[Federal Register Volume 67, Number 196 (Wednesday, October 9, 2002)]
[Proposed Rules]
[Pages 62918-62920]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-25120]


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FEDERAL ENERGY REGULATORY COMMISSION

18 CFR Parts 154, 161, 250 and 284

[Docket No. PL02-9-000]


Notice of Public Conference

September 26, 2002.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Notice of public conference.

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SUMMARY: On February 9, 2000, the Commission issued Order No. 636, 
amending its regulations in response to growing development of more 
competitive markets for natural gas and the transportation of natural 
gas (65 FR 10156, February 25, 2000). The Commission is holding a 
public conference to engage industry members and the public in a 
dialogue about policy issues facing the natural gas industry today and 
the Commission's regulation of the industry of the future.

DATES: Requests to participate: October 15, 2002. Conference date: 
October 25, 2002.

ADDRESSES:  Office of the Secretary, Federal Energy Regulatory 
Commission, 888 First street, NE., Washington, DC 20426.

FOR FURTHER INFORMATION CONTACT: Kenneth P. Niehaus, Office of Energy 
Projects, Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC, (202) 502-6398, [email protected].

SUPPLEMENTARY INFORMATION:
    1. The Federal Energy Regulatory Commission (FERC) will hold a 
conference on October 25, 2002, to engage industry members and the 
public in a dialogue about policy issues facing the natural gas 
industry today and the Commission's regulation of the industry for the 
future. The Commission expects a wide ranging discussion that will help 
the Commission establish its regulatory goals for an industry that 
anticipates long term growth to reach 30-Tcf annually. The Commission 
anticipates exploring issues concerning: (1) Supply and demand; (2) the 
application of the Commission's open access polices to liquefied 
natural gas (LNG) import facilities; (3) the Commission's Outer 
Continental Shelf (OCS) gathering policy; and (4) the flexibility 
pipelines need to serve historical load as well as new demand. In 
addition, the Commission will provide an opportunity for market 
participants and other interested persons to raise issues and make 
policy recommendations for Commission consideration.

[[Page 62919]]

I. Background

    2. In 1997, the Commission held a conference to revisit its 
approach to natural gas regulation in light of significant changes in 
the structure of the natural gas industry that occurred as a result of 
Order No. 636.\1\ Since that time, the energy industry has continued to 
experience ongoing structural changes that impact the supply and demand 
of natural gas. Some of these changes include shifts in the industry 
from regulated to non-regulated gathering operations. Over the past 
five years, the Commission has seen an increase in abandonment of these 
facilities from the regulated companies to non-regulated affiliated and 
non-affiliated gathering companies. Changes from regulated to non-
regulated services raise important issues that the Commission needs to 
consider in assuring unrestricted access to necessary supplies from the 
OCS.
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    \1\ Pipeline Service Obligations and Revisions to Regulations 
Governing Self-Implementing Transportation and Regulations of 
Natural Gas Pipelines After Partial Wellhead Decontrol, 57 FR 13,267 
(April 16, 1992), FERC Stats. & Regs Preambles January 1991-June 
1996 ] 30,939 (April 8, 1992), order on reh'g, Order No. 636-A, 57 
FR 36,128 (August 12, 1992), FERC Stats. & Regs. Preambles, January 
1991-June 1996 ] 30,950 (August 3, 1992), order on reh'g, Order No. 
636-B, 57 FR 57,911 (December 8, 1992), 61 FERC ] 61,272 (1992), 
notice of denial of rehearing (January 8, 1993), 62 FERC ] 61,007 
(1993), aff'd in part and vacated and remanded in part, UDC v. FERC, 
88 F.3d 1105 (D.C. Cir. 1996), order on remand, Order No. 636-C, 78 
FERC Sec.  61,186 (1997), order on reh'g, Order No. 636-D, 83 FERC ] 
61,210 (1998).
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    3. In Order No. 637,\2\ issued in 2000, the Commission revised, 
among other things, its regulations relating to scheduling procedures, 
capacity segmentation, and pipeline penalties to improve the 
competitiveness and efficiency of the interstate pipeline grid and to 
enhance pipeline transportation services. Changes in historical 
pipeline operations brought about by Order No. 637 may impact 
investment in much needed pipeline infrastructure to fulfill future 
demand for natural gas.
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    \2\ See Regulation of Short-Term Natural Gas Transportation 
Services and Regulation of Interstate Natural Gas Transportation 
Services, FERC Stats. & Regs. Regulations Preambles (July 1996-
December 2000) ] 31,091 (Feb. 9, 2000); order on rehearing, Order 
No. 637-A FERC Stats. & Regs. Regulations Preambles (July 1996-
December 2000) ] 31,099 (May 19, 2000), aff'd in part and rev'd and 
remanded in part, INGAA v. FERC, 285 F.3d 18 (D.C. Cir. 2002).
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    4. The increasing demands placed on pipelines by new electric 
generation load may impact the flexibility pipelines currently have in 
meeting the service demands of historical customers. In its Annual 
Energy Outlook 2002, Energy Information Administration (EIA) forecasts 
that natural gas for power generation will grow 4.6 percent annually, 
reaching from 9.65 to 10.36 Tcf in 2020 depending on economic growth 
(consumption in 2000 was 4.24 Tcf).
    5. The economy, mild weather patterns, and major developments in 
the financial foundation and structure of the energy industry may also 
have important repercussions on long term markets, supplies, and 
investment in infrastructure. Reduction in market capitalization of 
many major energy players, substantial layoffs, the exiting and 
restructuring of many companies' energy trading business, bankruptcies, 
the sale of major assets by major energy players, and the cancellation 
of many future gas-fired generation projects all may potentially affect 
natural gas markets and the infrastructure it depends upon.
    6. Even with the nation's current economic slowdown, however, 
natural gas demand continues to grow. Overall, EIA projects that the 
natural gas market will grow from the 22.83 Tcf consumed in 2000 to 
between 30.02 to 32.63 Tcf in 2015, with projections for 2020 from 
32.03 to 34.99 Tcf, depending on economic growth. All the above 
mentioned events may impact the industry's ability to prepare for and 
meet the future anticipated demand.

