<DOC>
[108th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:97130.wais]
LNG IMPORT TERMINAL AND DEEPWATER PORT SITING: FEDERAL AND STATE ROLES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ENERGY POLICY, NATURAL
RESOURCES AND REGULATORY AFFAIRS
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
JUNE 22, 2004
__________
Serial No. 108-238
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
______
U.S. GOVERNMENT PRINTING OFFICE
97-130 WASHINGTON : 2004
____________________________________________________________________________
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
DAN BURTON, Indiana HENRY A. WAXMAN, California
CHRISTOPHER SHAYS, Connecticut TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
DOUG OSE, California DENNIS J. KUCINICH, Ohio
RON LEWIS, Kentucky DANNY K. DAVIS, Illinois
JO ANN DAVIS, Virginia JOHN F. TIERNEY, Massachusetts
TODD RUSSELL PLATTS, Pennsylvania WM. LACY CLAY, Missouri
CHRIS CANNON, Utah DIANE E. WATSON, California
ADAM H. PUTNAM, Florida STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia CHRIS VAN HOLLEN, Maryland
JOHN J. DUNCAN, Jr., Tennessee LINDA T. SANCHEZ, California
NATHAN DEAL, Georgia C.A. ``DUTCH'' RUPPERSBERGER,
CANDICE S. MILLER, Michigan Maryland
TIM MURPHY, Pennsylvania ELEANOR HOLMES NORTON, District of
MICHAEL R. TURNER, Ohio Columbia
JOHN R. CARTER, Texas JIM COOPER, Tennessee
MARSHA BLACKBURN, Tennessee BETTY McCOLLUM, Minnesota
PATRICK J. TIBERI, Ohio ------
KATHERINE HARRIS, Florida BERNARD SANDERS, Vermont
(Independent)
Melissa Wojciak, Staff Director
David Marin, Deputy Staff Director/Communications Director
Rob Borden, Parliamentarian
Teresa Austin, Chief Clerk
Phil Barnett, Minority Chief of Staff/Chief Counsel
Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs
DOUG OSE, California, Chairman
EDWARD L. SCHROCK, Virginia JOHN F. TIERNEY, Massachusetts
CHRISTOPHER SHAYS, Connecticut TOM LANTOS, California
JOHN M. McHUGH, New York PAUL E. KANJORSKI, Pennsylvania
CHRIS CANNON, Utah DENNIS J. KUCINICH, Ohio
NATHAN DEAL, Georgia CHRIS VAN HOLLEN, Maryland
CANDICE S. MILLER, Michigan JIM COOPER, Tennessee
PATRICK J. TIBERI, Ohio
Ex Officio
TOM DAVIS, Virginia HENRY A. WAXMAN, California
Barbara F. Kahlow, Staff Director
Carrie-Lee Early, Professional Staff Member
Lauren Jacobs, Clerk
Krista Boyd, Minority Counsel
C O N T E N T S
----------
Page
Hearing held on June 22, 2004.................................... 1
Statement of:
Blossman, Jay, commissioner, Louisiana Public Service
Commission; Kenneth D. Schisler, chairman, Maryland Public
Service Commission; and Joseph Desmond, deputy secretary,
energy, California Resources Agency........................ 114
Garman, David, Acting Under Secretary, Department of Energy;
Patrick H. Wood III, chairman, Federal Energy Regulatory
Commission; and Rear Admiral Thomas Gilmour, Assistant
Commandant of Marine Safety, U.S. Coast Guard, Department
of Homeland Security....................................... 26
Markey, Hon. Edward J., a Representative in Congress from the
State of Massachusetts..................................... 13
Santa, Donald F., Jr., president, Interstate Natural Gas
Association of America; Philip Warburg, president,
Conservation Law Foundation; and Jerry A. Havens,
distinguished professor of chemical engineering, University
of Arkansas................................................ 139
Letters, statements, etc., submitted for the record by:
Blossman, Jay, commissioner, Louisiana Public Service
Commission, prepared statement of.......................... 117
Desmond, Joseph, deputy secretary, energy, California
Resources Agency, prepared statement of.................... 129
Garman, David, Acting Under Secretary, Department of Energy:
Information concerning Coast Guard/MARAD LNG permits..... 113
Information concerning delivered natural gas prices...... 63
Information concerning DOE veto authority................ 79
Information concerning studies........................... 99
Prepared statement of.................................... 28
Gilmour, Rear Admiral Thomas, Assistant Commandant of Marine
Safety, U.S. Coast Guard, Department of Homeland Security:
Information concerning discrete asset level comparisons.. 105
Information concerning firefighting equipment standards.. 109
Information concerning selection of sites................ 72
Information concerning the Deepwater Port Act of 1974.... 75
Information concerning the Sandia report................. 107
Information concerning U.S. flagged liquid natural gas
vessels................................................ 111
Prepared statement of.................................... 54
Havens, Jerry A., distinguished professor of chemical
engineering, University of Arkansas, prepared statement of. 166
Markey, Hon. Edward J., a Representative in Congress from the
State of Massachusetts, prepared statement of.............. 16
Ose, Hon. Doug, a Representative in Congress from the State
of California, prepared statement of....................... 4
Santa, Donald F., Jr., president, Interstate Natural Gas
Association of America, prepared statement of.............. 142
Schisler, Kenneth D., chairman, Maryland Public Service
Commission, prepared statement of.......................... 124
Warburg, Philip, president, Conservation Law Foundation,
prepared statement of...................................... 152
Wood, Patrick H., III, chairman, Federal Energy Regulatory
Commission:
Letter dated July 7, 2004................................ 82
Prepared statement of.................................... 38
LNG IMPORT TERMINAL AND DEEPWATER PORT SITING: FEDERAL AND STATE ROLES
----------
TUESDAY, JUNE 22, 2004
House of Representatives,
Subcommittee on Energy Policy, Natural Resources
and Regulatory Affairs,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 2 p.m., in
room 2247, Rayburn House Office Building, Hon. Doug Ose
(chairman of the subcommittee) presiding.
Present: Representatives Ose, Schrock, Tiberi, and Tierney.
Staff present: Barbara F. Kahlow, staff director; Carrie-
Lee Early, professional staff member; Lauren Jacobs, clerk;
Megan Taormino, press secretary; Krista Boyd, minority counsel;
and Earley Green, minority chief clerk.
Mr. Ose. Good afternoon. Welcome to today's hearing of the
Subcommittee on Energy Policy, Natural Resources and Regulatory
Affairs. Today's subject matter is LNG import terminal and
deepwater port siting, Federal and State roles.
I want to welcome my friend from Massachusetts and my
friend from Virginia to today's hearing. The way we will
proceed is we have four panels of witnesses today. The first
will be Congressman Markey, the second will be Federal
witnesses, the third will be State witnesses, and the fourth
will be private individuals representing the private sector.
Now, we are conflicted because we have a series of votes
that will start shortly. To the extent we can get through
opening statements, we will do that. When the bells ring, we
will recess, go over and vote. Probably going to be about 35 or
40 minutes, and then we will be back here to continue the
hearing.
Now, in the course of this hearing, you will see a couple
of things. No. 1, we swear in all our witnesses. That is
standard practice on this committee. It is the way it is
whether Republicans are in charge or Democrats are in charge.
It is nothing personal, so just get used to it. Once we have
made our statements, we will go to the witnesses. Each panel
will be allowed to make their statements. Their written
statements are entered into the record automatically. If you
are a witness, you have 5 minutes to summarize your statement.
I have a heavy gavel given the number of witnesses we have
today, and the 5-minute rule will be enforced. If you are not
done, then that is just too bad.
So any questions? Good.
The transformation of the U.S. natural gas industry to a
healthy, efficient, competitive state has been a decades long
and sometimes contentious process of interdependent changes in
law and innovation by industry. Nationally, we moved from a
balkanized and poorly regulated industry to a free market model
which brought lower prices. Nevertheless, as witnessed recently
and especially in certain parts of the country, natural gas
price levels are vulnerable to shortage.
The 2000-2001 California electricity crisis was in part
exacerbated by the deficiency of natural gas supply. Recent
harsh winters in the Northeast depleted natural gas storage and
caused significant price swings which were felt nationally.
The United States, especially on the West Coast, is relying
more and more on natural gas. It is the fuel choice for
electric power generation because it is reliable and is much
cleaner than other fossil fuels. Natural gas is also used by
individual citizens and by industry, agriculture and
transportation as a raw material. As a critical resource used
throughout the economy, shortages in natural gas have a
profound impact much more felt, or much more closely felt than
other commodities.
North American natural gas fuels are depleting at an
increasing rate. Even if new domestic natural gas comes on to
the market, most experts believe we will need even more.
Pipeline imports from Canada make up about 15 percent of
total U.S. consumption, but there, too, experts anticipate
diminishing sources.
California has particular reason for concern. In 2003,
California produced only 17 percent of its natural gas
consumption. More than half of California's electricity
generation is based on natural gas. As coal plants are retired,
this dependency is going to increase. California is especially
subject to price fluctuation because it is at the far end of
the pipeline grid.
For the economy of California and the rest of the United
States to flourish, there must be a plentiful, affordable
energy supply. Without it, our economy will go into decline.
I contend that increasing U.S. importation of LNG should be
a component of the solution, either with onshore or offshore
facilities. Enormous quantities of natural gas are located in
places from which it is impossible or impractical to export
through pipelines. These are known as stranded locations. The
solution is increasing shipment to the industrialized world in
liquid form. One tanker can carry enough material to power 10
million houses.
Today's hearing is going to focus on the multiple Federal
agencies that have various authorities over LNG, including
agencies in the Departments of Commerce, Defense, Energy,
Interior, Homeland Security and Transportation as well as the
Environmental Protection Agency and the Federal Energy
Regulatory Commission.
We are going to discuss today how the Federal and State
regulatory framework is furthering policy goals, such as
competitive pricing, regional supply, safety and environmental
integrity. We are also going to discuss how involved Federal
and State agencies are working together and, finally, how they
plan to overcome what appear to be systemic barriers such as
local community fears and conflicting laws.
I look forward to the testimony of our witnesses today.
They include the gentleman from Massachusetts, Mr. Ed Markey,
who is invited to the witness table when I get through the rest
of this list; Mr. David Garman, who is the Acting Under
Secretary of the Department of Energy; Mr. Patrick H. Wood III,
the chairman of the Federal Energy Regulatory Commission; Rear
Admiral Thomas Gilmour, who is the Assistant Commandant of
Marine Safety at U.S. Coast Guard, Department of Homeland
Security.
Also joining us on the second panel, Jay Blossman from the
Louisiana Public Service Commission; Chairman Ken Schisler from
the Maryland Public Service Commission; and Mr. Joe Desmond,
who is the Deputy Secretary for Energy for the California
Resources Agency.
And, the final panel, we are joined by Mr. Donald F. Santa,
Jr., who is the president of the Interstate Natural Gas
Association of America; by Mr. Phillip Warburg, who's president
of the Conservation Law Foundation; and, by Dr. Jerry Havens,
who's the distinguished professor of chemical engineering at
the University of Arkansas.
I am pleased to recognize my friend of Massachusetts for
the purpose of an opening statement.
[The prepared statement of Hon. Doug Ose follows:]
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Mr. Tierney. Thank you, Chairman Ose. I will try to be as
brief as I can.
I want to thank you for having these hearings and note it
is an important issue around this country. I know in your State
you have particular issues. We have some in our State, and
Congressman Markey is going to talk about Everett,
Massachusetts in his district and the LNG facility there. Just
a couple of weeks ago, we were informed that people were
speculating they would like to put an offshore facility a
little more than 10 miles off the cost of Marblehead and
Gloucester, which is in my district, and people are reaching
out for a way to supplement our energy supplies and resources
in this country, particularly as we look at rising gasoline
prices and shortage of fossil fuels in other places.
We have to look at this in a number of different ways. One
way we ought to look at it is first determining what is our
need, and in doing that, we ought to look and see whether or
not we have some other way to reduce the need for fossil fuels
and for natural gas, whether it is through conservation or
alternative sources, and identify what the prospects are, the
feasibility of getting these alternative sources and plans into
place, when they might be effective and to what degree might
they reduce our need for fossil fuels and natural gas.
The other thing we have to be careful of course is not
getting into the kind of reliance on natural gas coming from
unstable areas of the world that we're currently in with regard
to oil.
So those are things we have to do. If we determine that we
cannot displace the need for natural gas production to
increase, then obviously we have to look at all the other
considerations, not the least of which is safety, and I am sure
there will be many questions today about the safety of siting
places both on land and offshore, and offshore particularly
with regard to the fact that it seems that none of these
technologies have ever been utilized or proved to date and
there is a great deal of speculation as to what will happen if
there is an incident and just whether or not they'll work and
how they'll work. We have to be concerned for communities that
are near these facilities and near where these ships are
passing. We need to be concerned for the fishing community,
which makes their livelihood out of the ocean, and what will
happen if there is an incident at sea, the commercial shipping
industry if they are too close to the shipping lanes.
Environmentalists are concerned with what will happen to our
air and our water and inhabitants of them.
All of these things come into play. From homeland security
issues on through environmental and safety issues at home, we
need to ask a lot of questions, particularly when the
technology itself on the offshore basis is as yet unproven. We
need to know that this regulatory process, while it might be
streamlined, does not do so at the expense of any of those
other issues being fully and completely addressed in the way
that is safest and most meaningful for our citizens and the
environment that we must live in.
So we want to move in that direction. I want to welcome Ed
Markey, my colleague from Massachusetts here, thank him for the
work he has done. He has done great work in this area, both on
his Committee on Energy and Commerce and on his Committee on
Homeland Security, and he has taken the lead on many, many
instances in energy and in safety. And, I think he will have a
lot to say. I look forward to his testimony and that of the
other witnesses.
Thank you, Mr. Chairman, for exercising the oversight of
this committee, and I think in a very appropriate way.
Mr. Ose. Based on my friend's introduction, the gentleman
from Massachusetts, we welcome Congressman Markey to our
witness table. Congressman, you heard the bells, but we are
going to get your statement in here. I read it. I was
particularly interested in the issue of the insulation, so I
hope you dwell on that a little bit. The gentleman is
recognized.
STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MASSACHUSETTS
Mr. Markey. I thank the chairman, very much, Mr. Tierney,
members of the committee.
Let me begin by saying that LNG is an important component
of the energy supply in New England. It represents 20 to 25
percent of all natural gas in New England, the LNG that comes
in through the facility in Everett, MA, and obviously it is a
big part of our energy mix and it will be a big part of
America's energy mix as the years go by.
The question then is where is the most appropriate place
for these facilities to be sited. I would suggest to the
subcommittee that this is an issue that Congress already
considered 25 years ago based in large part about the public
safety concerns surrounding the siting of the Distrigas
facility in Everett, MA, in one of the most densely populated
parts of the United States, and the inherent difficulties in
trying to address the consequences of an accident or an act of
sabotage at this facility.
At that time the Congress enacted a law, which I authored,
which tried to learn from the Everett experience by directing
the Secretary of Transportation to consider the need for remote
siting as part of the rules applicable to all new LNG
importation terminals. The Secretary of Transportation
unfortunately has chosen to largely ignore this law and has
failed to comply with congressional intent regarding what
factors the Department needs to take into account in writing
rules for the siting of new LNG facilities.
Now, this failure had very little consequence for more than
25 years as no new LNG importation terminals were being built,
and so this Everett experience was something that was
illustrative but not relevant in terms of this energy source.
Today, however, with dozens of LNG terminals being proposed
around the country, this failure to comply with the existing
law can no longer be tolerated.
As I see it, there are currently four critical issues that
need to be addressed at the Federal level today. First, we need
to have a much better scientific and technical assessment of
the consequences of a terrorist attack against an LNG tanker or
an LNG terminal. Such a hazard assessment is needed to better
inform Federal siting decisions with respect to any new LNG
terminals around the Nation. It is also needed to better inform
State and local emergency planning and response activities with
respect to existing LNG facilities.
Second, we need help from both the Federal Government and
the facility operator to defray the costs that local
governments incur in securing LNG or other critical
infrastructure facilities from a terrorist attack.
Third, we need to get the Department of Transportation to
upgrade its LNG siting regulations to comply with the
congressional intent that all future LNG terminals be remotely
sited and demand that the Department stop merely incorporating
the National Fire Protection Agency standards into its siting
rules.
In the report language of the 1979 law, we wrote that one
area of particular concern to the committee has been the
failure to adopt comprehensive Federal standards regarding the
siting, design, operation and maintenance of liquefied natural
gas facilities. In 1972, the industry consensus standard
developed by the National Fire Protection Association were
incorporated into the Federal gas pipeline safety regulations
supposedly as an interim measure pending the development of
comprehensive standards. Despite widespread concern over the
adequacy of these interim standards and the growing importance
of LNG as an energy source, the promised comprehensive
standards have never been adopted.
H.R. 51, that is the 1979 law, addresses this problem by
identifying the criteria to be considered by the Secretary in
developing standards and setting firm guidelines for proposing
and adopting them, but they still continue just to incorporate
the National Fire Protection Agency standards 25 years later.
Fourth, we need the Coast Guard to undertake a more
thorough analysis of the safety of LNG tankers, including the
issues of brittle fracture and insulation flammability.
Looking to the future, LNG is likely to become an
increasing part of our energy mix. Given that fact, Congress
needs to ensure that the Federal Government takes further steps
to ensure that any future LNG terminals are sited in locations
that prevent them from becoming an active terrorist target.
At hearings to the congressional directive that the
Secretary consider the need for more remote siting, looking at
offshore siting alternatives and updating the LNG siting rules
so that they reflect sound science and decisions by Federal
agencies as opposed to industry self-regulatory bodies is
desperately needed.
Finally, a more thorough examination of the potential
consequences of a terrorist attack on an LNG tanker needs to be
done. Perhaps the Sandia study will address this issue, but
based on my experiences with the previous Quest and ABS
consulting studies, I think the Congress needs to step up
oversight in this area and demand that the studies that are
being funded by the Federal Government are scientifically sound
and subjected to full peer review.
I thank you, Mr. Chairman, Mr. Tierney, for holding this
hearing. You can see the tremendous interest which this subject
is now generating. It will only increase as the years go by.
Mr. Ose. I thank the gentleman for his participation in
today's hearing. Given the time constraints, I propose that we
recess, go vote. I understand there is four votes. We would
welcome you back for questions if your calendar permits. I
don't have any control over what goes on on the floor, despite
the fact I am the chairman and what have you.
Mr. Markey. If I may, I have a 10-page analysis which was
done on all of the issues that I would like to submit for the
record.
Mr. Ose. Would you like to submit it to the record? Without
objection, so ordered.
Mr. Tierney. Just 10 pages?
[The prepared statement of Hon. Edward J. Markey follows:]
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Mr. Ose. We are going to recess for 40 minutes. We will be
come back at 3 o'clock.
[Recess.]
Mr. Ose. All right. Welcome back. If we could have the
second panel consisting of David Garman; Patrick Wood III; and
Rear Admiral Thomas Gilmour. Please join us at the witness
table.
