White House, States Clash on Gas Terminals

President Bush called Wednesday for federal regulators, and not states, to have final say over the location of liquefied natural gas terminals, stepping into an emotional issue that has roiled California and other coastal states.

A provision similar to the one the president endorsed Wednesday is already moving through Congress. It is opposed by the administrations of Gov. Arnold Schwarzenegger in California and Gov. Jeb Bush, the president’s brother, in Florida. The two governors fear it would weaken the states’ ability to respond to safety and environmental concerns over the terminals.

The dispute offers a lesson in the politics of energy: Issues often divide lawmakers based on their home-state interests rather than their party affiliation.

The Bush administration and its allies in Congress have been looking for ways to speed up the building of energy facilities, an effort to address rising prices and supply shortages. Imported liquefied natural gas, or LNG, has been eyed increasingly as a way to fuel electricity-producing power plants and meet other energy needs.

LNG is the same natural gas commonly used in homes, but cooled into a liquid, which condenses it for easier shipment in ocean tankers. Before it is used as a fuel, it is warmed and returned to gas form.

Currently, three terminals that accept LNG deliveries are in operation on the East Coast and a fourth is on the Gulf Coast. Dozens of new facilities have been proposed, including one at the Port of Long Beach and two off the Ventura County coast.

But the proposed facilities have generated concerns about potential terrorism and other safety risks. A study last year by scientists at the Sandia National Laboratories, one of the government’s nuclear weapons labs, said that a terrorist attack on a tanker delivering LNG at a U.S. port could set off a fire hot enough to harm people and buildings nearly a mile away.

Bush stepped into an ongoing dispute over the relative powers of state and federal regulators in picking sites for LNG facilities. Speaking to a conference on small business Wednesday, the president said: “Congress should make it clear to the Federal Energy Regulatory Commission its authority to choose sites for new terminals, so we can expand our use of liquefied natural gas.”

Schwarzenegger’s energy advisor, Joe Desmond, said California objected to any effort to cut out states from decisions about where facilities are built and what conditions are imposed on their operations.

“The state has a role in participating in siting, based on its interests in protecting the health and safety of its citizens,” he said.

At the same time, Desmond said, Schwarzenegger agrees with Bush “that LNG must be an option in planning for future needs.”

A dispute over the proposed LNG facility in Long Beach apparently helped spur Congress to step into the question of who has final authority on location decisions. FERC has said it has sole jurisdiction over whether LNG terminals will be built. But California’s Public Utilities Commission has challenged that assertion in court.

“We would be happy to work with FERC,” said Harvey Morris, a California Public Utilities Commission lawyer. “We want the natural gas. We want to help get more supplies to California. But we just want to have some say over where a project is built.”

Bush’s comments came in a speech urging Congress to pass his long-stalled energy bill. Singling out the potential of LNG, he said imports of the liquefied gas nearly doubled in 2003 and rose 29% last year. But, he said, further increases would be limited by the small number of receiving terminals and storage facilities.

“Federal agencies must expedite the review of the 32 proposed new projects that will either expand or build new liquefied natural gas terminals,” the president said.

Supporters said Bush’s plan would end a bureaucratic logjam that they said had delayed building new LNG facilities.

“The goal is to provide some certainty,” said Mark Stultz, spokesman for the Natural Gas Supply Assn., “and to recognize that the nation as a whole is going to need to site more of these things in a timely fashion.”

David Pursell, a principal at Pickering Energy Partners, a Houston research firm, said Bush’s LNG proposal was “probably the best thing they can do -- give FERC full authority.... It will certainly help get LNG facilities built.”

But potential political roadblocks to Bush’s efforts were already surfacing. Sen. Dianne Feinstein (D-Calif.) said she would push legislation to “provide the states and the federal government joint authority over the siting of LNG facilities.”

The energy bill approved by the House would make the federal energy commission the final authority in choosing sites for LNG facilities. A move to include a similar provision in the Senate energy bill is expected next month.

Critics of efforts to expand federal authority have accused Republicans of violating one of their core principles: states’ rights.

“States’ rights -- that used to be a Republican position,” said Rep. Henry A. Waxman (D-Los Angeles). But the House effort to expand federal authority, he said, “has the view that Washington knows best.”

Rep. Lois Capps (D-Santa Barbara) said Californians should be especially concerned about the federal energy commission’s role, “given the agency’s miserable performance during the energy crisis of 2000-01. FERC allowed out-of-state power companies to rip off billions of dollars from Californian families and businesses, and we are still paying the price today.”

Republican leaders in Congress have said an increased role by federal regulators would be appropriate because the imported gas would be used in interstate commerce, a federal responsibility. They have also said that the greater federal role would help to reduce energy prices.

“We want the states to have a part in here,” Rep. Lee Terry (R-Neb.) said during the House debate on the energy bill last week. “What we just do not want is for the states and localities ... to have veto power.”

Bush did not specifically endorse the provision of the House bill, but an administration official said the president wanted Congress to clarify that the federal regulatory agency has “exclusive jurisdiction” over the siting of LNG terminals.

Energy commission Chairman Pat Wood III issued a statement praising Bush’s position. He pledged to work with state and local officials “to protect the safety and security of residents and minimize adverse environmental impacts.”

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Times staff writer Edwin Chen contributed to this report.