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Some changes made to open season plan TransCanada, ExxonMobil cite view of most that plan should go ahead, clarify some issues, say others not open season plan issues Kristen Nelson Petroleum News
In response to comments on its open season plan, TransCanada and ExxonMobil, sponsors of the Alaska Pipeline Project, the APP parties, have addressed “certain discrete procedural issues raised by ConocoPhillips and BP,” and also responded to a request by the State of Alaska for clarification of standards of conduct governing the open season.
But APP said “the majority of the issues BP raises are beyond the parameters of the current proceeding” and should not be considered by the Federal Energy Regulatory Commission in its review of the APP open season plan, while “BP’s comments relating to the data room and the availability of information are unfounded.”
Interestingly, in limited reply comments Denali—The Alaska Gas Pipeline LLC, agreed with TransCanada, telling FERC that an argument by a potential shipper that FERC do a “comprehensive review of any potential commercial issue inherent in the indicative tariff and similar materials and provide commercial guidance to the parties in order to satisfy its regulatory responsibilities … is exactly the opposite of the procedural safeguards adopted by the Commission to ensure that any such challenges, when they become ripe, will be fully adjudicated in a proceeding where an application for a certificate of public convenience and necessity is under consideration.”
Denali, whose pipeline project is in competition with the TransCanada-ExxonMobil project, is co-owned by BP and ConocoPhillips. Denali plans to file its open season plan with FERC in April and that plan will be subject to the same FERC pre-approval as the APP plan.
This review new Denali said FERC’s role, “during this compressed open season procedural schedule, is not to rewrite the commercial offering contained in the open season plan or to assist in the negotiations between potential shippers and the pipeline sponsor.”
The company said FERC has never before “reviewed and approved the procedures by which a new interstate natural gas pipeline planned to conduct an open season in the United States.”
Because the Alaska project is unique, FERC established regulations for the conduct of the open season process, Denali said, and: “By its very nature, the pre-approval review is preliminary and narrow.”
Denali also said FERC’s pre-approval of an open season plan “is not a final agency action and does not determine, resolve, or prejudice issues raised by a potential shipper that may be presented later.”
“Despite any assertion to the contrary, the Commission is well within its regulatory responsibilities to avoid the delay inherent in the potential shipper’s request to resolve issues that are properly addressed during the certificate phase or in commercial negotiations between the parties,” Denali said.
APP’s response In its own reply comments APP said of the five interested parties filing comments on the open season plan, four basically supported FERC approval — with requests for clarification on process issues — and none argued denial of the plan.
While four of the comments recognized the limited scope of FERC’s pre-approval review, BP “filed lengthy comments directed principally to terms and conditions of the APP commercial offering or to rate and tariff issues,” issues which APP said “have nothing to do with APP’s compliance with the Open Season Regulations or with the Commission’s pre-approval review.”
“APP, in the shipper negotiations that will be conducted as part of the open season process, will address these issues and any other commercial concerns BP may have about the offering,” and if the issues are not resolved during negotiations, then they would be appropriately raised with FERC after the application for a certificate of public convenience and necessity is filed (a step which will occur after the open season).
APP said ConocoPhillips raised two discrete issues about process: a request for clarification on when notification of bidders would occur and a request that the bidder can decline an open season capacity award in the event that there is oversubscription and capacity requests of all shippers are reduced.
APP said it had been its intent to notify bidders at the same time “and APP agrees to the requested clarification.”
On the oversubscription issue, APP said while it believes its approval provisions “implicitly provide bidders with this option, APP has no objection to making more explicit a bidder’s opportunity to decline a prorated capacity award.”
“BP’s comments raise certain other issues about the process for executing Precedent Agreements and about the standards for accepting non-confirming bids,” and APP said it “has no objection to revising the Notice to ensure timely Board approval and execution of the Precedent Agreements by both parties and to more clearly explain the difference between conforming and non-conforming bids and how bidder-proposed changes in conforming bids will be addressed by APP.”
APP said it would revise its proposed open season notice to address these issues, and attached a copy of the notice reflecting the revisions.
BP, Exxon issues APP said most of BP’s lengthy comments have nothing to do with conduct of the open season or with FERC’s open season regulations.
In a footnote APP said that while it did not intend “to respond on the merits of BP’s assertions,” the terms and conditions of the APP offering “have been tailored to address the unique challenges that will be faced” by the Alaska gas pipeline project. APP quoted FERC’s statement in Order No. 2005A, that “existing Commission policies predicated on competitive conditions in the lower 48 states are ill-suited for application in the case of an Alaska natural gas transportation project, particularly in view of ANGPA’s directives.” (The Alaska Natural Gas Pipeline Act, passed in 2004, found an Alaska natural gas pipeline to be in the national interest and, among other provisions, directed FERC to establish regulations for the project and to quickly permit the project once certain requirements are met.)
APP also said that while BP said that consideration of the issues it raised would not delay the open season, “the short time period in which the Commission’s decision is to be rendered is not conducive to the development of a full record, let along an informed decision, with regard to the BP issues.”
APP said ExxonMobil Gas & Power Marketing sought a FERC ruling that approval of the open season plan “will not constitute a binding determination with regard to the substance of the APP submission, and will not preclude bidders from entering into negotiations with APP concerning the commercial issues presented by the APP offering.” APP said it agrees with ExxonMobil’s comments on this issue and has no objection to the FERC ruling ExxonMobil seeks.
ConocoPhillips’ reply In its reply comments ConocoPhillips said it agreed with BP that “TransCanada should be directed to provide additional information respecting the costs and rates associated with the Alaska natural gas transportation project that it proposes,” and said such information should be available before the open season begins.
ConocoPhillips also wants more information on expansion options and costs, telling FERC that, “Given the significant cost risk placed on initial shippers in connection with potential expansions of an Alaska natural gas transportation project, much more information must be forthcoming.”
ConocoPhillips said it also agrees with BP in principle that “ambient incremental capacity should be made available to the initial firm transportation shippers who would actually be paying for all of the pipeline’s ability to provide physical capacity,” and said the magnitude of such capacity is a major component of shippers’ project economics.
With Alaska weather, ConocoPhillips said, “Such ambient incremental capacity could range as high as 300,000 to 400,000 MCFD, and could last for a period of 4-5 months per year.”
ConocoPhillips said the issue could be addressed through enhancements to the authorized overrun service but said it supports a model similar to that associated with the Alliance Pipeline’s negotiated rates, where firm shippers are allowed a pro rata priority to the authorized overrun service available capacity on any given day.
“Such an AOS paradigm in Alaska will help provide initial shippers with the economic certainty they require” to make the necessary long-term transportation commitments, the company said.
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