UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Joseph T. Kelliher, Chairman;

Nora Mead Brownell, and Suedeen G. Kelly.

+--------------------------------------------+----------+-------------+
| Columbia Gas Transmission Corporation      | Docket   | C           |
|                                            | Nos.     | P05-144-000 |
| Hardy Storage Company, LLC.                |          |             |
|                                            |          | C           |
|                                            |          | P05-151-000 |
|                                            |          |             |
|                                            |          | C           |
|                                            |          | P05-152-000 |
|                                            |          |             |
|                                            |          | C           |
|                                            |          | P05-153-000 |
+--------------------------------------------+----------+-------------+

ORDER ISSUING CERTIFICATES AND AUTHORIZING ABANDONMENT

(Issued November 1, 2005)

1.  On April 25, 2005, Hardy Storage Company, LLC (Hardy Storage) filed
    an application in Docket No. CP05-151-000 pursuant to section 7(c)
    of the Natural Gas Act (NGA) and Parts 157 and 284 of the
    Commission's regulations seeking authorization for the development
    and operation of a new underground natural gas storage facility in
    two partially depleted gas production fields located in Hampshire
    and Hardy Counties, West Virginia (Hardy Storage Project). In Docket
    No. CP05-152-000, Hardy Storage requests blanket certificate
    authorization pursuant to Part 284, subpart G of the Commission's
    regulations to provide storage services on behalf of others in
    interstate commerce with pre-granted abandonment of those services.
    Finally, in Docket No. CP05-153-000, Hardy requests a blanket
    certificate under Part 157, subpart F so that it may construct,
    acquire, operate, rearrange, and abandon certain facilities.

2.  In a companion application in Docket No. CP05-144-000, Columbia Gas
    Transmission Corporation (Columbia) requests authorization pursuant
    to sections 7 (c) and (b) of the NGA and Part 157 of Commission's
    regulations to construct and operate certain natural gas
    transmission facilities to provide firm transportation service under
    Part 284 of the Commission's regulations in Hardy County, West
    Virginia, Page, Rockingham, Shenandoah, Greene and Louisa Counties,
    Virginia and Baltimore County, Maryland (Hardy Transmission Project)
    and to transport natural gas to and from the Hardy Storage Project.

3.  The Commission finds that the Hardy Storage and Columbia proposals
    serve the public convenience and necessity and grants the requested
    authorizations.

    **I. [Background]{.underline}**

4.  Hardy Storage states that it does not currently own any pipeline
    facilities or provide any natural gas transportation services, but
    that upon issuance of the certificate authorizations requested
    herein, Hardy Storage will be a "natural gas company" within the
    meaning of section 2(6) of the NGA. Hardy Storage is a limited
    liability company organized under the laws of the State of West
    Virginia. Hardy Storage's members are Columbia Hardy Corporation
    (Columbia Hardy), a Delaware corporation and subsidiary of Columbia
    and Piedmont Hardy Storage Company, LLC (Piedmont Hardy), a North
    Carolina limited liability company and an affiliate of Piedmont
    Natural Gas Company, Inc. (Piedmont). Hardy Storage is a joint
    venture between wholly owned subsidiaries of NiSource, Inc. and
    Piedmont, each of which own a 50 percent interest. NiSource's
    subsidiary, Columbia, will be the operator of Hardy Storage.

5.  Columbia is a wholly-owned subsidiary of the Columbia Energy Group,
    which in turn is a wholly-owned subsidiary of NiSource Inc. Columbia
    states that it currently operates 36 storage fields in four states
    with approximately 3,500 wells, 246 Bcf working gas, and almost 4.4
    BCF/day of design day deliverability. Columbia states that its
    oldest storage fields have been in continuous operations since 1936.
    Columbia asserts that its Artemas A, Artemas B, Glady, Terra Alta
    and Terra Alta South Storage Fields have similar geologic, design,
    and operating characteristics as the Hardy Storage Field.

    **II. [Proposals]{.underline}**

    **A. [Hardy Storage's Proposed Facilities]{.underline}**

6.  Hardy Storage proposes to convert two partially depleted gas
    production fields that are connected with the facilities of Columbia
    to a storage field located in Hampshire and Hardy Counties, West
    Virginia. Hardy Storage explains that the storage field will consist
    of two pools: the Lost River pool, which begins a few miles from
    Columbia's Lost River Compressor Station and presently contains 11
    inactive production wells; and the Inkerman pool, which begins
    approximately 19.6 miles north of Lost River Compressor Station
    extending into Hampshire County and presently contains four inactive
    production wells.

7.  Hardy Storage states that both pools will be connected by new
    storage pipelines to a new Hardy Storage Compressor Station, and
    from there, connected by a new storage pipeline to Columbia's Lost
    River Compressor Station. Hardy Storage avers that its storage field
    is designed with the capacity to store approximately 12.4 MMDth of
    natural gas and deliver up to 176,000 Dth/day of natural gas. Hardy
    Storage states that the maximum shut-in stabilized surface pressure
    for the Hardy Storage Field will be 2,500

psig and the field pipeline system will have a maximum allowable
operating pressure (MAOP) of 2,700 psig.

8.  Specifically, Hardy Storage proposes to construct or recondition a
    total of 29 storage wells and construct 36.7 miles of pipeline,
    7,100 HP of compression, and associated appurtenances. Hardy Storage
    proposes to construct a new 13.0-mile long, 20-inch pipeline, Line
    X78-M1 (Line M1), to connect the storage field to Columbia's main
    transmission system at Columbia's Lost River Compressor Station.
    This 20-inch line will be constructed within the same right-of-way
    as Columbia's existing 10-inch T-14 line, that Columbia proposes to
    abandon.[^1] Specifically, Hardy proposes to install:

    -   approximately 0.06 miles of 10-inch pipeline, Line X78-M2 (Line
        M2), in Hardy County, West Virginia, beginning near the terminus
        of the proposed Line M1 and extending to its terminus at the
        existing 10-inch Line T-14. Line T-14 extends north to its
        terminus in Hampshire County, West Virginia;

    -   approximately 10.3 miles of 12-inch pipeline and 0.6 miles of
        6-inch pipeline, Line X78-F1 (Line F1), in Hardy and Hampshire
        Counties, West Virginia, beginning at Hardy's proposed Hardy
        Compressor Station and extending north to its terminus in
        Hampshire County, West Virginia;

    -   approximately 6.7 miles of 12-inch pipeline, Line X78-F2 (Line
        F2), in Hardy County, West Virginia, beginning at Hardy's
        proposed Hardy Compressor Station and extending south to its
        terminus;

    -   approximately 1.9 miles of 8-inch pipeline, Line X78-F3, in
        Hardy County, West Virginia, beginning at the southern end of
        the proposed Line F2 and extending south to its terminus.

        Hardy additionally proposes to install 26 new 4-inch, 6-inch,
        and 8-inch pipelines for reconditioned production wells and new
        storage wells. The three observation wells will not require
        additional pipeline. Hardy will also install ground beds,
        repeater towers, access roads and a methanol injection system as
        components of the project.

9.  Hardy Storage explains that it will convert 12 of Columbia's
    existing inactive production wells to injection/withdrawal wells and
    3 of Columbia's inactive production wells to observation wells.
    Hardy Storage asserts that the 15 wells will be reconditioned, and
    the wellheads will be replaced to accommodate the maximum
    stimulation pressure of 5000 psig and an injection pressure of 2700
    psig. One additional production well will be purchased and converted
    to a withdrawal-only storage well. Hardy Storage also will drill 13
    new wells for inclusion in the storage field.

10. Hardy Storage explains that due to normal operational issues
    associated with activating a new storage facility, it proposes to
    phase-in service levels with injections of natural gas into the
    storage fields to begin April 2007. Hardy Storage anticipates that
    the Hardy Storage Field will operate at 57 percent of capacity its
    first year of operation (withdrawal of up to 100,000 Dth/day during
    the 2007-2008 heating season), at 85 percent during its second year
    (withdrawal of up to 150,000 Dth/day during the 2008-2009 heating
    season) and at 100 percent during its third year (withdrawal of up
    to 176,000 Dth/day during the 2009-2010 heating season). Hardy
    asserts that this ramp-up of storage capability was announced in the
    open season held for services from the field and is reflected in the
    customers' contracts. Hardy Storage states that the open season
    resulted in full subscription of the project's storage capacity at
    recourse rates under 15-year contracts.

    **B. [Hardy Storage's Proposed Rates]{.underline}**

11. Hardy Storage proposes to provide open access storage services under
    Rate Schedule HSS for Hardy Storage Service and Rate Schedule IHSS
    for Interruptible Hardy Storage Services. Hardy Storage states that
    applicable rates for the primary term of service will be cost-based
    recourse rates, based on an estimated project cost of \$121,980,205.
    Hardy Storage states that since the storage service will be
    phased-in, they are proposing phased-in rates for its Rate Schedule
    HSS.

12. Hardy Storage proposes to use a phased-in approach similar to the
    one approved in *Saltville*,[^2] wherein the Commission held that
    storage rates must be based on the design capacity of the storage
    facility for each year during the phase-in period, along with the
    projected cost-of-service of each phase, not on actual working gas
    capacity.[^3] Hardy Storage asserts that it will seek to recover
    only the costs associated with facilities projected to be placed in
    service during each year of the three-year phase-in period.

    **C. [Hardy's Request for Waivers]{.underline}**

13. Hardy Storage states that its storage project will exist as a
    stand-alone storage facility and any firm or interruptible
    transportation service necessary to facilitate the injection or
    withdrawal of natural gas under Rate Schedules HSS and IHSS will be
    provided by Columbia. Because of this, Hardy Storage seeks waiver of
    the segmentation requirement set forth in Order No. 637 and the
    regulations thereunder, consistent with the Commission\'s treatment
    of similar storage projects.[^4] Hardy Storage also seeks waiver of
    the requirements regarding the allocation of primary point rights in
    segmented releases and within-the-path scheduling.

14. Additionally, Hardy Storage seeks waiver of the requirements under
    Order No. 637 to provide imbalance management services on the ground
    that it is not proposing to charge imbalance penalties.[^5] Hardy
    Storage states that its tariff does not include unnecessary
    restrictions on the ability of third parties to provide gas
    imbalance services. Hardy Storage also requests waiver of the
    requirement that the tariff contain language regarding imbalance
    status information. Hardy Storage asserts that its storage customers
    will not incur imbalances because the operational balancing
    agreement between Hardy Storage and Columbia will \"take the swing\"
    and keep the storage customers whole.

    **D. [Line T-14]{.underline}**

15. Columbia's Line T-14 is a 25-mile long pipeline with 8-inch and
    10-inch diameter pipe that Columbia's predecessor originally used as
    a gathering line to transport gas from its production field in Hardy
    County, West Virginia to the Lost River Compressor Station. In 1971,
    Columbia's predecessor shut-in the gas wells and entered into a
    lease agreement with Hampshire Gas Company (Hampshire Gas) for
    35,000 Mcf/d of firm capacity on a portion of Line T-14 to deliver
    gas to and from Hampshire Gas' Hampshire Storage Field and
    Washington Gas Light Company's (Washington Gas) city-gate at the
    Lost River Compressor Station. Under a 1976 lease agreement that
    Columbia states was not filed with the Commission, Columbia leased
    to Hampshire Gas and Washington Gas 50,000 Mcf/d of capacity on Line
    T-14 to transport gas to and from the Hampshire Storage Field on
    behalf of Washington Gas. Hampshire Gas currently provides
    Commission certificated storage service for its sole customer,
    Washington Gas.

16. Columbia states that it and Hampshire Gas are currently negotiating
    modifications to the lease agreement between Hardy Storage and
    Hampshire Gas and will file the revised agreement reflecting any
    construction of new facilities and the transportation on Line T-14,
    if any.[^6]

17. Columbia requests NGA section 7(b) authorization to abandon by sale
    the jurisdictional portions of its Line T-14 to Hardy Storage.
    Columbia states that, upon abandonment, Line T-14 will become a
    jurisdictional asset of Hardy Storage. Columbia also proposes to
    assign to Hardy Storage Columbia's rights and obligations to
    transport gas on behalf of WGL to and from Hampshire Gas' Hampshire
    Storage Field on Line T-14.

