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INGAA Opposing Changes to Natural Gas Act

The Interstate Natural Gas Association of America (INGAA) urged the Senate Energy and Natural Resources Committee chairman in a letter Thursday to oppose legislation that would amend the Natural Gas Act (NGA), which among other things attempts to bring it into parity with the Federal Power Act (FPA).

The legislation, S 672, was introduced by Sen. Maria Cantwell (D-WA) as the Natural Gas and Electricity Review and Enforcement Act, to be included in the broader energy legislation being considered by Congress (see related story).

"While proponents of the amendment frame the issue simply as achieving parity with section 206 of the FPA, the issue is much more complex," INGAA President Don Santa said in the letter, which was addressed to committee Chairman Jeff Bingaman (D-NM). "The issues raised by the amendment, in fact, go to the core of the relationship between the regulatory framework for natural gas pipeline regulation, the ability to raise private capital for expanding that infrastructure and the importance of such investment to the economic, energy and environmental policy goals that are a central focus of the new administration and the Congress."

Interstate gas pipeline companies in the past nine years, said Santa, "have invested over $51 billion dollars to maintain and expand the world's most reliable natural gas transportation system, including the construction of over 10,800 miles of new, high capacity interstate pipelines. These investments stimulate the economy by producing thousands of high paying construction jobs, as well as a continuing source of state and local tax revenue and a robust energy delivery network that lowers the total price of energy for consumers. In order to finance the billions of dollars of materials and construction costs associated with this new pipeline infrastructure, pipeline companies must raise capital in the marketplace. Investors consider not only the anticipated new project revenues, but also the revenues of the company's existing assets.

"Regulatory uncertainty about those revenue streams will significantly affect the ability to raise the required capital. In today's difficult economic climate, our industry is not requesting federal outlays to construct new natural gas infrastructure. Instead, all we ask is that the Congress not make it more difficult for existing companies to raise private capital for new pipelines by amending the 70-year-old statutory framework that has served the nation well."

Arguing whether the NGA should achieve parity with FPA, said Santa, implies that the:

"INGAA respectfully takes issue with these assumptions," said Santa. Significant differences exist between the two mandates, he said, because the gas and electricity industries have developed differently in the past 70 years.

"Only natural gas transportation and storage services now are regulated under the NGA; Congress decontrolled wellhead sales of natural gas 20 years ago," he said. "Furthermore, because pipelines no longer are in the business of buying and selling natural gas, pipeline rates reflect only the cost of transporting natural gas. On the power side, however, FPA jurisdiction still extends to wholesale sales of electricity in interstate commerce as well as the rates charged for electric transmission in interstate commerce."

Instead, INGAA argues that Congress should instead question whether adopting the FPA "retroactive refund model" for natural gas would improve consumer welfare, "or whether it will slow the development of energy infrastructure that will bring new, competitive natural gas supplies to the market and ultimately benefit consumers and the economy. The share of the total delivered cost of natural gas attributable to interstate transportation is low -- typically only about 10% of the total cost. Any reduction in pipeline transportation rates as a result of more frequent pipeline rate complaints would represent only a small portion of the total natural gas bill paid by consumers."

Santa reminded Bingaman that on two previous occasions, the New Mexico Democrat had voted against amendments to amend an NGA section similar to S 672. "The arguments that prevailed in those debates are just as compelling today," Santa wrote.

"The natural gas model of regulation embodied in the NGA is not broken," wrote Santa. "Mr. Chairman, rather than approaching you and other policymakers with a request for federal outlays to construct new natural gas infrastructure, our request to the Congress is simple and without cost -- do no harm..."

INGAA also opposes another aspect of the bill, which seeks to give FERC "cease and desist" authority to augment the anti-manipulation authority it was granted in the Energy Policy Act of 2005. The Commodity Futures Exchange Commission and the Securities and Exchange Commission currently have cease-and-desist authority, on which the proposed Federal Energy Regulatory Commission authority is modeled.

The proposal would allow FERC to go to federal court to obtain an injunction preventing a market participant from engaging in harmful behavior. FERC maintains that it needs additional authority based on a recent experience with an anti-manipulation case. While FERC was in the process of litigating the case, the company in question distributed its assets so that the assets were no longer jurisdictional to FERC.

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