On September 19, 2014, FERC, in response to a petition for declaratory order, disclaimed jurisdiction under both section 3 and section 7 of the Natural Gas Act (“NGA”) over Emera CNG, LLC’s (“Emera”) construction and operation of compressed natural gas (“CNG”) facilities that will be used to send CNG to the Bahamas via ocean-going tankers. In reaching its decision, FERC noted that Emera’s proposed facilities would not directly load the CNG onto ships, but would rather compress natural gas at a location where the CNG would first be loaded onto trucks, and then be transported a quarter mile by those trucks to ocean-going tankers.
In its order, FERC explained that it has previously only exercised its section 3 jurisdiction under the NGA – authority over import and export facilities – when pipelines are transporting natural gas to or from U.S. international borders, or when there are costal liquid natural gas (“LNG”) terminals loading ocean-going tankers from pipelines that deliver or takeaway natural gas from those LNG terminals. FERC concluded that Emera’s proposal did not fall under either category because the pipeline supplying the proposed compression facilities would not cross any international borders and the proposed compression facilities would not directly supply the ocean-going tankers ships. Furthermore, FERC held that the NGA’s section 2 definition of an “LNG terminal” was not applicable to the proposed CNG facility. In doing so, FERC explained that while the NGA’s definition of LNG terminal does describe some the actions that the proposed CNG facilities will undertake, there is no evidence that Congress intended the definition to apply to any other form of gas – including compressed gas – beyond gas that is in a liquid state.
With regard to FERC’s jurisdiction under section 7 of the NGA – authority over the transportation or sale of natural gas in interstate commerce – FERC explained that because the CNG would not be resold in interstate commerce, and the CNG will be delivered to the ocean-going tankers via trucks and not natural gas pipelines, section 7 does not apply. Additionally, FERC explained that a non-jurisdictional Hinshaw pipeline will deliver the gas to the proposed CNG facility and thus, the delivered gas will not be in interstate commerce. Since none of that gas will re-enter interstate commerce at the proposed CNG facility, FERC concluded that section 7 jurisdiction is not applicable.
Similar to a recent order in which FERC disclaimed jurisdiction for a separately proposed LNG facility (see September 8, 2014 edition of the WER), Commissioner Norman Bay dissented, arguing that the proposed CNG facility falls under FERC’s NGA jurisdiction. Specifically, Commissioner Bay took issue with the majority’s opinion that the CNG is not an export facility under section 3 of the NGA, even though the facility applied for export authorization from the Department of Energy pursuant to the same section of the NGA. Commissioner Bay also argued that the quarter mile distance the trucks will travel from the proposed facility to the ultimate loading location for the ocean-going tankers should not shield the proposed facility from FERC jurisdiction. Instead, Commissioner Bay argued that Congress has addressed the issue, and that “federal regulation over the sale of gas in foreign commerce is necessary in the public interest.” Therefore, Commissioner Bay concluded the proposed CNG facility should be classified as a natural gas export facility and subject to FERC jurisdiction under section 3 of the NGA.
A copy of the order is available here.