    **E. [Columbia's Proposed Facilities]{.underline}**

18. Columbia's proposed pipeline facilities will expand its system to
    accommodate the transportation sought by customers of Hardy Storage.
    Columbia proposes to construct facilities in two phases. In 2006,
    Columbia proposes to modify it existing yard piping at the Lost
    River Compressor Station located in Hardy County, West Virginia. The
    major construction, however, will occur in 2007 when Columbia
    proposes to install the following facilities:

-   approximately 15.5 miles of 24-inch pipeline and appurtenances,
    looping Columbia's existing Line WB-2-VA, beginning in Shenandoah
    County, Virginia and terminating in Rockingham County, Virginia.

-   approximately 9.7 miles of 24-inch pipeline and appurtenances,
    looping Columbia's existing Line WB-2-VA, beginning in Page County,
    Virginia and terminating in Rockingham County, Virginia.

-   approximately 5.3 miles of 24-inch pipeline and appurtenances,
    looping Columbia's existing Line WB-2-VA, located in Greene County,
    Virginia.

-   approximately 2.6 miles of 24-inch pipeline and appurtenances,
    looping Columbia's existing Lines VM-107 and VM-108, located in
    Louisa County, Virginia.

-   new measurement and regulation and associated appurtenances within
    the existing boundaries of Boswells Tavern M&R Station, located in
    Louisa County, Virginia.

-   a new heater and associated appurtenances at Manor Road M&R Station,
    located in Baltimore County, Maryland.

19. Columbia also proposes to modify existing regulation within the
    existing boundaries of Bickers Compressor Station, located in Greene
    County, Virginia.

20. Columbia explains that it conducted an open season for the new firm
    transportation service on the facilities to transport gas from the
    Hardy Storage Field which resulted in execution of 15-year precedent
    agreements for all of the available capacity.

    **F. [Columbia's Proposed Rates ]{.underline}**

21. Columbia proposes to provide open-access transportation service on
    the new facilities pursuant to a new Third Party Storage (TPS) Rate
    Schedule. Columbia filed to include Rate Schedule TPS in its
    currently effective FERC Gas Tariff. Columbia states that Rate
    Schedule TPS service will be provided on a non-discriminatory
    open-access basis to all customers receiving service from similarly
    situated third-party storage companies to the extent that those
    customers and their respective third-party storage companies meet
    the eligibility requirements specific to this new storage
    transportation service. Columbia states that it has elected to
    provide this new storage transportation service under the provisions
    of a new rate schedule due to the service's unique operational
    requirements and characteristics.

22. Columbia proposes to utilize its currently effective recourse rates
    under Rate Schedule FTS for the firm transportation service under
    the proposed TPS Rate Schedule. Columbia asserts that the FTS
    recourse rate levels will recover the expansion project costs and
    are appropriate since both Rate Schedules cover firm transportation
    service and utilize certain existing facilities.[^7] Columbia
    asserts that the rates set forth on the proposed tariff sheets
    reflect Rate Schedule TPS rates (including retainage) at levels
    equal to those applicable to the FTS Recourse Rate. TPS retainage
    rates would also mirror FTS retainage rates.

23. Columbia states that it has entered into precedent agreements with
    Baltimore Gas & Electric Company, the City of Charlottesville,
    Virginia (Charlottesville), Piedmont Natural Gas Company, Inc.
    (Piedmont), and Washington Gas to provide up to 171,594 Dth/day of
    firm transportation service downstream of the Hardy Storage
    facilities under the proposed TPS Rate Schedule.

24. Columbia seeks Commission authority to roll the cost of this
    mainline expansion into its system-wide rates.

    **III. [Interventions]{.underline}**

25. Joint notice of the Hardy Storage and Columbia applications was
    published in the *Federal Register* on May 12, 2005 (70 *Fed. Reg*.
    25,026). Seventeen entities[^8] filed timely, unopposed motions to
    intervene.[^9] Karen L. Garret filed a late motion to intervene in
    conjunction with comments responding to the Environmental
    Assessment. The Commission finds that granting the motion to
    intervene out of time will not delay,

disrupt, or otherwise prejudice this proceeding, or place an additional
burden on existing parties. Therefore, for good cause shown, we will
grant the motion.[^10] .

26. Hampshire Gas and Charlottesville filed protests to the
    applications; Piedmont and WGL filed comments. Landowners Martin
    Gorelick (Mr. Gorelick), Jerome H. Irick (Mr. Irick), and Alan D.
    Ward, Norma J. Caron, Melinda Buchanan-Ward, and Aaron Buchanan (the
    Wards) also filed comments in this proceeding.

27. Orange and Rockland Utilities, Inc. requests clarification of why
    Columbia is proposing a new rate schedule that is identical to its
    existing rate schedule. Piedmont seeks clarification on the penalty
    provisions in sections 7(c) and 7(e) of Hardy Storage's proposed
    Rate Schedule HSS.

28. Hardy Storage and Columbia filed a joint answer to the comments,
    protests and request for clarification. Rule 213 of the Commission's
    Rules of Practice and Procedure prohibits an answer to a protest
    unless otherwise ordered by the decisional authority.[^11] We will
    accept Hardy Storage's and Columbia's answer to the protests because
    it has provided information that may assist us in our
    decision-making process.

    **IV. [Discussion]{.underline}**

29. Since the proposed facilities will be used to store and transport
    natural gas in interstate commerce, subject to the jurisdiction of
    the Commission, the construction, acquisition, and operation of the
    facilities are subject to the requirements of subsections (c)
    and (e) of section 7 of the NGA.

    **A. [The Certificate Policy Statement]{.underline}**

30. The Certificate Policy Statement provides guidance as to how we will
    evaluate proposals for certificating new construction.[^12] The
    Certificate Policy Statement established criteria for determining
    whether there is a need for a proposed project and whether the
    proposed project will serve the public interest. The Certificate
    Policy Statement explained that in deciding whether to authorize the
    construction of major new pipeline facilities, we balance the public
    benefits against the potential adverse consequences. Our goal is to
    give appropriate consideration to the enhancement of competitive
    transportation alternatives, the possibility of overbuilding,
    subsidization by existing customers, the applicant\'s responsibility
    for unsubscribed capacity, the avoidance of unnecessary disruptions
    of the environment, and the unneeded exercise of eminent domain in
    evaluating new storage and pipeline construction.

31. Under this policy, the threshold requirement for pipelines proposing
    new projects is that the pipeline must be prepared to financially
    support the project without relying on subsidization from its
    existing customers. The next step is to determine whether the
    applicant has made efforts to eliminate or minimize any adverse
    effects the project might have on the applicant\'s existing
    customers, existing pipelines in the market and their captive
    customers, or landowners and communities affected by the route of
    the new pipeline. If residual adverse effects on these interest
    groups are identified after efforts have been made to minimize them,
    we will evaluate the project by balancing the evidence of public
    benefits to be achieved against the residual adverse effects. This
    is essentially an economic test. Only when the benefits outweigh the
    adverse effects on economic interests will we proceed to complete
    the environmental analysis where other interests are considered.

    **1. [Subsidization]{.underline}**

32. The threshold requirement is that the pipeline must be prepared to
    financially support the project without relying on subsidization
    from its existing customers.

33. Since Hardy Storage is a new natural gas company, it has no existing
    customers which could subsidize the new construction. Columbia's
    existing customers will not subsidize this project, but will instead
    realize an overall revenue responsibility reduction since revenues
    exceed the associated project's projected annual cost of service
    during each of the first ten years of operations. Columbia's
    existing customers will benefit because their overall revenue
    responsibility will be reduced when the facility costs and increased
    determinants are rolled in to Columbia's system-wide rates.[^13]
    Thus, both proposals satisfy the threshold requirement under the
    Policy Statement that there be no financial subsidy from the
    applicant's existing customers.

    **2. [Adverse Effects]{.underline}**

34. Since Hardy Storage is a new entrant into the pipeline business with
    no existing customers, there will be no negative impact on existing
    customers. In addition, no service on any other pipeline will be
    displaced, since the proposed facilities satisfy the increased
    demand for storage service on Columbia's system. Neither will
    construction of the proposed facilities result in any degradation of
    service to Columbia's existing customers. Neither Columbia's
    existing customers nor their service will be adversely affected by
    the proposed expansion to Columbia's system. Rather, the project as
    proposed will enhance the reliability and flexibility of the system
    and the revenues are expected to exceed the costs of the project in
    each of the first ten years of the project's life. Thus, there will
    not be any adverse effects on existing pipelines or their customers.

35. Hardy Storage's proposal will confer financial and timing benefits
    to its customers. By converting the production field to storage
    prior to its total depletion, the reservoir will be able to provide
    a higher value service to the gas industry as a high performance
    storage field by delivering 176,000 Dth during periods of peak
    demand, as compared with an average daily output of only 5,000 Dth
    or less per day as a production field. This difference in
    performance from the same reservoir (with additional facilities for
    storage) will have the potential for a greater positive impact on
    Hardy Storage's customers' financial and operational management of
    their winter gas requirements.

36. Hardy Storage has designed the storage facility in a manner which
    utilizes and upgrades existing facilities owned by Columbia, that
    will be transferred to Hardy Storage, to enhance the newly proposed
    facilities, enabling Hardy Storage to provide the firm service
    commitments as represented in the precedent agreements.
    Additionally, the Commission has determined that converting
    approximately 5.9 Bcf of native gas to base gas is the most
    economical and efficient manner in which to achieve the total of
    17.6 Bcf of base gas required for reliable operation of the Hardy
    Storage Field.

37. The proposal to construct and operate facilities includes injection
    and withdrawal wells and compression additions to the Lost River and
    Inkerman reservoirs creating approximately 7.85 Bcf of working gas
    capacity in the Lost River reservoir, and approximately 4.15 Bcf of
    working gas capacity in the Inkerman reservoir. In addition, the
    facilities are located within Columbia's system grid, and will, if
    constructed, improve the reliability and flexibility of Columbia's
    services in the Mid-Atlantic region. Columbia's customers will have
    more flexibility to store and withdraw gas on a year-round basis. In
    addition, we find no identified adverse effect on other pipelines,
    landowners, or communities. We conclude that the Hardy Storage and
    Columbia facilities will further the development of the interstate
    natural gas infrastructure.

38. Both Hardy Storage and Columbia have designed their projects to
    minimize the economic impact on effected landowners. Hardy Storage
    states that it has under lease the substantial majority of the
    storage rights in the reservoir and protective acreage areas that
    will be converted into the storage project and does not anticipate
    extensive use of eminent domain authority. Columbia states that only
    four percent of the approximately 500 acres of land that would be
    needed for its project are projected to require eminent domain
    proceedings. Thus, we find that any adverse impacts on landowners
    and communities near the storage field or along the pipeline route
    will be minimal with respect to the project as a whole.

39. For all of these reasons, we find, consistent with the Certificate
    Policy Statement and section 7(c) of the NGA, that the public
    convenience and necessity requires approval of Hardy Storage's and
    Columbia's proposals. As is the Commission's practice, the
    certificate issued herein is conditioned on Hardy Storage's having
    executed contracts for the level of service and the terms of service
    represented in the precedent agreements before commencing
    construction on the project.

    **B. [Hardy Storage's Proposed Rates]{.underline}**

40. The Commission has reviewed the rates proposed by Hardy Storage and
    finds that they reflect the cost-of-service underlying Rate Schedule
    HSS. Therefore, the Commission approves the proposed maximum rate
    reflected in the tariff, subject to the conditions discussed below.

41. Charlottesville has negotiated a precedent agreement for 1,627 Dth
    per day of Maximum Daily Storage Quantity from Hardy Storage for a
    period of 15 years. The precedent agreements between Hardy Storage
    and its customers contain projected maximum rates applicable to
    seasonal storage capacity as well as maximum rates applicable to
    maximum daily storage injection/withdrawal rights. However,
    Charlottesville maintains, the maximum rates filed for Rate Schedule
    HSS in the proposed FERC Gas Tariff significantly exceed the top of
    the range of the maximum rates projected in the precedent agreement
    for the three years of phased-in rates.

42. Section 2(c) of the precedent agreement entered into between
    Charlottesville and Hardy Storage provides that the applicable rates
    for service will be the maximum rates as set forth in Hardy
    Storage's FERC Gas Tariff. Further, section 3(c) of the precedent
    agreement states that the maximum rate in the Hardy Storage Tariff
    for service using the facilities shall be based upon the costs
    associated with the facilities, including but not limited to the
    design, construction, and installation of the facilities, and the
    levels of service to be provided through the facilities.

