May 26--States have the right to reject liquefied natural gas projects, and that right won't change under a new energy bill pending in Congress, according to the chairman of the Federal Energy Regulatory Commission.

States can use the authority given to them by federal statutes to "effectively veto any proposed LNG terminal," said Patrick H. Wood III, the FERC chairman.

Wood issued a statement from Washington, D.C., yesterday that addressed the key issue of who has the ultimate authority to approve or reject LNG terminals -- the federal government or local and state governments.

The issue is of particular importance to Rhode Island and Massachusetts, where LNG projects have been proposed. The projects are almost unanimously opposed by local officials in both states, as well as by a number of citizens groups.

The proposal by KeySpan LNG LP is supported by the Greater Providence Chamber of Commerce, which has said that unless the LNG facility at Fields Point is expanded, prices will rise and hurt economic development in the state.

Wood's remarks came as a surprise to Attorney General Patrick C. Lynch, who has filed a lawsuit in federal court against KeySpan. The suit seeks to clarify the state's rights in LNG siting. Lynch has been an outspoken opponent of the two local LNG proposals.

"It sounds too good to be true," Lynch said in an interview yesterday after being read Wood's remarks by a reporter.

Wood's statement was issued as the U.S. Senate prepares to debate an energy bill that contains an amendment affirming the FERC's authority to site LNG terminals. Opponents of the bill have characterized that language as a "power grab" that takes away states' rights in the siting process.

But Wood said the LNG amendment does not do that.

"Affirming FERC's Natural Gas Act authority will not diminish the important and considerable authorities that state and local governments bring to the LNG import terminal authorization process," Wood said.

"I don't see in the energy bill's LNG language where the states' robust regulatory authority will be affected, except to set a reasonable and statutorily supported timeline for the states to act."

He said that states are given the authority by three federal statutes -- the Coastal Zone Management Act, the Clean Water Act and the Clean Air Act -- to reject LNG projects.

"The states, acting under the authority delegated them with any of these three federal statutes, can effectively veto any proposed LNG terminal, regardless of this commission's approval of the project," Wood said.

KeySpan has proposed a $100-million upgrade to its Fields Point facility in Providence so it can accept deliveries of the super- cold fuel by tanker. Deliveries now arrive by truck.

In Fall River, Weaver's Cove Energy and Hess LNG have proposed building a new LNG terminal on a 73-acre industrial site in the northern section of the city.

The FERC is preparing to vote on the two projects. The commission's staff issued Final Environment Impact Statements on both proposals last week. The report on the KeySpan project found that it would not meet current safety standards.

The Weaver's Cove report concluded that the project could operate safely and would not adversely affect the environment.

Coincidentally, Lynch issued a news release yesterday calling for Weaver's Cove Energy to state whether it intends to apply to the Rhode Island Coastal Resources Management Commission for permission to dredge part of Mount Hope Bay.

That body of water, two-thirds of which is in Rhode Island, would be traversed by an LNG tanker heading to Fall River.

Lynch said that dredging operations would be conducted 24 hours a day for three years.

"Such activities would disturb the existing ecological balance, damage the environment and disrupt boating on our waters," Lynch said.

Laura Rickets, a spokeswoman for the CRMC, said she understands that Weaver's Cove Energy has applied for a water-quality certification from Rhode Island's Department of Environmental Management. Such a certification is required before the CRMC will consider a dredging permit, she said.

Jim Grasso, a spokesman for Weaver's Cove Energy, said the company is going through Rhode Island's permitting process.

"We have already filed the appropriate documents," he said. "They are being processed and under review."

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