[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.*
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* All attachments have been retained in subcommittee files.
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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.
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\1\ CRS Report for Congress: Liquefied Natural Gas (LNG)
Infrastructure Security: Background and Issues for Congress, September
9, 2003
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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
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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.
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\3\ Formerly Research and Special Programs Administration's (RSPA)
Office of Pipeline Safety
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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.
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\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
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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.
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\5\ Consequence Assessment Methods for Incidents Involving Releases
from Liquefied Natural Gas Carriers; ABSG Consultants, May 2004
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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.)*
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* 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.