KeySpan Corp.’s CEO is “cautiously optimistic” that the Federal Energy Regulatory Commission – which on June 30 denied the company’s controversial plan to upgrade its liquefied natural gas terminal in Providence – will eventually approve the proposal. And legal experts familiar with FERC say the agency has reversed its decisions on energy projects in the past.
Brooklyn, N.Y.-based KeySpan filed Aug. 4 for a rehearing before the FERC, which has 30 days from that date to respond to the request. The agency denied the company’s initial application to expand its Fields Point facility to accept larger LNG shipments via marine tankers, saying that KeySpan failed to propose modifications necessary to comply with current safety standards. The facility now can only receive LNG by truck.
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“Generally knowing how FERC works, they often grant appeals for rehearings,” said Attorney William J. Harmon, who specializes in energy law at Jones Day in Chicago.
“It’s not unheard of for (the FERC) to say no, and then turn around and say yes to an application,” Harmon said.
The agency could take several courses of action on KeySpan’s appeal. It could deny the request, leaving the company 60 days to file an appeal in the U.S. Court of Appeals for the District of Columbia.
Another option is to grant a second hearing, though it’s more likely for the FERC to issue a so-called tolling order that provides the agency with more time to consider whether to accept or deny the appeal, said Harvey L. Reiter, an attorney with Stinson Morrison Hecker LLP., in Washington, D.C.
Reiter, who worked for the FERC for five years and has appeared before the commission hundreds of times during his 21 years in private practice, was less optimistic about KeySpan’s chances of getting the agency’s approval if granted a second hearing.
“It doesn’t happen very often, but it has happened,” Reiter said. “There are probably several orders a year where the agency changes its mind.”
Recent developments at the FERC and in Washington could also impact the fate of KeySpan’s appeal.
Since the FERC ruled against KeySpan’s application, the makeup of the regulatory commission has changed, Reiter noted. Chairman Pat Wood finished his term on the commission on June 30, leaving the commission with a second vacancy.
President George W. Bush is empowered to appoint people to the five-member commission, with recommendations and the approval of the Senate. Commissioners serve five-year terms and have equal votes on energy project proposals, according to the FERC.
“There will be changes (on the commission) for sure,” Reiter added.
A weakness of KeySpan’s initial application was that it said it would have to increase the plant’s floor thickness or replace its foundation to comply with current safety codes. This would require the company to take its 500-million-cubic-foot LNG tank out of service, something to which KeySpan officials remain adverse.
“That tank is essential to meeting the needs of the customers in this region during the wintertime,” said Robert B. Catell, KeySpan’s president and CEO, in a recent interview. “It’s not about economics, it’s just that you can’t take that tank out of service without jeopardizing the supply of natural gas to the Northeast – and we’re not about to do that.”
KeySpan argues that it shouldn’t be required to modify its existing tank to comply with current regulations because its $100 million upgrade wouldn’t alter that portion of the facility.
“The other interesting fact, which perhaps is not well-known,” Catell said, “is that this facility when it was built originally was approved to be a marine LNG receiving facility. That’s another argument in which we say that we’re not even changing what it was originally approved for.”
Though KeySpan still refuses to take its tank out of service for any modifications, the company seems more amenable than before to purchasing abutting parcels, if that were a condition of FERC’s approval.
“If that is all that is required to create that exclusion zone,” Catell said, “if we are able to purchase that adjacent property, we would certainly attempt to do that.”
R.I. Attorney General Patrick C. Lynch, whose office is busy appealing FERC’s approval of an LNG port at Weaver’s Cove in Fall River, said he has maintained that people haven’t seen the last of KeySpan’s proposal.
However, Lynch said he “remains confident that FERC will hold their ground.” If the agency grants the appeal, Lynch said he would “relish” the opportunity to present an overwhelming amount of evidence of the project’s safety threats.
Lynch cited a May report by anti-terrorism expert Richard A. Clarke who concluded that an LNG tanker explosion at Fields Point could cause up to 12,000 casualties in Providence.
The attorney general said his office has learned that FERC will likely issue a tolling order for KeySpan’s appeal, primarily because the commission’s next meeting is scheduled for Sept. 15 (after the 30-day deadline).
