The Federal Energy Regulatory Commission yesterday approved aninitiative calling for it to conduct an inquiry into projecteddemand for natural gas in the Northeast quadrant of the UnitedStates and the corresponding need for new pipeline capacity in theregion.

The Commission has selected a public conference as the forum toconduct its inquiry, which will focus on anticipated gas demand andcapacity needs in the region east of the Mississippi River andnorth of Tennessee and North Carolina. It has scheduled theconference for June 7th, and is seeking input from the entireenergy industry.

FERC indicated it was undertaking the effort in an attempt tomake some sense out of the conflicting and disparate projectionsfor gas consumption and new capacity requirements in the targetedregion. This would provide “valuable insight into the developmentof a rational certificate’s policy,” Commissioner Linda Breathittsaid.

“I view this as fundamentally a data-collection exercise,” notedChairman James Hoecker. “Although we have lots of gas policy issueson the table, I don’t view this necessarily as a broad explorationof policy.”

FERC’s focus will be on “ascertaining what is probable and whatis unlikely in terms of demand growth in the Northeast quadrant,”which encompasses the Northeast, Midwest and part of theMid-Atlantic, he said. Although “this is not the whole enchilada, Ithink it will supply a useful [snapshot]” of the projected demandoutlook.

Breathitt said she supported the inquiry, but would havepreferred the scope to have been expanded beyond the Northeastquadrant. She believes it should have included all markets east ofthe Mississippi River, according to her staff.

“For us to restrict this conference to the Northeast does notrecognize the fact that…changes in capacity serving one regionmay affect pipeline operations in another region of the country,”possibly reducing the utilization of those facilities and affectingthe value and use of capacity release, Breathitt said.

Furthermore, limiting the scope to the Northeast quadrant “failsto recognize the fact that other regions of the country are alsoexpected to experience substantial growth in demand for naturalgas,” she noted. The certificate filings pending before FERC”indicate to me that projected demand for natural gas in theMid-Atlantic and Southeast [warrant] an equal examination by theCommission.”

She also questioned the “timing and the forum” that FERCselected to conduct the inquiry. “I don’t believe the Commissionhas reached a consensus concerning the ultimate goals of theconference.” Nor does it have “a unified sense of how thisconference fits in with the other generic and case-specificproceedings currently before us,” Breathitt said. Despite hermisgivings, she joined the FERC majority in approving theconference, saying that it would provide “at least a piece of thepuzzle” with respect to gas demand.

“I think it is appropriate for the Commission to take a deepbreath and avail itself of the opportunity to examine any availablecredible data that will enable [it] to formulate policies that: 1)approve the construction of necessary facilities; and 2) factor inthe full use of existing capacity,” remarked Commissioner WilliamMassey.

In the order approving the conference, he noted FERC posed anumber of “thoughtful” questions to the energy industry, such ashow much existing capacity is available to satisfy gas growth inthe market; can the utilization of existing capacity be increasedand, if so, how; and which new projects will be needed to meetgrowing gas demand. Industry has been asked to file writtenresponses at FERC within 15 days after the conference. Requests tospeak at the conference should be submitted by May 10th.

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