All right. Gentlemen, as I explained earlier, we are going
to have you rise, swear you in.
[Witnesses sworn.]
Mr. Ose. Let the record show that the witnesses answered in
the affirmative.
Our first witness on the second panel is Mr. David Garman,
who is the Acting Under Secretary of the Department of Energy.
He is joined by Patrick Wood III, who is the chairman of the
Federal Energy Regulatory Commission; and, Rear Admiral Thomas
Gilmour, who is the Assistant Commandant of Marine Safety at
the U.S. Coast Guard in the Department of Homeland Security.
Gentlemen, we have received your written statements. They
have been entered into the record. I, in fact, have read them.
We are going to recognize each of you in turn for 5 minutes to
make a summary of your written statement. We appreciate you
joining us today.
Mr. Garman, you are recognized for 5 minutes.
STATEMENTS OF DAVID GARMAN, ACTING UNDER SECRETARY, DEPARTMENT
OF ENERGY; PATRICK H. WOOD III, CHAIRMAN, FEDERAL ENERGY
REGULATORY COMMISSION; AND REAR ADMIRAL THOMAS GILMOUR,
ASSISTANT COMMANDANT OF MARINE SAFETY, U.S. COAST GUARD,
DEPARTMENT OF HOMELAND SECURITY
Mr. Garman. Thank you, Mr. Chairman, for inviting me to
provide the Department of Energy's perspective on the
importation of liquefied natural gas and the siting of the
facilities necessary to do it.
In addition to serving as the Acting Under Secretary, I
also serve as the Assistant Secretary for Energy Efficiency and
Renewable Energy. Put another way, I am responsible for those
programs designed to help us use less gas than we otherwise
would, either through the development of energy-efficient
technologies and through the development of power-generation
technologies using renewable energy.
As bullish as I am about the future of these technologies,
we will still need increasing supplies of natural gas, and we
must import more gas to meet the demands of our growing
economy.
We have a clash of values in this country, Mr. Chairman, as
we seem to want to pursue inexpensive energy services and
environmental values simultaneously. As a consequence of
environmental regulations, most new electricity generation is
coming from gas plants. Also, as a consequence of environmental
concerns, new gas exploration and production from public lands
in the intercontinental shelf is very, very controversial.
Demand is climbing, supply is falling, and price increases have
predictably resulted.
In response to these higher prices, LNG imports have more
than doubled from 228 billion cubic feet in 2002 to 506 billion
cubic feet in 2003. Expressed in terms of the percentage of
natural gas imported, LNG grew from 5.7 percent to 12.9 percent
of U.S. gas imports in just 1 year. Overall imports have also
been rising.
We currently receive 87 percent of our natural gas imports
from Canada, but we expect gas imported from Canada to decline
as Canadian fields mature, and as Canada copes with its own
growing domestic demand. Alaska gas will certainly help, but
even with new supplies from Alaska, we will need to import more
LNG.
The Northeastern United States is in perhaps the most
difficult position, lying where it does at the end of the
interstate pipeline system. Consumers there already suffer
higher electricity and gas prices than many other parts of the
country. LNG is also providing 20 percent of New England's gas
demand annually and can provide nearly 30 percent of New
England's peak-day requirements.
Given the situation we face, we need more LNG both in the
Northeast and around the Nation. And, it is critical that
necessary LNG import facilities receive appropriate permits and
approvals in a timely and orderly manner. We believe a uniform
national policy and Federal regulation of LNG import and
related facilities best serves this goal.
The Federal Government, pursuant to the Natural Gas Act,
has authority over the siting, construction and operation of
LNG import and export facilities. This authority is shared
between the agencies represented on this panel.
Chairman Wood will cover aspects of Federal authority and
jurisdiction, so I will not repeat them, other than to say that
the Department of Energy agrees with FERC's perspective.
My fundamental point, and I will close with this, Mr.
Chairman, is that our economy depends on new supplies of LNG.
The chairman of the Federal Reserve, Alan Greenspan, has
personally and repeatedly made this point. Therefore, we must
not jeopardize our ability to import the LNG we need by
complicating the siting authority with a patchwork of
regulatory regimes working at cross purposes.
I will end with that and will be happy to respond to
questions either today or in the future. Thank you, Mr.
Chairman.
Mr. Ose. I thank the gentleman for his testimony.
[The prepared statement of Mr. Garman follows:]
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Mr. Ose. Our next witness is the chairman of the Federal
Energy Regulatory Commission, who has been with us regularly on
energy issues. It is good to see him again.
Chairman Wood, welcome. You are recognized for 5 minutes.
Mr. Wood. Thank you, Chairman Ose, Mr. Tierney. In my
testimony I discuss some of the issues relating to the
Commission's view of its jurisdiction vis-a-vis State
regulators over LNG facilities. But, in my opening statement, I
would like to focus on the broader processes, because I think
there is some incorrect information or just some
misunderstanding about the broad role that goes on in
permitting these new facilities today.
Currently we do have, as the map indicates, four existing
facilities in the continental United States. There is one in
Puerto Rico as well as an export facility in Alaska, and then a
number of smaller ones.
Mr. Ose. We are going to recess for 5 minutes.
[Recess.]
Mr. Ose. We will reconvene.
Mr. Wood. In addition, we have 13 pending applications
before the Commission, and then another--the bottom half of
this chart which is attached to my testimony--another 20 or 30
potential out there, in the United States, as well as about
half a dozen, maybe 8 to 10, being considered in Mexico and in
Canada. There is a tremendous need to have the sufficient
staffing at the Commission to address these filings as they
come forth to make sure that the safe and reliable operations
come out of these permitted facilities.
So we have established a stand-alone office in our Division
of Energy Projects to make sure that we give these the proper
review, both the new permits as well as the existing ones. We,
of course, oversee the safety of the cryogenic facilities, and
of the environmental conditions of the facility's operations,
as well as the safety and security on an ongoing basis.
As to the new permits, which I think is the main focus of
the hearing today, we encourage parties to meet with the
Commission staff early on before they move forward into seeking
permit authority from the Commission, and engage in a prefiling
process.
The prefiling process is an effort to engage in a
nonconfrontational manner other agencies, State, Federal and
local, our sister agencies represented here as well as the DOT;
to also talk to local elected officials, to landowners, to
environmental groups to bring out all of the interests, again
in a nonconfrontational format, in advance of an application
being filed with the Commission. We found that this has worked
very successfully in our hydroelectric licensing program, and
that we want it to be a useful tool for us in reviewing in a
thorough but expeditious manner any LNG siting facility that is
brought forth.
And we did actually yesterday or last Friday approve the
second new LNG facility in the last quarter century, in
Freeport, TX, that did use this process. And it was a very
successful and well-vetted application that I think addressed
all of the issues, including safety, that were raised
throughout the year and 3 months that we were reviewing it.
As a final point before heading off to questions, I did
want to mention the very involved role that a number of other
agencies played in the process besides the Commission. Attached
to the back of my testimony are charts of the two permits that
have happened on our watch at the Commission in 2002, and this
one last week in Louisiana and in Texas, that indicate the
tremendous involvement of other sister Federal agencies, as
well as State agencies and local entities such as police
departments and departments of transportation, both in Texas
and in Louisiana. I think they have demonstrated, certainly to
me, that there is broad consultation and broad involvement of
States to participate, but not in an overlapping format, but in
a collaborative format in a way that we all do what we are good
at together to bring the process to a head through the
environmental impact review process.
So I would just recommend those to you, Mr. Chairman, to
the committee, for review as you look at the balance between
State and Federal entities with regard to our appropriate roles
in reviewing the permitting of new LNG facilities. I look
forward to any questions.
Mr. Ose. I thank the gentleman.
[The prepared statement of Mr. Wood follows:]
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Mr. Ose. Our third witness on the second panel is Rear
Admiral Thomas Gilmour, who is the Assistant Commandant of
Marine Safety, the U.S. Coast Guard, for the Department of
Homeland Security.
Sir, this I believe is your first appearance before our
subcommittee, and as always, welcome. We have read your
testimony. It has been entered into the record. You are invited
to summarize in 5 minutes.
Admiral Gilmour. Yes, sir. It is my pleasure to discuss the
Coast Guard's role in safety security of natural gas vessels
and facilities and how we are cooperating, as was said, with
other Federal agencies.
The Coast Guard plays a major role in ensuring all facets
of marine transportation of LNG, including vessel, shoreside
terminals and proposed deepwater ports, are operated safely.
Today I will briefly review the jurisdiction and
partnerships the Coast Guard uses to ensure the safe operation
of vessels, terminals and offshore ports.
As noted in the January 2004 Congressional Research Service
report to Congress on LNG, the LNG tanker industry claims an
impressive safety record over the last 40 years. Since
international shipping began in 1959, tankers have carried over
33,000 LNG cargoes without a serious accident at sea or in
port. LNG tankers have experienced groundings, collisions
during this period, but none has resulted in a major spill or
compromise of a cargo tank. The LNG marine safety record is
partly due to a double hull design.
Today there are approximately 150 LNG vessels operating
worldwide, although a majority of them are foreign flag. All
LNG vessels calling in the United States meet both our domestic
regulations and international requirements. Our domestic
regulations for LNG vessels were developed in the early 1970's,
and various vessel inspections are now codified in 46--Title 46
of the U.S. Code.
Our domestic regulations closely parallel international
requirements, but there are more stringent requirements, such
as a requirement for enhanced steels to deter brittle fracture
in certain areas of the hull.
Before being allowed to trade in the United States, LNG
carriers must submit detailed vessel plans and other
information to the Coast Guard, and upon the satisfactory plan
review and onsite verification, the vessel is listed--given a
certificate of compliance. They are boarded by marine safety
personnel prior to each U.S. port entry to verify proper
operation of navigational safety, firefighting and cargo
control systems.
LNG vessels are also subjected to additional measures, many
of the special security precautions that predated the September
11 tragedy, and include such things as vessel control measures
that are implemented when an LNG vessel is transiting a port,
or as it approaches; safety zones around vessels to prevent
other vessels from approaching the LNG carrier; escorts by
Coast Guard patrol craft; and, coordination with other State
and local organizations.
Since September 11th, additional security measures have
been implemented by the Coast Guard. We now subject LNG vessels
to at-sea boardings, where Coast Guard personnel conduct
special security sweeps of vessels to ensure positive control
of the vessel is maintained throughout its port transit. This
is in addition to everything I just mentioned.
And, of course, the most important post-September 11
maritime development has been the passage of the Maritime
Transportation Security Act of 2002 [MTSA]. The Coast Guard has
developed a comprehensive new body of security measures
applicable to vessels, marine facilities, and our maritime
personnel. It is closely aligned with the International Ship
and Port Facility Code, which becomes effective this July, or
in about 10 days. Under the ISPF code, vessels, including LNG
tankers, must have certificates, and we will rigorously enforce
this requirement on July 1st.
Regulations developed under the authority of the Ports and
Waterways Safety Act assign the Coast Guard responsibility for
safety issues within the marine transfer area of shore-side LNG
terminals, and this area is defined as a waterfront facility
between the vessel, or where the vessel moors, and the first
shutoff valve of the pipeline immediately before the receiving
tanks. The rest of the facility is regulated by RSPA.
New maritime security regulations were developed under
MTSA, and these require the LNG terminal operator to conduct a
facility security assessment and to develop a threat-scalable
security plan that addresses the risks identified within the
assessment. The six existing U.S. LNG terminals have submitted
their security plans to Coast Guard review and approval last
December. In contrast to our safety responsibility, where our
authority is limited to the transfer area, our authority
regarding security encompasses or could encompass the entire
facility.
The Federal Energy Regulatory Commission has siting
authority for shoreside LNG terminals. However, our role is
that we review the construction of the existing facility and
submit a letter of intent to the Coast Guard Captain of the
port where the facility is located. The Captain of the port
looks at the application of the owner and operator and looks at
those things adjacent to the facility in the navigational
waterway.
On February 10th the Coast Guard entered into an
interagency agreement with FERC and RSPA to work in a
coordinated manner to address these issues of safety and
security in waterfront LNGs.
For deepwater ports, the Coast Guard authority to regulate
these ports is from the Deepwater Ports Act, and the
regulations pertaining to licensing, design, equipment
operation are found in Title 33, in subchapter NN. MARAD is the
licensing authority, while Coast Guard is the lead on
application review and has the primary jurisdiction over
design, equipment, and operations.
To expedite the process and more efficiently coordinate
activities, the Coast Guard entered into an MOU involving more
than a dozen agencies, including FERC, Minerals Management
Service, and the Environmental Protection Agency. This MOU
establishes a commitment on the part of all participating
agencies to work together to meet an aggressive time line
mandated by the Deepwater Ports Act.
Thank you for giving me the opportunity to discuss our role
in LNG safety. I will be happy to answer any questions.
Mr. Ose. Thank you, Admiral.
[The prepared statement of Admiral Gilmour follows:]
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Mr. Ose. As I explained earlier, what we do is we go by
panel through a series of questions. Each Member is allowed 5
minutes. If there are sufficient questions, we will have
multiple rounds. I want to welcome the gentleman from Utah.
And, I will commence with the questions.
Mr. Garman, I looked in today's Wall Street Journal, and
the futures for heating oil are--excuse me, not for heating
oil, for natural gas are--least through May 2005 are over $6
per million BTUs.
Now, I am curious about from the DOE's perspective what
your projections are for natural gas prices nationally for the
next 24 months.
Mr. Garman. I think as the futures, current prices are also
around $6 per million BTUs. And, I think that it is a safe bet;
$6 is about right.
Now, we are in reasonably good shape in the storage
capacity this year compared to last year. So we are hoping that
we will be heading into the heating season with an adequate or
more than adequate supply for the winter, which would bode well
for price stability during the winter heating months.
Mr. Ose. If today's price is $6, both on the spot and the
futures market, what has been a historical price for natural
gas?
Mr. Garman. They have ranged in years past from $2 to $4.
Mr. Ose. So, if it was $4, that $2 increment, what does
that translate to in terms of consumer expenditures compared to
the historical norm? Does the DOE have anything of that nature?
Mr. Garman. We do. It depends on, of course, how much gas
you use. It has forced some consumers to be more efficient,
which is, of course--if there is a silver lining in this dark
cloud, it is that higher prices do get consumers thinking about
ways to use that energy more efficiently. And, that is
something that we want to help them with and have been trying
to help them with.
But, it is a substantial--it can be hundreds of dollars per
household during heating season, and additional fuel adjustment
charges for electricity purchased during the summertime for
peak electricity use as well.
Mr. Ose. Well, I am specifically interested in those
markets where we have a deficit situation; for instance,
California. I did a back-of-the-napkin calculation last night.
I am within one order of magnitude, so that is quite a bit of
variability, but I am not sure of my math either, but it is
somewhere on the order of $2 billion in added consumer expense,
if you consider having an LNG importation facility as opposed
to not having an LNG importation facility. That is the
difference in the dampening effect on price from having an LNG
facility. Are those in the ballpark?
Mr. Garman. You ask a tough question of a witness under
oath, Mr. Chairman.
Mr. Ose. You can say, I don't know.
Mr. Garman. What I would like to do is to task the Energy
Information Administration to work with your staff, and with
reasonable assumptions in the matter of, I would say, a week or
so come up with some numbers that----
Mr. Ose. Why don't we give you the markets and deficits
that we are particularly concerned about, and you and EIA can
put that number together. I am specifically interested about
California, New England and Florida, being the ends of the
pipe, so to speak, with little, if any, domestic production.
Mr. Garman. Happy to do that, Mr. Chairman.
[The information referred to follows:]
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Mr. Ose. The gentleman from Massachusetts.
Mr. Tierney. Thank you.
Mr. Garman, I guess we are having a full day with your
testimony to both committees. Thank you for being here. Thank
the other witnesses on that.
Admiral Gilmour, let me ask you, it is my understanding
there has never--no one has an offshore or deepwater port
facility operating just yet; am I right?
Admiral Gilmour. Yes, sir.
Mr. Tierney. The one that has been approved most recently,
and maybe the only one that has been approved, is the one in
Louisiana?
Admiral Gilmour. Yeah. We have two that have record
decisions, and they are both in Louisiana. Yes, sir.
Mr. Tierney. How far offshore are those that were approved
in Louisiana?
Admiral Gilmour. The Chevron-Texaco Port Pelican is 36
miles offshore, and the El Paso Energy Bridge is 100 nautical
miles offshore.
Mr. Tierney. When you were reviewing those for approval,
was there any standard distance offshore of how far it had to
be before you would reconsider your approval? Was there a point
that you wanted to get them beyond in order for it to be
considered, or is that just a factor that you weigh in with
other things, and it could be as close as a mile or two?
Admiral Gilmour. There was no minimum distance, but I think
the closest is on the order of 10 miles, in that magnitude.
Mr. Tierney. I notice that there is a proposal off of the
northeast coast in my district for about 10 miles out. I want
to know what the considerations should be with respect to that
siting. Just what will you look at in terms of a fishing
community, the commercial shipping community, the environmental
community, and the people's landway on the land as to what
dangers there might be there?
Admiral Gilmour. Yes, sir. We would certainly consider all
of those factors. We haven't received that application yet, but
certainly the traffic part would be something we would look at,
and we have received questions and comments on the fishing side
of that. But I would add that there are a lot of offshore
facilities in the Gulf and a lot of fishing going on in the
Gulf also, sir.
Mr. Tierney. Are there established standards for those
considerations, or is it case by case? Do you have standards of
how far it has to be from a particular fishing ground or how
far it has to be from a shipping lane, or do you deal with it
on a case-by-case basis?
Admiral Gilmour. No, sir. But there are other agencies that
would be concerned with a lot of those issues. I would add that
due to the significance of these particular structures, there
would be some sort of security zone around them when there was,
you know, a vessel present. So that would be a concern
certainly to fishermen. But I am sure that we would get that in
our public hearings.
Mr. Tierney. Well, what would interest me is that we don't
even know whether this technology will work or not. Am I right?
Admiral Gilmour. No, sir. I think that the technology
itself is proven, it just hasn't been done offshore yet.
Mr. Tierney. In what context was it proven? Just
theoretically?
Admiral Gilmour. No, sir. There are a number of these kinds
of facilities operating onshore now.
Mr. Tierney. It is not done offshore, which I think would
be a substantially different situation, right?
Admiral Gilmour. Different environment. Yes, sir.
Mr. Tierney. So there are none of them that are actually up
and operational, none of them that have been proven other than
theoretically. So how is it that you go about establishing your
standards for what you expect to happen or that could happen
with respect to how they operate and what problems might arise?
Admiral Gilmour. We have standards for our offshore
structures. I think the structures are pretty well known--the
standards for the structures. And we are working with industry
and--to meet our regulations and other agencies to look at the
natural gas side of that operation.
The Louisiana offshore oil port is a similar type
operation, obviously not operating for LNG, but for crude oil
importation, and it has operated quite successfully. But you
are right. This is a different kind of operation.