II. Scope of Inquiry

    7. The purpose of this conference is to discuss short and long term 
issues that may impact the Commission's regulation of the natural gas 
industry. The Commission wants to explore whether the Commission's 
current regulatory approach in natural gas fosters or impedes supply 
production and investment in development of the infrastructure needed 
to meet the anticipated long term growth to 30-Tcf annually. In 
addition to providing an open forum for communicating with the 
Commissioners, the Commission wishes to address the following topics.

A. Supply Forecast

    8. EIA projects that natural gas consumption could reach 34.99 Tcf 
annually in 2020. Decreasing gas prices have resulted in a reduction in 
capital expenditures for development in natural gas production. 
Evidence indicates that production in traditional supply regions, 
including onshore gas production in the Permian Basin and offshore in 
the shallow shelf of the Gulf of Mexico, is in decline. At the same 
time, Canadian imports have been falling while domestic exports to 
Mexico have been increasing. Additionally, concerns have been raised 
relating to potential barriers that may restrict the domestic producing 
community's ability to meet the projected demand. The Commission wishes 
to explore natural gas supply issues and their impact on the 
infrastructure needed to meet forecasted demand.

B. Liquefied Natural Gas

    9. In the 1970's the Commission authorized the construction and 
operation of several LNG import terminals to provide a needed 
supplemental source of gas supplies to U.S. markets.\3\ In response to 
more recent demands for natural gas, the Commission has approved the 
reactivation of two of the original LNG import projects and the 
expansion of an existing LNG terminal.\4\ Additionally, there are two 
pending applications for other LNG expansion projects and one for a new 
LNG import facility.\5\
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    \3\ See Columbia LNG Corp., 47 FPC 1624, order on reh'g, 48 FPC 
723 (1972) (approving the construction and operation of the Cove 
Point and Elba Island LNG import terminals); Trunkline LNG Co., 58 
FPC 726, order on reh'g, 58 FPC 2935 (1977) (approving the 
construction and operation of a Lake Charles LNG import terminal); 
Distrigas Corp., 58 FPC 2589 (1977) (approving a settlement 
authorizing operation of LNG import terminal at Everett, 
Massachusetts).
    \4\ See Southern LNG Inc., 89 FERC ] 61,314 (1999), order on 
reh'g, 90 FERC ] 61,257 (2000); Cove Point LNG Limited Partnership, 
97 FERC ] 61,043, order on reh'g, 97 FERC ] 61,276 (2001); order 
denying clarification and reh'g, 98 FERC ] 61,270 (2002); Distrigas 
of Massachusetts, 94 FERC ] 61,008 (2001).
    \5\ CMS Trunkline LNG Co. (CMS) application filed in Docket No. 
CP02-60-000. In Docket No. CP02-60-000, the Commission preliminary 
approved CMS's application to expand its Calcasieu Parish, Louisiana 
terminal (100 FERC ] 61,217), and in Docket No. CP02-379-000 
Southern LNG's request authorization for further expansion of its 
Elba Island facility. On May 30, 2002, Hackberry LNG Terminal, 
L.L.C. filed an application in Docket No. CP02-374-000, et al., to 
construct and operate a new LNG import facility.
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    10. The Commission recognizes that LNG imports are expected to 
become a key supply source in the U.S. over the next ten years. We 
believe it is time to reexamine our existing policy in light of the 
changes that have occurred in the gas industry since that time. While 
the Commission recently denied a request to disclaim jurisdiction over 
the siting, construction, and operation of LNG facilities,\6\ it has 
not reviewed its open access policy as it pertains to LNG import 
facilities. The Commission wishes to explore regulatory goals that will 
remove unnecessary barriers to the development of LNG facilities and 
supply as a major source of natural gas to meet the forecasted future 
demand.
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    \6\ See Dynegy LNG Production Terminal, L.P., 97 FERC ] 61,231 
(2001).

