Natural Gas Transmission Regulation in the US Jeff Wright, Chief Energy Infrastructure Policy Group...

Natural Gas Transmission Regulation in the US

Jeff Wright, ChiefEnergy Infrastructure Policy

GroupOffice of Energy Projects

Federal Energy Regulatory Commission

AtComisión Federal de

Electricidad Mexico City, Mexico

July 29, 2004

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FERC

Office of Energy Projects

What Is FERC?

• An Independent Regulatory Agency in the Executive Branch of the US Government

• Created by the Department of Energy Organization Act (1977)

• Federal Power Commission was the predecessor of FERC

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FERC


How is FERC Organized?

• There are 5 Commissioners– Nominated by the President, confirmed

by the Senate, President designates Chairman

– Each commissioner has a 5-year fixed term, with one term expiring each year

• The Chairman sets the triweekly Commission agenda– Orders voted out by majority rule

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FERC


FERC is an IndependentFederal Regulatory Agency

• Political Party– No more than 3 commissioners from one

political party• President and Congress

– No review of FERC’s decisions by President, Department of Energy or other agencies

• Industry Participants– No private discussions of open cases– Restrictions on FERC employees: stock,

gifts, future employment

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FERC


Program Offices

Office of Energy ProjectsNatural Gas Pipeline Construction and AbandonmentHydroelectric Projects (licensing, safety, complianceEnvironmental Reviews for Natural Gas and Hydro Projects)

Office of Markets, Tariffs, and RatesNatural Gas, Electric, and Oil Rates and Terms/Conditions of Service

Office of Market Oversight and InvestigationMarket Monitoring and Enforcement

Office of Administrative LitigationFERC Trial Staff

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FERC


FERCHelping Markets Work

AdequateInfrastructure

OEP

EffectiveMarket Rules

OMTR

MarketOversight

OMOI

CompetitiveMarketFERC

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FERC


FERC

ChairmanWood (R)

ExternalAffairs

GeneralCounsel

Markets,Tariffs, Rates

ExecutiveDirector

AdministrativeLitigation

AdministrativeLaw Judges

EnergyProjects

Secretary

CommissionerBrownell (R)

CommissionerKelliher (R)

CommissionerKelly (D)

Vacant

MarketOversight &

Investigations

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FERC


What Does FERCRegulate?

• Natural Gas Industry– Interstate transportation rates and

services– Interstate gas pipeline and liquefied

natural gas terminal construction and oversee related environmental matters

• Electric Power Industry – Interstate transmission rates and

services– Wholesale energy rates and services– Corporate transactions, mergers,

securities issued by public utilities

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FERC


What Does FERCRegulate? (con’t)

• Oil Pipeline Industry– Interstate transportation rates and

services of crude oil and petroleum products

• Hydroelectric Industry– Licensing of nonfederal hydroelectric

projects– Oversee related environmental

matters– Inspect nonfederal hydropower

projects for safety issues

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FERC


Major Pipeline Construction Projects

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FERC


The Regulatory ProcessAs A Balancing Act

OEP Organizational StructureDirector

J. Mark Robinson

Deputy DirectorRobert J. Cupina

Division of Pipeline Certificates

Director - Berne L. MosleyDeputy Dir. – Vacant

Division of Gas- Environment & Engineering

Director - Richard R. HoffmannDeputy Dir. – Lauren H. O’Donnell

Division of Hydropower Licensing

Director - Ann F. MilesDeputy Dir.- Lon R. Crow

Division of HydropowerAdmin. & ComplianceDirector - Joseph D. MorganDeputy Dir. - Hossein Ildari

