Will FERC Abandonment Policy Fit Today's Market and Regulatory Environment?

Natural Gas & Electricity, Vol. 29 Issue 3 pp.10

October 2012

Janna ChesnoJim Curry, and Michael Diamond wrote an article entitled, "Will FERC Abandonment Policy fit Today's Market and Regulatory Environment?" appearing in the October 2012 issue of Natural Gas & Electricity.

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Serious pipeline incidents in 2010 and 2011 have prompted new federal pipeline safety requirements that are expected to result in significant cost increases for some pipelines. At the same time, rising shale gas and other unconventional gas production has shifted market dynamics by cutting locational price difference, resulting in reduced throughput and revenues on pipelines in certain areas. Faced with potentially significant regulatory cost increases and declining revenues, some interstate pipelines may seek to abandon uneconomic interstate pipeline facilities or services.

The Federal Energy Regulatory Commission (FERC) is the federal agency responsible for approving or denying abandonment requests, and it applies a multifactor analysis that balances the needs of pipelines and their customers. Under FERC's abandonment policy, when a pipeline seeks abandonment because its operation has become uneconomic, it must overcome a "presumption in favor of continued service." Overcoming this presumption may be difficult in cases where the pipeline's customers protest the abandonment. As abdandoment requests increase, FERC will need to carefully consider these significant industry changes, but it is unclear what weight FERC will give them.

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Click here for the article published in Natural Gas & Electricity © 2012, Oct., Wiley Periodicals, Inc., a Wiley company.