Revision of Existing Regulations Governing the Filing of Applications for the Construction and Operation of Facilities To Provide Service or To Abandon Facilities or Service Under Section 7 of the Natural Gas Act

SUMMARY: The Federal Energy Regulatory Commission is amending the

regulations codifying the Commission's responsibilities under the

Natural Gas Act and Executive Order 10485, as amended. The Commission

is updating its regulations governing the filing of applications for

the construction and operation of facilities to provide service or to

abandon facilities or service under section 7 of the Natural Gas Act.

The changes are necessary to conform the Commission's regulations to

the Commission's current policies.

DATES: These regulations become effective June 14, 1999.

ADDRESSES: Federal Energy Regulatory Commission, 888 First Street, NE.,

Washington DC 20426.

FOR FURTHER INFORMATION CONTACT:

Michael J. McGehee, Office of Pipeline Regulation, Federal Energy

Regulatory Commission, 888 First Street, NE., Washington, DC 20426,

(202) 208-2257.

Carolyn Van Der Jagt, Office of the General Counsel, Federal Energy

Regulatory Commission, 888 First Street, NE., Washington, DC 20426,

(202) 208-2246.

SUPPLEMENTARY INFORMATION: In addition to publishing the full text of

this document in the Federal Register, the Commission also provides all

interested persons an opportunity to inspect or copy the contents of

this document during normal business hours in the Public Reference Room

at 888 First Street, NE., Room 2A, Washington, DC 20426.

The Commission Issuance Posting System (CIPS) provides access to

the texts of formal documents issued by the Commission from November

14, 1994, to the present. CIPS can be accessed via Internet through

FERC's Home page (http://www.ferc.fed.us) using the CIPS Link or the

Energy Information Online icon. Documents will be available on CIPS in

ASCII and WordPerfect 6.1. User assistance is available at 202-208-2474

or by E-mail to [email protected].

This document is also available through the Commission's Records

and Information Management System (RIMS), an electronic storage and

retrieval system 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. RIMS is available in the Public Reference

Room or remotely via Internet through FERC's Home page using the RIMS

link or the Energy Information Online icon. User assistance is

available at 202-208-2222, or by E-mail to [email protected].

Finally, the complete text on diskette in WordPerfect format may be

purchased from the Commission's copy contractor, RVJ International,

Inc. RVJ International, Inc. is located in the Public Reference Room at

888 First Street, NE., Washington, DC 20426.

I. Introduction

The Federal Energy Regulatory Commission (Commission) is amending

its regulations governing the filing of applications for certificates

of public convenience and necessity authorizing the construction and

operation of facilities to provide service or to abandon facilities or

service under section 7 of the Natural Gas Act (NGA),1 and

amending the blanket certificate under subpart F of part 157. The

Commission has determined that portions of its regulations need to be

revised and/or eliminated in order to reflect the current regulatory

environment of unbundled pipeline sales and open-access transportation

of natural gas. The revisions would: (1) Bring the existing regulations

up-to-date to match current policies; (2) eliminate ambiguities and

obsolete language; (3) make the regulations more germane and less

cumbersome; and (4) reduce the existing reporting burden by a total of

8,284 hours.

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\1\ 15 U.S.C. 717b.

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Additionally, the Commission is consolidating and clarifying its

current practice concerning the reporting requirements needed for its

environmental review of pipeline construction projects under the

National Environmental Policy Act of 1969.2 Generally, the

Commission's existing requirements for the environmental review process

are outdated, located in several different parts of the Commission's

regulations, or, in practice, have been replaced with a preferred

format that is not in the Commission's regulations, but is now used

routinely by jurisdictional companies. The new regulations will provide

better guidance to the regulated industry concerning what particular

information the Commission needs to conduct a timely environmental

analysis.

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\2\ 42 U.S.C. 4321-4370a.

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II. Background

Since the enactment of the Natural Gas Policy Act of 1978 (NGPA)

3 and the Natural Gas Wellhead Decontrol Act of 1989

(Decontrol Act),4 the natural gas industry has undergone

significant changes. Historically, the Commission regulated natural gas

producers and wellhead prices and interstate pipelines served as gas

merchants. Pipelines now generally provide only open-access

transportation services and the Commission no longer regulates

producers and wellhead prices. The Commission implemented these changes

through its rulemaking process 5 and through issuing policy

statements.6

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\3\ 15 U.S.C. 3301-3432 (1978).

\4\ Pub. L. 101-60, 103 Stat. 157 (1989).

\5\ See Regulation of Natural Gas Pipelines After Partial

Wellhead Decontrol, Order No. 436, 50 FR 42408 (November 5, 1985)

FERC Stats. and Regs. para. 30,665 (October 9, 1985)(Order No. 436

instituted open-access, non-discriminatory transportation to permit

downstream gas users to buy gas directly in the production area and

to ship that gas via interstate pipelines); Order Implementing the

Natural Gas Wellhead Decontrol Act of 1989, Order No. 523, 55 FR

17425 (April 25, 1990) FERC Stats. and Regs. para. 30,887 (April 18,

1990) and Removal of Outdated Regulations Pertaining to the Sales of

Natural Gas Production, Order No. 567, 59 FR 40240 (August 8, 1994)

FERC Stats. and Regs. para. 30,999 (July 28, 1994)(in Order Nos. 523

and 567, the Commission generally amended its regulations to delete

those pertaining to its jurisdiction over the sale of natural gas

production); and Pipeline Service Obligations and Revisions to

Regulations Governing Self-Implementing Transportation; and

Regulation of Natural Gas Pipelines After Partial Wellhead

Decontrol, Order No. 636, 57 FR 13267 (April 16, 1992) FERC Stats.

and Regs. para. 30,939 (April 8, 1992)(in Order No. 636, the

Commission adopted regulatory changes to finally complete the

evolution to competition in the natural gas industry by mandating

the unbundling of interstate natural gas sales service from

transportation service, requiring that those services be sold

separately to natural gas purchasers).

\6\ Pricing Policy For New and Existing Facilities Constructed

by Interstate Natural Gas Pipelines, 71 FERC para. 61,241 (1995).

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On September 30, 1998, the Commission issued a Notice of Proposed

Rulemaking (NOPR),7 proposing to amend the Commission's

regulations to conform them to its existing policies and procedures.

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\7\ Revisions of Existing Regulations Under Part 157 and Related

Sections of the Commission's Regulations Under the Natural Gas Act,

63 FR 55683 (October 16, 1998), IV FERC Stats. and Regs. para.

32,535 (September 30, 1998).

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This Final Rule serves four basic purposes. First, it will remove

certain

[[Page 26573]]

regulations that are outdated and obsolete including, among other

things, regulations that pertain to producer related activities made

obsolete by the Natural Gas Wellhead Decontrol Act of 1989 and

regulations that pertain to a pipeline's merchant function.

Additionally, it will remove various regulations that pertain to

certain activities that were performed under the blanket certificate

issued in subpart F of part 157 that are now performed under part 284

of the Commission's regulations. The Final Rule will also remove

certain outdated and/or unnecessary filing requirements and reports.

Second, the Final Rule clarifies and updates certain aspects of the

regulations, for example Secs. 2.55, 157.10 and 157.202, to conform

them to the Commission's present policies. Third, it modifies certain

existing regulations to aid in expediting the Commission's procedures

for constructing certain facilities. Finally, the Final Rule replaces

certain outdated environmental filing procedures with commonly followed

industry practice.

In essence, the Final Rule makes numerous changes to the

Commission's regulations in an effort to streamline the certificate

process. First, it requires that pipelines file more complete

applications by including the information described in the checklist in

appendix A to part 380. The checklist specifies the minimum content of

an acceptable environmental report. This information is important for a

pipeline to include when it files an application because it ensures

that the staff has the minimum environmental information necessary to

begin its review. Since the environmental review is generally the most

time consuming part of the certificate process, it is critical for

pipelines to follow the checklist in appendix A to part 380. A pipeline

can avoid rejection or unnecessary delays associated with requests for

additional information by including the minimum checklist information

in its initial application.

The Final Rule also incorporates a number of changes from the

proposals in the NOPR in response to the comments filed. The following

list details some of the changes in the final rule:

--Section 2.55(a) now recognizes that facilities installed along with

new transmission facilities will qualify as auxiliary, as long as

pipelines provide the Commission with a description of the auxiliary

facilities at least 30 days in advance of their installation;

--Sections 153.21 and 157.8, now states that an application will be

rejected if it ``patently fails to comply with applicable statutory

requirements or with applicable Commission rules, regulations, and

orders for which a waiver has not been granted,'' instead of if it

``does not conform to the requirements of this part;''

--Section 157.10 allows pipelines five business days instead of two

business days as proposed to provide voluminous or hard to reproduce

materials to parties that request such information;

--Section 157.20 allows pipelines to notify the Commission of the

reason that an end-user/shipper cannot flow gas within 10 days after

the expiration of the time specified in the order, rather than 30 days

before expiration of the date;

--Section 157.202(b)(2)(i) now includes certain compression

replacements, in addition to mainline, and lateral replacements in the

definition of eligible facilities;

--Section 157.202(b)(6) now includes situations involving natural

forces beyond the pipeline's control in the definition of miscellaneous

rearrangement;

--Section 157.208(f)(2) allows pipelines to use the prior notice

procedures to increase the Maximum Allowable Operating Pressure of

lateral lines that were originally certificated under both case-

specific section 7(c) certificates and the Part 157 blanket

certificate;

--Section 157.215 clarifies that injection, withdrawal and observation

wells can be drilled for reservoir testing purposes; and

--Section 157.217 now clarifies that pipelines are able to switch

customers from individually certificated section 7(c) transportation

rate schedules to part 284 blanket certificate transportation rate

schedules.

Additionally at the request of commenters, the Final Rule: (1)

Provides more guidance on the Director of the Office of Pipeline

Regulation's (OPR) ability to dismiss unsubstantiated protests to prior

notice application; (2) clarifies that the environmental compliance in

Sec. 157.206(b) only applies to activities involving ground disturbance

or changes to operational air and noise emissions; (3) reduces the

reporting requirements contained in Sec. 157.208(e); and (4) codifies

the Commission's policy that prohibits pipelines from segmenting

projects under their blanket certificates to meet the Commission's

spending limits.

These changes will help clarify the regulations, bring them up to

date and speed up the processing of pipeline construction and

abandonment applications.

III. Discussion

A. Part 2--General Policy and Interpretations

Part 2 contains the Commission's statements of general policy and

interpretations regarding the NGA, National Environmental Policy Act

(NEPA), the Economic Stabilization Act of 1970 and Executive Orders

11615 and 11627, the NGPA and the Public Utility Regulatory Policies

Act of 1978.

Section 2.55--Definition of Terms Used in NGA Section 7(c)

Section 2.55(a)--Auxiliary Facilities Constructed With Newly Proposed

Jurisdictional Facilities

Section 2.55 defines facilities that are excluded from the

requirements of section 7(c) of the NGA and may, therefore, be

constructed without additional certificate authority. Section 2.55(a)

exempts auxiliary facilities, such as valves, drips, yard and station

piping, and cathodic protection equipment, from NGA section 7(c)

authority. The NOPR clarified that auxiliary facilities intended to be

installed at the same time and related to newly proposed jurisdictional

facilities do not qualify for the exemption under Sec. 2.55(a) since

the exemption is limited to installations which are designed

specifically to improve the operation of an existing transmission

system.

Comments: El Paso Energy Corporation (El Paso) 8 states

that the proposal creates arbitrary distinctions among facilities and

would unduly restrict pipeline operations. El Paso contends that

identical facilities would be considered jurisdictional or

nonjurisdictional based solely upon when they were constructed. This

would subject new jurisdictional yard and station piping to abandonment

authorization, while identical existing facilities would need no such

authorization. According to El Paso, Enron Interstate Pipelines (Enron)

9 and Koch Gateway Pipeline Company (Koch Gateway), such a

finding would increase the burden on pipelines by requiring them to

keep records of all such facilities in order to abandon the

jurisdictional ones when necessary. These parties believe that such

facilities

[[Page 26574]]

should maintain their Sec. 2.55(a) nonjurisdictional status. They argue

that any other finding would be inconsistent with the objective of

making the regulations less cumbersome and unnecessarily increase the

administrative burden on both the pipeline and the Commission.

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\8\ El Paso consists of El Paso Natural Gas Company, East

Tennessee Natural Gas Company, Midwestern Gas Transmission Company,

Mojave Pipeline Company, and Tennessee Gas Pipeline Company.

\9\ Enron consists of Northern Natural Gas Company, Florida Gas

Transmission Company and Black Marlin Pipeline Company.

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El Paso argues that the exemption in Sec. 2.55(a) should apply to

all auxiliary-type facilities, whether installed in connection with new

or existing transmission facilities. It requests that pipelines, at a

minimum, should not be required to obtain section 7(b) authority to

remove or replace any auxiliary-type facility installed in connection

with new transmission facilities.

Williston Basin Interstate Pipeline Company (Williston Basin)

contends that auxiliary facilities associated with newly proposed

facilities constructed under section 7(c) that do not cause ground

disturbance should be exempt under Sec. 2.55(a).

The Williams Companies (Williams) 10 suggests that the

following clause be added to the end of Sec. 2.55(a):

\10\ Williams consists of Kern River Gas Transmission Company,

Northwest Pipeline Corporation, Texas Gas Transmission Corporation,

Transcontinental Gas Pipe Line Corporation, and Williams Gas

Pipelines Central, Inc.

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Facilities constructed along with new transmission facilities do

not qualify as auxiliary installations for the purposes of this

section until such facilities and the related transmission

facilities are complete and made available for service.

Williams believes that this would clarify that after this type

facility is in service, it qualifies as an ``auxiliary facility'' for

purposes of future modifications or abandonments.

Commission Response: As stated, the current Sec. 2.55(a) limits the

installation of auxiliary facilities to facilities installed to an

existing transmission system. The NOPR proposed to exclude any

auxiliary-type facilities constructed in conjunction with new pipeline

facilities from the NGA exemption in Sec. 2.55(a). As the commenters

point out, this would establish dual classifications for similar

facilities and would create uncertainty regarding the nonjurisdictional

status of such facilities. Accordingly, in order to treat auxiliary

facilities constructed in conjunction with new transmission facilities

the same as auxiliary facilities constructed as part of an existing

transmission system, the Commission will modify the definition of

Sec. 2.55(a) to include facilities constructed in conjunction with new

pipeline facilities.

However, we are concerned that adding such facilities to the

project after certification but before service begins, without notice

or identification of such facilities, will not allow the Commission to

environmental review all facilities related to a project proposed for

construction under section 7(c) of the NGA. We will add wording to

Secs. 2.55(a)(2) and 380.12(c)(2) to ensure that the Commission is

aware of any facilities scheduled for installation on a newly

certificated facility prior to it being put into service. We believe

this is necessary because certain aboveground auxiliary facilities

involve substantially different environmental impacts than a pipeline

by itself. These impacts may be of great concern to affected

landowners. Therefore, in order for the Commission to review all

facilities related to a proposed construction project for new

facilities, we will require that the pipelines include a description of

the facilities in the environmental report required by

Sec. 157.14(a)(6-a) of the Commission's regulations. For newly

authorized facilities not yet in service, we will require that the

pipeline notify the Commission of the proposed installation of the

auxiliary facilities at least 30 days prior to the installation of such

facilities.

