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Industry Meetings Begin Debating NORP, NOI

Industry Meetings Begin Debating NORP, NOI

The first of a series of industry-sponsored meetings aimed at bringing the divided gas segments closer together on some of the major regulatory initiatives proposed by FERC got underway in Houston last week. Not surprisingly, industry representatives at the initial session agreed to narrow the "primary focus" of their negotiations to two proposals to ease pipeline rate regulation - short-term capacity auctioning and negotiated terms and conditions.

The closed-door sessions are expected to be a "dynamic process" characterized by "interactive dialogue" that hopefully will result in, if nothing else, the filing of "richer" industry comments on both the mega-notice of proposed rulemaking (NOPR) and notice of inquiry (NOI) in April, said Nicholas J. Bush, president of the Natural Gas Supply Association (NGSA). Bush outlined procedure at a press briefing last Tuesday in Washington DC prior to the first round of talks. Sources indicated industry representatives quickly got down to work last week, putting alternative proposals on the table for consideration.

"...[T]here have been differences of opinion among the segments in the industry about the need for further [regulatory] changes, about the scope of those further changes, the breadth of those changes [and] the nature of those changes," he noted. The meetings are intended as a forum to help the various industry segments bridge some of those differences - to "at least better understand [and possibly accommodate] each other's position." The NOPR/NOI comments to be submitted to FERC will have "more clarity" as a result, he said, adding that no one in the industry "want[s] to do this wrong."

But Bush doesn't realistically expect industry to achieve uniformity on all the key issues. "I think that it [would] be naive for somebody to believe that this would result in four, five or six or seven filings that [are] homogenous," he told reporters. At best, it's hoped the meetings will help the various gas segments to find some common ground.

Bush and other NGSA officials dismissed the suggestion that the industry-wide meetings had the earmarks of a negotiated-rulemaking effort. "We're not doing any rulemaking here. We're not doing any dealmaking," Bush said.

"The negotiated-rulemaking concept requires unanimous agreement among all the parties. Given the different perspectives that the different industry segments have on the issues, that's not likely to occur," noted Philip Budzik, NGSA's director of federal regulatory affairs. "But that doesn't mean you can't come together on some of the issues and reduce the degree of contentiousness."

Industry plans to meet seven times in Houston (on the first and third Wednesday of each month) until April 22, when comments are due at FERC. The producers, pipelines and distributors each will have six representatives attending, while the American Public Gas Association, the Process Gas Consumers Group and Edison Electric Institute each will have one representative. Also, there will be antitrust counsel in attendance, and the major gas trade groups will be represented to take notes for their full membership. Commission staff members have not been invited, nor will the press be allowed to attend. "I don't think it's a good idea. That might put a different tone" on the proceedings, Bush said. This is a "shared conversation among the industry" without it having to "weigh every word."

"These meetings are going to tie up a lot of the associations' time" over the next couple of months, Budzik said. He noted that NGSA also plans to meet with its own members on alternate weeks to inform them of the progress in the industry talks.

The industry-sponsored meetings were the brainchild of Robbi Luxbacher, vice president of natural gas for Exxon U.S.A., and Stan Horton, chairman and CEO of the Enron Gas Pipeline Group. The details of the sessions were worked out among the various gas segments during the past couple of months, Bush said. He lauded the Commission for giving industry a second extension of the deadline on the NOPR/NOI comments last month, which paved the way for the talks. "I think this has been a really good move by FERC."

Auctioning of short-term capacity and negotiated terms and conditions, primarily because of their controversial nature, will top the agenda at the industry powwows. Although much of the industry has indicated its distaste for the auction proposal in the NOPR, producers are undecided on the issue, according to Bush. "Everybody has written that the industry has reacted negatively to auctions. Well, we're not dismissive entirely of the auction process. We think it's too soon to make some kind of a final determination on any one issue."

Overall, however, producers "still question the seriousness of the need for extensive [regulatory] changes," he said. They're especially concerned that the regulatory initiatives proposed by the Commission will have a "large and significant impact" on the allocation of capital within the natural gas industry.

Procedurally, the order of importance in which the issues were presented to the gas industry - with the short-term transportation issues framed in a more-pressing NOPR, and the long-term transportation issues outlined in a less-urgent NOI - proved "difficult for us to manage," Bush said. He noted it quickly became apparent that it was difficult to address the short-term issues without first looking at the long term. The two areas were intertwined. And so the producer group did a reverse, deciding first to "talk about what the NOI ought to be, and then maybe we'll make some decisions about the way the NOPR [ought to be]."

Susan Parker

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