The Gas Technology Institute (GTI) told FERC in an application last week that it believes the gas industry needs, and pipeline industry supports, a new gas research, development and demonstration (RD&D) surcharge on gas transported on interstate pipelines — albeit a much smaller one than the one that currently is in place.

GTI is requesting that a 0.56-cent/Dth surcharge be added to interstate pipeline tariffs and levied on gas transportation starting in January. It amounts to an annual funding requirement of about $44 million.

The current Gas Research Institute (GRI) surcharges are being phased out on Aug. 1 because of a settlement agreement the industry signed in 1998. At that time, pipeline companies argued that the surcharges were too costly and were giving competitive advantages to some pipelines. GTI believes this much smaller surcharge — about one-third of the GRI surcharges in 2002-2004 — will be much easier to swallow, in part because they will be used primarily to fund gas transportation and delivery research and development projects.

“As we prepared this application, we found strong gas industry and stakeholder support for a collaborative approach to research and technology development and demonstration,” said GTI President John F. Riordan. “We think the proposed surcharge mechanism addresses the RD&D funding issue in a fair and equitable way.”

GTI spokesman Joe Hilyard said the organization, which is the primary successor to GRI, had a “good deal of discussion” with the pipelines that will collect the funds and with the Interstate Natural Gas Association of America, which represents interstate pipelines. “We think that the program is one that is going to be of interest to them,” he said.

GTI’s application requests approval of a collaborative gas industry RD&D program and associated budget for 2005 and places the proposed 2005 program into the broader framework of a five-year (2005-2009) RD&D plan.

The program consists of 48 potential RD&D projects in 20 broad areas, ranging from advanced gas supply options, pipeline integrity management, and gas storage to pipe and leak location, infrastructure security, and advanced cogeneration systems.

The application proposes a 2005 funding level in four broad areas of interest to the gas industry and gas customers: gas supply ($7 million), gas transmission ($11 million), gas distribution ($19 million), and gas utilization ($7 million), as well as $4 million for program management and administration. GTI estimates that the RD&D program would cost the average U.S. household 50 cents per year.

“Continued development of advanced technology by the gas industry has never been more important,” said Riordan. “U.S. natural gas production has been essentially flat over the past five years, while gas demand is projected to grow by 35% by 2025. It will take a range of new technology to develop additional gas supplies as well as to expand and protect the U.S. pipeline system, control gas delivery costs, and ensure that gas is used in the most efficient and environmentally acceptable ways.”

If FERC approves the application, a new independent board of trustees will be formed to oversee the program, which would officially begin in January. In addition, GTI has proposed the creation of sector-specific committees addressing gas supply, gas transmission, gas distribution, and gas utilization to provide input and guidance on RD&D priorities, funding levels, program execution, and related issues. GTI will serve as the initial administrator of the program, under a contract with the board of trustees.

For more information on the program go to the GTI website: www.gastechnology.org.

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