February 09, 2005 --- Vol. 11, No. 15February 2005

FERC issues final rules for open season for Alaska gas pipeline

The Federal Energy Regulatory Commission issued final rules this morning for conduct of open seasons for capacity for Alaska natural gas pipeline projects, and said that its policy will be a “rebuttable presumption for rolled-in treatment” of expansion costs, an issue of concern to those who will not have gas discoveries in time to bid on initial capacity and have to rely on expansions to move their gas.

Rolled-in tariffs include expansion costs with original costs and shippers pay the same rate; in incremental pricing, the method the FERC has favored for expansion tariffs, those who need expansion capacity pay for it.

Congress gave the commission 120 days to establish rules when it passed the Alaska Natural Gas Pipeline Act last fall, a Feb. 10 deadline. The commission issued proposed rules Nov. 15 and held a technical conference in Anchorage Dec. 3.

The commission said in a statement that its rules “require prospective applicants to use the results of an Alaska state gas study to design capacity needs for use within the state, and design in-state delivery points and in-state transportation rates as part of the open season.”

FERC is permitting pre-subscriptions for anchor shippers. “Anchor shippers,” the commission said, “refer to the few shippers that hold significant volumes of natural gas that will financially support, to a great extent, the initial design and cost of a project.”

FERC said that among the changes it made to its proposed rules as a result of public comments is a recognition of Alaska in-state needs, requiring that delivery points and transportation rates be based on an in-state study, and requiring separate bidding on specified in-state capacity.

Also as a result of public comments, FERC said pre-subscriptions — the anchor shipper concept — applies only to initial capacity, not expansions; pre-subscription agreements must be made public within 10 days and all other bidders have the choice of best pre-subscription terms; and pre-subscription capacity will be subject to pro-rata reductions.

FERC said that policy considerations behind the rules include: a balance of encouragement of project construction with fair and open competition; rebuttable presumption for rolled-in rate treatment of costs of expansions; and balance of appropriate oversight with letting market forces work.

Editor’s note: See full story in Feb. 13 issue of Petroleum News.

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