[Federal Register Volume 65, Number 32 (Wednesday, February 16, 2000)]
[Proposed Rules]
[Pages 7803-7806]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-3597]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 157

[Docket No. RM00-5-000]


Optional Certificate and Abandonment Procedures for Applications 
for New Service Under Section 7 of the Natural Gas Act

Issued February 9, 2000.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The Federal Energy Regulatory Commission is proposing to 
remove its optional certificate regulations. On September 15, 1999, the 
Commission issued a policy statement to provide the industry with 
guidance with respect to how the Commission will evaluate new proposals 
for pipeline construction projects to take account of changes in the 
natural gas industry in recent years. The Policy Statement provides 
that pipelines should not rely on existing customers to subsidize new 
projects that do not benefit them, and also provides that the 
Commission will only certificate new projects where it finds that, on 
balance, the public benefits outweigh any adverse effects. The Policy 
Statement did not include applications for new construction projects 
filed under the optional certificate rules, however. The Commission is 
proposing to remove the optional certificate regulations because it 
believes that a uniform regulatory scheme applicable to all certificate 
applications will best accomplish the Commission's goals, as set out in 
the Policy Statement, of assuring that all relevant interests and 
circumstances are considered and balanced in assessing the public 
convenience and necessity.

DATES: Written comments are due on or before April 3, 2000.

ADDRESSES: File comments with the Office of the Secretary, Federal 
Energy Regulatory Commission, 888 First Street, NE, Washington, DC 
20426.

FOR FURTHER INFORMATION CONTACT:
William L. Zoller, Office of Energy Projects, Federal Energy Regulatory 
Commission, 888 First Street, NE, Washington, DC 20426, (202) 208-1203.
Joseph B. O'Malley, Office of the General Counsel, Federal Energy 
Regulatory Commission, 888 First Street, NE, Washington, D.C. 20426, 
(202) 208-0088.

SUPPLEMENTARY INFORMATION:

I. Introduction

    The Federal Energy Regulatory Commission proposes to remove its 
optional certificate regulations in Subpart E of Part 157 of the 
Commission's regulations.\1\ The policies embedded in these regulations 
have been overtaken by subsequent policy developments--most 
particularly the Commission's September 15, 1999 Policy Statement.\2\ 
The optional certificate regulations, promulgated in 1985, established 
procedures whereby an eligible applicant may obtain, for purposes of 
providing new service, a certificate authorizing: the transportation of 
natural gas; sales of natural gas; the construction and operation of 
natural gas facilities; the acquisition and operation of natural gas 
facilities; and conditional pre-granted abandonment of such activities 
and facilities. On September 15, 1999, the Commission issued a policy 
statement to provide the industry guidance with respect to how the 
Commission will evaluate new proposals for pipeline construction 
projects to take account of changes in the natural gas industry in 
recent years. The Policy Statement provides that pipelines may not rely 
on existing customers to subsidize new projects that will not benefit 
them and that construction projects will be approved only where the 
public benefits outweigh any adverse effects. The optional regulations 
do not provide for consideration and weighing of public interest 
factors, and are thus inconsistent with current Commission policy.
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    \1\ 18 CFR 157.100 et seq.
    \2\ Certification of New Interstate Natural Gas Pipeline 
Facilities, 88 FERC para.61,227 (1999) (Policy Statement)
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II. Background

    Before a pipeline may construct any natural gas facilities subject 
to the Commission's Natural Gas Act (NGA) jurisdiction, it must obtain 
a certificate of public convenience and necessity authorizing such 
construction under section 7 of the NGA. In conjunction with the open 
access transportation program that the Commission established in Order 
No. 436, the Commission adopted the optional certificate regulations in 
1985 as an alternative to the conventional certificate process. A key 
goal of the optional certificate program was to provide the full 
benefits of competition to consumers by facilitating easier pipeline 
entry and exit from markets.\3\
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    \3\ See Order No. 436, Regulation of Natural Gas Pipelines After 
Partial Wellhead Decontrol, 50 FR 42408 (Oct. 18, 1985), 50 FR 45907 
(Nov. 5,1985); FERC Stats. & Regs. para.30,665 (1985), at p. 31,570.
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    The optional certificate regulations establish a rebuttable 
presumption that, subject to review under the National Environmental 
Policy Act, an application is required by the public convenience and 
necessity if the applicant is willing to assume all the economic risk 
of a new service.\4\ To assure that the applicant shoulders the project 
risk, the optional regulations prohibit cost shifting \5\ and any 
reduction in the certificated level of billing determinants used to 
design initial rates for a project or service.\6\ In addition, the 
Commission requires maximum demand and usage recourse rates in optional 
certificates based on

[[Page 7804]]

