States v. Feds on LNG

By Ian

Some language from Rep. Pete Domenici (R-N.M.) on liquified natural gas (LNG) tucked into a big piece of spending regulation made it through Congress; much to the chagrin of those who don't really seem to read everything that's in them. (Not an easy task , I grant you. In this case, I imagine a few legislative staffers are getting stern talkings-to.)

The provision inserted as a part of a report -- and thus devoid of the strength of law -- gives jurisdiction to FERC for the siting of Liquified Natural Gas (LNG) terminals. This angers those who favor the state having the ultimate say over the siting of such facilities -- an argument to which I tend to be highly sympathetic. The problem is, a number of those who are looking to keep control in the hands of the state are doing so solely for the purpose of being able to stop the facilities from being built. Or, to be more precise, California and others are possibly seeking restrictive regulations that would seriously hamper the development of such facilities; this at a time when the California energy system could use the extra source of supply.

While FERC recently relaxed a bit on some regulation of LNG importation, I don't particularly like the idea of continually ceding control over to federal agencies. (Oddly, one of Domenici's arguments for doing so is that government control would help ensure that there is enough LNG to meet the rising demand. Where he gets data showing that government-controlled supply is a sure path to matching demand, I'm sure we'd all like to know.) And perhaps leaving the decision to the states could impose a small economic lesson on California (and kin). The growth of the LNG industry is proceeding apace, though I hold no belief that this is a major subsitute for petroleum; as the number of approved LNG facilities grows, those places that erect barriers so high that entry is impossible deny themselves an energy source as well as potential industry development. Though, I'm sure Texas and Louisiana would be happy to have the jobs.

-- December 14, 2004 3:40 PM |

Comments

Andrew McManama wrote:

When you say "This angers those who favor the state having the ultimate say over the siting of such facilities -- an argument to which I tend to be highly sympathetic" do you mean the state of california or the government?
It's not entirely clear, and I certainly do not favour either honestly.

-- December 15, 2004 1:45 AM ∞

Ian wrote:

Well, it seems to upset quite a few constituencies. The representatives of California are fighting to get rid of Domenici's language (and some are now making sure people understand that a report does not carry the weight of law, and so the language is largely pointless). The California Public Utilities Commission has been in a regular fight with FERC over siting jurisdiction. And local community groups have been demanding "hearings" on the subject. (I put this in quotes because, from what I can tell, these are not real public debates since the LNG companies are rarely if ever heard from.)

I might not favor the general tendencies of either the populace or the government of California, but I'd much rather have them be the deciding factor than FERC.

-- December 15, 2004 9:50 AM ∞

Andrew McManama wrote:

Yeah, I agree completely. I've just been spending too much time on mises.org and any time someone says they favour the state, I get a little snarky.

-- December 15, 2004 6:01 PM ∞

Larry wrote:

LNG would help lower natural gas prices which are at all time high averages. The lowered prices would benefit the entire nation; however California and its Coastal Commission and other such states have the power to prevent LNG facilities from delivering gas to the Western States. It seems reasonable that the interstate commerce clause should trump the state's internal regulatory authority. FERC already has the right to site underwater pipelines without state regulation, so they are a logical agency to give this power to.

-- December 16, 2004 12:22 PM ∞

Ian wrote:

I think the question is more centralized on the debate over siting the facilities. I'm even worse at legal things than I am at everything else I do...but I think the big issue is a question of how far down the chain can the Federal power go? That LNG could be transported across state lines is certainly true, but does that mean that the original point of import must then come under federal control? The interstate clause, as far as my limited knowledge goes, would/should only come into effect when dealing with issues of actual transportation. The language from Domenici is, it seems to me, an attempt to get California's government out of the mix so New Mexico can take advantage of buying LNG once the companies come in (something I really would like to see). Rates or safety concerns or somesuch about the movement of the LNG would seem to be part of FERC's jurisdiction, but the basic dispute is around build/can't build decisions within California.

I agree that more widespread use of LNG would be something of a boon to the US as a whole, but so too would be the building of more nuclear power plants. FERC doesn't get to tell states that they have to allow the plants in, however, just becausee the electricity from the plant could be sold over state lines.

-- December 16, 2004 12:58 PM ∞

Larry wrote:

Ian,

New Mexico is an exporter of natural gas so Domenici's actions are not necessarily in the best interest of his state. I really think that his actions are those of a energy knowelable senator and are what he believes are in the best interest of the country, ignoring the luddite tendacies of California. Nukes can be sited anywhere and so if California doesn't want them, theoritically AZ could install one, but actually there are too many other blocks to nuke power. However, if the coastal states block LNG terminals, then no gas, other than that which routes through Mexico, is going to efficeintly reach the Western interior states.

-- December 16, 2004 9:21 PM ∞

Mike Giberson wrote:

I think FERC has primary siting authority over natural gas pipelines, though natural gas jurisdictional issues are a little outside my area of competence. As an LNG terminal would be involved in international commerce, it seems that it would fall under federal jurisdiction.

While state authority over siting decisions would seem to bring appropriately local knowledge to bear on the decision, it also imposes local political constraints on interstate (and in this case international) commerce.

-- December 20, 2004 10:00 AM ∞

Ian wrote:

This is all getting beyond my scope, but I find it fascinating.

I still wonder at the division between sites and transport. I can certainly see why the import of LNG falls to FERC, but I don't know where the end of the federal chain of control ends (if it does). Feds can't control the production of wine, but they seem more than happy to futz around with the interstate movement of it. I figured the jurisdiction of FERC allowed it to make rulings that said, in effect "Should the state of California allow for the building of LNG ports, it must adhere to the following rules..." But I guess not.

-- December 20, 2004 2:23 PM ∞

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