Section 2.55(b)--Construction Area for Replacement Facilities

The NOPR proposed to revise Sec. 2.55(b)(1)(ii), concerning the

replacement of existing facilities, to clarify that this section only

applies to replacements that involve construction within the

certificated right-of-way. It also proposed a new appendix A to part 2

which gave guidance on the size of the construction right-of-way (ROW)

and extra workspace which could be used for construction under

Sec. 2.55(b). These guidelines apply only where there are no records or

other tangible evidence of what areas were used in the original

construction.

Comments: This proposal generated many comments from the industry,

most expressing the concern that the proposal is too strict and does

not take into account many realities that pipelines face with

replacement construction projects. The Interstate Natural Gas

Association of America (INGAA) contends that where a pipeline's

existing right-of-way (ROW) does not cover the area outside the ROW

proposed for use, pipelines will secure such additional ROW from

affected landowners prior to commencing any construction activities.

For example, INGAA states that access to a facility to be replaced will

be different because original equipment bridges and other ROW accesses

have been restored, or construction may require working on the opposite

side of the original ditch because loop lines may have rendered the

original side unsafe. In addition, INGAA states that Occupational

Safety and Health Administration (OSHA) rules require more workspace

for safe construction. Great Lakes Gas Transmission Limited Partnership

(Great Lakes), Questar Pipeline Company (Questar) and Williston Basin

have similar concerns. These parties contend that the proposed

regulations are not clear as to whether replacements are limited to the

specific ROW historically attached to the facility being replaced or

whether any existing, certificated ROW or previously disturbed on and

off-site temporary work areas may by used for the replacement. They

argue that pipelines should be able to use any previously disturbed

areas because they would have already been reviewed environmentally by

the Commission, or other federal, state or local agencies exercising

jurisdiction. They urge the Commission not to set workspace limits

based merely on the size of the replacement pipeline, since other

factors such as construction technique, soil type and terrain are

involved. In addition, these parties contend that since section 2.55

does not confer eminent domain, landowners would be protected.

Duke Energy Pipelines (Duke Energy) 11 contends that a

one-size-fits-all approach fails to address additional work space

needed for termination points, such as turn-arounds, which would not

have been termination points during the original construction. It

claims this approach also fails to address restrictions due to adjacent

newer pipeline, larger diameter pipeline, new environmental

restrictions such as topsoil segregation, and similar changes that have

occurred since original construction.

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\11\ Duke Energy includes Algonquin Gas Transmission Company,

Panhandle Eastern Pipe Line Company (Panhandle), Texas Eastern

Transmission Corporation, and Trunkline Gas Company (Trunkline).

Duke Energy states that it recently announced the sale to CMS Energy

of Panhandle and Trunkline.

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El Paso and Enron argue that the appendix A limitation of a 75-foot

ROW for pipelines larger than 12 inches is too restrictive. They

propose that the Commission revise appendix A to implement a more

flexible approach for determining the appropriate amount of ROW. El

Paso suggests that appendix A provide that replacements involving 30

inch or larger pipeline can use up to 100 feet of ROW, while Enron

proposes that 100 feet of ROW is appropriate for

[[Page 26575]]

replacements involving 16 inch or greater pipeline. According to El

Paso, such space is needed because OSHA requires deeper and wider

trenches for larger pipelines.

In order to obviate the Commission's concern that the replacement

activities were not within the original certificated footprint, INGAA

proposes to add a new paragraph (e) to new appendix A, part 2. New

paragraph 2(e) is proposed to read:

If not located within the areas described above, pipe or

equipment storage yards and temporary construction trailers should

be located in previously graded or graveled areas.

INGAA argues that where multiple lines exist within an existing ROW

corridor, siting of new replacement facilities should be allowed in any

portion of the existing certificated or maintained ROW, whether or not

that ROW was the one certificated for the replacement facility or not.

Since the entire ROW has been disturbed and dedicated for use by the

pipeline, use of any portion of such ROW would be consistent with the

initial finding that construction was in the public convenience and

necessity.

INGAA seeks clarification that replacement facilities not

qualifying under Sec. 2.55(b) because of the ROW issue would qualify as

eligible facilities under Sec. 157.208(a).

Michigan Gas Storage Company (Michigan Gas) asks that the

Commission clarify or expand on the requirement in Sec. 2.55(b)(1)(ii)

that replacement facilities have a substantially ``equivalent designed

delivery capacity'' as the facilities being replaced. Michigan Gas

states that it is not clear whether, in the context of storage wells,

the term refers to daily deliverability or seasonal cyclic capacity or

both. Michigan Gas further states that for transmission facilities, it

is not clear whether this term applies to daily design capacity or to

maximum capacity as used in Sec. 157.14(a)(7) and (8).

Commission Response. As stated, several commenters request that the

Commission expand Sec. 2.55(b) to allow pipelines to construct

replacement facilities and/or use areas outside of the existing ROW for

additional work space. However, we note that acquiring additional ROW

from landowners raises issues associated with the Commission's

landowner notification proceeding in Docket No. RM98-17-000. We do not

believe it is appropriate to expand the pipeline's ability to acquire

additional property from landowners outside of the Commission's review

before we resolve the issues raised in the landowner notification

proceeding. Accordingly, we will continue to follow Commission policy

and limit the pipeline's use of property to construct facilities under

Sec. 2.55 to the existing ROW.12

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\12\ See NorAm Transmission Co., 70 FERC para.61,030 (1995).

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Appendix A to part 2 defines current policy for the workspace

area.13 Current Policy requires that replacement facilities

must be placed in the existing ROW. The Commission believes that the

work spaces designated in the appendix A are adequate for the general

case and will be adequate for most situations.

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\13\ See, March 15, 1995 letter from the Director of OPR to

Tennessee Gas Pipeline Company in Docket No. CP95-189-000.

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While we are not allowing additional ROW width under Sec. 2.55, we

are not limiting ROW width with respect to construction under any other

part of the regulations. The staff's ``Upland Erosion Control and

Mitigation Plan'' and ``Wetland and Waterbody Mitigation Procedures''

specify guidelines for ROW width, but the applicant can propose

different ROW widths appropriate to the project. The Commission will

determine if the proposed widths are justified on a case-by-case basis.

INGAA has filed a study concerning ROW needs. We will take this

study under consideration when we review project-specific justification

for proposed ROW widths.

Miscellaneous Sec. 2.55 Issues

While we proposed no changes to the reporting requirements in

Sec. 2.55(b)(4), Williams contends that the one-time report in

Sec. 2.55(b)(4)(i) should be deleted, consistent with deletions of

other obsolete reports. We agree. This report relates to replacements

commenced between July 14, 1992 and November 9, 1992 and is no longer

relevant and will be deleted.

Williston Basin asks the Commission to clarify whether very minor

replacements need to be included in the annual report required in

Sec. 2.55(b)(4)(ii). We clarify that any facility, regardless of size

needs to be reported, unless, as the regulation states, the facility is

an above-ground replacement that did not involve compression or the use

of earth-moving equipment.

Williston Basin also seeks a clarification that the reference to

``earthmoving equipment'' in Sec. 2.55(b)(4)(ii) means mechanical

equipment. We clarify that the term ``earthmoving equipment'' is

intended to mean motor-driven equipment used for ground disturbance.

As to the clarification Michigan Gas seeks, the phrase ``equivalent

designed delivery capacity,'' in the context of storage wells refers to

both the daily deliverability and the seasonal cyclic capacity. In the

context of transmission facilities, it refers to peak day design

capacity, not maximum capacity.

B. Part 153--Application for Authorization To Export or Import Natural

Gas

Although this part does not currently require that filings be made

electronically, the Commission intends that this part will be subject

to the electronic filing requirements currently being established in

the proceeding in Docket No. PL98-1-000.

Section 153.21--Conformity With Requirements

Section 153.21(b) sets forth the criteria for the rejection of

filings made under this subpart. The NOPR proposed to revise this

section to authorize the Director of OPR to reject applications that do

not conform to the requirements of this part within 10 days of filing,

without prejudice to the applicant's refiling a complete application.

Comments: The Natural Gas Supply Association (NGSA) states that the

proposed revision is silent as to whether rejection will have any

bearing on acceptance of a subsequent application that does not conform

with Commission regulations. NGSA states that the related Sec. 157.8

allows for rejection without prejudice to refiling, and proposes that

Sec. 153.21(b) be modified by adding ``without prejudice.'' NGSA also

proposes that the Commission not dismiss an application under

Sec. 153.21(b) unless the applicant has been given notice of the

defects and allowed an opportunity to cure those defects.

Commission Response: We intend for pipelines to file complete

applications or face the prospect of having their proposal rejected.

However, our intent is to reject such applications without prejudice to

pipelines refiling completed applications. We will also clarify our

standards for rejection so that an application will not be rejected

unless it ``patently fails to comply with applicable statutory

requirements or with applicable Commission rules, regulations, and

orders for which a waiver has not been granted.''

[[Page 26576]]

C. Part 157--Applications for Certificate of Public Convenience and

Necessity and for Orders Permitting and Approving Abandonment Under

section 7 of the Natural Gas Act

Subpart A--Applications for Certificates of Public Convenience and

Necessity and for Orders Permitting and Approving Abandonment of

Service under section 7 of the Natural Gas Act, as Amended, Concerning

any Operation, Sales, Service, Construction, Extension, Acquisition or

Abandonment

Section 157.6--Applications; General Requirements

The NOPR proposed to add a new Sec. 157.6(b)(8), which will require

pipelines to file the information necessary to make an upfront

determination on the rate treatment of new construction projects in

accordance with the Commission's Statement of Policy in Docket No.

PL94-4-000.14

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\14\ Pricing Policy For New And Existing Facilities constructed

By Interstate Natural Gas Pipelines, 71 FERC para.61,241 (1995).

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Comments: Enron states that requiring information regarding the

detailed rate impact analysis by rate schedule and zone is over broad

and should be required only where an applicant is seeking rolled-in

rate treatment.

INGAA and Koch Gateway submit that the requirement that ``an

analysis reflecting the impact of the fuel usage by zone resulting from

the proposed expansion'' should be clarified to reflect that not all

pipelines employ a zoned fuel rate. Koch Gateway proposes that

Sec. 157.6(b)(8)(ii) be revised to read as follows: ``* * * and an

analysis reflecting the impact of the fuel usage resulting from the

proposed expansion project (including by zone, if applicable).''

Commission Response: While the NOPR preamble is not specifically

clear on when the detailed rate impact analysis should be filed, the

proposed regulation states that the detailed information is needed only

``if the applicant does not propose to charge incremental rates.'' We

will clarify our position and the proposed regulation. We clarify that

pipelines are required to file the information necessary to make an

upfront determination on the rate treatment of new construction

projects only when they propose rolled-in rates or when they propose

incremental rates that are below the maximum part 284 rate. In both

these cases, the same implications involving the initial rate

established by the Commission and the prospective rate impact apply.

Thus, the information required in Sec. 157.6(b)(8) is necessary for the

Commission to make a proper determination regarding the proposed rate

treatment in both these instances. However, pipelines need not file the

information in proposals where it seeks incremental rates at or above

the maximum effective part 284 rate.

Further, we note that Koch Gateway's revision is appropriate and

will be adopted. The NOPR did not intend for pipelines to submit

information that was not relative to their system's rate structure. To

the extent that pipelines employ zoned rates, they must submit the

requested information. If a pipeline employs a postage stamp rate or

some other non-zoned rate structure, it does not need to submit such

information on a zone basis.

Section 157.8--Acceptance for Filing or Rejection of Applications.

The NOPR proposed to amend this section to authorize the Director

of OPR to reject applications that do not conform to the requirements

of this part within 10 days of filing, without prejudice to the

applicant's refiling a complete application.

Comments: Duke Energy and National Fuel Gas Supply Corporation

(National Fuel) contend that the proposal is not consistent with the

existing authority the Director of OPR has to reject filings. They

argue that the existing authority to reject filings in

Sec. 375.307(b)(2) applies to tariff and rate schedule filings that

automatically go into effect within 30 days unless the Commission takes

action. Further, they argue that this rejection only applies if the

filing ``patently fails to comply with applicable statutory

requirements and with all applicable Commission rules, regulations, and

orders for which a waiver has not been granted.'' Similarly, they state

that Sec. 375.307(e)(6) provides for the rejection of prior notice

applications which ``patently fail to comply with the provisions of

Sec. 157.205(b).'' However, they contend that the proposal to reject

certificate applications contains no minimum legal standards, since

rejection can occur if an application does not conform to the

requirements of part 157.

Duke Energy, Great Lakes, Indicated Shippers,15 and

National Fuel all contend that the Commission must identify any

deficiencies in an application and allow for the deficiencies to be

remedied before a filing is rejected. Duke Energy specifically proposes

that instead of rejecting an application within 10 days, a deficiency

letter should be issued within 10 days, with a subsequent 10 days to

cure. Duke Energy contends that this will not increase the burden on

staff since Sec. 385.2001 requires a rejection letter indicating the

deficiencies. Thus, to the extent that there is some confusion in the

requirements for filing an application, a deficiency notice will

provide a reasonable opportunity for issues to be resolved.

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\15\ Indicated Shippers consists of Chevron U.S.A., Dynegy

Corporation, Exxon Corporation, Marathon Oil Corporation, and Shell

Offshore, Inc.

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Indicated Shippers states that if the proposal is adopted, the

Commission should modify Sec. 157.9, the notice provision, to require

that the Commission issue a formal notice of the Director's rejection

in lieu of the official notice of the application. In that way,

interested parties will be notified promptly that there is no need to

intervene and/or protest. Indicated Shippers also contends that the

proposal intends for the Commission to assign the same docket number to

a resubmitted application. Therefore, the Commission should establish a

time limit for resubmission of an application, rather than leave the

docket open.

Enron and INGAA are concerned that the proposed language could be

interpreted to mean that a filing could be rejected for incomplete

environmental reports, which are incomplete for any reason other than

denial of access to lands, even if all of the minimum checklist items

are provided. They propose that the Commission clarify in section 157.8

that a filing will not be rejected if the minimum checklist provisions

have been met.

Commission Response: We will revise our proposal so that the

standards for rejecting certificate filings are the same as those the

Director of OPR applies in rejecting filings under Sec. 375.307(b)(2)

and (e)(6). Under those sections, a filing will not be rejected unless

it ``patently fails to comply with applicable statutory requirements

and with all applicable Commission rules, regulations, and orders for

which a waiver has not been granted.'' We will incorporate this

language into Secs. 153.21 and 157.8. In addition, we will view an

application as ``patently'' deficient if it fails to include the

minimum checklist of environmental information, as well as the

information required in part 157. Thus, pipelines are put on notice

that they must file the information requested or their applications

will be subject to rejection. The Commission will not expend its

resources on patently deficient applications.

Requests for a notice and cure period prior to rejecting any filing

are denied. The minimum environmental checklist and the information

required in part 157 do not include new or unique

[[Page 26577]]

requirements. We are codifying our long-standing environmental

procedures in order to help ensure more timely processing of

applications by requiring that pipelines no longer file patently

deficient applications. As such, we will no longer send deficiency

letters seeking the minimum checklist information required of filings.

However, if an application is rejected, the Director of OPR will send a

letter indicating the deficiencies and reasons for rejection. In such a

circumstance, an applicant will have full knowledge of the deficiencies

in its application and the steps necessary to comply with the

Commission's filing requirements. Also, the Director of OPR's rejection

letter will be on CIPs and potential interveners should take notice.

We disagree with Indicated Shippers' belief that a resubmitted

application be redocketed with the same number as the rejected

application. We are conforming Sec. 157.8 to the existing regulations

in Sec. 153.21(b) that require a new docket number for rejected

applications that are resubmitted. The Commission prefers to have

finality in its docketing system. In addition, the Commission's

regulations give no administrative or other procedural benefit to

applicants because of the docket number assigned to a particular

project.