Division of Dam Safety& Inspections

Director – Constantine G. TjoumasDeputy Dir. – Daniel J. Mahoney

Energy InfrastructurePolicy Group Jeff C. Wright

Assistant DirectorManagement & Operations

Thomas E. DeWitt

Certificates Branch 1Michael J. McGehee

Certificates Branch 2William L. Zoller

Gas Branch 1Michael J. Boyle

Gas Branch 2John S. Leiss

Gas Branch 3Lonnie A. Lister

Hydro East Branch 1Vincent E. Yearick

Hydro East Branch 2Edward A. Abrams

Hydro West Branch 1Jennifer Hill

Hydro West Branch 2Timothy J. Welch

Land ResourcesBranch

John E. Estep

Engineering &Jurisdiction BranchWilliam Y. Guey-Lee

Biological ResourcesBranch

George H. Taylor

Washington OfficeWilliam H. Allerton

Atlanta RegionalOffice

Jerrold W. Gotzmer

Chicago RegionalOffice

Peggy A. Harding

New York RegionalOffice

Anton J. Sidoti

Portland RegionalOffice

Harry T. Hall

San FranciscoRegional Office

Takeshi Yamashita

LNG EngineeringBranch

Chris M. Zerby

04/19/23

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FERC


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FERC


Natural Gas Act (NGA)

Natural Gas Policy Act (NGPA)

Regulation of Interstate Construction

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FERC


• Facilities to Transport Gas Under NGPA Section 311 May Be Constructed Without FERC Approval.

• Facilities can only be used to transport on behalf of an intrastate or LDC

• Must comply with environmental requirements

• If cost of facilities exceeds $7.5 million, FERC must be notified 30 days prior to construction

NGPA

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FERC


Natural Gas Act

NATURAL GAS ACT

Section 3 Import/Expor

t

CaseSpecific

CaseSpecific

BlanketAuthority

Automatic PriorNotice

Section 7(c)Interstate

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FERC


• Automatic Authorization• Cost of facilities is less than $7.5 million

• Facilities are “eligible” facilities

• Prior Notice• Cost is between $7.5 and $21 million

• 45-day notice period prior to construction

• Facilities are “eligible” facilities

Natural Gas Act

• Blanket Certificate

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FERC


• Conduct a full review of proposal including engineering, rate, accounting, and market analysis

• Conduct an environmental review by preparing an Environmental Assessment or an Environmental Impact Statement

Natural Gas Act

• Case Specific Section 7(c) Certificate

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FERC


NGPA OR NGA?

• NGA Certificate Grants a Right of Federal Eminent Domain

• NGPA Does Not Confer Any Rights of Federal Eminent Domain; Pipeline May Seek State Eminent Domain

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FERC


Imports/Exports

• Any entity that proposes to site, construct and operate or modify facilities used to import or export gas must file an application pursuant to Section 3 of the NGA and file for the issuance of a Presidential Permit.– In order to obtain a Presidential Permit,

the Commission must "consult" with the Secretaries of State and Defense prior to its issuance.

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FERC


Imports/Exports

• The owner of the gas must apply to the Office of Fossil Energy, Department of Energy (DOE/FE) for Section 3 authority as well.

• Jurisdictional pipelines that filed for Section 3 authorization to site, construct, and operate border facilities will not be the same party that applies for Section 3 authority from DOE/FE.

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FERC


Major Pipeline Projects

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FERC


Projects Certificated

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FERC


Major Pipeline Projects Certificated (MMcf/d)

January 2002 to July 2004

11.3 BCF/D Total2,778 Miles

Transco(323) Southern (330)

Kern River

(886)

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North Baja (500)

Tuscarora(96)

Northwest(162,113)

Kern River (282)

Iroquois(70)

TETCO(250)

Northwest(224)

NFS/DTI(150)

GeorgiaStraits (96)

1. Algonquin (285) 2. Islander East (285) 3. Iroquois (85) 4. Columbia (135,270)

SCG Pipeline (190)

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3

4

Northwest(191)

East Tennessee (510)

Tennessee (320)

TETCO (197)

Greenbrier (600)

El Paso (320)

WBI(80)

ANR(220,107,143)

El Paso (140)

TETCO(223)


Cove Point(445)

Ocean Express(842)

6 CheyennePlains (560)

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5. CIG (282,92) 6. CIG (118) 7. TransColorado (125) 8. WIC (116)

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Calypso(832)

Discovery (150)

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FERC


Currently PendingProjects

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FERC


Major Pipeline ProjectsPending (MMcf/d)

July 2004

11.2 BCF/D Total153 Miles

Trunkline(1,500)

Cheniere Corpus Christi(2,600)

CheniereSabine(2,600)

Mill River(800)

McMoRan(1,500)

CompassPass

(1,000)

Algonquin(140)

Algonquin BG LNG(500)

San Juan Expansion(Transwestern)

(600)

CheyennePlains (170)

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FERC


On The Horizon

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FERC


How Does FERC Evaluate All Of These Major Projects?

