The National Association of Regulatory Utility Commissioners has ratified a resolution calling on the Federal Energy Regulatory Commission to reconsider its recent decision removing the five-year cap that limited the length of contract term that an existing shipper must match in order renew an expiring pipeline contract under the right-of-first-refusal (ROFR) process (see NGI, Nov. 4). The action came at the group’s annual meeting in Chicago last week.

Existing pipeline shippers, who believed FERC’s requirement of a five-year term cap under ROFR thwarted potential abuses, opposed removal of the cap.

There was no apparent policy reason behind the Commission’s action. The agency just wants to “quit getting kicked in the ears by the courts” over the ROFR term cap, so FERC has removed it, Chairman Pat Wood told reporters at the time. “You get beat up enough by the courts, you just roll [over].”

Under the Commission’s ROFR rules, an existing pipeline shipper whose contract was set to expire was required to match a competitor’s bid up to a pipeline’s maximum rate at a maximum term of five years in order to keep his capacity. But FERC’s latest action removes all term restrictions on shippers. Without the cap, shippers will have to match whatever term is stipulated by a competing bidder.

The term limit issue has been a contentious one between the U.S. Court of Appeals for the District of Columbia and the Commission over the years, resulting in several remands. The court said FERC failed to provide an “affirmative explanation” for the choice of five years.

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