Finally, we note that INGAA proposes the following revision:

However, an application will not be rejected solely on the basis of

(1) environmental reports that are incomplete because the company

has not been granted access by the affected landowner(s) to perform

required surveys, etc., or (2) environmental reports that are

incomplete, but where the minimum checklist requirements of part

380, appendix A have been met.

We agree with INGAA's proposed revision and will change Sec. 157.8

accordingly. We recognize that not all environmental information is

available at the time of filing. However, the information in the

checklist is the minimum that must be submitted at the time of filing.

Section 157.9--Notice of Application

The NOPR proposed to issue a notice within 10 days of filing.

Comments: The Process Gas Consumers Group, the American Iron and

Steel Institute, and the Georgia Industrial Group (Process Gas

Consumers) are concerned that abandonment of laterals will strand end

users behind LDCs. They want to strengthen the provisions to require

that notices should be actually delivered to all of the pipeline's

shippers who have taken service through the lateral or delivery point

in the last five years. In addition, they argue that notice should be

posted on the pipeline's EBB and that applications subject to

delegation orders have as complete a notice as abandonment applications

going to the Commission, including maps of the facilities to be

abandoned. They contend that such requirements will ensure due process

rights of shippers which directly or indirectly, or through released

capacity, take service through the pipeline.

Commission Response: We believe that the Commission's current

procedure for noticing certificate applications, including prior notice

applications filed under Sec. 157.205, more than adequately identifies

the nature and content of each filing. Requiring that notices be

delivered to all shippers that have used certain facilities during the

past five years would prove to be extremely unwieldy, burdensome, and

administratively inefficient. We see no basis why shippers who are no

longer on the pipeline system should be notified. We do not intend to

create a separate class of applications that are treated differently

than other filings. Moreover, notices of applications, and applications

themselves are available for electronic viewing at the Commission's

website at www.ferc.fed.us/online/rims.htm. Thus, Process Gas

Consumers, and all others, will be able to view in total all

applications filed with the Commission.

Section 157.10--Interventions and Protests

The NOPR determined that allowing parties to intervene in response

to Draft Environmental Impact Statements (EIS) is appropriate. It also

proposed to amend Sec. 157.10 to clarify that pipelines do not have to

serve voluminous or difficult to reproduce materials, such as copies of

environmental information, upon all parties in a proceeding, except as

specifically requested. The NOPR provided that any party requesting a

complete copy of a filing must be served with one within two business

days.

Comments: INGAA also seeks clarification that the pipeline need

only keep voluminous or difficult to reproduce material, such as

complete sets of environmental information, available to the public

until the construction application is no longer pending Commission

action. Similarly, Great Lakes states that it is not clear what

constitutes a ``central location'' for keeping a complete filing. Great

Lakes seeks clarification that this requirement is met if the pipeline

maintains copies, either paper or electronic, at compressor stations

located closest to the project site(s). Williston Basin wants to make

such information available in public building(s) or town(s) near the

vicinity of the job site.

Duke Energy requests that the Commission extend the proposed two

business day time period to provide voluminous or difficult- to-

reproduce material to 10 days. Similarly, Great Lakes seeks to have the

time frame extended from two days to five days. Both parties believe

that numerous requests, the nature of the information, and the fact

that outside consultants may be required to reproduce the material

necessitates more than a two day time frame. The American Public Gas

Association states that parties will need time to evaluate information

once it is received and recommends that the Commission provide 45 days

for interventions to be prepared. El Paso Energy seeks clarification

that companies are not required to provide copies of confidential

material to interveners and will still be able to request confidential

treatment for information under section 388.112. Likewise, Great Lakes

wants clarification that privileged and confidential data are not

required to be provided with any electronic information kept near the

job location.

Process Gas Consumers requests that all notices supply the name,

address and telephone number of an applicant's knowledgeable contact to

allow parties to request an applicant's voluminous material (only

available upon request).

Great Lakes urges the Commission not to expand its current

intervention procedures to allow non-utility agencies to intervene by

notice. The Sempra Energy Companies (Sempra Energy) 16 is

concerned that pipelines will not provide voluminous material timely

and thus, interveners may be not have time to evaluate a filing and

face having their protest dismissed.

---------------------------------------------------------------------------

\16\ Sempra Energy consists of various entities including

Pacific Interstate Transmission Company, Pacific Interstate Offshore

Company, Southern California Gas Company, and San Diego Gas and

Electric Company.

---------------------------------------------------------------------------

The Advisory Council on Historic Preservation (Council) states that

the rule should allow for intervention based on section 106 of the

National Historic Preservation Act (NHPA) the same as intervention is

allowed for NEPA.

Commission Response: As to the Council's request, we note that we

treat section 106 of the NHPA as part of the environmental process.

We agree with INGAA that a pipeline only need keep voluminous

materials available to the public until the application is no longer

pending Commission action, i.e., the order is final and not subject to

rehearing. The

[[Page 26578]]

reason the information is meant to be available to the public in the

first place is so that parties will know all the details of a

particular project in sufficient time to intervene and express any

opinions they may hold.

The Commission will allow pipelines to keep electronic copies of

voluminous material at a central location, such as libraries and like

public buildings, in each county in the project area provided that the

information is easily accessible. Williston Basin's proposal that such

information be made available in public buildings or towns near the job

site appears to present fewer access problems than keeping such

material at the job location. There could be safety or other reasons

that the interested public may not have easy access to materials kept

on the job site. It seems preferable to locate such material in

buildings open to the public with flexible business hours, i.e.,

libraries and like public buildings with evening and weekend hours,

located in each county as close as practicable to the project area to

provide for as much public access as possible.

Various parties object to the proposal that pipelines serve a full

copy of such voluminous or difficult to reproduce material on

requesting parties within two business days and seek a longer time

period. Due to the nature of the material at issue, it seems reasonable

to allow the pipelines more time to reproduce and distribute requested

material. We will require that the pipeline have complete copies of its

application at the above mentioned publicly available building

location(s) in each county affected by the project, either in paper or

electronic format, within three business days of filing an application.

However, we will allow the pipeline five business days from the date of

a request to supply a requesting party with a full copy of the filing.

Since we are requiring that pipelines make complete copies of

applications available publicly, we do not anticipate extensive

individual requests for such copies. However, it is incumbent upon the

pipeline applicant to serve copies of its application to parties

seeking detailed information regarding the proposed project.

Pipelines do not have to supply privileged or confidential material

when serving these copies, nor supply such material with copies

provided near the job location. However, if at a later time, the

Commission or its delegate determines that any claim to privileged or

confidential treatment under Sec. 388.112 is without merit, the

pipeline must serve such material on requesting parties and include

such material with the copies provided near the job location.

We agree with Process Gas Consumers' request that all notices

should supply the name, address and telephone number of the contact

person to allow parties to request an applicant's voluminous material.

We will modify Secs. 157.6(b)(7) and 157.205(b)(5) accordingly.

As to Great Lakes' concern regarding non-utility interveners, the

NOPR did not change the status or rights of any parties intervening in

certificate proceedings. All parties have the same rights and status in

a proceeding before the Commission as they had prior to issuance of the

NOPR.

Sempra Energy's concern is misplaced. The intent in the NOPR was to

limit the OPR Director's authority rejecting unsubstantiated protests

to prior notices filed under the blanket certificate issued in subpart

F of part 157. The Director of OPR's authority does not extend to

rejection of protests to section 7(c) applications filed under subpart

A of part 157. If a pipeline does not provide voluminous material

timely, as required by the regulations, parties can protest and/or file

a complaint. In such a situation, the pipeline risks delaying the

timetable it has established for completing its proposed project.

However, in order to prevent any further misunderstanding of our intent

regarding rejection of protests, we will modify Sec. 375.307(a)(10) to

specifically state that this rejection authority is limited to

unsubstantiated protests to prior notice applications.

Section 157.16--Exhibits Relating to Acquisitions

The NOPR proposed to revise Sec. 157.16(c)(1) to require the

pipeline to include a brief statement explaining the basis or methods

used to derive the related depreciation, depletion and amortization

reserves.

Comments: INGAA is concerned about the change requiring ``* * * a

brief statement explaining the basis or methods used to derive the

related depreciation, depletion or amortization''. It contends that the

proposed change is duplicative of other provisions in Sec. 157.16 and

should be deleted. It argues that the introductory text should provide

the Commission with the information it seeks and that the proposed

revision is unnecessary.

Commission Response: We disagree. The purpose of the change is to

point out a specific area where additional information would facilitate

the processing of an application. While the introductory text of

Sec. 157.16 requires the pipeline to provide a full and complete

explanation of all particulars of the acquisition, this requirement is

very broad and often overlooked with respect to the accumulated

depreciation, depletion and amortization reserve amounts. When this

occurs, the application is delayed because this information must then

be requested from the pipeline.

Section 157.17--Applications for Temporary Certificates in Cases of

Emergency

The NOPR proposed to amend Secs. 157.17(a) and (b) to remove as

outdated the reference to the date the Commission initiated its

electronic filing requirements.

Comments: Great Lakes urges the Commission to use the NOPR to

clarify the circumstances which constitute an emergency under this

section and Sec. 284.262. Great Lakes wants the Commission to clarify

that if an emergency exists, a temporary certificate can be authorized

when construction is necessary to forestall an anticipated loss of

capacity or when a foreseeable facility outage (or other emergency

event) outside a pipeline's control is probable. As an example, Great

Lakes cites naturally occurring changes such as a landslide or riverbed

erosion. A pipeline may deem it prudent to relocate facilities away

from the suspect area before damage occurs. Another example involves

corrosion that will, in short time, breach the pipewall. A pipeline

should be able to immediately repair such a situation as an emergency.

Great Lakes also proposes that Sec. 284.262 be updated to reflect

pipelines' transition from merchants to transporters. Great Lakes

contends that such a change would redefine emergencies outside the

context of a gas supply shortage and make allowances for emergency

facility repairs. Great Lakes suggests that the Commission revise the

self-implementing emergency provisions of Sec. 284.262 to permit 60-day

remedial construction to remedy facility problems which threaten

interruption of transportation, followed by a 45-day prior notice-type

filing for permanent approval to operate the emergency facilities. This

change would allow pipelines to repair facilities over a 60-day period,

and then file a prior notice to obtain permanent authority to operate

emergency facilities.

Finally, Great Lakes states that the Department of Transportation

(DOT) would view a pressure reduction, at least temporarily, as

relieving certain emergency conditions. However, Great Lakes is

concerned that this might not satisfy NGA requirements since the

[[Page 26579]]

pressure reduction could result in a loss of design-day throughput and

an involuntary abandonment of service. Great Lakes seeks clarification

that when a DOT-defined emergency transpires, for purposes of acquiring

a temporary certificate, the emergency will continue until the pipeline

has restored its system to its prior operating condition.

Commission Response: We agree that our emergency regulations should

be updated to recognize that pipelines are now primarily transporters

and not merchants of gas and that pipelines should be able to respond

to imminent emergencies. However, the possibility still exists that a

supply shortfall could precipitate an emergency. Therefore, we will

amend Sec. 284.262 to reflect that emergencies can occur due to

diminution of pipeline supply or capacity, both anticipated and

unanticipated. We clarify that pipelines can repair facilities affected

by an emergency in order to restore capacity for a 60-day period

(subject to an additional 60 day period) followed by a prior notice or

section 7(c) application to obtain permanent authority to operate the

emergency facilities.

We also clarify that in emergency instances where pipelines are

required to reduce operating pressure to satisfy DOT safety standards,

the underlying emergency continues to exist until the pipeline restores

its regular operating conditions. Of course, the continued emergency

status is contingent upon the pipeline complying with the requirements

of sections 157.17 and 284.262.

Section 157.18--Applications To Abandon Facilities or Services;

exhibits

The NOPR proposed to add an explicit statement that makes it clear

that an environmental report is required for certain kinds of

abandonments as specified in Sec. 380.3(c)(2).

Comments: INGAA notes that the proposed regulations require an

environmental report for the abandonment of facilities, except for

categorical exclusions. INGAA and Enron believe that all facilities

abandoned in-place should be excluded from the environmental reporting

requirement. This would be consistent with the proposal in the NOPR in

Sec. 157.206(b) that environmental review should be commensurate with

the amount of ground disturbance. The same principle should apply to

facilities abandoned in-place. In the alternative, INGAA, Enron, and

Questar suggests that any necessary clearances be provided for in-place

abandonments rather than a full environmental report.

Commission Response: We do not agree with INGAA that all facilities

abandoned in place should be excluded from the environmental reporting

requirement. For example, certain facilities may be contaminated with

polychlorinated biphenyls (PCBs). Even facilities that are abandoned in

place may have associated ground disturbance such as that required to

cut and cap the pipeline segment. In addition, the Commission wants to

determine if the landowner has any concerns with respect to having the

pipeline removed. Clearly, this action warrants some level of

environmental review. As has been our policy involving all projects

that are minor in scope, pipelines can determine what environmental

resource reports are not applicable to their project and identify them

in the application along with the reasons they are not applicable.

Thus, a detailed environmental report is not contemplated for a routine

abandonment in place of a section of pipeline, but key environmental

factors need to be addressed.

Section 157.20--General Conditions Applicable to Certificates

Section 157.20(b)

The NOPR proposed to revise Sec. 157.20(b) to allow for facilities

to be completed ``and made available for service'' instead of ``in

actual operation'' within the period of time specified in a particular

order.

Comments: INGAA and Enron support the concept, but have concerns

about the notification requirement. Both parties state that pipelines

may have no way of verifying, at the 30 day mark, whether the end-user/

shipper will meet the time period to flow gas. Enron requests removal

of the 30 day notification requirement. Facilities may be available to

other shippers on a secondary basis, although the firm end-user/shipper

has not taken service. INGAA and Williams propose that pipelines report

within 10 days after the prescribed time if the end-user/shipper has

not taken service through the new facilities. Enron suggests that a

pipeline report within 30 days instead of 10 days after the date

specified in order if the shipper has not taken service through new

facilities.

Williams recommends that the phrase ``shall be actually undertaken

and regularly performed'' be modified to read ``shall be available for

regular performance.'' Williams contends that this is consistent with

the proposed change in Sec. 157.206(c), since the pipeline cannot

control when the customer may be ready to start service.

Process Gas Consumers requests that the Commission clarify that it

did not intend to continue applying a one-year completion period

(``period of time to be specified''), since it is changing the

regulation to allow for unintended delays in commencing service. They

also want the Commission to clarify that it will continue to be

flexible in granting waivers and/or extensions of time to complete

facilities.

Commission Response: We agree that pipeline applicants may not be

able to verify 30 days in advance that a shipper is unable to meet the

timetable to commence service. It seems reasonable to allow a pipeline

to report within 10 days after the prescribed time if the end- user/

shipper has not taken service through the facilities. In addition,

Williams' proposal seems reasonable and consistent with the change

proposed in the NOPR. However, Process Gas Consumers is incorrect in

assuming that the Commission intends to discontinue determining a time

frame for the facilities to be constructed. To the contrary, we intend

to continue applying a specific time period for the completion of

construction projects. While that time period is typically one year,

the Commission has permitted other periods of time for completion of a

project and will continue to exercise its discretion in acting on

waivers and/or extensions of time to complete facilities.

Section 157.20(c) and (d)

We will revise Sec. 157.20(c) and (d) to remove the requirement

that quarterly reports be filed. Section 157.20(c)(2) requires

applicants to file quarterly progress reports on authorized

construction. We will remove this section because it duplicates

information the Commission's environmental staff already collects.

