General Counsel Report

APGA's General Counsel, John Gregg of McCarter & English, prepares this weekly report to highlight the industry news for public natural gas professionals.

February 22, 2018

APGA Rebuts Pipelines on Federal Income Tax Impact on Rates
After APGA and other shippers representing most of the natural gas shippers in the US petitioned FERC to take action on the impact of lower federal income taxes on interstate pipeline rates under FERC jurisdiction, the pipelines’ trade association INGAA and the parent companies of the largest pipelines dismissed the request in their various answers. APGA was hopeful that INGAA would offer that its members would be making voluntary filings to reduce the rates of recourse rate shippers but the responses were quite the opposite. APGA shot back that INGAA’s response was misleading and created “straw men” to knock over. APGA pleaded that FERC remember their duty to protect recourse rate shippers. The pipeline pleadings exposed that most of their business is conducted today under negotiated rate contracts but that APGA’s primary request is to adjust the maximum rates under pipeline tariffs that nearly all of its members pay. APGA said that if FERC determined not to address pipeline rates on a case-by-case basis but instead pursued a generic policy or rule directing pipelines how to handle accounting challenges created by the new tax law, then the Commission must account for such changes to become effective January 1, 2018. Subsequently, APGA joined with the other petitioners in rebutting the pipeline’s claim that FERC lacked authority under NGA Section 5 to take the requested action. FERC may make some ruling in March.

Judge Gives DOE Deadline to Issue Commercial Packaged Boiler Standard
A federal court has granted summary judgment to the NRDC and other plaintiffs who succeeded in having the court order DOE to publish the 4 energy efficiency standards by March 16th, including a new standard commented on by APGA for commercial packaged boilers. APGA opposed the methodology used to establish the standard. The order is the first interpretation of the DOE “error correction rule,” which was put in place in 2016 to allow at least for technical corrections of the complicated DOE actions on appliance efficiency standards. While APGA, AGA, and others claimed that there were substantive errors in the standard meriting a re-look under that rule, DOE has taken no action. The court found that DOE must act even though there is no timeline prescribed: inaction is not an option. The court rejected the contention made by DOE that the rule preserves DOE's "free-standing authority and discretion to continue to assess, modify, or withdraw draft rules that the agency has contemplated before those rules are published as final rules in the Federal Register."
The court concluded in applying the rule that, “the Department has already made its policy decision.” The court concluded: “All the Error Correction Rule allows is a process to ensure that the regulatory text reflects that policy; then the regulatory text is published in the Federal Register.” If DOE appeals this ruling, the court will entertain a motion for a stay of the March 16 deadline, pending appeal.

Airline and Propane Associations Urge FERC to Apply Standards of Conduct to Liquids Pipelines
Airlines for America and the National Propane Gas Association have filed a petition with FERC requesting that the agency issue a proposed rule to expand its existing affiliate Standards of Conduct to cover pipelines that transport crude oil, natural gas liquids, and petroleum products. The current Standards of Conduct – which are intended to prevent undue discrimination by restricting the sharing of non-public information with marketing affiliates – apply only to interstate natural gas pipelines and electric transmission providers. The associations assert that expansion of the standards is warranted to address various abuses by liquids transporters. “By their own admission, crude oil, NGL, and petroleum product pipelines are currently engaging in practices similar to those used by the Commission to justify developing and enforcing affiliate Standards of Conduct for electric utilities and natural gas pipelines,” the petition states. The petition includes a proposed rule modeled after the current standards but tailored to liquids pipelines.

Gulf LNG Exporters Vow To Change the World
At their S&P Global Platts annual LNG conference in Houston recently attendees reportedly agreed that the ongoing production boom in West Texas and other shale basins throughout the country has already begun to transform LNG into a global commodity by shifting trade patterns and longstanding business models elsewhere in the world. Steven Winberg, the DOE's assistant secretary for fossil fuels, said six projects underway in Texas, Louisiana, Georgia and Maryland will support LNG exports in excess of 10 Bcf per day. "We're going to have too much gas with nowhere to go," said Renato Pereira, vice president of business development and marketing for Houston's Tellurian Inc., an LNG upstart.

Southern California Declares Gas Curtailment
Freezing temperatures in Southern California caused record demand in Southern California Gas’ territory, compelling both SoCal Gas and San Diego Gas & Electric to place systemwide gas supply curtailments on power generators and a watch on other “non-core” customers. Last October, the utility predicted this potential to the California Public Utilities Commission because of the restrictions on use of the Aliso Canyon storage facility damaged in 2015.

 View past reports here.