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NGPL Gets 2nd Try to Justify Proposal on Facility Damage

November 29, 1999
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NGPL Gets 2nd Try to Justify Proposal on Facility Damage

Maybe it was because it was Thanksgiving, but FERC was in a very understanding mood last week. It agreed Natural Gas Pipeline Co. of America (NGPL) had failed to justify the need for a proposed tariff change that would hold a "party tendering gas" liable for pipeline facility damages that are caused by lower-quality gas entering NGPL's system. The Commission, however, didn't reject the proposal.

Instead, it gave the Midwest pipeline "the opportunity to provide supplemental information" to support "its claims of operational requirements or problems that it is experiencing with parties tendering non-conforming gas" into its system. It also directed Natural to "address the [other] concerns raised by protesters."

FERC ordered Natural to submit the additional information within 15 days of the order, after which parties can file supplemental protests or comments. In the meantime, it has accepted the proposed tariff revision and suspended its effectiveness until May 1 or a date established in a subsequent order (whichever is earlier), subject to conditions.

For Dynegy Marketing and Trade, a key concern was Natural's definition of the "party tendering the gas." If Natural plans to "place the responsibility for gas not meeting quality specifications on the shipper, then the proposal is unreasonable in that the shipper has no ability to control the quality specifications of its gas. It is the pipeline or system operator that typically is in charge of monitoring gas quality and ensuring that it falls within the stated specifications," Dynegy told FERC in its protest.

Even though the system operator or pipeline would likely be the liable party, Dynegy said it opposed putting any language in Natural's tariff that "would predetermine which party is responsible for any damages that might occur from lower-quality gas entering Natural's system."

The Houston energy marketer said Natural always has the option to file a civil lawsuit to recover facility damages caused by someone's negligence. But it fears that if the tariff is changed as requested by Natural, the pipeline may be allowed to "impose liability without necessarily demonstrating any fault on the part of the party tendering the non-conforming gas."

In last week's order, FERC directed the pipeline to specifically address the lack of an "apparent mechanism by which a tendering party may challenge Natural's determination of liability and damages," as well as the "appropriateness" of Natural assigning liability not only for the damages to its facilities caused by low-quality gas entering its system, but to facilities owned by third parties.

Indicated Shippers, which include major producers and marketers, said Natural has no business determining damages to third-party facilities caused by non-conforming gas. "It is inappropriate for NGPL to include a provision in its tariff in which it attempts to assign responsibility for damages on any facilities other than those owned by NGPL."

Indicated Shippers also agreed that Natural has failed to justify the need for the proposed tariff revisions. "....[N]othing in the record in this case indicates that NGPL has any operational problems related to non-conforming gas."

The Process Gas Consumers, American Iron and Steel Institute and International Paper Co. echoed the sentiment. Natural "has not indicated.....whether it is experiencing problems with parties tendering non-conforming gas to NGPL's system or what, if any, 'damages' to its own facilities or those of other receiving or third parties may have occurred to prompt the proposal of this new tariff change." Susan Parker

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