Likewise, we will remove Sec. 157.20(d)(1), which requires applicants

to file quarterly progress reports on the status of facility

acquisitions. However, pipelines are still required to notify the

Commission of the date of acquisition of facilities and the beginning

of authorized operations.

Subpart F--Interstate Pipeline Blanket Certificates and Authorization

Under Section 7 of the Natural Gas Act for Certain Transactions and

Abandonment

Section 157.202--Definitions

Section 157.202(b)(2)(i)--Eligible Facilities

The NOPR proposed to expand the definition of ``eligible facility''

contained in Sec. 157.202(b)(2)(i) to include mainline and lateral

[[Page 26580]]

replacement facilities that do not qualify under Sec. 2.55(b) because

they will have an impact on mainline capacity.

Comments: INGAA contends that any replacement project which would

not qualify under the proposed Sec. 2.55(b) regulations would or should

qualify as an eligible facility under Sec. 157.208(a), if it meets the

spending limits and environmental constraints. Similarly, National

Fuel, Questar and Williams are concerned that the change would not

cover a mainline replacement not qualifying under Sec. 2.55(b) because

of the requirement that replacements must be within same ROW. They

argue that replacements not in the same ROW should be covered under the

blanket certificate instead of requiring a separate Sec. 7(c)

application. National Fuel suggests the following revision to proposed

Sec. 157.202(b)(2)(i):

Further, eligible facility includes mainline and lateral

replacements that do not qualify under Sec. 2.55(b) of this chapter

because they will have an impact on the capacity of the mainline

facilities, or because they will not satisfy the location or work

space requirements of Sec. 2.55(b).

Commission Response: We intend to allow replacement facilities that

do not qualify under Sec. 2.55(b) because of land requirements to be

eligible facilities that can be constructed under Sec. 157.208 of the

blanket certificate. Further, to the extent that pipelines require more

ROW than is provided for in appendix A to part 2 for replacement

projects, including those not in the original footprint, such as river

crossings, etc., those replacements would qualify as eligible

facilities under our proposal. We reiterate that any such replacements

are subject to the environmental requirements of this section and will

be subject to whatever landowner notification procedures that may be

adopted in Docket No. RM98-17-000.

Replacements for Sound Engineering Purposes and Incremental Capacity

Comments: The American Gas Association (AGA) states that the

proposed regulations do not clearly reflect the Commission's intentions

that replacements must be done for sound engineering purposes and not

to create additional mainline capacity. AGA contends that the proposals

will allow construction of facilities that can substantially increase

capacity and result in bypass. AGA proposes that Sec. 157.202(b)(2)(i)

be amended to provide that replacements are done for sound engineering

reasons and not to create additional mainline capacity. Similarly, El

Paso and Michigan Gas Storage request the Commission clarify the

regulation so that mainline and lateral replacements are done only for

``sound engineering reasons and not for the purpose of creating

additional mainline capacity.'' They contend that this clarification in

regulatory text will ensure that the limitation is clearly communicated

to certificate holders, eliminating potential confusion and compliance

issues.

El Paso contends that the Commission should remove the words

``because they will have an impact on the capacity of the mainline

facilities'' from the definition replacements as eligible facilities.

El Paso argues the proposed language defining replacement facilities is

likely to create confusion because it refers to ``impact on the

capacity,'' whereas Sec. 2.55(b) requires replacements to have a

``substantially equivalent designed delivery capacity.''

NGSA, on the other hand, opposes expanding eligible facilities to

include any mainline and lateral replacements done automatically. NGSA

contends that such replacements should only be allowed on a prior

notice basis. This would allow parties to protest unnecessary

replacements, which they believe are not being done for ``sound

engineering reasons,'' but solely to increase capacity. NGSA proposes

that any facility replacement resulting in an increase of capacity be

subject to a prior notice.

Similarly, Sempra Energy opposes inclusion of any mainline

facilities within the blanket certificate. Sempra Energy is concerned

with additional mainline capacity being constructed under the guise of

``replacements.'' It believes that new or additional markets should be

served through permanent capacity release, by another market entrant,

or by LDCs or other non-FERC regulated services. Allowing construction

of additional mainline capacity under the blanket provides pipelines a

competitive advantage without Commission, state, consumer, and

competitive reviews.

Indicated Shippers suggests that prior notice be required for

construction of all mainline facilities that could affect capacity,

regardless of cost. Indicated Shippers believes such a limit would help

protect against pipelines circumventing cost caps by segmenting

essentially integrated projects in order to keep each component below

the automatic authorization cost cap.

Commission Response: As we stated in the NOPR and reiterate here,

any replacement facilities must be done for sound engineering reasons.

Our purpose is to allow replacements under the blanket certificate

where the replaced facility is marginally larger than the existing

pipeline. We recognize that this may result in an incidental increase

in mainline capacity. To the extent that additional capacity is created

by the project, such capacity must be incidental and not intended to

increase the point to point transportation capacity of the

pipeline.17 As such, we will revise the definition of

eligible facility in Sec. 157.202(b)(2)(1) to include replacement

facilities that result in an increase in the capacity of mainline

facilities. The regulation will also specifically state that

replacements must be done for sound engineering purposes and not for

the primary purpose of creating additional mainline capacity.

---------------------------------------------------------------------------

\17\ However, if usable capacity is created, it must be posted

on the pipeline's EBB along with any other unused capacity.

---------------------------------------------------------------------------

NGSA and Sempra Energy oppose inclusion of replacements under the

blanket certificate because they believe that pipelines will use the

new regulations to increase mainline capacity at customer expense. We

disagree. Revising the definition of eligible facility specifically

puts pipelines on notice that any replacement must be done for sound

engineering reasons and not for the purpose of creating additional

mainline capacity. Parties believing that replacements are done for

other than those reasons should inform the Commission and may want to

consider filing a complaint. In addition, they can challenge the cost

and intent of the replacement in the relevant rate proceeding. Finally,

we find that parties have not presented any compelling reason why the

Commission should specifically exclude all replacements that result in

an incidental, incremental increase in capacity from being subject to

the automatic authorization requirement.

Replacement Compression Facilities

Comments: Great Lakes proposes that the Commission include

compressor replacements as eligible facilities, when such replacements

cannot be constructed under Sec. 2.55(b) because they will have an

impact on mainline capacity. Great Lakes requests that the Commission

clarify that replacement compression facilities which result in

incidental changes in capacity, in addition to increases in replacement

pipe size, are included in the proposed definition of eligible

facilities. Great Lakes claims that certain compressor and engine

models are no longer manufactured and most newer compressors have a

greater horsepower rating and yield greater capacity. According to

Great Lakes, a pipeline's option often is reduced to either

[[Page 26581]]

donating a unit so it can replace obsolete or major damaged units

immediately, or wait for separate section 7(c) approval to install

replacement compression facilities which yield an unintended, but

measurable, increase in capacity.

Great Lakes requests that the Commission recognize a pipeline's

need for flexibility in terms of sizing replacement compression

facilities under Sec. 2.55(b). Great Lakes wants the Commission to

clarify that pipelines are allowed to install under Sec. 2.55(b)

replacement compressor units or components which are the nearest,

practical, commercially available match to the removed unit or

component.

Commission Response: We agree that replacement compressors, as well

as replacement mainlines and laterals that have an incidental impact on

mainline capacity should be covered by the proposed change to the

definition of eligible facilities because they do not qualify under

Sec. 2.55(b). The rationale for including replacement compressors is

the same as that for replacement lines. To the extent that replacement

pipeline or compression is marginally different than the original

facilities and may result in an increase in capacity, the replacement

must be done for sound engineering reasons and not for the primary

purpose of creating additional mainline capacity.

However, we emphasize that replacement pipeline and compression

must be the closest available size and horsepower rating to the

facilities being replaced. While these replacement projects are subject

to the spending limits in Sec. 157.208, pipelines must not segment any

such projects in order to circumvent the automatic or prior notice

spending limits under the blanket certificate. We note that parties who

either know or believe that a pipeline segmented replacement facilities

to avoid cost caps can challenge recovery of those costs in the

relevant rate proceeding and attempt to show a pattern by the pipeline

of violating the Commission's regulations.18

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\18\ Our authority to remedy cases of segmenting includes

revoking the pipeline's blanket authority.

---------------------------------------------------------------------------

Under Sec. 2.55(b) replacements must have a ``substantially

equivalent design delivery capacity.'' Therefore, if the installation

of the nearest, practical, commercially available compressor unit would

result in an increase in capacity, the replacement would not qualify

under Sec. 2.55(b) and may be eligible to be installed under the

pipeline's blanket certificate.

Storage Laterals and Miscellaneous Rearrangements

Comments: The KN Pipelines request that the Commission clarify that

miscellaneous rearrangement of, and appropriate changes in diameter of

storage laterals within the field meet the definition of ``eligible

facility.'' \19\ KN Pipelines contends that the practical process of

rearranging a mainline pipe or storage pipe is the same, in both cases

the pipeline would likely have to acquire a new easement. KN Pipelines

states that a reasonable use of the blanket certificate for the

relatively small laterals typically associated with storage fields will

help alleviate an unnecessary burden on the Commission. Similarly,

Questar seeks clarification that injection and withdrawal laterals

connecting storage filed wells with central compression or transmission

lines are eligible as small diameter laterals under Sec. 157.208(a).

---------------------------------------------------------------------------

\19\ KN Pipelines consist of Natural Gas Pipeline Company of

America, KN Interstate Gas Transmission Company, and KN Wattenberg

Transmission Limited Liability Corporation.

---------------------------------------------------------------------------

Michigan Gas also states that the reference in this subsection

should be to facilities necessary to provide service within existing

certificated levels, rather than certificated volumes. This would

recognize that replacement storage field facilities may not be directly

related to the existing certificated storage ``volumes.''

Commission Response: We agree with KN Pipelines that storage and

other lateral lines as well as mainlines can be rearranged under

Sec. 157.208. Section 157.202(b)(6) contemplates miscellaneous

rearrangement of facilities that does not result in any change in

service, including changes in existing field operations or relocation

of existing sales or transportation facilities. As to KN Pipelines

clarification, as long as any change in the diameter of storage

laterals does not result in any change in service such as increasing

capacity, deliverability or the injection and withdrawal rate, and

otherwise meets the definition for miscellaneous rearrangement in

Sec. 157.202(b)(6), we agree with KN Pipeline's request that such a

change can be done under Sec. 157.208.

Additionally, injection/withdrawal laterals connecting storage

field wells with central compression or transmission lines are eligible

as small diameter laterals under Sec. 157.208(a). These type facilities

are consistent with the intent of the regulations, as long as they do

not result in any change in existing service or operation, or increase

the capacity or deliverability of the storage field. We see no reason

to treat storage laterals any different than any other lateral covered

under the blanket authority.

We also agree with Michigan Gas and will change the reference from

``within existing certificated volumes'' to ``within existing

certificated levels.''

Automatic Abandonment

Comments: El Paso states that the NOPR does not address the issue

of whether pipelines must obtain abandonment authorization for mainline

or lateral facilities which are being replaced under the blanket

certificate. The Commission should clarify that either no section 7(b)

authority is needed for replacements constructed under this section or

provide for blanket section 7(b) authority.

Commission Response: We note that under new Sec. 157.216(a)(2),

pipelines will have the authority to automatically abandon eligible

facilities, subject to the pipeline obtaining written consent from

existing shippers. However, there is no need to get shipper approval

when the abandonment is for a facility that will be replaced and the

pipeline will continue service.

Interconnecting Points

Comments: INGAA wants the Commission to expand the definition of

interconnecting points to include the pipeline that connects the tap,

meter, M&R and minor related piping identified in the NOPR. INGAA and

Koch Gateway believe that excluding interconnecting pipeline segments

from the blanket certificate unnecessarily restricts open access

service and limits the ability of pipelines to quickly react to meet

market demands for additional grid flexibility. According to INGAA and

Koch Gateway, the spending limits under the blanket certificate

effectively limits the length of any interconnecting pipeline. INGAA,

KN Pipelines and Questar request that the Commission, as a minimum,

include compression as part of the facilities involved in an

interconnect. They state that compression is common, since the

prevailing pressures of interconnecting pipelines usually differ.

Questar argues that allowing only approximately 200 feet of ``minor

related piping'' is too restrictive. Questar contends that there is a

clear need to allow piping that may be miles in length, even as much as

20 miles, to interconnect with other interstate pipelines. Regardless

of length, Questar states that the function is the same--to connect the

systems of two transporters operating under Part 284. Citing KN

Interstate Gas Transmission Company

[[Page 26582]]

(KN Interstate),\20\ Questar contends that many pipelines interpreted

the term ``interconnecting points'' to include any facility necessary

to connect the facilities of two open access pipelines, as long as the

cost fell under the dollar ceiling in Sec. 157.208. Questar proposes

that the definition be expanded to include any facilities, including

piping, compression, metering, etc., necessary to interconnect two open

access transporters. Williams suggests that the Commission add ``and

associated piping'' after ``interconnecting points'' to recognize in

the regulations that some additional piping may be necessary.

---------------------------------------------------------------------------

\20\ 83 FERC para. 61,305 (1998).

---------------------------------------------------------------------------

Commission Response: We do not believe it is appropriate to expand

the definition of eligible facilities to include interconnecting

pipeline. In KN Interstate, we found that a 2-mile pipeline was not an

interconnecting point. The order clarified that an interconnecting

point under Sec. 157.208(a) specifically refers to taps, meters, M&R

facilities and minor piping. This is consistent with the intent of the

blanket certificate, which is to allow pipelines to construct

facilities so routine that they have relatively little impact on

ratepayers or pipeline operations.

Among others, non-eligible facilities include main lines,

extensions of a main line, and any facility, including compression and

looping, which alters the capacity of a main line.21 Thus,

while a proposed pipeline facility may be associated with an

interconnecting point between open-access transporters, the facility

nevertheless is not an eligible facility because it is a mainline

connecting two interstate pipelines, not a supply or delivery lateral.

The same rationale applies to compression located on any such pipeline.

To specifically clarify this point, we will add a new definition as

Sec. 157.202(b)(12), Interconnecting point(s), to specifically limit

the eligible facilities to the tap, metering, M&R facilities and minor

related piping.

---------------------------------------------------------------------------

\21\ We are adopting a limited exception to our definition of

eligible facilities to allow replacement mainline, lateral, and

compression facilities that may result in an incidental increase in

mainline capacity.

---------------------------------------------------------------------------

Storage Injection, Withdrawal, and Replacement Wells

Comments: Enron, INGAA and Michigan Gas contend that adding the

word ``storage'' in the definition of eligible facility, ``needed by

the certificate holder to receive gas into its system for further

transport or storage'' permits storage injection/withdrawal and

replacement wells and associated piping to be constructed under the

blanket certificate. They suggest that the Commission explicitly

confirm this understanding in its final rule.

Commission Response: The proposal to include such wells under the

blanket certificate is part of the ``landowner notification''

proceeding in Docket No. RM98-17-000. As noted there, the Commission is

considering expanding the definition of eligible facilities to include

replacement or observation wells. However, we expressed concern about

whether and how pipelines should be required to acquire consent from

the landowner prior to beginning construction.