Mr. Tierney. And so who is going to be--you talk about some
of these where the owner-operator is responsible for the safety
plan. Is that going to be the same case on the deepwater port?
Admiral Gilmour. They are required to submit a plan, an
operations plan, to us, and we indeed will review it.
Mr. Tierney. You are reviewing against nonexisting
standards is my concern. You don't really have a set standard
for this type of operation because it has never been done
before. So we are really flying a little bit in the dark here.
Admiral Gilmour. We have interim final rules in 33 CFR. So
we do have standards for that.
Mr. Tierney. You are going to apply them against 33 CFR?
Admiral Gilmour. Yes, sir.
Mr. Tierney. You established the standards in that CFR.
They then develop the plan and submit them, and you measure it
against that?
Admiral Gilmour. Yes, sir.
Mr. Tierney. That is with respect to all of the safety
features?
Admiral Gilmour. Yes, sir.
Mr. Tierney. Concerns terrorism threats?
Admiral Gilmour. Well, terrorism threats would come under
the requirements in MTSA for offshore facilities, which we have
on the order of 40 in the Gulf that are currently being
reviewed, and will be applied by July 1st.
Mr. Tierney. But those are not 40 gas operations?
Admiral Gilmour. No, sir. Those are oil production. They
will meet the same kind of plan for security as oil production
platforms.
Mr. Tierney. Is there no difference in security
considerations for oil and gas?
Admiral Gilmour. I wouldn't say there weren't any
differences, but they would be quite similar in the kinds of
threats that they would have. Yes, sir.
Mr. Tierney. I notice that my time is up, But I would like
to explore that a little bit more at some other point. Thanks.
Mr. Ose. The gentleman from Utah.
Mr. Cannon. Thank you, Mr. Chairman.
Mr. Garman, the chairman was talking a little bit about
price. And the current price is about $6 here in America. What
has the world price been? And I take it we influence world
price, but can you give a comparison about where world price is
and what will happen if we have more LNG facilities in America?
Mr. Garman. I will try. Actually there is not a fungible
world market price of natural gas in the same way that there is
for oil, for the very reason that oil is more fungible, it can
move in and out more freely, and the absence of LNG terminals
in the United States make it more of a regionalized market.
Anecdotally I am told that prices in the United States are
trending higher than they have been in, say, Europe. Europe is
maybe closer to $3.50 per million BTUs. As a consequence, this
has put large consumers of natural gas, particularly processed
gas consumers, fertilizer plants, and others, in a really tough
position, even considering moving some of their operations
overseas where gas prices are cheaper than they are here.
Mr. Cannon. Did you say that current prices in Europe are
$3.50 per million BTUs?
Mr. Garman. I would want to check on that. That is my
recollection, somewhere around $3, $4. They are cheaper than
they are here.
Mr. Cannon. Largely because of LNG facilities.
Mr. Garman. Through pipelines with Russia, the former
Soviet Union, they have access to supplies that we obviously
don't.
Mr. Cannon. So it is going to take us a while to actually
get some LNG facilities and to transform ourselves. But the EIA
predicts growth in short-term trade in LNG. How much LNG
industry growth is needed to create a vibrant and efficient LNG
short-term trading market?
Mr. Garman. Well, let me try to answer that question a
couple of ways. The National Petroleum Council, which Secretary
Abraham commissioned to look at this situation we face,
estimated sort of--to have a balanced future, we probably need
nine new terminals and nine expansions of three existing
terminals in the years ahead, between now and 2025.
The Energy Information Administration has a different
estimate, but is somewhat similar. They expect to see four new
terminals in the Atlantic Coast and Gulf in the 2007 to 2010
timeframe, and then maybe expanding to 9 to 12 terminals
between now and 2025. So different assumptions, obviously, and
different methodologies.
We are not going to need all 43 of those that are being
talked about, but we probably need somewhere between 5 and 15
terminals here.
Mr. Cannon. What efforts has DOE taken, including any in
conjunction with the FTC or other Federal agencies, to educate
State and local governments and the public about LNG?
Mr. Garman. This was also one of the recommendations of the
National Petroleum Council. And we have been working with NARUC
to try to communicate to consumers the opportunities to--safety
aspects and considerations for LNG.
Let me always put in my pitch for energy efficiency. We are
also using this opportunity to work with consumers to
understand how they can save and use, obviously, less natural
gas for residential uses and less electricity, which translates
into lower--I mean, these are part of--a balanced strategy, we
think, is not only to identify new sources of supply, new
opportunities for importation in LNG, but we also want to use
what we have more efficiently and remind consumers of the
opportunities to do that as well.
Mr. Cannon. One final question. What is DOE doing to
facilitate importation of LNG from countries, especially Mexico
and Canada, our neighbors?
Mr. Garman. Well, we have--even though Mexico has supplies
of natural gas, we have tended to export natural gas, small
amounts, to them. As I have mentioned in testimony, we are a
large--Canada is our largest provider by far, but we expect, or
EIA expects, in 2010 that their supplies will peak and start to
decline as they struggle to deal with their more mature fields,
and also take care of their own domestic demand.
So we have looked to Mexico. We have looked to Canada. We
are looking to Norway. We are looking to Peru. We are looking
to a variety of different countries that aren't necessarily the
same countries that supply us with oil to try to provide us
with our energy needs for the future.
Mr. Cannon. Thank you, Mr. Chairman.
I yield back.
Mr. Ose. Thank the gentleman.
Mr. Garman, did I understand you correctly in your
testimony that you don't think we can conserve our way to self-
sufficiency in natural gas?
Mr. Garman. No. As important as efficiently using the
supplies are, and as important as it is to develop new
renewable energy resources to augment our supplies of energy,
we still need more natural gas.
Mr. Ose. Commissioner Wood, to try and simplify things just
so I can understand them, I want to make sure that I have it
clear. FERC is responsible by derivation from DOE with siting
and permitting--permit and siting questions for onshore
facilities?
Mr. Wood. Yes, sir.
Mr. Ose. And, Admiral, you are responsible for permitting
and siting facilities offshore in conjunction with MARAD?
Admiral Gilmour. That is correct, sir.
Mr. Ose. As it relates to onshore facilities, it would seem
to me--and I have looked at that health care proxy, health care
system proxy, that defines the permitting process, and it would
seem to me that if FERC could say adopt a standard that says if
you meet these or this template, you will be approved, it would
seem to me that would expedite quite a bit of FERC's
considerations, or at least narrow the questions to
peculiarities about individual sites.
Has FERC said to industry or to the developers who do these
things: For an onshore facility, this is the type of template
we expect?
Mr. Wood. Specifically, no. However, the filings that we
have seen, again, the 13 that are before us in either the
prefiling or filing process, do have a relatively similar
approach, which is the cryogenics, which is the heart of the
actual vaporization process, and the continuing to keep it
cold, if they are storing it in liquid form. Those are
relatively defined through the Transportation Department regs,
back again to what Mr. Markey referenced, and those were done
quite a few years ago.
But those standards have been really the ones that define
what the onshore apparatus looks like.
Mr. Ose. Do they also address like setbacks from an
adjacent development?
Mr. Wood. Yes, for the new ones going forward. There is
some question about the historical ones, but for the going
forward, after the adoption of those regs, there are set-
asides, or exclusion zones is the term that is used in the
regulations, if the liquid were to spill and catch fire.
Mr. Ose. Do you have minimum setbacks under these exclusion
zones?
Mr. Wood. Yes. And they vary based on the design. But the
formula is known in advance, so if the design has, for example,
a tall concrete wall around where the fluid could spill out,
and that wall, in fact, can shield some of the adjacent area
from the heat, then the heat radius is smaller.
If the wall is smaller, if it is earthen than your heat
radius can actually go farther, so the exclusion zone would be
larger in those cases.
But it is actually a specific kind of formulaic approach
that is used, but it depends again on the actual design, which,
as your question indicates, there is not a standard onshore
facility design that, therefore, if you know you are going to
build it this way, it is 2,200 feet from this point to the edge
of the property.
Mr. Ose. Well, the reason I ask the question is that I am a
sufficient student of technology to understand that the more
you can use off-the-shelf technology that is standardized, the
faster you can get to market. And I am curious whether FERC is
moving in a direction as it relates to the facilities
themselves or the exclusion zone to say, you use this type of
technology, these are the parameters, or this type, or this
type of technology, these are the parameters, where they can
just pull it off the shelf and just basically hunt for a site
where it would fit.
Mr. Wood. I think that idea has a lot of merit. It is not
one that we have adopted up to now.
Mr. Ose. I have the same question for the Coast Guard as it
relates to offshore facilities. Has there been any effort to
define a template, if you will, or, as Mr. Tierney was driving
at, the standards under which these facilities would be
constructed?
Admiral Gilmour. Yes, sir. I think that the regulations
would certainly for construction give a template of--and there
are a number of gas-drilling offshore structures operating out
there right now. And we use things like class society rules,
industry or recommended practices, and regulations that are
used by MMS for those kinds of things.
Now, as far as a template for siting, offshore distances
and those kinds of issues, we really haven't done that. But we
have through the Sandia lab studies and the other studies that
are being done by the gentleman to my right, with our
assistance, I think we are going to look at some of those
issues.
Mr. Ose. This is my final point on this round--it would
seem to me that given the 330-day timeframe that you have to
work with, to the extent that you can say on day zero, before I
walk in, Congressman Ose, this is the template you have, you
can meet this template, or you can meet that template, but if
you meet one, then these are the parameters, if you take this
other one, these are the parameters, you are not picking the
winners or losers, you are just saying what the parameters are,
it just seems to me that would go a long way toward making it
easier for you to meet your timelines.
Admiral Gilmour. Yes, sir. We are working on doing just
that. I think our biggest problem so far was putting together a
staff to address this issue at the same time the regulations
were in effect.
Mr. Ose. I suspect that Mr. Tierney is going to followup,
because sitting up here, I didn't hear you talk in response to
his questions about having a template. You talked about the
unique characteristics of individual applications, but not
about a template. So I don't mean to hijack your questions, but
I suspect that is where you are going back. But my time is
expired.
Mr. Tierney. Well, yeah. I think you obviously are where I
am going on this. If you want to use industry regulations, the
problem that we have with the offshore, the deepwater ports, is
there are no examples, no experience on this. So am I wrong to
think that there is some problem with that, or some issues
there about using industry standards where they have not done
it before; there are no examples to point back to, and we are
talking about whatever assumptions the industry settles on from
their experts that are going to be used by the Coast Guard? It
concerns me a bit.
Admiral Gilmour. No, sir. But there are a plethora of
shoreside operations doing exactly the same operation. We need
to adapt to an offshore environment.
Mr. Tierney. But it is not exactly the same. The offshore
environment is substantially different than the onshore
environment, the considerations are different, and the
environment out there is substantially different. So it has not
been done before. Particularly some of the models that I have
heard talked about where the boat will pull up and just hook up
to an already-existing buoy of some sort and pull up, that is
not done on land, right?
Admiral Gilmour. No, sir, but it is done in loop. I mean,
we have articulated lines in loop. So we do have some
experience, although, granted, not for cryogenic----
Mr. Tierney. So, again, I get back to, shouldn't we be
establishing independently our norms and our standards and the
things we are going to measure it against, and not necessarily
just relying on industry where we are coming up with something
that is so totally new on that? I would like to think that we
are at least making an effort to do that so we have our own
standards to evaluate it against.
Admiral Gilmour. Yes, sir. I would say more than relying on
industry, we are adapting existing standards to the offshore
environment.
Mr. Tierney. But you did indicate that you are using
industry regulations and industry examples on that. So are you
independently having evaluations done and having independent
individuals tell you how they might adapt that, and what
differences there are, and what concerns we ought to have, and
how they ought to be addressed?
Admiral Gilmour. Yes, sir. And we are working certainly in
conjunction with all of the other regulatory agencies that have
done this kind of regulation on the shoreside for years. So,
yes, sir, those are the standards that exist that we are using.
Mr. Tierney. Bear with me, if you will, for a second, all
three of you, because I want to sort of walk through this.
With respect to a deepwater port, who has the ultimate
authority? The Department of Transportation? Who is going to
finally say yes or no with respect to that?
Admiral Gilmour. Yes, sir. We will.
Mr. Tierney. They are divided there between two agencies.
One is the Coast Guard, and the other is the Maritime Safety--
--
Admiral Gilmour. The Maritime Administration. Yes, sir.
Mr. Tierney. And so you both recommend to the Secretary,
and the Secretary makes the final determination?
Admiral Gilmour. Yes, sir.
Mr. Tierney. What role does the State play? And are they
able to have a veto on that, or only to contribute information?
Admiral Gilmour. The State will work in--certainly their
voice will be heard in a number of areas.
Mr. Tierney. So do they have a veto, or do they merely have
a way to put their voice in and weigh in on some issues?
Admiral Gilmour. Yes, sir. They will be able to weigh in on
the issues.
Mr. Tierney. But not make the final determination and not
change the direction. If the Department of Transportation
decides it wants to go one direction, the State wants to go
into another, DOT is going to make the final determination?
Admiral Gilmour. Under oath, as the previous gentleman
stated, I think that is the case, but we can get written
confirmation.
Mr. Tierney. If you can do that for me.
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Mr. Tierney. Who else weighs in on it? Do you have at the
tip of your fingers there as to what other agencies weigh in,
and what do they weigh in about?
Admiral Gilmour. Yes, sir. There are 11 other agencies,
including NOAA on the fisheries issues and the EPA, etc.
Mr. Tierney. Bear with me and give me the etc. You told 11
or 13. Can you give them to me and what they weigh in on? NOAA
is weighing in on the fishing industry's issues. EPA is
weighing in on the environmental issues. Conservation areas,
are they weighing in?
Admiral Gilmour. Yes, sir. And the folks that are sitting
here are looking at other areas, too.
Mr. Tierney. Well, Mr. Wood, what are you looking at when
you look at the offshore facility?
Mr. Wood. Our contribution to the offshore, sir, is
minimal. Again, it is theirs.
Mr. Tierney. Mr. Gilmour, we are back to you. That didn't
go too far in that direction. So what else have you got on it?
Admiral Gilmour. If we had a question on an issue involving
the gasification part of a system that we weren't familiar
with, we would go to someone in FERC or DOE and talk to them
about the system and get their input on that.
Mr. Tierney. So that is you reaching out to them. Are there
any automatic people that have to be consulted and
automatically have to weigh in on this? What about the issues
around Showhegan, the area that is set aside up in the New
England area off the coast out there, all of the conservation
and environmental concerns up there, does someone automatically
get a right to weigh in on those, or is that only if you reach
out to them?
Admiral Gilmour. Well, it would be like a number of other
issues. When FERC issues a facility, shoreside facility, you
know, there are a number of other agencies that look at the
navigational side, too. And when it comes out, it is sent to
all of those other agencies automatically. And I am sure that
some of our Federal agencies certainly that are worried about
fisheries conservation and/or national sanctuaries would----
Mr. Tierney. I don't want to make this torture. I was going
to ask you if you would do me a favor. Would you submit to the
committee a list of what State and Federal agencies as a matter
of right are engaged in the determination process for deepwater
ports, and which others might be an elective contributor if the
Coast Guard or Department of Transportation elects to do that?
If you can give me that, I would appreciate that. Thank you.
Admiral Gilmour. Yes, sir.
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Mr. Ose. There is one aspect to this. If there is an
offshore facility, FERC is charged with the responsibility for
permitting and siting onshore tanks to store the stuff
transported on and for the pipelines that service those.
Mr. Tierney. Right.
Mr. Ose. I am pleased to recognize the gentleman from Ohio.
Mr. Tiberi. Thank you, Mr. Chairman.
Just kind of following up on Mr. Tierney's line of
questioning with respect to homeland security, Admiral, there
has been concern, Admiral, in the past about security issues,
that potentially a terrorist attack could occur through
attempting the use of LNG tankers offshore to inflict harm on
U.S. citizens. And, in fact, there were--there was a
Massachusetts link to this, at least a rumor that maybe
terrorists at one point in time were stowed away on a tanker
that landed in Massachusetts several years ago.
What is the Coast Guard doing to ensure safety with respect
to potential terrorist activity?
Admiral Gilmour. Well, sir, you know, immediately after
September 11, we did a number of things, and we are still
doing. These kinds of vessels are boarded offshore. They
provide a 96-hour advance notice of arrival listing crews. And
actually MTSA will increase those things that they are looking
at. So we vet the crew members, board them offshore, and then
do a security sweep, which includes identifying crew members,
have positive control of the vessel as it comes into port.
Again, as I said in my opening statement, we provide
waterside escorts to ensure the vessels do not approach too
closely. We have done that for a number of years for safety
purposes. We have a zone that does not allow, in many cases,
other vessels to even be transiting in the area.
The safety inspection, we look at critical systems such as
firefighting, cargo and navigational equipment, but we have
been doing that from the very beginning for LNG vessels. The
security requirements for MTSA are based on the international
ISPF codes, ports and vessel security code.
So on the vessel side, we will also look at their security
plan and how they are adapting it both from their--on their way
in and when they are at the facility. We also will look at
previous ports they have been to determine if, after July 1st,
they are ISPF-approved ports.
So we will look at the port that they have been to, we will
look at the crew as they come in, and we will look at their
security plan. And again, there is facility plans, both
required both on the shore side and for offshore platforms, on
the offshore side.
Mr. Tiberi. Does the Coast Guard have a process in place to
review protocols periodically based upon different types of
threats that may pop up?
Admiral Gilmour. Oh, yes, sir. We are a member of the
Intelligence Community, and we talk about those every morning.
Yes, sir, we do have those.
Mr. Tiberi. So you have a process in place where you review
that?
Admiral Gilmour. Yes, sir. That includes vetting of crew
members and any threat streams that may be available to the
Intelligence Community.
Mr. Tiberi. Thank you.
Mr. Wood, still on the subject of safety, I think that we
would agree that the international safety record of the LNG
industry is superb, quite impressive, and even including the
onshore LNG storage sites in the United States. We have been
very lucky.
Having said that, opponents and critics of the industry
have--like many others in the energy sector have been very
critical in using tactics to scare both community leaders and
members of particular communities over the potential risks.
Has FERC, the Federal Government, thought about putting
anything in place, a review process to work with local
communities to let them know about the scientific evidence of
what exists today?
Mr. Wood. Yes, sir. In fact, that is one of the strongest
reasons that we have to encourage applicants--again, this chart
over here I was describing a little earlier--has a number of
applications there, particularly the list on the bottom half,
that have not yet come before the Commission that are out there
being talked about.
What we have encouraged companies to do, and, in fact, a
number that are in the 13 that are pending before our
Commission have done, is engage in the prefiling process, which
is a much less confrontational, more collaborative format that
worked pretty successfully on the hydropower side and gas
pipeline side, and to use here as well, to bring the
communities in, as is being done by all of these 13 now, to
have open houses, to exchange information, to bring Commission
staff there, to bring them together with members of the
community, environmental groups, elected officials, the State
resource agencies, to sit down and discuss, again, in a very
collaborative roundtable format the issues here, as well as
give us the opportunity to explain why this is important not
just to the community, but to the State and the region.
