FERC staff offer example

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Federal Energy Regulatory Commission staff members from the Office of Energy Projects Division of Pipeline Certificates were in Anchorage Jan. 12 for a workshop on the open season process for Alaska.

The goal of an open season is precedent agreements, said Richard Foley, a regulatory gas utility specialist. Precedent agreements are contracts, and the shippers best suited for the line are identified in open season for further negotiations leading to precedent agreements.

From the pipeline’s perspective, a precedent agreement says the pipeline will build the line if specified conditions are met; from the shipper’s perspective, a precedent agreement says the shipper will pay the pipeline for capacity to move gas, if certain conditions are met.

Foley offered a recent example of publicly available precedent agreements for the Ruby Pipeline, a 675-mile, $1.3 billion, 1.5 billion-cubic-foot-per-day line with multiple shippers.

Negotiations with anchor shippers began in early 2007 and precedent agreements were signed in mid-2008 through early 2009, with one agreement modified in mid-2009.

Precedent agreements for the Ruby Pipeline included conditions including:

• The pipeline files and gets all approvals with agreeable terms and conditions;

• The pipeline starts and completes construction;

• The shipper can’t terminate if the pipeline is already in the 16-month construction time, but the clock stops if government stops the work;

• There are options for carbon and greenhouse taxes;

• Creditworthiness requirements must be satisfied; and

• Anchor shippers’ precedent agreements are approved by the state commission.

The overview included some items that are special features for an Alaska open season, including anchor shippers. Anchor shippers are allowed, Foley said, but other bidders are allowed to get matching terms if there are such pre-subscription agreements.

No bid can be rejected solely because a bidder has a bid pending in another open season, and second-chance bids — after the initial due date — must be considered as long as the project’s progress does not prohibit capacity changes.