A battle is brewing in Tennessee to determine exactly whatconstitutes “retail distribution.” On one side is a nascentpipeline company and Tennessee producer that wants to make directsales to industrial end-users. On the other is a group of about 19utility districts seeking to defend what they view as theirstate-granted turf. The Tennessee Regulatory Authority (TRA) isexpected to decide soon what retail distribution means.

“Our view is if it’s being delivered for consumption then it’sretail. If it’s being delivered for resale, then it’s wholesale,”said Chuck Welch, the attorney representing the Informal Coalitionof Gas Utility Districts.

The Tennessee Oil and Gas Association (TOGA), which representsoil and gas producers in the state, has taken the side of TengascoPipeline Corp. The company wants to bypass the utility districtsand transport gas directly to industrial customers in Claiborne,Hancock and Hawkins counties, TN. Tengasco Pipeline is a whollyowned subsidiary of Tengasco Inc. — a gas and oil company withE&ampP operations in Tennessee and Kansas. Tengasco Inc.’sestimated Tennessee reserves represent what is believed to be thelargest newly found gas field in North America.

Tengasco, which is more than a year away from establishing aninterconnect with interstate East Tennessee Natural Gas, currentlymust sell its Tennessee gas production instate. The company wantsto sell directly to industrial end-users, but Tennessee law isunclear on whether such a direct sale would constitute retaildistribution, which by law is the province of only the utilitydistricts. The TRA granted approval in July for Tengasco totransport gas directly to end-users, and the utility districts arefighting the ruling.

“We can no longer allow unregulated utility districts to standon the necks of Tennessee producers,” said TOGA Executive DirectorBill Goodwin.

Tennessee State Rep. Joe Armstrong (D-15th District), a memberof the Tengasco board of directors, said bills are being drafted todefine retail distribution. “[The utility districts are] sayingbasically that if we’re allowed to go directly to the end-user,then we’re going to cherry pick the customers. They don’t wantcompetition, point blank. The gas market has changed, deregulationhas brought in competition. These small utilities are just tryingto hold on to the last bastion of monopoly.”

Welch said his utility district clients recognize competition isan inevitability, but they want the transition to a competitivemarket to be fair.

Joe Fisher, Houston

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