We found that there have been three highly publicized
places where local projects have been rejected in Maine, in
Alabama and in California. None of them came in and took
advantage of the prefiling process at FERC. And we do think
that there is a direct nexus between community buy-in,
community understanding, proper mitigation of safety concerns,
of environmental concerns. A lot of that getting worked out in
advance makes it much easier for an application to go through a
process and be successful on the other end.
Mr. Tiberi. Thank you, Mr. Chairman.
Mr. Ose. Admiral, along the line of Mr. Tierney's line of
questioning, I would refer you to section 9, paragraph (b)(1)
of the Deepwater Port Act of 1974 regarding the ability of
Governors of adjacent Coastal States to approve or disapprove
of a license that the Secretary may issue.
There is a specific prohibition in here in paragraph (b)(1)
that the Secretary shall not issue a license without the
approval of the Governor of each adjacent Coastal State. You
might want to check on that.
Admiral Gilmour. Yes, sir.
Mr. Ose. I also understand that in the memorandum that the
Department of Energy signed delegating authorities, that the
Secretary retained the ability to disapprove the issuance of a
permit or siting decision?
Mr. Garman. That is correct.
Mr. Ose. So an applicant may end up getting a permit for an
onshore, offshore facility and the Department of Energy--
Secretary of the Department of Energy could even then veto
that?
Mr. Garman. It has happened one time.
Mr. Ose. 1989.
Mr. Garman. And it is a reserved authority that the
Department, in transferring these authorities to the FERC, has
maintained for itself.
Mr. Ose. But your authorities don't extend to the offshore
facilities in terms of the veto? They do or they don't?
Mr. Garman. We still have authorities over the general
question of importing or exporting natural gas generically. So
in theory, whether the facility was onshore or offshore, DOE
could exercise authority to reject the importation of natural
gas irrespective of its method of importation.
Mr. Ose. If for no other reason, you have the storage tanks
onsite that have to be sited, or onshore that have to be sited
that you could decline to issue a permit on?
Mr. Garman. I would like to have an attorney to check my
answer.
Mr. Ose. We will direct that question to you in writing.
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Mr. Ose. Now a question in California has arisen where
there are some who believe that they have jurisdiction over
these decisions. Mr. Wood, would you please step me through the
FERC--I want the cliff notes version--the FERC's decision as it
relates to the ultimate authority on siting and permits for
either interstate or intrastate natural gas.
Mr. Wood. Under section 3, which is the import-export
authority to which we have been delegating the import piece--we
have export duties as well--section 3 authority is really just
the foreign commerce piece, so it is irrelevant whether that is
interstate or intrastate, which after our decision in 2002 to
forebear from reviewing these under section 7 unless an
applicant requests it, we just reviewed it under section 3 of
the Natural Gas Act. That really is irrelevant as to interstate
and intrastate. For that reason we have the open question in
California as to whether we have jurisdiction, exclusive
jurisdiction or the State had jurisdiction as well. We view
this as the ultimate use of the gas being in a single State or
multiple States. Section 3 alone just deals with the import
nature of it. And so the review is based on a public interest
standard.
Mr. Ose. Foreign commerce issue is what you are talking
about?
Mr. Wood. Exactly. Section 7 is a different provision that
was used to approve the existing operating facilities. We did
it under section 3 and section 7 in the 70's. And we looked at
the law there and concluded that in fact that section 7 is not
required to be the reviewing standard. So to streamline it, but
to make sure we are still looking at these issues, we looked at
section 3 as being sufficient. That is triggered by the import
from a non-American site, which all these would be, as opposed
to an interstate commerce problem.
Mr. Ose. You have a difficulty that is coming at you, if I
understand you correctly, the duration of the permits for
existing facilities, are they permanent?
Mr. Wood. There is no time limit on these.
Mr. Ose. The facility that Distrigas has in Boston, that is
a permanent permit?
Mr. Wood. It has no limit. It is permanent.
Mr. Ose. Do the permits that you are considering now, have
you started to include a time limitation?
Mr. Wood. We have not.
Mr. Ose. How is FERC going to go about effectively
communicating to industry that this is the type of template we
are looking for?
Mr. Wood. Clearly the ones we have set up a standard. I
think you have to have a few data points about what is working
in the real world. We do have, and to answer your earlier
question, the technology of vaporization, the vaporizers and
the storage tanks are all relatively standard. And so the
applicants, in fact, look for a location that will actually be
big enough to handle those and handle the exclusion zones that
are associated with those technologies. I will give some detail
to you and submit it for the record. But the types of plans
that we have already approved apparently do come from a
relatively standard technology. It is not a standard where you
kind of walk into FERC and get a rubber stamp approval if you
have all these things met.
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Mr. Ose. That wouldn't be a bad approach.
Mr. Wood. Now I would say just on the two we have done
since I have been on the Commission, Chairman Ose, the issue is
not dominated about the actual facilities themselves and the
exclusion zones. Those have been relatively understood and
accepted. And then you have to get a relatively significant
size piece of land to be sufficiently buffered. It is the other
issues that suface in the environmental review process under
NEPA. It requires that issues such as water discharges,
dredging, air emissions, which this one in Freeport was in the
Houston air zone, so the State agency that was delegated with
Clean Air Act authority had to look at the impact on air of
vaporizing gas. The impacts of navigation that the Coast Guard
is concerned with as well as the safety issues we are concerned
with, all these things are unique to the actual geography of
the place, and so it is hard to standardize that. If you put it
here, we still have to look at wetlands impacts, bird impacts,
archeological impacts under the whole suite of environmental
protection laws that we have in this country.
The bulk of what we have to do in looking at each of these
is not the actual footprint of the facility itself, but the
surrounding impacts that putting that footprint on a piece of
land and ocean has with regard to all the other things we need
to consider. And I think certainly, as I mentioned to the
gentleman from Ohio, the way to streamline that is to start in
an early phase and work through those things collaboratively
with the agencies and citizens in those areas, and that's how
you streamline a process.
Mr. Ose. On that particular point, I get many pieces of
input from lots of different sources, some of which are
suggesting to me that the prefiling collaborative effort is not
very well organized at present and could stand sufficient or
significant improvement, to share with you.
Mr. Wood. Send them to me. We want it to be successful.
Mr. Ose. My question deals with those things that you know
you are going to have. You know you are going to have a tanker
come into a facility. You might have it onshore, in which case
you have to have a harbor that has sufficient draft to hold the
vessel. You have to have exclusion zones. You have to be able
to turn that vessel. Why can't you do--let me back up a minute.
Mr. Tierney hit on a needs assessment earlier in terms of where
do we need these facilities. Mr. Markey also mentioned it,
where do we need these facilities. It doesn't seem like rocket
science to me to go into those regions and identify the
different spots where you have existing infrastructure you
could plug in. My question really becomes why could you not do,
in effect, a programmatic environmental document of that nature
that takes 95 percent of this stuff off the table?
Mr. Wood. That's a good question. The question is, do you
expend a lot of effort picking a preferred LNG part as we did
in your home State in the 80's and then no one ever showed up
at the party. Is that an effective use of the Federal
resources, or do we look at what someone who is quite willing
to make a half-billion dollar investment at a minimum, those
type of operators who, in my experience with the 13 we have in
the door, have done a significant amount of homework in
advance. We don't rubber-stamp that, to be sure, but it does
help that someone who is putting significant investment into
these big projects is going to look at the dredging, the harbor
issues, the navigation issues, the potential wetlands issues,
wildlife issues; where does the dredge go; what kind of
pipelines are we tying into; is there sufficient downstream
capacity to actually hold this big slug of gas as it goes into
the grid. I mean, those kind of things, quite frankly, are
being thought through by all the applicants that we have seen
come in our door so far. And while I think there is certainly
room for improvement, I would think that picking preferred
spots might be counter productive, it is kind of a role we got
away from on gas pipeline.
Mr. Ose. I don't think it is rocket science. It seems to me
that industry knows where those spots are and where the
infrastructure is.
So that brings me to a question to Admiral Gilmour. From a
harbor standpoint, from a vessel working in the waters of the
United States, it seems to me that the manner in which that
vessel works isn't going to vary from one place to the next. I
mean, you are not going to want boats approaching it. You are
going to need a turning radius of X, you are going to need a
draft clearance of Y. Why is it not possible to set up that
kind of a template under a programmatic basis or otherwise so
that people can get on with frankly taking a process that in
your case is 330 days, but in FERC's case might be endless, and
telescoping it down? Is that possible?
Admiral Gilmour. The applications that we have, we are
again trying to work with industry to develop things that--the
things they should address as early as possible regarding some
of those issues. I would say to a degree, depending on how they
decide to gasify, there may be different kinds of environmental
impacts that they would have to address in their environmental
impact statement, but in general----
Mr. Ose. But the gasification facilities are going to be
onshore.
Admiral Gilmour. If you are talking to the onshore side,
then yes, sir, I would say it is quite standard what they would
address on the onshore side.
Mr. Tierney. There is at least one prototype that would
have the gasification process on the ship?
Admiral Gilmour. Yes, sir.
Mr. Tierney. There is one prototype. It is the one I
understand that some people are contemplating off the shore of
Gloucester and Marblehead and up that way, would be to hook up
with the buoy, hydraulically pull up with that liquefied on
board and put it right in and just flow right into the pipe,
right? And the thing would be contained in the ship.
Mr. Ose. Gasify it on the ship, am I right?
Admiral Gilmour. There is one such application. So there
would be--in that case they would require no cooling. They
would not have to use water to help cool and send it over the
side. So it would be a different kind of situation than doing
it on the fixed platform. But from the shore side, yes, sir. I
think industry pretty much knows the kinds of things they need
to address with us. I would say the only unknown or not
unknown, but perhaps issues that we need to look at and in fact
are looking at are some of those that Congressman Markey
brought up.
Mr. Ose. If I walked in your office today, could I go to
some place and get a defined set of parameters that you would
expect me to meet for an offshore facility?
Admiral Gilmour. Seeing that we have only approved two of
them, no, sir. We couldn't hand you something and say, if you
fill all the blanks here. From a security side, I would say to
a large degree, yes, but what we would encourage is to have
people to come in and look at the issues with us and we can
talk about areas where we have had problems before.
Mr. Ose. Gentleman from Massachusetts.
Mr. Tierney. Is there a ship that we know about that we
have already seen that has the gasification process on board?
Does such a thing exist or is that in construction?
Admiral Gilmour. I really don't know the status of that
vessel. I think it's under construction.
Mr. Tierney. Mr. Garman, I ask you, are there studies
within your Department that indicate what Department of Energy
at least thinks is the necessary amount of liquid natural gas
that will have to be imported and then further studies that
indicate how that amount might be decreased by the conservation
or alternative fuels progress and what reasonable expectation
we have of meeting that progress by certain dates and how it
might be impacted? Are those types of studies around?
Mr. Garman. I think it's fair to say that the Energy
Information Administration studies made an attempt to
understand what we could reasonably expect to achieve through
efficiency and conservation efforts in its modeling of future
gas needs.
Mr. Tierney. Would you think that would be in English so
that Members of Congress would understand those studies and
what they're modeling and what their assumptions were?
Mr. Garman. I, too, am perplexed and overwhelmed by EIA
modeling efforts.
Mr. Tierney. If it is, I would ask you to please submit it.
If it isn't, I would like you to submit it with a scientist to
interpret it.
Mr. Garman. I will try to interpret it.
Mr. Tierney. I would like to see what it is they thought
are the projections and see how reasonable those might be and
what goals we might have set for people to get to the place
where we need to get. I would appreciate that. Why don't I
yield?
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Mr. Ose. Mr. Garman, the estimate for the 2007 to 2010
timeframe that specified I think we needed four----
Mr. Garman. Energy Information estimate, that we would need
four new facilities in the Atlantic and the Gulf by the 2007-
2010 timeframe.
Mr. Ose. And the estimate of supply and demand and balance
in the market is based upon--and pricing that might be affected
is based upon those new facilities being built?
Mr. Garman. Yes.
Mr. Ose. If those new facilities aren't being built--that
is what Congressman Tierney and I actually have to endure is
the outcry that comes from a pricing perspective. So if the
assumptions on the EIA study are that price is going to be X
because these facilities are being built or on-line, if those
facilities aren't on-line it is a whole different ball game, is
it not?
Mr. Garman. That's correct.
Mr. Tierney. If they don't go on-line, what are our
prospects of making up the difference by either conservation or
alternative fuels and the feasibility of moving those? And that
would be helpful if you put those in the reports to us.
Mr. Garman. What will happen if those facilities are not
built, prices will climb and consumers will conserve, because
they will be responding to a price signal.
Mr. Tierney. Unless you develop an alternative source of
energy for them within that timeframe to take up some of that
need or unless they get conservation conscious overnight. There
might be goals we could set or ways to at least help us in our
policy decisions in what we ought to be pushing for, whether we
should be going for liquid natural gas or understanding that
some of the siting things might be difficult. What should we be
pushing out in the meantime in case that doesn't happen?
Mr. Garman. Our approach is to plant many seeds.
Mr. Tierney. Let me do a little leg work for Congressman
Markey here. He didn't ask us to do this, but I thought he had
some reasonable questions to ask. Who in the Federal Government
tests the insulation on LNG carriers for fire resistance?
Admiral Gilmour. Sir, in things like that, they would be
tested to industry standards.
Mr. Tierney. Who does make the determination?
Admiral Gilmour. Independent organizations for whoever
would require it. In our case it would be the Coast Guard.
Mr. Tierney. That's your job. The Coast Guard is
responsible for making sure that LNG carriers have fire
resistant insulation?
Admiral Gilmour. Yes, sir. We are required to ensure that
they have the proper type of insulation that meets certain
requirements. But I wouldn't say necessarily in all cases it
had to be fire resistant, I guess is where I am going with
that.
Mr. Tierney. There are LNG carriers out there where the
insulation isn't fire resistant and that is OK with the Coast
Guard?
Admiral Gilmour. It would depend on how it were applied.
There are other ways to skin that cat, if you will. There are
other things you can do.
Mr. Tierney. And the Coast Guard makes the determination of
what is acceptable and what isn't?
Admiral Gilmour. Absolutely.
Mr. Tierney. Do you use industry standards on that?
Admiral Gilmour. Some of our own regulations and some
independent labs test those, but I would say, you know,
industry standards developed by you know API, ANSI, other third
party type.
Mr. Tierney. And that is what the Coast Guard uses? None of
its own analysis?
Admiral Gilmour. We have some of our own requirements and
we use industry standards in some cases.
Mr. Tierney. What hazard analysis has been done to examine
what would happen in the event of a fire on an LNG carrier
ignited the insulation or otherwise compromised it? Has
somebody done those analyses?
Admiral Gilmour. We have looked at some point at just about
every kind of accident that could happen on any kind of vessel
in developing our regulations. So, yes, sir, we have looked at
collisions, groundings, fires and developed criteria for all of
those areas.
Mr. Tierney. What Mr. Markey is most concerned about is
polystyrene.
Admiral Gilmour. Yes, sir.
Mr. Tierney. You have done study or analysis to examine
what would happen if that particular product were ignited on an
LNG carrier?
Admiral Gilmour. We could certainly know what the
properties of any kind of insulation material would be and how
it would react to flame.
Mr. Tierney. You know that because you have already had
analysis done?
Admiral Gilmour. We have either had analysis done or would
require analysis for a given application.
Mr. Tierney. As I understand it, Mr. Markey's concern is
that polystyrene is being used on some ships and he is
concerned that people have not made this analysis. Can you help
us out there?
Admiral Gilmour. Sir, you are asking a very complex and
difficult question that you would have to know where it was
used, how it were used and if it were encapsulated. There are a
number of complicating issues. So that the insulation itself
might burn, but if it were put into a steel container, you
wouldn't have that concern. Or if it were put into another
environment, you wouldn't have that concern. So it is a very
complicated question.
Mr. Tierney. Let me help you here. It's not something I
thought of here. The Department responded to a letter that Mr.
Markey sent indicating that foam polystyrene insulation is not
used on LNG carriers precisely because it is susceptible to
melting and deformation in a fire. Mr. Markey then indicated
that he has since found that statement to be inaccurate, that
the LNG vessel manufacturer reports in a sales brochure that it
uses that polystyrene--there is more information that goes on.
So my question would be if it is used, as he seems to believe
that it is, are there analyses that you could provide to this
committee as to what the effect would be if it was compromised?
Admiral Gilmour. We can look at that. I don't know what
context--and I am sure I will get the opportunity to look at
his letter, but I don't know what context that was in. But we
can certainly----
Mr. Tierney. It was in the context of this polystyrene
being used as insulation on an LNG carrier. At some point he is
concerned that it is going to be compromised and what results
from that. I don't know what other context to put it in for
you.
Admiral Gilmour. As I stated earlier, we would have to look
at if we thought it indeed could happen. I mean there are a lot
of----
Mr. Tierney. Will you provide that analysis to us with
respect to that polystyrene? If you have done analysis with
respect to polystyrene's possible use or use on LNG carriers,
would you provide that to the committee?
Admiral Gilmour. We can discuss that issue.
Mr. Ose. Will you provide it or won't you?
Admiral Gilmour. Yes, sir.
Mr. Ose. We don't want to discuss it, we want to see it.
That's the difference. If you have a report, will you provide
it to the committee?
Admiral Gilmour. Sir, first of all, I don't know the
context of the letter, so I don't know we have an exact report
that is going to address Congressman Markey's issue, but we can
provide an analysis to you of insulation used on----
Mr. Tierney. Forget Mr. Markey for a second. I am going to
make a direct request. Will you provide to this committee any
analysis that you have done with respect to polystyrene's use
on LNG vessels?
Admiral Gilmour. Yes, sir.
Mr. Tierney. That pretty much covers everything, whether
you think it is there or you don't think it is there or if it's
there, what you think is going to happen, and that should give
us whatever we need. I would appreciate that if you would do
that.
Admiral Gilmour. Yes, sir.
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Mr. Tierney. In the light of the post-September 11 threat,
is there any plan by the Department, Coast Guard in particular,
but the Department on the whole to review the safety standards
applicable to LNG carriers, including fire safety standards, to
determine whether they need to be upgraded to better address
the threat of sabotage or terrorist attack?
Admiral Gilmour. Yes, sir. There is a study through Sandia
Labs that we are working in conjunction with DOA that will look
at that threat.
Mr. Tierney. Are they still in process?
Admiral Gilmour. Yes, sir.
Mr. Tierney. Will you provide those to the committee when
they are done?
Mr. Gilmour. Absolutely.
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Mr. Tierney. I think my time is up.
Mr. Ose. I want to go back to the national fire standards
that were used in the original design criteria for the
carriers, the vessels. Now there has been some comment and
discussion here that those were adopted I think in 1974. And
have those standards been updated periodically since then, Mr.
Wood, Mr. Garman, Admiral Gilmour?
Mr. Wood. I am not aware of when they were adopted or when
they have been amended.
Mr. Garman. I do not know.
