A FERC official last week confirmed that the Commission staff isreviewing its crucial “need” test used in certifying new pipelineprojects to determine whether any changes are warranted.

The existing policy, which has been in effect since Order 636,requires a pipeline to show that most, if not all, of a newproject’s capacity is subscribed under long-term contracts in orderto win FERC certification. But a spate of landowner protests and anincrease in the amount of project capacity being held by pipelinemarketing affiliates have prompted the staff review into whetherother factors should be weighed in the certification process, saidMarsha Gransee, associate general counsel of oil and gas at FERC.

Some staff “always have been uncomfortable” with just usinglong-term contracts to satisfy the Commission’s “need” test, shesaid. Gransee noted the issue is only in front of staff at thispoint; it has not reached the Commission level.

There has been an “incredible amount” of complaints about newpipeline projects from affected landowners, she noted. In addition,practically “every pipeline project that comes through the door hashad an incredible amount” of the capacity subscribed by thepipeline’s marketing affiliate. Taken together, these two trendshave raised significant concerns at FERC about its existingcertificate process, Gransee said.

If the Commission is going to question the contracts of pipelinemarketing affiliates, “do you also [plan to] look behind thecontracts of [independent marketers] Enron and Natural GasClearinghouse and the rest of the marketers?” an energy executiveasked Gransee at GasMart/Power ’98 last week. “Otherwise, you havea totally discriminatory process.”

The Commission’s “need” policy, at least for now, will remainintact. However, it could change down the road. “That’s correct,”she noted.

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