With the ink barely dry on the final FERC order, state Rep.Frank LaGrotta of Pennsylvania yesterday sought review of theCommission’s decision awarding a certificate to the hotly contestedIndependence Pipeline that would run through his state. Thelawmaker said the Commission should have denied the Midwest-to-EastCoast pipeline project a certificate because the precedentagreements it filed as a show of market support contained “outclauses” for shippers.

In a Dec. 17 interim order addressing the proposed Independenceline, FERC “rejected three 10-year precedent agreements for servicewith Enron and Eastern Energy because their ‘out clauses’ preventedthem from meeting ‘the Commission policy regarding a bindingcommitment.’ [Now] seven months later, the Commission has acceptedcontracts as binding that contain the same clauses,” LaGrotta said.

The Commission “should have rejected” the precedent agreementsthat Independence filed on June 26 “without further discussion orexamination,” he said in a prepared statement. “At the very least,the FERC should have accepted the numerous requests submitted to itprior to the vote [on Independence] that asked for a delay untilthese discrepancies could be more closely examined.” LaGrotta andSen. Rick Santorum (R-PA) were among the lawmakers that asked FERCto put Independence on the back burner.

“The FERC did not respond to our requests. The Commissionerssimply approved the project with stipulations that the contracts bebinding before the digging begins. That sounds like unequivocalevidence to me that they were not binding contracts as submitted onJune 26…..The Commission owes us the right to make these pointsin rehearing.”

In the December interim ruling, FERC approved the Independencepipeline project and the related SupplyLink expansion, but withheldtheir certificates until they could submit binding firm precedentagreements representing at least 35% of each project’s capacity.Last month, Independence filed firm precedent agreements for 38% ofits project’s capacity, while SupplyLink submitted precedentagreements for 78%.

Despite protests from landowners in Ohio and Pennsylvania andpotential competitor Millennium Pipeline that the agreementscontained contract-out clauses and, therefore, weren’t binding,FERC ruled on Wednesday that the precedent agreements reflectedsufficient market support for Independence and SupplyLink. Itconceded, however, its policy on what constitutes a “bindingcommitment” has not been “clearly articulated” with respect to suchclauses.

The “out” clauses opposed by landowners would have givenIndependence the right to terminate agreements if it had failed toobtain a final certificate by June 1, 2001, according to FERC.Millennium, on the other hand, took issue with “out” clauses thatwould give a shipper’s board of directors a specified time periodto pull out of a contract.

The Independence and related SupplyLink projects have beenparticularly controversial for landowners and electedrepresentatives from Ohio and Pennsylvania, through which the400-mile greenfield Independence line would criss-cross to serveeastern gas markets. If the projects are ever built — they stillhave to undergo rehearing at FERC and then probably will head tothe courts — they would transport nearly 1 Bcf/d of gas from theMidwest to serve East Coast and Northeast markets.

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