Are There Any Criteria Used inThis Evaluation?

Project Evaluation

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FERC


Major Pipeline Projectsin Pre-filing (MMcf/d)

July 2004

3.1 BCF/D Total402 Miles

Questar(102)

Seafarer Pipeline(El Paso) (372)

Entrega(EnCana)(1,300)

Logan Lateral(Texas Eastern)

(900)

Transcontinental(105)

El Paso(Piecance

Expansion)(300)

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FERC


Major Pipeline Projects On The Horizon (MMcf/d)

July 2004

8.3 BCF/D Total3,640 Miles

Maritimes Phase IV (400)Blue Atlantic (El Paso)

(1,000)Transcontinental (150)

Northwinds Pipeline(NFG) (500)

Freedom Trail (Tennessee)(150)

Coronado (500)Sun Devil Project(Transwestern) (500)

Piceance to Cheyenne (KM Interstate) (500)Advantage Southern (KM Interstate) (330)

Silver Canyon Project (KM Interstate) (750)KM West Texas (KM Interstate) (300)

Wheatland Expansion (KM Interstate) (80)Western Frontier (So. Star)(540)

Kern River Expansion (500)TransColorado (750)

Panhandle Eastern (500)Bison Pipeline (Northern Border) (240)

Trailblazer (100)

Petal (500)

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FERC


PL99-3-000Certificate Policy

• New Certificate Policy Statement issued on September 15, 1999.

• Clarification of Certificate Policy Statement issued on February 9, 2000.

• Further clarification issued on July 26, 2000.

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FERC


CertificatePolicy Problems

• The reliance on percentage of capacity under long-term contracts to show demand.

• The pricing of new facilities.

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FERC


Policy Drawback:Reliance on Contracts

• The amount of contracted capacity is not a proxy for all public benefits.

• Requirement for long-term contracts contrasts with industry’s move to short-term contracts with marketers.

• Loss of customer choice reduces efficiency.

• Contracts don’t offer adequate justification to landowners.

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FERC


Policy Drawback:Pricing of New Facilities

• Rolled-in pricing bias leads to:– Subsidization by existing

customers– Overbuilding of facilities– Aggravate adverse environmental

impacts– Distortion of competition between

pipelines

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FERC


n Foster Competitionn Consider Captive Customersn Avoid Unnecessary Physical Impactsn Achieve Optimal Amount of Facilitiesn Encourage Complete Recordn Expedite Review Time

Goals


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FERC



• Apply Threshold Test

– Subsidization Incremental Rates

– No Subsidization Rolled-in Treatment

– System improvements for existing customers Rolled-in Treatment

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FERC



• Develop Record– Adverse Impacts on

• Existing Customers and Pipelines• Landowners• Communities

– Specific Benefits– Need and Market– Condemnation Impact

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FERC


Adverse Impacts

NeedsandBenefitsRecord

n Balance Benefits and Impactsn Complete Traditional Environmental Process


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FERC


Opportunities for Public Involvement

The FERC Process:

• Issue Notice of the Application

• Project Sponsor Sends Landowner Notification Package

• Issue Notice of Intent to Prepare the NEPA Document (i.e., scoping)

