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Possible FERC legal conflict for ANGDA Participation on Alaska Gasline Development Corp. team questioned because of proposed role as shipper on interstate, bullet lines Kristen Nelson Petroleum News
Because the Alaska Natural Gas Development Authority is bidding for pipeline capacity in interstate gas pipeline open seasons this year, and has expressed an intention to bid for capacity on a proposed in-state bullet line, its participation on the Alaska Gasline Development Corp. team that is developing a plan for the in-state line could pose a conflict of interest barred by the Federal Energy Regulatory Commission.
A good part of a Sept. 8 ANGDA board meeting was taken up with a discussion between the board, AGDC President Dan Fauske and ANGDA CEO Harold Heinze.
Heinze, as ANGDA’s CEO, is one of the five AGDC team members designated by the Legislature in House Bill 369, which created the development team in the Alaska Housing Finance Corp. and named the CEO of AHFC as chair of the team. HB 369 requires development of an in-state natural gas pipeline plan to be delivered to the Legislature by July 1, 2011. That plan is required to have a natural gas pipeline operational by Dec. 31, 2015.
FERC issues Those AGDC issues, unresolved at the end of the board meeting, concern FERC requirements for separation between pipelines and shippers.
As Deputy Commissioner of Revenue Marcia Davis explained it, separation of pipeline and shipper is a legal principle developed at FERC because at one time large conglomerates, with both shipping and pipeline interests, were giving sweetheart deals and providing information to affiliates not available to others.
FERC said everyone who ships has to have an equal shot, Davis said: You can’t treat your own shipper differently.
This requires a Chinese wall: The shipper side can’t talk to the pipeline side. “Equal access” became the norm in the United States, she said.
Davis said she didn’t understand the issue in the context of the interstate lines, the Alaska Pipeline Project and Denali, but understands it in reference to the AGDC in-state bullet line if ANGDA is a potential shipper on a bullet line.
Decision requested Background information from ANGDA said that in early August Fauske, Dave Haugen and Mike Buller of AGDC expressed concerns that ANGDA’s access to project information and participation in work briefings of the HB 369 team would present a potential conflict with regulatory rules because “ANGDA as a potential shipper would have an information advantage over other potential shippers.”
At an Aug. 12 team meeting, Fauske asked that ANGDA resolve the conflict between being a potential in-state gas shipper and being a member of the AGDC development team. Based on advice of AHFC counsel Ken Vassar of Birch Horton Bittner & Cherot, other team members concluded “ANGDA must either forswear any commercial participation in a gas line project developed by the team … or withdraw as a team member.”
In other words, to stay on the team, ANGDA would not be able to bid in an open season for an in-state bullet line project.
Heinze and ANGDA staff and contractors have recused themselves from gas line development team activities.
A draft motion presented to the board proposed that ANGDA compartmentalize its work with the Natural Gas Supply Co., the co-op of Southcentral utilities, which would be the party interested in shipping gas.
Heinze would participate in AGDC team deliberations and “would treat all AGDC and bullet line project information as confidential and separate from other ANGDA efforts.”
Tony Izzo, an ANGDA contractor, would continue to represent ANGDA as a member of NGSC.
“ANGDA would not represent the NGSC or participate in any open season for any in-state bullet line that evolves from the HB 369 effort,” the draft motion said, but Heinze, Izzo and other ANGDA contractors would continue to work with NGSC and its members on participation in the open season process of both the APP and the Denali gas pipeline projects.
Fauske: Not my idea Fauske told the ANGDA board that AGDC wants Heinze on the team, but said when the issue of bidding on bullet line capacity rose in a discussion, one of the engineers said it might be a problem with FERC. This is not about ANGDA personnel, Fauske said, it’s about wanting to do things right, and once the issue had been raised there was the specter that the team’s work might be placed in jeopardy.
Vassar, the AHFC attorney, said the question for AGDC and the development team is that of confidence in the outcome. ANGDA has expressed an interest in being a bidder on the project, he said, and if AGDC ends up as the pipeline owner, if a member has influence on the project and intends to be a shipper, how does the perception that this shipper had unfair advantage be overcome.
A draft motion for the ANGDA board to consider at the Sept. 8 meeting directed Heinze to compartmentalize ANGDA’s work with the NGSC, its members and others concerning potential shipper actions related to any in-state bullet line.
Fauske asked for a few days to respond on whether the motion would resolve the issue.
Heinze said he’d already recused himself from the team, but he said ANGDA wasn’t going to back off the open season for the big line if the issue is more than any role ANGDA might play as a potential shipper on a bullet line.
Also at the meeting the board welcomed its newest member, Rick Koch of Kenai, but said goodbye to one of its longest-serving members, Mayor Dan Sullivan of Anchorage, who tendered his resignation to the governor Sept. 2. Sullivan was appointed to the ANGDA board by Gov. Frank Murkowski in 2003.
This leaves the seven-member board, once again, two members short.
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