FERC to Probe Gas Pipeline Practices

The Federal Energy Regulatory Commission (FERC) has approved issuance of a Notice of Inquiry (NOI) into natural gas pipeline practices for recovery of fuel, lost and unaccounted-for natural gas. The Commission is exploring how best to both guard against over-recovery of fuel costs by pipelines and encourage pipelines to improve fuel efficiency and reduce lost and unaccounted-for fuel.

"Without periodic rate review, many pipeline fuel retention rates have been in effect for years," said Independent Petroleum Association of America (IPAA) Chairman Mike Linn. "While pipelines should be compensated fairly for the fuel used in transporting natural gas, some pipelines appear to be benefiting from large over-recoveries. We support today's action in that it will prompt an assessment of the way in which pipelines recover fuel."

"Process Gas Consumers (PGC) applauds the Commission for opening up this inquiry into pipeline fuel over-recoveries. As FERC has previously held, fuel should not serve as a pipeline profit center and we are anxious to work with FERC to make sure that this principle is followed uniformly throughout the pipeline grid," said Dena Wiggins, PGC's General Counsel.

"We have been working closely with IPAA on this issue and have jointly retained the services of an outside consultant to assist in studying this problem. IPAA and PGC will file these results in the docket opened up by today's notice."

The NOI seeks comment on FERC policy regarding the method of cost recovery used by pipelines and whether policy should be changed to prescribe a uniform recovery method for all pipelines. Comments are due 60 days from the date the NOI is published in the Federal Register.

IPAA represents the companies that drill 90 percent of the nation's oil and natural gas wells. These companies produce 82 percent of American natural gas and 68 percent of American oil.

PGC is a national association of industrial gas consumers who require natural gas in many of their key operations. PGC works to promote coordinated, rational, and consistent federal and state polices relating to natural gas and its transportation. Its member companies represent a broad cross-section of U.S. industry, both geographically and in terms of products produced, including steel, aluminum, cars, textiles, chemicals, glass, fertilizer and other manufactured products. These industrial operations employ millions of people nationwide and consume more than half a trillion cubic feet of natural gas annually.