While stressing FERC doesn’t want the pipeline companies to haveto pay “ransom” to landowners, Commission Chairman James Hoeckertold a meeting of the National Association of Regulatory UtilityCommissioners (NARUC) in San Francisco yesterday pipelines have todo a better job of hammering out early, innovative deals withproperty 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 areliterally tied.”

Illinois state regulator Ruth Kretschmer, however, took up thepipelines’ cause, stating her past experience in real estate and asa state energy regulator has shown “money talks,” and thatso-called “robber barons” have extorted a lot of money frompipelines. She said some of the pipeline companies have paid theequivalent of “black mail” to landowners to avoid delays in theirprojects.

“It is a very difficult issue,” Hoecker conceded. FERC doesn’twant to subject the pipelines to extortion by property owners. “Onthe other hand, there is a lot of finger pointing and we don’t havemuch of a record at all about how good the land work has been priorto companies filing applications with FERC.

“If we are going to give a company the right of eminent domainunder federal law, we better do it in those instances where thereis a clear need. Because quite frankly, property rights are a bigdeal in Washington, DC, right now,” he said. “Handing out therights of eminent domain has to be done sparingly.”

He said FERC is open to more expedited certification of new andexpanded interstate pipeline projects and currently is streamliningthe process with a new “project office,” which will focus on theconstruction, engineering and environmental aspects of energyprojects.

But the pipeline industry “has to be more proactive upfront asfar as landowners’ concerns and engage in a collaborative processso we don’t have a holdup once we have a proposal before us. Sitingis extremely difficult when you have thousands of letters fromlandowners and members of Congress calling you saying a project iscompletely contrary to the public interest.

“If we want to find a responsible way to deal with those issuesworking with the industry – and I think clearly [the pipelines]have gotten the message – then I think our process in the futurewill work very well,” he said.

He admitted state regulation has been way ahead of FERC inimplementing performance-based ratemaking. “We are going to have tobegin to look more critically at this and to develop new ways toinvent good and more efficient economic behavior.” He said thecommission was open-minded toward individual incentive proposalsfrom pipelines, but added the caveat that he was unaware of how thestate PBR mechanisms have worked so far.

Generically, he said that setting performance standards forcompanies can end up being “the ultimate example ofcommand-and-control regulation” if they are not carefully thoughtout and implemented.

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