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Messing With Texas

Armed with calls for gas price transparency, FERC takes aim at intrastate pipelines—the long-forgotten and largely private preserve of the Lone Star State.

Fortnightly Magazine - October 2007

Hays goes on to document how the Texas Midstream and intrastate pipeline sectors recently defeated state legislation (House Bill 821) aimed at introducing greater competition and price transparency into state gas markets. Similarly, the Texas Producers Alliance claims that the Texas RRC essentially failed to follow through on a study of competition within intrastate gas markets, mandated by Nov. 1, 2006, by a legislative rider attached to a general appropriations bill introduced in the 79th legislative session. As the Alliance points out, that rider had instructed the RRC to compare competition in the Texas intrastate gathering and pipeline industry with FERC’s open access-regime for interstate pipelines.

For its part, the RRC states that it convened a “blue ribbon” committee (the Natural Gas Competition Study Advisory Committee) to carry out the law, and later adopted a new informal rule (effective March 15, 2007) to facilitate industry complaints of unfair pipeline practices. It adds that its committee recommendation led to further legislative reform (House Bill 3273) to enhance RRC enforcement authority and add more price transparency to intrastate markets. (See, Comments of Railroad Commission, p. 13-15, FERC Docket RM07-10, filed July 11, 2007.)

Nevertheless, Hays and the Producers Alliance continue to assert that Texas RRC tariff rules and practices largely remain indecipherable, and that enforcement of fair competitive practices and rules is achieved largely through opaque complaint procedures.

The Rulemaking Proposal

The commission’s proposal to force intrastate pipelines to report actual gas flows stems from a congressional mandate to “facilitate price transparency” in interstate natural-gas markets, and to disseminate information about availability and prices of natural gas sold “at wholesale and in interstate commerce.”

These instructions come from sec. 316 of the Energy Policy Act of 2005 (EPACT) law, adding a new sec. 23 to the Depression-era 1938 Natural Gas Act. But more importantly, Congress in EPACT added curious language stating that FERC may obtain the information in question “from any market participant.” This legislative language has spurred considerable debate in the docket about whether Congress intended to grant new jurisdiction to FERC over the intrastate sector. Moreover, the issue arises whether such information must deal directly with interstate flows, or whether, as FERC argues, the law actually allows the feds to collect information regarding purely intrastate flows, on the assumption that such flows, even though technically nonjurisdictional, are still “about” and “pertain to” interstate markets, and so should lie within FERC’s prerogatives.

These issues have given rise in turn to all sorts of tedious discussions of legislative history and prior legal precedent.

The Texas Pipeline Association (TPA), in opposing FERC’s rulemaking proposal, notes that in hearings on EPACT sec. 316, held before the Energy and Air Quality Subcommittee of the House Committee on Energy and Commerce, FERC’s then General Counsel Cynthia Marlette testified only about possible collection of price and transaction information, not pipeline flow information. The TPA adds that when the bill was reported out of the Senate Committee on Energy and Natural Resources, the report noted only that the measure would authorize FERC to establish an electronic information system regarding information