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Industry Split on Section 311, Hinshaw Proposal

Industry is split over FERC's proposed optional notice procedures that would enable intrastate and Hinshaw natural gas pipelines to obtain quick approval of filings on rates and operating conditions without an agency order.

The independent Petroleum Association of America (IPAA), which represents mostly small independent producers, and a group of larger producers -- Apache Corp., BP America Production and Noble Energy, as well as marketers -- objected to the proposed notice procedures, which were contained in a notice of proposed rulemaking (NOPR) issued in October, because they would provide for automatic approval of noncontested rate filings for intrastate gas pipelines subject to Section 311 of the Natural Gas Policy Act (NGPA) and Hinshaw Pipelines (see NGI, Oct. 22).

On the other hand, the American Gas Association (AGA), which represents gas distributors, and a Texas pipeline association supported the "expeditious" adoption of the changes propposed in Federal Energy Regulatory Commission's (FERC) NOPR.

Under the NOPR, filings on rates or operating conditions by intrastate pipelines pursuant to Section 311 of the NGPA and Hinshaw pipelines would be "deemed approved" if no protests are filed [RM12-17].

"The NOPR would appear to eliminate the Commission's affirmative oversight obligations under Section 311 of the NGPA to perform an independent analysis to ensure that the rates and conditions of service of Section 311 intrastate and Hinshaw pipelines are fair and equitable," said Indicated Shippers, which included Apache, BP America, BP Energy, Noble Energy and Occidental Energy Marketing.

"Essentially, the NOPR would permit automatic implementation of market-based rates for such pipelines, without a finding of a lack of market power, and without an affirmative order by the Commission, in so long as no one objects," they said.

"Lighter-handed regulation for Section 311 and Hinshaw pipelines...was originally intended to provide incentives to intrastate and Hinshaw pipelines to deliver gas into interstate markets to remedy shortages. Supply imbalances between intrastate and interstate markets have not existed for many years. Thus there is no longer any policy justification for additional incentives, in the form of further reduced regulation of Section 311 intrastate and Hinshaw pipelines," said Indicated Shippers.

While supporting FERC's efforts to remove "unnecessary impediments" to the development of new gas supply, the IPAA said it "strongly opposes" any attempt to reduce or eliminate FERC staff review of 311 pipeline rates.

"To the extent that FERC can conduct its review and allow for an expedited approval schedule, then a streamlined process would benefit pipelines, producers and natural gas consumers. However, streamlined procedures should not sacrifice the need for FERC to ensure fair and equitable rates," the producer group said.

The NOPR gives parties a total of 60 days (following a rate filing) to intervene and file a protest and comments. If no protest is filed within the time allowed, the filing would be deemed approved without further order. However, if a protest is filed, regulations provide for a 30-day period under which the pipeline, protester (or any other intervenors) and FERC staff could resolve the protest. If the protest remains unresolved after 30 days, then the Commission will establish procedures to resolve the case. FERC has 60 days from the deadline for filing protests to establish the procedures.

The Commission's existing regulations provide similar prior notice blanket certificate procedures for interstate pipelines under Section 157 of the agency's regulations.

The AGA "agrees that the new notice procedures would reduce the burden on regulated intrastate and Hinshaw pipelines and simplify the process in cases where no protests are filed...The proposed notice procedures would thus streamline the process and allow the Commission's resources to be better devoted to addressing filings that are protested," said the group, whose members have been classified as Hinshaw pipelines.

With respect to hotly protested filings, AGA said the Commission's "filing procedures should provide for prompt resolution of contested issues raised by such filings...AGA is concerned that in cases where there are vigorous protests that cannot be resolved in the proposed 30-day reconciliation period, use of the proposed procedures may delay the process and delay an ultimate Commission decision on the rate filing."

Moreover, the gas distribution group urged FERC not to change its substantive rate filing requirements, specifically the requirements with respect to periodic rate review.

While supporting the NOPR, the Texas Pipeline Association (TPA) urged the Commission to shorten the time period allowed to protest a rate filing. "Shortening the proposed 60-day protest period will help the Commission obtain its goals of increasing regulatory certainty while simultaneously reducing the regulatory burden on pipelines performing Section 311 transportation," said TPA, which represents 40 natural gas and liquids intrastate pipelines in Texas.

Additionally, the Commission should consolidate the protest period into a single period. The NOPR gives opponents "14 days to file interventions and initial comments and an additional 46 days to file final comments and protests. The TPA believes that a bifurcated protest period is unnecessary and has the potential to needlessly complicate the process," the pipeline association said.

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