Gas producers and large consumers told FERC they are dumbfounded by an attempt by the Gas Technology Institute (GTI) to reinstate mandated surcharges on interstate gas transportation for the purpose of funding its gas research, development and demonstration (RD&D) budget after the entire industry reached an agreement in 1998 to do away with the program.

In a protest filing, Anadarko Petroleum, ExxonMobil, BP, Burlington Resources, Occidental Petroleum and Aera Energy (collectively called Indicated Shippers) told FERC last week that the plan, which would impose a surcharge of 0.56 cents/Dth on pipeline transportation starting in January, violates the 1998 settlement agreement that calls for current Gas Research Institute (GRI) surcharges to be permanently phased out this year. (GRI and the Institute of Gas Technology merged to become GTI in 2000.) GTI filed its proposed funding plan with FERC last month (see NGI, July 5).

The producers noted that the industry spent “a laborious” two years (1996-1998) negotiating the settlement and agreeing that the GRI surcharges should be phased out and that RD&D should be funded voluntarily. “It is unconscionable for these entities that are now apparently supporting this resuscitated GTI/GRI application to ignore the 1998 settlement and to seek anew a federal government handout, requiring parties to relitigate issues that were permanently settled in 1998.”

In their request for rejection, Indicated Shippers also said the surcharges would “burden interstate commerce by increasing the delivered price of natural gas in an arbitrary and discriminatory manner, which harms both consumers and producers.

“To the extent the industry is supportive of GTI RD&D, as claimed by GTI in its application, then there should be no problem obtaining voluntary funding,” the shippers added. “In fact, the application indicates that GTI has been successful in procuring approximately $42 million on a voluntary basis from various government and private sources. In light of this it is unclear why GTI should be seeking what appears to be an additional $48 million through guaranteed funding authorized by FERC.”

“We thought we agreed that in the future the free market would determine both the funding sources and the targets of R&D activity. We thought the Commission approved the settlement. GTI would have us believe otherwise.”

GTI believes that because it was not a signatory to the original settlement — its predecessor, GRI, was — it is free to propose new surcharges for funding RD&D. GTI has gained the support of the American Gas Association, the Department of Energy and the Interstate Natural Gas Association of America (INGAA) (see NGI, Aug. 2, Aug. 9).

INGAA, which represents interstate pipeline companies, told FERC last week that the mandatory surcharges are necessary because they will “reduce the cost of gas transportation and distribution service to all customer classes” — presumably following GTI’s RD&D and the implementation of any resulting new technologies.

“A robust RD&D program is in the best interest of the natural gas industry as well as consumers given the growing demand for natural gas, the fundamental shift in gas deliverability and increased pipeline safety requirements…”

INGAA highlighted multiple programs GTI intends to fund, some of which will “focus on reducing the cost of investment in new and replacement [pipeline] facilities, the cost of operating pipelines and the cost of maintaining them.” Others would “develop and disseminate new technologies and operating procedures that reduce the cost and increase the deliverability of large volume storage facilities.

“GTI’s proposed transmission sector RD&D will benefit all gas consumers and participants in the delivery chain by developing technologies that ensure a reliable and cost efficient infrastructure system… Given the significant public benefits that could flow from the GTI RD&D program, the proposed 0.56 cents per decatherm surcharge is a small price for ratepayers to pay,” INGAA said.

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