Maximum Allowable Operating Pressure

Comments: El Paso and INGAA suggest that the Commission allow

pipelines to use the prior notice procedures under Sec. 157.205(b) to

update or increase the Maximum Allowable Operating Pressure (MAOP) of a

lateral when the lateral pressure is less than that of the upstream

mainline. El Paso states that increasing the MAOP of a lateral

typically is performed for the purpose of providing additional pressure

to a distribution customer whose load at a particular delivery point

has increased over the years to such an extent that, on cold days, the

existing MAOP of the lateral is insufficient to ensure delivery of all

of the shipper's volumes. El Paso and INGAA contend that allowing this

will eliminate an arbitrary distinction between laterals constructed

under section 7(c) and laterals constructed as eligible facilities

under the blanket certificate. INGAA notes that any additional capacity

created would be posted on the pipeline's EBB. Williams, however,

suggests that Sec. 157.208(f)(2) be rewritten to allow this change

automatically, instead of under the prior notice procedure.

Commission Response: Currently, pipelines must file a certificate

amendment in order to increase the MAOP of laterals constructed under

case-specific section 7(c) authority (see Sec. 157.20(g), which was

redesignated Sec. 157.20(f) in the NOPR). However, for laterals

constructed as eligible facilities under Sec. 157.208 of the blanket

certificate, pipelines need only file a prior notice to increase the

MAOP (see Sec. 157.208(f)(2)). We agree that there need not be an

artificial distinction between updating the MAOP of laterals

constructed under individual section 7(c) authority and under

Sec. 157.208 blanket certificate authority. Therefore, we intend to

modify Sec. 157.208(f)(2) to permit pipelines to follow the prior

notice procedures in order to increase the MAOP of laterals constructed

under section 7(c).

We disagree with Williams suggestion that any increase in lateral

MAOP be allowed automatically instead of under the prior notice

procedures. When this section was promulgated in Order No. 234, we

required prior notice of any intent to change the MAOP because of the

need for safety and reliability of service. These reasons have not

changed. Increasing the MAOP of a lateral could have a detrimental

effect on interconnections along the facility. For example, receipt

point pressures may no longer be great enough to allow gas to enter the

lateral. At the other end of the lateral, increased delivery pressures

may cause problems for delivery customers' existing M&R facilities. For

these reasons, we will not allow a prospective change in the MAOP to be

done automatically.

Section 157.202(b)(2)(ii)(B)--Extension of a Main Line

Several parties seek changes to Sec. 157.202(b)(ii)(B), which

excludes extensions of mainlines from eligible facility status.

Comments: El Paso, Enron, and INGAA all propose that the Commission

modify this section to permit pipelines to construct, as eligible

facilities, mainline extensions which are designed to receive gas

supplies from another pipeline. These parties submit that mainline

extensions, as well as the interconnecting pipe in KN Interstate are no

different than any supply lateral constructed as eligible facilities.

El Paso Energy recommends that the Commission revise this section

so that mainline extensions which enable pipelines to receive gas

supplies from a gatherer, intrastate pipeline, or interstate pipeline

would become eligible facilities.

Commission Response: This is essentially the same argument earlier

raised and rejected to expand the definition of interconnecting points

to include any connecting pipeline. For the same reasons, we will not

expand the definition of eligible facilities to include mainline

facilities, other than the limited exception for replacements as

discussed earlier. The Commission excludes mainlines and their

extensions from the definition of eligible facilities because they

alter mainline capacity and can have a substantial impact on the rates

and services a pipeline provides. These facilities are not considered

the type of routine construction the regulations contemplated for

automatic

[[Page 26583]]

authorization, without any review by the Commission.

Section 157.202(b)(ii)(D)--Minor Storage Operations

The NOPR revised Sec. 157.202(b)(2)(ii)(D) to extend the blanket

authority for tests or other minor storage operations which do not

increase certificated, including grandfathered, storage capacity,

deliverability or storage boundary.

Comments: Market Hub Partners, L.P. (Market Hub Partners) states

that the Commission must ensure that pipelines that own both storage

facilities and pipeline facilities are not able to leverage the

automatic authorizations to give an unfair advantage to the pipelines'

storage facilities.

National Fuel supports the proposal to limit the exclusion of

storage facilities from the definition of eligible facilities in

Sec. 157.202(b)(2)(ii)(D) because the current definition would exclude

even an uprising or minor rerouting of a small diameter storage

pipeline.

Commission Response: Initially, we modified Sec. 157.202(b)(ii)(D)

to allow minor changes in storage operations that do not alter the

certificated capacity, deliverability, or the storage boundary. We did

not intend this change to allow, for example, pipelines to drill

additional injection/withdrawal wells automatically for the purpose of

increasing field deliverability, even though such change would not

affect the certificated capacity of the storage field.

We are concerned that ``and'' in the regulation instead of ``or''

will create situations for pipelines to test, develop, or utilize an

underground storage field in any manner, as eligible facilities, so

long as the action does not increase the certificated storage capacity

or boundary of a field. Under existing Sec. 157.215, pipelines can

automatically construct and operate pipeline and compression facilities

and drill wells for the testing and development of reservoirs, subject

to specified spending limits. In modifying this regulation, we intended

to allow minor changes to field operations and facilities, such as

rerouting or changing storage field lines. We did not intend for

pipelines to be able to use this section to drill additional wells as

eligible facilities, even if such wells would not change the capacity

of a field. As noted above, we are currently exploring the option of

allowing pipelines to drill replacement or observation wells under

Sec. 158.208 as part of the landowner notification proceeding in Docket

No. RM98-17-000. Since we also clarified above that minor storage field

changes, including rerouting or changing storage lines, can currently

be done under the blanket certificate, we will change our proposal here

so that wells must still be drilled under Sec. 157.215. Accordingly, we

will revise Sec. 157.202(b)(2)(ii)(D) to state:

A facility required to test, develop or utilize an underground

storage field or that alters the certificated capacity,

deliverability, or storage boundary, or a facility required to store

gas above ground in either a gaseous or liquefied state, or a

facility used to receive gas from plants manufacturing synthetic gas

or from plants gasifying liquefied natural gas.

Section 157.202(b)(5)--Small Diameter Laterals

The NOPR proposed to revise Sec. 157.202(b)(5) to remove the phrase

``small diameter lateral'' and add, in its place, the words ``small

diameter supply or delivery lateral'' to further clarify what

facilities are not considered main line facilities.

Comments: Williams contends that the Commission should adopt a

flexible but more definitive description such as replacing ``small''

with ``laterals which have a diameter which is equal to or less than

four-fifths the diameter of the mainline to which it connects or from

which it extends.''

Commission Response: We decline to adopt Williams' suggestion to

modify the definition of ``small diameter lateral.'' The proposed

regulation makes it clear that lateral lines are eligible facilities

that can be constructed under Sec. 157.208.

Section 157.202(b)(6)--Miscellaneous Rearrangement

While the NOPR proposed no changes to Sec. 157.202(b)(6),

Miscellaneous rearrangement of any facility, we received comments

suggesting various changes.

Comments: INGAA seeks clarification that replacements done to

ensure safety, e.g., when residential, commercial or industrial

development has encroached on the pipeline, to comply with

environmental regulations, maintain operational integrity or because of

erosion, changes in river or stream courses or other forces beyond the

pipeline's control, would qualify as eligible facilities. Since these

situations require prompt action, INGAA believes that the list of

examples should be expanded to include these situations. National Fuel

shares the same concern.El Paso wants the Commission to expand the

definition to recognize the range of factors beyond a pipeline's

control which might require a rearrangement of facilities. El Paso

believes that the definition should include any forces, including

natural causes, which are outside a pipeline's control, as well as

rearrangements conducted at the request of a landowner. El Paso

contends that this change would increase flexibility and clear-up the

confusion that exists regarding the applicability of the provision.

El Paso Energy recommends that the definition be revised as

follows:

Miscellaneous rearrangement of any facility means any

rearrangement of a facility that does not result in any change of

service rendered by means of the facilities involved, e.g., changes

in existing field operations or relocation of existing facilities

when (1) requested by the landowner, (2) when required by highway

construction, dam construction, erosion, or the expansion or change

of course of rivers, streams or creeks, or (3) to respond to other

forces beyond the certificate holder's control when necessary to

ensure safety, comply with environmental regulations or maintain the

operational integrity of the certificate holder's facilities.

Great Lakes argues that off ROW replacement facilities should be

allowed under this section. According to Great Lakes, topographical

changes due to floods, landslides and other naturally occurring events

should qualify under this section. The Commission should clarify that

construction resulting from acts of nature are authorized.

Commission Response: We intend that ``other similar reasons'' for

miscellaneous rearrangements includes such reasons as maintaining

operational integrity or problems due to natural causes such as changes

in river or stream courses or other natural forces beyond the

pipeline's control. We are excluding encroachment of residential,

commercial or industrial development in the definition of miscellaneous

rearrangement of facilities because it involves landowner issues. These

issues are better addressed in the proceeding in Docket No. RM98-17-

000, which discusses many landowner issues in detail. Rearrangement in

these instances still require appropriate NEPA review. We will revise

Sec. 157.202(b)(6) accordingly.

Section 157.202(b)(10)--Sales Taps/Delivery Points

The NOPR modified Sec. 157.202(b)(10) to remove the words ``Sales

tap(s)'' and add in their place, the words ``Delivery points.'' The

NOPR also proposed to amend the related Sec. 157.202(b)(2)(ii)(E) to

remove the words ``Sales Tap'' and add, in their place, the words

``Delivery points under Sec. 157.211.'' To implement the change to

these sections, the NOPR proposed removing existing Sec. 157.212--

Changes in delivery points--and revising Sec. 157.211--Sales taps--to

become new Sec. 157.211--Delivery points.

[[Page 26584]]

Comments: INGAA contends that the definition in Sec. 157.202(b)(10)

limits pipelines because it does not include the pipeline associated

with the delivery point. INGAA is concerned that the definition limits

construction only to facilities at the actual point of delivery, and

not to a lateral facility extending to or from those points, which

drastically reduces the usefulness of this option. It argues that since

delivery points are not installed without any associated piping of some

length, the limited definition will reduce a pipeline's flexibility to

add new customers, such as electric generation, to the grid, because

any such addition will require a section 7 filing.

Duke Energy and Great Lakes propose that the Commission clarify the

regulation to avoid confusion so that heaters, minor gas conditioning

facilities, treatment, odorization, and similar equipment that may be

required on delivery facility installations is covered by the phrase

``appurtenant facilities''.

Great Lakes states that this section should also permit new

delivery points for existing customers, not just to attach new

customers.

National Fuel states that the definition in Sec. 157.202(b)(10)

should be changed to replace ``any customer'' with ``any party.'' In

many cases, the owner of the facility to be interconnected with the

pipeline is not a customer of the pipeline, but another entity

transporting gas for the customer of the pipeline.

Commission Response: Commenters are concerned that the new

definition of delivery point either changes the way such facilities can

be constructed or changes or limits the type of facilities, i.e.,

related delivery laterals, that can be constructed. Currently,

pipelines must file a prior notice to construct a sales tap under

Sec. 157.211 or a delivery point under Sec. 157.212. Since the related

delivery lateral is considered an eligible facility, pipelines

currently can construct this connecting line automatically under

Sec. 157.208, subject to the spending limits in that section. These

laterals are eligible facilities because they are specifically excluded

from the definition of main line in Sec. 157.202(b)(5).

The Final Rule creates a new Sec. 157.211 to encompass the

construction of all delivery points, rather than have two confusing

sections to choose between. New Sec. 157.211 allows pipelines to

construct virtually any delivery point for both new and existing

customers, with the exception of bypass facilities, on an automatic

basis, subject to the spending limits in Sec. 157.208. However, the

authority for pipelines to construct related delivery laterals remains

unchanged, i.e., they are eligible facilities. Prospectively, a

pipeline will be able to construct both the delivery point and the

related upstream delivery lateral on an automatic basis, subject to the

limitations in Secs. 157.208 and 157.211. Thus, for projects that meet

the spending limits and do not involve bypass, pipelines are relieved

of the burden of making an upfront filing prior to constructing the

delivery facilities.

As to Duke Energy and Great Lakes proposal to clarify the

definition of ``appurtenant facilities'' in Sec. 157.202(b)(10) to

include minor gas conditioning and similar facilities, we agree and

will modify the section. We also agree that the reference to ``any

customer'' should be modified to refer to ``any party'' to recognize

the reality of transportation today.

Section 157.203--Blanket Certification.

The NOPR proposed minor editorial changes.

Comments: The Council questions whether the issuance of a blanket

certificate under this subpart constitutes an ``undertaking'' as

defined under the NHPA.

Commission Response: The creation of the blanket certificate

program was covered by the environmental assessment issued in 1981,

which concluded that projects which meet the standard environmental

conditions would not have a significant effect on the human

environment. The blanket certificate only authorizes projects which

adhere to these procedures which, among other things, protect historic

properties. The Commission determined that projects which were required

to adhere to these procedures would not have an effect on historic

properties eligible for the National Register of Historic Places.

Therefore, while these individual projects may be undertakings, they do

not require the Council's comment.

Section 157.205--Notice Procedures

Section 157.205(d)--Publication of Notice of Request

The NOPR proposed to require that the Commission would issue a

notice within ten days of the filing of an application in redesignated

Sec. 157.205(d). Process Gas Consumers requests that, among other

things, the Commission require pipelines provide more specific notice

directly to its customers, as specified in the discussion of Sec. 157.9

above. As stated in our response in Sec. 157.9, we believe the existing

notice requirements provide sufficient opportunity for all parties to

receive adequate notice of filings with the Commission.

Section 157.205(e)--Protests

The NOPR proposed to amend redesignated Sec. 157.205(e)(2) to add

that parties protesting an application in a prior notice filing

specifically set out the reasons and rationale for their protest.

Comments: The American Public Gas Association states that the

request is reasonable if the potential protestor has all the filed

material well before the protest deadline. It argues that it is

critical that protestors have the relevant data and the time to analyze

the data if they are to file substantive protests.

Commission Response: The NOPR proposed a number of changes, most of

which are designed to speed up the processing time for certificate

filings by requiring pipelines to file substantially complete

applications or face the prospect of having such filings rejected. We

note that prior notice applications are usually non-controversial and

involve routine activities. It is incumbent upon the pipeline to

include all relevant material with the application to ensure that the

application will not be rejected. The extended time frame for pipelines

to supply voluminous or hard to reproduce materials generally applies

to significant transmission facilities that require a separate section

7(c) application. Thus, prior notice filings, by their nature, should

be substantially complete when filed, which should allow ample time for

interested parties to timely intervene.

In the event that a potential protestor believes that an

application does not contain sufficient information for it to justify a

protest, it should explain specifically what information is missing and

how that affects its ability to protest. If such a situation were to

occur, the proposal in the NOPR is not intended to deprive any party of

the opportunity to point out the defects in an application.

Section 157.205(g)--Withdrawal or dismissal of protest

The NOPR proposed in redesignated Sec. 157.205(g) to allow the

Director of OPR to dismiss any protest to a prior notice filing which

does not raise a substantive issue and fails to provide any specific

reason or rationale for the objection.

Comments: AGA wants the Commission to clarify that protests

alleging that the pipeline's activity will result in a bypass of the

LDC will not be dismissed for lack of substance. AGA

[[Page 26585]]

proposes that Sec. 157.205(g) and the related Sec. 375.307(a)(10) be

revised to state that any protest that alleges bypass will not be

dismissed. AGA suggests that the following language be added at the end

of each regulation:

However, the Director of the Office of Pipeline Regulation may

not dismiss a protest that alleges bypass. Such a protest will

subject the request of the certificate holder to the full procedural

requirements of the Natural Gas Act under section 7 authorization

for the particular activity.

American Public Gas Association expresses two concerns: (1) That

the term ``substantive'' is too vague and gives the Director of OPR

excessive discretion; and (2) that the relationship of a dismissal of a

protest and the effect of a protest is unclear. APGA states that it is

not clear that dismissal of a protest prevents conversion of the

proceeding to NGA section 7 status. APGA suggests that the Commission

forgo these changes.

