A leading gas marketer last week decried FERC’s reprimand ofNatural Gas Pipeline Company of America (NGPL) formarketing-affiliate improprieties as being far too light. The minoradmonishment, according to Natural Gas Clearinghouse (NGC), failedto provide adequate redress to the overall market, and to producersand marketers victimized by the Midwest pipeline’s wrongdoing.

A key critic of Natural’s behavior, NGC assailed theCommission’s decision to suspend half of the $8.8 million civilpenalty on the condition the pipeline remains on its best behaviorover the next two years. It called on FERC to reinstate the maximumfine, and to “reach deep into the arsenal of tools” it has at itsdisposal to impose stern remedial actions against Natural. Thepenalty alone – particularly one that has been cut in half – won’tbe enough to discourage Natural, or other interstate pipelines,from engaging in illicit affiliate activities in the future, themarketer said.

In addition to a maximum civil penalty, NGC urged FERC to orderNatural and its marketing affiliate, MidCon Gas Services, to”disgorge” all profits made from marketing-affiliate violations;prohibit MidCon Gas from conducting business on Natural for atleast as long as the Commission found the violations to haveoccurred (442 days); demand full separation of MidCon Gas fromNatural; require MidCon Gas to “disgorge” any capacity obtainedthrough its improper activities; and to require Natural and MidConGas to reveal, subject to a protective order, the details of thegas sales agreement with Amoco Production.

These measures would “send a strong signal” to the industry thataffiliate abuse will not be tolerated, the marketer said.

The Commission slapped Natural with the multi-million dollarcivil penalty last month for displaying favoritism to MidCon Gaswhen awarding transportation capacity, a move that gave itsaffiliate a competitive edge over non-affiliate shippers. Theallegations of preferential treatment first surfaced in a complaintfiled by Amoco last year.

Requiring pipelines to return profits reaped from illegal,affiliate transactions was a remedy that was contemplated by theCommission when it adopted the marketing-affiliate standards, NGCnoted. Specifically, it said FERC has the authority to require NGPLto “disgorge” its profits under the Natural Gas Act (NGA) and theNatural Gas Policy Act (NGPA).

Divorcement of Natural from MidCon Gas operations is needed to”return to the market the illegally obtained share of the marketcaptured by MidCon, thus reestablishing, to the greatest extentpossible, the competitive market that existed prior to theviolations,” NGC told FERC [RP97-232].

NGC also urged FERC to allow third-party inspection, subject toa protective order, of the gas sales agreement betweenNatural/MidCon Gas and Amoco Production. The sales agreement ispart of a settlement negotiated between the parties last summer,privately resolving the affiliate-abuse allegations that werelodged by Amoco and which ultimately led to the reprimand by theCommission.

NGC says any “above-market dollars transferred to Amoco underthis contract reflect not only the damages to Amoco, but areindicative of the damages to others in the market. Amoco aloneshould not be compensated, and surely should not share inperpetuated ill-gotten gains.”

In a separate, yet parallel filing, NGC asked FERC to rethinkits decision requiring all of Natural’s capacity to be awardedthrough an open auction process [RP97-431], which would undulyrestrict other shippers in doing business with Natural.

Susan Parker

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