Another battle over industrial natural gas customers has been
launched by Oklahoma Natural Gas Co. against Williams Natural Gas
Co. - this one stemming from a cogeneration plant at the Conoco Inc.
refinery in Ponca City.
ONG, a division of ONEOK Inc. of Tulsa, filed a protest May 11
in Williams' pipeline certificate application at the Federal Energy
Regulatory Commission to transport up to 18 million cubic feet of
gas per day to the Ponca City plant.
There are three lawsuits tracking in a similar controversy
between ONG and Williams stemming from the Smith Cogeneration Inc.
plant at Firestone Tire & Rubber Co. in Oklahoma City. A yearlong
court battle erupted in the fall of 1988 over the Oklahoma City
plant, and appeals still linger.
At the crux of the issue - referred to as bypass - is the
transportation of natural gas to industrial end-users by interstate
pipelines such as Williams, resulting in the loss of or lack of a
new customer to local distribution companies such as ONG.
The 52-megawatt cogeneration plant in Ponca City is being built
by Oklahoma Gas & Electric Co. and is due to go into operation in
1991. Conoco will be the beneficiary of steam produced by the
cogeneration plant. Electricity generated will be inserted into
OG&E's power grid.
In the agreement between Conoco and OG&E, Conoco is responsible
for providing natural gas to the power plant. The commodity is
being bought from Brandywine Industrial Gas Inc., a wholly-owned
production subsidiary of Conoco, and Williams has been contracted to
transport it to the plant. Hence, Williams plans to build a
12.3-mile, $2.3 million spur off its interstate pipeline to the
Currently, ONG is transporting gas to the Conoco plant, but lost
out in an open bidding process to Williams. ONG said it could serve
the cogeneration plant with a $60,000 upgrade of its existing
facilities at Conoco.
Williams, a subsidiary of The Williams Companies Inc. of Tulsa,
maintains that as an interstate pipeline it is solely regulated by
the Federal Energy Regulatory Commission. Because the gas in
question is being inserted into Williams' interstate pipeline
system, the company says it is moving in interstate commerce.
Conversely, ONG claims a spur off Williams' interstate line to
serve an industrial customer consitutes a local distribution system
that would come under the oversight of state regulators. The
utility notes that Williams is serving some 79 customers in Oklahoma.
"Oklahoma Natural is not afraid of fair competition," the
utility's protest states.
However, the utility asserts it is concerned about competition
from companies that are not regulated by the Oklahoma Corporation
Commission, as is ONG. The utility claimed that as much as $50.5
million in revenues are at risk to being lost to bypass. This
potential loss, ONG said, would result in a 16.5 percent increase in
Federal Energy Regulatory Commission policy has been to allow
bypass to foster competition in the natural gas transportation arena
so long as local distribution companies are not precluded from
competing as well.
John Cary, attorney for Williams, said ONG was not discriminated
against in the bid to serve Conoco. …