Duke Energy states that the regulation should be clarified so that

a notice of dismissal of protests is issued within the 30 day

resolution period. Duke Energy contends that this will eliminate the

need for any further order and helps ensure that the prior notice

process cannot be used by protestors seeking other unrelated

consideration from the pipeline.

Indicated Shippers contends that the proposal inappropriately

delegates one of the Commission's most fundamental responsibilities

under the NGA to the Director of OPR. It contends that all interested

parties must be given a meaningful opportunity to present their

positions to the Commission, including the ability to seek a hearing.

The Director of OPR must not be placed in position of establishing

policy and precedent. Indicated Shippers and NGSA both argue that

dismissal of a protest would effectively permit a prior notice to

become effective long before the Commission could act on a protesting

party's appeal or motion for stay of the dismissal. According to

Indicated Shippers, if the Director of OPR keeps this authority, the

Commission needs to amend Sec. 375.307(a) because it only authorizes

action on uncontested filings. If a protest is filed, a prior notice is

contested. Market Hub Partners states that protestors should not have

their protest rejected because of deficiencies in pipeline filings or

because of delays in noticing filings.

El Paso contends that the standard for determining which protests

will be dismissed is vague and expresses concern with how it will be

applied. El Paso requests that the Commission clarify that protests

which merely raise conclusory allegations without specific factual

support may be dismissed by the Director. For example, protests which

allege unfair competition or undue discrimination without support

should be dismissed. El Paso states that this clarification is

necessary to assure that protestors cannot delay projects by merely

raising arguments which lack factual support or legal merit.

INGAA and El Paso recommend that Sec. 157.205(g) be revised as

follows:

The Director of OPR may make a determination whether protests

raise a substantive issue or set forth specific reasons and

rationale for the objection, and dismiss the protest for failure to

either raise a substantive issue or set forth specific reasons and

rationale for the objection.

INGAA states that the authority to dismiss protests for either

reason will give the Director broader discretion to dismiss protests

while still applying the standards set forth.

Commission Response: The intent of the proposed regulation is to

allow the Director of OPR to dismiss any unsubstantiated protest to a

prior notice application. Protests that raise legitimate issues will

not be dismissed. However, ``no issue'' protests, those that offer no

support for the protest, are subject to dismissal. For example, AGA

requests that any protest alleging bypass not be dismissed. Simply

stating an objection is not enough reason to impede the progress of a

prior notice filing. However, if, for example, an allegation of bypass

is accompanied by specific reasons and rationale for the objection,

then such a protest will not be dismissed. A protestor does not

necessarily have to prove that its allegation is true, but it does have

to substantiate its objection. This will not deprive any party of an

opportunity to present its position to the Commission for

consideration. We reiterate, the dismissal pertains only to protests

that do not raise a substantive issue and fail to provide any specific

detailed reason or rationale for the objection.

As stated, APGA contends that it is not clear how the dismissal of

a protest will effect the conversion of the proceeding to a NGA section

7 proceeding. Also, Duke requests that the Commission clarify that the

protest will be dismissed during the 30 day resolution period. We

clarify that the Director of OPR will dismiss an unsubstantiated

protest within 10 days of its filing. However, we will continue to

require that the 30 day reconciliation period run for the entire 30

days to allow the protesting party time to pursue other alternatives.

Section 157.206--Standard Conditions

Section 157.206(b)--Environmental Compliance

The NOPR proposed to create a lead-in to the environmental

conditions of subpart F in redesignated Sec. 157.206(b) to indicate

that the conditions apply only to activities under the blanket

certificate that involve ground disturbance or changes to operational

air and noise emissions.

Comments: Enron and Williams agree with the proposed clarification,

but request that it be codified in Sec. 157.206(b).

Sempra Energy states that it cannot imagine a situation in which

blanket activity will not ``involve ground disturbance or changes to

operational air and noise emissions.'' It contends that any ambiguity

will provide pipelines with incentive to characterize projects as non-

ground disturbing to eliminate the notice and protest process and

construct facilities. Sempra Energy proposes that the Commission

either: (1) eliminate the proposed revision; or (2) clarify that

standard environmental conditions continue to apply to all

construction, installation, removal, re-work, or repair of facilities.

Commission Response: We agree with Enron and Williams and will

modify Sec. 157.206(b) to reflect this clarification. As to Sempra

Energy's concern, we reiterate that these conditions apply to all

activities performed under the blanket certificate, regardless of cost.

Thus, they apply to facilities constructed under the automatic and

prior notice procedures. However, we will clarify that the standard

environmental conditions continue to apply to all construction,

installation, removal, re-work, or repair of facilities performed under

the blanket certificate.

Section 157.206(b)(5)

The NOPR proposed to revise redesignated Sec. 157.206(b)(5) to

bring it into line with current usage concerning limitations on

compressor station noise levels.

Comments: Duke Energy, El Paso Energy, INGAA, and Williams all want

the Commission to clarify whether any change to a single compressor

unit or adding a new unit requires the noise level of the entire

compressor station to be reduced to 55 dB(A). They are concerned about

the terms ``modified, upgraded, or uprated.'' These parties contend

that the language implies that almost any modifications to individual

compressor units will force other previously approved units in the same

station to meet the 55 dB(A) noise limits, even if no modifications to

these

[[Page 26586]]

units are performed. They believe such a result would be at odds with

current Commission policy, which requires pipelines to maintain

compressor stations at existing levels when any changes are made. These

parties request that the Commission clarify the 55 dB(A) noise level is

applicable only to the individual unit being added, modified, upgraded,

or uprated and not to the entire compressor station which was

previously installed.

Commission Response: Our intent was to have the noise limit apply

to the new or modified compressor units. We will modify

Sec. 157.206(b)(5) to reflect this intent.

Section 157.206(c)--Commencement

The NOPR proposed to revise redesignated Sec. 157.206(c) to allow

for facilities to be completed ``and made available for service''

instead of ``in actual operation'' within one year of

authorization.22

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\22\ See the related discussion of a similar change in

Sec. 157.20(b).

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Comments: El Paso Energy and INGAA agree with the proposal, but

request that the annual report required in Sec. 157.208(e)(2) be

modified to reflect the change here.

Commission Response: The Commission is concerned with the actual

completion date of projects constructed under the blanket certificate

for, among other things, environmental review purposes. However, we are

also concerned with the date service commences. Changing the reporting

requirements so that facilities will not be reported until they are

``available for service'' could result in delays in both reporting and

review. While facilities could be ``completed and made available for

service'' within the specified timetable, service may not commence at

that time if the end-user/shipper is not ready to flow gas. Since the

annual report in Sec. 157.208(e)(2) currently requires the actual date

that construction was completed, we will modify the report to also

require the date service commenced.

Section 157.208--Construction, Acquisition, Operation, and

Miscellaneous Rearrangement of Facilities.

Section 157.208(a) and (b)

Consistent with our proposed change to the definition of an

eligible facility in Sec. 157.202(b)(2)(i), the NOPR clarified that

Secs. 157.208(a) and (b) will now include certain replacement

facilities that do not qualify under revised Sec. 2.55(b).

Comments: INGAA requests clarification that rearrangements of

storage lines will also be included in this section as the practical

process is the same whether a pipeline is rearranging mainline pipe or

storage pipe.

Commission Response: It appears that INGAA wants a clarification of

the definition of miscellaneous rearrangement of any facility. The

definition does not specifically limit the rearrangement to mainline

versus lateral or storage lines. It limits the reasons for the

rearrangement. Storage lines, as well as mainlines can be rearranged as

eligible facilities under this section, so long as the rearrangement

qualifies under the definition in Sec. 157.202(b)(6).

Section 157.208(c)(9)

The NOPR proposed to amend redesignated Sec. 157.208(c)(9) to add

the specification that a copy of consultations for the Endangered

Species Act, the National Historic Preservation Act, and the Coastal

Zone Management Act be included in any prior notice filing made under

this section.

Comments: The Council asks the Commission to describe what

constitutes ``clearance'' and how can it be obtained by the certificate

holder given the Commission's nondelegable responsibility.

INGAA states that the preamble to the NOPR requires a copy of

consultations, while the regulation requires a copy of the clearance

received at the time a prior notice is filed. INGAA wants the

Commission to clarify whether the final clearance is required or

whether just the copy of consultations is required. If the final

clearances are required, INGAA contends that this does not reflect the

realities of dealing with the various permitting agencies involved.

While understanding the Commission's need to verify that clearances

have been obtained before the prior notice period runs, INGAA suggests

that pipelines file requests for clearances at the time of the prior

notice and supplement with actual clearances when received. Enron and

Great Lakes raise the same concern and request that actual clearances

be filed within 30 days. If clearances are not received by the close of

the protest period, the Commission could deem the prior notice

protested. INGAA proposes the following language:

A copy of the clearance received or the request for clearances

for Endangered Species Act, the National Historic Preservation Act

and the Coastal Zone Management Act shall be included in any prior

notice filing. If a request for clearance is filed, then a copy of

the final clearance must also be filed, when received. Failure to

file the final copy by the end of the protest period will deem the

prior notice filing protested.

Commission Response: As to the Council's request, we will change

the word ``clearances'' to ``agreements.'' We have already addressed

the issue of delegation when we said that projects which comply with

the standard conditions do not constitute undertakings which would

affect historic properties.

As to INGAA's request, we clarify that the reference to a copy of

consultations means a final agency agreements. Prior notice filings, by

definition, are for those projects on which the company could begin

construction within 45 days from the filing date. As a result there is

no justification for allowing the company to file a prior notice

without already having the agreements.

Section 157.208(e)

Section 157.208(e) details the annual reporting requirements for

facilities completed under this section. The NOPR proposed to revise

this section to require complete reports only for facilities

constructed under the automatic authority conferred by Sec. 157.208(a).

Comments: INGAA requests that the Commission clarify whether

pipelines are required to identify facilities constructed under prior

notice procedures and the cost levels of such facilities in their

annual report in Sec. 157.208(e).

Commission Response: Pipelines are still required to identify such

facilities and to provide the complete cost information required in

Sec. 157.208(e)(3). However, because the prior notice application

includes all the information regarding the facility, the only

identification necessary would be the docket number of the prior notice

that authorized construction. We note that this action reduces the

reporting burden on all pipelines.

Section 157.209--Temporary Compression Facilities

The NOPR proposed to create a new Sec. 157.209 to allow blanket

certificate holders to install temporary compression for the limited

purpose of maintenance or repair of existing permanent compressor

unit(s).

Comments: El Paso Energy and INGAA want the Commission to clarify

that pipelines can operate temporary compressors occasionally for

maintenance purposes to ensure that the compressors will perform up to

specifications when needed, including complying with the 55 dB(A) noise

level. INGAA argues that, in cases of

[[Page 26587]]

routine maintenance, pipelines should be able to install a temporary

engine while repairing a permanent engine, or install a spare engine in

place of the engine that is removed for repair. INGAA recommends that

these activities be permitted as maintenance under this section.

Commission Response: We will grant the clarification. It is

consistent with the intent of this section and will help ensure the

reliability of certificated entitlements in the event of compressor

problems.

Section 157.211--Sales Taps

The NOPR proposed to redefine this section as Delivery points and

provide for automatic and prior notice authorization to acquire,

construct, replace, modify, or construct any delivery point.

Construction of Delivery Points

Comments: Enron and INGAA state that the NOPR describes receipt

points as being constructed under Sec. 157.211, while the proposed

regulations indicate that receipt points are eligible facilities to be

constructed under Sec. 157.208.

Commission Response: The Commission agrees with Enron and INGAA

that the intent is for receipt points to be constructed automatically

as eligible facilities under Sec. 157.208, subject to the spending

limits. Section 157.211 would cover receipt points that prospectively

will function as delivery points as a result of unbundling. The ``and

vice versa'' in the preamble to the NOPR was inadvertent. We clarify

that delivery points will not actually be converted into receipt points

under Sec. 157.211.

Definition of End-User

In Sec. 157.211(a)(2), the NOPR required prior notice of the

construction of a delivery point where the gas is being ``delivered to,

or for the account of, an end-user that is currently being served by an

LDC.''

Comments: National Fuel requests that the Commission revise

Sec. 157.211(a)(2)(i) to read instead where the gas is being

``delivered directly to an end user'' to clarify that delivery into an

LDC facility that feeds an end user could be undertaken automatically

under Sec. 157.211(a)(1).

Commission Response: In a situation where a pipeline delivers gas

directly to an LDC, which then redelivers the gas to an end-user, the

LDC performs a transportation function and is not bypassed in such a

transaction. Accordingly, under that situation, automatic authorization

is appropriate.

Prior Notice Requirement for Bypass

Comments: AGA and Sempra Energy note that the regulations do not

specifically mention ``bypass'' and that a prior notice is only

required when a customer is ``currently being served'' by an LDC. AGA

believes that ``currently being served'' is sufficiently ambiguous that

pipelines could evade the prior notice requirements, even where an LDC

is being bypassed. AGA suggests that the Commission change

Sec. 157.211(a)(2)(i) to add: ``currently being served'' includes

circumstances where the customer is attached to the LDC even if it is

not currently taking gas. AGA also requests that the Commission modify

Sec. 157.205 to require that the pipeline notify both the LDC and the

state utility commission of any bypass activity. AGA also requests that

the Commission define bypass to include situations where the pipeline

proposes to serve a customer within the LDCs' service area, even if the

LDC previously has not served that customer.

On the other hand, Process Gas Consumers (PGC) argues that the

Commission should eliminate the use of prior notice for all delivery

points, including new delivery points for end users served by LDCs. PGC

states that the Commission's policy is well established and consistent

with principles of nondiscriminatory access. According to PGC, end

users and LDCs are equally entitled to new delivery points, including

ones that bypass traditional suppliers. If a pipeline violates a

Commission policy, PGC states that it is subject to a complaint under

NGA section 5. PGC further states that if the customer violates any

contract with an existing supplier, it faces a contract remedy. PGC

also argues that direct service to an end user should also be automatic

if the contract has expired or will expire by the time service from the

new delivery point commences.

PGC also wants the definition of delivery point in

Sec. 157.202(b)(10) expanded to include new and additional service to a

customer, whether or not at the same location. For example, an

industrial user installing a second plant should be entitled to treat

the new installation as new service and should be able to obtain a

delivery tap automatically. The end user should not be subject to

protests and delays because it continues to receive service for the

remainder of its operations from its existing LDC. New service, beyond

the existing LDC service should entitle the end user to obtain a

delivery tap under the automatic procedures.

Commission Response: The Commission has previously determined that

a bypass does not occur when a pipeline proposes direct service to a

new customer that is not currently being served by an LDC under an LDC

contract.23 The purpose of 157.211(a)(2)(i) is to provide

notice to an LDC of a potential bypass. This is consistent with our

current bypass policy, which we apply on a case by case basis, and see

no basis to change that policy. This policy requires that a nexus be

shown between the LDC's obligation to purchase service from the

pipeline and the pipeline's proposed service to the end-user. Our

policy is not to engage in speculation as to an LDC's market, nor

second guess end-users'' choices.

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\23\ See K N Interstate Gas Transmission Company, 85 FERC para.

61,327 (1998), Texas Eastern Transmission Corporation, 71 FERC para.

61,020 (1995), and Mojave Pipeline Company, 69 FERC para. 61,921

(1994).

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As stated, PGC argues that adding delivery points to serve end-

users should be allowed under the automatic authorization. We disagree.

