Natural Can Declare Shippers Liable for Damages
After giving Natural Gas Pipeline Co. of America (NGPL) a
second bite at the apple, FERC last week said the pipeline had
sufficiently defended a proposed tariff revision that would allow
it to hold its shippers liable for damages resulting from
lower-quality gas entering its system.
FERC "determines that Natural has an operational justification
for the proposed [tariff change]. The examples provided by Natural
support a need to clarify that shippers may be held liable for
non-conforming gas damage," the order said [RP00-39]. It noted
several other pipelines have similar liability clauses in their
But it ordered Natural to strike a part of its proposal that
also would enable it to assign damages for low-quality gas entering
pipeline facilities owned by third parties. "...[N]one of the other
pipeline companies' [tariffs] include reference to damage on
third-party facilities. It is inappropriate for Natural to
reference" this in its tariff, FERC said.
In the event "Natural's system is damaged by non-conforming gas,
then [it].....will need to seek damages through the courts or other
legal procedures outside of the Commission" to determine the
responsible part and the extent of liability.
Last November, the Commission approved the proposed tariff
revision to be effective May 1 based on the condition that Natural
further justify the need for the change. FERC said the pipeline
will have complied with its directive once it removes any reference
to "third-party facilities" from its proposal. It ordered Natural
to do so within 15 days of the order.
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