June 22. 2005 8:10PM

Senate agrees to give feds power on liquefied natural gas

By H. JOSEF HEBERT
Associated Press Writer

The Senate voted Wednesday to let the federal government override objections from California and other states to the location of liquefied natural gas terminals.

Supporters argued that LNG imports will help meet a growing demand for natural gas and lower prices. But opponents of the provision, part of a wide-ranging energy bill the Senate hopes to complete this week, said states should get more of a say in locating terminals because of concerns about tanker spills and terrorists.

The Senate rejected, 52-45, a proposed amendment by Sen. Dianne Feinstein, D-Calif., that would have allowed governors to veto a final LNG siting decision by the Federal Energy Regulatory Commission.

"States must have a role in siting LNG facilities in order to protect the welfare of their citizens," Feinstein said. "States will be responsible for the safety of these facilities for a long time after they're sited."

California has been the focus of a legal fight over the authority of FERC to approve an LNG terminal in Long Beach despite state objections.

The energy bill includes a provision clarifying that FERC has the "exclusive" authority to make a final decision on an LNG import facility. Similar language was included in the House-passed version.

"Any governor that wants to participate ... has ample opportunity to do that," maintained Sen. Pete Domenici, R-N.M., adding that there were a "myriad" of zoning, environmental and other permits that a project still must obtain.

But he said the country is dependent on natural gas and will need a growing amount of LNG imports to meet demand.

"The country can't wait around and say we'll wait until this matter is litigated to see how many governors will say no until we find one that will say yes," said Domenici.

California and a growing number of other coastal states, especially in heavily populated areas of the Northeast and West, have raised concerns over siting LNG sites because of the potential for a spill or possible terrorist attack against a site or incoming LNG tanker.

A report last year by the Sandia federal lab concluded terrorists could tear one or more holes in a tanker that would release LNG and create an intense fire capable of causing significant property damage and serious burns as far as a mile away.

"I admit this is a small probability, but nonetheless it is such and therefore it has to be considered," said Feinstein.

There are four LNG import facilities currently operating in the United States: in Massachusetts, Maryland, Georgia and Louisiana. More than 40 additional facilities have been proposed, including three in California: two offshore sites off the coast of Ventura County, and the onshore Long Beach facility that's being pursued by Mitsubishi Corp.

The energy bill language would not affect governors' ability to veto offshore projects, an authority they have under the Deepwater Port Act. But it would apply to onshore sites like the one in Long Beach that's generated growing local opposition from residents concerned about safety.

Mitsubishi hasn't gotten a final OK from Long Beach for the land to proceed with the project, and state and federal environmental impact reports won't be issued until fall.

But the project sparked a legal fight between FERC and the California Public Utilities Commission when FERC rejected the PUC's attempt to assert jurisdiction over the project. The dispute is now before the 9th U.S. Circuit Court of Appeals.

The energy bill language appears designed to bolster FERC's side of the lawsuit, and could profoundly affect California's case, said Harvey Y. Morris, principal counsel for the Public Utilities Commission.

"This is a slap in the face of the states," Morris said. "They're saying states can't even have a say over where an LNG site can be located, it can be two miles from the downtown of a major city, on landfill with earthquakes around, like the Port of Long Beach, and the state has no say."

While currently LNG accounts for only about 3 percent of U.S. natural gas use, the Energy Department estimates the market share will grow to more than 20 percent by 2025 because of a decline in domestic natural gas supplies.

LNG is natural gas that is cooled to minus-260 degrees Fahrenheit to liquid form so it can be shipped on a specially designed tanker. At an import facility that liquid is stored in tanks before being gradually warmed and returned to a gaseous state and shipped through conventional pipelines.

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Associated Press Writer Erica Werner contributed to this report.