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Appalachian Producers Decry FERC Approval of Equitrans' Gathering Rates

Appalachian Producers Decry FERC Approval of Equitrans' Gathering Rates

The Independent Oil & Gas Association of West Virginia (IOGA) has filed an emergency motion asking FERC to correct "serious errors" that it claims the agency made by suspending Equitrans L.P.'s proposed 156% rate increase for only one day and in waiving the 30-day notice requirement under the Natural Gas Act (NGA).

"IOGA urges the Commission not to wait to remedy its [Dec. 30] order," which granted Equitrans L.P.'s plea for a one-day suspension of the proposed rates, even though the Commission held that the rates may be "unjust and unreasonable," the association said. "Each passing month places IOGA's producer members at risk of having a monopolist pipeline and its affiliates unfairly capture monopoly rents that the NGA is designed to preclude."

FERC approved the pipeline's request to establish rates for gathering of gas on facilities that were refunctionalized from transmission in West Virginia and Pennsylvania. The new charges are in addition to gathering rates and retainage charged by Equitrans' affiliate, Equitable Field Services LLC, the 10 cents/Dth many producers pay for products extraction of gas delivered to Equitrans, and Equitrans' 100% load factor transportation rates ($0.2160/Dth in the winter, and $0.1865/Dth in the summer) and associated transportation retainage (3.77%), the IOGA said [RP05-105].

"Total payments to Equitrans alone, assuming $5 /Dth gas prices, would increase from $0.3375/Dth to $0.8627/Dth, a 156% increase" for a shipper in West Virginia as a result of the new charges, it noted.

"Creating another layer of gathering and establishing a rate where one did not previously exist represents an enormous burden on producers that are so critical to the success and proper functioning of the Equitrans system," IOGA said.

"Imagine driving on a toll road. You arrive at the toll bridge and pay your toll to cross the same river that you have crossed every day to get to and from work. Suddenly, midway across the river, the tollkeeper's sister has installed another toll booth that requires a second payment before you are allowed to continue on the same route you have traveled for decades. There is no turning back."

Moreover, "on the first trip on Dec. 31, you are assessed the new fee all the way back to Dec. 1 and must pay that as well before passing the toll gate. In short, you have completed and paid for 98% of your journey only to find out that the last 2% will cost nearly as much as the first 98% and, by the way, the new tollkeeper also takes 2.7% of the gasoline you have in your tank. That is the situation in which a producer selling gas into Equitrans now finds itself," the IOGA told the Commission.

The IOGA contends that the Commission abused its discretion by "arbitrarily and capriciously" suspending a 156% rate increase for only one day and in waiving the 30-day notice requirement. It also claimed that FERC improperly relied on its 1980 decision in Valley Gas Transmission Inc. to support the one-day suspension. In that case, the agency held that the pipeline had a significant, unexpected loss of throughput, leading to significant erosion of Valley's earnings.

"The facts here do not rise to the level of Valley's 'harsh and inequitable results," the IOGA argued. It noted that the fourth quarter earnings of Pittsburgh, PA-based Equitable Resources, parent of Equitrans, will be on target with expectation and will not show a loss. "The alleged harsh and inequitable results are illusory and do not provide a basis for a one-day suspension."

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