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DATE: November 12, 1997
CONTACT: Charlotte LeGates
PHONE: 202/326-9316
FAX: 202/326-9334
E-MAIL: clegates@ngsa.org
"For a pipeline to be able to pick and choose who does and who does not receive service would be devastating," continues the brief, which provides support for a series of decisions at the Federal Energy Regulatory Commission (FERC) through which a PCS Nitrogen (formerly Arcadian) fertilizer plant in Augusta, Georgia, saved more than $4 million annually. Savings resulted when the facility was able to take its gas directly from a nearby pipeline instead of having to buy it through a local distribution company, Atlanta Gas Light (AGL). (See NGSA's Sept. 18 press statement for additional details.)
The brief supports FERC against AGL's objections that have landed the case in the Eleventh Circuit. The pipeline company in question, Southern Natural Gas Company (owned by Sonat, Inc.), is now supporting FERC's decision, having resolved its disagreement with Arcadian through a voluntary settlement.
Among the many regulatory battles waged in the late 1980s and early 1990s that shaped today's competitive marketplace, the Arcadian case is unique, because in this case, the pipeline's discrimination against a customer had repercussions in the marketplace. Southern provided a direct tap for a rival fertilizer company while refusing one for Arcadian. Thus, the pipeline was in a position to directly influence the relative competitiveness of rival fertilizer firms. As the brief points out, "whatever else Section 5 [of the Natural Gas Act] may mean . . . it cannot mean that such selective pipeline conduct would be permissible."
"Were we to lose this case," explained John Sharp, NGSA's counsel and director of congressional affairs , "pipelines would be free, with impunity, to unduly discriminate by denying direct service to one customer while granting it to another -- that is, to pick winners and losers. And FERC would be powerless to intervene and level the playing field. At the end of many contracts, pipelines could close off current service or, again with impunity, renew some and cut off others. "Granting pipelines that kind of power could erode natural gas demand projections," Sharp continued, "because it would increase delivered gas costs to some industrial customers by requiring them to pay unnecessary local distribution fees.
The producer/customer brief argues that the Arcadian/Southern settlement contributed to the development of a stable and competitive natural gas marketplace. "The ability of gas users to receive gas directly from pipelines has placed pressure on local distributors to become more competitive," noted Ed Grenier of Sutherland, Asbill & Brennan LLP, counsel (with Paul Turner) for PGC and GIG, in addition to NGSA. "If AGL is successful in the Eleventh Circuit, this competitive pressure on distributors could be destroyed."
Additionally, the brief shows that FERC both followed correct procedure and exercised authority appropriately.
The producer/consumer parties are pitted against AGL, the American Gas Association (AGA) and the City of Dalton, Georgia, which has submitted separate arguments. The brief argues against the additional Dalton arguments by pointing out that Dalton appears to misinterpret some aspects of interstate pipeline rate-setting and also to object generally to industrials' ability to buy gas without using a distributor -- an argument for which this case is not an appropriate venue.
The brief's text is available in html from this website by clicking
here, in Adobe Acrobat format by clicking here,
or via fax from the NGSA receptionist. (Advisory to those who share fax
machines: It's 50 pages long!)
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