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Pipeline Restructuring: Slicing a Shrinking Pie

Fortnightly Magazine - October 15 1997

eliminate the right of first refusal requirement altogether. By permitting capacity holders to match the terms of competing offers of up to a maximum of five years, the commission places unnecessary and unwarranted bargaining power in the hands of existing capacity holders who can ... selectively retain valuable capacity and preclude a workably competitive market. (Coastal Cos., p. 24.)

STREAMLINING NEW CONSTRUCTION

(They will come, if you can build it.)

At the technical conference held on May 29 and 30, Williams Cos. CEO Keith Bailey proposed a way to streamline the process of certifying construction of new pipelines. His pipeline, he said, would willingly trade the right of eminent domain for relaxation of certification rules at the FERC. In written comments, Williams said pipelines should be allowed to begin construction on acceptance of a certificate, with a written commitment to meet environmental and other performance objectives. (Williams Cos., p. 26.)

Consolidated Natural Gas Co. urges the FERC to extend "blanket" certification to include "routine" permits under environmental and historic preservation laws. It says its pipeline affiliate, CNG Transmission Corp., has obtained generic clearance from the Fish and Wildlife office at the U.S. Department of Interior for all pipeline replacement projects of less than 500 feet in length. (CNG, p. 13.)

Another idea would combine blanket certification with de minimis exemptions, with:

• Small Projects. Simplified rules for projects with a de minimis size and environmental impacts; %n7%n

• Protest Rulings. Authority delegated to the Office of Pipeline Regulation for a quick ruling on protests, so that parties know "up front" whether ex parte rules apply;

• Shorter Notice. Protests filed in 30 days, not 45;

• Landowner Requests. Relief for "miscellaneous rearrangements," such as minor adjustments (height, relocation, etc.) at request of landowners;

• Delivery Taps. Quick handling under 18 C.F.R. sec. 157.208;

• Automatic Abandonment. Expanded criteria under 18 C.F.R. sec. 157.216 to include laterals, taps and other receipt facilities (including fuel compressors) abandoned through non-use; and

• Segment Replacements. Allow short segments to be replaced with different-sized pipe (waive "substantially similar capacity" rule), so long as overall capacity of lateral or system segment is not affected. (K N Interstate, pp. 12-14.)

The NorAm Trading and Transportation Group %n8%n also has suggested using the procedures set forth in 18 C.F.R. sec. 157.206(d) %n9%n as a model for review of pipeline construction projects otherwise certified under NGA sec. 7.

Under the NorAm idea, "[t]he staff could determine that the project would have no significant impact on the environment and would issue a 'finding of no significant impact' (FONSI). ... This procedure ... is different from ... a regulatory approach in which the pipeline gathers together all environmental materials which it believes are relevant." (NTTG, pp. 23-24.)

PRICING NEW FACILITIES

(Rolled-in rates: a subsidy?)

Current FERC policy allows rolled-in pricing %n10%n for new pipeline facilities that are integrated with existing facilities and produce system benefits without unduly increasing rates for customers. Operational benefits include: 1) increased system or operational reliability, 2) better access to new supplies or markets or 3) greater flexibility to meet imbalances or otherwise boost efficiency. Financial