43. The Commission has reviewed the rates proposed by Hardy Storage and
    finds that they reflect the cost-of-service underlying Rate Schedule
    HSS. Although Charlottesville argues that the proposed maximum rate
    exceeds the projected maximum rate in its precedent agreement with
    Hardy Storage, except as relates to Hardy Storage's proposed rate of
    return, Charlottesville has not contended that the proposed rate
    does not properly reflect the costs associated with the project. We
    address Hardy Storage's proposed cost of equity and debt below.
    Moreover, Hardy Storage is required to submit within six months a
    statement explaining any significant differences between the costs
    estimates submitted with the certificate application and the actual
    costs of constructing the facility. Finally, Hardy Storage's
    certificate authorization is conditioned on Hardy Storage filing a
    cost and revenue study at the end of its first three years of actual
    operation to determine whether its then existing recourse rates are
    just and reasonable. Therefore, we reject the claim that Hardy
    Storage's rates are excessive, as conditioned herein.

**C. [Rate of Return]{.underline}**

44. Hardy Storage proposes a 12.00 percent overall pre-tax rate of
    return based on a seven percent cost of debt and a 14 percent return
    on equity. Charlottesville takes exception to Hardy Storage's
    proposal as being "grossly inflated as it includes excessive costs
    for long-term debt, common equity, and income taxes."
    Charlottesville proposes that the overall rate of return should not
    exceed 8.15 percent.

45. Charlottesville further points to Hardy Storage's proposed rate of
    return on common equity as being excessive and proposed that it
    should be reduced to a level no higher than 12.00 percent.
    Charlottesville cites *High Island Offshore System, L.L.C.* (HIOS)
    that held that the appropriate rate of return on equity is 11.22
    percent. Charlottesville maintains that Hardy Storage's risks are
    minimal since the services are fully subscribed at maximum rates for
    15 years.

46. Hardy Storage refutes Charlottesville's assertions, stating that its
    proposed rate of return is more closely analogous to those approved
    by the Commission in *Cheniere.*[^14] In *Cheniere*, the Commission
    approved the cost of service and initial rates proposed by Cheniere
    finding them "reasonable for a new pipeline entity." Additionally,
    the Commission approved the 14 percent return on equity. In the
    instant application, the Commission finds that Hardy Storage's
    proposal is more similar to Cheniere's as both Cheniere and Hardy
    Storage represent new legal entities. Notwithstanding the fact that
    the project is fully subscribed for maximum rates for 15 years, the
    Commission believes that new storage projects face additional
    developmental and operational risks inherent to the nature of
    underground gas storage in a depleted natural gas field which are
    unique to these facilities.[^15] In addition, Cheniere proposed a 50
    percent debt/50 percent equity capital structure while Hardy
    proposes a more highly leveraged capital structure with 70 percent
    debt. Accordingly, the Commission approves Hardy Storage's proposed
    14 percent return on equity.

47. Charlottesville posits that Hardy Storage's 7.00 percent long-term
    debt cost is excessive in "today's environment" and that a 6.00
    percent long term debt level would be closer to today's financing
    conditions. Charlottesville proposes a long-term debt level of 6.50
    percent. Hardy Storage's answer indicates that they are willing to
    utilize the actual debt cost when Hardy Storage files to implement
    its initial rates for service. The Commission has required similar
    action before[^16] and thus will require Hardy Storage to use its
    actual debt cost when it files to implement initial rates for the
    Hardy Storage Project.

    **D. [Income Tax Allowance]{.underline}**

48. Hardy Storage is including a federal income tax allowance in its
    cost of service. Hardy Storage states that this approach is
    consistent with their understanding of Commission rate-making
    policy.[^17] Hardy Storage explains that as a limited liability
    company it will pay to its owners all of the income generated
    through its jurisdictional services, who, in turn, will be liable
    for federal income tax on reported income allocated to them by Hardy
    Storage.

49. Charlottesville asserts that, based on *BP West Coast Products,
    LLC v. FERC*, Hardy Storage should not be allowed an income tax
    allowance. [^18]

50. Hardy Storage answers that it clearly qualifies for an income tax
    allowance since both of its owners will have an income tax liability
    on their interests in Hardy Storage. It explains that the owner of
    the Columbia Hardy Storage interest is Columbia Hardy Corporation
    which will record the book income (50 percent) from the Hardy
    Storage partnership and the taxes on the partnership's income.
    Columbia Hardy will make estimated tax payments and file its income
    tax returns as part of the NiSource, Inc. consolidated return.
    Columbia Hardy will make payments to NiSource, Inc. and then
    NiSource, Inc. will pay the applicable federal and state taxes.
    Piedmont Hardy Storage Company, LLC, the owner of the Hardy Storage
    interest, is a direct subsidiary of its parent corporation Piedmont
    Natural Gas Company, Inc. In this case, Piedmont Hardy Storage
    Company is a limited liability company that is disregarded as a
    separate entity from its parent for federal and state income taxes
    purposes. Thus, in its consolidated return as the parent company,
    Piedmont Natural Gas Company will report income from the Hardy
    Storage partnership and pay the required taxes on its federal and
    state income tax returns.

51. Recently, the Commission issued its *Policy Statement on Income Tax
    Allowances*[^19] which provides that "an \[income tax\] allowance
    should be permitted on all partnership interests, or similar legal
    interests, if the owner of that interest has an actual or potential
    income tax liability on the public utility income earned through the
    interest." Based on the corporate structure of the Hardy Storage
    partnership and the Commission's Income Tax Allowance Policy, the
    Commission accepts Hardy Storage's proposal for entitlement of the
    use of an Income Tax Allowance.

    **E. [Cost and Revenue Study]{.underline}**

52. Charlottesville maintains that Hardy Storage should be required to
    file a cost and revenue study at the end of its first three years of
    actual operation to determine whether

its then existing recourse rates is just and reasonable. The Commission
will require Hardy Storage to complete such a study.[^20]

**F. [Valuation of Native Gas]{.underline}**

53. Hardy Storage states that the Hardy field is a partially depleted
    production field estimated to have approximately 17,300,000 Mcf of
    remaining gas in place. Hardy Storage proposes to purchase from
    Columbia the existing gas in place so that it would need to purchase
    only approximately 300,000 Mcf of additional gas for injection into
    the storage field to reach the necessary base gas level to support
    the field's design pressures. Hardy Storage would then convert
    5,900,000 Mcf of the native gas to base gas to make the field
    operational as a storage facility.[^21] Hardy Storage states that,
    under a number of lease agreements with landowners, it also must
    purchase the oil and gas mineral owners' royalty interests if the
    Hardy field is converted from production to storage and must use an
    industry-accepted methodology for determining the value of the
    remaining economically recoverable gas. Under the methodology Hardy
    Storage used, the proposed base gas valuation is approximately
    \$1.50 per Mcf.

54. Charlottesville requests that the Commission review Hardy Storage's
    valuation of native gas in the storage field and the cost of the
    additional gas to be purchased for base gas. Charlottesville further
    requests that the Commission require an appropriate open season for
    the submission of bids by gas sellers to assure that Hardy Storage
    pays as low a price as possible for the 300,000 Mcf of gas required
    for the Hardy Storage Project.

55. The Commission has reviewed Hardy Storage's proposed native gas
    valuation and approves of Hardy's proposed use of native gas in
    place for base gas. This obviates the necessity of replacing such
    gas should it be produced to depletion. With gas prices in the \$6
    to \$11 range in recent months, it is not cost effective to require
    Hardy to produce the remaining native gas and repurchase gas to
    inject to reach the required level of base gas. The very large cost
    differential coupled with the time savings associated with retaining
    the existing native gas lead the Commission to conclude that Hardy's
    proposal is reasonable. Furthermore, the Commission will not direct
    Hardy to hold an open season to solicit bids from sellers for the
    remaining base gas which Hardy must inject. Hardy has an obligation
    under the Natural Gas Act to prudently incur costs, and when those
    costs have been incurred they are subject to review and challenge in
    Hardy's general cases.

56. Mr. Gorelick, a landowner, is concerned that Hardy Storage may not
    properly compensate him for gas to which he is entitled under his
    lease agreement. The compensation issue raised by Mr. Gorelick is a
    contractual matter between the parties. To the extent Mr. Gorelick
    seeks additional compensation under an existing lease agreement, the
    remedy lies in the court with the appropriate jurisdiction.[^22]

**G. [Hardy's Proposed Tariff]{.underline}**

**1. [Use of Customer's Gas]{.underline}**

57. Piedmont, which has executed a binding precedent agreement with
    Hardy Storage, contends that the proposed Hardy Storage tariff was
    developed subsequent to the execution of such agreement. Piedmont
    maintains that section 6(g) of the Hardy Storage Service (HSS) Rate
    Schedule and section 22 of the General Terms and Conditions (GTC),
    when read together, support an interpretation that Hardy Storage is
    attempting to reserve the right to use a customer's storage gas for
    any purpose without seeking approval from the customer or
    compensating the customer, but imposing on the customer the
    responsibility to insure its storage quantities against loss.
    Piedmont maintains that Hardy Storage should not be authorized to
    reserve the right to use customers' storage gas while also requiring
    them to pay for third-party insurance coverage. Piedmont requests
    that the Commission reject the provisions or condition them to (1)
    provide compensation for the use of a customer's gas, or (2)
    eliminate the customer's requirement to provide insurance for
    storage quantities. Charlottesville and Washington Gas expressed
    concerns similar to that of Piedmont on this issue.

58. Columbia responds that the provisions in the Hardy Storage tariff
    are identical or nearly identical to tariff provisions in Columbia's
    tariff that have been in effect for over a decade. Columbia further
    states that the Commission rejected arguments similar to those made
    in this proceeding in approving its currently effective tariff.[^23]

59. The Commission does not interpret Hardy's tariff as allowing Hardy
    to use its customers' gas for any desired purpose without
    compensating the customers. Further, the Commission has previously
    approved similar provisions in Columbia's Gas Tariff and will grant
    approval of the requested tariff language here. [^24]

    **2. [OFOs]{.underline}**

60. Piedmont and Charlottesville provided comments to the proposed FERC
    Gas Tariff regarding Operation Flow Orders (OFOs) as they relate to
    Rate Schedule HSS section 7(a), which states that pursuant to
    section 17 of the GT&C, a penalty of \$5.00 per Dth per day shall be
    assessed to a customer for all quantities in violation of the
    OFO.[^25] Piedmont also points to section 17.1(a) of the GT&C
    regarding Hardy Storage's right to issue Operational Flow Orders in
    order to: ". . . maintain and protect the integrity and performance
    capability of Seller's storage field(s) (including requiring
    customers to inject gas into or withdraw gas from storage at a
    specified time). . ."[^26]

61. Piedmont does not object to OFOs when dictated by necessary
    operational conditions, but opposes the \$5.00 per Dth per day
    penalty charge for quantities that are not delivered to or withdrawn
    from storage after a demand from Hardy Storage. Piedmont contends
    that a customer should not be assessed a penalty for failing to
    withdraw gas from storage or inject quantities into storage that
    were not otherwise scheduled by the customer. Piedmont requests that
    the Commission reject the Hardy Storage tariff language suggesting
    that a customer would be subject to penalties during an OFO event.

62. Hardy Storage's and Columbia's answer indicates that they held
    numerous discussions with the proposed shippers regarding rate and
    tariff issues and that they further believed the only tariff issue
    that could not be resolved was whether Hardy Storage should have a
    tariff provision that requires customers to inject or withdrawal gas
    during an OFO.

63. Section 17.1(a) of the General Terms and Conditions of Hardy
    Storage's Tariff states:

    Seller, in its reasonable discretion, shall have the right to issue
    Operational Flow Orders (OFO) as specified in this section upon
    determination by Seller that action is required . . . to maintain
    and protect the integrity and performance capability of Seller's
    storage fields(s) (including requiring customers to inject into or
    withdraw from storage at a specified time).

