LNG USA 2005 IQPC Houston, Texas November 9, 2005 Bruce F. Kiely Baker Botts L.L.P. Washington, D.C .

1. LNG USA 2005 IQPC Houston, Texas November 9, 2005 Bruce F. KielyBaker Botts L.L.P.Washington, D.C.

2. What The Energy Policy Act Of 2005 Did And Did Not Do 2

3. What Did The EPAct Do? EPAct §311 – FERC Jurisdiction With the notoriety about the current and expected shortage of natural gas and the need for new supply sources to be closer to markets, LNG siting is a feature of EPAct and Policy • Affirmed FERC's exclusive authority to approve onshore LNG terminals • siting, construction, expansion, operation • FERC cannot deny an application if the applicant wants exclusive use of the terminal • FERC cannot condition approval on open access or rate levels Comment: EPAct does not change other Federal authority delegated to states Coastal Zone Management Act Clean Air Act Clean Water Act 3

4. EPAct §311d - Pre-Filing Requirement for LNG Terminals • Requires applicant to do NEPA pre-filing at least 6 months prior to filing application • FERC has issued pre-filing regulations • Mandatory pre-filing requirement covers all new and expansion projects • Need to coordinate U.S. Coast Guard “Waterway Security Assessment” (“WSA”) with pre-filing process • Need to establish all stakeholders and levels of communication • Need to meet a series of time deadlines for action • Can consult with FERC Staff and FERC’s Third Party Environmental Consultant Comment: Overall, not too many changes to past pre-filing practice, but it now is more formalized and mandatory 4

5. EPAct §311d - State Consultations Governor of state in which an LNG terminal is proposed is to designate a leading state agency • Requires FERC to consult with state agency in charge of LNG projects in state where terminal is to be located as to • state and local safety considerations • feasibility of remote siting • local emergency response capabilities 5

6. EPAct §311d - State Safety Advisory Report • State may provide FERC with "advisory report" on safety considerations • FERC must review and respond specifically to each issue Comment: FERC already performs the analysis, but EPAct creates a new requirement for FERC action and a new potential for legal challenge • State may conduct post-in-service safety inspections and report to FERC 6

7. EPAct §311d - FERC Approval of LNG Project • Requires that applicant develop an Emergency Response Plan ("ERP") in consultation with USCG, state and local agencies • Requires that ERP must include a cost-sharing plan listing safety-related costs of state and local to be reimbursed by applicant • Requires FERC to approve the ERP 7

8. EPAct §313 – FERC as Lead Agency for NEPA Review • Designates FERC as lead agency for all Federal approvals including Federal approvals administered by states • Examples: USACE – Dredging Permit USCG – WSA, NVIC compliance CZMA – Consistency Determination CWA - §401 Permit CAA – Clean Air Permits • FERC to set Processing Schedules for others to follow • FERC required to set schedule for all Federal approvals including Federal approvals administered by states • All agencies must meet the scheduled deadlines • If agency fails to meet deadlines, applicant may appeal failure to act to D.C. Circuit • D.C. Circuit may require agency to act if it finds failure to act would prevent construction, expansion or operation of the terminal 8

9. EPAct §313 – Judicial Review • Court of Appeals for circuit in which terminal is to be located has exclusive jurisdiction over appeals of Federal approvals administered by states: CWA, CAA (not CZMA) Comment: One state already has challenged constitutionality of judicial review of a state act under CWA in the Second Circuit • FERC is to develop one consolidated record for all appeals of Federal actions except CZMA • No change as to appeals of FERC actions as to LNG terminal 9

10. What EPAct Did Not Change • NEPA Review – full NEPA review is required • Public Interest – public interest finding under NGA §3 still required • State Agency Approvals Under State Laws • Applicants still face challenges in approval process of anti-infrastructure states • Technicalities of regulations • Delay in processing • Repeated demands for information • Changing standards 10

11. State Agency Approvals Of Certain Federal Laws • Coastal Zone Management Act (“CZMA”) • Clean Water Act (“CWA”) • Still face delay tactics • Repeated requests for information • State programs that require all state environmental permits as pre-condition to CZMA consideration/approval • Claims of incompleteness of application to cause delay • CZMA a tool of choice of anti-infrastructure states • Appeal of adverse CZMA action is to Department of Commerce • EPAct §381 - New deadline for action by Secretary of Commerce on CZMA appeals 30 days after filing of appeal to issue notice of appeal 160 days after notice to close the record – issue notice record is closed 60 days after notice record is closed to act on appeal 11

12. Conclusion • EPAct is helpful statute, but not a complete solution to onshore siting issues • Need to follow FERC’s pre-filing rules carefully • Try to get states to cooperate • Try to get states to act promptly • Develop the best record possible • Need to pay serious attention to USCG requirements and how they interface with FERC’s NEPA and Section 3 processing • Need to be prepared to address the challenge of actions of states opposed to infrastructure acting under state and Federal laws 12

13. bruce.kiely@bakerbotts.com THANK YOU