On September 4, 2014, FERC issued two concurrent declaratory orders – one involving Shell U.S. Gas & Power, LLC (“Shell”), and the other involving Pivotal LNG, Inc. (“Pivotal”) – that addressed FERC’s jurisdiction over Liquid Natural Gas (“LNG”) facilities, and the transportation and sale of LNG in general, under the Natural Gas Act (“NGA”).  FERC generally stated in its declaratory orders that (1) the transportation of LNG via non-pipeline modes of transportation to end users would not be subject to FERC’s jurisdiction under section 7 of the NGA, (2) facilities that receive LNG by waterborne vessels in interstate commerce that will be delivered to end users without entering a pipeline system will not be considered LNG Terminals under section 3 of the NGA, and (3) sales for resale will only be subject to FERC jurisdiction under section 7 of the NGA if the gas is transported at some point by interstate pipeline.   
 
Shell filed its petition for a declaratory order at FERC on October 16, 2013.  In its petition, Shell requested a FERC declaratory order concluding that its envisioned sale of LNG – either at road or multimodal fueling stations – that is either (a) produced and then liquefied in the U.S. or (b) imported by Shell (via truck, rail, or marine vessel) from Canada, and then sold for vehicular fuel uses in the U.S., with any remaining “boil-off” or “tail” gas being used as end-use fuel in production operations, would not be subject to FERC’s jurisdiction.  Meanwhile, Pivotal filed a petition for declaratory order at FERC on April 11, 2014.  In its petition, Pivotal requested that FERC determine that (a) its LNG facilities would not be deemed an “LNG Terminal” subject to FERC’s jurisdiction by virtue of Pivotal producing LNG at its facility that would subsequently by transported in interstate commerce by waterborne vessel, and (b) its various LNG sales and purchases (including LNG purchased from various LNG facilities, transported by means other than interstate pipeline for resale, and ultimately consumed as end-use fuel or feedstock) do not constitute sales or transportation of natural gas in interstate commerce that is subject to FERC’s jurisdiction under sections 1(b) and 7 of the NGA. 

In its declaratory order addressing Shell’s petition, FERC first clarified that a “person” becomes subject to FERC’s jurisdiction under section 3 of the NGA by engaging in import/export activities, regardless of whether that person is considered a “natural gas company” under the NGA.  As such, FERC concluded that the exemption for vehicular gas under section 1(d) – which prevents a person from becoming a “natural gas company” – is not relevant to FERC’s jurisdictional determination under section 3 regarding the importation/exportation of gas. 

FERC then went on to make three broad findings based on Shell’s petition.  First, FERC stated that NGA section 7 jurisdiction over transportation and facilities only applies to transportation by pipeline and pipeline facilities.  Because Shell’s proposal stated that it will only transport LNG as an “end product” by non-pipeline modes of transportation (i.e., truck, rail, or marine vessel), the proposed transportation and related facilities would not be subject to FERC jurisdiction under section 7.  Second, FERC clarified that section 7 jurisdiction over sales for resale only applies to gas transported at some point by interstate pipeline.  As applied to Shell’s proposal, FERC concluded that while  any of Shell’s sales of LNG for resale that had been previously transported by an interstate pipeline may be subject to FERC’s jurisdiction under section 7 of the NGA, such sales will be authorized under the automatic blanket certificate in 18 C.F.R. § 284.402 of FERC’s regulations. 

Finally, FERC ruled that Shell’s proposed facilities used to receive imported Canadian LNG via waterborne vessels and to liquefy and send out domestic LNG by waterborne vessels that will be delivered to end users without entering a pipeline system will not be subject to FERC jurisdiction as an LNG Terminal under section 3 of the NGA.  Notably, with regard to this finding, Commissioner Norman Bay dissented, arguing that Shell’s proposed facilities that will receive imported gas from Canada should be considered LNG Terminals, even though the imported gas will be delivered via non-pipeline modes of transportation, because section 3 of the NGA applies to “all natural gas facilities” and not just “transportation facilities” (which the Commission has generally limited to facilities that send or receive natural gas by pipeline under section 7 of the NGA).

With regard to Pivotal’s petition, FERC made three general findings that were consistent with its declaratory order in Shell’s proceeding.  First, it found that Pivotal’s proposed transportation of LNG would not be subject to FERC’s jurisdiction because the LNG will be delivered by non-pipeline modes of transportation to end users.  Second, FERC found that Pivotal’s LNG facilities would not become “LNG Terminals” under Section 3 of the NGA because Pivotal’s facilities will not receive LNG by waterborne vessel in interstate commerce that will later be injected into a pipeline system.  Third, with regard to Pivotal’s proposed LNG sales and purchases, FERC clarified that if any of Pivotal’s sales for resale of LNG is used as non-vehicular fuel (and is not a “first sale” under the NGA because it is produced by Pivotal or an affiliated entity), then none of Pivotal’s sales will be exempt from FERC’s section 7 jurisdiction.  However, FERC also noted that to the extent Pivotal’s (and its affiliates’) sales for release are subject to section 7, such sales will be authorized under the automatic blanket certificate in 18 C.F.R. § 284.402 of the Commission’s regulations.

A copy of the Shell declaratory order can be found here, while a copy of the Pivotal order can be found here.