April 2012, Vol. 239 No. 4
Government
FERC Rejects Controversial Enterprise Tariff Increase
The Federal Energy Regulatory Commission rejected a major tariff increase sought by the Enterprise TE Products Pipeline Company for the Enterprise TEPPCO pipeline. The increase was hotly opposed by the National Propane Gas Association (NPGA) and many individual shippers.
Nils Nichols, Director, Division of Pipeline Regulation at FERC, said the Enterprise TE Products Pipeline Company (Enterprise TEPPCO) failed to meet FERC requirements, for example, by not explaining 22 propane and butane route cancellations. But that was just one of a number of technical inadequacies Nichols pointed to in the tariff increase application. Nichols did not comment on whether the requested rate hikes themselves were “just and reasonable,” which is the standard FERC uses.
“We are in the process now of deciding how to proceed,” says Rick Rainey, spokesman for Enterprise Products.
The NPGA had led an attack on the tariff increase request, filed in February, which Enterprise wanted to put in place on March 12.Tom Van Buren, Vice President of Ferrell North America and Chairman of NPGA’s Pipeline Advocacy Task Force, says, “Never before have we seen such an emphatic and concerted response to a FERC proceeding. The industry believes the abnormally large rate increases — many of which are 70% to more than 100% — will have a devastating effect on the competitiveness of propane as an alternative fuel in the eastern United States.”
Casey P. McFaden, Senior Counsel, BP America Inc., says the amount of the rate increases sought from BP in each zone ranged from a low of about 2% to 124%. BP estimates that the proposed annual rate increase sought by TEPPCO from BP alone as a result of this filing would exceed $2.4 million per year.”
The Enterprise TEPPCO pipeline runs from near Houston, TX, to upstate New York.
The NPGA alleged in filing its protest that FERC’s policy of “light-handed enforcement” as applied to the oil pipeline industry has effectively left it up to shippers to protect the consuming public by challenging the enormous rate increases proposed by Enterprise TEPPCO. Rick Roldan, NPGA’s President and CEO, states “The propane industry has drawn a line in the sand today for one simple reason: unless the propane industry takes action, FERC will not do so on its own.”
FERC Begins To Examine Gas And Electric Utility Integration
Talking about FERC, the commission is starting to look at the issue of whether natural gas pipelines and electric utilities are working smoothly together. That general question was at the center of a meeting at FERC during February. Commissioner Philip Moeller is apparently the guy who is behind the FERC initiative in this area, which looks at the growing reliance of generators on natural gas as they switch out of coal. The FERC commissioners are asking a lot of questions, such as to what extent FERC should consider modifying its existing Standards of Conduct with regulated utilities—either on an emergency basis or in a more fundamental manner—to assure greater coordination of the two industries.
One of the more controversial issues is likely to be whether FERC ought to align “gas days” and “electricity days.” These markets are not always open on the same days. Another issue that will come up is balancing services offered by pipelines. “It should be understood that several of the major natural gas pipelines do not offer any balancing services,” says one state public power executive who declines to be identified. “That is not a good fit if a natural gas-fired electrical generation facility wants to load follow.”
Don Santa, president and CEO of the Interstate Natural Gas Association of America, says, “The interstate natural gas pipeline industry has a proven track record of building infrastructure and providing services when the needs of the market are expressed by customers willing to reserve and pay for pipeline capacity. While there is merit to addressing opportunities for improving communications and scheduling, it is unrealistic to believe that these efforts alone will ensure that natural gas generators can operate reliably under any circumstances.”
Obama Proposed Fiscal 2013 Budget Has Ups and Downs
Obama administration budget requests for fiscal 2013 for key pipeline regulatory and construction programs are working their way through congressional appropriation committees. The Pipeline and Hazardous Materials Safety Administration (PHMSA) would receive new funding for additional inspectors, allowing the agency to do more intensive inspections of pipeline safety. Meanwhile, the budgets at the Environmental Protection Agency for the Clean Water and Drinking Water State Revolving Funds would continue their dive.
The PHMSA FY 2013 request is an increase of nearly $75 million above FY 2012 enacted levels. That figure includes $177 million for pipeline safety, an increase of $67 million above FY 2012 enacted levels with that addition going to support the Pipeline Safety Reform (PSR) initiative. The PSR expands the number of inspectors available to provide oversight to the system of pipelines and restructures the partnership between the federal and state entities responsible for enforcement and compliance in managing pipelines. The request includes an additional 150 positions–120 new inspectors and 30 program personnel. An additional $20.8 million is requested for state pipeline safety grant programs to restructure the program to ensure standardization among all state pipeline safety programs. Also, $3 million dollars is requested to create a formal Accident Investigation Team that will review significant accidents not reviewed by NTSB.
“We have closed a record number of enforcement orders for the past three years, but we have more work to do to,” says PHMSA Administrator Cynthia Quarterman. “The 2013 budget request will help build upon these efforts to protect communities and increase oversight over the commercial transportation of hazardous materials by air, rail, vessel, highway and pipeline.”
While it is not clear at this early stage how much of the $57 million increase for pipeline safety congressional appropriators will grant, they clearly will cut the dollars available to the two SRFs. The Obama proposal for EPA overall was $8.3 billion, $105 million below the fiscal 2012 actual budget. The SRFs are the biggest contributors to that reduction, their two budgets being cut a total of $359 million.
The budget proposal calls for approximately $1.18 billion for the clean water state revolving fund, a 19.8 percent reduction from the approximately $1.47 billion enacted in fiscal 2012. The drinking water state revolving fund would see a smaller decrease from $918 million in fiscal 2012 to $850 million in fiscal 2013.
But even the most deficit sensitive Republicans are complaining about the Obama administration’s second, straight proposed annual reduction in SRF funding. “Given the incredible need, the incredible benefits from investment, I was extremely disappointed to see that EPA’s FY13 Budget requested a decrease in funding for the Drinking Water and Clean Water State Revolving Fund programs for the second year in a row,” says Sen. James Inhofe (R-OK). “Every federal dollar that EPA directs away from addressing the primary goal of the SRF programs reduces the capacity of a state to leverage federal funding and address infrastructure needs.”
Rep. Hal Rogers (R-KY), chairman of the House Committee on Appropriations, complained to EPA Administrator Lisa Jackson on February 29 that while state grants get hacked by 7 percent, sector-specific grants for Administration pet projects are up 14 percent, and funding for climate change research is up 19 percent, reflecting a centralization of funding for the administration’s favored projects.
Adam Krantz, managing director of government and public affairs, National Association of Clean Water Agencies, acknowledges that the SRF budgets will be cut in fiscal 2013. The question is whether Congress restores some of the $359 million the Obama administration proposes to cut. “The troubling aspect is that the SRFs, the EPA programs with the most impact on job creation, are being cut so that the EPA can use those funds for other priorities, be that enforcement, or moving funds within programs, be that from drinking water to superfund, or whatever,” explains Krantz. “Congress may look closely at why infrastructure programs are the focus on the redistribution of funds within the agency.”
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