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of antitrust law. In an essential facilities case, the defendant is entitled to raise any bona fide business justification for withholding access, including the availability of competitive alternatives. While the plaintiff's cost of duplicating the essential facilities is relevant, the defendants cost of providing service is not. Similarly, in adjudicating an access impasse, the potential customer's cost of replicating the at-risk facility (through by-pass or otherwise) may be considered, but the at-risk pipeline's cost of service may not.

Although the at-risk pipeline's cost of service would not be at issue, a range of other facts might be introduced. The filed transportation contracts could be relevant. On the other hand, direct comparisons might be inappropriate for a number of legitimate reasons. For example, the subscribing customers may have been willing to share a greater portion of project risks, or the subscribing customers may be receiving a distinct type of service. Rather than attempting to list all the potential grounds for bringing an impasse complaint (and all the potential business justifications for a particular pipeline operator's actions) legislation should establish a prompt means of resolution and underscore the immateriality of the at-risk pipeline's cost of service.

behavior.

In resolving an impasse case, the mediator must find a
rate that the parties would have agreed to in the absence
of the at-risk pipeline's inappropriate
Obviously, this standard carries a wide degree of
latitude, as it must to accommodate the variety of
impasse cases that might arise. But the emphasis rests
on what should not be considered
pipeline's cost of service (or, similarly, the pipeline's
projected units of service).

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the at-risk

be

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One final word on impasse remedies is important. impasse dispute is a conflict between the at-risk pipeline and a potential customer. The dispute does not involve existing customers, and their rights should not affected by a potential shipper's complaint. Therefore, legislation should provide that no remedy in an impasse case may divest any existing shippers contractual rights as embodied in an executed service agreement with the at-risk pipeline.

b.

Sections 4 and 5 of the Natural Gas Act would provide the primary safeguard against cross-subsidization.

C.

Shippers may seek remedies by filing impasse complaints as described above in response to Question 7(a).

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Thank you for providing the opportunity for me to testify at the recent Energy and Natural Resources Committee hearing on the National Energy Security Act of 1991.

Brooklyn Union endorses the purposes of the Act and is pleased with its balanced approach to reducing our dependence on imported oil and facilitating the continuation of reliable natural gas supplies over the long-run. It is rewarding to see the important role that natural gas can play both in contributing to energy security as well as in improving the environment.

My written answers to the follow up questions you sent to me on March 11, 1991 are attached. We are also preparing written testimony on Title XI TRANSPORTATION AND ALTERNATIVE FUELS of S.

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341 and will forward it to you shortly.

Thank you, again, for this opportunity to participate in this important process. Do not hesitate to contact me if you require any further information.

CC:

Don Santa, Esq.

Sincerely,

Robert B. Setell

ANSWERS TO POST-HEARING QUESTIONS

By

ROBERT B. CATELL

President & Chief Operating Officer

THE BROOKLYN UNION GAS COMPANY

On

TITLE X OF S. 341

THE NATIONAL ENERGY SECURITY ACT OF 1991

April 1, 1991

QUESTIONS OF SENATOR PETE V. DOMENICI

1.

Do you support the Commission's open access transportation

program?

Yes, Brooklyn Union supports the Commission's open access transportation program. We were one of the first local distribution companies to take advantage of open pipeline access and the growing spot natural gas market to purchase lower cost gas supplies.

Traditionally,

Open access transportation has produced fundamental changes in the way Brooklyn Union purchases its gas supplies to the benefit of its customers. we purchased all of our gas requirements from pipeline suppliers under a bundled sales service. Today, with the unbundling of pipeline services into separate sales and transportation functions, we can buy gas directly from producers under either spot or long-term purchase agreements, which reflect our market profile. This allows us to better stabilize the price and control the reliability of our gas supplies. Open access transportation has allowed us to diversify our supply sources. We have already converted substantial amounts of pipeline sales service to firm transportation, which has resulted in lower retail gas prices.

One final necessary step is to deal with the issue of

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