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
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
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