LNG-LHG Proposed Rule

As I noted in yesterday’s blog, the Coast Guard published a notice of proposed rule making (NPRM) on the safety and security reporting requirements supporting the Coast Guard’s development of a Letter of Recommendation for the permitting of liquefied natural gas (LNG) and liquefied hazardous gas (LHG) [not ‘liquefied hydrogen gas’ as I incorrectly reported yesterday] facilities. Comments on the proposed rule are required to be submitted by June 29th, 2009 and may be submitted to the Regulations.gov web site using docket # USCG-2007-27022. No public meetings are currently planned. Since the proposed regulation would require the submission of information to the Coast Guard, they have also filed an Information Collection Request (ICR) to the OMB to approve that data collection. Comments on the ICR can be submitted to the OMB by oira_submission@omb.eop.gov (include the docket number and ‘Attention: Desk Officer for Coast Guard, DHS’ in the subject line of the e-mail. Current Situation The Federal Energy Regulatory Commission (FERC) regulates LNG import facilities located onshore or in state waters. Under 18 CFR parts 153 and 157 FERC requires LNG facilities to submit a Waterway Suitability Assessment (WSA) to the Coast Guard as part of the pre-filing process for the LNG facility permit. Current Coast Guard regulations do not address the WSA issue, but they do use the WSA to formulate their letter of recommendation (LOR) to FERC about the safety issues related to the proposed LNG facility. The current Coast Guard WSA/LOR procedures are covered in Navigation and Vessel Inspection Circular (NVIC) 05-08. Coast Guard regulations (33 CFR part 127) do address notification issues related to construction and updating of LNG facilities. Section 127.007 requires LNG facilities to send a letter of intent (LOI) to the Coast Guard when there is an intention to construct, modify, or reactivate an LNG or LHG facility. The Coast Guard uses the information in the LOI to prepare a LOR for the permitting agency about the ‘suitability of the waterway’ for the intended facility. Proposed Regulation The proposed rule would amend part 127 of 33 CFR to bring the Coast Guard regulations in line with the requirements in the FERC regulations. The current 60 day time limits for LOI submission would be changed to prior to the pre-filing request to FERC under 18 CFR parts 153 and 157, or one year before the start of construction or one year before the start of transfer operations for facility reactivations. The same time limits would apply to non-FERC regulated LNG or LHG facilities. The FERC WSA requirements would be extended to all LNG and LHG facilities on or along regulated waterways where there would be maritime deliveries of LNG or LHG. The WSA rule would be expanded to require a Preliminary WAS and a Follow-on WSA. The preliminary WSA would be submitted with the LOI and include an introductory explanation of the following topics:

(1) Port characterization; (2) Characterization of the facility and tanker route; (3) Risk assessment for maritime safety and security; (4) Risk management strategies; and (5) Resource needs for maritime safety, security, and response.

The Follow-on WSA would require a more in depth explanation of the topics in the Preliminary WSA. It would be submitted at the same time as the FERC application, or, for non-FERC regulated facilities, at least 180 days before transfer operations began for LNG or LHG. Additionally, the Follow-on WSA would have to address “any other safety or security impacts to the port and waterway identified by the Captain of the Port (COTP) and not otherwise covered in the list of subjects discussed in the Preliminary WSA” (74 FR 19160). Because of other potential regulatory and construction delays, it is not unusual for a significant period of time to pass between the issuance of the Coast Guard LOR and the start of actual operations. In order to ensure that the WSA information remains current, the proposed rule would require facilities that have submitted both the Preliminary and Follow-on WSAs to annually review their Follow-on WSA and provide a written report of that review to the Captain of the Port. An updated WSA would be required any time that changes occurred that affected “the suitability of the waterway for LNG or LHG traffic”. A similar report would be required to be submitted between 60 and 30 days prior to the start of operations. My Observations on the NPRM Once again the Coast Guard has put a great deal of discretionary authority in regards to security requirements in the hands of the COTP. On one hand this may insure that the unique characteristics of the port in question are addressed in the identification of security issues and their resolution. On the other hand it makes it inevitable that there will be a variation in the application of security rules from port to port. Like the MTSA security rules, this new regulation puts an additional burden on the staff of the COTP. I hope that the training of the staff reflects these requirements. A well thought out and executed training development program for the security staff will go a long way to ensuring that there will be minimal and justifiable variation in the application of security rules under the various COTP.