We see no reason to modify our policy to provide an LDC currently

providing service to an existing customer notice of a potential bypass.

To the extent that a pipeline wishes to add a delivery point for a

customer where the affected contract with the LDC has expired, the

pipeline may add the delivery point under the automatic authorization.

However, the existing firm contract must expire prior to the

construction of new delivery facilities in order not to constitute a

bypass.

Further, we note that the regulation requires prior notice whenever

the facilities are constructed to serve a customer currently being

served by an LDC. This includes a delivery point to provide additional

volumes to that customer. We believe that the LDC should have notice

that such facilities are proposed to be built.

CD Reductions

Comments: AGA, the Joint Consumer Advocates,24 and

Rochester Gas and Electric Corp. (Rochester) urge the Commission to

permit LDCs to reduce their contract demand to the extent pipelines

bypass their facilities. The current policy predicates any CD reduction

on a contractual nexus between the capacity and the bypassing LDC

customer. However, these parties contend that LDCs often do not have

service agreements with their customers

[[Page 26588]]

and most do not deliver specific quantities to end-users. Instead, LDCs

provide retail service for whatever requirements the customer needs.

The LDC tariffs become the contract when service commences. Moreover,

they claim that the Commission's standard is overly restrictive and

fails to reflect current market realities.

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\24\ The Joint Consumer Advocates consist of the Pennsylvania

Office of Consumer Affairs, the Iowa Office of Consumer Advocate,

and the West Virginia Consumer Advocate Division.

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Commission Response: In Order No. 636, the Commission stated that

it would consider requests by LDCs for relief from pipeline bypass.

Where an LDC could show a nexus between the bypass and the costs at

issue, the Commission stated that it would consider reducing the LDC's

contract demand and reservation charges.25 Determining if CD

reductions are justified is dependent on the facts and circumstances in

each particular case. Any challenges to the Commission's current policy

should be made on a case by case basis. The parties have not provided

any compelling reason that would warrant the Commission's changing its

current policy in the context of this rulemaking proceeding. We note

that the proposed regulation keeps the existing policy in place, so if

a prior notice is protested on the issue of bypass, these points can be

examined as they are now.

---------------------------------------------------------------------------

\25\ See Texas Gas Transmission Corp., 70 FERC para. 61,207

(1995).

---------------------------------------------------------------------------

Tariff Must Permit Addition of Delivery Point

Comments: PGC also seeks to have the Commission eliminate the

requirement in Secs. 157.211(a)(1)(ii)and (a)(2)(iii) that the

certificate holder's tariff does not prohibit addition of new delivery

points. PGC contends that since Order No. 636, no pipeline's tariff

should prevent the construction of delivery points. The proposed

language is so broad that, notwithstanding creditworthiness provisions,

pipelines could refuse to construct for policy or other reasons, which

PGC argues is against open access provisions.

Commission Response: A pipeline's tariff sets the parameters under

which it will construct delivery points. Any construction of new

delivery points need to be consistent with the terms of the pipeline's

tariff. Pipelines cannot structure their tariffs to impede constructing

delivery points and are required to provide non-discriminatory, open

access service. Part of this service is constructing delivery points

for shippers. While we never said that pipelines had to build

facilities, if a pipeline does build facilities for one customer, it

must build facilities for other similarly situated customers on a non-

discriminatory basis.26 We recognize that there may be

certain economic parameters in a tariff, including creditworthiness,

that shippers may need to comply with in order for a pipeline to

construct a new delivery point. However, a pipeline must have a

legitimate reason not to construct facilities for shippers that request

them. While we will not eliminate the requirement in

Secs. 157.211(a)(1)(ii) and 157.211(a)(2)(iii) that ``the certificate

holder's tariff does not prohibit the addition of new delivery

points,'' pipelines must not use their tariffs as a shield when they

are requested to construct facilities. Shippers that believe that they

have been unfairly denied a new or additional delivery point can file a

complaint with the Commission detailing the adverse

action.27

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\26\ See Missouri Gas Energy v. Panhandle Eastern Pipe Line

Company, 75 FERC para. 61,166 at 61,550 (1996).

\27\ See Arcadian Corporation v. Southern Natural Gas Company,

55 FERC para. 61,207 (1991), reh'g 61 FERC para. 61,183 (1992).

---------------------------------------------------------------------------

Prior Notice Requirement for Full Pipelines

Comments: According to APGA, attaching new customers to a full or

nearly full pipeline potentially affects the operating flexibility and

service to all existing firm customers. APGA does not object to

construction of new delivery points for existing customers where

overall pipeline firm obligations are not increased. However, before

new customers are added to a pipeline, APGA contends that there should

be prior notice and opportunity to protest, because the quality of

existing service is at issue when new customers are added.

Commission Response: APGA wants to limit the automatic construction

of delivery points to existing customers, not new customers being added

to the system because of the potential service impact on others. One of

the purposes of the blanket certificate is to expedite construction of

minor facilities that will not have a significant impact on ratepayers.

This is accomplished in part by limiting the cost of certain facilities

and requiring that service through such facilities is provided within

existing certificated volumes. However, the Commission recognized that

the blanket certificate issued under part 284 certificates

transportation of gas using available capacity on a first-come, first-

serve basis. In other words, transportation provided under a part 284

blanket certificate is within certificated volumes and pipelines

holding a part 157 certificate are authorized to construct any eligible

facilities to provide transportation authorized under a part 284

blanket certificate. Thus, nothing prevents a pipeline from

constructing new delivery points in accordance with this section to

accommodate additional service to any customer, so long as the service

is supported by a related transportation agreement under part 284.

However, pipelines cannot contract for service that depends on firm

capacity reserved for others.

Meter Facilities

Comments: Williams suggests that Sec. 157.211(a)(1) be revised to

recognize situations where a replacement or modification to meter

facilities involves a reduction in measurement capacity to accommodate

the need for greater accuracy. This would avoid confusion when a

customer's load is reduced at one delivery point, but there is no

overall reduction in customers total capacity.

Commission Response This section already allows pipelines to

``modify'' any delivery point, which would apply to the situation

Williams describes.

Lateral Associated with Delivery Points

Comments: Great Lakes states that the new definition of delivery

point precludes construction of associated lateral lines. According to

Great Lakes, this is a step backwards since certain limited-length

lateral lines can now be constructed as part of the delivery point

prior notice procedure. Great Lakes contends that the Commission should

allow lateral lines associated with new delivery points to be

constructed on a self-implementing basis, unless bypass is involved.

Commission Response: We addressed this argument in our discussion

of Sec. 157.202(b)(10). There we explained that the delivery point

itself and related facilities can be constructed under Sec. 157.211,

while the connecting lateral would qualify as an eligible facility and

generally be constructed automatically under Sec. 157.208.

Section 157.215 Underground Storage Testing and Development.

This section provides automatic authorization, subject to certain

conditions, for the construction and operation of pipeline and

compression facilities to be used for the testing and development of

underground reservoirs for the possible storage of gas.

The NOPR proposed to require the certificate holder to identify the

date construction began in revised Sec. 157.215(b)(1)(iii).

Comments: INGAA and National Fuel propose that the section be

revised to

[[Page 26589]]

reflect the Commission's current policy, which allows pipelines to

acquire facilities and recognizes that they can currently drill

injection/withdrawal and observation wells when testing and developing

storage fields.

Petal Gas Storage Company (Petal) states that the Commission should

clarify that the scope of the blanket certificate allows for the

construction of salt dome storage caverns under the automatic and prior

notice provisions of Sec. 157.208. Alternatively, if both the

construction and operation of a new salt dome cavern currently requires

formal section 7(c) authorization, Petal argues that the Commission

should at least permit the construction of the cavern (drilling and

leaching) and installation of related facilities (flow lines) under

blanket authorization, while operation of the additional facilities is

considered in a separate section 7(c). If the Commission does grant

either of these requests, the Commission should clarify that salt dome

storage facilities are included within the scope of storage facilities

eligible for automatic authorization under Sec. 157.215, or create a

new provision to allow for automatic authorization for certain

activities, such as drilling a well, leaching, and testing a cavern,

that are necessary to develop a salt dome storage cavern.

Commission Response: We agree with INGAA that specifically

including well work and acquisition of facilities would clarify the

scope and intent of this section. We will modify Sec. 157.215(a)

accordingly. We note that whatever policy might be adopted in the

landowner notification proceeding in Docket No. RM98-17-000 would apply

to any construction under the blanket certificate, including this

section.

We do not agree with Petal about automatic or prior notice

authorization for the construction and development of solution-mined

salt cavern storage. Construction, testing, and development of

conventional storage fields (depleted gas or oil field and aquifer)

generally requires more than three years for different testing and

development phases to verify various storage parameters. Moreover, a

conventional storage field developed pursuant to this authorization

cannot be placed in operation to render storage services in interstate

commerce without further Commission evaluation and authorization.

In contrast to a conventional storage field development, all

aspects of a solution-mined underground gas storage facility, which

will be created through the planned leaching of a naturally bedded or

domal salt formation, is designed before drilling and leaching. This

includes selecting an appropriate site, physically developing the

cavern and testing and commissioning the cavern. It also involves

environmental impacts different than those related to the construction,

testing, and development of conventional storage fields. Therefore,

certification of salt cavern storage facilities is more similar to

construction of mainline pipeline transportation facilities than to the

development of a conventional underground storage facility. This

section will not provide for either automatic or prior notice

authorization for the construction and development of solution-mined

salt cavern storage.

Section 157.216 Abandonment

Section 157.216(a)

The NOPR proposed a new Sec. 157.216(a)(1) to specifically

reference that receipt point facilities are eligible for automatic

abandonment authorization under the subpart F blanket certificate.

The NOPR also proposed to expand the automatic authority under

Sec. 157.216 to allow abandonment of: (1) Delivery points used to

provide firm and interruptible service, if the points are unused for 12

months and no longer under a firm contract, and (2) any eligible

facility constructed under automatic authority, subject to customer

consent.

Customer Consent and Automatic Authorization

Comments: INGAA is concerned about the requirement to obtain

written consent from all customers who have received service in the

past 12 months. Abandonment of a tie-over on a mainline or some

facilities at an interconnection with another pipeline could be very

burdensome because of the sheer number of customers that could be

affected. INGAA proposes to allow abandonment of eligible facilities if

it will not terminate or degrade service to such existing customers.

This protects customers without an unnecessary administrative burden.

National Fuel states that receipt and delivery points should

qualify for automatic abandonment if affected customers consent,

regardless of whether the facility was used in the past 12 months.

AGA wants the Commission to clarify that primary delivery points

under contracts are not eligible for automatic abandonment, even if

they have not been used in the past 12 months.

Indicated Shippers and NGSA state that the proposals to allow

pipelines to abandon receipt points automatically and by prior notice

could permit pipelines to abuse the ability to abandon service to a

point. They suggest that the abandonment of all supply facilities be

subject to prior notice, regardless of cost. They contend that without

prior notice, upstream suppliers and other parties behind the

facilities could become stranded, causing shut-in and possible loss of

reserves. According to Indicated Shippers and NGSA, the proposed

written consent applies only to transportation customers, not upstream

supply parties, including producers, pooling parties, balancing parties

and point operators that may also deliver gas into the subject

facilities. These parties may have Operational Balancing Agreements

(OBA) or other agreements with the pipeline that conform to a pro forma

agreement in the pipeline's FERC Gas Tariff. Given the cost level for

automatic abandonment, Indicated Shippers requests that the Commission

clarify how it intends to determine the cost of eligible facilities

serving a supply function for purposes of automatic abandonment.

Indicated Shippers and NGSA argue that prior notice for such facilities

protects against inappropriate abandonment of jurisdictional

facilities.

Both Indicated Shippers and NGSA request that the Commission

clarify that the term ``customers'' (for purposes of abandonment under

the blanket certificate) includes: (1) Upstream producers and other

suppliers that (a) have confirmed a nomination at the point in the

previous 12 months or (b) are not currently using the facilities, but

have within the previous 12 months made a request to the pipeline in

writing for firm or interruptible service using specific supply

facilities; (2) point operators; (3) gatherers; (4) pooling parties; or

(5) OBA parties. Indicated Shippers argues that the Commission should

require written consent of these affected upstream parties in addition

to the capacity holders in the facilities.

These parties contend that without this clarification, the new

regulations could be interpreted to allow a pipeline to abandon those

facilities using prior notice without the consent of the affected

parties behind the upstream supply facilities, if those parties do not

ship gas from the point under their own transportation agreements with

the pipeline. Unless upstream parties are considered customers, even a

protest would be illusory since consent is only needed from

``customers''.

Commission Response: INGAA believes that seeking customer consent

will be administratively burdensome if numerous customers use a

facility proposed to be abandoned. INGAA

[[Page 26590]]

suggests that abandonment be allowed as long as it will not terminate

or degrade service to existing customers. However, INGAA does not

specify how it will determine that abandonment of any facility will not

terminate or degrade existing service.

It is the Commission's statutory responsibility to ensure that

abandonment of any facility is permitted by the present or future

public convenience and necessity. In order to meet this responsibility,

the Commission will require pipelines to demonstrate that service will

not be degraded or terminated, or that service is no longer needed

through a specific facility by providing consent from customers that

have received service during the past 12 months. While there may be

certain instances where this requirement could create a burden, we

believe that our statutory responsibility under NGA section 7(b)

outweighs any such potential administrative inconvenience.

National Fuel argues that abandonment should be automatic for

receipt and delivery points, if the affected customers agree,

regardless of when the facilities were last used. National Fuel can use

Sec. 157.216(a)(2) to abandon receipt points automatically, since they

are eligible facilities, as long as it has all the customers' consent,

regardless of whether the receipt point was used in the past 12 months.

However, delivery points are not eligible facilities because of

potential bypass situations and therefore, are not covered by

Sec. 157.216(a)(2). The Commission determined that expanding the

automatic abandonment authority was appropriate only if the customer

who used the facilities during the preceding 12 months consented to

such action. Therefore, we will continue to require a prior notice

filing for delivery point facilities which were in use during the last

12 month period specifically because we are concerned with the

potential for existing customers to lose access to facilities. We

believe that any perceived delay involved in filing a prior notice is

offset by the protection the procedure gives customers.

As we stated in the NOPR, the Commission does not intend to allow

automatic abandonment of delivery points used for firm service that are

under contracts that are in force and effect, because parties paying

demand charges should retain the availability of those points.

As stated, Indicated Shippers argues that gas suppliers, point

operators, gatherers, pooling parties, and OBA parties upstream of

receipt points and gas supply facilities should be included as

customers from whom consent is required prior to facilities being

abandoned automatically. The Commission believes that its proposal to

allow automatic abandonment of receipt or delivery points that have not

been used for a one year period provided it is no longer controlled by

a firm contract is appropriate. Pipelines should have the flexibility

to abandon facilities that are no longer used and useful. To the extent

that upstream suppliers do not have contract agreements with the

pipeline but, instead, have gathering, pooling, balancing, or some

other type agreement with the pipeline's shippers, they should seek the

appropriate remedy under those contracts. We note that pipelines are

not designed to stand by without charging for service.

Sections 157.216(d) (4) and (5)

The NOPR proposed to modify Sec. 157.216(d)(4) and add new

Sec. 157.216(d)(5) to require that pipelines supply: (1) The date earth

disturbance related to an abandonment began, and (2) the date

clearances were actually received under the Endangered Species Act, the

National Historic Preservation Act, and the Coastal Zone Management

Act.

Comments: Michigan Gas Storage contends that clearances under the

National Historic Preservation Act should not be required where the

same earth that was disturbed for construction is redisturbed for

abandonment. It states that paragraphs (d) (4) and (5) should be

limited to abandonment of facilities where there is earth disturbance

beyond the earth disturbance involved in the original construction.