100 percent and 95 percent of the project's design capacity, 
respectively.\7\
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    \4\ See Order No. 436, at p. 31,584.
    \5\ Section 157.103(d)(8) provides that no costs originally 
allocated to the new service (or facility) by the certificate holder 
may thereafter be shifted by the certificate holder to any other 
service without a filing under Part 154 and a determination by the 
Commission that the costs sought to be reallocated are in fact being 
incurred for the benefit of the other services.
    \6\ Section 157.103(d)(4) provides that any rate filed for new 
service must be designed to recover costs on the basis of projected 
units of service. The units projected for the new service in the 
filed initial may be increased in a subsequent rate filing (in 
effect, decreasing rates) but may not be decreased.
    \7\ See, e.g., Mojave Pipeline Company, 47 FERC para. 61,200 
(1989) and Delta Pipeline Company, 52 FERC para. 61,004 (1989). The 
Commission found that design of rates on a lower load factor has the 
effect of shielding the pipeline from the risks of underutilization 
of capacity. The 95% load factor used to design usage rates 
recognizes that the design capacity of the capacity is not always 
available due to maintenance considerations and compressor outages.
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The Commission's September 15, 1999 Policy Statement

    In a Notice of Inquiry issued July 29, 1998,\8\ the Commission 
revisited its section 7 certificate policy in view of the continuing 
changes taking place in the natural gas industry. After conducting a 
comprehensive review, with considerable input from the public, the 
Commission issued its September 15, 1999 Policy Statement, 
Certification of New Interstate Natural Gas Pipeline Facilities, to 
provide guidance on how the Commission will evaluate proposals for 
certificating new construction in the future. The Policy Statement did 
not adopt new rules for filing applications; rather, the Policy 
Statement is intended to provide an analytical framework for 
determining when a particular pipeline project is required by the 
public convenience and necessity.
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    \8\ Notice of Inquiry, Regulations of Interstate Natural Gas 
Transportation Services, 84 FERC para. 61,087 (1998).
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    The threshold requirement of the new policy is that the pipeline 
must be prepared to develop the project without relying on 
subsidization by its existing customers.\9\ The Policy Statement also 
encourages pipelines seeking a certificate to resolve potential issues 
very early in the process by submitting applications designed to avoid 
or minimize adverse effects on such groups as existing customers of the 
applicant, existing pipelines serving the market and their captive 
customers, and affected landowners and other community interests. After 
the applicant makes efforts to minimize adverse effects, construction 
projects that have residual unresolved issues will be approved only 
where the public benefits of the projects are found to outweigh the 
adverse effects. An applicant may submit evidence of the public 
benefits to be achieved by the proposed project, such as contracts, 
precedent agreements, studies of projected demand in the market to be 
served, or other evidence of public benefit of the project.
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    \9\ Policy Statement, at p. 61,750.
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III. Discussion

    The Commission is proposing to remove the optional certificate 
regulations because it believes that a uniform regulatory scheme 
applicable to all certificate applications will best accomplish the 
Commission' s goals, as set out in the Policy Statement, of assuring 
that all relevant interests and circumstances are considered and 
balanced in assessing the public convenience and necessity.
    The Commission's Policy Statement established a core set of 
principles and considerations for evaluating new pipeline construction 
projects that is in part consistent with the policies that underlie the 
optional certificate procedures. By precluding subsidization of new 
projects, the Policy Statement provides that existing customers are 
protected from assuming the risk of a project that was not designed for 
their benefit. Similarly, under the optional certificate program, the 
applicant cannot look to subsidization from customers.\10\ In other 
respects, however, current policy is inconsistent with the optional 
certificate regulations. Because the optional certificates operate 
under a rebuttable presumption that they are in the public interest, 
the Commission does not weigh the public benefits against the adverse 
effects in considering such applications. The Commission believes that 
at this point it is better to consider all certificate applications 
under the recently articulated Policy Statement.\11\
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    \10\ The Commission notes that the optional certificate 
regulations have not resulted in faster issuance of certificates, as 
originally anticipated. There has been little or no difference 
between the two programs in Commission review and processing time. 
Environmental review is the driving force in total processing time, 
and environmental review requirements are the same under either 
program.
    \11\ In its order clarifying the Policy Statement, which is 
being issued contemporaneously with this NOPR, the Commission 
provides that, pending a final rule in this proceeding, the 
presumption in favor of an application filed under the optional 
certificate regulations will be considered rebutted if the adverse 
affects of the proposed project are found to outweigh its benefits. 
This is an interim solution, however. In the long run, the 
Commission believes that the better course is to treat all 
applications under one set of procedures.
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IV. Environmental Analysis