64. The Commission has previously recognized that a pipeline must have
    the ability to require injections or withdrawals when operating
    emergencies so require.[^27] Moreover, penalties are a reasonable
    means of enforcing such requirements. However, Piedmont asserts that
    "\[u\]nless a Customer had quantities scheduled either for injection
    or withdrawal," an OFO issued by Hardy Storage could "result in the
    incurrence of penalties on Columbia and potentially other upstream
    pipelines, thereby forcing Customers to incur penalties either on
    Hardy Storage or on upstream pipeline(s)." Charlottesville similarly
    claims that it should not be put in a position of being forced to
    inject or withdraw gas and thereby incur a penalty on Columbia.
    Hardy Storage and Columbia's answer provides that in section 17.3 of
    the Hardy Storage Tariff, entitled "Limitations" the Hardy Storage
    Project customers are protected against the very harms they claim
    may occur:

    \(a\) Customer shall not be required to flow gas pursuant to this
    section in excess of Customer\'s maximum entitlement level specified
    in Customer\'s Service Agreement(s) with Seller.

    \(b\) A Customer must comply with an OFO within the time period set
    forth therein unless the Customer is able to demonstrate that such
    compliance: (1) is not within Customer\'s physical or contractual
    control; (2) is prevented by operating conditions on a third party
    pipeline system beyond Customer\'s control; (3) is precluded by its
    contractual restrictions with a third party pipeline system;
    and/or (4) is prevented due to a force majeure event as defined in
    section 15 (Force Majeure) of the General Terms and Conditions;
    provided that Customer shall make a good faith effort to comply with
    an OFO, including seeking waivers of any contractual limits with
    third party pipelines or modifications of operating conditions on
    third party pipeline systems. Customer shall notify Seller
    immediately if it believes that it is excused from compliance with
    the OFO for the

    reasons set forth in this subparagraph (b), and shall promptly
    provide Seller with documentation sufficient to support its basis
    for non-compliance.

    \(c\) A Customer shall not incur penalties for complying with an
    OFO.

65. Section 17.3 expressly provides that a Customer is not required to
    schedule injections or withdrawals on a third party pipeline in
    response to an OFO if such action "is precluded by contractual
    restrictions with a third party pipeline system." Thus, if Piedmont
    and/or Charlottesville can demonstrate that they would be penalized
    under Columbia's tariff, they would not be subject to OFO
    penalties.[^28]

66. Piedmont also claims that it should not be liable for OFO penalties
    if it does not inject or withdraw quantities of gas from storage as
    instructed by Hardy Storage during an OFO event, relying for this
    argument on the language contained in General Terms and Conditions
    section 19.1 which provides as follows:

If Customer fails to comply with an OFO issued by Seller pursuant to
section 17 (Operational Flow orders) of the General Terms and
Conditions, a penalty of \$5.00 per Dth per day shall be assessed on all
quantities taken or delivered in violation of that OFO.

67. Piedmont argues that if it does not nominate gas for injection or
    withdrawal on a gas day when an OFO has been issued by Hardy Storage
    requiring injections or withdrawals, it will not be taking or
    delivering gas during an OFO event, and therefore will not be
    subject to penalty.

68. The Commission finds that section 19 of the General Terms and
    Conditions provides that penalties set forth in section 19 apply to
    the HSS and IHSS Rate Schedules "unless otherwise indicated . . . in
    individual Rate Schedules." Rate Schedule HSS provides in section
    7(a) that OFO penalties "shall be assessed to Customer for all
    quantities in violation of the operational flow order." Section 7(a)
    of the IHSS Rate Schedule is identical. Thus, an OFO penalty may be
    assessed under Rate Schedules HSS and IHSS regardless of whether
    quantities are being taken or delivered during an OFO event, unless
    section 17.3 excuses compliance.

    **3. [Penalties for Excess Injections or Withdrawals]{.underline}**

69. Piedmont, Washington Gas, and Charlottesville have concerns with the
    penalty provisions proposed by Hardy Storage in sections 7(c) and
    7(e) of the HSS Rate Schedule. The parties argue that Hardy Storage
    should only be able to impose a monthly penalty charge when Hardy
    Storage can establish that excess monthly injections and/or
    withdrawals (1) cause operational harm to its system; (2) otherwise
    exacerbate a "critical day" situation; or (3) have some causal
    relationship to the "critical day."[^29]

70. The Commission has previously approved Columbia's monthly imbalance
    penalty which will only be assessed 1), if Columbia has called a
    "critical day" on at least one day during the month and 2), if the
    shipper does not utilize the various imbalance management options at
    its disposal (*e.g.*, netting and trading) in the succeeding month
    to resolve its imbalance.[^30] The Hardy Storage tariff provisions
    are similar in language and identical in operation, to the language
    approved by the Commission for Columbia. However, the protesters
    express a valid point when they state that penalties should only be
    assessed when they are linked to behavior that threatens system
    integrity. For instance, if Hardy Storage were to declare a
    "critical day" on the second day of the month, and the conditions
    which caused that declaration abated and were not experienced for
    the rest of the month, Hardy Storage would be able to assess
    penalties on shippers that exceeded the injection/withdrawal
    parameters set out regardless of whether Hardy Storage's system
    integrity was threatened. Penalties are designed to deter behavior
    that threatens the pipeline's or storage company's operations, and
    to the extent those conditions are not present, penalties should not
    be assessed. The Commission directs

Hardy Storage to clarify its tariff to provide that penalties may only
be assessed in instances where it operational integrity is threatened.

**4. [Automatic Forfeiture]{.underline}**

71. Piedmont notes that section 7(g) of the HSS Rate Schedule provides
    for the automatic forfeiture of all gas quantities in excess of 50
    percent of a Customer's Hardy Storage Contract Quantity that remain
    in storage beyond April 1 of each year. Hardy Storage, pursuant to
    an EBB posting, would sell such quantities to the highest bidder,
    with the revenues (then classified as penalty revenues) allocated to
    all non-offending customers. Piedmont states that it would not
    oppose this provision if it did not include the specific language in
    section 7(g) stating that such EBB posting "*may* provide as a
    condition of sale that such gas be withdrawn from storage within a
    period of time to be specified in the notice."[^31] Piedmont
    maintains that there needs to be a cause and effect relationship
    before a penalty can be assessed; if forfeited gas quantities do not
    need to be physically withdrawn from storage, then there is no
    justification for forfeiture to occur. Piedmont requests that Hardy
    Storage be required to state in its tariff that unless operational
    requirements require the physical removal of excess quantities, the
    forfeiture would not occur.

72. Hardy Storage and Columbia's answer states the proposed tariff
    language will be revise to reflect that the EBB posting "*will*
    provide as a condition of sale that such gas be withdrawn from
    storage within a period of time to be specified in the notice."

73. Hardy Storage and Columbia's answer addresses Piedmont's concern, in
    part. However, the Commission directs Hardy Storage to revise its
    tariff to specify that a condition of sale of confiscated gas is
    that such gas must be withdrawn from storage within a period of time
    after the sales take place, to be specified in the notice. In
    addition, confiscation of gas should only take place where
    operational concerns necessitate the physical withdrawal of excess
    quantities of gas. Further, the Commission directs Hardy Storage to
    revise its tariff to specify that confiscation and sale of gas will
    only take place when operational concerns require withdrawal of
    excess gas.

    **H. [Gas Quality]{.underline}**

74. Hampshire Gas states that to the extent Hardy Storage has gas
    production from its production well connected to the transmission
    system which is jointly to be used to provide services to Hardy
    Storage and Hampshire Gas, Hardy Storage should be required to treat
    and process the gas stream during either the injection or withdrawal
    process to remove any liquids, objectionable chemical properties, or
    other concentrations of elements or compounds that may be corrosive
    or toxic, may represent an environmental hazard, or may cause injury
    or interference with proper operation of Hampshire Gas' facilities.

75. Hardy Storage responds that prior to the commencement of injections
    into the Hardy Storage Field, it will acquire ownership of the
    Tharp-Hampton well, a third-party production well that it will
    operate as a withdrawal-only storage well, most likely on a
    year-round basis. Hardy Storage agrees with Hampshire Gas that any
    gas that enters the remaining portion of Line T-14, the 20-inch
    replacement pipeline to the south, or Columbia\'s transmission
    system must meet the appropriate gas quality standards set forth in
    each pipelines\' tariff. Moreover, Hardy Storage states that to the
    extent the gas withdrawn from Tharp-Hampton does not automatically
    meet these gas quality standards, Hardy Storage will install and
    operate the necessary gas conditioning equipment. We believe that
    Hardy Storage's answer adequately addresses Hampshire Gas' concern.

    **I. [Pig Run]{.underline}**

76. Hampshire Gas states that Hardy Storage's application refers to
    construction of "0.06 mile of 10-inch storage pipeline and
    appurtenances," which will connect the existing 10-inch T-14 to the
    north of the proposed Hardy Storage compressor to the newly
    constructed 20-inch replacement portion of Line T-14 to the south of
    the Hardy Storage field. Hampshire Gas requests assurances that
    Hardy Storage will install facilities at the terminus of these
    facilities to allow for future pigging operations as specified in
    DOT regulations applicable to situations where transmission piping
    is being replaced. Hardy Storage answers that the pipeline will be
    installed to accommodate a pig run. We believe that Hardy Storage's
    answer adequately addresses Hampshire Gas' concern.

    **J. [Construction Schedule]{.underline}**

77. Hampshire Gas requests that Hardy Storage cooperate to establish a
    construction schedule to lessen the impact on Hampshire Gas'
    physical injection and withdrawal seasons. In addition, Hampshire
    Gas asks the Commission to give Columbia the flexibility to provide
    Hampshire Gas with a temporary alternative gas transportation
    service in the event that construction disrupts service. Hardy
    Storage agrees that there is a need for optimal communication and
    coordination between Hardy Storage and Hampshire to mitigate the
    impact associated with the potentially long service interruption
    that will occur in the summer of 2006. Hardy Storage states that it
    will continue communication on this issue to address Hampshire's
    concerns regarding the potential service interruption. We believe
    that Hardy Storage's answer adequately addresses Hampshire Gas'
    concern.

    **K. [Line T-14]{.underline}**

    **1. [MAOP]{.underline}**

78. Hampshire Gas notes that Hardy Storage proposes to test the existing
    10-inch portion of the T-14 line such that the line may be operated
    at a pressure of 1,400 psig. Hampshire Gas states that it has never
    experienced pressures that high for either injection or withdrawal
    purposes and that the potential operation of the pipeline at
    pressures significantly different from historical norms could
    negatively impact its operations. Hampshire Gas asks Hardy Storage
    to install adequately sized piping or compression capabilities to
    ensure that existing pressures are maintained.

79. Columbia and Hardy Storage answer that the maximum operating
    pressure of the northern portion of Line T-14 will be set at 1,200
    psig, the level equal to the MAOP of Hardy Storage's proposed
    20-inch replacement pipeline for the southern portion of Line T-14
    (Line M1). Furthermore, they state that they have met with Hampshire
    Gas and have shown that, although these pipelines will be rated to
    operate up to 1,200 psig, Hardy Storage does not intend to operate
    them in a manner that will result in Hampshire Gas' operating above
    its historical pressure levels. We believe that Columbia's and Hardy
    Storage's answer adequately addresses Hampshire Gas' concern.

80. Hampshire Gas asserts that the existing 10-inch Line T-14 north of
    the proposed Hardy Compressor Station must be electrically isolated
    from the newly constructed 20-inch replacement portion of Line T-14
    (Line M1) south of the Hardy storage field. Hardy Storage agrees
    that such isolation is necessary and plans to install an insulation
    joint at the point where these two lines meet. We believe that Hardy
    Storage's answer adequately addresses Hampshire Gas' concern.

    **L. [Columbia's Rates]{.underline}**

    **1. [Rolled-in Rates]{.underline}**

81. Columbia requests rolled-in rate treatment for the costs of its
    proposed project. The Policy Statement provides that expansion
    projects could receive rolled-in rate treatment when it is
    demonstrated that rolled-in pricing would result in a reduction in
    the unit cost of service for existing customers. In this case,
    Columbia's existing customers will enjoy a reduced revenue
    responsibility because of the construction. Accordingly, the request
    for rolled-in rate treatment is approved.

    **2. [Rate Schedule TPS]{.underline}**

82. Orange and Rockland seeks clarification as to why Columbia is
    proposing a new Rate Schedule TPS, since the proposed rates are
    identical to the existing Rate Schedule FTS rates.