• Hold Scoping Meetings

Public Input:• File an Intervention;

register for e-subscription

• Contact the project sponsor w/questions, concerns; contact FERC

• Send letters expressing concerns about environmental impact

• Attend scoping meetings

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FERC


Opportunities for Public Involvement

The FERC Process:• Issue Notice of

Availability of the DEIS

• Hold Public Meetings on DEIS

• Issue a Commission Order

Public Input:• File comments on the

adequacy of DEIS

• Attend public meetings to give comments on DEIS

• Interveners can file a request for Rehearing of a Commission Order

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FERC


Comments and Protests

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

Kern River/Mojave 1990

Iroquois 1990

USG Pipeline1997

Independence1999

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FERC


Traditional vs. Pre-Filing Process

AnnounceOpen

Season

AnnounceOpen

Season

Develop

StudyCorrido

r

DevelopStudy

Corridor

Conduct

Scoping

Conduct

Scoping

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Review DraftResource Reports& Prepare DEIS

IssueDraftEIS

IssueDraftEIS

FileAt

FERC

IssueOrder

IssueOrder

FileAt

FERC

Prepare ResourceReports

Prepare ResourceReports

IssueFinalEIS

IssueFinalEIS

(months)

Traditional - Applicant

Traditional - FERC

Pre-Filing - Applicant

Pre-Filing - FERC

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FERC


Benefits of Pre-Filing

• More interactive NEPA process, no shortcuts

• Earlier, more direct involvement by FERC, other agencies, landowners

• Goal of “no surprises”

• Time savings realized only if we are working together with stakeholders

• FERC staff is an advocate of the Process, not the Project!

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FERC


PROPOSED PIPELINE LOOPING

An Example:Kern River Expansion

XPROPOSED COMPRESSOR STATION

• 716 miles of pipeline looping through CA, NV, UT, WY

• 3 New Compressors• $1.2 Billion • 885.6 MMcf/day of additional

capacity– Doubles Kern River’s

capacity from 845.5 MMcf/day to 1.7 Bcf/day

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FERC


Kern River Expansion Environmental Highlights

• Environmentally Acceptable– New pipe parallels initial right-of-way.– Mitigation measures minimize potential impacts.

• First Major Project to utilize NEPA Pre-Filing– Order issued less than 1 year from initial filing

date - Final EIS completed in June 2002 which was 11 months from filing date.

– In comparison, FEIS and certificate for Gulfstream required 16 months from initial filing date; Kern River’s initial greenfield project required 30 months for the FEIS.

– Interagency cooperation contributed to meeting Federal and state environmental requirements.

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FERC


Issues/Initiatives

Timely Business Decisions Preliminary Determinations (1988)

Staff Resources Environmental Third-Party Contractors (1994 and 1998)

Staff Accountability/Incentive

GPRA Compliance (1999)

Policy Guidelines Certificate Policy Statement (1999)

Effective Regulations Certificate Rule (1999)

Issue Initiative

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FERC


Issues/Initiatives

Due Process and Reroutes

Landowner Notification Rule (1999)

Administrative Procedures

Ex Parte Communication Rule (1999)

EIS Process Concurrent Order and EIS (2000)

Staff Resources OEP = Gas/Hydro Synergy (2000)

Staff Accessibility Outreach (2000)

Rehearing Timing 30-Day Deadline (2001)

Issue Initiative

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FERC


Interagency Agreements

• IA for Environmental Review of Natural Gas Pipelines– Signed May 2002

– Working Group Established

– FERC chairs working group

– Each participating agency developed internal agency guidance

– Group working on survey to get feedback on implementation experiences/success

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FERC


Interagency Agreements

• IA for LNG Safety and Security– Signed January 2004 by FERC, USCG, DOT

– Defines roles and responsibilities

– Establishes FERC as lead for NEPA review

– Stresses coordination, seamless review

– Coordination continues from initial review through construction and operation

– Includes terminal facilities and ships

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FERC


FERC Infrastructure Conferences

• Five Conferences Held– Seattle– New York City– Orlando– Chicago– Denver

• Purpose– Bring together experts to discuss infrastructure issues in region

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FERC


TopicsAddressed

• Adequacy of Existing Infrastructure

• Necessary Additions of Infrastructure

• Barriers to Expansion• Environmental and Landowner

Concerns

Natural Gas Transmission Regulation in the US Jeff Wright, Chief Energy Infrastructure Policy Group...

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