    Commission regulations describe the circumstances where preparation 
of an environmental assessment or an environmental impact statement 
will be required.\12\ The Commission has categorically excluded certain 
actions from this requirement as not having a significant effect on the 
human environment.\13\ No environmental consideration is necessary for 
the promulgation of a rule that is clarifying, corrective, or 
procedural, or that does not substantially change the effect of 
legislation or regulations being amended.\14\
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    \12\ Regulations Implementing National Environmental Policy Act, 
52 FR 47897 (Dec. 17, 1987), codified at 18 CFR Part 380.
    \13\ 18 CFR 380.4(a)(2)(ii).
    \14\ 18 CFR 380.4.
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    This proposed rule removal is procedural in nature. Applicants for 
pipeline construction authority must satisfy the same environmental 
requirements under either the optional or Policy Statement procedure. 
Thus, no environmental assessment or environmental impact statement is 
necessary for the requirements proposed in the rule.

V. Regulatory Flexibility Impact Statement

    The Regulatory Flexibility Act of 1980 (RFA) \15\ generally 
requires a description and analysis of final rules that will have 
significant economic impact on a substantial number of small entities. 
The Commission is not required to make such analysis if a rule would 
not have such an effect.\16\
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    \15\ 5 U.S.C. 601-612.
    \16\ 5 U.S.C. 605(b).
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    The Commission does not believe that removal of the optional 
certificate rules would have such an impact on small entities. The 
proposed removal of regulations would have impact only on interstate 
pipelines, which generally do not fall within the RFA's definition of 
small entity.\17\ Accordingly, pursuant to Section 605(a) of the RFA, 
the Commission proposes to certify that the removal of regulations 
proposed here will not have a significant economic impact on a 
substantial number of small entities.
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    \17\ 5 U.S.C. 601(3), citing to section 3 of the Small Business 
Act, 15 U.S.C. 632. Section 3 of the Small Business Act defines a 
``small business concern'' as a business which is independently 
owned and operated and which is not dominant in its field of 
operations.
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VI. Information Collection Statement

    The following collection of information is being forwarded to the 
Office of Management and Budget (OMB) for review under section 3507(d) 
of the Paperwork Reduction Act of 1995.\18\ The collection of 
information related to the subject involved here falls under FERC-537, 
Gas Pipeline Certificates: Construction, Acquisition, and 
Abandonment.\19\
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    \18\ 44 U.S.C. 3507(d).
    \19\ The current burden estimate for FERC-537 is 138,264 hours. 
This number is based on an average of 50 respondents (companies 
making filings), 11.2 responses (filings per respondent), and 246.9 
hours of preparation time per response.
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    The action proposed here will remove a heretofore little used 
alternative to the conventional section 7(c) application

[[Page 7805]]

process. While the optional certificate process does arguably offer 
pipelines a less burdensome process, in practice the overwhelming 
majority of applications for construction authority since adoption of 
the optional certificate rules have been filed under the conventional 
application process. What we are intending to accomplish is not to 
impose new information burdens on pipeline applicants, but to maintain 
the informational status quo. As a practical matter, our action should 
not have any appreciable effect on the collection of data from the 
pipeline industry. Nevertheless, we invite parties submitting comments 
to address this matter. Comments are solicited on the Commission's need 
for this information, whether the information will have practical 
utility, the accuracy of the provided burden estimates, ways to enhance 
the quality, utility, and clarity of the information to be collected , 
and any suggested methods for minimizing respondents' burden, including 
the use of automated information techniques.
    The OMB regulations require OMB to approve certain information 
collection requirements imposed by agency rule.\20\ Accordingly, 
pursuant to OMB regulations, the Commission is providing notice of its 
proposed information collection to OMB.
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    \20\ 5 CFR 1320.11.
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    Title: FERC-537, Gas Pipeline Certificates: Construction, 
Acquisition, and Abandonment.
    Action: Proposed Data Collection.
    OMB Control No. 1902-0060. The respondent shall not be penalized 
for failure to respond to this collection of information unless the 
collection of information displays a valid OMB control number.
    Respondents: Business or other for profit.
    Frequency of Responses: On occasion.
    Interested persons may obtain information on the reporting 
requirements by contacting the following: Federal Energy Regulatory 
Commission, 888 First Street, NE, Washington, DC 20426, [Attention: 
Michael Miller, Office of the Chief Information Officer, Phone: (202) 
208-1415, fax: (202) 208-2425, e-mail: [email protected]]
    For submitting comments concerning the collection of information 
and the associated burden estimate, please send your comments to the 
contact listed above and to the Office of Management and Budget, Office 
of Information and Regulatory Affairs, Washington, DC 20503. 
[Attention: Desk Officer for the Federal Energy Regulatory Commission, 
phone: (202) 395-3087, fax: (202) 395-7285]