83. Columbia's answer explains that Rate Schedule TPS service is a
    limited form of no-notice service that is being provided on an
    open-access, generally available basis to shippers on Columbia's
    system that meet the requirements of Rate Schedule TPS, including
    having access to third party storage. Specifically, Rate Schedule
    TPS service provides shippers the right to make adjustments after
    the close of the gas day, within certain predetermined parameters,
    in order to effectuate a form of no-notice service. In order to make
    this right available, Rate Schedule TPS contains very specific
    restrictions (not imposed on Rate Schedule FTS service) designed to
    ensure Columbia's ability to meet its existing firm service
    obligations. For example, TPS customers must eliminate their total
    imbalance on Columbia within 48 hours of notice that Columbia's
    system operations require the removal of such imbalance.
    Additionally, if the TPS customer fails to do so, Columbia will have
    the ability to remove the imbalance itself, either by agreement with
    the third party storage company or as the operator of the third
    party storage company. These components of the service differentiate
    Rate Schedule TPS from Rate Schedule FTS.

84. Orange and Rockland further seeks explanation of what it perceives
    to be increased flexibility proposed for TPS customers in section 3
    of that rate schedule. Orange and Rockland states that section
    3(b)(3) of Rate Schedule TPS proposes to use FSS inventory to
    resolve TPS imbalances, but the availability of the TPS Rate
    Schedule is not limited to entities with FSS contracts. Thus, it
    posits, "it appears possible that Columbia is offering flexibility
    to customers without FSS inventory balances while denying that
    flexibility to customers with such balances."

85. Columbia answers that under the TPS Rate Schedule, all TPS shippers
    are entitled to incur a transportation imbalance on their TPS
    service agreement on each gas day equal to 33 percent of each
    shipper's maximum daily withdrawal quantity. Such TPS service
    agreement transportation imbalance in total may not exceed at any
    time the shipper's transportation demand on its TPS service
    agreement. To the extent that a TPS shipper's transportation
    imbalance exceeds the transportation demand, there are two options
    for correction. First, if the TPS shipper has FSS storage, then the
    amount in excess of transportation demand is removed from that
    shipper's FSS storage inventory on the next gas day. If the TPS
    shipper does not have FSS storage or has inadequate FSS storage,
    then the shipper will (1) in the case of under-tendered quantities,
    pay Columbia for the

under-tendered imbalance or (2) in the case of over-tendered quantities,
forfeit the imbalance quantities.

86. Columbia's distinction between the two rate schedules and mitigation
    measures in place to ensure flexibility related to imbalances
    between the two rate schedules is satisfactory to the Commission and
    thus, the Commission approves the use of the proposed Rate Schedule
    TPS. O&R fears that Columbia is offering imbalance flexibility to
    one group of customers while denying it to another. As Columbia
    points out in its answer, all Rate Schedule TPS shippers have the
    flexibility to incur imbalances up to a specified level, and
    imbalances incurred beyond those limits must be resolved. Section
    3(b) offers different avenues for resolving those excess imbalances
    to shippers, depending upon whether or not the shipper has an
    adequate Rate Schedule FSS balance or not. Both subsets of shippers
    however, are permitted the flexibility to incur imbalances up to the
    specified level. The Commission will not require any additional
    changes to Columbia's tariff in this regard.

    **3. [Line T-14 - Abandonment and Lease]{.underline}**

87. We find that Columbia's proposed abandonment by sale of its Line
    T-14 to Hardy Storage is in the public convenience and necessity and
    will therefore approve the abandonment.

88. Hardy Storage has ensured that its customers do not bear the costs
    attributable to those portions of the facilities required to
    continue the movement of gas to Washington Gas on new Lines M1 and
    M2 from the Hampshire Gas' Hampshire Storage. Accordingly, the lease
    agreement does not impact our decision to approve the instant
    proposals. However, we note that the proposed lease must be approved
    by the Commission and Hampshire Gas must have a rate schedule on
    file for service on the leased capacity to the extent it is
    different from its existing rate schedules.

    **M. [Engineering]{.underline}**

89. The Commission's engineering staff analyzed Hardy Storage's and
    Columbia's applications and concludes that if constructed as
    proposed, Hardy Storage's facilities would be able to provide a
    projected 29.6 Bcf of natural gas storage service. The Lost River
    Reservoir is suitable for natural gas storage, with an estimated
    total inventory of 17.35 Bcf at a maximum shut-in wellhead pressure
    of 3,000 psia. The Inkerman Reservoir is suitable for natural gas
    storage, with an estimated total inventory of 12.25 Bcf at a maximum
    shut-in wellhead pressure of 3,000 psia. The two reservoirs together
    are capable of meeting the peak day maximum deliverability of 171
    MMcf/d. The addition of the new Hardy Compressor Station will
    provide an additional 7,100 hp

of compression, enabling Hardy Storage to access and utilize the
approximate 12 Bcf of working gas.

**N. [Part 284 Subpart G Blanket Transportation
Certificate]{.underline}**

90. Hardy Storage has applied in Docket No. CP05-152-000 for a Part 284,
    Subpart G blanket transportation certificate, which would provide
    Hardy Storage certain automatic NGA section 7 natural gas
    transportation authorizations for individual customers under the
    terms of its contracts and tariff. Because Hardy Storage will become
    an interstate pipeline with the issuance of a certificate to
    construct and operate the proposed facilities, and because a Part
    284, Subpart G blanket certificate is required for Hardy Storage to
    offer transportation services, the Commission will issue the
    requested Part 284 certificate authority to Hardy Storage.

    **O.** **[Part 157, Subpart F Blanket Construction
    Certificate]{.underline}**

91. Hardy Storage also has applied in Docket No. CP05-153-000 for a Part
    157, Subpart F blanket construction certificate. Part 157, Subpart F
    blanket certificates accord natural gas pipelines certain automatic
    NGA section 7 facility and service authorizations and allows them to
    make several types of simplified prior notice requests for certain
    minimal section 7 facility and service authorizations. Because Hardy
    Storage will become an interstate pipeline with the issuance of a
    certificate to construct and operate pipeline facilities, we will
    also issue the requested Part 157, Subpart F, blanket certificate to
    Hardy Storage.

    **P. [Environmental Assessment]{.underline}**

92. On October 8, 2004, we issued a Notice of Intent to Prepare an
    Environmental Assessment for the Proposed Hardy Storage Project and
    Virginia Looping Project and Request for Comments on Environmental
    Issues. We received comments from the Natural Resources Conservation
    Service (NRCS), the U.S. Fish and Wildlife Service (FWS) County of
    Shenandoah, County of Louisa, Louisa County Health Department,
    Central Shenandoah Health District, Lord Fairfax Environmental
    Health District, Virginia Council on Indians, National Park Service
    (NPS), Virginia Department of Historic Resources (VADHR), Virginia
    Department of Game and Inland Fisheries (VADGIF), and from one
    affected landowner, Jerome Irick. Commission staff addressed all
    substantive comments in the environmental assessment (EA).

93. Our staff prepared an EA for Columbia's and Hardy Storage's
    proposals. The EA addresses geology and soils, water resources and
    wetlands, vegetation, wildlife, fisheries, threatened and endangered
    species, cultural resources, land use, visual resources, air

quality and noise, polychlorinated biphenyls, reliability and safety,
and alternatives. Eleven comments were filed in response to the EA which
are discussed below.

94. Joyce Doucette states that she is opposed to the project and is
    concerned about the effects on West Virginia's natural resources.
    More specifically, she is concerned with the quality and supply of
    water and soils, and conservation and clean up of rivers and
    streams. The need for the project, its location, and all the
    environmental effects mentioned by Ms. Doucette are discussed in the
    EA The project would convert a partially depleted gas production
    field owned by Columbia into a storage field and would make use of
    existing Columbia right-of-way to the greatest extent practicable to
    minimize impacts to the environment. It is not clear from her
    comment whether Ms. Doucette had received a copy of the EA.
    Accordingly, a copy of the EA is being provided to this commenter.

95. John Ailes of Bailey & Glasser LLP filed comments stating that the
    proposed buffer zones and the storage area need to be better defined
    relative to surface properties; there is a lack of discussion of
    dewatering of the storage field; access roads should have specific
    erosion control measures and reclamation plans; pre-blast surveys
    should be required; and that permits should be obtained for new
    injection wells. He also states that endangered and threatened
    species surveys should be completed prior to construction, and the
    possibility of the migration of stored gas to the surface should be
    discussed.

96. The EA examined and analyzed the surface areas to be encompassed by
    the storage field and buffer zone. Hardy Storage is now in the
    process of more accurately mapping the precise boundaries of the
    surface area and landowners can request this information from Hardy
    Storage when it is available. The final maps will be filed with the
    Commission in accordance with environmental condition 4. It is
    unlikely that dewatering of the storage field would be necessary,
    but if it is necessary, Hardy Storage would obtain the required
    National Pollutant Discharge Elimination (NPDES) permits before
    conducting dewatering activities and construction. Specific erosion
    control plans must be developed for any expected water discharge as
    part of the NPDES permits issued by the states prior to
    construction. These specific plans would be in addition to the
    project-wide erosion control plan reviewed in the EA process. The
    new and existing access roads necessary to construct and operate the
    project will be constructed and maintained like the pipeline
    right-of-way and in accordance with any additional erosion control
    measures specified in the appropriate state Stormwater Permit. All
    access roads will be restored consistent with respective
    landowners\' requests. The environmental inspectors and our
    compliance program will ensure proper erosion control measures are
    in place. Endangered species surveys will be completed before
    construction. The sensitive species review is discussed further
    below.

97. Hardy Storage and Columbia indicate that a blasting plan will be
    developed prior to construction; condition 12 of this order requires
    landowner notification to be included as part of the blasting plan.
    The locations of the gas injection and observation wells are
    indicated on the maps in the EA and Hardy Storage must obtain the
    appropriate permits for them.

98. It is unlikely that stored gas would migrate to the surface since
    the geologic formation to be used for the storage field has held
    natural gas deposits for millions of years. If there had been a
    significant leak in the formation, gas would not have accumulated in
    the formation. Although the injection and observation wells can leak
    if improperly constructed, Hardy Storage will monitor the storage
    field and make well repairs as necessary.

99. Karen L. Garrett states that refueling and storage of hazardous
    materials should not be done within 400 feet of a private well as is
    required for municipal wells. She also has concerns regarding stream
    and river crossings, vegetation, cultural resources, air quality and
    noise, and threatened and endangered species. She requests landowner
    blasting notification and the construction schedule, and expressed
    concern that the pipeline class areas as defined by the U.S.
    Department of Transportation (DOT) should be upgraded as the
    population near the pipelines increase.

100. We have found that the 400 foot and 200 foot buffers for refueling
     and hazardous materials storage for municipal and private wells
     adequately protect wells. Stream and river crossings will be done
     according to our Wetland and Waterbody Construction and Mitigation
     Procedures (Procedures) and as permitted by the state. Landowner
     notification of blasting is required in environmental condition 12
     as part of the blasting plan. Vegetation, cultural resources, air
     quality and noise, and threatened and endangered species are
     discussed in the EA. All permits and clearances must be obtained by
     Hardy Storage and Columbia prior to our granting of construction
     approval. The EA discusses the general construction schedule, but
     this may change based on outstanding surveys that are required and
     permits that must be obtained prior to construction. Columbia has
     filed some additional information discussed below regarding
     compensation for forest clearing. Also, as pipeline class areas
     change as defined by the DOT, Hardy Storage and Columbia are
     required by the DOT to upgrade the pipeline to the new class
     requirement.

101. The Virginia Department of Environmental Quality (VADEQ) comments
     that drinking water resources within three miles of the project
     should be protected from adverse public health impacts, and states
     that the EA does not cover erosion and sediment control and
     stormwater management. VADEQ states that the project should
     minimize air quality impacts and recommends the continued
     coordination with the Virginia Department of Game and Inland
     Fisheries (VADGIF) and the U.S. Fish and Wildlife Service (FWS)
     regarding state and federally listed endangered and threatened
     species. The VADEQ states that Columbia should coordinate with the
     Virginia Karst Program, which it has agreed to do, regarding the
     karst area in the vicinity of the crossing of the North Fork of the
     Shenandoah River. The VADEQ also states that the Virginia
     Department of Historic Resources (DHR) has not yet received the
     Commission's effect determination for the project, a Memorandum of
     Agreement (MOA), or draft treatment plan. The Commission will make
     an effect determination and initiate a MOA following completion of
     all outstanding surveys and evaluations. Columbia has recently
     submitted a draft treatment plan to the DHR.

