NGI The Weekly Gas Market Report
The first of a series of industry-sponsored meetings aimed atbringing the divided gas segments closer together on some of themajor regulatory initiatives proposed by FERC got underway inHouston last week. Not surprisingly, industry representatives atthe initial session agreed to narrow the “primary focus” of theirnegotiations to two proposals to ease pipeline rate regulation -short-term capacity auctioning and negotiated terms and conditions.
The closed-door sessions are expected to be a “dynamic process”characterized by “interactive dialogue” that hopefully will resultin, if nothing else, the filing of “richer” industry comments onboth the mega-notice of proposed rulemaking (NOPR) and notice ofinquiry (NOI) in April, said Nicholas J. Bush, president of theNatural Gas Supply Association (NGSA). Bush outlined procedure at apress briefing last Tuesday in Washington DC prior to the firstround of talks. Sources indicated industry representatives quicklygot down to work last week, putting alternative proposals on thetable for consideration.
“…[T]here have been differences of opinion among thesegments in the industry about the need for further [regulatory]changes, about the scope of those further changes, the breadth ofthose changes [and] the nature of those changes,” he noted. Themeetings are intended as a forum to help the various industrysegments bridge some of those differences – to “at least betterunderstand [and possibly accommodate] each other’s position.” TheNOPR/NOI comments to be submitted to FERC will have “more clarity”as a result, he said, adding that no one in the industry “want[s]to do this wrong.”
But Bush doesn’t realistically expect industry to achieveuniformity on all the key issues. “I think that it [would] be naivefor somebody to believe that this would result in four, five or sixor seven filings that [are] homogenous,” he told reporters. Atbest, it’s hoped the meetings will help the various gas segments tofind some common ground.
Bush and other NGSA officials dismissed the suggestion that theindustry-wide meetings had the earmarks of a negotiated-rulemakingeffort. “We’re not doing any rulemaking here. We’re not doing anydealmaking,” Bush said.
“The negotiated-rulemaking concept requires unanimous agreementamong all the parties. Given the different perspectives that thedifferent industry segments have on the issues, that’s not likelyto occur,” noted Philip Budzik, NGSA’s director of federalregulatory affairs. “But that doesn’t mean you can’t come togetheron some of the issues and reduce the degree of contentiousness.”
Industry plans to meet seven times in Houston (on the first andthird Wednesday of each month) until April 22, when comments aredue at FERC. The producers, pipelines and distributors each will have six representatives attending, while the American Public GasAssociation, the Process Gas Consumers Group and Edison ElectricInstitute each will have one representative. Also, there will beantitrust counsel in attendance, and the major gas trade groupswill be represented to take notes for their full membership.Commission staff members have not been invited, nor will the pressbe allowed to attend. “I don’t think it’s a good idea. That mightput a different tone” on the proceedings, Bush said. This is a”shared conversation among the industry” without it having to”weigh every word.”
“These meetings are going to tie up a lot of the associations’time” over the next couple of months, Budzik said. He noted thatNGSA also plans to meet with its own members on alternate weeks toinform them of the progress in the industry talks.
The industry-sponsored meetings were the brainchild of RobbiLuxbacher, vice president of natural gas for Exxon U.S.A., and StanHorton, chairman and CEO of the Enron Gas Pipeline Group. Thedetails of the sessions were worked out among the various gassegments during the past couple of months, Bush said. He lauded theCommission for giving industry a second extension of the deadlineon the NOPR/NOI comments last month, which paved the way for thetalks. “I think this has been a really good move by FERC.”
Auctioning of short-term capacity and negotiated terms andconditions, primarily because of their controversial nature, willtop the agenda at the industry powwows. Although much of theindustry has indicated its distaste for the auction proposal in theNOPR, producers are undecided on the issue, according to Bush.”Everybody has written that the industry has reacted negatively toauctions. Well, we’re not dismissive entirely of the auctionprocess. We think it’s too soon to make some kind of a finaldetermination on any one issue.”
Overall, however, producers “still question the seriousness ofthe need for extensive [regulatory] changes,” he said. They’reespecially concerned that the regulatory initiatives proposed bythe Commission will have a “large and significant impact” on theallocation of capital within the natural gas industry.
Procedurally, the order of importance in which the issues werepresented to the gas industry – with the short-term transportationissues framed in a more-pressing NOPR, and the long-termtransportation issues outlined in a less-urgent NOI – proved”difficult for us to manage,” Bush said. He noted it quickly becameapparent that it was difficult to address the short-term issueswithout first looking at the long term. The two areas wereintertwined. And so the producer group did a reverse, decidingfirst to “talk about what the NOI ought to be, and then maybe we’llmake some decisions about the way the NOPR [ought to be].”
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