Natural Gas Transmission from Marcellus Shale Fields Hits Snag

By Jim Dougherty

Most Connecticut business owners have heard of the Marcellus Shale. It is a geologic formation a mile underneath parts of Pennsylvania, New York, Ohio, and West Virginia and is considered the world’s largest unconventional gas reserve. Estimates indicate it holds over 500 trillion cubic feet of natural gas, the equivalent of 3.65 trillion gallons of oil.

Because the most productive Marcellus fields are close-by in northeast Pennsylvania, many Connecticut businesses eagerly anticipate considerably lower commodity (supply) costs and substantially reduced transportation (delivery) costs. However, the abundant gas flow to Connecticut may have hit a regulatory snag that could delay delivery.

Regulatory Issues

A Pennsylvania Public Utility Commission (PUC) administrative law judge (ALJ) recently issued a recommended decision denying public utility certification of a pipeline gathering company. This company sought public utility status to enjoy PUC gas safety oversight and to take advantage of a public utility’s considerable eminent domain powers in siting gathering pipelines.

The company and several other parties, including the PUC’s prosecutorial staff, submitted a joint settlement petition that encouraged approval of their application. Many other companies, including the state trade association of gas producers, opposed the settlement/application. Exceptions to the decision were due December 31, after which the PUC will issue a final ruling on the application, settlement, and ALJ’s decision. The PUC may adopt all, some, or none of the ALJ’s decision.

Making this development more troublesome is the company’s simultaneous filing with the Federal Energy Regulatory Commission (FERC) of a petition requesting that FERC not exercise jurisdiction over its gathering/transportation services. FERC has since issued an order granting the company’s request exempting jurisdiction. Accordingly, the ALJ’s decision holding that the PUC similarly does not have jurisdiction is problematic from a regulatory standpoint. The likely outcome lies in appellate court resolution, which may substantially delay Connecticut transmission of much sought-after Marcellus gas. Stay tuned.

Jim Dougherty is a senior partner at the law firm of McNees Wallace & Nurick LLC. He can be reached at jdougherty@mwn.com.

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