Commission Response: If there is no ground disturbance or if the

disturbance is similar to the previous ground disturbance, the report

might consist simply of the applicant's statement that there is no

ground disturbance or the SHPO agreement that the ground disturbance

does not constitute a concern. However, since it is difficult to

ascertain the many situations that could arise and the many exceptions

possible, the Commission will still require that the applicant obtain

agreement from the appropriate SHPO in order to avoid the requirement

for a more detailed report. Of course, as with all the resource

reports, the option is there to explain the absence of material based

on the nature of the project. It will then be up to the staff to

determine if the reason is adequate.

Section 157.217--Changes in rate schedules

The NOPR proposed to remove this section, which provides pipelines

with automatic authority to permit customers to change rate schedules.

Comments: Duke Energy believes that if a pipeline and its customer

both desire to convert to part 284 service, they should be able to do

so on an automatic and mutually agreeable basis, so long as it is non-

discriminatory. Duke Energy understands that the Commission has limited

its interpretation of this section in the past, citing Northwest

Pipeline Company.28 However, it believes that the regulation

should continue and be clarified to allow section 7(c) customers to

convert to part 284 service. Such a conversion would be consistent with

Order No. 636.

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\28\ 49 FERC para. 61, 162 (1989), reh'g denied, 50 FERC para.

61, 200 (1990).

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Commission Response: We agree. The Commission's policy is to foster

conversion from individually certificated transportation and storage to

open access transportation and storage. Therefore, we will revise

Sec. 157.217 to specifically provide that pipelines can change rate

schedules, at a customer's request, for the purpose of converting part

157 transportation or storage service to a complementary part 284

service. This section will provide automatic abandonment authorization

for the part 157 transportation service, obviating the need for

pipelines to file separate abandonment applications. However, pipelines

will need to make a filing to reflect removal of the part 157 rate

schedule from their tariff. We will also grant a generic waiver, to the

extent necessary, to allow the converting shipper to retain its

existing capacity through the conversion. We will also require that the

rate the shipper will pay after conversion to part 284 will reflect all

the maximum rates and charges associated with the service.

Appendix II to Subpart F--Procedures for compliance with the National

Historic Preservation Act of 1966 under Sec. 157.206(d)(3)(ii)

The NOPR proposed minor editorial revisions, such as changing the

reference in the title from ``Sec. 157.206(d)(3)(ii)'' to

``Sec. 157.206(b)(3)(ii)''.

Comments: The Council made several comments relating to the

inclusion of interested persons in the regulations for complying with

cultural resources requirements. Specifically, it said that involvement

of interested persons needs to be clarified in Appendix II. It said

that appendix II does not offer any

[[Page 26591]]

explicit guidance on consultation with interested persons. In

particular it doesn't specifically refer to the authority given to

certain tribes to take over the function of the SHPO on their lands.

Further, in reference to Sec. 380.12(f), since the rule does not

explicitly provide for the involvement of interested persons in the

development of mitigation/treatment, the project sponsor could propose

a Treatment Plan, inappropriately, without consultation with any

interested persons. Finally, the Council argues that the rule does not

go far enough in providing a consultative role for interested persons,

since Sec. 380.14(a) states only that the Commission will ``take into

account views of interested parties.''

Commission Response: With respect to appendix II, to better

indicate tribal authority we will modify the first sentence of

paragraph 1(a) to read: ``* * * procedures used by the appropriate

Tribal or Federal land managing agency * * *'' In addition reference to

the Tribal Historic Preservation Officer (THPO) should be added in most

parts of the regulation referring to the SHPO. We will add reference to

the THPO as appropriate, including a new definition of THPO in appendix

II: ``(d) ``THPO'' means the Tribal Historic Preservation Officer.''

And in paragraph (1)(b) ``If there is no SHPO or THPO, if appropriate,

or if the SHPO or THPO, as appropriate, decline to * * *''. Similar

changes have been made to paragraphs (3) through (9).

We disagree with the Council and believe that the rule, in

general, adequately provides for the involvement of interested parties.

The rule references OPR's ``Guidelines for Reporting on Cultural

Resources Investigations'' and the pertinent sections--III.B.2., IV.A,

V.B.12, VI.B.3., VI.C., VII.C., VIII.D., which provide for public

participation throughout the process. In addition, the Commission's

environmental process, which includes sending out Notices of Intent,

holding scoping meetings, and issuing Environmental Assessments or

Environmental Impact Statements, allows us to explicitly solicit

comments from any potentially interested persons regarding cultural

resources.

With respect to Treatment Plans, as we have already stated, the

guidelines do indicate the need to involve interested persons. However,

there would be nothing wrong with an applicant proposing such a

Treatment Plan since the Commission's environmental process would

ensure the involvement of interested persons in the formulation of the

ultimate Treatment Plan to be used. The applicant's plan is merely a

starting point.

While a company can file a Treatment Plan in resource report 4

(Sec. 380.12(f)), they don't have to. The guidelines at section VIII.D

provide for review of a Treatment Plan by interested persons even if

the Treatment Plan is filed with the Commission early in the process.

Appendix II--Paragraph (7)

Comments: The Council contends that the citation in paragraph (7)

to 36 CFR Sec. 800.3(a) should be to 36 CFR Sec. 800.9 instead.

Commission Response: We agree the reference should be changed.

However, we believe a more appropriate reference is to 36 CFR

Sec. 800.5 rather than 36 CFR Sec. 800.9. Under the current Council

regulations, Sec. 800.5 ``Assessing effects'' references Sec. 800.9

applying the ``Criteria of Effect and Adverse Effect,'' accomplishing

the effect the Advisory Council is seeking.

Appendix II--Arbitration

Comments: The Council states that Appendix II does not provide for

arbitration of disputes or cases where the SHPO may choose not to

consult with the project sponsor.

Commission Response: This is not correct. Paragraph 1(b)

specifically deals with the case where the SHPO declines to consult. If

there is a dispute that can't be resolved, then the project is not

authorized under this program, and the only way it can proceed is

through the standard certificate process (see paragraph (9)). There was

no intent to provide for arbitration of a project the Commission may

not be aware of prior to construction.

D. Part 284--Certain Sales and Transportation of Natural Gas Under the

Natural Gas Policy Act of 1978 and Related Authority

Part 284 sets forth the general provisions and conditions that

govern certain sales and transportation of natural gas under the NGA

and the NGPA.

Subpart J--Blanket Certificates Authorizing Certain Natural Gas Sales

by Interstate Pipelines

Section 284.288--Reporting Requirements

This section sets forth the annual reporting requirements for an

interstate pipeline making sales under this subpart. Blanket sales

certificates were issued to interstate pipelines in Order No. 636. The

NOPR sought comment on whether the information required by this section

is still necessary or whether it has become obsolete, leading to

removal of the section from the regulations.

Comments: Indicated Shippers argues that the requirement is far

from obsolete and should be retained, since the circumstances leading

to imposing the reporting requirements remain a reality. Interstate

pipelines continue to maintain monopoly control over gas

transportation. Thus, there is no basis for eliminating this

requirement. Indicated Shippers contends that the information is

necessary to determine if the pipeline is exercising market power. The

requirement acts as a deterrent to unlawful conduct that otherwise

would go unreported.

Conversely, National Fuel and Williston Basin support discontinuing

the reporting requirement.

Commission Response: We no longer place the same emphasis on this

report as we did when it was implemented. We believe that eliminating

this report will not have a detrimental impact on the customers of any

pipeline engaging in unbundled sales under subpart J of part 284.

Pipelines engaging in such sales are fully unbundled and have in place

system transportation rates that reflect their cost of service. These

transportation rates will not be affected by any unbundled sales a

pipelines makes under subpart J. Therefore, in the interim, the volume

of any such sales and the associated revenue will not impact the rates

customers currently pay for service. When a pipeline files a section 4

proceeding, the information related to subpart J sales will be set out

in the pipeline's Statement G, Secs. 154.312(j) (i) and (ii), which

require, among other things, revenues and billing determinants by rate

schedule and customer name. It is in the context of a rate case that

the costs associated with any unbundled sales can be scrutinized.

E. Part 375--The Commission

Part 375 sets forth the general provisions of the Commission, the

procedures for Sunshine Act meetings and delegations of authority.

Subpart C--Delegations

Section 375.307 Delegations to the Director of the Office of Pipeline

Regulation.

Sections 375.307(a)(1) and (a)(4)

The NOPR proposed to increase the $5,000,000 spending limit to

match the prior notice limits set forth in Sec. 157.208(d).

Comments: AGA requests that the Commission expressly preclude

pipelines from segmenting their projects to meet this spending

threshold. AGA

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suggests that this section be revised to include:

``An applicant must certify that the proposed project has not

been improperly segmented in order to meet the spending limit

specified in Sec. 157.208(d).''

Commission Response: We reiterate that updating and broadening the

certificate regulations is designed to facilitate the filing of more

complete applications and to provide faster processing of applications

once they are filed. We do not intend for these changes to provide

opportunities for pipelines to circumvent the intent of our regulations

and policies. However, rather than revise the delegation of authority

regulations, we will instead revise the blanket certificate

regulations. Therefore, we will revise section 157.208 to specifically

state that pipelines shall not segment projects in order to meet the

spending limits in Sec. 157.208(d).

Section 375.307(a)(3)

The NOPR proposed to remove an obsolete condition in

Sec. 375.307(a)(3), which delegates abandonment authority to the

Director of OPR for gas purchase facilities with a construction cost of

less than $1 million or the deletion of delivery points.

Comments: NGSA requests that this section be modified to take into

account the financial and operating interests of upstream producers,

gatherers and point operators attached to facilities proposed to be

abandoned. NGSA raises the same argument it raised regarding a similar

proposal to modify the abandonment of receipt points under

Sec. 157.216.

Commission Response: For the same reasons set forth in our answer

in Sec. 157.216, we will deny this request.

Section 375.307(a)(10)

The NOPR proposed new Sec. 375.307(a)(10) to delegate to the

Director of OPR the authority to dismiss protests to prior notice

filings that the Director determines do not raise a substantive issue

and fail to provide any specific detailed reason or rationale for the

objection.

Comments: Sempra Energy states that the Commission should recognize

that not all applications have merits and that opponents or protestors

may not have adequate information at the time of protest to prevent

dismissal of their protest. This delegation calls for legal conclusions

by the OPR Director rather than factual holdings or ministerial action

on routine matters and is not truly appropriate for delegation.

Commission Response: As we noted earlier, the authority delegated

to the Director of OPR to dismiss protests is intended to apply only to

situations where unsubstantiated allegations are raised, and only

applies to such protests filed in response to prior notice applications

filed under Sec. 157.205.

F. Part 380--Regulations Implementing the National Environmental Policy

Act

The regulations in Part 380 implement the Commission's procedures

under the NEPA. These regulations supplement the regulations of the

Council on Environmental Quality (CEQ), 40 CFR parts 1500 through 1508

(1986). Part 380 essentially follows the CEQ procedures concerning

early and efficient review of environmental issues, public notice and

participation, scoping, interagency cooperation, comments, and timing

of decisions on proposals.

Section 380.12--Environmental Reports for Natural Gas Act Applications

The NOPR proposed to replace part 380 appendix A (guidelines for

the environmental report), which is out of date and contains numerous

errors, with the currently optional appendix G resource reports in the

electronic filing requirements, which virtually all companies are now

using instead of appendix A. In Sec. 380.12 the NOPR listed, in detail,

the information the Commission needs to conduct an environmental review

of a proposal under NEPA. The NOPR proposed that applications not

meeting a minimum specified portion of these requirements will be

rejected.

Mileposts and Map Checklist

Comments: National Fuel states that all references to mileposts in

this section should be revised to permit the use of conventional survey

centerline stationing if available. Most companies use field survey,

stake and mark pipeline centerlines using conventional survey

stationing, which National Fuel contends is far more accurate than

mileposts. They assert that survey stationing provides a discrete

location identified for each feature within each milepost. National

Fuel argues that companies should not be required to convert

conventional survey stationing references to mileposts merely to file

applications. In addition, National Fuel states that it would be

helpful if the Commission included a mapping summary table or checklist

in Sec. 380.12, since the mapping requirements are spread throughout

the section.

Commission Response: The intent of all the ``mileposting''

requirements is to have a unique and uniform method of identifying the

position of resources on the route of the proposed pipeline. We will

accept any method that accomplishes this goal; therefore we add a new

Sec. 380.12(b)(6) to read:

Whenever this section refers to ``mileposts'' the applicant may

substitute ``survey centerline stationing'' if so desired. However,

whatever method is chosen should be used consistently throughout the

resource reports.

Rather than cluttering the regulation with a listing of where

things can be found, we will provide a guidance list of the Commission

regulations that require maps and post it on our INTERNET website. The

following sections include references to maps or plat plans in the

regulations: 380.12(c)(1); 380.12(c)(2)(i)(C); 380.12(c)(3)(i);

380.12(c)(3)(iii); 380.12(c)(4); 380.12(d)(4); 380.12(k)(2)(iv);

380.12(l)(2); 380.12(l)(3); and 380.12(o)(1, 2-4, & 6).

Minimum Checklist Requirement

The NOPR proposed to add a checklist of minimum filing requirements

for environmental reports (Sec. 380.12) as appendix A to part 380;

missing items will result in an application being subject to rejection

under Sec. 157.8.

Comments: Great Lakes and INGAA state that some of the information

required in the checklist is not available at the time of filing. For

example, information on all access roads and contractor staging yards

by milepost can not be finalized until after a project is bid out and

the contractor is able to assess the project. Some information, such as

description of proposed compressors, including manufacturer name, model

number and horsepower rating will harm the bidding processes to the

detriment of ratepayers. Other information such as wildlife resource

surveys is seasonally dependent. INGAA asks the Commission to consider

these realities when deciding whether to reject an application. INGAA

recommends that the Commission modify the checklist to allow more

general information to be provided at the time of filing, along with a

schedule of when more detailed info will be provided.

Great Lakes requests that the Commission modify the checklist to

designate certain data (including data regarding wetlands, T&E surveys,

and cultural resource surveys) which, although preferred at the time of

filing, may be omitted without the filing being rejected provided that

the pipeline includes an acceptable schedule for filing any omitted

material. The new regulations should recognize both failure to obtain

landowner consent to

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entry and seasonal considerations such as weather as excusing a

pipeline from supplying environmental information at the time of

filing.

Enron agrees with INGAA that some information is not available at

the time of filing. Enron suggests that the following items be removed

from the checklist: Wetland maps and delineation, Sec. 380.12(d)(4);

contractor and pipe storage yards, Sec. 380.12(j)(1)(iv), hydrostatic

test data, Sec. 380.12(d)(6); planned residential and commercial

business development, Sec. 380.12(j)(3); and manufacturer's name and

model numbers for compressor units, Sec. 380.12(k)(4). Enron contends

that a filing should not be rejected based on environmental information

that is not available at time of filing.

INGAA recommends that the following be added to the end of

Sec. 380.12(a)(2):

Each topic of the checklist should be addressed or its omission

justified. Any information missing at the time of filing shall be

identified as to why it is missing and when the applicant

anticipates it will be filed. The Director shall consider the

proposed timing of the filing of missing information in concert with

that of other competing applications, if any. If this missing

information is needed to complete a NEPA analysis of a competing

application within a reasonable time frame, the Director will notify

the applicant of a revised time schedule for the needed information.

Failure to provide the data within the time schedule may result in

the delay of processing or rejection of the application.

Process

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