WATCHING WASHINGTON MEGA-NOPR DEBATE PEAKS

With Patrick Crow This is a red letter week for gas industry lobbyists: industry groups will give the Federal Energy Regulatory Commission their final arguments on the pipeline comparability of service rulemaking. There's a lot riding on the rule (dubbed "Mega-NOPR"), and it has cast producers and pipelines-which had been working in tandem to promote gas use-back in their old adversarial roles.

Oct. 14, 1991

3 min read

This is a red letter week for gas industry lobbyists: industry groups will give the Federal Energy Regulatory Commission their final arguments on the pipeline comparability of service rulemaking.

There's a lot riding on the rule (dubbed "Mega-NOPR"), and it has cast producers and pipelines-which had been working in tandem to promote gas use-back in their old adversarial roles.

The proposed rule (OGJ, May 27, p. 31) would require pipelines to unbundle services (transportation, marketing, gathering, etc.) so consumers, shippers, and producers could choose and pay for only the services they want.

Pipelines would have to transport gas for third parties under terms and conditions comparable to the pipeline's sales or merchant service.

The long lines want FERC to avoid such a generic approach and instead take a flexible company by company approach. They want the option of offering bundled services.

MEGA-NOPR SHOT IN THE ARM?

Henson Moore, deputy Energy secretary, recently said FERC's proposed rule would be a shot in the arm for the depressed gas industry because it would facilitate a return to long term sales contracts.

"This is the single most persistent message I'm hearing, all across the industry, from executives at both ends of the pipe. Producers want long term contracts, the pipelines want them, utilities and other large customers want them. But they are not happening. Why?

"Some of the problem obviously is because of bad past experiences.

Some of the problem is because of regulatory attitudes, particularly at the state level, where regulators' concerns with short term consumer costs override the local distribution companies' need for assured, longer term supplies.

"And a third part of the problem seems to be a real lack of understanding across industry segments. Lacking the vertical integration of much of the oil industry, gas producers, pipelines, and LDCs have not been effective in working together-not as aggressive marketers of gas, nor as aggressive advocates of sound, long term gas policies.

"Whatever its causes, this serious disconnection among industry segments hurts the consumer as well as the industry. It's time to stop shooting at each other and to start figuring out how to get willing sellers together with willing buyers under the long term contracts both sides say they want."

NGSA VIEW

Nicholas Bush, Natural Gas Supply Association president, last week agreed the pending FERC rule "will drive the industry back toward long term contracts because pipelines will have an incentive to acquire firm supplies."

He said the rule is critical to the success of FERC's long effort to inject more competition into the gas market, particularly into transportation.

"If you don't unbundle, the whole thing falls apart. The industry needs identifiable costs for specific services."

Bush said the rule is good for producers because it will inject more competition between wellhead and burnertip and that will "be a springboard" for increased gas sales.