Shippers on Natural Gas Pipeline Co. of America (NGPL) havecalled on FERC to reject a tariff proposal that would hold the”party tendering gas” liable for damages to the pipeline’sfacilities and third-party facilities that are the result oflower-quality gas entering NGPL’s system. Many contend the proposedtariff change is much too vague.

“…..[I]t is unclear what Natural means by ‘the party tenderingthe gas.’ If Natural intends to place the responsibility for gasnot meeting quality specifications on the shipper, then theproposal is unreasonable in that the shipper has no ability tocontrol the quality specifications of its gas. It is the pipelineor system operator that typically is in charge of monitoring gasquality and ensuring that it falls within the statedspecifications,” said Dynegy Marketing and Trade in its protest[RP00-39].

Although 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 the Midwest pipeline always hasthe option to file a civil lawsuit to recover facility damagescaused by someone’s negligence. But it fears that if the tariff ischanged as requested by Natural, the pipeline may be allowed to”impose liability without necessarily demonstrating any fault onthe part of the party tendering the non-conforming gas.” Dynegyurged FERC to dismiss Natural’s request. A decision on theproposal is expected at today’s Commission meeting.

The Process Gas Consumers, American Iron and Steel Institute andInternational Paper Co. said the proposed tariff change was “overlybroad and unsupported and should be rejected.” Natural hasn’t givenany “explanation…..for its proposed sweeping tariff language.[It] has not indicated…..whether it is experiencing problems withparties tendering non-conforming gas to NGPL’s system or what, ifany, ‘damages’ to its own facilities or those of other receiving orthird parties may have occurred to prompt the proposal of this newtariff change,” the industrial gas customers said.

For the industrials, Natural’s proposed tariff change raisesmore questions than it answers. “Is the ‘party tendering the gas’intended to include only the actual NGPL shipper, or could it applyto others such as a producer or marketer that delivers gas at apool or interconnect? How would NGPL determine and assign liabilityfor non-conforming gas at receipt points at which more than oneparty tenders gas at any moment in time?”

If non-conforming gas is such a problem on Natural’s system,then the pipeline should consider tariff language that will addressthe problem, but “without the deficiencies of this over-broadapproach and without depriving parties of appropriate rights” tochallenge Natural’s determination of liability and the amount ofdamages due, the industrials said. They, too, asked the Commissionto dismiss the pipeline’s proposal.

Indicated Shippers, which includes major producers andmarketers, said Natural has no business determining damages tothird-party facilities caused by non-conforming gas. “It isinappropriate for NGPL to include a provision in its tariff inwhich it attempts to assign responsibility for damages on anyfacilities other than those 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.”

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