PHMSA Worries About Pipeline Safety, Senate Bill Worries Pipeline Industry

By Stephen Barlas, Washington Editor | May 2009 Vol. 64 No. 5

Don Santa, the INGAA president, says the APGA has been trying for years to amend Section 5 of the Natural Gas Act, which pipeline customers use when they file a case at FERC charging that pipeline rates are unreasonable. Those efforts have always been unsuccessful, Santa explains, and he doesn’t see any changes in the political landscape which would make Congress more receptive in 2009 to the APGA’s drive to modify Section 5 so that FERC could order pipelines to issue retroactive rebates.

Currently, FERC can only collect for damages from the date of the completion of the case. Cantwell’s bill would allow collection of refunds starting from the date at which FERC or a pipeline customer filed the case. Another provision would allow FERC to issue temporary cease and desist restraining orders to pipelines if the commission finds the pipeline is taking an action of “significant harm” to natural gas consumers.

A Cantwell aide said the bill is aimed more at energy trading companies than pipelines, though it catches pipelines in its web nonetheless. Although Congress gave FERC enhanced “anti manipulation” power in the 2005 Energy Act, that did not prevent the commission from stopping Amaranth Advisors LLC, who FERC took enforcement action against. However, Amaranth liquidated its assets before FERC could collect the full penalties assessed. That is where the new cease and desist authority would come in.

At hearings on March 26, Sen. Jeff Bingaman (D NM), chairman of the Senate Energy & Natural Resources Committee, essentially endorsed the Cantwell bill. That resulted in an April 2 letter to Bingaman from Santa who argued that the premise of the Cantwell bill was faulty, and that its effect would be to scare away investors in pipelines who might worry that the new regulatory language could affect pipeline revenue streams, and hence their return on investments.

In terms of the Cantwell provisions themselves, Santa said that the pricing histories of the electric and natural gas industries are different, and the rebate provision in the Federal Power Act was added because of specific complaints about wholesale sales of electricity. Pipelines, on the other hand, do not sell natural gas; their rates are based on the transportation of that gas. “The real question for the Congress is whether adopting the FPA retroactive refund model for natural gas really will improve consumer welfare, or whether it will slow the development of energy infrastructure that will bring new, competitive natural gas supplies to the market and ultimately benefit consumers and the economy,” Santa wrote.