FERC Investigates Pipeline Rates; PHMSA Rejects INGAA Pleas

January 2011 Vol. 66 No. 1

Both Kinder Morgan and Ozark produced general statements after the investigations were announced. KMIGT noted that the FERC staff bears the burden of proving that Kinder Morgan's rates are no longer just and reasonable. The company seemed to also, at the same time, be preparing for the worst. Referring to the possibility FERC would find its rates unreasonable, it said: "If there is a change in rates, typically the rates are changed from the point of the decision moving forward, rather than a refund to customers." KMIGT spokesman Larry Pierce declined to comment further.

Gregory J. Rizzo, president and chief executive officer, Spectra Energy Partners LP, pointed out that Ozark did benefit in 2009 from an opportunity to transport additional natural gas volumes due to another pipeline company being offline, which increased annual revenues. He added that the company expected lower projected revenues in 2010 and a potential reduction in its revenues in 2011 of up to $10 million, related to increased competition from new pipelines and expiring contracts.

PHMSA Rejects INGAA Pleas On New Safety Reporting
New pipeline safety reporting requirements went into effect on Jan. 1, 2011, although implementation has been delayed for some of the changes. Gas and hazardous liquid lines now must report an unintentional release of gas that results in an estimated gas loss of 3 million cubic feet (Mcf) or more. That represents a setback for INGAA, which had pressed for a 20,000 Mcf threshold. In addition, each operator of a gas pipeline, gas pipeline facility, LNG plant or LNG facility must obtain from the Pipeline and Hazardous Materials Safety Administration (PHMSA) an Operator Identification Number (OPID) by Jan. 1, 2012. Many pipelines already have OPIDs. Those OPIDs will be used by the PHMSA to create a new National Registry of Pipeline and LNG Operators.

The most controversial issue in the rulemaking was PHMSA's desire to expand the definition of "incident" to include unintentional leaks of 3,000 Mcf of gas. The key elements in the current and longstanding requirement are a leak causing more than $50,000 in damage, causing a death or deemed significant by the operator. Intentional releases of gas have to be reported if they result in death, inpatient hospitalization or $50,000 in property damage. Transmission or gathering pipeline operators must submit DOT Form PHMSA F 7100.2 as soon as practicable but not more than 30 days after detection of an incident.