Mr. Ose. How contemporaneous are the standards--I can't
remember the exact phraseology, it is like the national fire
safety--National Fire Protection Association--those standards.
How contemporaneous are they in terms of currency?
Admiral Gilmour. Sir, I am not sure that those were applied
to the vessel side, but we can give you what does apply. And in
fact, we have updated fire fighting and fire protection
capabilities since 1974.
Mr. Ose. I think that is at the heart of the question, is
whether or not we are using standards that are 30 years old or
something a little more current, and that would be a big help
to us in terms of addressing some of these concerns.
Admiral Gilmour. We can provide that information to you,
too, sir.
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Mr. Tierney. Last question I have, if you have an old ship
that might have had some sort of insulation or problem, I think
it has since been decided that is not safe, is there a
provision or process by which they are asked to remove that?
And if so, who then checks and inspects to see whether or not
that has occurred?
Admiral Gilmour. Yes, sir. That would be the case, and we
would look at it and we would make that determination. You
must--you gentlemen must realize, though, the only vessels we
can apply standards to are those that come to the United
States, that trade with the United States, and that is what we
will give our analysis based on.
Mr. Tierney. There are about 150 of those?
Admiral Gilmour. I am not sure there is that many. I think
it is in the 40 range that are trading currently with the
United States.
Mr. Tierney. And if there is a vessel that comes to a
deepwater port 12 miles out or 112 miles out, that would still
be considered within your jurisdiction and you would check on
those?
Admiral Gilmour. Absolutely. And most of those are new
vessels under construction.
Mr. Tierney. Only two of them under U.S. flag?
Admiral Gilmour. Yes, sir.
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Mr. Ose. I want to thank this panel for your patience and
perseverance. I do want to emphasize the concept of a
programmatic template both for onshore and offshore facilities
that would, I think in the end, it might be a dime invested to
save $5 worth of processing or resource allocation, and it just
seems to me like it would be a huge step. I am a little bit
curious from the Department of Energy the parameters under
which the Secretary would veto a siting or permit decision made
by FERC or Coast Guard-MARAD. Could you share that with us?
Mr. Garman. Our only data point is that one experience in
Alaska when there was a proposal, not a project, to export
Alaskan natural gas to Japan. As I recall, the Department had a
preference that the export site occur at the Port of Valdez
rather than closer to Seward, which is what the project
proponents had wanted. FERC had approved the project. The
Department of Energy disapproved it. And then FERC reapproved
the project at the export site at the Port of Valdez. That is
the only experience that exists on the record. I don't believe
there is set criteria, and I don't know the detailed history of
why the Secretary at that time made those decisions or the
reasons he used.
Mr. Ose. It would be helpful to flush that out.
Mr. Garman. We will do a little investigation.
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Mr. Ose. Final point. If you look around the Pacific Rim,
that is the source of significant supply or generation of
natural gas. A lot of that stuff is being flared off.
Australia, as I understand it, just entered into an agreement
with China for a significant importation into China. We are
behind the curve here, gentlemen, and we need that gas big
time. To the extent that this committee can help you expedite
permitting or siting decisions, whether they be onshore or
offshore, I think we stand ready to do our share.
We thank you for your testimony today. We are going to take
a 5-minute recess and will reconvene at 4:30 with the third
panel.
[Recess.]
Mr. Ose. We are going to reconvene. I want to welcome our
third panel of witnesses today. We are joined by Jay Blossman,
who is the commissioner of the Louisiana Public Service
Commission; also by the chairman of the Maryland Public Service
Commission, Mr. Kenneth Schisler; and by the deputy secretary
for energy in the California Resources Agency from the Golden
State, Mr. Joe Desmond. Gentleman, you saw we swear our
witnesses in. So if you please rise.
[Witnesses sworn.]
Mr. Ose. Let the record show the witnesses have answered in
the affirmative. We have received your written statements and
they have been entered into the record. I have read them and
reviewed them accordingly. We are going to recognize you for 5
minutes to summarize your testimony.
Mr. Blossman, you are first.
STATEMENTS OF JAY BLOSSMAN, COMMISSIONER, LOUISIANA PUBLIC
SERVICE COMMISSION; KENNETH D. SCHISLER, CHAIRMAN, MARYLAND
PUBLIC SERVICE COMMISSION; AND JOSEPH DESMOND, DEPUTY
SECRETARY, ENERGY, CALIFORNIA RESOURCES AGENCY
Mr. Blossman. Thank you, Mr. Chairman. It is my distinct
pleasure to be here today to address you on one important
topic, jurisdiction over siting of liquefied natural gas import
facilities. In my comments I will address State policies
involved in siting LNG import facilities.
Liquefied natural gas has long played a role in U.S. energy
markets, but concerns about rising natural gas prices, current
price volatility and the possibility of domestic shortages are
sharply increasing the demand for LNG imports. To meet this
demand, dozens of new onshore and offshore LNG import terminals
have been proposed in coastal regions throughout the United
States. There are five onshore LNG terminals in the United
States. In addition to these active terminals, developers have
been proposing numerous new LNG import terminals in the coastal
United States.
Louisiana Public Service Commission is interested in the
siting of LNG regasification facilities because they have a
potential of representing a major capital investment in our
State. LNG siting in Louisiana will allow the State to leverage
and even extend our existing energy infrastructure. Our State
has energy intensive users of natural gas, and LNG terminals
will expand a vital energy resource needed to preserve these
energies.
The development of LNG is an important national energy
concern in which Louisiana can make a significant contribution.
According to a study done by Louisiana State University Center
for Energy Studies, the construction of an LNG regasification
facility in Louisiana has the potential impact of $2.2 billion
and nearly 14,000 jobs associated with the construction of this
facility. The center also stated that there is a potential $220
million impact associated with the annual operation of an LNG
facility in Louisiana and the Gulf of Mexico, with an estimated
1,600 jobs associated with that operation.
As it relates to economic opportunities for LNG development
in Louisiana, we are in a unique position. Louisiana is the
second largest producer of natural gas. It is the third largest
consumer of natural gas in the United States, beyond Texas and
California. Louisiana's high natural gas consumption ranking is
due to high industrial use per customer. Louisiana's industrial
consumption ranks second in the United States behind Texas.
Proposed LNG terminals will directly impact the safety of our
communities and a number of States and congressional districts,
and they are likely to influence energy costs nationwide.
Faced with the widely perceived national need for greater
LNG imports and the persistent public concerns about LNG
hazards, Congress is justifiably examining the adequacy of
safety provisions in Federal LNG siting regulations. The FERC
grants the Federal approval for the siting of the new onshore
LNG facilities under the Natural Gas Act of 1938. This approval
process incorporated minimum safety standards for LNG
established by the Department of Transportation, which in turn
incorporated siting standards set by the National Fire
Protection Agency. Although LNG has a record of relative safety
for the last 40 years and no LNG tanker or land-based facility
has been attacked by terrorists, experts have questioned the
adequacy of key LNG siting regulations relating to safety
zones, marine hazards, and remote siting.
While the Federal Government is primarily responsible for
LNG terminal safety, State and local laws such as
environmental, health and safety codes can affect LNG
facilities as well. Under the Pipeline Safety Act, a State may
also regulate intrastate pipeline facilities if a State submits
a certification or makes an agreement with the Department of
Transportation.
Regulation of interstate facilities remains the primary
responsibility of Federal agencies. The Office of Pipeline
Safety, however, may authorize a State to act as its agent to
inspect interstate pipelines associated with LNG facilities
while retaining its enforcement responsibility. State
regulation of LNG safety siting ranges from comprehensive to
piecemeal.
Apart from State regulation aimed specifically at LNG
facilities, generally applicable State and local laws such as
zoning laws and permit requirements for water, electricity,
construction and waste disposal also may serve to impact the
planning and development of LNG facilities. With respect to LNG
in particular, local laws have been overridden by State
legislation in the past. It should also be noted that federally
authorized LNG projects cannot be frustrated by contrary
provisions found in State or local law.
I look forward to answering your questions, Mr. Chairman. I
think it is a very important part of the energy policy with
LNG, and I am here to support the Lake Charles facility. Thank
you.
[The prepared statement of Mr. Blossman follows:]
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Mr. Ose. I thank you. I appreciate your testimony and the
adherence to the time requirement.
We are pleased to welcome the chairman of the Maryland
Public Service Commission, Mr. Kenneth Schisler.
Mr. Schisler. Thank you, Mr. Chairman. I am pleased to be
here to testify. I will not read my statement. As you
indicated, you have it in the record.
But to summarize, my testimony primarily supports any
change to Federal law necessary to clarify that FERC and its
sister Federal agencies have exclusive jurisdiction over the
siting of new liquefied natural gas import terminal facilities.
There certainly is a role for States. But in terms of siting,
given the importance of the energy supply as an important
global economic issue as well to the United States, as noted by
Fed Chairman Greenspan on several notable occasions, I believe
that the siting issues are best left to the Federal Government,
where regulatory issues can be addressed, as you mentioned, Mr.
Chairman, the interest in having one template for siting LNG.
Imagine, if you will, if you had 50 plus different templates
for businesses seeking to site an import facility to have to
navigate through. These investments are hundreds of millions of
dollars of capital necessary to be raised in order to support
one of these facilities, and regulatory certainty certainly
should take front seat. And State issues, while certainly are
addressed, I believe the Federal jurisdiction is important to
ensure that regulatory certainty.
State commissions regulate local distribution companies. We
have a lot of important work to do to ensure that intrastate
business activity is taken care of. Maryland law as it relates
to siting facilities actually is nonexistent. There is no
statute in Maryland law relating to LNG siting. We do have a
statute that in my interpretation is subordinate to Federal law
to ensure the operational safety of LNG facilities. But, until
quite recently, there was no question as to the exclusive
nature of the Federal jurisdiction.
Recently--and FERC issued its order in the SES Long Beach
case determining, following principles of foreign commerce,
asserting exclusive jurisdiction. That jurisdiction has been
challenged by the California Public Utilities Commission. The
analysis would be the same whether the jurisdiction was derived
under interstate commerce or foreign commerce, but I certainly
agree with the FERC in its order asserting jurisdiction.
Maryland's experience with LNG started with the Cove Point
facility, which is fairly close to the Nation's Capital, about
50 miles away. In 1978 to 1980, Cove Point received import
shipments from Algeria. Market conditions and pricing in
Algeria caused that plant to be mothballed in 1980. It was
mothballed until 1994, when liquefaction facilities were added
to that facility and it was used for gas storage for peak
periods until 2003, when Cove Point reactivated and began
importing LNG. And to date nearly 60 deliveries have been made
into that facility.
In October 2001, just after the September 11 terrorist
attacks on our country, FERC approved the Cove Point facility.
Obviously the application had been underway for some time at
that point. Immediately following that approval at the request
of Maryland's junior U.S. Senator Barbara Mikulski and others,
FERC was asked to reconsider its approval and did reconsider
its approval and reaffirmed its approval and reactivation of
Cove Point. Following Maryland's statute to ensure the
operational safety of the facility, the Maryland commission in
2002 also approved the reactivation and shipments began in
2003.
In terms of cooperation with local authorities, I have a
letter which I am happy to enter into the record from the
office of Maryland State Fire Marshal noting the cooperation
not only by the Federal authorities but the owners of Dominion
have had with Cove Point. Cove Point is located very close to
the Calvert Cliffs nuclear power plant and those two facilities
work in cooperation to ensure the safety of the nearby
community. Again, as noted by the fact that Maryland endorsed
the reactivation after the Federal agencies completed their
work, I have a great deal of confidence in the Federal agency's
review. The role of the States is one more of collaboration.
And, through Federal-State partnerships and regulation, the
Office of Pipeline Safety comes to mind, the air quality
issues, the certificate of public convenience and necessity as
it relates to the onsite generation or cogeneration at Cove
Point, we have relationships and they work well. But, in terms
of the exclusive siting, it is my belief that the regulatory
certainty is paramount and therefore siting should remain
vested in FERC exclusively.
[The prepared statement of Mr. Schisler follows:]
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Mr. Ose. I thank the gentleman. We will enter the letter
into the record as requested.
Our third witness on this panel is Mr. Joseph Desmond, a
Deputy Secretary for Energy at the California Resources Agency.
Sir, welcome to our witness table and you are recognized for 5
minutes.
Mr. Desmond. Good afternoon. The Governor's Deputy Cabinet
Secretary sends his warmest regards.
You have before you today an important issue of direct
concern to both the Nation and the State of California. It is
an honor to appear before you to let you know what we are doing
in California as it relates to our need for sources of natural
gas and consideration of liquefied natural gas import
terminals. While California has a very successful track record
in aggressively promoting energy efficiency and renewable
energy, let me be clear: Our State has determined that we need
to pursue additional sources of natural gas supplies such as
LNG. The State's Energy Commission recently completed a
comprehensive review and assessment of our energy situation and
in its recent report identified the need to embrace additional
sources of natural gas supply such as LNG.
California recognizes that the current record high natural
gas prices represent a significant cost to businesses and
residential customers and it is imperative we seek out ways to
ensure reliable and competitively priced gas supplies for the
future. To that end the Secretary of Resources has directed
State agencies to work together to develop the information
necessary to provide the public and decisionmakers information
on various LNG issues and to provide an effective coordinated
review of LNG import terminal applications.
Please be aware our interest in seeing LNG facilities
developed on the West Coast is balanced by our expectation that
any development is done in a manner that protects the health
and safety of our citizens and the quality of our environment.
Currently, the State of California's role in approving LNG
terminals differs depending on whether the proposed project is
located onshore or offshore. For offshore LNG facilities, the
lead State agency to the State Lands Commission which works
with other State and Federal agencies. The Deepwater Ports Act
provides that the Governor of California has final review to
approve or reject any offshore LNG proposal.
For onshore projects, there are many State and local
agencies that are involved in the local permit process but
ambiguities in the law have given rise to recent jurisdictional
disputes over onshore permits.
As I mentioned earlier, we have already taken steps to
organize our agencies to effectively respond to new
applications for LNG import terminals. First we started working
with FERC over a year and-a-half ago when we heard that
California might receive LNG applications. We responded with a
2-day training session on LNG for all public agency staff
members to provide them technical background.
Third, over a year ago, we established the LNG Interagency
Permit Working Group of governmental agencies potentially
involved in the review of new LNG import terminals. That
working group meets regularly to define roles and
responsibilities, resolve issues and establish a technically
consistent information base.
Fourth, we have been identifying issues and taking action
to resolve them on a timely basis at all levels of government.
And last we sponsored a comprehensive workshop on natural gas
supply and demand and infrastructure issues with FERC
participating in the event.
Based on our experience, I believe we can offer you several
suggestions for action, particularly as they relate to Federal-
State roles. We have declared our intent to work
collaboratively with our Federal colleagues when reviewing LNG
import terminal applications and have a long history of
successfully working with them on other energy projects.
Currently State agencies are conducting joint environmental
reviews of the Long Beach LNG import terminal application with
FERC and the Cabrillo Port LNG import terminal application with
the U.S. Coast Guard. The Coast Guard has distinguished itself
by coming to California several times to establish a close
working relationship at all levels of government by making
their staff available to work closely on an informal and formal
basis. We have technical staff and agencies capable of
independently reviewing complex projects and willing and able
to conduct our work on a collaborative basis with our Federal
and State colleagues.
Not only do we work collaboratively, but we also try to
make our work transparent to the public. We have established
several Web sites to educate the public of both the permit
application review process and LNG in general. These themes of
continued collaboration and working relationships and
transparency are good guides for the future.
So how does this apply to the issue at hand? First, we ask
that you look at Congress' most recent action in this area when
it amended the Deepwater Port Act to permit it to be used for
licensing. It is a good model that serves to reflect the
current thinking and actual practice on this issue. And second,
we suggest that we all look at ways to increase the
transparency of our work so the public can become better
informed and more fully participate in the process.
Our many decades of conducting reviews, holding local
workshops and hearings, and posting as much information as
available on Web sites and mailing lists has taught us we often
don't fully understand all the issues until we frequently meet
with the local communities. Local events are particularly
useful in flushing these issues out, particularly for those
communities who have already expressed reservations about LNG
safety.
Last, Federal agency rules that shield critical energy
information from the public should be reexamined to ensure they
are necessary as written or could be slightly relaxed and still
meet legitimate security objectives, and I would be happy to
expand on these further.
[The prepared statement of Mr. Desmond follows:]
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Mr. Ose. I thank the gentleman.
Mr. Blossman, you have in Louisiana an operating onshore
facility. You have approved an offshore facility. My question
is what has been your experience in terms of working with the
Federal permitting agencies in getting to a conclusion? Has it
been positive, negative or ambivalent?
Mr. Blossman. It has been very, very easy. The Public
Service Commission along with the Governor sent a letter to the
FERC requesting the project, requesting approval, and it was
done. I mean, I guess it is easier to grant an expansion of our
existing and a new one when you have one there. So it was quite
easy.
Mr. Ose. What about Port Pelican? Port Pelican is not an
existing facility, is it?
Mr. Blossman. Not an existing facility, no, sir.
Mr. Ose. In terms of an expansion, FERC did all the
analytical stuff that they needed to do. The Governor weighed
in with a letter requesting approval and FERC agreed and they
approved the expansion. But in terms of the offshore facility,
is it your testimony that the work with the Coast Guard and
MARAD proceeded very well, that they took into account local
concerns, environmental issues and the like?
Mr. Blossman. It is my belief that--we did not hear that
there was any problems with that.
Mr. Ose. How does the siting issues for other utilities in
Louisiana differ from the siting consideration for an LNG
facility, if at all?
Mr. Blossman. As I stated, we use so much natural gas in
Louisiana with our industries along the Mississippi River that
the siting for the LNG was, like I said, somewhat--it was easy.
And other sitings that we had for other things that the Public
Service Commission regulates, we haven't had a whole bunch of
problems with that either other than what you all aren't
talking about, merchant plants with local community
involvements about water. But the opposition was virtually
nonexistent.
Mr. Ose. Certainly over a long period of time in Louisiana
communities have come to understand how to deal with these
risks and hazards that might come with them and they are just
prepared for them?
Mr. Blossman. Apparently so. I know there was some concern
and there is some concern about the LNG ships coming in the
Calcasieu River with the pilotage and the channel having to be
shut down when they bring a ship of that size into the port.
But other than that there is no major difficulty.
Mr. Ose. But that activity has transpired for any number of
years successfully?
Mr. Blossman. Yes, sir.
Mr. Ose. And you have never had any collisions?
Mr. Blossman. None whatsoever.
Mr. Ose. Now, Mr. Schisler, out at Cove Point you are 3
miles from a nuclear power plant, as I understand it. In terms
of taking the plant out of mothball status, what was your
experience in working with Federal agencies to make that
happen?
Mr. Schisler. Well, Mr. Chairman, I became chairman of the
Maryland Commission July 1 of last year, which was after the
reactivation had been finally approved. However, I was a member
of the legislature and observer of the Commission's activities,
and actually member of the legislature on the Eastern Shore
just across the Chesapeake from the Cove Point terminal, and my
observation was that the reactivation was a smooth process.
