# 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

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URL: https://www.frixlaw.com/law-library/documents/fr%3A99-11247

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** May 14, 1999
- **Citation:** 64 FR 26572

## Text

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.
---------------------------------------------------------------------------

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

\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
---------------------------------------------------------------------------

\22\ See the related discussion of a similar change in
Sec. 157.20(b).
---------------------------------------------------------------------------

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 c

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A99-11247. Public record. Not legal advice.