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Producer Group Wants More Guidance on Gas Quality Issues

FERC took a "notable first step" earlier this month when it issued its long-awaited policy statement on natural gas quality and interchangeability, but the agency still needs to provide the industry with more guidance on key policy issues, a producer coalition told the agency last Wednesday.

"Gas quality issues on interstate pipelines are not likely to be resolved by settlements alone, at least anytime soon. Rather, Commission guidance is critically needed, particularly on key policy issues that, once decided, could serve as a framework for future settlements," a group of six oil and gas producers wrote in a letter to FERC Chairman Joseph Kelliher.

The Federal Energy Regulatory Commission "would be grievously mistaken if it were to assume that, now that it has issued a policy statement on gas quality, it can put gas quality issues on auto-pilot and wait for the settlements to roll in. In fact, very little in the way of settlement is likely to occur until the Commission provides critically needed direction for the industry," said the group, which included Devon Energy, Dominion Exploration and Production, Forest Oil, Hydro Gulf of Mexico, Kerr-McGee Oil & Gas and Newfield Exploration Co. The producer comments focused on gas quality issues solely.

With respect to hydrocarbon liquids control on interstate pipelines, the coalition called on FERC to decide two "pivotal" issues:

Variations on both these issues currently are pending before the Commission in two cases -- ANR Pipeline (RP04-435) and Natural Gas Pipeline Company of America (RP01-503). "We urge the Commission to decide both the ANR and NGPL cases on the merits without further delay. Decisions in these cases will establish important principles in a real-life setting, providing direction for future settlements of cases involving HDP limits on interstate pipelines," the group said.

In the policy statement, FERC took an important first step by "strongly encouraging" use of the technical analysis in the National Gas Council Plus white paper on liquids drop out to help set HDP limits in future tariff filings, the group said (see NGI, June 19). "Currently pending cases, however, are not covered by the policy statement," it said, citing a glaring shortfall.

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