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Kelliher: Storage Pricing Reform, Relaxed Blanket Rules Top Gas Agenda

While electricity items have dominated the agenda at FERC in recent weeks, Chairman Joseph Kelliher last Tuesday made clear that natural gas issues haven't been forgotten at the agency.

Storage pricing reform is "probably on the top of my personal agenda on natural gas issues," he told gas executives and regulators at the Natural Gas Roundtable in Washington, DC. FERC plans to finalize the proposed rule, which seeks to revise the agency's pricing policies to promote the construction of more natural gas storage sites, "in due course," Kelliher said. He declined to give a time frame for when FERC would issue a final rule.

"No. 2 on [my] list of priorities" on the gas side is a petition filed by the Interstate Natural Gas Association of America and the Natural Gas Supply Association last November, Kelliher said. "I personally think [the petition] has a lot of merit...I think we should act on it." The two gas groups have called on the Federal Energy Regulatory Commission to relax the agency's blanket certificate rules to spur the construction of certain mainline pipeline expansions, underground storage improvements and takeaway facilities for liquefied natural gas (LNG) projects.

"There's a perception that the Commission is not acting on gas quality and interchangeability, but the fact is we are acting," Kelliher said, noting that there were four possible ways for the agency to address the issues. FERC currently is resolving gas quality/interchangeability issues in individual complaint cases, the chairman said. "That path is [a] path that we've been on for some time."

Other alternatives would require FERC to issue a policy statement to "explain in more detail the Commission's general approach" to gas quality and interchangeability issues, or issue a rulemaking, Kelliher said. But in order for the agency to come out with a rulemaking, "there really needs to be some demonstration that there is actually a national problem [with respect to gas quality and interchangeability]. I don't think that demonstration has yet been made," he noted.

"We are on one of these paths [the complaint process]" for resolving gas quality and interchangeability. "But really the question is, should we move onto one of the other paths. And I think the burden of proof is on someone who thinks we should shift to one of those other paths perhaps," he said.

Another issue that FERC is addressing is its new authorization to require greater transparency in both the natural gas and electricity markets, according to Kelliher. "We're authorized to act, but not required to act. The question is should we exercise this discretionary authority."

This issue "was something we talked about after the Energy Policy Act was enacted. But then when natural gas prices flew up, it just seemed like that was probably not the right time to introduce some new variables in the reporting of natural gas wholesale sales or perhaps even in the areas of gas transportation service. But we have been looking internally at what our options [are on] both the electricity and gas side in exercising transparency authority. The three [FERC] offices will be discussing the options... I would think we would agree on some number of options, and then we will have a technical conference" possibly this summer, put out a "strawman" and seek industry comments, he said.

"We have seen a lot of progress on the Alaska pipeline in recent months," Kelliher said, but he added "there will not be a formal filing at the Commission for some period." Key decisions about an Alaska pipeline are before the Alaska legislature now. "I hope that they do act on the governor's proposal" to build the line that would run from Alaska's North Slope to the Lower 48 states, he noted.

Lastly, Kelliher said he opposed proposals calling for LNG terminal projects to undergo a regional siting process. "I guess I don't see [the] virtue in the regional siting process because it's been tried before and it's failed before, and I guess I'd rather avoid the experience in the LNG arena," he noted.

"If you look at New England and if you assume that hypothetically that Weaver's Cove was the product of a regional siting process, would that change anything? Would Fall River [Massachusetts] be anymore supportive of the project if it somehow was the product of a regional siting process? Would Providence [Rhode Island] be anymore supportive of the KeySpan project" if it went through the regional siting process? Kelliher believes the answer is "no."

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