FERC Chairman sees expanded LNG role in US energy mix

Federal Energy Regulatory Commission Chairman Pat Wood III said his agency expects more proposals for liquefied natural gas terminals because of expanding US natural gas demand.

By OGJ editors

WASHINGTON, DC, Oct. 16 -- Federal Energy Regulatory Commission Chairman Pat Wood III said his agency expects more proposals for liquefied natural gas terminals because of expanding US natural gas demand.

"All the gas in the continent won't add up to what we need by 2012," he told industry officials Tuesday at the American Petroleum Institute's annual meeting. Various industry and government analyses predict US demand for gas could reach 30 tcf in 10 years.

Wood said the nation's four existing import terminals wouldn't keep pace with expected demand. As a result, the commission expects industry to look to LNG imports as a way to meet the shortfall.

While regulators should be aware of security challenges brought on by last year's Sept. 11 terrorist attacks, that should not preclude more terminals from being built, Wood said.

To address concerns from existing terminals, the US Coast Guard on Oct. 11 created three new security zones for LNG carriers in Boston Harbor to protect vessels and surrounding areas from sabotage or accidents. The new zoning is likely to mean more vessel traffic congestion but is "necessary for the protection of life and property," the Coast Guard said in a federal Register notice.

FERC recently approved the reactivation of two LNG import projects and the expansion of an existing terminal. The agency is expected to delve deeper into security and permitting issues surrounding LNG and natural gas at a public conference the agency will hold Oct. 25. Wood told API members that FERC wants to update the permitting process, which he said has not been revised in 30 years.

Rethinking the commission's current LNG permitting process will be just one item on the agenda however. Commission officials said they expect a "wide ranging" discussion that will explore the following issues: supply and demand, the commission's federal offshore gathering policy, and the operational flexibility that pipelines need to serve historical load as well as new demand.

Other market issues
Vigorously enforcing existing trading rules, instead of creating new regulation, should protect energy markets from fraud, Wood said.

Laws now on the books allow the Commodities Futures Trading Commission and the Justice Department to punish unethical traders that falsify data, Wood said.
An interim FERC staff report in August found that energy marketers manipulated published natural gas price indices during the California power crisis. Two companies,

Dynegy Inc. and American Electric Power Co. admitted their traders gave false gas price information to private companies that publish market-reporting data. Those data are used to help set future contracts.

But Wood indicated that industry might be already fixing the problem on its own so that regulators can avoid more drastic measures, such as calling on the Energy Information Administration to collect information on spot gas prices.

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