There was a fair amount of cooperation already between State
and Federal agencies, and I think the evidence of that process
is that the State was satisfied with it. The cooperation it
received from the Federal agencies was the Maryland
Commission's own endorsement of the review process that Federal
agencies undertook.
There was a fair amount of community information
disseminated, particularly about the Coast Guard issues, with
bringing the LNG ships up the Chesapeake Bay, and that
information was disseminated, community input welcomed and
other issues resolved.
Mr. Ose. What's the closest community to Cove Point?
Mr. Schisler. There is a community just south of the
facility. I believe it is Solomon's Island and it is
immediately adjacent to the terminal property. However, the
property is probably 1,000 acres or so, and the footprint of
the plant is located in the center of that, and there is a
substantial green buffer between the plant and the nearby
communities.
Mr. Ose. So your exclusion zone is the perimeter of the
property around the plant?
Mr. Schisler. That's correct.
Mr. Ose. In terms of the impact on the price of natural gas
in Maryland, have you been able to quantify the dampening
effect of access to this natural gas?
Mr. Schisler. That would be very difficult to quantify the
impact. But certainly having more diverse supplies in the mid-
Atlantic region is a positive. Cove Point is proposing another
expansion to come on-line in 2008, and what that expansion
would do likely is make economic--some pipeline expansion in
Pennsylvania and in Virginia, and that would further add to the
infrastructure available in the mid-Atlantic both to increase
the diversity of supply, increase competition. And obviously
the benefits of competition could realize lower prices for
consumers. I wouldn't want to speculate on the price impacts of
reopening that LNG terminal, but I would suggest that it would
have to be positive for consumers.
Mr. Ose. Do you regulate the retail price of natural gas in
Maryland? In other words, you set the pricing?
Mr. Schisler. Yes and no. We have a restructured gas
market. We have opportunities for consumers to go off of
default service, but we also have default service that is price
regulated.
Mr. Ose. What is the price on default service?
Mr. Schisler. The only figure I want to venture here today
is the approximate wholesale price that we are hearing today.
About $6.
Mr. Ose. I am trying to quantify the impact of an LNG
facility and the natural gas that it brings to an area, just so
that we have some scientific or empirical data to do that. In
terms of Cove Point, you talked about the pipeline changes in
Virginia and Pennsylvania. What about locally around Cove
Point? What kind of changes had to be accounted for?
Mr. Schisler. The gas that is gasified from the LNG
facility at Cove Point immediately enters the interstate
pipeline system on the property at Cove Point and travels
approximately 90 miles to the main distribution of the
interstate pipeline system. There are several city gates along
the way.
One of the things I was asked to prepare for today is what
changes needed to be taking place as a result of a
reactivation. Washington Gas Light has a gate that serves the
Chalk Point power plant, and the utility was on notice that the
pressures would be higher if LNG reactivated but there was some
20-year hiatus at the facility. The utility needed to update
some of its infrastructure. But again the high pressures called
for by LNG coming from Cove Point were known.
So again that was a risk, I guess, that the utility took.
There were some gas quality issues that needed to be addressed,
but those were addressed to the satisfaction of the utility to
ensure first of all that water wasn't entering the system
through--from the LNG that was being added--gasified and being
added to the system.
And finally because of we are now looking at LNG coming
from many nations around the world, there is concern about the
BTU content and the gas quality. And onsite at Cove Point,
there is a nitrogen facility such that if the BTU content of
that gas is too high for distribution in the system, nitrogen
is added to reduce that BTU content and to interstate quality
range. And so there really are no changes other than the
anticipated changes necessary to WTL gates off the interstate
pipeline.
Mr. Ose. Did you have to take special security measures at
Cove Point?
Mr. Schisler. I asked company representatives that very
question in terms of what--two-fold. One, what as a result of
September 11 did they have to do different? And they
reactivated after September 11, so it was a general increased
awareness. The secluded nature of the facilities on the Cove
Point property lent itself to ensuring--they never wanted
anyone around that facility and those facilities were fairly
protected. The patrols, the level of security does increase as
the threat level changes. I am not sure I could recount all of
those changes, but the security of the facility as an inactive
site was one thing.
Now there is gas on the site, there is heightened security.
The gas docks where the gas is offloaded in liquid form just
into the Chesapeake Bay used to be prime fishing. Now of course
that is off limit. There is an exclusion zone. Whether there is
a ship at the dock or not, fishermen, commercial fisherman are
not permitted within a 500-yard radius of the gas docks.
Mr. Ose. How do these security measures differ from other
hazardous materials within the State and the transport thereof;
for instance, chlorine, ammonia or gasoline?
Mr. Schisler. Mr. Chairman, I'm not sure that I'm competent
to answer those questions. Those would be questions more
appropriately addressed by our environmental officials that
regulate those materials, and I wouldn't want to venture a
guess and be inaccurate.
Mr. Ose. And you have a storage facility also in Maryland?
Mr. Schisler. Yes.
Mr. Ose. So you have the regasification facility, and you
have a storage facility?
Mr. Schisler. And at some point, Cove Point was also used a
storage facility.
Mr. Ose. Do the security measures at the storage facility
differ from those at the regasification facility?
Mr. Schisler. I don't know the answer to that question.
Mr. Ose. Here is what is going on. I've got four votes over
on the floor. It's likely to take 45 to 50 minutes.
Mr. Desmond, I need to move on to the floor. Are you able--
are the three of you able to wait for our return?
Mr. Blossman. Mr. Chairman, I have a flight at 7 a.m. out
of Reagan National, and I did not plan to stay.
Mr. Ose. 7 a.m.?
Mr. Blossman. 7 p.m.; I could stay if it was 7 a.m.
Mr. Ose. Well, I've gone through the questions I had for
you. If it would be possible, I'd like Mr. Schisler and Mr.
Desmond to stick around for our return.
Mr. Blossman, I understand your schedule requirements, and
I'm OK with dismissing you as a witness here. If we have
additional questions, we will submit them to you in writing,
and we would appreciate a timely response accordingly.
Mr. Blossman. Absolutely, Mr. Chairman. Thank you very
much.
Mr. Ose. We will take at least a 45-minute recess here. So
we will be at back at 5:45 or shortly thereafter.
[Recess.]
Mr. Ose. The hearing will reconvene.
Mr. Desmond, you heard a long conversation earlier about
trying to identify programmatically a template for siting a
facility, both onshore and off. Has the California Energy
Commission, which I understand hierarchically reports through
the Resource Agency----
Mr. Desmond. That's correct.
Mr. Ose. Has the California Energy Commission taken any
affirmative steps to identifying locations with you where LNG
import facilities could be constructed?
Mr. Desmond. No. It has left it to the marketplace to
determine which sites they would propose for review and
permitting.
Mr. Ose. Similar to the questions that I posed to the
previous panel, has the Energy Commission taken any affirmative
steps to define the parameters under which they would otherwise
approve an LNG facility?
Mr. Desmond. Yes, it has. The best evidence I can cite to
that end is the formation of the Interagency LNG Permitting
Work Group which pulls together all the relevant State agencies
to identify their appropriate roles. This is where we have that
sort of bifurcation of responsibilities depending on whether it
is onshore or offshore.
In the case of offshore, we have the State Lands
Commission. Also, now, we have enhanced that authority. And in
the case of onshore, it tends to be the local siting which
takes the lead, but we still have all of the agencies from Fish
and Game to Wildlife to Local Air Quality Board, all of which
have to do this.
Now, in the case of the Long Beach onshore, I will tell you
they're having to organize this information and put it together
jointly between the Port of Long Beach and FERC, is a flowchart
that identifies the appropriate roles in a template form
identifying which agency has to have which permit and what are
the appropriate points of time in which the public can comment
on each of those steps.
The State has continued to go further. It is in the process
of crafting an action plan for the Governor to look at the
issues around the data requirements, the criteria that he would
need to apply in order to make the decisions that come about
from the Deep Water Port Act that requires him to either
approach, disallow, approve with amendments or suggestions back
or take no action. So California is actively involved in
documenting this and communicating it in a number of different
forms.
Mr. Ose. Have you been able to work pretty cooperatively
with FERC in one case and Coast Guard and NARAD in the other?
Mr. Desmond. FERC has been very cooperative, but there are
two areas which we think make some sense to revisit. The first
is, around the use of restricted information that we need to
share with the public--and it is the opinion of the folks
working so far with FERC that they have taken a broad view of
that and some relaxation of the standards around the location
of the facilities and the discussion of the sensitivity on
safety issues, particularly with respect to terrorism, would
benefit the public evaluation of a proposed project. So that is
one area.
The second area is that FERC has developed ex parte rules
that currently prohibit legitimate conversations between
Government organizations where both are pursuing the same
public objective. So in that case, we believe that the
increased communication between the two respective agencies,
the State and FERC, would increase the efficiency of the
Government in accelerating the approval process for LNG import
terminals.
Mr. Ose. Long story short, how many LNG terminals do you
think we need to build in California to maintain an appropriate
supply?
Mr. Desmond. Long story short, I believe the market will
support two facilities. And I say that because 1 billion--let
me give you some figures to put that into perspective. The
average daily consumption of natural gas is about 6 billion
cubic feet per day.
Mr. Ose. In California?
Mr. Desmond. In California, that is average. We have a peak
demand of 10,000, but 6 billion cubic feet per day is average.
A 1-billion LNG import terminal then would supply about 17
percent of the average daily need. And so you can see two 1-
billion terminals could supply as much as 34 percent of the
average daily or something less.
I think the market fundamentals make it difficult to
justify that you would see more than two facilities over the
next 10 years. But that's not to say that, over the long run,
we would see a third or a fourth added. And a lot of this will
be due to where that gas is sold. In the case of the Baja or, I
should say, the Sempra proposal down in Mexico, 50 percent of
the output of that LNG terminal is dedicated to the supply of
Mexico. And it is then, because it is open season, we are
competing for that gas with States such as Arizona and Nevada
with whom we share those pipelines.
It is possible it could support more, but as far as
California's needs in the short term, we're looking at price
differentials to probably handle about two.
Mr. Ose. Has your analysis gone so far as to make some
determination as to what the price of--what the target price
for natural gas in California should be?
Mr. Desmond. The original IEPR report that we put out in
2003 is already much out of date in terms of our expectations
of where the price was. The State is in the process of updating
that information. I have seen analyses from industry experts to
indicate the cost of delivered LNG into California being
supported even if the long-term price of natural gas was
between $4 and $5.
At its current level, certainly it supports bringing the
LNG terminals in. But we still go back to the basic question
that California needs new sources of natural gas supply, and
there are four ways that we can do that. Either there is going
to be a new interstate pipeline bringing gas in from Alaska or
the Rocky Mountain areas, increased instate production, instate
gas storage or LNG terminals.
Mr. Ose. Or some combination thereof?
Mr. Desmond. Or some combination of those, that's correct.
Mr. Ose. If we don't site them in California, I presume we
rely on our Mexican friends or our Oregonian friends?
Mr. Desmond. If we don't site them in California on the
import terminals, there is still the opportunity to bring
natural gas in from the Rocky Mountain areas, such as Wyoming
or Alaska, but that is a very long-term outlook, and I am not
sure it would be delivered in time.
Likewise, we could look at siting additional terminals in
the Gulf of Mexico, in through Texas-Louisiana, and bringing
that gas into the existing pipeline, but already, California is
competing for that capacity and for that gas that is already
there. So we still have the issue of the physical
infrastructure being very limited because California is at the
end of that pipeline. So there are certain benefits that come
about from having access, essentially, to new sources, not just
the entire Pan-Pacific region that has that gas.
Mr. Ose. As I understand it, the cost to transport from the
Gulf via pipeline is about $2 per million cubic feet. Is that
accurate?
Mr. Desmond. I don't have those figures handy.
Mr. Ose. OK.
All right. I don't have any further questions at this
point. We may well have some things that occur to some of the
Members up here post-hearing, to which we will certainly send
them to you in writing and hope for a timely response--and ask
for a timely response.
I do appreciate you both taking time to come down and
testify and share with us what you have. If you have
suggestions, we would take them prospectively, too, in writing.
Thank you both. You are both excused.
Mr. Desmond. Thank you, Chairman.
Mr. Ose. I want to call our final panel up to the witness
table.
We have in our fourth panel, Mr. Donald Santa, Jr., who is
president of the Interstate Natural Gas Association of America.
We have Mr. Philip Warburg, who is president of the
Conservation Law Foundation. And our third witness is Dr. Jerry
Havens, who is the distinguished professor of chemical
engineering at the University of Arkansas.
Gentlemen, as you saw in the previous panels, we swear all
of our witnesses in. If you would please rise and raise your
right hands.
[Witnesses sworn.]
Mr. Ose. Let the record show that the witnesses answered in
the affirmative.
As we shared with the previous panels, we have received
your written testimony. And it has been read, and it will be
part of the record, and we invite each of you to summarize your
testimony in the 5-minute period.
Mr. Santa, you are first. You are recognized for 5 minutes.
Thank you for joining us.
STATEMENTS OF DONALD F. SANTA, JR., PRESIDENT, INTERSTATE
NATURAL GAS ASSOCIATION OF AMERICA; PHILIP WARBURG, PRESIDENT,
CONSERVATION LAW FOUNDATION; AND JERRY A. HAVENS, DISTINGUISHED
PROFESSOR OF CHEMICAL ENGINEERING, UNIVERSITY OF ARKANSAS
Mr. Santa. Thank you, Mr. Chairman, and thank you for the
opportunity to testify today.
I am Donald Santa, and I'm the president of the Interstate
Natural Gas Association of America which represents the
interstate and interprovincial natural gas pipelines in North
America. Our member companies deliver 90 percent of the natural
gas consumed in the United States. Our members also include the
owners and operators of the four existing operational LNG
terminals in the continental United States.
I'm also here today on behalf of the Center for LNG, a
consortium that includes approximately 60 trade associations,
LNG terminal operators, project sponsors, suppliers,
transporters and others involved in the LNG business.
To begin with, let me place LNG in perspective. While the
focus of today's hearing is LNG, we must develop gas supply
from multiple sources to meet the existing and still-growing
domestic demand for natural gas. LNG is not the silver bullet.
It is one of several sources, all of which we need.
An important corollary to this supply message is the
importance of public policies that promote the construction of
pipeline and storage infrastructure to help to meet demand.
Let me now comment on the existing regulatory framework for
LNG terminal permitting. Both FERC and the U.S. Coast Guard are
doing exemplary jobs with their responsibilities here in
responding to the demands of the marketplace. I would
especially commend FERC on the recently issued Freeport LNG
order authorizing the second of the new domestic terminals.
Now, let me address industry concerns. The first concern I
would highlight is safety and security and some of the
misperceptions and fears associated with that. It is very
important that the industry, the Congress, regulators and the
administration show leadership on these issues in terms of
developing an authoritative record with respect to safety and
security.
As has been mentioned, there are a number of Government and
other reports that either have been recently released or soon
will be released. For example, the Sandia report, commissioned
by DOE, will be out shortly. The DNV report, which is a private
risk-assessment group report, is coming out shortly. these
reports will help to establish the record for having a
grounding for discussion of security and safety.
Are there safety risks associated with LNG? Yes, there are.
However, there are safety risks associated with a host of other
undertakings that we undertake as individuals and commercially.
Against that, we must put this in perspective. Look at the
exemplary safety record of over 30 years of the international
LNG business, and also consider the focus that has been given
to these issues here in the United States by FERC, the Coast
Guard, Department of Transportation, and other agencies.
Another concern for the industry is approval and siting
issues, with the first of these issues being jurisdictional
conflicts. As has been referenced today, there is an ongoing
dispute between the Federal Energy Regulatory Commission and
the California Public Utilities Commission over jurisdiction
over LNG terminal siting onshore. We believe that FERC has a
right, both as a matter of law and as a matter of public
policy. We believe that there is nothing different about the
facts of this case that would distinguish it from other cases
in which the courts have considered FERC's Section 3 authority.
And we also believe, as a matter of policy, it is important
that FERC have the exclusive jurisdiction over siting LNG
terminals onshore.
While FERC has the exclusive jurisdiction for the threshold
decision on authorizing construction of a project, it is very
important to point out that there are a host of other State and
Federal authorities that apply to permitting these facilities.
As a matter of fact, with respect to the Freeport project
that's been referenced, I looked at application for that
project, and there were eight separate Federal agencies, and 11
State and local agencies, that were part of the process, and
over 33 separate authorizations that were required.
The FERC process under the National Environmental Policy
Act provides a very inclusive process in which all of those
agencies are included as participating agencies. The FERC takes
steps to be very inclusive and cooperative with State and local
agencies. And in fact, our experience on the natural gas
pipeline side has been that, with respect to some of those
authorities, particularly delegated authorities, such as the
Coastal Zone Management Act, the States end up having
considerable leverage on that process.
Let me also talk about the economic consequences associated
with these decisions and the costs of delay and the costs of
doing nothing. A group affiliated with INGAA, the INGAA
Foundation, recently commissioned a report to look at natural
gas infrastructure requirements in light of the current supply
and-demand situation. That report, which will be released in
mid-July, will include a finding that, if you assume a 2-year
delay for needed natural gas infrastructure--being pipelines,
storage facilities, LNG import terminals--that the costs to the
economy from that delay will be $200 billion between now and
the year 2020. The cost alone in the State of California over
that period will be $30 billion.
Mr. Chairman, I would emphasize that the costs would be
even greater if nothing is done, if these facilities are not
constructed.
Now let me briefly address legislation. There are
provisions in the pending comprehensive energy bill----
Mr. Ose. Mr. Santa, I just have to tell you, I have had a
history of enforcing the 5-minute rule, and you are a minute
over already. You have 30 seconds.
Mr. Santa. Mr. Chairman, these facilities are very capital
intensive. Delays can be fatal to these facilities and can be
very costly to consumers and the sponsors. It is very important
that there be a clear path, a consolidated path, for siting
these facilities.
We thank you for the opportunity to testify on behalf of
INGAA and the Center for LNG and thank you for your interest in
this topic.
[The prepared statement of Mr. Santa follows:]
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Mr. Ose. Thank you, Mr. Santa.
Our next witness joins us from the Conservation Law
Foundation where he serves as president. That would be Philip
Warburg.
Sir, welcome to our witness table. You are recognized for 5
minutes.
Mr. Warburg. Thank you for the opportunity to appear before
the committee today. The Conservation Law Foundation is the
oldest and largest regionally focused environmental advocacy
group in the Nation with offices throughout New England. We
work extensively on energy, marine and coastal issues, and we
approach those issues with a regional New England perspective.
We believe, however, that New England's concerns regarding the
siting of new LNG terminals are widely shared by other parts of
the Nation.
Recent proposals for new LNG terminals in New England have
been extremely controversial. In Maine, Massachusetts and Rhode
Island, several siting proposals are advancing rapidly on a
community-by-community basis. They are not part of a coherent
strategy for evaluating the overall need for terminal capacity
in New England, nor are they based on rigorously defined
criteria for identifying potential sites.
