September 5, 2018

FERC and PHMSA Sign MOU for LNG Projects

Holland & Knight Energy and Natural Resources Blog
Dianne R. Phillips

As previously reported, on Aug. 31, 2018, Kevin J. McIntyre, Chairman of the Federal Energy Regulatory Commission (FERC) and Howard "Skip" Elliott, Administrator of the Pipeline and Hazardous Materials Safety Administration (PHMSA) of the U.S. Department of Transportation executed a Memorandum of Understanding regarding Liquefied Natural Gas Transportation Facilities (MOU). The MOU continues the longstanding working relationship between FERC and PHMSA with respect to review of proposed liquefied natural gas (LNG) projects, but creates a more formal relationship whereby PHMSA will evaluate compliance with the siting criteria found in 49 C.F.R. Part 193 Subpart B for the purpose of FERC’s evaluation of applications filed under Section 3 of the federal Natural Gas Act, 15 U.S.C. §§ 717b and 717b-1. PHMSA will issue a "Letter of Determination" to FERC with the results of its evaluation no later than thirty (30) days prior to the estimated deadline for FERC’s issuance of its final Environmental Impact Statement (EIS) or Environmental Assessment (EA) prepared under the National Environmental Policy Act (NEPA), 42 U.S.C. § 4321 et seq

PHMSA has long held a significant role in regulating LNG facilities and monitoring compliance with the National Fire Protection Association Standard for the Production, Storage, and Handling of Liquefied Natural Gas (LNG) also known as NFPA 59A. The 2001 version of NFPA 59A is incorporated by reference into the Part 193 siting requirements. Specifically, Subpart B includes specific requirements for siting LNG "containers" (tanks) and "transfer systems" as defined in NFPA 59A (2001) to ensure such facilities have an adequate thermal exclusion zone and flammable vapor-gas dispersion distance. See 49 C.F.R. §§ 193.2057 and 193.2059. Additionally, PHMSA has jurisdiction to approve alternative methods of calculating vapor-gas dispersion models and has set a procedure for doing so. Given the importance of these two siting criteria in determining whether an LNG project should be authorized, it is not surprising that PHMSA has such an important role in FERC’s process.

This 2018 MOU follows a 2004 Interagency Agreement among FERC, PHMSA and the United States Coast Guard (USCG) developed during the height of the LNG import terminal furor incentivized by of the Energy Policy Act of 2005. Although the market has undergone a complete reversal since then with the rush to build LNG import terminals turning into a rush to export LNG, the siting requirements remain the same because all LNG terminals require "containers" and "transfer systems" to operate. As noted, the 2004 Interagency Agreement remains in effect.

It remains to be seen whether this new MOU will shorten the review time for LNG projects as some would hope. Not coincidentally, however, the same day FERC and PHMSA announced the MOU, FERC also issued revised review schedules for twelve pending LNG projects. Only time will tell if this MOU will have its intended effect.

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