Permitting LNG Terminals Challenges and Opportunities

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LNG USA 2005 IQPC Houston, Texas November 9,
2005 Bruce F. KielyBaker Botts
L.L.P.Washington, D.C.
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What The Energy Policy Act Of 2005 Did And Did
Not Do
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What Did The EPAct Do?

• EPAct 311 FERC Jurisdiction
• With the notoriety about the current and
  expected shortage of natural gas and the need for
  new supply sources to be closer to markets, LNG
  siting is a feature of EPAct and Policy
• Affirmed FERC's exclusive authority to approve
  onshore LNG terminals
• siting, construction, expansion, operation
• FERC cannot deny an application if the applicant
  wants exclusive use of the terminal
• FERC cannot condition approval on open access or
  rate levels
• Comment EPAct does not change other Federal
  authority delegated to states
• Coastal Zone Management Act
• Clean Air Act
• Clean Water Act

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• EPAct 311d - Pre-Filing Requirement for LNG
  Terminals
• Requires applicant to do NEPA pre-filing at least
  6 months prior to filing application
• FERC has issued pre-filing regulations
• Mandatory pre-filing requirement covers all new
  and expansion projects
• Need to coordinate U.S. Coast Guard Waterway
  Security Assessment (WSA) with pre-filing
  process
• Need to establish all stakeholders and levels of
  communication
• Need to meet a series of time deadlines for
  action
• Can consult with FERC Staff and FERCs Third
  Party Environmental Consultant
• Comment Overall, not too many changes to
  past pre-filing practice, but it now is more
  formalized and mandatory

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• EPAct 311d - State Consultations
• Governor of state in which an LNG terminal is
  proposed is to designate a leading state agency
• Requires FERC to consult with state agency in
  charge of LNG projects in state where terminal is
  to be located as to
• state and local safety considerations
• feasibility of remote siting
• local emergency response capabilities

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• EPAct 311d - State Safety Advisory Report
• State may provide FERC with "advisory report" on
  safety considerations
• FERC must review and respond specifically to each
  issue
• Comment FERC already performs the analysis,
  but EPAct creates a new requirement for FERC
  action and a new potential for legal challenge
• State may conduct post-in-service safety
  inspections and report to FERC

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• EPAct 311d - FERC Approval of LNG Project
• Requires that applicant develop an Emergency
  Response Plan ("ERP") in consultation with USCG,
  state and local agencies
• Requires that ERP must include a cost-sharing
  plan listing safety-related costs of state and
  local to be reimbursed by applicant
• Requires FERC to approve the ERP

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• EPAct 313 FERC as Lead Agency for NEPA Review
• Designates FERC as lead agency for all Federal
  approvals including Federal approvals
  administered by states
• Examples
• USACE Dredging Permit
• USCG WSA, NVIC compliance
• CZMA Consistency Determination
• CWA - 401 Permit
• CAA Clean Air Permits
• FERC to set Processing Schedules for others to
  follow
• FERC required to set schedule for all Federal
  approvals including Federal approvals
  administered by states
• All agencies must meet the scheduled deadlines
• If agency fails to meet deadlines, applicant may
  appeal failure to act to D.C. Circuit
• D.C. Circuit may require agency to act if it
  finds failure to act would prevent construction,
  expansion or operation of the terminal

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• EPAct 313 Judicial Review
• Court of Appeals for circuit in which terminal is
  to be located has exclusive jurisdiction over
  appeals of Federal approvals administered by
  states CWA, CAA (not CZMA)
• Comment One state already has challenged
  constitutionality of judicial review of a state
  act under CWA in the Second Circuit
• FERC is to develop one consolidated record for
  all appeals of Federal actions except CZMA
• No change as to appeals of FERC actions as to LNG
  terminal

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What EPAct Did Not Change

• NEPA Review full NEPA review is required
• Public Interest public interest finding under
  NGA 3 still required
• State Agency Approvals Under State Laws
• Applicants still face challenges in approval
  process of anti-infrastructure states
• Technicalities of regulations
• Delay in processing
• Repeated demands for information
• Changing standards

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• State Agency Approvals Of Certain Federal Laws
• Coastal Zone Management Act (CZMA)
• Clean Water Act (CWA)
• Still face delay tactics
• Repeated requests for information
• State programs that require all state
  environmental permits as pre-condition to CZMA
  consideration/approval
• Claims of incompleteness of application to cause
  delay
• CZMA a tool of choice of anti-infrastructure
  states
• Appeal of adverse CZMA action is to Department of
  Commerce
• EPAct 381 - New deadline for action by Secretary
  of Commerce on CZMA appeals
• 30 days after filing of appeal to issue notice of
  appeal
• 160 days after notice to close the record issue
  notice record is closed
• 60 days after notice record is closed to act on
  appeal

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Conclusion

• EPAct is helpful statute, but not a complete
  solution to onshore siting issues
• Need to follow FERCs pre-filing rules carefully
• Try to get states to cooperate
• Try to get states to act promptly
• Develop the best record possible
• Need to pay serious attention to USCG
  requirements and how they interface with FERCs
  NEPA and Section 3 processing
• Need to be prepared to address the challenge of
  actions of states opposed to infrastructure
  acting under state and Federal laws

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bruce.kiely_at_bakerbotts.com
THANK YOU