From our organization's perspective, this ad hoc approach
fails to provide an adequate basis for decisionmaking about
individual proposals. It has also pitted New England
communities against one another in wrestling with the merits
and risks of specific proposals.
During the 1990's, the Conservation Law Foundation was the
leading advocate for replacing oil- and coal-fired power plants
in New England with less polluting natural gas facilities.
Those efforts led to the building of over 9,000 megawatts of
capacity at natural-gas-fired power plants, a very significant
component of New England's overall power supply.
The environmental benefits of natural gas should not,
however, cause us to ignore or belittle the negative
environmental impacts that may be associated with LNG import
facilities. We must soberly consider the public safety risks
and other environmental hazards posed by these facilities. But
before individual siting decisions can be made, we all would
benefit from a much clearer picture of the actual need for
added terminal capacity.
We therefore propose a two-pronged approach to the siting
of new LNG terminals in New England and other parts of the
country. First, a regional needs assessment should be
conducted, led by key Federal agencies with the full
involvement of State governments. This assessment can buildupon
the wealth of existing analyses in determining a realistic
level of need in order to avoid overbuilding or underbuilding
of terminals.
It is essential that this assessment be based on a balanced
approach that looks to increased efficiency and demand-side
management of gas and electricity in addition to supply side
answers, like augmenting terminal capacity. The efficiency
measures we favor do not require anyone to sit shivering in the
cold or sweltering in the heat. We are talking about high-
efficiency appliances, better building codes and smart building
management that will reduce consumers' bills without damaging
the economy or lowering anyone's quality of life.
Increased deployment of renewable energy resources like
wind and solar power can have the same salutary effect on fuel
demand. Every megawatt of renewable energy displaces a megawatt
of production from conventional fossil fuel and nuclear power
plants.
The many agencies working on LNG terminal siting literally
need to work off the same page in assessing LNG demand and the
corresponding need for additional capacity.
The second prong in our proposal is a regional siting
approach that will involve Federal, State, and local leadership
in determining the actual site or sites for new terminals.
Community stakeholders should be included in an informed
participatory process that can translate the assessed regional
need for expanded LNG supplies into a coordinated effort to
build appropriate LNG infrastructure. New facilities should not
be approved unless there is a clearly demonstrated need for the
facility and a very high degree of confidence that the facility
is sited in the right location--a location that takes both
public safety and environmental protection concerns into
account.
There is a real risk that LNG terminals will be sited in
communities that either want them the most or are able to
oppose them least effectively. What we need is a proactive
approach that gives us tools to identify the best site or sites
for these facilities from an environmental and public safety
standpoint. We also need an approach that would avoid
unnecessary duplication of costly and environmentally damaging
infrastructure.
I'd like to close by emphasizing that we do not believe
that Congress should impose a moratorium on the current review
of proposed LNG terminals. We strongly believe, however, that a
regional evaluation should be undertaken before any new LNG
import facilities are approved. Time for initiating a regional
approach is of the essence.
In light of certain remarks made earlier today, I want to
be clear on one final point: This regional approach that we are
proposing should harmonize with, rather than override, relevant
State laws regarding environmental protection and public
safety. A coherent and coordinated strategy should guarantee a
meaningful role for State government, particularly on siting
decisions. Thank you.
[The prepared statement of Mr. Warburg follows:]
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Mr. Ose. Thank you, Mr. Warburg.
Our final witness on the panel is the distinguished
professor of chemical engineering at the University of
Arkansas, Dr. Jerry Havens.
Sir, welcome to our panel. We have received your testimony;
it is in the record. You are recognized for 5 minutes to
summarize.
Mr. Havens. Thank you, Mr. Chairman.
I also appreciate this opportunity. And I am speaking here
today as an individual and not an agent of my university.
I have, for some 30 years now, been studying methods for
assessing the potential consequences of major accidental
releases of LNG, and my remarks here today are confined to the
estimation of the extent of danger to the public around such
spills. I believe that the potential danger to the public from
LNG spills is mainly from the very large fires that could
occur. I want to emphasize that I am talking about fires
resulting from the spillage of several millions of gallons of
LNG. A single tank on a typical LNG carrier contains 6 or more
million gallons of liquified natural gas. The fire from such a
spill, if it occurs on to water and was therefore uncontained,
would be very large, perhaps up to a half mile in diameter or
larger if more of the containment system failed.
We have no experience with fires this large, but we do know
that they could not be extinguished. They would just have to
burn themselves out, and the radiant heat extending outward
from the fire's edge could cause serious burns to people at
large distances.
There are two ways that very large fires can follow a major
LNG spill. If LNG is spilled, it will rapidly evaporate, and
the vapors will mix with air to form a mixture in the
concentration range of approximately 5 percent to 15 percent
LNG vapor. Such mixtures of LNG vapor and air will inevitably
form when LNG is spilled. And if an ignition source, such as an
open flame or a spark, is present, as would be highly likely to
accompany the violent circumstances that would cause such a
release, a large pool fire would result.
However, if no ignition sources are present in the
flammable gas mixture, a vapor cloud will result, and the cloud
will spread downwind from the spill until it either contacts an
ignition source or disperses harmlessly. The maximum distances
of the danger zones extending from a pool fire or a flammable
vapor cloud determine the zones which would endanger the
public.
It is the estimation of these distances, which are
identified in 49 CFR 193 as pool fire radiation and vapor cloud
dispersion exclusion zones, that I want to inform you about,
because such exclusion zones are required in order to ensure
that people are not exposed to danger if such a fire should
occur, and such requirements will therefore determine the
effectiveness of the LNG siting regulations to provide for
public safety.
I first began studying these questions in the 1970's when,
as this committee knows, the first wave of interest in LNG
importation arrived in the United States. I am privileged to
have had an important role in the development of the current
regulatory requirement for determining vapor cloud exclusion
zones. The computer models currently required in 49 CFC 193 for
calculating such exclusion zones were the result of
developments by my associates and I at the University of
Arkansas.
I have also been involved in the development of the methods
required in 49 CFR 193 for determining pool fire radiation
exclusion zones. In my opinion, the current requirements in 49
CFR 193 for determining these exclusion zones are based on good
science, and they are adequate for their purpose. Indeed, the
present regulations are the result of considerably more
research on LNG safety than has been performed for many other
hazardous materials that are routinely transported in very
large quantity.
Furthermore, I believe it is important to emphasize that
the hazards associated with LNG, aside from the localized
dangers involved with handling any cryogenic fluid, are neither
unique nor extreme when compared with other hazardous
materials. The potential dangers we are discussing here today
are brought into the present focus because the enormous amounts
of energy that must necessarily be concentrated to enable
economical transport of LNG across the world's oceans.
However, the suitability of the methods required by the
regulations for determining these exclusion zones, in my
opinion, are not in serious dispute. The problem lies in the
specification of the LNG spills that must be considered as
possible. Current U.S. regulations require that exclusion zones
be calculated for spills in the landbased portion of an LNG
import terminal only. The regulations do not currently apply to
spills that might occur from the LNG vessel on to water.
Because spills on land are subject to a variety of control
measures to limit the area and extent of the spill, such as
dikes or impounds in the systems, exclusion zones in support of
requests for siting landbased LNG terminals are typically, in
my experience, less than about 1,000 feet. However, if
exclusion zones were required to protect the public from LNG
spills on to water from an LNG vessel, either at the jetty or
in route to or from the terminal, there is good scientific
consensus that the fire radiation exclusion zones could extend
to a mile or more if the entire contents of a single tank were
rapidly spilled. And if the regulations were applied to the
determination of vapor clouds, they could extend to several
miles.
I want to emphasize the present regulations do not require
the address of spills from a tanker at the facility. It is very
sobering and surprising to me to realize that the ongoing LNG
siting debate regarding public safety comes down to this. And I
sincerely hope that those responsible for protecting the public
recognize and seriously consider this very important question.
Since September 11----
Mr. Ose. Dr. Havens.
Mr. Havens. We no longer----
Mr. Ose. You are 2 minutes over your time. I am going to
give you 30 seconds to wrap up. OK, 30 seconds to wrap up.
Mr. Havens. 30 seconds?
Mr. Ose. Correct.
Mr. Havens. I must also tell you that I am very concerned
that spills from LNG vessels caused by terrorist attacks might
not be limited to the partial contents of a single tank on the
vessel, as is widely assumed. Because of these concerns, I have
written to the Secretary of Homeland Security in late February
to urge the Department to consider the vulnerability of LNG
tankers. I am very disappointed that I haven't received any
response from the Department of Homeland Security regarding my
concerns.
Thank you. That concludes my comments.
[The prepared statement of Mr. Havens follows:]
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Mr. Ose. I thank the gentleman for his testimony.
Would you care to go first?
The gentleman from Massachusetts.
Mr. Tierney. Thank you.
Thank all the witnesses for your testimony. I appreciate
it.
Dr. Havens, if we assume that there is a spill on water in
one of these deep water port proposals that are being made, you
have indicated that the vapor could go downwind for some
unspecified number of miles.
Mr. Havens. Well, 3 or 4 miles, as calculated for the
entire contents of a single tank, which is about 6 million
gallons.
Mr. Tierney. And if we had more than a single tank, would
the distance somehow correlate to the spillage?
Mr. Havens. If the amount spilled were twice as large, it
would not be twice as far, but it would be further.
Mr. Tierney. So if you had a whole tanker go up?
Mr. Havens. Well, it would be, in my judgment, probably
physically impossible to spill the entire tanker rapidly. But
nevertheless, if it were released, then it would be a danger
that would extend greater than 3 or 4 miles. This is the vapor
cloud exclusion zone, not the fire radiation zone.
Mr. Tierney. In a proposal that suggests a site 10 miles
offshore, if you had a multicompartments spill, no ignition, so
the vapors were up, what is the likelihood in reaching land?
What would be the danger if it did? And is that something we
should be concerned about, reasonably?
Mr. Havens. And the distance is 10 miles?
Mr. Tierney. 10 miles.
Mr. Havens. Everything I know about this problem suggests
to me that there are no conceivable circumstances that I can
consider, even with the loss of the entire tanker, where the
vapor cloud travel would be as much as 10 miles.
Mr. Tierney. Assuming that this is sited, as proposed, a
distance from fishing activity, how far would an exclusion zone
reasonably be put around this site to protect people on fishing
vessels or, for that matter, people on commercial vessels
passing by?
Mr. Havens. Well, first of all, let me say that the idea of
an exclusion zone to protect the public--and ordinarily, we are
concerned primarily with gatherings of people and so forth. So
for example, on a landbased facility, the approximate distance
to schools or gathering places would be much more sensitive
than some other areas.
Anyone in these exclusion zones, should there be a fire in
that vapor cloud, is going to be in severe trouble.
Mr. Tierney. So people in a fishing fleet out there, if
they go too close, how far ought the fishing fleet be kept away
from this site?
Mr. Havens. Well, for a single tank spill, if it were
spilled very rapidly, the distances that have been calculated
and actually have even been published by the Department of
Energy are 3 or 4 miles.
Mr. Tierney. And that is for both the fire, if it
happened----
Mr. Havens. No, sir. That is for the vapor cloud distance.
The fire distance is somewhat less. Typically, it might be on
the order of a mile. And it would be at the distance of 1 mile
that people would be subjected to heat radiation that would
cause severe burn. This is in about 30 seconds.
Mr. Tierney. Mr. Warburg, your organization obviously has
some concerns, I would imagine, about Stellwagen Bank, an area
like that. What questions would you like to ask Dr. Havens
through me about the dangers to that area? You don't know what
questions yourself, you go right to the source. Sometimes I am
willing to admit that I don't know everything about this, and
sometimes I don't know the questions to ask to get where I want
to go, but I am suspecting that you do.
Mr. Warburg. We are also at the stage of asking the right
questions because I think we have not satisfied ourselves that
there has been a sufficiently rigorous process of looking at
the environmental and public safety issues pertaining to both
the onshore and offshore facilities.
I think we have to put the risks associated with the
proposed offshore facility in perspective in that we are
currently facing an onshore facility at Everett, MA, which
exposes tens of thousands of people, maybe more, to a very high
level of risk if there were a tanker incident. So that is a
concern that we have.
We also have a concern about the various other heavily
populated sites that are being considered in New England for
the siting of new LNG terminals, and this is where, again, we
see that there is a need for more coherent delineation of
criteria vis-a-vis distance from large population centers for
the siting of any new terminals.
We are certainly concerned about the marine resource
protection issues raised by the offshore proposal. This is a
proposal that really only surfaced in the last 2 months. We
certainly don't have the information on the various risks that
could be involved and the various levels of encroachment on the
fishing community that placing this kind of a facility would
entail.
Mr. Tierney. Let me take a stab at it. Dr. Havens, are you
familiar with Stellwagen Bank?
Mr. Havens. I'm sorry.
Mr. Tierney. Are you familiar with Stellwagen Bank off the
coast?
Mr. Havens. Off Gloucester?
Mr. Tierney. Off Gloucester, yes.
Mr. Havens. Yes.
Mr. Tierney. If there is spillage on to the water and say
it did get to flow over the Stellwagen Bank area, first the
vapor and then a fire, what damage, if any, to things under the
ocean or to the ocean itself?
Mr. Havens. Under the water?
Mr. Tierney. Right.
Mr. Havens. We are talking now about a vapor cloud fire,
which means that, if it were a flammable cloud and it extended
out there and it were ignited somehow, then it would flash
through the cloud. I would not expect that would have any
effect on anything in the water because it would be a very
rapid fire.
Now, people that were exposed to that fire would be in
serious trouble.
Mr. Tierney. And if it never caught fire, it would
eventually dissipate into the environment, into the atmosphere,
as opposed to settling on the water?
Mr. Havens. That is correct.
Mr. Tierney. Do you want to jump in?
Mr. Ose. I am ready when you are.
Mr. Tierney. Mr. Warburg, what would your regional
assessment process look like? How much time would it take? You
said you didn't want to have a moratorium necessarily on LNG
placements. So how would it be structured that you would have a
regional assessment, as you suggested, to coincide with the
placement process?
Mr. Warburg. I want to clarify: I said that I thought there
shouldn't be a moratorium on the review of proposals. I think
there should be a freeze on any decisions vis-a-vis particular
sites. That's a very important distinction. We need all the
information we can get regarding the various environmental and
public health impacts, for example, the ones you have been
raising vis-a-vis Stellwagen Bank and the offshore site. We
feel that there needs to be a look at what is the need--and
that means looking very creatively at some of the issues that
you raised with the representative of the Department of Energy,
namely, what can we expect from energy conservation in the
region? What can we expect from renewable energy resources in
the region such that we, perhaps, need less of an additional
capacity for LNG import than we now assume?
Our concern is that we're seeing one proposal after the
other placed on the table along New England's coastline. There
is no constraint right now on the number of facilities that
conceivably could be approved. And there is insufficient
systematic consideration of very vital factors, such as public
health and safety.
Mr. Tierney. And how do you and your organization strike
the balance between what some will say is a serious need for
that fuel now against the risks that you propose?
Mr. Warburg. We are, in principle, supportive of natural
gas as a transitional fuel, a cleaner-burning, less-polluting
transitional fuel, though a fossil fuel. However, we feel that
we shouldn't rush to build major new infrastructure with all of
the environmental and public health implications of that
infrastructure until we are very sure we know what is essential
and that we are not duplicating capacity.
Mr. Tierney. Thank you.
I yield.
Mr. Ose. Thank you.
Dr. Haven, I am curious about something. You heard me ask
this question of the previous panels, about a template for
design. And if I followup on your exclusion zone onshore from a
facility, you are suggesting that this 1-mile standard is
sufficient? Is that correct?
Mr. Havens. No, I think that is not exactly what I said. I
talked about an exclusion zone that would be the order of a
mile, and that was for a pool fire rather than a vapor cloud
problem.
Mr. Ose. And the vapor cloud was 3 to 4 miles.
Mr. Havens. About 3 miles. And these were spills on water,
spills on water.
Mr. Ose. I want to go onshore for a moment.
Mr. Havens. Yes.
Mr. Ose. If you go onshore, if you were to say to Pat Wood,
``Pat come over here in the corner and tell me what kind of
safety framework I need to set up for this site,'' what would
be the size of your exclusion zone?
Mr. Havens. I would agree with the methodology that has
been followed in the siting of the present onshore terminals.
And that is this, they specify--they have to specify what--how
much material might be spilled and that, usually, the
assumption has to be made that the largest transfer line in the
facility, which would normally be the line that goes from the
ship to the storage tanks, was severed and that it remained
pumping for 10 minutes. That kind of a spill would be on the
order of 50,000 gallons a minute, and it is a very large spill.
However, on the land, there are a number of measures that
are taken so that, where that material might be spilled, there
are trenches and sumps and impoundment basins and all kinds of
things that keep that spill contained and minimize the
resulting pool fire or vapor cloud dispersion. And as a result
of those control measures, normally you wouldn't expect the
people to have accidents that would extend more than about
1,000 feet.
Now, my understanding of the regulations and my
experience--I've had a lot of experience in applying them for
people--is that you must calculate these distances, and then,
as the terminal operator, you must own that property. If you
don't own that property, you are not going to build the
terminal.
The point that I'm trying to raise is that, if we are going
to be talking about protecting the public, the additional
feature of protecting the public from spills associated with a
marine site that are from the tanker are controlling, in my
view. Nevertheless, they are not required to be addressed by
the current regulations.
Mr. Ose. It's the difference--your point is the difference
between risk and hazard, if I understand the terms correctly.
Mr. Havens. The difference between?
Mr. Ose. Risk and hazard. You think the methodology
properly quantifies the risk, but it doesn't properly quantify
the hazard?
Mr. Havens. No, what I'm saying is that the tools, the
methods that are prescribed in the regulations, which are
computer models which you have to tell how much you spill and
what the atmospheric conditions are and so forth, and they spit
out these exclusion zones.
What I'm saying to you is that I believe that those tools
are perfectly adequate. There is nothing wrong then.
But you can get any answer from those models that you want
depending on how much material you spill and so forth. And at
the end of the day, I believe that the really vulnerable
situation that controls the public safety issue anymore, post-
September 11, is the LNG tanker.
Mr. Ose. Let me just dwell on something for a minute. On
the incident that you define where you had the 50,000 gallons
spilled in 10 minutes----
Mr. Havens. 50,000-gallons-per-minute for 10 minutes.
Mr. Ose. 500,000 gallons. You talked about a radius from
that point of 1,000 in any given direction?
Mr. Havens. The 50,000-per-minute, 10-minute spill is
required on the land. On land, that spill would always occur
into an impoundment basin, so it would not spread.
Mr. Ose. All right. That ends up being about 300 acres in
size, that site, if it is a 1,000 foot radius from that point.
Mr. Havens. No, no, no, the 1,000 feet is the downwind
distance beyond which the flammable vapor cloud would no longer
be flammable. In other words, we spill the LNG into a ditch.
All right? It vaporizes and forms a cloud. The cloud drifts off
downwind.
