Giving pipelines the presumption in favor of rolled-in rates mayhave been a good idea a couple of years ago, but CommissionerWilliam Massey says he’s now beginning to have second thoughtsabout that decision.

“I’ve just been thinking about the changes in the gas marketover the past few years and whether we made the right call infavoring rolled-in rates,” he said in an interview with NGI lastweek. “I haven’t made my mind up about that” yet, but “I do thinkit would be very useful for us to debate that question right now.”An alternative to the rolled-in rate presumption, he noted, wouldbe either no presumption at all, or simply requiring those shipperswho sign up for new capacity to pay for it.

Massey believes a debate on this issue and others isparticularly important in light of the fact that more and morecapacity is being held by pipeline marketing affiliates. “I thinkwhat this Commission needs to think about is whether our policiesare somehow discouraging long-term commitments by capacity-holdersother than affiliates.”

He also wants FERC to take a close look at the certificationprocess, which he said is becoming “more complex” at a time whenthere’s a “push” to increase pipeline capacity by almost one-third.He sees the process now being transformed by outsideforces-landowners-that are more organized and more vocal in theiropposition to proposed pipeline projects. “…[T]hey certainlyweigh in before this Commission with more force” on environmentaland local concerns than they did in the past.

FERC is “right in the middle of all of this,” he said. “We wantto grow the gas market, we want to meet the needs of a 30 Tcfmarket” that’s anticipated in 15-20 years, which would require theinstallation of an additional 8 Tcf of new pipeline capacity, butit’s taking place “in an environment that appears to be morepolitically charged.” The key question facing the Commission is”how do we weigh all this, how do we sort it out, with all thesecrosswinds.” FERC will have a “very tough job [of] balancing all ofthese competing” concerns.

Massey stopped short of saying that FERC is bowing more toenvironmental and local concerns when deciding whether to certifypipeline projects, but he said “it seems to me that in recent casesenvironmental concerns have been highlighted more.” This may havebeen “just because of the particular facts of those projects, or it[may have been] that the advocates before the Commission, who haveconcerns about projects, have become more sophisticated in makingtheir cases.”

He cited several pipeline project cases-Granite State GasTransmission’s LNG project in Maine, United States Gypsum Corp.’spipeline facility in Tennessee/Alabama and Southern Natural Gas’pipeline extension into northern Alabama-that have generatedsubstantial local opposition. “I think [these are] just symbolic ofthe problems to come.”

Massey said his “hunch” is that the Commission’s certificationprocess will evolve on a case-by-case basis rather thangenerically. He expects changes to the certification process, aswell as issues such as flexible terms and conditions for pipelinesand reform of the secondary market, to be addressed by FERC thisyear. These are among the many second-generation Order 636 issuesincluded in an options paper that’s currently being reviewed at theCommission. “There is a considerable focus on gas issues [at FERC]right now.”

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