Pipelines, Producers Argue Investments, Returns
Producers are eating a bigger slice of the revenue pie,
pipelines claim. Pipelines, however, are piling up a much greater
return for a much smaller investment, producers retort. And that's
just the beginning of the arguments spawned by FERC's probing the
possibility of lighter-handed regulation of pipelines, including
negotiated terms and conditions.
An analysis paper issued by the Interstate Natural Gas
Association of America Wednesday includes a pie chart showing
producers collecting the lion's share or 53% of revenues in 1997,
while pipelines took home only 16% and LDCs collected 31%. Revenue
shares for both pipelines and local distributors have declined from
23% and 36%, respectively, in 1986, while the producers' share has
grown from 40%, INGAA says, claiming producers are threatening the
growth potential of the natural gas market by insisting on
continued regulatory control of their transportation monopoly.
But that's not the whole story, the Natural Gas Supply
Association says. To get that share of the revenue, producers
invested $89 billion or 57% of the overall industry's $157 billion
invested between 1986 and 1997, while pipelines invested just $26
billion or 17% of the total, according to NGSA's Phil Budzik. That
means a 15% to 17% rate of return for pipelines, while producers
have collected less than 6%.
Going forward the pipeline paper claims regulated rates will
hamper the development of new pipelines to get to the projected 30
Tcf market. Producers, however, say that since much of the new
market will be during the summer peak when pipelines are not full,
there is no need for a massive pipeline investment. They cite
various analysis which show producers investing between $40 and $80
billion, while pipelines top out at $25 billion in getting to the
30 Tcf market.
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