VII. Comment Procedure

    The Commission invites interested persons to submit written 
comments on the matters and issues proposed in this notice to be 
adopted, including any related matters or alternative proposals that 
commenters may wish to discuss.
    The original and 14 copies of such comments must be received by the 
Commission before 5:00 p.m. April 3, 2000. Comments should be submitted 
to the Office of the Secretary, Federal Energy Regulatory Commission, 
888 First Street, NE, Washington DC 20426 and should refer to Docket 
No. RM00-5-00.
    In addition to filing paper copies, the Commission encourages the 
filing of comments either on computer diskette or via Internet E-Mail. 
Comments may be filed in the following formats: WordPerfect 8.0 or 
below, MS Word Office 97 or lower version, or ASCII format.
    For diskette filing, include the following information on the 
diskette label: Docket No. RM00-5-000; the name of the filing entity; 
the software and version used to create the file; and the name and 
telephone number of a contact person.
    For Internet E-Mail submittal, comments should be submitted to 
``[email protected]'' in the following format. On the subject 
line, specify Docket No. RM00-5-000. In the body of the E-Mail message, 
include the name of the filing entity; the software and version used to 
create the file, and the name and telephone number of the contact 
person. Attach the comment to the E-Mail in one of the formats 
specified above. The Commission will send an automatic acknowledgment 
to the sender's E-Mail address upon receipt. Questions on electronic 
filing should be directed to Brooks Carter at 202-501-8145, E-Mail 
address [email protected].
    Commenters should take note that, until the Commission amends its 
rules and regulations, the paper copy of the filing remains the 
official copy of the document submitted. Therefore, any discrepancies 
between the paper filing and the electronic filing or the diskette will 
be resolved by reference to the paper filing.
    All written comments will be placed in the Commission's public 
files and will be available for inspection in the Commission's Public 
Reference room at 888 First Street, NE, Washington, DC 20426, during 
regular business hours. Additionally, comments may be viewed, printed, 
or downloaded remotely via the Internet through FERC's Homepage using 
the RIMS or CIPS links. RIMS contains all comments but only those 
comments submitted in electronic format are available on CIPS. User 
assistance is available at 202-208-2222, or by E-Mail to 
[email protected].

VIII. Document Availability

    In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
Internet through FERC's Home Page (http://www.ferc.fed.us) and in 
FERC's Public Reference Room during normal business hours (8:30 a.m. to 
5:00 p.m. Eastern time) at 888 First Street, NE, Room 2A, Washington, 
DC 20426.
    From FERC's Home Page on the Internet, this information is 
available in both the Commission Issuance Posting System (CIPS) and the 
Records and Information Management System (RIMS).
--CIPS provides access to the texts of formal documents issued by the 
Commission since November 14, 1994.
--CIPS can be accessed using the CIPS link or the Energy Information 
Online icon. The full text of this document is available on CIPS in 
ASCII and WordPerfect 8.0 format for viewing, printing, and/or 
downloading.
--RIMS contains images of documents submitted to and issued by the 
Commission after November 16, 1981. Documents from November 1995 to the 
present can be viewed and printed from FERC's Home Page using the RIMS 
link or the Energy Information Online icon. Descriptions of documents 
back to November 16, 1981, are also available from RIMS-on-the-Web; 
requests for copies of these and other older documents should be 
submitted to the Public Reference Room. User assistance is available 
for RIMS, CIPS, and the Website during normal business hours from our 
Help line at (202) 208-2222 (E-Mail to [email protected]) or the 
Public Reference at (202) 208-1371 (E-Mail to 
[email protected] ).
    During normal business hours, documents can also be viewed and/or 
printed in FERC's Public Reference Room, where RIMS, CIPS, and the FERC 
Website are available. User assistance is also available.

[[Page 7806]]

List of Subjects in 18 CFR Part 157

    Administrative practice and procedure, Natural gas, Reporting and 
recordkeeping requirements.

    By direction of the Commission.
Linwood A. Watson, Jr.,
Acting Secretary.
    In consideration of the foregoing, the Commission proposes to amend 
Part 157--Chapter I, Title 18, Code of Federal Regulations, as follows.

PART 157--APPLICATIONS FOR CERTIFICATES OF PUBLIC CONVENIENCE AND 
NECESSITY AND FOR ORDERS PERMITTING AND APPROVING ABANDONMENT UNDER 
SECTION 7 OF THE NATURAL GAS ACT

    1. The authority citation for Part 157 continues to read as 
follows:

    Authority: 15 U.S.C. 717-717W, 3301-3432; 42 U.S.C. 7101-7352.

Subpart E of Part 157--[Removed and Reserved]

    2. Remove and reserve subpart E, consisting of Sec. Sec. 157.100 
through 157.106.

[FR Doc. 00-3597 Filed 2-15-00; 8:45 am]
BILLING CODE 6717-01-P