Feds Cross a State Line

It’s hard to believe that a private company might be allowed to build a massive and potentially hazardous liquefied natural gas terminal at the Port of Long Beach without state regulators blessing the deal. Yet that could happen if the Federal Energy Regulatory Commission -- the same agency that left California dangling in the wind during the state’s 2001 energy crisis -- wins a battle among agencies over a proposed project to bring badly needed natural gas into California.

The terminal would process natural gas carried in liquid form to Long Beach on special tankers. The battle is over who decides whether it should be built, and under what conditions. State and federal regulators all agree that new sources of natural gas need to be tapped. There are also good reasons to settle the turf fights that slow down every energy project in the state. Speeding up permitting, though, shouldn’t mean freezing out the California Public Utilities Commission. And that’s what FERC, the Bush administration and some in Congress are trying to do.

Sound Energy Solutions, a Mitsubishi Corp. subsidiary that proposed building the Long Beach terminal, sparked the conflict by filing permit applications with FERC, thereby bypassing the PUC. The federal agency promptly tried to squash the PUC’s regulatory authority over safety and environmental matters. The dispute now seems destined for the courts.

FERC should have accepted PUC President Michael R. Peevey’s March 1 offer to stage joint hearings. That’s what occurred in the 1970s, the last time a natural gas terminal was proposed in California. The federal agency, though, wants to eliminate as many state and local agencies from the review process as possible. Regional air quality officials and the California Coastal Commission were worried enough to ask the federal agency to clarify what their role would be in the review.

FERC also has been open about making the Southern California proposal a test case that would solidify its role as the dominant regulator for dozens of liquefied natural gas terminals proposed in California and across the country. Not by coincidence, Rep. Lee Terry (R-Neb.) recently introduced legislation that threatens to knock many state and local regulatory agencies out of the box.

FERC Commissioner Joseph Kelliher claims that the natural gas future of the United States will be “bleak” if California prevails in the anticipated court fight. Kelliher wrongly assumes that California regulators already have decided to sink the Long Beach proposal. What commissioners are fighting for is the right to defend Californians, who still carry bitter memories and big electric bills from the last time FERC promised to protect their interests.