FERC trends

Environmental and landowner concerns are playing a larger role in the U.S. Federal Energy Regulatory Commission's consideration of pipeline construction certificates.

Kevin Madden, director of FERC's office of pipeline competition, told a Canadian Energy Research Institute conference that FERC received about 1,000 comments and protests during certification of the Iroquois pipeline a decade ago.

Now, for the Independence project in the Midwest, it has received about 5,000 submissions from landowners and others.

Madden said the trend will "heighten the commission's interest in how it may balance a particular project. Should it give more weight to the environment than it has in the past?"

He added, "We're also seeing (that) many landowners, and other federal agencies as well, want to get more involved in our decisionmaking process. The question is whether that is going to delay the regulatory process.

"Currently, we've avoided that by bifurcating the certificate process. We issue a preliminary determination where we allow and authorize the rates, terms, and conditions, and then do a complete environmental review, and finally marry them up in the end. I don't know how that's going to work in the future."

Affiliates

He said FERC, rather than determining, itself, whether a project is needed, has shifted to letting the market decide through contracts.

"However, when we did that, what we have seen is the substantial growth in pipeline affiliates' contracts in all of these major projects.

"When does an affiliate contract represent the fulfillment of competition, vs. when is it an attempt to circumvent a regulatory hurdle ahead of competitors? We're finding this a very difficult question."

He explained that local distribution companies are shifting from long-term to short-term contracts, and pipelines have used affiliates to "hit" that particular market.

"One of the concerns at the commission is whether we should factor in affiliates' contracts in determining whether or not there is a need for the project."

Reg review

FERC will review how it regulates rates and services, certifies lines, processes complaints, and sets cost-based rates-particularly return on equity investment.

He said FERC wants to reform the secondary market for pipeline capacity. It also wants to give lines greater flexibility in negotiating terms with shippers so they can respond better to marketplace changes. And FERC wants to harmonize its policies to help bring short and long-term markets in balance.

Madden said, "This is an interesting time (for pipelines) to be in the gas market. It's a time to make money. It's a time to evaluate services.

"The commission will be there to help the market, more so than it has done in the past."

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