102. No public water intakes are located three miles downstream of any
     surface water crossing and wells and springs would be protected as
     discussed in the EA. Columbia must comply with Virginia Sediment
     Control Law and would use our Upland Erosion Control, Revegetation
     and Maintenance Plan and Procedures which are referenced in the EA
     and are available on the FERC website. Columbia must also obtain a
     Virginia Pollutant Discharge Elimination System Permit prior to
     construction. Columbia is required to follow Virginia's Regulations
     for Control and Abatement of Air Pollution to minimize air quality
     impacts and will employ measures to reduce fugitive dust as
     discussed in the EA. The EA discusses threatened and endangered
     species, but in addition to that discussion, Columbia would conduct
     loggerhead shrike habitat assessments and would consult with the
     VADGIF on the results of the assessments prior to construction. An
     additional discussion on Virginia big-eared bats and Indiana bats
     is included below in the discussion of the FWS' comments.

103. The VADEQ -- Waste Division states that Columbia needs to conduct
     an environmental investigation on and near the corridor to identify
     any solid waste or hazardous waste sites or issues. Columbia's
     contractor, Environmental Data Resources, Inc. (EDR), performed a
     records review and found four sites of concern within 0.25 of the
     project area, but the project does not cross any of these sites. A
     groundwater and sediment contamination file review was also
     conducted at the VADEQ. The review concurred with EDR's findings.

104. The U.S. Department of the Interior, National Park Service, and
     Shenandoah National Park ask what potential impact the proposed
     project would have on the Shenandoah National Park and ask how
     Columbia could increase flow without constructing a pipeline within
     the park. As proposed, no construction would take place within the
     park, and we anticipate no significant affects to the park during
     construction or operation of the facilities. Columbia filed
     additional information stating that the project meets current
     capacity requirements without its having to construct additional
     pipeline within the park at this time. A single existing pipeline
     through the park does create an area of increased pipeline pressure
     drop, which Columbia is compensating for by looping the project. If
     additional volumes of gas and new pipeline facilities are required
     on Columbia's system in the future, an environmental assessment of
     the facilities would be prepared at that time.

105. The United States Department of the Interior, U.S. Geological
     Survey (USGS), comments that the EA on page B-2 states that
     "\[a\]ccording to the USGS, only 2 to 4 percent of seismic activity
     is predicted for this region (Frankel et al, 2002)." The USGS
     states that this information would be more correctly stated as,
     "\[t\]here is a 10 percent chance of exceeding peak ground
     acceleration values of 2 to 4 percent in 50 years." We agree this
     is a better way to state this information.

106. The United States Department of the Interior, FWS concurs with our
     determination that the project is not likely to adversely affect
     the bald eagle, the Shenandoah salamander, or the Madison Cave
     isopod. The FWS also states, based on survey reports that the
     Indiana bat does not occur in the project area in West Virginia,
     and that this portion of the project is not likely to adversely
     affect the Indiana bat. The FWS also states that, because surveys
     and consultation with the FWS are not complete in Virginia for the
     Indiana bat, shale barren rock cress, the Virginia big-eared bat,
     Northeastern bulrush, Virginia sneezeweed, dwarf wedgemussle, and
     James spinymussel, it is premature for the Commission to make a
     determination that this project is not likely to adversely affect
     these listed species. As stated in the EA on page B-27, Columbia
     has agreed to conduct surveys for these species which are
     anticipated to be completed in the summer of 2006 and which will be
     provided to the FWS. Environmental condition 15 in this Order
     requires evaluation of avoidance measures if shale barren rock
     cress, northeastern bulrush, and Virginia sneezeweed are found
     during surveys and further coordination with the FWS. Commencement
     of construction will not be authorized until these evaluations have
     been completed.

107. The FWS recommends surveys for the Virginia big-eared bat and
     Indiana bat due to recent findings of maternity roosts in the
     eastern portion of the Indiana bat's range. Surveys would be needed
     to determine whether maternity areas may be within the action area
     for this project. The FWS also recommends surveying for Indiana
     bats in Maddens Cave in Shenandoah County. Therefore, we have added
     the following environmental condition to address the FWS concerns
     for Virginia big-eared bat and Indiana bat:

     Columbia shall conduct mist net surveys for the Virginia big-eared
     bat and Indiana bat and provide the FWS copies of the results when
     completed. Indiana bat surveys for Maddens Cave should be included
     with the mist net survey results. Columbia shall not begin
     construction activities until:

     a\. Columbia files with the Secretary the results of the mist net
     surveys and any comments received from the FWS regarding the
     proposed action;

     b\. the staff completes formal consultation with the FWS, if
     required; and

     c\. Columbia has received written notification from the Director of
     OEP that construction or use of mitigation may begin.

108. Ronald Hillard, West Virginia State Conservationist with the
     Natural Resources Conservation Service (NRCS) states that
     information provided by the Moorefield West Virginia NRCS office
     was addressed in the EA.

109. Larry G. Combs, an affected landowner, filed comments stating that
     he understands the need for energy for public use but feels the
     rights of affected landowners are disregarded and that he has
     concerns about the use of eminent domain. Property rights, eminent
     domain, and landowner agreements with Hardy Storage are beyond the
     scope of the EA, although specific landowner concerns regarding
     construction and property access can be addressed in landowner
     agreements between Hardy Storage and affected landowners. Mr. Combs
     also states that the 100 foot tall repeater tower proposed for an
     adjacent property would be a hazard to his plans for a retirement
     home. No approved plans for a retirement home were provided and we
     do not believe the tower would be a hazard to any future nearby
     homes. All of the repeater tower locations are screened by the
     surrounding forest, so only a portion of the tower may be visible.
     Based on our site visits to the repeater tower sites, we do not
     believe there would be any significant impact to visual resources
     at existing residences located nearby as discussed in the EA.

110. Columbia clarifies the discussion on page B-38 in the EA regarding
     compensation for tree clearing. Columbia states the reference to
     tree clearing should be modified to say that, although Columbia is
     not responsible for compensating landowners for trees within
     Columbia's existing rights-of-way as such trees constitute
     encroachments that inhibit Columbia's ability to safely maintain
     and operate its pipeline(s), Columbia is responsible for
     compensating landowners for trees within the new permanent
     right-of-way and/or temporary construction easements that are
     removed as part of the construction process.

111. Columbia also provided a copy of a letter from the U.S.
     Environmental Protection Agency (EPA) dated September 22, 2003,
     which states that Columbia has demonstrated to the satisfaction of
     the EPA that all requirements for cleanup levels have been met, and
     further removal actions are not required at the Lost River
     Compressor Station. Therefore, since Columbia has documented that
     the contamination at the Lost River Compressor Station has been
     sufficiently remediated, condition 16 in the EA is no longer needed
     and has been deleted.

112. The EPA comments that the Commission should work closely with the
     FWS and the state to comply with the Endangered Species Act. The
     necessary Endangered Species Act consultation is underway with the
     FWS. Condition 15 will ensure that all steps in the consultation
     process, including any outstanding species evaluations, are
     completed before construction begins. We coordinated the sensitive
     species review with the applicable state agencies. Columbia has
     agreed to the protective measures recommended by the Virginia
     Department of Game and Inland Fisheries. The EPA also comments that
     Columbia and Hardy Storage should keep the public informed during
     construction and should implement measures to reduce air quality
     and noise impacts.

113. Condition 12 requires Hardy Storage and Columbia to notify
     residents prior to any blasting. Condition 6 requires that a
     complaint resolution procedure be implemented by the companies.
     Hardy Storage and Columbia would limit construction to daylight
     hours for most of the projects except for well drilling and
     horizontal directional drills which typically require 24 hour a day
     operations until complete. Where noise may be an issue at nearby
     residents for well drilling, directional drills, and at the Hardy
     Compressor Station, environmental conditions 18, 19, and 20 in this
     Order require noise mitigation plans if an equivalent
     daytime-nighttime sound level of 55 decibels is exceeded. Hardy
     Storage and Columbia would minimize air quality impacts as
     described in the EA. The mitigation plan must be filed with the
     Commission.

114. The EPA also asks if wetland classifications were being changed.
     Since most wetlands affected by the projects are presently
     maintained as emergent wetlands the classification and functions
     would not change. Hardy Storage and Columbia must obtain a section
     404 permit from the U.S. Army Corps on Engineers and a section 401
     Water Quality Certification or section 404 Permit from the
     Commonwealth of Virginia which permit wetland disturbances prior to
     construction.

115. Based on the discussion in the EA, we conclude that if constructed
     in accordance with Columbia\'s and Hardy Storage's applications and
     supplements, approval of this proposal would not constitute a major
     federal action significantly affecting the quality of the human
     environment.

116. Any state or local permits issued with respect to the
     jurisdictional facilities authorized herein must be consistent with
     the conditions of this certificate. The Commission encourages
     cooperation between interstate pipelines and local authorities.
     However, this does not mean that state and local agencies, through
     application of state or local laws, may prohibit or unreasonably
     delay the replacement of facilities approved by this
     Commission.[^32] Columbia and Hardy Storage shall notify the
     Commission\'s environmental staff by telephone or facsimile of any
     environmental noncompliance identified by other federal, state, or
     local agencies on the same day that such agency notifies Columbia
     and Hardy Storage. Columbia and Hardy Storage shall file written
     confirmation of such notification with the Secretary of the
     Commission within 24 hours.

117. The Commission on its own motion has received and made a part of
     the record in this proceeding all evidence, including the
     application and exhibits thereto, submitted in support of the
     authorizations sought herein, and upon consideration of the record,

[The Commission orders]{.underline}:

\(A\) In Docket No. CP05-144-000, a certificate of public convenience
and necessity is issued to Columbia authorizing it to construct and
operate its proposed Hardy Transmission Project as described more fully
in this order and in Columbia's application and as modified and
conditioned herein. In Docket No. CP05-151-000, a certificate of public
convenience and necessity is issued to Hardy Storage to construct, own
and operate its proposed Hardy Storage Project as described more fully
in this order and in its application, as modified and conditioned
herein.

\(B\) The certificates issued in Ordering Paragraph (A) are conditioned
on Columbia's and Hardy Storage's compliance with all applicable
Commission regulations under the NGA, particularly the general terms and
conditions set forth in Parts 154, 157, and 284, and paragraphs (a),
(c), (e), and (f) of section 157.20 of the regulations.

\(C\) Hardy Storage's proposed initial rates for firm storage and
transportation services are approved.

\(D\) Columbia's request for a predetermination favoring rolled-in rate
treatment for the associated transportation costs of service is granted.

\(E\) Hardy Storage and Columbia are directed to file actual tariff
sheets to implement their proposals no sooner than 60 days and no later
than 30 days before service commences.

\(F\) The certificates issued in Ordering Paragraph (A) are conditioned
upon Columbia's and Hardy Storage's compliance with the environmental
conditions set forth in the appendix to this order.

\(G\) Columbia's and Hardy Storage's facilities shall be made available
for service within 36 months of the date of the order in this proceeding
as required by section 157.20(b) of the Commission's regulations.

\(H\) Columbia and Hardy Storage shall notify the Commission\'s
environmental staff by telephone and/or facsimile of any environmental
noncompliance identified by other federal, state, or local agencies on
the same day that such agency notifies Columbia and Hardy Storage.
Columbia and Hardy Storage shall file written confirmation of such
notification with the Secretary of the Commission within 24 hours.

\(I\) Columbia and Hardy Storage must execute firm contracts equal to
the level of service and terms of service represented in their precedent
agreements prior to commencing construction.

