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Columbia Ordered to Justify Use of Nitrogen Standard in Refusing Gas

FERC last Thursday denied Colorado-based producer Norstar Operating LLC's request to order Columbia Gas Transmission to promptly interconnect its pipeline system with Norstar's casinghead natural gas well in Ohio.

However, the FERC decision was not a total defeat for Norstar. The Federal Energy Regulatory Commission agreed with Norstar's argument that the 4% nitrogen standard cited by Columbia in rejecting Norstar's request for an interconnect was not included in the pipeline's tariff, and therefore was not authorized by the Commission.

The Commission ordered Columbia Gas to submit a compliance filing justifying its use of a 4% nitrogen standard. "If it wants to restrict [its acceptance of] gas based on nitrogen, it's going to have to state what the restriction is, and the Commission will have to support it," an agency staffer said following FERC's monthly open meeting.

The order "doesn't give them [Norstar] immediate relief, but it requires Columbia to justify what it intends to do," the staff member noted. This "is not a loss [for Norstar] because the end result still has to be determined," she said.

The decision responds to a Section 5 complaint filed in February in which Norstar said Columbia denied its bid for an interconnect because the casinghead gas production from the producer's new well in Ohio did not satisfy a 4% nitrogen standard that was set forth in Columbia's "standard meter agreement." But the Centennial, CO-based Norstar, which is wholly owned by Norstar Petroleum Inc., argued that Columbia's meter agreement was not filed with FERC and was not part of Columbia's FERC gas tariff (see NGI, March 6).

Norstar said Columbia's action has resulted in the shut-in of casinghead gas production from the Ohio well (up to 2,000 Mcf/d). And as long as the gas is shut in, it said the well is unable to produce crude oil (up to 200 bbl/d). As a result, Norstar estimated in its complaint that it has been losing between $60,000 and $810,000 a month.

Norstar urged FERC to order Columbia to cease and desist from imposing gas quality standard specifications not set forth in the pipeline's gas tariff, promptly interconnect its jurisdictional gas pipeline with the producer's well, and accept gas from the well that meets the gas quality specifications set out in Columbia's tariff [RP06-231].

The case has caught the attention of producers and local distribution companies throughout the country, who believe the outcome could have widespread ramifications for the entire gas industry (see NGI, March 20). "A pipeline should not be permitted to refuse service, thereby effectively shutting in gas supplies, based on a quality requirement that is not contained in the tariff," observed producers BP America Inc. and ConocoPhillips, both of which have production attached to Columbia's system.

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