Gas Producers Lose Battle, Court Grants NorAm's Request

By Bob Drummond Bloomberg News | THE JOURNAL RECORD, February 19, 1997 | Go to article overview

Gas Producers Lose Battle, Court Grants NorAm's Request


Bob Drummond Bloomberg News, THE JOURNAL RECORD


WASHINGTON -- Natural gas producers lost a battle at the U.S. Supreme Court over whether the federal government must regulate gas- gathering activities by subsidiaries of interstate pipeline companies.

America's highest court Tuesday refused to step into a legal brouhaha about NorAm Energy Corp.'s bid to end Federal Energy Regulatory Commission oversight of its natural-gas gathering operations by spinning them off into a separate affiliate company.

FERC granted NorAm's request, over the objections of natural gas producers led by Amoco Corp. A federal appeals court upheld FERC's decision. Amoco and other producers, including Anadarko Petroleum Corp., DuPont Co.'s Conoco Inc., and USX Corp.'s Marathon Oil Co., appealed to the Supreme Court. The high court Tuesday rejected the appeal. The action leaves the appeals court decision undisturbed, in a victory for FERC and NorAm, along with other major pipeline companies, including the The Williams Companies Inc. and Phillips Petroleum Co.'s GPM Gas Corp. In the natural gas industry, gathering is the process of collecting gas from individual wells and moving it, through pipes, to the point where it enters an interstate pipeline system, for delivery to customers. In the past, when one pipeline company handled everything from gathering at the well to interstate delivery, both activities were subject to FERC regulation. Pipelines were required to file a single "bundled" rate to be charged for all services, subject to FERC regulation to guarantee that rates were "just and reasonable." Independent gas gathering companies, which are not connected to a pipeline company, are not legally subject to FERC rate regulation. In 1992, saying it wanted to introduce more competition in the natural gas market, FERC issued an order requiring pipelines to "unbundle" their rates by identifying separate charges for gathering and transportation services. A year later, NorAm Transmission Corp. filed a proposal with FERC to spin off its natural gas gathering facilities to a separate company, now called NorAm Field Services Corp. Gathering services by the affiliate, NorAm proposed, should be free from FERC rate regulation. FERC approved the proposal, subject to conditions guaranteeing that the gathering affiliate would be truly independent from NorAm's pipeline business. …

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