Mr. Ose. 1,000 feet in any direction.
Mr. Havens. No, downwind.
Mr. Ose. As it moves down in the wind.
Mr. Havens. In the wind, from that kind of spill, the
models predict--and I agree with them--that the cloud would be
harmless beyond about 1,000 feet. On land----
Mr. Ose. 1,000 feet from the point of spillage?
Mr. Havens. From the point of spillage.
Mr. Ose. Now, that would mean that you have a minimum-sized
facility of about 300 acres?
Mr. Havens. 300?
Mr. Ose. Acres. But it is my understanding that the
facility in Boston is nowhere near that size.
Mr. Tierney. Right.
Mr. Ose. So how do you deal with the situations you're
talking about as the rules are currently applied? How do you
deal with situations where you have a change in circumstances
or a change in risks on existing facilities?
Mr. Havens. Well, I think--let me say this again. I'm not
sure that I making the point that I want to make. I think the
consideration of the exclusion zones for the landbased
facilities, the land side of the facility, is handled
appropriately today.
My major point, the only one I'm really coming here to try
to convey is that there surely is a danger to the public
associated with events that might occur from the tanker. And
what I am saying is that the current application of the law to
the landbased facilities will typically give exclusion zones
within about 1,000 feet.
Mr. Ose. OK.
Mr. Havens. If they were applied to spills from the tanker
of the type that have already been considered, there is a
scientific consensus that the fire radiation dangers would go
up to about a mile.
Mr. Ose. Because of the lack of a containment?
Mr. Havens. Exactly. Because the LNG is not contained. It
can spread.
Mr. Ose. I've just been trying to get you on record on
landbased. I think I have succeeded here.
Mr. Havens. I'm having a little trouble hearing you for
some reason.
Mr. Ose. I've been trying to get you on record as it
relates to landbased facilities, and you have been very clear,
and I appreciate that.
Mr. Santa, I want to talk about something. We have heard
testimony earlier today that the capital investment in a
facility of this nature is somewhere on the order of $500
million?
Mr. Santa. The numbers that I have seen, Mr. Chairman, are
that, for a 1 Bcf regasification facility--that is the import
terminal--the cast is in the range of $600 million.
However, I think, when you look at the capital that is
involved in this, you also need to look at upstream in terms of
the waterborne transport and liquefaction facility, both of
which are significant. I think the costs now are about $100
billion per tanker, and for a 390 Bcf liquefaction facility, I
think it is in the range of $1.5 billion to $2 billion.
Mr. Ose. So you are talking about $2.2 to $2.7 billion for
the entire package?
Mr. Santa. Yes, sir.
Mr. Ose. Now, if I am a lender and I'm out in the financial
markets, I don't give you $2.2 to $2.7 billion without you
being able to tell me, if something goes wrong, my investment
is insured. Do you have insurance for these facilities?
Mr. Santa. I'm sure the facilities carry insurance. I think
also, in terms of the lenders on these or for that matter to
the extent that someone is financing it internally, there is
the whole issue of, to what degree do you have someone who is
willing to contract for the off-take of that facility to back-
stop the deal?
Mr. Ose. My concern is the insurance. Because it seems to
me that, over and above all, the Federal agencies and their
interests, all the State agencies and their interests, and all
the local agencies and their interests, the insurers are going
to go through your operation with a fine-tooth comb. Because if
they are going to assume a liability on the order of $2.2 to
$2.7 billion just for the system, let alone the impacts
elsewhere----
Mr. Santa. I believe there is a lot of commercial
discipline that is applied to these with respect to what one
needs to borrow, finance this and insure it.
Mr. Ose. Give us some sense of that discipline. Do the
insurers delve into the types of insulation that goes into the
tankers?
Mr. Santa. Sir, I don't know the answer to that, but we can
get that and supply that to you in terms of what may be applied
there in terms of their diligence on the tankers and other
parts of the infrastructure.
Mr. Ose. Do they delve into who crews the tankers, who is
the captain and all that sort of thing?
Mr. Santa. I would think there are standards that are
applied in terms of that. However, again, I am not intimately
familiar with that, and we could supply that for you.
Mr. Ose. Do they rate exposures based on source of
material, like Australia is a less risky source than say Qatar?
Mr. Santa. I don't know for a fact, but that seems a
reasonable assumption that enters into that.
Mr. Ose. Where could I go to get answers to that question?
I understand the Federal agencies and support their curiosity
about the safety and the operational integrity. But at the end
of the day, the people who are enforcing it, with all due
respect, are the people who have their capital at risk. And the
insurance companies definitely have that. And I'm trying to get
some sense from the industry, operational side, how rigorous
that is. Where can I go to get that information?
Mr. Santa. I would think--well, sir, I don't know, and we
could get back to the committee with that answer.
Mr. Ose. Why don't I give you a written question to that
effect?
Mr. Santa. I would be happy to respond to that.
Mr. Ose. I will list the questions, from the operational
side, that I am curious about.
Mr. Santa. OK.
Mr. Ose. Mr. Warburg, I'm actually sympathetic to your
concerns.
I'm curious, where should we build LNG facilities? Describe
for me the geographic or the circumstantial location, separate
and apart from what State it is in or whatever. Give me a sense
of where we ought to build them.
Mr. Tierney. Mars.
Mr. Ose. Mars. That is a long pipeline.
Mr. Warburg. I think we have to look very carefully at each
individual site in terms of its particular characteristics. I
think that remoteness from major population centers should be
one very, very important criterion and one which is clearly not
uniformly enforced today, by FERC or any other agency. And that
is a major concern that we have.
That said, there are high-value natural resources that are
at stake in various non-urban locations, and we certainly want
to look very carefully at those to make sure that any terminal
is built in an appropriate manner and does not destroy valuable
fisheries. For example, along Maine's coastline, one of the
major concerns that has come up----
Mr. Ose. Well, I have to--I'm curious about, in particular,
up along Maine, they get some northeasters that are pretty
severe. They have some storms up that way.
And I am trying to conceptualize--you know, we have nor'
easters up there. You have hurricanes in the Gulf. You have a
very steep drop-off on the coastal shelf of northern
California. You have a shallow one in southern California. I am
trying to figure out where is it that we should build these
things, where is it we should focus. I mean I can tell you for
a fact because of the must offer requirements that seem to
occur every winter, that we seem to be short--that is
inconsistent--that we are short in New England. I know we are
short in Florida. But I am trying to figure out where can we
put these LNG facilities in a manner--I am just curious as to
your feedback on that.
Mr. Warburg. There isn't a categorical answer. We want to
turn to FERC, as well as the relevant State agencies, to help
us define what the criteria should be. Clearly, there are
dredging issues in some coastal locations that we would need to
look at as well, to evaluate disruption of the natural
environment.
One of the sites that is proposed in Maine is a rather
precarious site in terms of whirlpool activity as well as the
need for dredging. So I think there need to be broad criteria
that define the outer limits of acceptability, again vis-a-vis
proximity to major population centers, and one has to look very
closely at the particular environments at stake.
We are not categorically opposed to the construction of
additional natural gas facilities. We want to make sure of the
need before they are authorized to go forward.
Mr. Ose. Have you ever supported one?
Mr. Warburg. Sorry?
Mr. Ose. Have you ever supported one?
Mr. Warburg. The only natural gas facility in Massachusetts
is the Everett facility, which was built decades ago.
Mr. Ose. When you and I were young.
Mr. Tierney. 1972.
Mr. Warburg. And we have major concerns about that facility
and we would like to explore the possibility of transferring
that facility at some point to a less precarious location,
because right now it requires tankers to operate very close to
downtown Boston and other neighborhoods.
Mr. Ose. All right. Mr. Santa, what are the parameters that
you think--I mean out of all of us, you have practical
operating exposure as to how this stuff works in the field.
What do you think the parameters of a design facility should
be? What are the minimums, if you will?
Mr. Santa. I think the minimums are compliance with all of
the currently applicable State and Federal laws that apply to
these facilities, all of which are considered as part of the
FERC process and collaboratively as part of the NEPA process
before the Commission.
Mr. Ose. You are satisfied with the current process as it
operates?
Mr. Santa. I am satisfied with the legal framework, but I
do think there are difficulties because that while the
Commission has the NEPA process and includes all of the other
agencies as participating agencies, there is the ability of
other agencies who have separate legal authority, and
particularly when it is State agencies acting pursuant to
delegated Federal authorities, such as under the Coastal Zone
Management Act or Clean Water Act, for those proceedings to
become very, very protracted and also at times for some of
those other agencies to second guess things which the
Commission considered as part of the certificate process. We
have seen that happen on several occasions with respect to
interstate pipelines in coastal areas, and I think there is no
reason to believe it might not also happen with LNG facilities.
Mr. Ose. There is a study done by DNV. When is that due
out?
Mr. Santa. I believe it is due out this summer.
Mr. Ose. We have the Sandia study that's pending and the
DNV study that's pending. Are there other studies?
Mr. Santa. There is a study that FERC commissioned that was
released in May on which FERC is taking public comment.
Mr. Ose. Gentleman from Massachusetts.
Mr. Tierney. First, Mr. Chairman, let me make one
clarification on the record. One other Member has notified me
that they wish to put something on the record. Am I clear in
indicating that you had expressed 10 days for Members to put
things on the record, 10 calendar days, and that will be
members of the committee as well as nonmembers?
Mr. Ose. All Members of Congress are welcome to submit
things to the record. Priority will be given to members of the
committee.
Mr. Tierney. So 10 calendars days?
Mr. Ose. Yes.
Mr. Tierney. Sorry for that interruption. Mr. Warburg, you
heard me earlier ask the Department of Energy representative
whether they had any studies concerning the actual need for
more liquid natural gas and other studies that tell us where we
might go in the future with respect to conservation and
alternative fuels. Are you aware of any studies that this
committee ought to have in front of it that will give us
information relative to those points?
Mr. Warburg. We can provide you with some of those studies.
There are a number of studies that point to double-digit
percentage opportunities for electricy and gas savings
resulting from energy efficiency investments. I should point
out that a lot of those energy efficiency investments could be
achieved over a much shorter time horizon than the construction
of a new LNG terminal, and that is a very important point in
terms of the sense of haste and sense of urgency that I have
heard many people express today regarding the construction of
these new facilities.
Mr. Tierney. You anticipated my next question. I thank you
for that. You should get those to us with haste.
I would like to know how much of a timeframe, whether these
are realistic proposals you believe that would be put in as
opposed to pie in the sky stuff.
Dr. Havens, if I could followup with you, when a tanker
comes in to Boston Harbor through the channel, there are some
very narrow channels there. I don't know if you are familiar
with that area or not. So if we suppose for a moment that there
is an incident that happens, not while the tanker is actually
at dock and unloading but passing through, and there is a
spill, could that spill affect those neighboring communities if
it is a vapor or if it's a fire? Does it change the fact that
the vessel is moving when the spill occurs as opposed to at the
dock and there is no container area involved?
Mr. Havens. No. If it were in a narrow enough area that the
shore contained the spill, the lateral threat, then it would
spread down the channel, and so as a result the kinds of
separation distances that I am talking about would apply to the
tanker wherever it is.
Mr. Tierney. If a tanker were heading down the channel near
shore and a spill happened and the gas went over to the shore
and it was spread out along the shore, if it ignited, all of
those people, communities on the shore would be at risk?
Mr. Havens. That's right. We would have a moving exclusion
zone that would go along with the tanker.
Mr. Tierney. Except that we don't, and that is the problem
that we have up there. We don't.
Mr. Havens. We have no exclusion zone that applies to the
tanker. Not a Federal requirement today.
Mr. Santa. As we talk about spills, I think it is important
to bear in mind the--not only looking at what is the worst case
scenario, but also the part of this what is the risk of
analysis, what is the probability of it happening. One thing
that has not been mentioned in this discussion is that LNG
tankers are double hulled vessels. There is an outer hull of
steel, that there typically is an 8-foot separation between
that and the containment vessel for the LNG; that vessel has an
outer wall, insulation--we've talked about insulation before
and then an inner wall, so that there may be another foot
before you actually get to the LNG. So in looking at the
probability that some event would lead to a puncture of the
outer hull, something would need to penetrate 8 to 9 feet in
before getting to the LNG and the point that there was any
puncture of the inner hull, I think we just need to bear in
mind.
Mr. Tierney. I don't discount that at all. I still have in
mind what happened to the U.S.S. Cole and then of course the
airline situation for another on that, and I suspect both of
those would possibly create the kind of scenario would go
through both hulls, am I right?
Mr. Santa. I am not saying it is impossible.
Mr. Tierney. Those two things come to my mind and make it
seem less unlikely than it might otherwise seem. Before
September 11 and before the U.S.S. Cole, I might have said,
well, when would that ever happen? Mr. Warburg, did you want to
add something to that?
Mr. Warburg. You anticipated my comment. One thing I
learned from my graduate statistics course was that rare events
do happen and sadly, post-September 11, we have learned that is
a very real fact. And even if we are talking about low-
probability events, we are talking about potentially
catastrophic events and we need to take all necessary measures
to prevent those from happening.
Mr. Tierney. What I learned from my statistics course was
try to get through it and get out the other side of it. Is
there anything that Mr. Ose or I have not asked any of the
witnesses that you wish we had that you want to put on the
record at this point in time?
Mr. Havens. I would like to say that all of my concerns
that I related to you here today, none of them--we wouldn't be
talking about them if September 11 hadn't happened. A
possibility of a terrorist attack on an LNG tanker I think is
something that needs to be seriously considered, because it
involves questions that Congressman Markey brought up earlier
today that get into technical details about the construction of
the tanker that all relate to the vulnerability of that tanker
to a terrorist attack.
Mr. Tierney. Mr. Warburg.
Mr. Warburg. One final comment vis-a-vis Georges Bank and
the offshore facility. The Conservation Law Foundation in the
1970's litigated and achieved a moratorium on oil and natural
gas drilling in Georges Bank, and we very much regard that area
as a cherished resource--one that we have to be very vigilant
in protecting. So any consideration of a facility in or
adjacent to that area would need to be scrutinized very, very
carefully in terms of the possible environmental impacts.
Mr. Tierney. Mr. Santa.
Mr. Santa. Earlier Mr. Warburg suggested a comprehensive
regional assessment to determine need and determine the optimal
sites for LNG facilities. I would add that the policy that the
FERC has used for about the last 20 years with respect to
interstate pipelines and other energy infrastructure is to let
the market decide. It is important to note that while that map
over there shows 40 something proposed LNG facilities, in fact
those facilities within a particular region are all competitors
of one another. The likelihood is that a significant number of
them, probably most of them, don't get built because given the
significant capital investment involved, unless someone has a
market for the offtake for that facility in the form of
contracts or someone who is willing to accept the commercial
risk associated with that, the facilities are not going to be
built. I would also----
Mr. Tierney. I have to refer you to my friends in the
refinery industry who don't seem to think that way, who have
been closing down about 100 of them as late. So they obviously
built them and then made the decision later. So I am not sure
that always flows through. There are numerous incidents where
people have built anticipating that the need was going to be
there and then later on found out that it wasn't. And should
all of these things with conservation and alternative fuels
actually come into play after they are built and they get
surprised because public policy all of a sudden wakes up, then
of course we will have that situation. And last, I would think
maybe there are some areas that as public policy we would think
would be more acceptable than others. If, in fact, someone is
going to fall by the wayside, ought we not have some say in
which ones fall by the wayside and which don't?
Mr. Santa. I would suggest to you if someone comes up with
a location that is not acceptable in terms of applying the
current laws that apply with respect to environment siting and
others, that facility could be rejected or if the regulatory
gauntlet to get it approved proves to be too protracted and
costly, the sponsor may not proceed. We have seen instances
where in the face of opposition, both with respect to the
facilities in Maine and also down in Mobile Bay, sponsors have
chosen not to proceed on facilities. So I think that in fact
the process does work.
Mr. Warburg. I would like to add that I think we could look
at the construction of natural gas power plants as an example
of a situation in which market forces caused facilities to be
built that are now lying idle. So we are very concerned that
the market not be allowed to govern the placement of facilities
that, even under the best circumstances, will be very damaging
to the environment and potentially damaging to public health
and safety.
Mr. Tierney. Well, I want to thank all of you. It has been
very enlightening.
Mr. Havens. I would like to make another comment for the
record. The recent study that has been talked about today that
was commissioned by FERC, the ABS Group study which has just
been in--you will find my comments on the Web site--that report
was commissioned by FERC in order to answer the question--I
know this because I proposed to do the work for them--to answer
the question, what would be the danger zones associated with a
single tank spill from an LNG tanker? That report is on record
by the ABS Group specifying distances very similar to the ones
I have told you about. The question that I am anxious to find
out is what FERC intends to do with that information now that
they have it.
Mr. Tierney. Thank you. Thank you, Mr. Chairman.
Mr. Ose. Do any of you know of any incident involving an
LNG tanker that compromised the safety of surrounding community
or environment?
Mr. Havens. Anything about that would compromise----
Mr. Ose. One that has occurred. We have 30 years of
operating history on these tankers and their receiving
facilities and their liquefaction facilities. Do you know of
any incident in which loss of life or something of that nature
occurred related to these?
Mr. Havens. There have been a number of incidents, but they
were not large scale like we are talking about. They were
contained. And I think the LNG industry in general, including
the shipping side, both sides has an exemplary record.
Mr. Ose. I am told in the Persian Gulf there was one of
these tankers that was hit and in fact the outer skin was
punctured, but the design worked and the inner skin held.
Mr. Havens. I believe that was a propane or an LPG tanker,
and that goes to some questions associated with the kind of
insulation that are used and so forth, and I don't think we
ought to probably talk too much about that in this forum.
Mr. Ose. Mr. Warburg.
Mr. Warburg. I would add that the political context has
utterly changed and that the past decades are not the right
predictor of the kinds of risks that we are talking about
today, and I think we have to be very cognizant of that fact.
We are not talking about routine tanker operations. We are
talking about the risk of an intentional attack on a tanker as
a terrorist target.
Mr. Ose. Something like Cove Point, which has reopened
since September 11, gives us our best empirical data base for
that particular question, and we heard testimony earlier that
things have gone very well there so far.
Mr. Santa.
Mr. Santa. I had been told of the LPG tanker incident in
the Persian Gulf that a missile was fired that Mr. Havens
talked about. Twenty some odd years ago in Staten Island, NY
there was a tank under construction where an incident occurred
during the construction where there was a fire and some workmen
were asphyxiated. However, it had nothing to do with the fact
that it was an LNG facility. It was not an operational
incident.
Mr. Ose. I want to thank our witnesses for joining us on
this fourth panel today. Clearly, I think this is perhaps the
most well attended hearing that Congressman Tierney and I have
put together for obvious reasons. At the end of the day, I am
not sure we are closer to an answer than where we started, but
I think we have narrowed the question. We appreciate your
participation in this hearing and the education you have shared
with us and we will stay on course to try and find a solution.
We are adjourned.
[Whereupon, at 7:10 p.m., the subcommittee was adjourned.]
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