The Federal Energy Regulatory Commission is considering callingon government and industry resources to help make its ownassessment of the future demand outlook for natural gas in theeastern half of the United States and the need for new pipelinecapacity, Chairman James Hoecker said last week.
The item has been placed on this Wednesday’s consent agenda as ageneral policy initiative, butHoecker said he wasn’t certain ifthe Commission would act on it at the meeting [PL99-2]. “We have todecide that internally. We’ve got a place-holder there [on theagenda for the item], and we’re going to try and figure…outbetween now and the meeting” whether to take any action, he saidlast Thursday following a luncheon speech to the Natural GasRoundtable in Washington D.C.
The Commission, facing strong advocates and contentiousopposition, so far has dodged major decisions on a variety of newpipeline projects proposed for the East. A study could provide therationale for future decisions.
The fact that the policy initiative hadn’t been put on thediscussion agenda suggested, at least to some industry sources,there was some uncertainty on the part of the Commission. “When Isaw it and looked at…where it was on the agenda, I said to myself’Don’t hold your breath.’ If they felt like they were going to moveahead, they would have put it on for discussion,” said a FERCobserver.
If the Commission should decide to move forward on this, “Ithink what we’re going to do is end up with fundamentally adata-collection exercise” to evaluate future gas demand, usingperhaps the expertise of the Energy Information Administration, theelectric industry and other gas customers, Hoecker noted. “But wehaven’t really figured out what the scope of it’s going to be, andhow we’re going to run it.”
He said he didn’t “really want to say too much [about it]because it could go in a variety of different directions.”Personally, “I’m interested in finding out pretty much what’shappening east of the Mississippi. I don’t know if that’spossible.”
Industry sources reacted cautiously to the news of a possibleFERC gas-demand review, given the lack of details. If it’s a”narrowly focused” exercise to assess natural gas demand, “thenit’s a good idea,” said one observer. “But if it’s a generalfishing expedition where you spend a lot of time listening to whyeveryone’s particular project is better, that doesn’t accomplishmuch.”
Hoecker didn’t dismiss the possibility of FERC holding aconference on the demand issue, noting that it still was “talkingabout” it. Both the Interstate Natural Gas Association of Americaand the Edison Electric Institute have asked FERC to sponsor aconference to judge the future level of gas demand in theNortheast, and the amount of new capacity needed.
The Commission’s initiative to possibly take a closer look atprojected gas consumption comes after it bypassed preliminarydeterminations (PDs) for four pipeline projects to the Northeastlast month due to questions about the “need’ for them. FERC wasvery divided on the PD issue, with commissioners Vicky Bailey andCurt Hebert Jr. dissenting.
“But I think all of us [on the Commission] are very interestedin ascertaining the nature of growing natural gas demand not justin the Northeast, but in other growing markets – Florida, theAtlantic area, Wisconsin [and] other areas in the Midwest – to helpus inform ourselves about the need for capacity,” Hoecker said.Data culled from the general-policy initiative, if undertaken,would be “complemented” by the gas industry’s comments on themega-notice of proposed rulemaking (NOPR), which also raised the’need’ issue [RM98-10]. Industry comments are due later this monthat FERC.
“I think we’re going to have a lively internal discussion aboutit [gas demand], and hopefully [will] arrive at a consensusapproach to making these kinds of decisions in the future” withrespect to the need for new capacity, he told a packed room of gasindustry executives and trade group representatives.
On a related issue, an official of Columbia Energy, one of thesponsors of the Millennium project, asked Hoecker whether hethought pipeline affiliate contracts and third-party contractsshould be viewed similarly or differently when judging the ‘need’for a project.
“Whether we ought to make a distinction is a fair question.Frankly, I think a contract’s a contract,” Hoecker said, but headded it also “depends on the circumstances surrounding it and theterms of the contract.” He conceded that FERC commissioners “havenot put our heads together and come to a common understanding [on]exactly how to interpret” the issue.
With respect to the NOPR comments that are due soon, Hoeckerindicated he wasn’t expecting a lot of agreement on major issuesfrom the gas industry. “Admittedly, we may receive few consensusproposals or responses to the NOPR,” he said, but nevertheless hethinks the entire natural gas industry will have benefited from themonths-long examination of existing FERC regulations and policies.
“This process has been unprecedented. I hear a lot about howFERC proposes a rule and that the fix is in. But I think this is aperfect demonstration of how the industry, the public and theCommission can engage in a substantive, meaningful dialogue overmany months, and hopefully will come up with some good answers,”Hoecker noted.
“I, for one, am extremely optimistic about what this record isgoing to tell us, and I’m very anxious to start reading” the NOPRcomments.
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