April 01, 2005 --- Vol. 11, No. 36April 2005

Federal open season pipeline rules draw protests, praise

In a flurry of filings last month, several heavy hitters in the Alaska gasline debate weighed in with complaints to the Federal Energy Regulatory Commission about the new “open season” rule for Alaska gas pipeline projects. FERC issued regulation No. RM05-1 on Feb. 9 and gave the public 30 days to make comments.

Open seasons are held whenever a pipeline is built to allow gas producers and shippers to identify each other, demonstrate interest in the pipeline and reach agreement with regulators on costs, tariffs and other considerations.

BP Exploration (Alaska) Inc., ConocoPhillips and Exxon Mobil Corp., who together own 95 percent of the 35 tcf of proven gas reserves on Alaska’s North Slope, filed a voluminous request March 11 for a rehearing on the regulation. The producers cited 11 problems with the regulation, including requirements they say discriminate against them in favor of mere shippers who will assume no risk in the project.

“The bottom line is the FERC proposed rules add risk and potential cost to an already extremely risky project,” said ExxonMobil spokesman Bob Davis.

In addition to provisions such as welcoming “late bidders” and mandating extensive information-sharing, Davis told Petroleum News April 1 that many of the problems the sponsor companies identified in the FERC regulation are technical but add potential cost to the gasline project.

ChevronTexaco, which owns a minority share of North Slope gas, praised the overall regulation in its March 11 filing. But the company asked FERC to rehear or clarify various aspects of the rule to avoid confusion, make certain gas agreements public and allow for voluntary, rather than government-mandated, design changes or expansion in the pipeline after an open season.

Enbridge Inc., a Canadian pipeline company hoping to build at least part of the Alaska gasline, also filed a request for rehearing March 11, saying FERC erred in four areas of the regulation. Enbridge also sought clarification of additional points.

In addition, the Interstate Natural Gas Association raised concerns about the regulation, noting that FERC “may be creating market uncertainty” by raising the specter of regulatory intervention in the gasline project.

The state of Alaska submitted comments in a March 11 filing aimed at convincing FERC to tighten and clarify certain regulatory language in the rule, but applauded the overall regulation for striking “the right balance.”

Anadarko Petroleum Corp. and the Alaska Legislative Budget and Audit Committee echoed this view, filing “answers” to the rehearing requests March 28.

Anadarko believes FERC did a good job of following Congress’ mandate to encourage gas exploration and production with the open season regulation, spokesman Mark Hanley said April 1. “We think the position the commission took will promote fair and equal access to the gasline,” Hanley added.

The LB&A asked for a waiver of FERC rules that prohibit responses to rehearing requests and praised the federal agency for “properly balancing all interests” in the regulation. The legislative committee also urged the agency to refuse to modify its rules, saying they were based on “solid, legal” reasoning.

FERC has 30 days to respond to the filings, however the commission can give itself additional time to consider a number of requests in the same docket, a FERC spokeswoman said April 1.

Editor’s note: See full story in April 10 issue of Petroleum News.

Petroleum News - Phone: 1-907 522-9469 - Fax: 1-907 522-9583
[email protected] ---