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Tennessee Districts Fighting Bypass

February 1, 1999
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Tennessee Districts Fighting Bypass

A battle is brewing in Tennessee to determine exactly what constitutes "retail distribution." On one side is a nascent pipeline company and Tennessee producer that wants to make direct sales to industrial end-users. On the other is a group of about 19 utility districts seeking to defend what they view as their state-granted turf. The Tennessee Regulatory Authority (TRA) is expected to decide soon what retail distribution means.

"Our view is if it's being delivered for consumption then it's retail. If it's being delivered for resale, then it's wholesale," said Chuck Welch, the attorney representing the Informal Coalition of Gas Utility Districts.

The Tennessee Oil and Gas Association (TOGA), which represents oil and gas producers in the state, has taken the side of Tengasco Pipeline Corp. The company wants to bypass the utility districts and transport gas directly to industrial customers in Claiborne, Hancock and Hawkins counties, TN. Tengasco Pipeline is a wholly owned subsidiary of Tengasco Inc. -- a gas and oil company with E&ampP operations in Tennessee and Kansas. Tengasco Inc.'s estimated Tennessee reserves represent what is believed to be the largest newly found gas field in North America.

Tengasco, which is more than a year away from establishing an interconnect with interstate East Tennessee Natural Gas, currently must sell its Tennessee gas production instate. The company wants to sell directly to industrial end-users, but Tennessee law is unclear on whether such a direct sale would constitute retail distribution, which by law is the province of only the utility districts. The TRA granted approval in July for Tengasco to transport gas directly to end-users, and the utility districts are fighting the ruling.

"We can no longer allow unregulated utility districts to stand on the necks of Tennessee producers," said TOGA Executive Director Bill Goodwin.

Tennessee State Rep. Joe Armstrong (D-15th District), a member of the Tengasco board of directors, said bills are being drafted to define retail distribution. "[The utility districts are] saying basically that if we're allowed to go directly to the end-user, then we're going to cherry pick the customers. They don't want competition, point blank. The gas market has changed, deregulation has brought in competition. These small utilities are just trying to hold on to the last bastion of monopoly."

Welch said his utility district clients recognize competition is an inevitability, but they want the transition to a competitive market to be fair.

Joe Fisher, Houston

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