\(J\) The certificate issued is further conditioned upon the following:

> 1\. Maximum inventory of natural gas stored of the Hardy Storage
> Project shall not exceed the certificated levels of 29,600 MMcf
> comprised of 17,350 MMcf attributable to the Lost River Reservoir and
> 12,250 MMcf capacity at the Inkerman reservoir, at 14.73 psia and 60
> degrees Fahrenheit, and the maximum shut-in wellhead storage pressure
> shall not exceed 3,000 psia, without prior authorization of the
> Commission.
>
> 2\. The Inkerman and Lost River Pools shall be operated in such manner
> as to prevent/minimize gas loss or migration.
>
> 3\. Hardy Storage shall submit semiannual reports (to coincide with
> the termination of the injection and withdrawal cycles) containing the
> following information (volumes shall be stated at 14.73 psia and 60
> degrees Fahrenheit and pressures shall be stated in psia):
>
> \(1\) The daily volumes of natural gas injected into and withdrawn
>
> from the storage reservoir.
>
> \(2\) The volume of natural gas in the reservoirs at the end of the
> reporting period.
>
> \(3\) The maximum daily injection and withdrawal rates experienced
> during the reporting period. Average working pressure on such maximum
> days taken at a central measuring point where the total volume
> injected or withdrawn is measured.
>
> \(4\) Results of any tracer program by which the leakage of injected
> gas may be determined. If leakage of gas exists, the report should
> show the estimated total volume of gas leakage, the volume of recycled
> gas, and the estimated remaining inventory of gas in the reservoir at
> the end of the reporting period.
>
> \(5\) Any surveys of pressures in gas wells, and the results of
> back-pressure tests and inventory verification studies conducted
> during the reporting period.
>
> \(6\) The latest revised structure contour maps showing location of
> the wells and the location of the gas-water contact if one exists.
> These maps need not be filed if there is no material change from the
> maps previously filed.
>
> \(7\) For the reporting period, a summary of wells drilled, worked
> over, or recompleted or worked-over with below ground surface depth of
> formation and casing settings. Additionally, summarize results of
> reservoir characteristics from any logs or cores taken in each well.

\(8\) Discussion of current operating problems and conclusions.

> \(9\) Such other data or reports which may aid the Commission in the
> evaluation of the storage project.
>
> Hardy Storage shall continue to file these reports semiannually until
> the storage inventory volume and pressure have reached or closely
> approximate the maximum permitted in this order. Thereafter, the
> reports shall continue on a semiannual basis for a period of one year.

\(K\) The waivers requested by Hardy Storage are granted.

\(L\) A blanket transportation certificate under Subpart G of Part 284
of the Commission's regulations is issued to Hardy Storage in Docket No.
CP05-152-000.

\(M\) A blanket construction certificate under Subpart F of Part 157 of
the Commission's regulations is issued to Hardy Storage in Docket No.
CP05-153-000.

\(N\) The motion to intervene out of time of Karen L. Garret is granted.

\(O\) Columbia's request for authorization to abandon its Line T-14, as
described above and in its application, is granted.

By the Commission.

( S E A L )

Magalie R. Salas,

Secretary.

**[Appendix]{.underline}**

> As recommended in the EA, this authorization includes the following
> condition(s):

1\. Hardy Storage and Columbia shall follow the construction procedures
and mitigation measures described in their applications and supplements
(including responses to staff data requests) and as identified in the
EA, unless modified by this Order. Hardy Storage and Columbia must:

a\. request any modification to these procedures, measures, or
conditions in a filing with the Secretary;

b\. justify each modification relative to site-specific conditions;

c\. explain how that modification provides an equal or greater level of
environmental protection than the original measure; and

d\. receive approval in writing from the Director of Office of Energy
Projects (OEP) **before using that modification.**

2\. The Director of OEP has delegation authority to take whatever steps
are necessary to ensure the protection of all environmental resources
during construction and operation of the project. This authority shall
allow:

a\. the modification of conditions of this Order; and

b\. the design and implementation of any additional measures deemed
necessary (including stop work authority) to assure continued compliance
with the intent of the environmental conditions as well as the avoidance
or mitigation of adverse environmental impact resulting from project
construction and operation.

3\. **Prior to any construction**, Hardy Storage and Columbia shall file
an affirmative statement with the Secretary, certified by a senior
company official, that all company personnel, environmental inspectors,
and contractor personnel will be informed of the environmental
inspector\'s authority and have been or will be trained on the
implementation of the environmental mitigation measures appropriate to
their jobs **before** becoming involved with construction and
restoration activities.

4\. The authorized facility locations shall be as shown in the EA, as
supplemented by filed alignment sheets. **As soon as they are available,
and before the start of construction**, Columbia and Hardy Storage shall
file with the Secretary any revised detailed survey alignment
maps/sheets at a scale not smaller than 1:6,000 with station positions
for all facilities approved by this Order. All requests for
modifications of environmental conditions of this Order or site-specific
clearances must be written and must reference locations designated on
these alignment maps/sheets.

> Hardy Storage's and Columbia's exercise of eminent domain authority
> granted under Natural Gas Act (NGA) section 7(h) in any condemnation
> proceedings related to this Order must be consistent with these
> authorized facilities and locations. Hardy Storage's and Columbia's
> right of eminent domain granted under the NGA section 7(h) does not
> authorize them to increase the size of their natural gas pipelines to
> accommodate future needs or to acquire a right-of-way (ROW) for a
> pipeline to transport a commodity other than natural gas.

5.  Hardy Storage and Columbia shall file with the Secretary detailed
    alignment maps/sheets and aerial photographs at a scale not smaller
    than 1:6,000 identifying all route realignments or facility
    relocations, and staging areas, pipe storage yards, new access
    roads, and other areas that would be used or disturbed and have not
    been previously identified in filings with the Secretary. Approval
    for each of these areas must be explicitly requested in writing. For
    each area, the request must include a description of the existing
    land use/cover type, and documentation of landowner approval,
    whether any cultural resources or federally listed threatened or
    endangered species would be affected, and whether any other
    environmentally sensitive areas are within or abutting the area. All
    areas shall be clearly identified on the maps/sheets/aerial
    photographs. Each area must be approved in writing by the Director
    of OEP **before construction in or near that area**.\
    \
    This requirement does not apply to extra workspace allowed by the
    *Upland Erosion Control, Revegetation, and Maintenance Plan,* minor
    field realignments per landowner needs, and requirements that do not
    affect other landowners or sensitive environmental areas such as
    wetlands.\
    \
    Examples of alterations requiring approval include all route
    realignments and facility location changes resulting from:

a\. implementation of cultural resources mitigation measures;

b\. implementation of endangered, threatened, or special concern species
mitigation measures;

c\. recommendations by state regulatory authorities; and

d\. agreements with individual landowners that affect other landowners
or could affect sensitive environmental areas.

6\. Hardy Storage and Columbia shall develop and implement an
environmental complaint resolution procedure. The procedure shall
provide landowners with clear and simple directions for identifying and
resolving their environmental mitigation problems/concerns during
construction of the project and restoration of the ROW. **Prior to
construction**, Hardy Storage and Columbia shall mail the complaint
procedures to each landowner whose property would be crossed by the
project.

a\. In their letters to affected landowners, Hardy Storage and Columbia
shall:

\(1\) provide a local contact that the landowners should call first with
their concerns; the letters should indicate how soon a landowner should
expect a response;

\(2\) provide Hardy Storage's or Columbia's Hotline phone number and
instruct the landowners that, if they are not satisfied with the
response, they should call Hardy Storage or Columbia \'s Hotline; the
letter should indicate how soon to expect a response; and

\(3\) instruct the landowners that, if they are still not satisfied with
the response from Hardy Storage or Columbia \'s Hotline, they should
contact the Commission\'s Enforcement Hotline at (888) 889-8030 or at
<hotline@ferc.gov>.

b\. In addition, Hardy Storage and Columbia shall include in their
weekly status reports a copy of a table that contains the following
information for each problem/concern:

\(1\) the date of the call;

\(2\) the identification number from the certificated alignment sheets
of the affected property;

\(3\) the description of the problem/concern; and

\(4\) an explanation of how and when the problem was resolved, will be
resolved, or why it has not been resolved.

7\. **Within 60 days of the acceptance of this certificate and before
construction begins**, Hardy Storage and Columbia shall file an initial
Implementation Plan with the Secretary for review and written approval
by the Director of OEP describing how Hardy Storage and Columbia will
implement the mitigation measures required by this Order. Hardy Storage
and Columbia must file revisions to the plan as schedules change. The
plan shall identify:

a\. how Hardy Storage and Columbia will incorporate these requirements
into contract bid documents, construction contracts (especially penalty
clauses and specifications), and construction drawings so that the
mitigation required at each site is clear to onsite construction and
inspection personnel;

b\. the number of environmental inspectors assigned per project area,
and how the company will ensure that sufficient personnel are available
to implement the environmental mitigation;

c\. the company personnel, including environmental inspectors and
contractors, who will receive copies of the appropriate material;

d\. what training and instruction Hardy Storage and Columbia will give
to all personnel involved with the construction and restoration (initial
and refresher training as the project progresses and personnel change),
with the opportunity for OEP staff to participate in the training
session(s);

e\. the company personnel (if known) and specific portion of Hardy
Storage's and Columbia's organizations having responsibility for
compliance;

f\. the procedures (including the use of contract penalties) Hardy
Storage and Columbia will follow if noncompliance occurs; and

g\. for each discrete facility, a Gantt or PERT chart (or similar
project scheduling diagram), and dates for:

\(1\) the completion of all required surveys and reports;

\(2\) the mitigation training of onsite personnel;

\(3\) the start of construction; and

\(4\) the start and completion of restoration.

8\. Hardy Storage and Columbia shall employ at least one environmental
inspector per construction spread. The environmental inspector shall be:

a\. responsible for monitoring and ensuring compliance with all
mitigation measures required by this Order and other grants, permits,
certificates, or other authorizing documents;

b\. responsible for evaluating the construction contractor\'s
implementation of the environmental mitigation measures required in the
contract and any other authorizing document;

c\. empowered to order correction of acts that violate the environmental
conditions of this Order, and any other authorizing document;

d\. a full-time position, separate from all other activity inspections;

e\. responsible for documenting compliance with the environmental
conditions of this Order, as well as any environmental conditions/permit
requirements imposed by other federal, state, or local agencies; and

f\. responsible for maintaining status reports.

9\. Hardy Storage and Columbia shall file updated status reports
prepared by the environmental inspector with the Secretary on a
**weekly** basis **until all construction and restoration activities are
complete**. On request, these status reports will also be provided to
other federal and state agencies with permitting responsibilities.
Status reports shall include:

a\. the current construction status of each spread, work planned for the
following reporting period, and any schedule changes for stream
crossings or work in other environmentally sensitive areas;

b\. a listing of all problems encountered and each instance of
noncompliance observed by the environmental inspector(s) during the
reporting period (both for the conditions imposed by the Commission and
any environmental conditions/permit requirements imposed by other
federal, state, or local agencies);

c\. corrective actions implemented in response to all instances of
noncompliance, and their cost;

d\. the effectiveness of all corrective actions implemented;

e\. a description of any landowner/resident complaints which may relate
to compliance with the requirements of this Order, and the measures
taken to satisfy their concerns; and

f\. copies of any correspondence received by Hardy Storage and Columbia
from other federal, state or local permitting agencies concerning
instances of noncompliance, and Hardy Storage's and Columbia's
responses.

10\. Hardy Storage and Columbia must receive written authorization from
the Director of OEP **before commencing service** on their projects.
Such authorization will only be granted following a determination that
rehabilitation and restoration of the sites are proceeding
satisfactorily.

11\. **Within 30 days of placing the certificated facilities in
service**, Hardy Storage and Columbia shall file an affirmative
statement with the Secretary, certified by a senior company official:

a\. that the facilities have been constructed in compliance with all
applicable conditions, and that continuing activities will be consistent
with all applicable conditions; or

b\. identifying which of the certificate conditions Hardy Storage and
Columbia have complied with or will comply with. This statement shall
also identify any areas along the ROW where compliance measures were not
properly implemented, if not previously identified in filed status
reports, and the reason for noncompliance.

12\. Hardy Storage and Columbia shall include procedures for notifying
residents prior to blasting in the blasting plan. The blasting plan
shall be filed with the Secretary for review and approval of the
Director of OEP **prior to construction.**

13\. Prior to construction, Columbia shall file any comments received
from the Natural Heritage Karst Program of Virginia on the geophysical
investigation results and recommendations concerning the HDD crossing
plans for the North Fork of the Shenandoah River and the adjacent karst
area between MP 12.3 and 12.4. Columbia shall also file its HDD
contingency plans for the North Fork of the Shenandoah River and
adjacent karst area for **review and approval by the Director of OEP**.

