Commission's Dilemma

By Pitts, William O. | THE JOURNAL RECORD, September 14, 1998 | Go to article overview

Commission's Dilemma


Pitts, William O., THE JOURNAL RECORD


Natural gas producers, gatherers and transporters will square off today at an Oklahoma Corporation Commission technical conference. It is the second such meeting on a Notice of Inquiry regarding rules to regulate gathering and transporting natural gas. Focus of today's arguments will be on the commission's jurisdiction and authority.

The real issue dividing producers and gatherers, however, is not so much what jurisdiction the commission has, but what it should be and how it should be exercised. There is a possibility those questions may also divide the commission.

Many producers want the commission to have broad authority to regulate many aspects of their transactions with gatherers, even where competitive conditions exist. They do not believe the commission has this authority. It is what they tried to give the commission last session in Senate Bill 319, which Gov. Frank Keating vetoed.

There are many different opinions as to the extent of the commission's jurisdiction in regulating contract negotiations between private parties. There is little argument about its power to regulate natural gas gathering fees, which are unduly discriminatory, or to insure producers access to gathering services at competitive nondiscriminatory rates where competition is absent. That is provided under laws passed in 1993 and 1995. Still, abuses exist.

Dr. Bruce M. Bell, chief executive of Post Oak Oil, Oklahoma City, and chairman of the Oklahoma Mid-Continent Oil and Gas Association, pointed this out in a recent press release.

"There is no doubt excessive gathering fees and inappropriate contractual terms and conditions have been imposed on producers by pipelines and gatherers where monopolistic conditions exist. This has been documented in various cases." Bell said.

Keating, in his veto message on SB 319, also acknowledged the problem. "I am convinced that there has been overreaching and discriminatory acts on the part of some pipeline companies," he declared.

Bell added, "It is as important to rectify and eliminate these abuses as it is to keep our gas gathering, processing and transportation systems in open competitive markets. The commission's actions," he warned, "must not extend to or allow the establishment of a regulatory albatross on the natural gas industry as a whole or any segment of it."

Code of conduct

The governor, in his veto message, also cautioned against "extending overly broad regulation of gas gathering facilities into the competitive marketplace during a period of deregulation." He called on the commission to develop a "code of conduct" to regulate gas gathering activities.

Faced with similar problems, the Texas Railroad Commission developed and promulgated such a code in 1997 after some 14 months of work. Through various associations and groups, the TRC worked with pipelines, gas processors, independent and major gas producers, royalty owners and municipalities, to reach acceptance of it. The code governs the gathering and transportation of gas by any entity that provides those services to others for a fee. It is comprised of five basic standards.

The first two require a transporter that provides transportation services to any shipper, including an affiliate, to apply or enforce any tariff or contract provision that allows for discretion in its application and enforcement in a similar manner to similarly situated shippers. …

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