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FERC Says Good-Bye to Optional Certificate Regs

FERC Says Good-Bye to Optional Certificate Regs

In an attempt to bring more uniformity to its certificate policy, FERC has issued a final rule abandoning its optional-certificate (OC) regulations that offered speedier processing of pipeline applications for sponsors who were willing to assume all of the risks.

The Commission took this action because while its OC regulations dovetailed in one respect with its new policy statement on certification of pipe construction --- both placed the financial risk for a new project on the pipe sponsor and the customers to be served by the project --- they diverged in another respect --- FERC generally wasn't required to weigh the benefits of OC projects against their adverse effects to existing customers, competing pipelines and affected landowners and other community interests.

That's because pipeline projects seeking approval under the OC procedures, which were established in 1985 under Order 436, routinely were awarded a "rebuttable presumption" that they were in the public interest. The Commission would weigh the benefits of a project only in cases where the presumption was challenged by a third party.

Given the OC regulations "conflict with a significant goal under the policy statement" that requires a benefits' review for new pipe construction, "we will remove them as an alternative means of certificating a project," the final rule said [RM00-5]. In the future, all certificate applications will be considered "under the broader balancing criteria articulated in the policy statement" that was issued last September (See NGI, Sept. 6).

With this action, the Commission closed a "loophole" that would have enabled sponsors to circumvent the public-interest balancing test by seeking OC approval of their projects. FERC omitted OC projects from the requirements of its new policy statement. That oversight, pipelines argued then, bestowed on OC pipe projects an unfair advantage over proposed pipelines that were seeking Section 7(c) approval.

For OC applications filed before the final rule, FERC said it would continue to apply the presumption of public interest to projects that aren't dependent on subsidies from existing shippers, "but that it would consider the presumption successfully rebutted.....if the adverse effects from the project outweigh the public benefits." This approach would apply only to those OC projects filed at FERC before the final rule goes into effect, which is 60 days from July 14.

Susan Parker

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