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Attorney: FERC Posting Rule Likely Headed to Court

After FERC Thursday rebuffed challenges to its rule asserting authority over major noninterstate pipelines (intrastates) for the first time, an attorney for a major intrastate pipeline group said the case was likely headed to appellate court.

The Texas Pipeline Association (TPA), the only state trade association representing intrastate pipelines, "is likely to appeal" the action of the Federal Energy Regulatory Commission (FERC), which upheld Order 720, which requires all major noninterstate pipelines, as well as interstate pipelines, to report operational information on their websites to further boost price transparency in the gas markets, said Paul Korman, TPA's attorney with law firm of Van Ness Feldman in Washington, DC.

The TPA and others argued that FERC does not have jurisdiction to impose posting requirements on noninterstate pipelines and that its transparency jurisdiction does not extend to intrastate activities.

"The Commission affirms Order 720, granting a number of requests for rehearing and clarification and adopting regulations consistent with our findings," the FERC order on rehearing said [RM08-2-001]. The next line -- "the modifications that are adopted substantially reduce the number of major noninterstate pipelines that must comply with the proposed transparency regulations" -- had Korman scratching his head.

"I can't explain that one to you," he told NGI. "They did do a little bit for [noninterstate] pipelines that lie entirely upstream of processing plants. But I don't see that as being a substantial reduction" for major noninterstate pipelines, Korman said. An attempt to obtain a clarification from FERC was unsuccessful.

"They changed very little" for noninterstate pipelines in the rehearing rule, he noted. In addition to the upstream exemption, the Commission also provided an exemption from the posting requirements for all major noninterstate pipelines that deliver more than 95% of their annual flows to end-users as measured by average deliveries over the preceding three calendar years.

Order 720, which was issued in late 2008, established new posting requirements under Section 23 of the Natural Gas Act (NGA) that call for all interstate and certain major noninterstate pipelines to post on their publicly accessible websites daily operational information, such as scheduled volume information and design capacity for certain receipt and delivery points. The order is already in effect for interstate pipelines and is expected to go into effect for major noninterstate pipelines 150 days following publication in the Federal Register.

The order defined a major noninterstate pipeline as a pipe that is not classified as a natural gas company under the NGA and delivers on average more than 50 Bcf/year during a three-year period. Noninterstate pipes with deliveries at this level contribute to price formation, FERC said. These pipes are now subject to the transparency regulations under NGA Section 23.

The FERC initiative requires these noninterstate pipelines to post daily specific scheduled flow information at each receipt or delivery point with a design capacity of 15 MMcf/d or more.

The Commission on rehearing addressed "one limited issue" for interstate pipelines -- that they should post no-notice information, said Joan Dreskin, vice president and general counsel for the Interstate Natural Gas Association. "FERC believes that the posting of information about no-notice service will enhance transparency and that this requirement is not unduly burdensome." It said it believes that no-notice service has an "impact on market decision and price formation."

While the order addressed key issues, Dreskin said overall it was a "little icing on top of the 70th cupcake."

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