In Depth: LNG Litigation and State Powers After EPAct 2005
The Energy Policy Act of 2005 (EPAct 2005) amended the Natural Gas Act of 1938 to streamline the process for approving natural gas projects, including LNG import terminals. The EPAct 2005 expressly provided the Federal Energy Regulatory Commission (FERC) with exclusive authority over applications to site, construct and operate LNG terminals and provided a direct, expedited appeal to the U.S. courts of appeals from certain agency decisions authorized under federal law. It also authorized the FERC to create a binding schedule for agencies reviewing projects under the FERC’s jurisdiction, and required the FERC to institute a prefiling process, create a single consolidated record for appeals from all agency decisions, and formally consult states during the application process.
Although the EPAct 2005 cements federal preemption in some areas, it allows the state to retain — and in some cases expands — powers that directly affect LNG terminal siting. These powers are not insignificant, but neither are they well defined. This lack of definition will continue to spark litigation in states and localities that oppose LNG. Moreover, the uncertainty created by the threat of litigation can jeopardize a terminal’s access to supply and commitments to consumer markets, and can cause delays that might result in abandonment of a project as market conditions change.
This article discusses areas where courts are likely to be asked to decide issues related to LNG terminal siting and considers the impact of the EPAct 2005 on LNG-related litigation. The article primarily considers litigated disputes over which government agency has jurisdiction to authorize or prohibit a project. This discussion is divided into two general types of jurisdictional disputes: federal versus state disputes and state versus state disputes. The article also considers the use of lawsuits to challenge issues indirectly related to the siting of terminals.
The article originally was published in the November 2006 edition of the Energy Law Journal and has been republished here with permission from the Energy Law Journal.