Congress Fuels Fire Between FERC, States

State officials from California to Rhode Island are fuming over a provision, slipped into the massive year-end spending bill expected to clear Congress next week, that says federal regulators should decide where liquefied natural gas terminals are built.

Many lawmakers say they didn’t know about the provision when they voted for the voluminous bill last month.

But state regulators know about it -- and they don’t like it. They said it could make it harder for them to block facilities that could harm the environment or pose safety and security risks.

The provision seems to leave the Republican-controlled Congress leaning against its natural tendency to support states’ rights. But the language reflects the determination of President Bush and his congressional allies to increase energy supplies, especially in the face of predicted increases in natural gas prices.

California appears to be the target of the provision. The state has gone to court challenging the Federal Energy Regulatory Commission’s claim that it has sole authority to decide whether an LNG facility will be built in Long Beach. The facility would receive imported natural gas that had been cooled to a liquid so that it could be transported by ship rather than pipeline.

Supporters say the provision would signal Congress’ backing of FERC’s position on preventing a burdensome regulatory process from delaying crucial energy projects.

The provision declares: “These facilities need one clear process for review, approval and siting decisions ... a process that also looks at the national public interest, and not just the interests of one state.”

Marnie Funk, a spokeswoman for Senate Energy Committee Chairman Pete V. Domenici (R-N.M.), said her boss put the language into the bill “to bring clarity to a situation in California that has been fraught with uncertainty and conflict.” Domenici aides drafted the language for a bill overhauling national energy policy, she said, and when that bill stalled, Domenici added it to the spending measure.

Carl W. Wood, a member of the California Public Utilities Commission, said the language “shows a complete contempt for the people of California and their representatives.”

Rhode Island’s attorney general, Patrick C. Lynch, attacked the provision as a “usurping of a sovereign state’s rights and ability to control its own destiny.” He also complained about the way the language was tucked into a massive bill under a category that deals with FERC’s salaries and expenses.

“Congress has created a culture of unaccountability that robs the public -- and in this case, whole states -- of the notion that our laws and America’s policies are deliberated in a fair and open manner,” said Tyson Slocum, research director for the energy program at Public Citizen, a consumer advocacy group.

Critics say the provision is an example of what happens when Congress rushes to approve a 3,016-page, $388-billion bill, with most of its members acknowledging they hadn’t read it before voting.

“These gigantic spending bills at the end of the year are just Christmas trees,” said Mike Healey, spokesman for the Rhode Island attorney general. “It’s almost impossible to know of every little ornament that’s been tucked onto one of the back branches of the tree.”

The provision dealing with LNG facilities grew out of a legal battle between California and an old nemesis, the FERC. California officials contended that federal regulators didn’t do enough during the 2000-01 energy crisis to hold down electricity prices, and they have been fighting the federal agency over how much the state should receive from companies that allegedly overcharged Californians.

The new debate is over FERC’s assertion that it has sole authority over the siting of LNG terminals, including the proposed $400-million onshore facility in Long Beach. FERC contends that the 1938 Natural Gas Act gives it sole authority over siting of the LNG plant.

The California Public Utilities Commission filed suit challenging that view. Its officials contend that they should have jurisdiction over the proposed Long Beach facility because it is to be built on land and would bring natural gas into California for local use, not interstate commerce.

Harvey Morris, an attorney for the California Public Utilities Commission, said states “whose citizens are right by a hazardous facility have a right to say something about whether that facility is built there or has to be somewhere more remote.”

Congress, in the report accompanying the spending bill, comes down on FERC’s side. It says the 1938 act “clearly preempts states on matters of approving and siting natural gas infrastructure associated with interstate and foreign commerce.” LNG terminals, it says, are “engaged in foreign commerce and, as such, fall clearly within the authority granted to the FERC.”

Though the language does not carry the “force of law,” it is intended to make the federal judges who decide the California lawsuit mindful of Congress’ intent, said Rep. Lois Capps (D-Santa Barbara), an opponent of the provision.

Rep. Lee Terry (R-Neb.), who has sponsored legislation that would essentially give the language the force of law, said he saw no conflict with states’ rights.

“Imports to the nation are a national commerce issue,” he said. “Natural gas supply is a national issue, so it is quite appropriate for Congress.”

The Long Beach terminal, proposed by Sound Energy Solutions, a subsidiary of Mitsubishi Corp., is among more than two dozen new LNG terminals proposed throughout the United States.

Thomas Giles, executive vice president and chief operating officer for Sound Energy Solutions, said his company did not lobby for the provision. “What we want is resolution to the dispute” between California and federal officials, he said. “We’d just like certainty as soon as possible.”

An LNG facility off the Ventura County coast also has been proposed, but state officials do not dispute federal jurisdiction because it would be built in federal waters. The U.S. Coast Guard is responsible for such terminals.

Four LNG terminals are in operation in the United States, on the East and Gulf coasts.