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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

about “price or transportation costs of natural gas in interstate commerce.”

Lastly, the association notes that when a federal appeals court in 1976 OK’d federal collection of certain intrastate pipeline data, it limited such data collecting to what could be gotten from interstate pipelines or other jurisdictional entities. (See, Union Oil v. FPC, 542 F.2d 1036.) Similarly, in the 2004 Bay Gas Storage order, FERC had denied a staff request to obtain summaries of customer contracts from an intrastate pipeline, as being outside its jurisdiction. (See 109 FERC ¶61,348.)

The student finds no shortage of arguments, pro or con, on whether FERC can lawfully compel intrastate pipelines to file market-related data.

Supporting the rulemaking proposal, the American Public Gas Association calls FERC’s right to such data “an open and shut case.” It welcomes the addition of new sources of pipeline operational data, beyond what is available currently, such as the gas-storage reports compiled by the U.S. Energy Information Administration:

“For too long, the weekly storage report [from EIA] has been the focus of the bulls and the bears that stand to make and lose huge amounts of money from market volatility. The data that the commission now seeks to elicit from the intrastate market will … provide far more meaningful supply/demand data than has been available to the public to date.”

From the other side comes the Louisiana Office of Conservation which, in the same manner as the Texas RRC oversees 6,362 miles of intrastate pipelines in the Sportsman’s Paradise. The Louisiana agency points to the EPACT language and remarks, “it seems odd that Congress would have increased the commission’s jurisdiction through such an ambiguous manner.”

Then comes the Enbridge Energy Co. Inc., an intrastate gas gatherer and processor, answering those who might favor FERC intervention to correct flaws in state regulatory regimes. Enbridge suggests that “it would not be prudent, nor should the commission itself want, to position itself as a ‘court of appeals’ for those parties dissatisfied from the states’ legislative, legal, and regulatory processes.”

Market Relevance

Even conceding FERC’s authority to collect information on intrastate pipeline flows, there remains the question of whether such flows contain any relevance or shed any light on the supply and price of natural gas traded at wholesale in interstate commerce.

Intrastate pipelines differ markedly from interstate pipelines, not only in terms of geography and topology, but in how they operate. As the case record shows, many intrastate pipelines are configured in a spider-web fashion, with literally thousands of receipt and delivery points. The majority of these points will connect not with mainline interstate pipelines or market hubs, but with city gates operated by local distribution companies (LDCs), or to storage facilities or end users, including (increasingly) gas-fired electric generators. Gas flows may give a distorted picture of market economics, since intrastate pipes may operate bi-directionally on a given day. Their receipts and deliveries often are tied to system balancing or other purely operational needs.

Consider Nicor Gas, primarily an LDC, which operates eight storage fields as a single system, all behind its city