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.

October 11, 2018

FERC Sets MLP Pipeline Question for Hearing
When Saltville Gas Storage Company L.L.C. file a rate decrease recently, FERC accepted the proposed tariff records, without suspension, to be effective October 1, 2018. The Commission also established a hearing pursuant to NGA section 5 to consider whether a further rate decrease is justified. Saltville uses the capital structure of its indirect parent, Spectra Energy Partners, LP (SEP), which is a master limited partnership (MLP). In accordance with the Commission’s Revised Policy Statement (July 18, 2018) , Saltville eliminated the income tax allowance from its cost of service and proposes to adjust to zero the Accumulated Deferred Income Taxes (ADIT) in its FERC accounts.

Atmos Energy Corporation, Duke Energy Progress, LLC, and Public Service of North Carolina, Inc. requested summary disposition of Saltville’s filing because of its proposed treatment of income taxes and ADIT. They argued that Saltville should not be allowed to eliminate its income tax allowance and ADIT because in the fourth quarter of 2018, Saltville will no longer be owned by SEP, but by Enbridge Inc., a C-corporation. FERC set the question for hearing. The matter could be precedential for several SEP pipelines: Texas Eastern, Ozark, and Algonquin Gas Transmission.

Municipal Utility Asks FERC to Regulate Power Purchase from State Agency
JEA, a municipal electric utility serving Jacksonville, Florida, has asked FERC to declare that a power purchase agreement between JEA and the Municipal Electric Authority of Georgia is subject to FERC jurisdiction – despite the fact that both the seller and the purchaser under the agreement are governmental entities and are therefore exempt from FERC regulation as public utilities under the Federal Power Act.

The agreement, which was originally executed in 2008, obligates JEA to purchase from MEAG certain output from two yet-to-be-completed nuclear units at Plant Vogtle in Georgia. In light of infamous plant cost overruns and delays, however, JEA no longer wishes to proceed with the transaction, so JEA is asking FERC to declare that the agreement and the underlying sales of electric energy are wholesale transactions in interstate commerce and are therefore subject to FERC’s exclusive jurisdiction under the Federal Power Act, which would obligate MEAG to file the agreement with FERC for review and approval.

Earlier this year, a federal appeals court rejected FERC’s attempt to assert jurisdiction over a natural gas transaction between municipalities in two different states under the Natural Gas Act, finding such assertion contrary to the clear and unambiguous language of the statute. The American Public Power Association joined APGA in filing an amicus brief opposing FERC jurisdiction over municipalities at that time.

NAESB Aiming to Create New Standards to Enable Smart Contracts
The North American Energy Standards Board is addressing a request to develop a new standard digital representation of natural gas trade events, consistent with NAESB WGQ Standard No. 6.3.1 – “NAESB Base Contract for Sale and Purchase of Natural Gas,” for the purpose of developing “smart contracts” and “distributed ledger technologies.” Smart contracts are protocols embedded into blockchain platforms to facilitate the automatic self-execution of a transaction if agreed upon terms are met. An agreed upon industry-wide language for smart contracts should increase the efficiency and interoperability across these various platforms. The gas NAESB contract today is settled on a process that includes emailing a PDF invoice each month. Other delivery mechanisms are used, but less than 5 percent use electronic transactions (EDI). Invoices must be reconciled and paid in a short period of time. In some cases, a preliminary invoice is sent for reconciliation before the final invoice is sent. The invoices are also large monetary amounts that can be very costly if errors are not caught or if payment is late. Thus, the industry is thinking that the settlement process is a good candidate for blockchain technology.

Transco Proposes to Increase Appalachian Take Away Again
Williams’ Transcontinental Gas Pipe Line has announce a new project that would further expand by 580 MMcf/d the pipeline system’s ability to move Marcellus and Utica gas supplies from the Leidy Hub and Zick interconnect to points downstream in Transco’s Zone 6 market area. Transco has secured shipper commitments from producers Seneca Resources and Cabot Oil & Gas for 100% of the firm transportation capacity planned to come on line toward the end of 2021. Last week, the full capacity of Atlantic Sunrise came on line (1.7 Bcf/d).

Department of Interior Sued for Zinke’s Emails
The DOI has not granted Freedom of Information Act requests for Secretary Ryan Zinke’s travel documents and emails, including those that came from private accounts, so a conservation group and a transparency advocate jointly filed suit in D.C. federal court this week. The groups say the responses could show he “used his position for personal or political gain.” The FOIA requests were submitted between August 21, 2017, and June 29, 2018.

FERC Nominee on Fast Track
The Senate Energy and Natural Resources Committee has scheduled an October 16 hearing to consider the nomination of Bernard McNamee, the Administration’s recent pick to fill the fifth and open seat at FERC. McNamee is the executive director of the US Department of Energy’s Office of Policy.

View past reports here.