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FERC Considers Review of Eastern Gas Demand

April 12, 1999
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FERC Considers Review of Eastern Gas Demand

The Federal Energy Regulatory Commission is considering calling on government and industry resources to help make its own assessment of the future demand outlook for natural gas in the eastern half of the United States and the need for new pipeline capacity, Chairman James Hoecker said last week.

The item has been placed on this Wednesday's consent agenda as a general policy initiative, but Hoecker said he wasn't certain if the Commission would act on it at the meeting [PL99-2]. "We have to decide that internally. We've got a place-holder there [on the agenda for the item], and we're going to try and figure...out between now and the meeting" whether to take any action, he said last Thursday following a luncheon speech to the Natural Gas Roundtable in Washington D.C.

The Commission, facing strong advocates and contentious opposition, so far has dodged major decisions on a variety of new pipeline projects proposed for the East. A study could provide the rationale for future decisions.

The fact that the policy initiative hadn't been put on the discussion agenda suggested, at least to some industry sources, there was some uncertainty on the part of the Commission. "When I saw it and looked at...where it was on the agenda, I said to myself 'Don't hold your breath.' If they felt like they were going to move ahead, they would have put it on for discussion," said a FERC observer.

If the Commission should decide to move forward on this, "I think what we're going to do is end up with fundamentally a data-collection exercise" to evaluate future gas demand, using perhaps the expertise of the Energy Information Administration, the electric industry and other gas customers, Hoecker noted. "But we haven't really figured out what the scope of it's going to be, and how we're going to run it."

He said he didn't "really want to say too much [about it] because it could go in a variety of different directions." Personally, "I'm interested in finding out pretty much what's happening east of the Mississippi. I don't know if that's possible."

Industry sources reacted cautiously to the news of a possible FERC gas-demand review, given the lack of details. If it's a "narrowly focused" exercise to assess natural gas demand, "then it's a good idea," said one observer. "But if it's a general fishing expedition where you spend a lot of time listening to why everyone's particular project is better, that doesn't accomplish much."

Hoecker didn't dismiss the possibility of FERC holding a conference on the demand issue, noting that it still was "talking about" it. Both the Interstate Natural Gas Association of America and the Edison Electric Institute have asked FERC to sponsor a conference to judge the future level of gas demand in the Northeast, and the amount of new capacity needed.

The Commission's initiative to possibly take a closer look at projected gas consumption comes after it bypassed preliminary determinations (PDs) for four pipeline projects to the Northeast last month due to questions about the "need' for them. FERC was very divided on the PD issue, with commissioners Vicky Bailey and Curt Hebert Jr. dissenting.

"But I think all of us [on the Commission] are very interested in ascertaining the nature of growing natural gas demand not just in the Northeast, but in other growing markets - Florida, the Atlantic area, Wisconsin [and] other areas in the Midwest - to help us inform ourselves about the need for capacity," Hoecker said. Data culled from the general-policy initiative, if undertaken, would be "complemented" by the gas industry's comments on the mega-notice of proposed rulemaking (NOPR), which also raised the 'need' issue [RM98-10]. Industry comments are due later this month at FERC.

"I think we're going to have a lively internal discussion about it [gas demand], and hopefully [will] arrive at a consensus approach to making these kinds of decisions in the future" with respect to the need for new capacity, he told a packed room of gas industry executives and trade group representatives.

On a related issue, an official of Columbia Energy, one of the sponsors of the Millennium project, asked Hoecker whether he thought pipeline affiliate contracts and third-party contracts should be viewed similarly or differently when judging the 'need' for a project.

"Whether we ought to make a distinction is a fair question. Frankly, I think a contract's a contract," Hoecker said, but he added it also "depends on the circumstances surrounding it and the terms of the contract." He conceded that FERC commissioners "have not put our heads together and come to a common understanding [on] exactly how to interpret" the issue.

With respect to the NOPR comments that are due soon, Hoecker indicated he wasn't expecting a lot of agreement on major issues from the gas industry. "Admittedly, we may receive few consensus proposals or responses to the NOPR," he said, but nevertheless he thinks the entire natural gas industry will have benefited from the months-long examination of existing FERC regulations and policies.

"This process has been unprecedented. I hear a lot about how FERC proposes a rule and that the fix is in. But I think this is a perfect demonstration of how the industry, the public and the Commission can engage in a substantive, meaningful dialogue over many months, and hopefully will come up with some good answers," Hoecker noted.

"I, for one, am extremely optimistic about what this record is going to tell us, and I'm very anxious to start reading" the NOPR comments.

Susan Parker

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