Increased natural gas production from shale formations in the U.S. has led to a notable increase in applications for regulatory approvals of liquefied natural gas (LNG) exports and construction of LNG export facilities. Three LNG export terminals have been approved since 2012, and another 14 terminals are currently proposed. This surge in interest in LNG exports may burden the resources and technical expertise of the two federal agencies that oversee LNG facility siting, design, construction, and operation, the Federal Energy Regulatory Commission (FERC) and the Pipeline and Hazardous Materials Safety Administration (PHMSA) within the Department of Transportation (DOT).
FERC has exclusive authority to approve the siting, construction, expansion, and operation of on-shore and near-shore LNG facilities. 15 U.S.C. § 717b(e). PHMSA establishes and enforces its own safety-related requirements in these areas. 49 U.S.C. § 60102(a). Under FERC regulations, applicants seeking approval for LNG facility construction must identify how their design plans for the project comply with PHMSA standards at 49 C.F.R Part 193. 18 C.F.R. Part 380.12(o)(14). PHMSA provides technical assistance to FERC in reviewing applications and, once a project is approved, PHMSA inspects LNG facilities and enforces its safety standards during and after construction.
Design approval authority over LNG facilities was a chief concern of the DOT as early as 1979, when the agency’s statutory authority to regulate the safety of natural gas, LNG, and hazardous liquid pipeline facilities was consolidated under the Pipeline Safety Act (49 U.S.C. § 60101 et seq.) (PSA). While it had not been DOT’s practice to undertake pre-construction design safety reviews of LNG facilities prior to 1979, environmental and safety concerns associated with large-scale LNG facilities led DOT to ask Congress for express authority to delay new construction pending review of a facility’s proposed design for compliance with its safety standards. Statement of Hon. Brock Adams, Secretary, DOT, Hearings Before the U.S. Senate Committee on Commerce, Science, and Transportation on S. 411 (Feb. 8, 1979). Congress ultimately decided that this authority was implicit in the existing PSA statutory framework and declined to expressly include it. Senate Report (Commerce, Science, and Transportation Committee) to Accompany S. 411, S. Rept. 96-182 (May 15, 1979). Since this time, PHMSA has regularly participated in pre-construction design review for LNG facilities, requiring compliance with its safety standards from project inception (and the Agency has been authorized to seek cost recovery or reimbursement for these reviews since 2006).
For market reasons, PHMSA review of LNG projects has historically focused almost exclusively on import terminals and related facilities. Because LNG exports require refrigeration of natural gas to a liquid state, a process considerably more complicated than the regasification process associated with LNG imports, design reviews for these facilities present a new set of technical and safety concerns. As a result, both PHMSA and FERC are reviewing the appropriate application of their technical requirements for hazard analyses and safety features at these facilities. If market forces continue to encourage the development of LNG export infrastructure, the regulatory approach to LNG facility design review will likely continue to evolve as well, and require more time to process applications.