The Changing Regulatory Scheme Applicable to Offshore LNG Terminals

Abstract

Abstract This paper describes the important regulatory changes underway in the United States (US) that will dramatically affect the design, construction, and operation of offshore terminals for importing liquefied natural gas (LNG). Numerous US oil and gas companies are developing projects to build offshore terminals for importing LNG into the US. As the offshore LNG terminal concept applies new technology, regulatory and technical design rules that will apply to these facilities are rapidly evolving. With the passage of the Maritime Transportation Security Act of 2002, the Deepwater Port Act of 1974 (DWPA) (33 USC 1501-1524) has been amended to include natural gas, fundamentally altering the regulatory process for offshore LNG terminals. Whereas the Federal Energy Regulatory Commission (FERC) and the US Coast Guard (USCG) previously played important roles in permitting and regulating onshore LNG facilities, the USCG and the US Maritime Administration (MARAD) now share the primary responsibility of regulating these facilities offshore, with subsidiary roles played by other federal agencies and the involved states. This paper examines the USCG's new role in offshore LNG terminal development, as well as the major requirements the DWPA imposes on applicants. The USCG will soon publish implementing regulations. DWPA requirements that previously applied to oil, now provide clues regarding the likely environmental review process. Although the USCG will be moving to the Department of Homeland Security, siting and operational oversight for deepwater ports is expected to remain with the Secretary of the Department of Transportation (SECDOT). This paper examines the Deepwater Port regulatory process and describes how these complex licensing requirements could affect the proposed siting, commercial viability, and environmental regulatory review of offshore LNG terminals. This paper also examines current efforts by various classification societies to develop technical guidance regarding the design, construction, and ongoing maintenance of offshore LNG terminals. The ABS Guidance Notes on Building and Classing Offshore LNG Terminals will be presented as an example of classification society efforts to fill the US regulatory void that currently exists for the technical requirements of offshore LNG terminals. In conclusion, this paper proposes a process to combine current regulations with classification society guidance as an effective means of developing appropriate design, construction, and operational requirements for offshore LNG terminals. Such a process may be helpful to US regulators in expediting the regulatory approval process for offshore LNG terminals currently being developed. Finally, this paper assists developers of offshore LNG terminals in understanding the complex US regulatory process and developing effective strategies to expedite critical regulatory approvals. The US Regulatory Scheme for LNG Terminals Prior to the passage of the Maritime Transportation Security Act of 2002 by Congress, and its signing by President Bush on November 25, 2002, FERC had jurisdiction over the siting of LNG import terminals under Section 3 of the Natural Gas Act. FERC asserted that this authority applied to both onshore and offshore LNG terminals.