FROM: Jim (no last name listed)


This memo provides an overview of Liquid Natural Gas (LNG) and the State's current regulatory jurisdiction over siting and operation of a facility.

THE PRODUCT. Liquid Natural Gas (LNG) is hydrocarbon fuel in a liquefied state that is predominantly composed of Methane (CH4). When natural gas is cooled to a temperature of approximately -260F at atmospheric pressure it condenses to LNG. One volume of this liquid takes up about 1/600th the volume of natural gas delivered at a stove burner tip. LNG weighs 55l less than water, and when vaporized it is odorless, colorless, non-corrosive, and non-toxic; vaporized it can be an asphyxiant when concentrated in air at levels that displace the oxygen needed for breathing. LNG (the liquid itself) is not flammable or explosive, but vaporized within a narrow range of concentrations (5% to 15%) and mixed with air, it will burn; lesser amount of air deprive it of needed oxygen, greater amounts sufficiently dilute it to prevent burning. Neither LNG, nor its vapor, can explode in an unconfined environment, but when confined (e.g. in a sewer system) in the right concentration it readily explodes in the presence of a spark. If LNG escapes from a storage vessel, it becomes lighter than air once warmed above -160F, dispersing into the atmosphere rather than collecting on the ground. Escaped vaporizing LNG will appear as a rising white cloud until temperature differentials reconcile.

STORAGE METHODS. LNG tanks are double-walled with extremely efficient insulation between the walls. Large tanks (typically >70,000 gallons) are low aspect ratio (height to width) and cylindrical in design with a domed roof, with low storage pressure (>5 psig). Smaller tanks (<70,000 gallons) are stored in horizontal or vertical, vacuum jacketed vessels at storage pressure usually between 5 psig to over 250 psig. LNG must be maintained cold (at least below -117F) to remain a liquid, independent of pressure.

TRANSPORTATION. LNG transports overland and underwater by pipeline and across the ocean by ship. Tanker delivered LNG is offloaded at on-shore and off-shore locations.

REGULATION. Review and approval for LNG infrastructure involves numerous local, state and federal regulatory agencies.

1. Transportation. The Federal Energy Regulatory Commission (FERC) is the regulatory agency that oversees both the construction of interstate natural gas pipelines and the


LNG Memo to Dawn Gallagher
November 26, 2003 Page 2 of 2

transportation of natural gas in interstate commerce under the Natural Gas Act, the Natural Gas Policy Act, the Outer Continental Shelf Lands Act, the Natural Gas Wellhead Decontrol Act, and the Energy Policy Act. Companies wishing to build interstate pipeline facilities or operate pipelines first must obtain a Certificate of Public Convenience and Necessity from FERC. In regulating the transportation of natural gas in interstate commerce, the commission sets rates, terms and conditions for operation of interstate gas pipeline facilities.

Once Natural Gas pipeline projects become operational, safety is regulated, monitored and enforced by the federal Department of Transportation. The U.S. Coast Guard oversees the safety of all marine operations at LNG terminals and tankers in U.S. coastal waters.

2. On-Shore Terminal Siting

A. Federal Oversight. FERC issues permits approving siting, construction and operation of on-shore terminals, including oversight of safety. Securing approval to construct and operate an LNG import terminal includes a preliminary ruling on non-environmental issues about 6 months following the date of application, and a final decision on all issues within a year to a year and a half from the date an application is filed.

B. State Oversight. DEP issues permits approving siting and construction plans to the extent that Site Location of Development Act thresholds are triggered or where protected natural resources will be affected.

3. On-Shore Terminal Operation

A. Federal Oversight. While USEPA establishes air and water standards with which the LNG industry must comply, in states with delegated programs, like Maine, those and other state-specific standards are applied by the state agency.

Other federal agencies involved in environmental and safety protection include: U.S. Fish and Wildlife Service, U.S. Army Corps of Engineers (for coastal facilities and wetlands), and the Occupational Safety & Health Administration within the U.S. Department of Labor.

B. State Oversight.

1) DEP. As a result of LNG's characteristics (see THE PRODUCT section in this memo), consensus exists among DEP staff and the AG's office that it does not pose the threats to surface and groundwater quality that Maine's oil handling requirements were established to prevent. As such, oil terminal operation requirements do not apply.

To the extent that an LNG facility generates waste or pollution, all other DEP administered requirements will apply, e.g. hazardous waste management, and air and water pollutant releases.

2) Fire Marshall's Office. In 2001, Maine's FMO adopted the State's Storage And Handling of Liquefied Petroleum Gases rule, 16-219 CMR 16, which by reference to NATIONAL FIRE PROTECTION ASSOCIATION STANDARD #58, LIQUEFIED PETROLEUM GAS CODE, 2001 edition; and Standard #59, STANDARD FOR THE STORAGE AND HANDLING OF LIQUEFIED PETROLEUM GASES AT UTILITY PLANTS, 2001 edition, allows it to regulate storage, handling, dispensing, and secure transportation of LNG.