Maybe it was because it was Thanksgiving, but FERC was in a veryunderstanding mood last week. It agreed Natural Gas Pipeline Co.of America (NGPL) had failed to justify the need for a proposedtariff change that would hold a “party tendering gas” liable forpipeline facility damages that are caused by lower-quality gasentering NGPL’s system. The Commission, however, didn’t reject theproposal.

Instead, it gave the Midwest pipeline “the opportunity toprovide supplemental information” to support “its claims ofoperational requirements or problems that it is experiencing withparties tendering non-conforming gas” into its system. It alsodirected Natural to “address the [other] concerns raised byprotesters.”

FERC ordered Natural to submit the additional information within15 days of the order, after which parties can file supplementalprotests or comments. In the meantime, it has accepted the proposedtariff revision and suspended its effectiveness until May 1 or adate established in a subsequent order (whichever is earlier),subject to conditions.

For Dynegy Marketing and Trade, a key concern was Natural’sdefinition of the “party tendering the gas.” If Natural plans to”place the responsibility for gas not meeting qualityspecifications on the shipper, then the proposal is unreasonable inthat the shipper has no ability to control the qualityspecifications of its gas. It is the pipeline or system operatorthat typically is in charge of monitoring gas quality and ensuringthat it falls within the stated specifications,” Dynegy told FERCin its protest.

Even though the system operator or pipeline would likely be theliable party, Dynegy said it opposed putting any language inNatural’s tariff that “would predetermine which party isresponsible for any damages that might occur from lower-quality gasentering Natural’s system.”

The Houston energy marketer said Natural always has the optionto file a civil lawsuit to recover facility damages caused bysomeone’s negligence. But it fears that if the tariff is changed asrequested by Natural, the pipeline may be allowed to “imposeliability without necessarily demonstrating any fault on the partof the party tendering the non-conforming gas.”

In last week’s order, FERC directed the pipeline to specificallyaddress the lack of an “apparent mechanism by which a tenderingparty may challenge Natural’s determination of liability anddamages,” as well as the “appropriateness” of Natural assigningliability not only for the damages to its facilities caused bylow-quality gas entering its system, but to facilities owned bythird parties.

Indicated Shippers, which include major producers and marketers,said Natural has no business determining damages to third-partyfacilities caused by non-conforming gas. “It is inappropriate forNGPL to include a provision in its tariff in which it attempts toassign responsibility for damages on any facilities other thanthose owned by NGPL.”

Indicated Shippers also agreed that Natural has failed tojustify the need for the proposed tariff revisions. “….[N]othingin the record in this case indicates that NGPL has any operationalproblems related to non-conforming gas.”

The Process Gas Consumers, American Iron and Steel Institute andInternational Paper Co. echoed the sentiment. Natural “has notindicated…..whether it is experiencing problems with partiestendering non-conforming gas to NGPL’s system or what, if any,’damages’ to its own facilities or those of other receiving orthird parties may have occurred to prompt the proposal of this newtariff change.” Susan Parker

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