Seeking to sort out capacity assignment rules for intrastates and Hinshaw pipelines, FERC Thursday issued a notice of inquiry (NOI) asking for public comment on whether and how holders of firm interstate capacity on some intrastate pipelines can allow others to use their capacity, including to what extent buy/sell transactions should be permitted (RM11-1).

The NOI also grants a blanket waiver allowing buy/sell transactions involving section 311 and Hinshaw pipelines to continue while the Commission is considering these policy issues. The Federal Energy Commission's ruling in a July 2010 order that a buy/sell transaction on intrastates or Hinshaws could only proceed if specifically approved by FERC raised a firestorm of protest from all points in the industry (see Daily GPI, Aug. 26).

FERC's general prohibition, tacked onto an order regarding transportation for Arizona Public Service and Sequent Energy Management, represented an attempt by FERC to roll back Section 311 of the Natural Gas Policy Act (NGPA) and sweep the capacity transactions back under the older Natural Gas Policy Act (NGA), the protesters said.

Granting case-by-case waivers "will ensure that any buy/sell transactions are transparent and can be monitored for undue discrimination," the Commission said in issuing the decision.

The ruling "is an unsupported and unwarranted extension of NGA-based regulations to NGPA-type services provided by intrastate and Hinshaw pipelines," according to a Texas Pipeline Association (TPA) request for rehearing. "The order relies entirely on speculation about potential discrimination that has not been shown to exist, and is otherwise not supported by even a scintilla of evidence...the Commission appears to be continuing its recent trend of imposing NGA-based policies onto NGPA-authorized transportation services, without any record basis for doing so, and in a manner that is inconsistent with the Commission's own prior policy announcements and with Congress' intent in enacting the NGPA, namely, to encourage intrastate pipelines to undertake voluntary service under NGPA."

Similar comments were filed by the Independent Petroleum Association of America; Natural Gas Supply Association and Electric Power Supply Association; American Gas Association; Morgan Stanley Capital Group Inc.; and BG Energy Merchants.

In announcing the NOI the Commission recognized that the policy issue is "more appropriately addressed in a rulemaking proceeding, where all affected industry participants will have an opportunity comment."

Section 311 of the NGPA permits intrastate pipelines to perform interstate service without becoming subject to the Commission's NGA jurisdiction. Section 1(c) of the NGA exempts from FERC jurisdiction pipelines subject to state commission regulation and that receive natural gas at or within their state boundaries that is consumed within the state. These pipelines are referred to as Hinshaw pipelines. Section 311 and Hinshaw pipelines that perform interstate services must do so on an open-access basis.

Comments to the NOI are due 60 days from the date of publication in the Federal Register.

©Copyright 2010 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.