A very divided FERC yesterday broke with a decade-old procedureby leapfrogging the preliminary determination (PD) step in fourcontroversial pipeline projects intended to serve the Northeast gasmarket. Instead, it deferred action on the fate of the projectsuntil all the environmental reviews are completed – “hopefully” byearly next fall.

In a 3-2 split — predicted last week by Daily GPI (See GPID, March 5), the Commission majorityindicated that the wide range of issues and concerns raised by theprojects – specifically, the unparalleled level of landowneropposition, questions over the “need” for the proposed pipelines andenvironmental concerns – warranted a break from its PD procedure, ifonly in these cases.

The “confluence” of the issues in the four projects -Independence, Millennium, SupplyLink and MarketLink – calls for”decision-making that affords us the ability [to consider] thewhole record at one time,” said Chairman James Hoecker. FERC needsto be able to “balance all the interests and concerns” – publicinterest, economic, landowner and environmental – in one fellswoop, he noted, adding the current bifurcated certificate processdoesn’t allow for this.

Hoecker stressed the Commission’s action wouldn’t stop it fromissuing PDs in other pipeline projects in the future. “I don’tcontemplate any precedental effect from this decision.” He said hewas not opposed to PDs. “I recognize that the industry has come torely on them and I recognize that they have some benefits that arevery important.” Typically, PDs provide “some assurance” thatprojects will go forward, enabling pipelines to obtain financingand shipper commitments, Hoecker said. But he had “some questionsabout whether a PD…would promote these particular goals in thesecases.”

Although “not insensitive to the volume of opposition” to theprojects, Commissioner Vicky Bailey said she was at odds withHoecker on this issue. Her “first and fundamental concern” was thatFERC was causing regulatory delay by not awarding PDs. She allowedthat the four projects were “hard cases, difficult cases,” but sheadded “I think that in the end all parties are served better by afair and reasonable decision in a timely fashion…”

Eschewing PDs for these projects “puts pressure on us I believe,not to issue PDs in future cases.” Her second concern was that FERCwas changing the process in midstream. “This is a process that theindustry has come to depend on,” even though it’s not formalized inFERC rules or in the Natural Gas Act (NGA).

Bailey suggested the FERC majority was putting too much stock inthe meaning of its PDs. “A PD is just that – a preliminarydecision. It’s not irretrievable; it’s not irresponsible.

She insinuated that the Commission was holding the four projects”hostage” to the outcome of the mega-notice of proposed rulemaking(NOPR) and notice of inquiry (NOI), which address the PD procedureand whether it should be changed. Hoecker flatly denied thischarge. “In fact, I don’t think that a final certificate order inthese cases will occur in any different point in time than theywould otherwise have.” Lining up with Hoecker were CommissionersLinda Breathitt and William Massey against Bailey and CommissionerCurt Hebert.

Under questioning from Bailey, Hoecker said the “best casescenario” calls for Commission to issue final orders on theprojects “hopefully” early next fall, but he added a lot depends onwhether the environmental reviews are completed in time. Scopingmeetings are scheduled for both projects.

The “collective view” is that early fall is achievable, assumingnone of the applications are amended or no further extensions aregranted, he said. The chairman has made “clear to me” that theprojects are a “priority” in the certificate area, and will be sountil decisions are handed down.

Although a “little disappointed that FERC didn’t follow itsnormal procedure,” Frank Ferazzi, vice president of customerservice and rates for Williams Gas Pipeline/Transco, said he wasencouraged the projects will be a top priority at the Commission,and that final decisions were promisedin the fall. Based on theseassurances, he said Transco will continue to move forward with itsMarketLink expansion from the Leidy, PA, hub to the New York area.

Transco also is partner in the controversial Independencegreenfield project, along with ANR Pipeline and National Fuel GasSupply. Asked if Independence might consider merging with theMillennium project in the wake of FERC’s move, Ferazzi said it’s”hard to rule anything out,” but he added no “serious discussions”have been held about that lately.

However, in a prepared statement, Millennium sponsor, ColumbiaGas Transmission, said it was firmly committed to its project, andhoped it “[would] not be tarred with the brush of the highly vocallandowner objections to our competitor’s project,” namelyIndependence.

Additionally, Bailey asked Hoecker whether the projects raised”novel” landowner issues that caused the FERC majority to want toleapfrog the PD step. The “sheer numbers” of landowner concerns,particularly with the Independence project, do make the cases “ifnot unique, certainly somewhat unusual,” Hoecker countered.

“…[W]e live in an environment now where pipeline construction[is] subject to much more public and congressional scrutiny,”requiring FERC to take the time to “balance” all of the interests,he said. Bailey said she agreed, but added that she thought the”tension level and stress level [would be] helped” if landownersknew early on how the Commission was leaning with respect tospecific projects.

Hebert said opponents of Commission action pointed to the highlevel of landowner opposition and questioned the “need” for theprojects, but he said he found these reasons “unavailing.”

“It is the number of landowner concerns that is cited, not thequality or the content of those concerns” as the basis for a policychange, Hebert said. He added that he found it “troubling” thatFERC was letting itself be “manipulated by size,” rather thanaddressing the issues in the pipeline cases. “What pipeline projectfor substantial construction has not engendered landownerconcerns?” he asked. Additionally, he noted he wasn’t convincedthat an increase in the use of affiliate contracts was enough towarrant skipping the PD process.

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