FERC & DOE LNG Primer: the black, the white, and the gray area.

• Author: Persily, Larry
• Position: OIL & GAS

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Forget for a moment the challenges for an Alaska North Slope natural gas pipeline project--whether buyers in Japan or China will sign long-term contracts to buy the gas--whether an Alaska project can offer gas at competitive rates overseas--or maybe whether prices in North America will rebound.

Forget the other hurdles--avoiding construction cost overruns, permitting delays and litigation.

Cast aside the never-ending debate over oil and gas taxes in Alaska.

Assume all that is resolved in favor of building a multibillion-dollar, large-diameter, large-volume North Slope gas pipeline. What about federal approval for moving the gas (the pipeline and possibly a gas liquefaction plant) and federal approval for selling the gas?

Welcome to the Federal Energy Regulatory Commission and the U.S. Department of Energy.

First, let's talk about getting the gas to customers. That means a pipeline and, if the customers are overseas, a liquefaction plant and terminal to load the liquefied natural gas aboard tankers for delivery across the ocean.

FERC will have jurisdiction over the liquefaction terminal. That is a matter of federal law. It was a bit ambiguous until Congress passed the Energy Policy Act of 2005, which settled the issue and gave FERC jurisdiction to license onshore LNG import and export facilities nationwide.

The law states that FERC "shall have the exclusive authority to approve or deny an application for the siting, construction, expansion or operation of an LNG terminal." The law goes on to define an LNG terminal as "all natural gas facilities located onshore or in state waters that are used to receive, unload, load, store, transport, gasify, liquefy or process natural gas that is imported to the United States from a foreign country, exported to a foreign country from the United States, or transported in interstate commerce by waterborne vessel."

That pretty much covers everything. The only thing outside FERC jurisdiction is the LNG tanker itself.

In its role under the law, FERC would take the lead on a terminal's environmental impact statement, coordinate reviews by other federal agencies, set deadlines for environmental analysis, and maintain a consolidated record for the project application.

Although FERC would take the environmental-review lead, it would not regulate the LNG facility's rates. That's between the private parties operating the plant and paying for the services.

Step outside the LNG terminal's...