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Rules Refined for Alaska Pipeline Open Season

FERC last Wednesday refined a final rule issued earlier this year that outlines the open season steps potential sponsors must follow when allocating transportation capacity on a long-line system stretching from Alaska's North Slope to markets in the Lower 48 states.

The order on rehearing "does not substantively change" the rule, referred to as Order 2005, but rather "refines" a few of the issues, a FERC staff member said during the regular agency meeting.

The state of Alaska, Enbridge Inc., Chevron/Texaco Natural Gas, a division of Chevron U.S.A., and a joint filing by the North Slope producers -- ExxonMobil Corp., BP Exploration (Alaska) Inc. and ConocoPhillips -- sought either clarification or repeal of certain aspects of the open season rules, which were issued in February.

Specifically, the Commission clarified that it may require design changes to ensure that some portion of a proposed voluntary expansion will be allocated to new shippers, or shippers seeking to transport gas from areas other than the Prudhoe Bay or Point Thomson in Alaska, provided they agree to sign qualifying, long-term transportation contracts.

The order clarifies that late bidders (shippers who make qualified bids after the expiration of the open season) must make "good faith showings" for why they failed to bid during the initial open season as part of their late bid package.

In addition, the order eliminates the 30-day advance notice requirement for pipeline applicants to file open season procedures at FERC, reducing the entire process to 180 days from the originally proposed 210 days, the FERC staffer noted.

It also affirms FERC's prior decision of the presumption in favor of rolled-in rates for expansions of the Alaska line. FERC indicated that it will examine whether this results in subsidies on a case-by-case basis.

The order further clarifies in cases where there are no pre-subscription agreements (i.e. prearranged deals) by shippers, that if there is excess capacity bid for during open season, then pro-rata allocation would apply, the staffer said.

Lastly, the Commission clarified that pipeline applicants must establish a separate entity to conduct the open season, and said that open season notices need not include a cap on contract terms.

The revision to Order 2005 will become effective on the date the order is published in the Federal Register, according to FERC. A bill signed by President Bush in October 2004 supporting the construction of an Alaska gas pipeline system required the Commission to issue regulations governing open seasons for the pipeline in early February.

The pipeline project would add roughly 1,800 miles of large-diameter pipe to already existing infrastructure for delivery of 4.5 Bcf/d of natural gas to U.S. markets. The proposed pipe is expected to take about eight years or more to build, and will have an estimated price-tag of $15-20 billion. Alaska's three top producers -- BP, ExxonMobil and ConocoPhillips-- have submitted a proposal to the state of Alaska to build the mega-project.

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