National Fuel Gas Supply Corp., 031518 FERC, CP17-74-000

Docket Nº:CP17-74-000
Party Name:National Fuel Gas Supply Corporation
Judge Panel:Before Commissioners: Kevin J. McIntyre, Chairman; Cheryl A. LaFleur, Neil Chatterjee, Robert F. Powelson, and Richard Glick. Nathaniel J. Davis, Sr., Deputy Secretary.
Case Date:March 15, 2018
Court:Federal Energy Regulatory Commission

162 FERC ¶ 61, 239

National Fuel Gas Supply Corporation

No. CP17-74-000

United States of America, Federal Energy Regulatory Commission

March 15, 2018

Before Commissioners: Kevin J. McIntyre, Chairman; Cheryl A. LaFleur, Neil Chatterjee, Robert F. Powelson, and Richard Glick.

ORDER ISSUING CERTIFICATE AND GRANTING ABANDONMENT

1. On March 10, 2017, National Fuel Gas Supply Corporation (National Fuel) filed an application pursuant to sections 7(b) and 7(c) of the Natural Gas Act (NGA)[1] and Part 157 of the Commission's regulations, 2 requesting abandonment and certificate authorizations for its Line YM28 and Line FM120 Modernization Project (Modernization Project) located in Cameron, Elk, and McKean Counties, Pennsylvania. National Fuel requests authorization to: (i) construct and operate approximately 14.4 miles of 12-inch-diameter pipeline to replace its existing Line YM28; (ii) replace via insertion approximately 5.8 miles, and remove from service and idle approximately 9.5 miles, of its Line FM120; and (iii) abandon in place its Line YM28 that is being replaced. The project will enable National Fuel to replace aging pipeline facilities in order to enhance the safety and reliability of its interstate pipeline system.

2. For the reasons discussed below, the Commission will grant the requested authorizations, subject to conditions described herein.

I. Background and Proposal

3. National Fuel, a corporation formed under the laws of the Commonwealth of Pennsylvania with its principal place of business in Williamsville, New York, transports and stores gas in interstate commerce in New York and Pennsylvania, subject to the Commission's jurisdiction. National Fuel is a natural gas company as defined by section 2(6) of the NGA.3

4. National Fuel proposes to install approximately 14.4 miles of new 12-inch-diameter pipeline beginning at National Fuel's Line K, in Wetmore Township, Pennsylvania, and terminating at its existing Line FM120 in Sergeant Township, Pennsylvania. The new pipeline, which will be designated Line KL upon being placed into service, will replace existing Line YM28 and includes construction of: (i) an interconnect at the intersection of Line KL and Line FM120; (ii) a bridle connection at Line K, including the replacement of an existing mainline valve on Line K; and (iii) a mainline valve near the midway of Line KL.

5. National Fuel further proposes to insert approximately 5.8 miles of 6-inch-diameter 1500 FlexSteel high pressure pipe into a portion of National Fuel's existing 12-inch-diameter Line FM120 pipeline. Line FM120, which was purchased by National Fuel in 1959, begins at the interconnect with Line YM28 in Sergeant Township, McKean County, Pennsylvania, and runs south for approximately 30.4 miles, terminating at an interconnection with Line FM100 in Benezette Township, Cameron County, Pennsylvania. The 5.8-mile insertion would start at the interconnection with Line YM28 and run south.

6. National Fuel proposes to remove from service and idle the next 9.5 miles (running south from the end of the 5.8-mile insertion) of Line FM120, holding them for future use. This portion runs from the interconnection with Wellendorf Storage Line D6(s) to the interconnection with Line VM71 in Elk and Cameron Counties, Pennsylvania. The idled segment of Line FM120 will be purged of residual natural gas, pigged of any free-flowing liquids, and capped at each end.

