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No Utility Status for Gathering Lines, Pennsylvania Lawmaker Says

A Pennsylvania lawmaker plans to introduce a bill soon that would prohibit gas gathering companies from becoming public utilities.

State Rep. Phyllis Mundy, a Democrat from northeastern Pennsylvania, is concerned about midstream players having eminent domain privileges as they work to expand natural gas gathering systems in Pennsylvania to meet growing Marcellus Shale production.

"These companies could utilize the power of eminent domain in order to circumvent discussions and negotiations with homeowners on the issues of land easements, property and mineral rights," Mundy wrote to fellow lawmakers last Monday, seeking co-sponsors.

The Pennsylvania Public Utility Commission (PUC) is currently reviewing three separate requests from gathering line companies seeking to gain public utility status -- Laser Northeast Gathering Company LLC, Peregrine Keystone Gas Pipeline LLC and Pentex Pipeline Co.

Mundy chose to pursue legislation after the PUC recently voted to make Laser Northeast a public utility (see Shale Daily, May 20). An aide to Mundy told NGI's Shale Daily that the proposed legislation is gaining support in concept, although the language is not yet finalized. Mundy previously attempted to add similar language to a public utility bill currently stalled in a House committee.

The cases before the PUC generally revolve around whether a natural gas gathering line serves a public need.

Laser Northeast began construction in February on a $50 million gathering project that will run about 30 miles from Susquehanna County in northeastern Pennsylvania to a connection with the Millennium interstate pipeline in New Windsor, NY.

An administrative law judge decided last December that a gathering system connecting wells to a transmission line did not meet the definition of a public service, and therefore Laser Northeast should not be a public utility (see Shale Daily, Dec. 3, 2010). The PUC voted 3-2 in May to give Laser Northeast public utility status, but it remanded the case back to the administrative law judge first.

The outcome of that case will have immediate implications.

Peregrine Keystone is seeking public utility status to build a gathering system through three counties in southwestern Pennsylvania, but in January the PUC put that request on hold until the Laser case reaches some conclusion that can be considered a precedent. The $16.2 million system would serve the Peregrine Keystone affiliate Arrington Oil & Gas LLC, as well as other producers in the region.

Pentex got public utility status in 1988 to operate a one-customer gathering system in Bradford County in northeastern Pennsylvania, but now it wants to expand its service area to connect shale producers in the area to the Tennessee Gas Pipeline (see Shale Daily, April 4). After months of collecting claims and counterclaims, PUC plans to begin the formal litigation process for that case in early July.

Many who have commented on the existing proceedings are worried about longer-term implications.

In addition to public concerns about eminent domain, some midstream players -- in particular MarkWest Liberty Midstream & Resources LLC and Laurel Mountain Midstream LLC -- are worried that making one gathering company a public utility would open the door to making all gathering companies public utilities. That distinction brings not only eminent domain privileges, but also new regulations.

The PUC has so far been opposed to regulating gathering lines across the board (see Shale Daily, March 2).

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