Commissioner Curt Hebert Jr. said a decision in a Granite StateGas Transmission case this week signaled a “radical departure” inthe current policy used by the Commission to judge whether aproposed project has sufficient market demand. Since Order 636, theCommission has required pipelines and other companies to show thatmost, if not all, of a project’s capacity was under long-termcontracts to gain a certificate. “All of that changed [last week],”Hebert told NGI in an interview.
“You had a majority of the Commission who stood up and said,’You can have five settlement conferences, you can be heard beforethe Chief ALJ, you can have a full Commission hearing, you can meetall the standards of the current market policy for need, and we’restill going to put [your project] off because we’re going to try todecide what’s best for your future as opposed to letting youdecide.”
The three senior members of FERC were reluctant to concede thata policy shift had occurred, but Hebert was outspoken on the issue.”I think it certainly would be naive for anyone to suggest that[the Granite State] case does not represent change in currentpolicy. You can try to hide from it, but the facts speak forthemselves. And when people look at this case, pipelinesspecifically, they have got to get real nervous about whether ornot they’re going to move forward with projects,”
The Granite State decision, he said, should not be viewed as anisolated occurrence. “I can tell you it’s not a one-time thing forme.” In fact, he predicted that “in any case that comes before usnow, if someone doesn’t want the pipes or they don’t want tanks inthe ground, they’re going to [cite] this case” as precedent.
The issue of a policy change surfaced when FERC, by a 3-2 vote,set for hearing again Granite State’s proposal to build acontroversial 2 Bcf-capacity liquefied natural gas (LNG) tank inthe Maine community of Wells. Specifically, it set for hearing theissue of whether two pipeline projects, Portland Natural GasTransmission System (PNGTS) and Maritimes & Northeast, couldact as viable supply alternatives and meet the peak-shaving needsof Northern Utilities (NU), an LDC affiliate of Granite State thatwould be served by the LNG project. Although the issue ofalternatives to the LNG project was raised at the Commission oralargument last January, the senior FERC members insisted it wasn’tresolved. Both Hebert and Commissioner Linda K. Breathittdissented.
“What kind of signal is this sending to the industry? This casehas been going on since July of ’96. It’s probably not going to beresolved best-case scenario until July ’98, which means theproject’s probably not going to be completed, if at all, until2001. That’s horrible lead time,” said Hebert. “Who can plan aproject based on that type of lead time?”
Hebert said he could see how the Granite State order would makethe pipelines feel uneasy. “Why should pipelines be excited aboutputting new pipes in the ground if, in fact, they’re not sure theycan [obtain certification] once they prove need. The proof requiredfor need right now is a contract. And you’ve got a Commission thatsays ‘Well, that’s not enough right now. We’re going to look behindthe contract.” He doesn’t think it’s FERC job to look behind thecontracts. Indeed, he raised the very same issue in an order lastmonth that resolved a transportation dispute between Texas EasternTransmission (Tetco) and Public Service Electric and Gas. “I gotvery upset” there, he noted. “We don’t need to become the FERC thatsays on one hand ‘We’re going to have lighter handed regulation andwe’re going to be a referee and not the police, and then, on theother hand, come back and say, ‘But by the way, we’re going tostart looking behind your contracts because we know how to run youbusiness better than you do.'”
This attitude on the part of FERC “is not consistent, it’s veryunfair, it’s over-regulation, …and just like I said in the TexasEastern dissent I wrote, it’s cannibalistic regulation,” Hebertsaid. He noted it was a prime example of the Commission being “toomettlesome” in the natural gas industry’s affairs.
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