In most cases, interstate natural gas pipeline companies are required under Section 7c of the Natural Gas Act of 1938 to obtain a certificate of public convenience and necessity before constructing pipeline facilities. Besides review of operational aspects of the system, other legislation requires extensive review of the financial and environmental aspects of the projects. These requirements have resulted in a sometimes lengthy and complex process.

Once a project is approved and constructed under a Section 7c certificate, the costs of the facilities are eligible for inclusion in the pipeline company rate base (when the company files its next general rate case) and the risks associated with recovery of those costs are minimized. Other options are also available to pipeline companies for capacity expansion, depending on the size of the project and the amount of risk the company is willing to assume. These options include:

• Blanket Certificate. Blanket certification can be used for relatively small projects. A blanket certificate approves a series of similar actions in one authorization. For instance, construction of small additions to a natural gas pipeline may be authorized by a blanket certificate, provided the total cost does not exceed some threshold level and other eligibility criteria are met.
• Optional Expedited Certificate (OEC). In 1987, under Order 500, FERC introduced OEC's whereby construction could be approved without assessment of its financial soundness. In return, the pipeline company agrees to bear the majority of the risk of the project.
• NGPA Section 311. Section 311 of the Natural Gas Policy Act (NGPA) of 1978 allows an interstate pipeline company to sell or transport gas "on behalf of" any intrastate pipeline or local distribution company. FERC has exempted the construction of facilities used solely for Section 311 transportation from certificate requirements.

Contact:

Susanne Johnson for financial analysis (Office of Energy Markets and End Use)
susanne.johnson@eia.doe.gov
Fax: (202) 586-9753
 
OR

James Tobin for industry structure (Office of Oil and Gas)
james.tobin@eia.doe.gov
Fax: (202) 586-4420
 
OR

 
National Energy Information Center for further information
infoctr@eia.doe.gov
Phone: (202) 586-8800