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Landowner Deals Crucial for Speedy Certification

Landowner Deals Crucial for Speedy Certification

While stressing FERC doesn't want the pipeline companies to have to pay "ransom" to landowners, Commission Chairman James Hoecker told a meeting of the National Association of Regulatory Utility Commissioners (NARUC) in San Francisco yesterday pipelines have to do a better job of hammering out early, innovative deals with property owners affected by their projects.

"We'll act faster if the pipelines act responsible up front," Hoecker said. "Frankly, if they don't do that, our hands are literally tied."

Illinois state regulator Ruth Kretschmer, however, took up the pipelines' cause, stating her past experience in real estate and as a state energy regulator has shown "money talks," and that so-called "robber barons" have extorted a lot of money from pipelines. She said some of the pipeline companies have paid the equivalent of "black mail" to landowners to avoid delays in their projects.

"It is a very difficult issue," Hoecker conceded. FERC doesn't want to subject the pipelines to extortion by property owners. "On the other hand, there is a lot of finger pointing and we don't have much of a record at all about how good the land work has been prior to companies filing applications with FERC.

"If we are going to give a company the right of eminent domain under federal law, we better do it in those instances where there is a clear need. Because quite frankly, property rights are a big deal in Washington, DC, right now," he said. "Handing out the rights of eminent domain has to be done sparingly."

He said FERC is open to more expedited certification of new and expanded interstate pipeline projects and currently is streamlining the process with a new "project office," which will focus on the construction, engineering and environmental aspects of energy projects.

But the pipeline industry "has to be more proactive upfront as far as landowners' concerns and engage in a collaborative process so we don't have a holdup once we have a proposal before us. Siting is extremely difficult when you have thousands of letters from landowners and members of Congress calling you saying a project is completely contrary to the public interest.

"If we want to find a responsible way to deal with those issues working with the industry - and I think clearly [the pipelines] have gotten the message - then I think our process in the future will work very well," he said.

He admitted state regulation has been way ahead of FERC in implementing performance-based ratemaking. "We are going to have to begin to look more critically at this and to develop new ways to invent good and more efficient economic behavior." He said the commission was open-minded toward individual incentive proposals from pipelines, but added the caveat that he was unaware of how the state PBR mechanisms have worked so far.

Generically, he said that setting performance standards for companies can end up being "the ultimate example of command-and-control regulation" if they are not carefully thought out and implemented.

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