[BETA] Fortnightly

In three similar orders, the Federal Energy Regulatory Commission (FERC) has given itself regulatory authority over linked and integrated intrastate pipelines in certain situations.

The first order finds the Kansas Pipeline (KP) system a single interstate pipeline system subject to the FERC's Natural Gas Act (NGA) jurisdiction, requiring KP to file an application for certificate authorization (Docket No. RP95-212-000). KP (em composed of three affiliated pipeline companies (KansOk, Riverside, and Kansas Pipeline) (em is operated as an integrated system by a fourth company, KPOC. Essentially, over time, KP has combined a Hinshaw pipeline with a former interstate oil pipeline to create a chain of three, physically linked, affiliated pipelines that span three states.

The FERC found it contrary to Order 636 to allow some pipelines that perform interstate transportation to balkanize into a chain of affiliates subject to the regulations of various states. Further, such an interpretation of FERC regulations under section 311 of the Natural Gas Policy Act (NGPA) would create a strong incentive for interstate pipelines to construct a second-tier grid owned by affiliates, to provide interstate service under an intrastate framework.

In the second order, the FERC found that if Panhandle Eastern Corp. and Centana Energy Corp. construct their proposed, separate pipeline segments, they would create an interstate pipeline requiring FERC certification (Docket No. CP95-349-000). The FERC expressed concern that certain construction by interstate pipelines pursuant to section 311 of the NGPA, and by Hinshaw pipelines pursuant to state authority, may constitute interstate pipeline construction subject to the NGA.

Commissioner Donald F. Santa, Jr. noted that section 311 of the NGPA was intended to integrate the balkanized pipeline system, not to provide subterfuge among affiliates. Commissioner William L. Massey dissented strongly, claiming that the order "will have a chilling effect on the level of legitimate and lawful activities of intrastate and Hinshaw pipelines who perform NGPA section 311 transportation."

In the third order, a unanimous FERC found that the Lee 8 Storage Partnership, a Michigan intrastate gas utility, must show cause why it need not file for certification under the NGA to engage in its proposed storage and storage-related transportation services under section 311 (Docket No. SA95-4-000). The FERC ruled that Lee 8's plans to mix Michigan gas with out-of-state gas would constitute the transportation of natural gas in interstate commerce.

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