If Rockies Express Pipeline (REX) quickly files needed environmental information, FERC will be able to meet the pipeline’s request for an expedited final environmental review and certificate for its REX-East leg, said Chairman Joseph Kelliher Friday.
“We can meet the schedule…if they provide us with the environmental information we need to complete our environmental review,” Kelliher told reporters during a press briefing in Washington, DC. “I don’t think we have all of the information [that] we need yet. But if we get [it], we can meet that schedule.”
REX is pressing the Federal Energy Regulatory Commission to complete a final environmental impact statement (FEIS) in March and issue a certificate in April-May for REX-East, which would extend 639 miles from Audrain County, MO, to the terminus of the entire REX pipeline in Clarington, OH.
Kelliher’s remarks followed a FERC letter sent to REX last month in which agency staff said that “because of missing or incomplete information, we cannot commit to an expedited schedule for the issuance of the final EIS” for REX-East (see NGI, Jan. 28).
As for the number of REX-extension projects that have been proposed to run from Clarington to East Coast markets, Kelliher said he thinks FERC likely will address them on a project-by-project basis rather than consolidate any of them. “We did something like that in New Jersey years ago where we had….multiple projects and we consolidated them…That was a pretty exceptional proceeding. I guess I’ll just take that under advisement. I can’t say just right now that’s what we’re doing.”
Although Dallas-based Energy Transfer Partners (ETP) responded in October to the enforcement charges against it, and Amaranth Advisors provided “some kind of response” last month, Kelliher gave no indication as to when or how FERC would decide the cases (see NGI, Oct. 15, 2007). Amaranth has been charged with manipulation of the natural gas futures market, while ETP is alleged to have manipulated the physical gas market at the Houston Ship Channel and Waha trading hub (see NGI, Dec. 17, 2007, July 30, 2007).
Kelliher noted that key side issues — de novo review of agency enforcement actions and the jurisdictional clash between FERC and the Commodity Futures Trading Commission (CFTC) — have been raised and are pending in federal appellate courts.
In the U.S. Court of Appeals for the District of Columbia Circuit, Amaranth Advisors is seeking review of a December order in which FERC rejected the former hedge fund’s challenge to FERC’s assertion of jurisdiction over alleged manipulation of gas futures contracts (see NGI, Dec. 10, 2007). FERC contends that it has jurisdiction when alleged manipulative trading of gas futures contracts significantly affects prices in the physical gas market, over which the agency has exclusive authority. Amaranth, however, claims that the CFTC has sole jurisdiction over the gas futures market.
As a result of FERC’s new-found authority under the Energy Policy Act of 2005, “I…don’t really think we have the option of electing not to investigate manipulation in [futures markets] that affect physical gas customers,” Kelliher said.
He indicated that Energy Transfer has raised the issue of de novo review in the U.S. Court of Appeals for the Fifth Circuit. The Energy Transfer case has sparked controversy over whether FERC enforcement actions should be subject to de novo review — a new trial in district court.
“I don’t think that you can really read the Natural Gas Act as providing for de novo review,” Kelliher said. If the courts would grant de novo review of FERC enforcement actions, it would essentially nullify agency enforcement proceedings, Kelliher said.
As for the jurisdictional flap between FERC and the CFTC, “I think only the courts can resolve our disagreements because agencies can’t change the statute,” he told reporters.
He doesn’t think Congress should try to resolve the dispute between the two agencies. “I think the courts are the better way to solve it…If Congress were to try to resolve it, you’d have different committees [that] would favor different agencies, and you might end up with ambiguity.”
Kelliher said he championed the inclusion of master limited partnerships (MLP) in proxy groups to determine oil and natural gas pipelines’ return on equity (ROE). “I think that it would almost be perverse to not allow them in.” For Kelliher, “the question really isn’t whether we allow MLPs in the proxy group, it’s simply how.”
In July, FERC’ proposed a policy statement that would allow pipelines to use MLPs in proxy groups to determine ROEs (see NGI, July 23, 2007). While pipelines favor the shift in policy, they are opposed to FERC’s proposal to cap the cash distributions used to determine an MLP’s return under the discounted cash flow (DCF) methodology at an MLP’s reported earnings. The Commission said this action would render MLP cash distributions comparable to corporate dividends for the purpose of a DCF analysis.
On the electricity front, Kelliher expressed strong support for competition in the wholesale power markets and said the push by some for re-regulation of the industry would be a “terrible outcome” for consumers.
“I think competitive markets are working well. There has been criticism of competition, but most of that criticism is really expressing frustration with fuel costs,” he said.
Prices for natural gas, a key input fuel to generate electricity, “are much higher than they used to be and that’s the primary driver for higher electricity prices,” he noted. “I think that some critics lay responsibility for the rise in natural gas and coal prices at the foot of competition policy.”
And Kelliher doesn’t see gas prices coming down anytime soon. “This country has placed a 10-year bet on the adequacy and price of natural gas as it relates to electricity prices. So I don’t expect natural gas prices are going to decline sharply in the near future.”
Kelliher said he is dumbfounded that some believe re-regulation will lead to lower fuel prices. “I don’t see what the rationale for that is.”
As for the concept of re-regulation, “you can’t put the genie back in the bottle,” and “I think that would be a terrible outcome for consumers,” he said.
Kelliher noted that regulation, which he supports, is good at some things — encouraging investment in new energy facilities and dealing with manipulation of energy markets. Competition, on the other hand, is “much better at deploying new technology.” Regulation produced the rotary telephone, while competition led to the Blackberry, he said.
And in a re-regulated world “the country would be doomed to fail to meet the climate challenge.”
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