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Natural Can Declare Shippers Liable for Damages

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 tariffs.

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.

Susan Parker

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