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Natural Gas Transmission Regulation in the US

Natural Gas Transmission Regulation in the US. Jeff Wright, Chief Energy Infrastructure Policy Group Office of Energy Projects Federal Energy Regulatory Commission At Comisión Federal de Electricidad Mexico City, Mexico July 29, 2004. What Is FERC?.

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Natural Gas Transmission Regulation in the US

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  1. Natural Gas Transmission Regulation in the US Jeff Wright, Chief Energy Infrastructure Policy Group Office of Energy Projects Federal Energy Regulatory Commission At Comisión Federal de Electricidad Mexico City, Mexico July 29, 2004

  2. 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

  3. 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

  4. 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 FERC is an IndependentFederal Regulatory Agency

  5. Program Offices Office of Energy Projects Natural Gas Pipeline Construction and Abandonment Hydroelectric Projects (licensing, safety, compliance Environmental Reviews for Natural Gas and Hydro Projects) Office of Markets, Tariffs, and Rates Natural Gas, Electric, and Oil Rates and Terms/Conditions of Service Office of Market Oversight and Investigation Market Monitoring and Enforcement Office of Administrative Litigation FERC Trial Staff

  6. Effective Market Rules OMTR FERCHelping Markets Work Adequate Infrastructure OEP Competitive Market FERC Market Oversight OMOI

  7. FERC Chairman Wood (R) Commissioner Brownell (R) Commissioner Kelliher (R) Commissioner Kelly (D) Vacant Secretary Energy Projects Markets, Tariffs, Rates Market Oversight & Investigations Administrative Litigation Administrative Law Judges General Counsel External Affairs Executive Director

  8. 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 What Does FERCRegulate?

  9. 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 What Does FERCRegulate?(con’t)

  10. Major Pipeline Construction Projects

  11. The Regulatory ProcessAs A Balancing Act AGENCIES COMPETITORS CAPTIVES FERC CUSTOMERS LANDOWNERS PIPELINES

  12. FERC OEP Organizational Structure 11/14/2014 12 Office of Energy Projects

  13. Regulation of Interstate Construction Natural Gas Policy Act (NGPA) Natural Gas Act (NGA)

  14. 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

  15. Natural Gas Act NATURAL GAS ACT Section 3 Import/Export Section 7(c) Interstate Case Specific Blanket Authority Case Specific Automatic Prior Notice

  16. Natural Gas Act • Blanket Certificate • AutomaticAuthorization • 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

  17. Natural Gas Act • Case Specific Section 7(c) Certificate • 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

  18. 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

  19. 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.

  20. 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.

  21. Major Pipeline Projects Certificated Currently Pending On The Horizon

  22. Projects Certificated

  23. Major Pipeline Projects Certificated (MMcf/d)January 2002 to July 2004 Georgia Straits (96) 5. CIG (282,92) 6. CIG (118) 7. TransColorado (125) 8. WIC (116) 1. Algonquin (285) 2. Islander East (285) 3. Iroquois (85) 4. Columbia (135,270) Northwest (162,113) Northwest (224) Iroquois(70) WBI (80) ANR (220,107,143) NFS/DTI (150) 1 Tuscarora (96) Northwest (191) 2 3 6 Cheyenne Plains (560) 8 TETCO(223) 4 TETCO(250) 7 5 Cove Point (445) Kern River (886) Greenbrier (600) El Paso (140) East Tennessee (510) Kern River (282) North Baja (500) TETCO (197) SCG Pipeline (190) Transco (323) El Paso (320) Southern (330) Discovery (150) Calypso (832) 11.3 BCF/D Total 2,778 Miles Tennessee (320) Ocean Express (842) 1 Office of Energy Projects

  24. Currently PendingProjects

  25. Major Pipeline ProjectsPending (MMcf/d)July 2004 Algonquin (140) Mill River (800) Algonquin BG LNG (500) Cheyenne Plains (170) San Juan Expansion (Transwestern) (600) Cheniere Sabine (2,600) Trunkline (1,500) McMoRan (1,500) Cheniere Corpus Christi (2,600) Compass Pass (1,000) 11.2 BCF/D Total 153 Miles 1

  26. On The Horizon

  27. Project Evaluation How Does FERC Evaluate All Of These Major Projects? Are There Any Criteria Used in This Evaluation?

  28. Major Pipeline Projectsin Pre-filing (MMcf/d)July 2004 Entrega (EnCana) (1,300) Transcontinental (105) Questar (102) Logan Lateral (Texas Eastern) (900) El Paso (Piecance Expansion) (300) 3.1 BCF/D Total 402 Miles Seafarer Pipeline (El Paso) (372) 1

  29. Major Pipeline Projects On The Horizon (MMcf/d)July 2004 Panhandle Eastern (500) Bison Pipeline (Northern Border) (240) Trailblazer (100) 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) Maritimes Phase IV (400) Blue Atlantic (El Paso) (1,000) Transcontinental (150) Northwinds Pipeline (NFG) (500) Freedom Trail (Tennessee) (150) Petal (500) 8.3 BCF/D Total 3,640 Miles 1

  30. 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.

  31. CertificatePolicy Problems • The reliance on percentage of capacity under long-term contracts to show demand. • The pricing of new facilities.

  32. 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.

  33. 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

  34. PL99-3-000Certificate Policy Goals • Foster Competition • Consider Captive Customers • Avoid Unnecessary Physical Impacts • Achieve Optimal Amount of Facilities • Encourage Complete Record • Expedite Review Time

  35. PL99-3-000Certificate Policy • Apply Threshold Test • Subsidization  Incremental Rates • No Subsidization  Rolled-in Treatment • System improvements for existing customers  Rolled-in Treatment

  36. PL99-3-000Certificate Policy • Develop Record • Adverse Impacts on • Existing Customers and Pipelines • Landowners • Communities • Specific Benefits • Need and Market • Condemnation Impact

  37. Needs and Benefits Record Adverse Impacts PL99-3-000Certificate Policy • Balance Benefits and Impacts • Complete Traditional Environmental Process

  38. 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 Opportunities for Public Involvement

  39. 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 Opportunities for Public Involvement

  40. Comments and Protests

  41. Traditional vs. Pre-Filing Process Develop Study Corridor File At FERC Announce Open Season Prepare Resource Reports Traditional - Applicant Conduct Scoping Issue Draft EIS Issue Final EIS Issue Order Traditional - FERC Announce Open Season Develop Study Corridor File At FERC Prepare Resource Reports Pre-Filing - Applicant Conduct Scoping Review Draft Resource Reports & Prepare DEIS Issue Draft EIS Issue Final EIS Issue Order Pre-Filing - FERC 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 (months)

  42. 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!

  43. An Example:Kern River Expansion • 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 PROPOSED COMPRESSOR STATION PROPOSED PIPELINE LOOPING X

  44. 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.

  45. Issues/Initiatives IssueInitiative

  46. Issues/Initiatives IssueInitiative

  47. 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

  48. 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

  49. FERC Infrastructure Conferences • Five Conferences Held – Seattle – New York City – Orlando – Chicago – Denver • Purpose – Bring together experts to discuss infrastructure issues in region

  50. TopicsAddressed • Adequacy of Existing Infrastructure • Necessary Additions of Infrastructure • Barriers to Expansion • Environmental and Landowner Concerns

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