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RCA: We can’t rule on storage regulation Commission says that changes to state statutes would be the simplest way of clarifying whether Cook Inlet gas storage regulated Alan Bailey Petroleum News
On Jan. 27 the Regulatory Commission of Alaska issued an order declining to rule that the commission would not regulate a natural gas storage facility that Cook Inlet Natural Gas Storage LLC plans to build in the Cannery Loop gas field on Alaska’s Kenai Peninsula. The order leaves open the question of whether RCA would ultimately regulate the facility.
Faced with the likelihood of gas deliverability shortfalls in the winter of 2011-12 unless more gas storage comes into operation in the Cook Inlet basin, gas utility Enstar Natural Gas Co. has been working with CINGS, a subsidiary of pipeline company TransCanada, to fast track the construction of the storage facility, for use by utilities or gas producers that need to store summer-produced gas to meet peak winter demand.
And, worried about the potential impact of regulatory uncertainty on the economics of the gas storage project, CINGS had on Dec. 21 petitioned the commission for a declaratory judgment not to regulate the facility, and had requested a rapid decision on the ruling — during a December RCA technical workshop on natural gas storage CINGS and Enstar expressed concern that any required regulatory approval for the facility would need to be in place prior to the 2010 summer construction season.
Unclear But Alaska statutes do not spell out with unambiguous clarity RCA responsibilities when it comes to gas storage.
And in its Jan. 27 order RCA emphasized that the question of its current jurisdiction over gas storage is a matter of law rather than of public policy. The commissioners said that RCA does not have the authority to rule on the legal question of the scope of its jurisdiction, and that any ruling on this matter by the commission “will ultimately be given no weight.” Consequently, a ruling by the commission would not remove the regulatory uncertainty regarding the storage facility.
The Alaska Supreme Court has ultimate authority in interpreting the statutes governing RCA jurisdiction, but “the most expeditious way to clarify our jurisdiction is through amendment to our statutes, explicitly authorizing us to regulate natural gas storage or exempting natural gas storage from our regulation,” RCA said.
RCA said that attorneys, all “leading practitioners of our regulatory bar,” had confirmed the statutory fuzziness over gas storage regulation by presenting diametrically different interpretations of the statutes in legal briefs submitted to RCA by various utilities and Cook Inlet gas producers.
Utility statute The state statute for public utilities specifies that a regulated utility must own, operate, manage or control a plant, pipeline or system for “furnishing by transmission or distribution of natural … gas to the public for compensation.”
And, in the absence of the term “gas storage” in the statute, much legal argument centers on the term “transmission,” the commission said. In fact no one has argued for regulating the planned gas storage facility as a natural gas pipeline, it said.
In its December petition to RCA, CINGS had argued that it would not be involved transporting gas because its customers would deliver gas for storage and accept gas deliveries from storage at a single facility boundary close to the facility gas reservoir.
And gas producers Marathon Alaska Production and Aurora Gas supported CINGS’ position, saying that, since CINGS would not be involved in gas “transmission,” the storage facility did not fall under RCA jurisdiction. No transportation “Natural gas storage is not within the normal understanding of what constitutes ‘transmission and distribution,’ particularly in light of the limitation of the (Alaska) Pipeline Act which defines natural gas transportation in terms of the physical movement between different points,” said attorney Andrea Wolfman in Marathon’s brief to RCA. “The meaning of ‘transportation’ under the Pipeline Act is a relevant indicator of the meaning of the word ‘transmission’ under the Utilities Act as well. Since storage in an underground reservoir does not involve the physical movement between different points, it would not constitute transportation under the Pipeline Act and should not constitute transmission under the Utilities Act either.”
Not so, said attorney Donald Edwards in power utility Chugach Electric Association’s brief.
“CINGS proposes to use pipes to move gas to and from the public at transmission pressures and therefore can be said to furnish natural gas by transmission,” Edwards said. The CINGS facility would operate in the middle of a gas transmission system, accepting gas from the public, moving the gas through a system of pipes into storage and then later moving the gas back through its pipe system to the public, for delivery to the utilities, he said.
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