FERC Issues Order on Rehearing Clarifying Revisions to Blanket Certificate Authority

On June 22, the Federal Energy Regulatory Commission (Commission) issued an order (Order No. 686-A) granting in part, and denying in part, requests for rehearing and clarification of its Final Rule (Order No. 686) expanding the scope of activities authorized under its blanket certificate regulations. (See Oct. 26, 2006 Issue Alert FERC Issues Final Rule Expanding Scope of Blanket Certificate Authority.)

The rule applies to natural gas companies holding a Natural Gas Act (NGA) section 7(c) certificate and blanket certificate authority under Part 157, Subpart F of the Commission’s regulations. Clarifications and denial of requests for rehearing are effective 30 days after publication in the Federal Register. The Commission’s grant of rehearing concerning the measurement of compressor noise is effective 120 days after publication in the Federal Register.

Key Issues in the Order on Clarification and Rehearing

Blanket certificate authority to change the MAOP of facilities. Section 157.208 (f)(2) of the blanket certificate regulations permits natural gas companies to alter the maximum allowable operating pressure (MAOP) of supply or delivery laterals, provided companies comply with the prior notice provisions of § 157.205 of those regulations. Order No. 686-A clarifies that, provided companies meet all applicable blanket certificate regulatory requirements, they can rely on blanket certificate authority to change the MAOP of facilities that are not supply or delivery laterals, such as mainlines.

Authority for certain underground storage projects. The Final Rule extended blanket certificate authority to include certain underground storage field projects. Order No. 686-A clarifies that the final rule did not limit activities that may be performed under § 2.55 of the Commission’s regulations. Thus, storage, mainline, and LNG and synthetic gas pipeline facilities that qualify as auxiliary installations or replacements can still be undertaken pursuant to § 2.55. A company need not obtain a blanket certificate as a prerequisite to act under § 2.55.

The Final Rule added a new §157.213 (a) that allows certificate holders to perform activities on certain underground storage facilities, but does not allow a certificate holder to alter the function of any well. Order No. 636-A clarifies that § 157.213 (a) does not preclude temporarily plugging a storage field well as part of standard maintenance operations. In contrast, permanently plugging a well would require compliance with the abandonment requirements of § 157.216.

In a key revision of the Final Rule, Order No. 636-A at P 9 amends §§ 157.213 (b) and (c) to permit companies to employ blanket certificate authority to make modifications to storage facilities to enhance injection and withdrawal capacity.

The Commission explained that this change is consistent with the previously expressed intent to permit a company to rely on expanded blanket certificate authority "to re-engineer an existing storage facility to decrease cushion gas, increase working gas, improve injection and withdrawal capabilities, and add more cycles per season," provided that the company can do so without changing the storage facility’s total inventory, reservoir pressure, or reservoir or buffer boundaries.

Compressor Station Noise. Previously, the Commission required compressor facilities installed under blanket certificate authority to meet a noise level of 55 dBA at any pre-existing noise sensitive area (NSA). The Final Rule required compressor facilities constructed under blanket certificate authority to meet a limit of 55 dBA at the boundary of the compressor site. On rehearing, Order No. 686-A returns to the previous rule specifying that noise attributable to any new compressor or addition to an existing compressor station must not exceed the noise limit at any pre-existing NSA. Thus, the noise limit for compressors under blanket certificates will be consistent with the noise limit for case-specific certificate compressor projects.

Abandonment Authority. In the Final Rule, § 157.210 permits companies to rely on blanket certificate authority to "acquire, construct, modify, replace, and operate natural gas mainline facilities, including compression and looping"; revised § 157.216 (b)(2) provides for the abandonment of such facilities. Order No. 686-A clarifies that facilities that were constructed under case-specific authorization, but that could now qualify for authorization under the current blanket certificate program criteria, may be abandoned pursuant to the provisions § 157.216 (b). To qualify for abandonment, the facilities must have been installed subsequent to the Commission’s implementation of the blanket certificate program and their original cost must have met the § 157.208 project cost cap in effect at the time of their construction.

Annual Report. The Final Rule added § 157.207 (c), which stated that the annual report summarizing the previous year’s blanket certificate activities should include information on storage facility remediation and maintenance activities qualifying for automatic authorization under § 157.213 (a), but neglected to further describe the information to be included. Order No. 686-A removes § 157.207 (c), and instead modifies § 157.207 (a), which lists activities to be included in the annual report, to cover activities subject to the expanded blanket certificate authority. The reporting requirements for the expanded blanket certificate activities will duplicate those for the existing blanket activities.

Landowner Notification. Order No. 686-A modifies §§ 157.203 (d)(1) and (2) 1) to clarify that landowner notification must be in writing, 2) to stress that landowners have an option, not an obligation, to contact the company or Commission Hotline, and 3) to direct companies to provide the current telephone number and email address of the Commission’s Enforcement Hotline in their notifications.