POWER October 2013 - 26

LNG Exports:
Who Gets to Decide?
Rick Glick
A
n abundance of North American natural gas, coupled with
high foreign demand, has sparked interest in exportation
of natural gas. However, liquefied natural gas (LNG)
facilities are controversial. Some opponents raise safety concerns-accidents,
explosions, seismic events, climate change-
while others assert that domestic gas prices will rise if exports
occur on a significant scale.
Whose job is it to establish and enforce standards for LNG
development and exports? The Natural Gas Act (NGA) gives the
Federal Energy Regulatory Commission (FERC) exclusive jurisdiction
over interstate gas pipelines. The Energy Policy Act of 2005
amended the NGA to clarify that FERC jurisdiction extends to
siting of LNG terminals. Thus, national energy policy centralizes
regulatory authority for LNG development in a single federal
agency, FERC.
Or does it? When Congress designated FERC to decide the full
range of LNG siting issues, it also preserved the authority of individual
states conferred by the Clean Water Act, Clean Air Act,
and the Coastal Zone Management Act (CZMA). Thus, LNG project
developers must secure permits for waste water discharges and
air emissions, in compliance with federally approved state standards.
Similarly, developers must certify " consistency " with state
coastal management plans approved by the National Oceanographic
and Atmospheric Administration (NOAA).
Some states have wielded these authorities in a manner that
exceeds any legitimate interest in enforcing local environmental
standards. They have exploited their preserved environmental
authority to attempt to unilaterally veto LNG projects. CZMA has
been the weapon of choice.
CZMA v. LNG
The CZMA is intended to encourage states to preserve, protect,
and restore their coastal environments. The states are to develop
programs that include objectives, policies, and standards
to guide coastal development. Once NOAA approves the plan, the
state is eligible for federal funding to support further planning
efforts. The CZMA and NOAA rules require developers to certify
consistency with the state plan.
The CZMA contemplates local participation in the planning
process, but purposely restricts the role of local laws and concerns.
First, state coastal management plans must give " adequate
consideration " to the " national interest " in energy facilities. Second,
CZMA requires state plans to ensure that local regulations do
not " unreasonably " restrict land uses of " regional benefit. " Third,
state coastal management agencies have the ability to override
local zoning ordinances.
The states have been creative in their attempts at blocking
LNG development under their CZMA programs, but have been
challenged in court. In AES Sparrows Point v. Smith, a county
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adopted an ordinance to stop an LNG project, and the Maryland
coastal management agency included the ordinance in its CZMA
coastal plan. The Fourth Circuit Court of Appeals held that the
NGA preempted the ordinance because it had not been approved
by NOAA as an amendment to the state coastal plan. One judge
on the Fourth Circuit was more direct, saying that states lack
authority under the CZMA to ban LNG facilities and the ordinance
would have been preempted under any circumstances.
A second case, Weaver's Cove Energy LLC v. Rhode Island Coastal
Resources Management Council, involved a more subtle state approach
to blocking LNG projects. State law required the coastal
agency's approval of dredging plans. Because the Weaver Cove LNG
project proposed disposal of dredged materials in Massachusetts
over which Rhode Island would have no jurisdiction, Rhode Island
argued that it could not process the developer's consistency
certification. The First Circuit didn't buy Rhode Island's argument,
holding that FERC has exclusive domain over dredging issues, and
thus the NGA preempts the state's dredging requirement.
Oregon CZMA Implementation
In recent years, three LNG terminals and gas pipelines have been
proposed in Oregon. All have encountered resistance at the local
level, which under Oregon's implementation of CZMA is particularly
troublesome. The Oregon Coastal Management Plan is a
simple compilation of state laws, local land use comprehensive
plans and regulations, and permits. The Oregon coastal management
agency recently adopted rules requiring local permits to
show " consistency " with the state coastal plan.
The net result is that local governments are given veto authority
over LNG projects that FERC has approved, and notwithstanding
that FERC would have reviewed many of the same issues
included in the local government process. There could be no more
explicit repudiation of congressional authority to impose a national
program for the siting of energy facilities.
Even if the courts prevent the states from abusing their CZMA
authority to foil LNG projects, the added cost, uncertainty, and
delay imposed on developers can be just as destructive as if the
states are upheld. Whatever one may think about LNG facilities,
gas pipelines, or energy exports generally, the fundamental question
remains: Is there a national energy policy or not? As important
as local concerns are, they cannot be allowed to trump the
national interest or there will be few interstate infrastructure
projects-highways, telecommunications networks, or electric
transmission lines, to name a few-that will withstand the Not
in My Backyard test. ■
-Richard M. Glick (rickglick@dwt.com) is a partner in Davis
Wright Tremaine LLP's energy and environmental practice group.
Mr. Glick and his law firm represent one of the three LNG projects
being developed in Oregon.
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POWER October 2013

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