a construction certificate nor an operating certificate, but the project would be subject to Commission regulations designed to ensure that the project complies with the applicable statutory standards. The pre-construction and non-certificate options share some common elements with sections 204 and 205 of S.570. Legislation adopting at-risk development will have no impact on the Commission's open access transportation program. The open access provisions set access and rate standards for transportation on "traditional" facilities, 1.e.. facilities which are certificated under Section 7(c) of the Natural Gas Act (NGA) and which are governed by traditional cost-of-service regulation. In contrast, access and rates for transportation on an at-risk facility are determined by market demands, as measured by customer's willingness to contract for service. Because of this critical distinction, traditional facilities should remain subject to open access regulation. QUESTION 3: Would you prefer the NGPA section 311 amendments in S.341 or those in S.570? QUESTION 4: What changes would you recommend be made to sections 203, 204 and 205 of S.570? RESPONSE: LL&E has generally discussed what amendments we would like to see to section 311 of the NGPA. LL&E endorses expanding section 311 So that qualifying interstate and intrastate transportation can be provided on behalf of any person. The purpose of this provision was to integrate the interstate and intrastate markets, and this aim is ill served by the court's restrictive reading of the current "on behalf of" standard. LL&E submits that the vast bulk of interstate pipeline construction would proceed either as at-risk facilities or as traditional facilities. Widespread use of Section 311 construction authority is unnecessary and inappropriate, particularly if noticeand-protest proceedings are made available for traditional projects costing up to $50 million. LL&E therefore urges that interstate pipeline construction under Section 311 should be limited to those minor facilities which are required to interconnect with other facilities providing Section 311 service. LL&E also notes that there is a debate over the Commission's authority to impose NEPA requirements on Section 311 projects. rendered moot if Section This debate would largely be construction were limited to incidental facilities. 311 QUESTION 5: S.341 contains an antitrust exemption for marketing coops formed by small independent natural gas producers. Would this help independent producers market their natural gas? RESPONSE: LL&E believes that legislative measures which afford smaller producers greater flexibility in marketing natural gas would be helpful. Accordingly, we generally support the antitrust exemption for small independent gas producers. We are, however, examining the language to ensure that it contains no unintended consequences for other production operations. QUESTION 6: Assuming that section 3 of the Natural Gas Act is not repealed and the FERC is not merged into DOE, as has been proposed by the Administration in S.570, would you favor transferring the administration of section 3 from DOE to FERC? RESPONSE: LL&E agrees that FERC should not be merged into DOE but has no current opinion whether the administration of section 3 should be transferred from DOE to FERC. QUESTION 7: One difference between S.341 and S.570 is that section 10001 of S.341 would subject persons who construct pipelines under the proposed optional procedures to Natural Gas Act jurisdiction, including the prohibition of discrimination, whereas sections 204 and 205 of S.570 would not. If sections 204 and 205 of S.570 were adopted: a. b. C. Would FERC have jurisdiction to conduct investigations to assure a non-discriminatory level playing field? Could FERC prevent cross-subsidization non-jurisdictional between pipeline What would prevent a deregulated pipeline from discriminating against, or even excluding entirely, an independent producer, and what remedy would that producer have? RESPONSE: LL&E is firmly convinced that every person should have an equal opportunity to build and operate at-risk facilities. market approach to at-risk development will produce more (and more efficient) projects, but only if every producer, marketer and other entrepreneur is left free to participate in the at-risk market. Conversely, any restrictions would necessarily block entrepreneurs from building facilities at their own risk a result clearly - P-52 contrary to expanding the gas pipeline system. Therefore, LL&E opposes limiting at-risk opportunities to existing "natural gas companies," i.e.. incumbent interstate pipelines. Moreover, at-risk development is fundamentally incompatible with many of the regulatory burdens imposed on "natural gas companies" under the NGA, and any definition of atrisk developers would therefore need to identify which NGA sections did and did not apply. With these points in mind: a. LL&E is confident that more (and more efficient) pipelines will be built if developers and shippers are allowed to allocate project benefits and burdens through private contracts. Given this entrepreneurial setting, at-risk rates should not be subject to the "just and reasonable" standard in the Natural Gas Act or the "Fair and equitable" standard in the Natural Gas Policy Act. Over the years these two standards have become burdened with cost-of-service connotations, and cost-of-service regulation is fundamentally at odds with at-risk development. For example, cost-of-service regulation hampers initiative by imposing significant regulatory costs. (In fact, the only at-risk developers who would not be harmed by the imposition of regulatory costs are the interstate pipelines since they are already costof-service regulated.) Moreover, the imposition of costof-service regulation would deprive the at-risk entrepreneur of whatever benefits might accrue from its negotiated service contracts. The appropriate measure is whether an at-risk rate is "mutually agreeable." The mutually agreeable rate standard serves two functions, affirming negotiated rates and providing a standard for resolving impasse. The affirmation function cannot be overemphasized. All negotiated rates meet the mutually agreeable standard, and should not be subject to any regulatory oversight, particularly Sections 4 and 5 of the Natural Gas Act. LL&E strongly believes that negotiation should be the primary mechanism for establishing rates and terms of service. At the same time, LL&E realizes that there may be times when a potential shipper and the operator of an at-risk facility fail to come to terms. A potential shipper should be entitled to file a complaint alleging that the operator has engaged in conduct which in effect constitutes a denial of service. For example, a complaint could allege that the operator has refused to negotiate or that the offered price or terms were prohibitively onerous. In applying the mutually agreeable standard to an impasse case, the arbitrator should analogize to civil complaints alleging a violation of the essential facilities doctrine 6 |