PA Regulation of Natural Gas Gathering and Midstream Activity - Laser Northeast Gathering Update
On August 25, 2011, the Pennsylvania Public Utility Commission (“PaPUC”) provided additional clarification in the Laser Northeast Gathering Company, LLC (“Laser”) proceeding regarding the criteria used to determine when a natural gas gathering and midstream company’s activities constitute service “for the public” potentially causing that company to be subject to “public utility” regulation by the PaPUC. The Laser proceeding is a precedent setting proceeding of great interest to landowners, consumers, natural gas producers and gathering and midstream companies operating in Pennsylvania.
As background, Laser proposes to construct a gathering system in Pennsylvania extending into New York where it is to interconnect with an interstate natural gas pipeline. Its purpose is to provide gathering service to producers. At Laser’s request, the Federal Energy Regulatory Commission (“FERC”) previously agreed that the system performs a gathering function under FERC’s applicable test. In Pennsylvania, Laser is seeking “public utility” status under Pennsylvania law, which, if granted, would also provide Laser with the power of eminent domain.
In an August 25, 2011 Commission order (“August 25 Order”), the Commission denied a request for reconsideration of its earlier June 2011 decision holding that Laser’s activities met the definition of “public utility.” However, the Commission reiterated that not all gathering and transportation service providers will be considered public utilities subject to the Commission’s jurisdiction. “Indeed, the Commission has no intention of seeking to impose economic regulation on gathering and transportation service providers as a general matter.” August 25 Order at 19. The Commission offered some clarification on the criteria it uses to make its assessment:
[T]he absence of a finding of an intent to serve all producers that request service would be dispositive in determining that an entity is not a public utility. Similarly, a gatherer that uses contracts to determine which producers are privileged to demand service would likewise not be a public utility. A seminal tenet of public utility status is holding oneself out as offering service to “the public,” and both of the circumstances set forth . . . remove an entity from providing service to “the public.”
August 25 Order at 18. Conversely, Laser has committed to serve any and all requesting customers, to use negotiated contracts to establish technical requirements (but not as an exclusionary tool), and has committed to expand its capacity, as needed, to meet increased customer demand.
The Laser proceeding now continues on remand before an ALJ for further fact finding and to determine whether Laser should be granted the certification it seeks.
Should you have any questions about this alert, please contact
Kurt Krieger. For general questions involving energy law, please contact the
Energy Team at Steptoe & Johnson PLLC.