a total of 10 new terminals 
having been approved. Another 13 LNG import terminal applications have 
been formally filed with FERC as of 2/18/05 and an additional 6 
proposals have been filed with the Coast Guard/MARAD for a total of 19 
pending applications. Also, various project sponsors throughout the 
United States have identified at least 14 potential sites for LNG 
import terminals. Canadian and Mexican officials have also either 
approved sites or project sponsors have made proposals to the 
appropriate governmental agency in those countries. Therefore, we find 
at least another 12 proposals that may move forward in either Canada or 
Mexico, some or all of which through existing or proposed pipeline 
infrastructure could service the U.S. East and West coasts or locations 
in between.)
    3) The appropriate placement of LNG import terminals: I am not 
comfortable that the U.S. has an effective energy policy in place as of 
right now but certainly as a community confronting the issue of LNG 
import terminal siting, I can tell you that a main focus for me is LNG 
as it applies to that potential energy policy. My sentiments above, 
about the necessity of having a comprehensive needs analysis done, I 
hope, will not fall on deaf ears. I believe that LNG should be a 
component of U.S. energy policy, but we need to know exactly how much 
of a factor it should play, because it is vitally important to the next 
question that I will raise, the question of where to place these LNG 
import terminals. The LNG industry paints the portrait of an extremely 
dire situation; they say that we need LNG import terminals so bad and 
so quickly that they should be allowed to place them in any location 
imaginable. This is a difficult concept for many citizens, including 
myself, to buy into. Many feel, as I do, that the ideal location for 
LNG import terminals should be offshore or in very remote locations. 
While I understand that the industry will argue that LNG accidents 
either through mechanical failure, human error or terrorist attack are 
low-probability events, reports like the Sandia report should leave no 
doubt in anyone's mind; If such a situation were to occur it would be a 
high consequence event. Thus we are left to balance the concept of low 
probability vs. high consequence. This is a balancing act that seems to 
be a very daunting one, especially post 9/11. Although, as Americans, 
we believe strongly that we should not live in fear, to do so would be 
to allow those terrorizing our country to enjoy a certain amount of 
victory. Those that would harm us should be denied that opportunity. 
However, we do have a responsibility to act smarter then we have in the 
past. I believe that it is the duty of all those responsible for 
homeland security and the protection and preservation of our homeland 
to mitigate future threats. So, we have to ask ourselves, does it make 
sense to place LNG import terminals in heavily populated areas, 
residential neighborhoods or urban settings? I don't believe it does. 
Not if alternatives exist. Alternatives include siting LNG import 
terminals in remote onshore locations or through the use of technology, 
placing them offshore. If it turns out that offshore technology or 
siting onshore terminals in remote locations costs more in terms of 
slightly higher gas prices, I believe it is a cost that American 
citizens will find reasonable.
    Also, I do not believe that such costs would be as high as some say 
or if siting these terminals in such locations will even bring about 
higher costs. I say this because every time an LNG tanker visits a 
current or future import terminal there are or will be tremendous 
safety and security costs that local, state and federal governments 
will have to pay. Those funds are going to have to come from the U.S. 
taxpayer. I believe that costs for safety and security are less or 
would be less when we begin to talk about siting these terminals 
offshore or in remote onshore locations. As I said in bullet #1 if this 
committee, or you, Senator Domenici, are already planning to saddle the 
American people with the extremely high costs of safeguarding these LNG 
tankers as they go into heavily populated areas, why not consider 
instead, saving us all some money by seeing to it that offshore or 
remote onshore locations become the preferred alternative. At that 
point maybe some would even be willing to discuss taking the savings 
from sending these tankers into less densely populated areas and 
reapplying those monies to encourage and reward companies that agree to 
develop offshore terminals or remote onshore terminals. Finally, we 
should also realize that when it comes to siting LNG import terminals 
that we aren't talking about Economics 101. What I mean by this is many 
are saying that more terminals equals more supply and therefore much 
lower costs for the consumer. I don't necessarily believe that this 
should be stated as a matter of fact. (Please see the attached article, 
which discusses this issue in more detail.)*
---------------------------------------------------------------------------
    * The attachments have been retained in the subcommittee files.

    Thank you for the opportunity to present these ideas before your 
committee. Should you have any questions or should you wish to contact 
me, please feel free to call me at 508-324-2600.
            Sincerely,
                                    Edward M. Lambert, Jr.,
                                                             Mayor.

                                    
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