Regulations related to the construction of interstate gaspipeline facilities took center stage at FERC last week, with theCommission proposing on one hand two initiatives aimed atstreamlining and expediting the certificate process for newprojects, while at the same time seeking through a third measure toexplore the possibility of involving landowners earlier on in theprocess – a move that, while generally viewed as inevitable andeven necessary, could pose added headaches for gas pipelines.

FERC commissioners unanimously voted out three companionmeasures – a notice of proposed rulemaking (NOPR) that would expandthe scope of blanket certificate authority for pipelines, as wellas offer a number of other “housekeeping” changes to FERC’s Part157 regulations [RM98-9]; a second NOPR that would give gaspipelines the option to engage in a collaborative process – withlandowners, environmentalists et al – to resolve conflicts prior tofiling their applications [RM98-16]; and a notice of a technicalconference to address, among other things, FERC’s current landownernotification process [RM98-17].

The combined efforts “will be important to the rational andappropriate expansion of pipeline capacity in the future consistentwith environmental requirements and landowners’ needs, and [they]will expedite our procedures…,” said Chairman James Hoecker.

The chairman singled out the proposed use of the collaborativeprocess for gas pipeline projects as “particularlyimportant…because it has as its goal the improvement ofcommunication, enhancement of public participation in our process,and the resolution of conflicts early…” It would be modeled afterthe process being used on the hydroelectric side for therelicensing of projects. In certain hydro relicensing cases, “youidentify all interested parties – landowners, resource agencies andany other interested [persons] – and bring them together…to talkthrough what the issues are, to come to some common understandingabout what studies you’re going to do, and to try to work out theterms and conditions under which the project will be relicensed inan ‘informal, non-adversarial fashion’ before the application isfiled,” a FERC staff member explained.

“We’ve had good success with it. We’ve probably got 30 hydroprojects that are using those processes now. It has significantlyaccelerated the time between when the application’s filed and whenthey issue [a] relicensing order, and we’ve avoided rehearings andcourt appeal[s],” he said.

Commissioner William Massey thinks the use of the collaborativeprocess is “an idea that we should definitely explore.” But it maynot be appropriate in every case.

The Interstate Natural Gas Association of America (INGAA) alsoquestioned whether the collaborative exercise would be of muchvalue to pipelines. “The dynamics of hydro relicensing and buildinga new gas pipeline in terms of negotiating with intervenors arereally a lot different,” said Lorraine Cross, senior vice presidentof regulatory affairs. “In a hydro relicensing case, you’rerelicensing an existing facility and you’re talking about addingnew licensing conditions, which the intervenors will regard ashaving a benefit to them. So they obviously have an incentive tobring the negotiations eventually to a close because they can’t getthe benefits until then. In the meantime, the facility continues tooperate status quo.”

Comparatively, however, gas pipeline project cases usually aremore contentious, she noted. “In some gas pipeline certificateapplications, you have pipelines against pipelines, and they’llnever give up.” And then there is the growing opposition fromlandowners. She believes the collaborative process – which FERCproposes as an option but is considering making mandatory – onlywould work if pipelines already own the rights-of-way to theirprojects, such as in the case of the conversion of an oil pipelineto natural gas.

From the pipeline standpoint, Cross believes the Commission’sNOPR addressing blanket certificate authority will be morevaluable. It “sounds as if it would expand the scope of thatregulation, which would mean that for a lot of what you might callroutine projects that are now being treated as major Section 7 (c)applications [subject to a lengthy certification process], you caninitiate construction at your own risk and expense without priorFERC approval.” Using the expanded authority for projects such asuse of temporary compression and uncontested abandonment “shouldsave the Commission a lot of time and certainly will save us [thepipelines] a lot of time and expense.”

For Massey, the proposed revisions to FERC’s Part 157regulations, the crux of which is the expansion of the blanketcertificate authority, “aren’t sexy, but…the combined effect, Ithink, will help us increase the speed with which the Commissioncan process certificate application[s].” Toward that objective, theCommission also proposed “to increase the spending limit on theconstruction and acquisition of facilities that can be acted on bythe director of [the Office of Pipeline Regulation] from $5 millionto over $19 million.” The last time FERC raised the limit was inthe mid-1980s. “So it’s certainly time to take a look at that againwith inflation and all.” Specifically, the NOPR would allowpipelines to construct, operate, rearrange, replace or abandon morefacilities than currently are covered under their blanketcertificate authority; revise FERC regulations to facilitateconstruction of receipt points; allow pipelines to construct andoperate temporary compression stations under their blanketcertificate authority; require that prior-notice applications benoticed within 10 days of an application; and delegate to thedirector of the Office of Pipeline Regulation the authority todismiss protests that don’t raise substantive issues or fail toprovide detailed reasons for an objection.

Pacifying Landowners

As for the third and last initiative, FERC plans to hold atechnical conference in December to closely review its existingpolicy for notifying landowners. This is seen as a first steptoward a possible NOPR or some other action that would proposechanges. This largely is in response to mounting landownerdissatisfaction with the spate of pipeline projects proposed indensely populated areas of the country. In addition, it comes inthe wake of legislation sponsored by Sen. Fred Thompson (R-TN) thatwould require landowners to be formally notified by certified mailof any pipeline projects that could cross their property.

“Right now we [FERC] require that the pipeline submit a list oflandowners at the point where we give notice of our [environmentalreview]. Then that notice is mailed out to the list oflandowners…That’s sort of part way into the process. And thequestion that’s being posed here is should that [landownernotification] be earlier,” noted the FERC staff member.

INGAA’s Cross said pipelines already have responded to theCommission, offering to voluntarily notify affected landownerssituated along a project’s right-of-way as soon as an applicationreceives a docket number, which is the day after it’s filed, and tosend them a copy of a FERC brochure that describes in “prettyneutral terms what their rights are and how they could intervene inthe process.” The proposal still is pending.

Greater landowner involvement, which would result from this NOPRand the recent proposed rulemaking exempting certain off-the-recordcommunications between FERC staff and landowners from ex parterules, would undoubtedly complicate the certificate process forpipelines, Cross said, but she and others think it’s an inevitablefact of life.

Presently, some of the “most pronounced” landowner concerns arebeing seen on the Independence Pipeline project, as well as withsome of the other large new projects that would transport gas fromChicago to the East Coast, the FERC staff member noted. “It’sinteresting in parts of the country where oil and gas explorationand development are sort of part of the local economy, these[landowner] issues don’t loom so large. That’s part of the businessclimate there.”

Also, although rising landowner dissatisfaction is owing inlarge part to new projects being sited in virgin and denselypopulated areas, “I think some of it stems from [the fact that]some companies are better at customer relations than others…Ithink that there’s been some sort of public relations problems insome areas,” he said.

Susan Parker

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