Producers, pipelines in dispute over pipeline quality gas specs

Kate Thomas
OGJ Online Staff

HOUSTON, Jan. 4, 2002 — Natural gas pipeline operators turned up the heat in a dispute with producers over specifications for pipeline quality gas.

The disagreement grew out of a tariff the Natural Gas Pipeline Co. (NGPL) filed with federal regulators regarding the management of the quality of gas entering the NGPL system, which resulted in an application for rehearing by a group of producers.

In a letter to Federal Energy Regulatory Commission Chairman Pat Wood, the Natural Gas Supply Association asked the commission to examine the “burgeoning problem” of pipeline using tariff interpretations to accept or reject gas supply “based on gas quality specifications.” Such scrutiny is warranted to ensure unreasonable restrictions on gas supplies are not put in place, the NGSA said.

NGSA listed five concerns with respect to the way pipelines may change quality standards at “their discretion with little or no commission review.”

The producer group said it is worried when and if pipelines refuse to accept gas of a quality they have consistently accepted for many years; engage in a consistent practice of inappropriately applying and/or interpreting the quality specifications in their tariffs; refuse to make operational adjustments that are both feasible and relatively inexpensive in order to be able to accept certain production attached to their systems; alter quality specifications without taking reasonable mitigation measures; and make them without adequate notice or commission review.

In a response, the Interstate Natural Gas Association of America said NGSA’s claim “hardly bears discussion” given the strong competition among pipelines and the aggressive pipeline initiatives to attach new sources of supply.

The pipeline group said the problem is rooted in a December 2000 decision by producers to stop extracting nonmethane hydrocarbons from their gas streams because prices had shifted to the point that a btu of gas was worth more than a btu of liquids — not a arbitrary decision by pipelines to change their quality specifications.

“This economic choice by the producers was simple and rational,” said INGAA Pres. Jerald V. Halvorsen. “The only problem with it is that interstate pipelines were never constructed to be able to handle such a wealth of liquid and liquefiable hydrocarbons downstream of the processing plants.”

A sudden, widespread decision by Gulf of Mexico producers and their processing affiliates to shut down on shore extraction plants left pipelines with a severe operational problem, affecting service reliability, compliance with delivery tariffs, including delivered-gas quality standards, and safety, particularly contaminants and liquids affecting corrosion, Halvorsen said.

He explained pipelines were left to convert high-liquid offshore supplies into merchantable, pipeline quality gas. Halvorsen said pipelines had “no choice” but to look to their tariffs to protect operational viability of their systems.

Furthermore, he said, NGSA offered no proof of its claim of a “burgeoning problem” for the commission to examine.

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