14\. Columbia shall submit a Directional Drill Contingency Plan for the
North Fork of the Shenandoah River. The Directional Drill Contingency
Plan shall address how Columbia:

a\. would handle any inadvertent release of drilling mud into the
waterbody or areas adjacent to the waterbody, including procedures to
contain inadvertent releases;

b\. would seal the abandoned drill hole; and

c\. clean up any inadvertent releases.

> Columbia shall file the plan with the Secretary for review and written
> approval by the Director of OEP prior to construction.

15\. Columbia shall evaluate whether shale barren rock cress,
northeastern bulrush, and Virginia sneezeweed could be avoided by a
re-route, use of a horizontal bore, or other avoidance measures and
provide that information to the U.S. Fish and Wildlife Service (FWS).
Columbia shall not begin construction activities until:

a\. Columbia files with the Secretary the results of the evaluation and
any comments received from the FWS regarding the proposed action;

b\. the staff completes formal consultation with the FWS, if required;
and

c\. Columbia has received written notification from the Director of OEP
that construction or use of mitigation may begin.

16\. Columbia shall conduct mist net surveys for the Virginia big-eared
bat and Indiana bat and provide the FWS copies of the results when
completed. Indiana bat surveys for Maddens Cave should be included with
the mist net survey results. Columbia shall not begin construction
activities until:

a\. Columbia files with the Secretary the results of the mist net and
cave surveys and any comments received from the FWS regarding the
proposed action;

b\. the staff completes formal consultation with the FWS, if required;
and

c\. Columbia has received written notification from the Director of OEP
that construction or use of mitigation may begin.

17\. Columbia shall defer construction and use of facilities and
staging, storage, and temporary work areas or new or to-be-improved
access roads until:

a\. Columbia files the Virginia SHPO's comments on the Phase I-II
Cultural Resource Survey and Testing report (including any comments on
the HDD at site 44SH0385, and boring of the segment of the Southern
Railroad);

b\. Columbia files a treatment plan for site 44GN 115, and any other
sites requiring treatment plans, and the Virginia SHPO's comments on the
plans;

c\. Columbia files a report for any areas remaining to be surveyed (such
as the staging areas near site 44GN117), and the Virginia SHPO's
comments on the report;

d\. Columbia files the results of Phase II evaluation of the historic
component of site 44GN117, and deep testing at the North Fork of the
Shenandoah River, and the Virginia SHPO's comments; and

e\. the Director of OEP reviews and approves all reports and plans and
notifies Columbia in writing that it may proceed.

[]{.mark}

> All material filed with the Commission containing location, character,
> and ownership information about cultural resources must have the cover
> and any relevant pages therein clearly labeled in bold lettering:
> **"CONTAINS PRIVILEGED INFORMATION -- DO NOT RELEASE."**

18\. Hardy Storage shall file a noise survey with the Secretary **no
later than 60 days** after placing the Hardy Compressor Station in
service. If the noise attributable to the operation of all of the
equipment at the Hardy Compressor Station at full load exceeds an
equivalent daytime-nighttime sound level (L~dn~) of 55 decibels (dBA) at
any nearby noise sensitive area (NSA), Hardy Storage shall install
additional noise controls to meet the level **within 1 year** of the
in-service date. Hardy Storage shall confirm compliance with the L~dn~
of 55 dBA requirement by filing a second noise survey with the Secretary
**no later than 60 days** after it installs the additional noise
controls.

19\. Prior to well drilling, Hardy Storage shall file with the Secretary
a drilling noise mitigation plan for review and written approval by the
Director of OEP**.** This plan shall specify all noise mitigation
equipment necessary to reduce the noise from drilling operations at the
nearest NSAs to 55 dBA L~dn~ and how Hardy Storage would monitor noise
levels during drilling activities.

20\. Prior to construction, Columbia shall file with the Secretary a
horizontal directional drill (HDD) noise mitigation plan for review and
written approval by the Director of OEP. This plan shall specify all
noise mitigation equipment necessary to reduce the noise from HDD
operations at the nearest NSAs to 55 dBA L~dn~ and how Columbia would
monitor noise levels during HDD activities.

[^1]: Columbia requests section 7(b) authorization to abandon by sale a
    portion of Line T-14 that it states was misclassified as a
    jurisdictional Transmission Plant asset in the year 2000. Upon
    abandonment of this portion of Line T-14, Line T-14 will become a
    jurisdictional asset of Hardy.

[^2]: *Saltville Gas Storage Co., L.L.C.*, 107 FERC ¶ 61,267*, reh\'g
    granted in part and denied in part*, 109 FERC ¶ 61,200 (2004)
    (*Saltville*).

[^3]: 107 FERC at P 33 (emphasis added); *see generally, Midwest Gas
    Storage, Inc.*, 55 FERC ¶ 61,140 (1991) (approving phased rates for
    storage service in which the capacity costs for each phase are based
    on the maximum annual storage volumes, not on working gas capacity).

[^4]: *Blue Lake Gas Storage Co.*, 96 FERC ¶ 61,164 (2001); *Steuben Gas
    Storage Co.,* 96 FERC ¶ 61,004 (2001).

[^5]: *See, e.g.,* 18 C.F.R. § 284.12(c)(2)(iii) (2004); 96 FERC at
    61,728; 96 FERC at 61,012.

[^6]: Transportation for the leased capacity will occur on Line T-14
    from the Hampshire Storage Field, then on Line M2 and M1 prior to
    delivery at the Lost River Compressor Station.

[^7]: *Citing Dominion Transmission, Inc.*, 99 FERC ¶ 61,367 at Ps
    65-68, *reh'g denied*, 101 FERC ¶ 61,047 at Ps 8-15 (2002);
    *Southern LNG Inc*., 103 FERC ¶ 61,029 at Ps 41-43 (2003);
    *Chandeleu Pipe Line Co.*, 108 FERC ¶ 61,181 at Ps 9-10 (2004).

[^8]: Piedmont Natural Gas Company, Inc., PSEG Energy Resources & Trade
    LLC, UGI Utilities, Inc., New Jersey Natural Gas Company, NiSource
    Distribution Companies, Virginia Power Energy Marketing, Inc. UGI
    Energy Services, Inc., Baltimore Gas and Electric Company, Columbia
    Gas Transmission Corporation, Transcontinental Gas Pipeline
    Corporation, Virginia Natural Gas and Pivotal Utility Holdings, Inc.
    d/b/a Elizabethtown Gas, Delmarva Power & Light Company,
    Constellation NewEnergy-Gas Division, LLC, Hampshire Gas Company,
    City of Charlottesville, Virginia, Washington Gas Light, and Orange
    and Rockland Utilities, Inc.

[^9]: Timely unopposed motions to intervene and timely notices of
    intervention are granted by operation of Rule 214 of the
    Commission's Rules of Practice and Procedure. 18 CFR § 385.214
    (2005).

[^10]: 18 C.F.R. § 385.214(d) (2005).

[^11]: 18 C.F.R. § 385.213(a)(3)(2005). Rule 213 does not prohibit
    answers to comments or requests for clarification.

[^12]: *Certification of New Interstate Natural Gas Pipeline Facilities*
    (Certificate Policy Statement), 88 FERC ¶ 61,227 (1999), *order
    clarifying statement of policy*, 90 FERC ¶ 61,128, *order further
    clarifying statement of policy*, 92 FERC ¶ 61,094 (2000).

[^13]: *See* Columbia's Exhibit N. Additionally, the looping of Lines
    WB-2-VA and VM-109 will contribute to enhanced reliability and
    flexibility of service through the creation of additional capacity
    on which existing customers may draw during off-peak periods.

[^14]: *Corpus Christi LNG, L.P. Cheniere Corpus Christi Pipeline
    Company*, 111 FERC ¶ 61,081 (2005) (*Cheniere*).

[^15]: See *Midwest Gas Storage Inc.,* 55 FERC 61,140 (1991) and
    *Steuben Gas Storage Company,* 52 FERC ¶ 61,287 (1990), *Order
    Granting in Part and Denying in Part Rehearing*, 53 FERC ¶ 61,102
    (1990).

[^16]: *See, e.g., Colorado Interstate Gas Co.,* 105 FERC ¶ 61,095
    (2003)

[^17]: *See e.g., Lakehead Pipe Line Company, L. P.*, 71 FERC ¶ 61,338
    (1995), *rehearing denied*, 75 FERC ¶ 61,181 (1998); *Chevron U.S.A.
    Inc., et al.*, 81 FERC ¶ 61,183 at 61,806 (1997) ; *Nautilus
    Pipeline Company, L.L.C.,* 78 FERC ¶ 61,325 at 62,389 (1997); and
    *Garden Banks Gas Pipeline, LLC*, 78 FERC ¶ 61,066 at 61,239 (1997).

[^18]: 374 F.3d 1263 (D.C. Cir. 2004)

[^19]: 111 FERC ¶ 61,139 (2005).

[^20]: *See, e.g., Saltville Gas Storage Co. LLC,* 109 FERC ¶ 61,200 at
    PP 23-24 (2004).

[^21]: Hardy Storage states that the remaining 11.4 Bcf of gas is not
    economically recoverable and will remain in the field as native gas
    at no cost to its customers.

[^22]: Under section 7(h) of the NGA, when the certificate holder cannot
    acquire rights-of-way by contract or is unable to agree with the
    property owner on the amount of compensation, the certificate holder
    may acquire the property rights by exercising the right of eminent
    domain in a court action. It is incumbent upon the applicant to make
    good faith efforts to negotiate with landowners for any needed
    rights. However, if the parties cannot reach agreement, issues of
    compensation for land taken by a pipeline under the eminent domain
    provisions of the NGA are matters for state or federal court.

[^23]: *See Columbia Gas Transmission Corp.,* 64 FERC ¶ 61,060 at p.
    61,511, *order on reh'g,* 64 FERC ¶ 61,365 at pp. 63,504-05 (1993).

[^24]: *Id.*

[^25]: Hardy FERC Gas Tariff, Pro Forma Original Volume No. 1, Original
    Sheet No. 21.

[^26]: Hardy FERC Gas Tariff, Pro Forma Original Volume No. 1, Original
    Sheet No. 130.

[^27]: *See, e.g., Natural Gas Pipeline Co. of America*, 101 FERC ¶
    61,200 at P 110 (2002), *reh'g denied*, 103 FERC ¶ 61,174 (2003).

[^28]: Piedmont acknowledges that section 17.3 provides Piedmont the
    relief it seeks, but then shifts the focus away from this relief by
    arguing that an OFO might compromise its operational and economic
    business plan. However, a failure by Piedmont to comply with a
    properly issued OFO in an emergency situation under circumstances
    not excused by section 17.3 would pose grave threats to every
    customer's ability to inject or withdraw its gas. The Commission
    should not impose such a risk on the customers of Piedmont,
    Charlottesville, Washington Gas, etc. *See, Columbia Gas
    Transmission Corp.,* 104 FERC ¶ 61,168 at P 29 (2003) (rejecting
    attempts to restrict OFO authority on the ground that "Columbia must
    have reasonable discretion to maintain system integrity" and finding
    that the parties, if they feel Columbia is implementing its OFO
    procedures in an arbitrary and discriminatory manner, can file a
    complaint with the Commission).

[^29]: **^?^** *See* comments of Washington Gas at p.4 and Piedmont at
    p. 8 and Charlottesville's protest at p. 22.

[^30]: *See,* Rate Schedule FSS, sections 7(d) and (e), Second Revised
    Sheet No. 170. *Columbia Gas Transmission Corp.,* 100 FERC ¶ 61,084
    at P 200 (2002) (This new \"critical day\" provision complies with
    the requirement that penalties should not be imposed unless a
    pipeline\'s system integrity is threatened).

[^31]: Hardy FERC Gas Tariff, Pro Forma Original Volume No. 1, Original
    Sheet No. 23

[^32]: **^?^***See, e.g.*, *Schneidewind v. ANR Pipeline Co.*, 485 U.S.
    293 (1988); *National Fuel Gas Supply v. Public Service Commission*,
    894 F.2d 571 (2d Cir. 1990); and *Iroquois Gas Transmission System,
    L.P., et al.*, 52 FERC ¶ 61,091 (1990) and 59 FERC ¶ 61,094 (1992).