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[[Page 62920]]

C. Offshore Gathering Policy

    11. In ExxonMobil Gas Marketing Company v. FERC,\7\ the court 
affirmed the Commission's gathering policy as it pertained to 
facilities located in the OCS. In Order No. 639,\8\ the Commission 
determined that under the Commission's authority under the Outer 
Continental Lands Act (OCSLA), gatherers in the OCS must report 
information regarding service provided through their gathering 
facilities. The Commission believes that such information is necessary 
to assure that the gatherers providing service in the OCS do so on an 
open and nondiscriminatory basis. Subsequently, however, the court 
determined that the OCSLA did not give the Commission authorization to 
promulgate such a requirement.\9\ The Commission wishes to explore 
future regulatory policies and goals that would promote the further 
development of offshore supply sources in the OCS.
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    \7\ 297 F.3d 1071 (2002).
    \8\ Regulations under the Outer Continental Shelf Lands Act 
Governing the Movement of Natural Gas on Facilities on the Outer 
Continental Shelf, 65 FR 20,354 (Apr. 17, 2000), FERC Stats. & Regs. 
] 31,514 (2002), order on reh'g and clarification, Order No. 639-A, 
65 FR 47,294 (Aug. 2, 2000), FERC Stats. & Regs. ] 31,103 (2000).
    \9\ See Chevron U.S.A., Inc. v. FERC, No. 02-5056 (D.C. Cir.).
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D. Flexibility in Pipeline Operations

    12. Natural gas is now the fuel of choice for new power generation 
due to the efficiency of technology, low initial investment costs, 
relative ease of siting new plants, and lower pollutant emissions. 
Electric generation load is more variable through a given day than a 
traditional pipeline customer load.\10\ Therefore, electric generation 
customers require transportation services and facilities that 
accommodate hourly rather than daily swings in gas consumption and 
wider fluctuations in consumption volumes.\11\ Because of the large 
amounts of gas used as gas-fired generation plants, and their potential 
to cause rapid and unanticipated hourly consumption demands, 
traditional pipeline customers have expressed the concern that the 
ramping-up of one or more power plants could lead to pressure drops 
which, in turn, could result in a reduction in both the pressure and 
rate of gas flowing through the meter station and distribution 
facilities. The Commission believes it is imperative that the future 
pipeline infrastructure meets the flexibility and service needs of all 
of their customers. We wish to explore issues related to serving new 
demand to meet current and future needs.
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    \10\ Impact of Power Generation Gas Demand on Natural Gas Local 
Distribution Companies, American Gas Association, prepared by: 
Energy and Environmental Analysis, Inc. There are baseload 
generators, intermediate load generators, and peaking plants. Used 
together, these plants maintain electric power levels throughout the 
electric transmission grid sufficient to meet customer demand. 
Generally, baseload units (these are high fixed-cost units using 
less expensive fuel and with the lowest operating costs) meet the 
based demands. Intermediate load generators (i.e., most combined 
cycle facilities) are run regularly, by not on a full time basis. 
Peaking units are generally last dispatched and operated only on the 
days and hours of highest electricity demand. These units generally 
have low fixed costs, but high operating and fuel costs.
    \11\ Id.
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E. Open Forum

    13. In addition to addressing the above mentioned issues, the 
Commission also seeks to encourage industry representatives and 
interested individuals to raise other issues for the Commission to 
consider in shaping its future regulatory policies concerning the 
natural gas industry. The Commission envisions that the conference will 
consist of panels and an open forum that will give all interested 
individuals an opportunity to raise issues.

III. Participation

    14. The conference will be held on October 25, 2002 at FERC, 888 
First Street, NE., in Washington, DC in the Commission Meeting Room. 
The public is invited to attend. Anyone interested in participating 
should contact Ken Niehaus at 202-502-6398 or at 
[email protected] by October 15, 2002. Requests for participate 
should include information concerning the issue or issues the 
participant would like to raise. We will issue further details on the 
conference including the agenda and a list of participants, as plans 
evolve.
    15. The conference will be transcribed. Those interested in 
acquiring the transcript should contact Ace Reporters at 202-347-3700 
or 800-336-6646. Transcripts will be placed in the public record ten 
days after the Commission receives the transcripts. Additionally, 
Capitol Connection offers the opportunity for remote listening and 
viewing of the conference. It is available for a fee, live or over the 
Internet, via C-Band Satellite. Persons interested in receiving the 
broadcast, or who need information on making arrangements should 
contact David Reininger or Julia Morelli at Capitol Connection (703-
993-3100) as soon as possible or visit the Capitol Connection website 
at http://www.capitolconnection.gmu.edu and click on ``FERC.''

Linwood A. Watson, Jr.,
Deputy Secretary.
[FR Doc. 02-25120 Filed 10-8-02; 8:45 am]
BILLING CODE 6717-01-M