7. Finally, National Fuel proposes to abandon in place Line YM28, an 8-inch-diameter, 7.7-mile pipeline in McKean County, Pennsylvania. Line YM28 will be purged of residual natural gas and pigged of free-flowing liquids. National Fuel estimates that the total cost of the Modernization Project is $39.5 million and anticipates that the facilities will be placed into service in November 2018.

II. Notice, Interventions, and Comments

8. Notice of National Fuel's application was issued on March 29, 2017.4 The notice established April 13, 2017, as the deadline for filing interventions and comments. The parties listed in Appendix A filed timely, unopposed motions to intervene in response to National Fuel's application. Timely, unopposed motions to intervene are granted by operation of Rule 214 of the Commission's Rules of Practice and Procedures.5

9. In separate motions to intervene, Allegheny Defense Project (Allegheny) and William M. Belitskus filed similar comments on the project, primarily raising concerns that the environmental review for the Modernization Project is improperly segmented from National Fuel's Northern Access 2016 Project, 6 and will not sufficiently consider what they deem to be the cumulative impacts and indirect effects of increased shale gas development. On April 28, 2017, National Fuel filed responses to these comments.

III. Discussion

10. Because the facilities that National Fuel proposes to abandon have been used to transport natural gas in interstate commerce subject to the Commission's jurisdiction, and because the new facilities will be used for jurisdictional service, the proposed abandonment, construction, and operation of the facilities are subject to the requirements of subsections (b), (c), and (e) of section 7 of the NGA.7

A. Certificate Policy Statement

11. The Certificate Policy Statement provides guidance for evaluating proposals to certificate new pipeline construction.8 The Certificate Policy Statement establishes criteria for determining whether there is a need for a proposed project and whether the proposed project will serve the public interest. The Certificate Policy Statement explains that in deciding whether to authorize the construction of major new natural gas facilities, the Commission balances the public benefits against the potential adverse consequences. The Commission's goal is to give appropriate consideration to the enhancement of competitive transportation alternatives, the possibility of overbuilding, subsidization by existing customers, the applicant's responsibility for unsubscribed capacity, the avoidance of unnecessary disruptions of the environment, and the unneeded exercise of eminent domain in evaluating new pipeline construction.

12. Under this policy, the threshold requirement for pipelines proposing new projects is that the pipeline must be prepared to financially support the project without relying on subsidization from its existing customers. The next step is to determine whether the applicant has made efforts to eliminate or minimize any adverse effects the project might have on the applicant's existing customers, existing pipelines in the market and their captive customers, and landowners and communities affected by the new facilities. If residual adverse effects on these interest groups are identified after efforts have been made to minimize them, the Commission will evaluate the project by balancing the evidence of public benefits to be achieved against the residual adverse effects. This is essentially an economic test. Only when the benefits outweigh the adverse effects on economic interests will the Commission proceed to consider the environmental analysis where other interests are addressed.

13. As stated above, the threshold requirement is that the applicant must be prepared to financially support the project without relying on subsidization from existing customers. The Certificate Policy Statement provides that it is not a subsidy for existing customers to pay for projects designed to replace existing capacity or improve the reliability or flexibility of existing service.9 Because National Fuel's proposed Modernization Project will replace existing pipeline facilities that have deteriorated due to age and will maintain existing levels of service and/or enhance the reliability of existing services, we find that there will be no subsidization of the project by existing customers.

14. We further find that the project will not adversely affect National Fuel's existing customers, or other pipelines and their customers. As discussed, the project is designed to enhance the reliability and flexibility of service to National Fuel's existing customers. The project will not displace service on any other systems. Moreover, none of National Fuel's existing customers or other pipelines or their captive customers have filed adverse comments regarding National Fuel's proposal.

15. National Fuel states that it has designed the project to minimize the impact on landowners. The proposed new pipeline, Line KL, is located primarily along existing pipeline corridors. National Fuel also states that it has conducted outreach activities in order to engage affected stakeholders in the project's planning process and will continue to work with landowners to address their concerns. Accordingly, we find that the Modernization Project will...

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