Document ID: FERC-2006-1255-0002
Agency: ferc
Document Type: Rule
Title: Revisions to the Blanket Certificate Regulations and Clarification Regarding Rates
Posted Date: 2006-10-31T05:00Z

[Federal Register: October 31, 2006 (Volume 71, Number 210)]
[Rules and Regulations]               
[Page 63680-63694]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31oc06-6]                         

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 157

[Docket No. RM06-7-000; Order No. 686]

 
Revisions to the Blanket Certificate Regulations and 
Clarification Regarding Rates

October 19, 2006.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is 
amending its blanket certification regulations to expand the scope and 
scale of activities that may be undertaken pursuant to blanket 
certificate authority. The Commission is expanding the types of natural 
gas projects permitted under blanket certificate authority and 
increasing the cost limits that apply to blanket projects. In addition, 
the Commission clarifies that a natural gas company is not necessarily 
engaged in an unduly discriminatory practice if it charges different 
customers different rates for the same service based on the date that 
customers commit to service. Rather than rely on the more demanding 
process of submitting an application under section 7(c) of the Natural 
Gas Act for certificate authorization for every project, the revised 
regulations will allow interstate natural gas pipelines to employ the 
streamlined blanket certificate procedures for larger projects and for 
a wider variety of types of projects, thereby increasing efficiencies, 
and decreasing time and costs, associated with the construction and 
maintenance of the nation's natural gas infrastructure.

DATES: The rule will become effective January 2, 2007.

FOR FURTHER INFORMATION CONTACT: 

Gordon Wagner, Office of the General Counsel, Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426. 
gordon.wagner@ferc.gov. (202) 502-8947.

Michael McGehee, Office of Energy Projects, Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426. 
michael.mcgehee@ferc.gov. (202) 502-8962.

SUPPLEMENTARY INFORMATION: 

Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G. 
Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff.

    1. On June 16, 2006, the Federal Energy Regulatory Commission 
(Commission) issued a Notice of Proposed Rulemaking (NOPR) in this 
proceeding.\1\ In the NOPR, the Commission proposed to amend its Part 
157, Subpart F, regulations to expand the scope and scale of activities 
that

[[Page 63681]]

may be undertaken pursuant to blanket certificate authority and 
clarified that existing Commission policies permit natural gas 
companies to charge different rates to different classes of customers. 
This Final Rule considers comments submitted in response to the NOPR, 
and as a result, makes certain relatively minor modifications to the 
regulatory revisions described in the NOPR, and affirms the 
clarification regarding rate treatment described in the NOPR.
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    \1\ 71 FR 36276 (June 26, 2006); FERC Stats. & Regs. ] 32,606 
(2006); 115 FERC ] 61,338 (2006).
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I. Background

    2. A natural gas company must obtain a certificate of public 
convenience and necessity pursuant to section 7(c) of the Natural Gas 
Act (NGA) to construct, acquire, alter, abandon, or operate 
jurisdictional gas facilities or to provide jurisdictional gas 
services. Once issued a case-specific NGA section 7(c) certificate, a 
gas company may also obtain a blanket certificate under NGA section 
7(c) and Part 157, Subpart F, of the Commission's regulations to 
construct, acquire, alter, or abandon certain types of facilities 
without the need for further case-by-case certificate authorization for 
each particular project.\2\ Currently, blanket activities are limited 
to a maximum cost of $8,200,000 per project undertaken without prior 
notice (also referred to as self-implementing or automatic 
authorization projects) and $22,700,000 per project undertaken subject 
to prior notice.\3\ Blanket certificate authority only applies to a 
restricted set of facilities and services, and currently does not 
extend to mainlines, storage field facilities, and facilities receiving 
gas from a liquefied natural gas (LNG) plant or a synthetic gas plant.
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    \2\ Certain activities are exempted from the certificate 
requirements of NGA section 7(c). For example, 18 CFR 2.55 in the 
Commission's regulations exempts auxiliary installations and the 
replacement of physically deteriorated or obsolete facilities, and 
Part 284, Subpart I, of the regulations provides for the 
construction and operation of facilities needed to alleviate a gas 
emergency.
    \3\ These are the current cost limits for calendar year 2006. 
Cost limits are adjusted annually. See 18 CFR 157.208(d), Table I 
(2006), as updated. As noted in the NOPR, in response to the impacts 
of hurricanes Katrina and Rita, these cost limits have been 
temporarily doubled for blanket projects that are built and placed 
into service between November 2005 and February 2007 to increase 
access to gas supplies. In addition, blanket certificate authority 
has been temporarily extended to cover facilities that would 
otherwise require case-specific authorization, namely, an extension 
of a mainline; a facility, including compression and looping, that 
alters the capacity of a mainline; and temporary compression that 
raises the capacity of a mainline. See Expediting Infrastructure 
Construction To Speed Hurricane Recovery, 113 FERC ] 61,179 (2005) 
and 114 FERC ] 61,186 (2006).
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    3. This Final Rule expands the scope of activities that can be 
undertaken pursuant to blanket authority by (1) increasing the project 
cost limit to $9,600,000 for an automatic authorization project and 
$27,400,000 for a prior notice project \4\ and (2) expanding the types 
of facilities that may be acquired, constructed, modified, replaced, 
abandoned, and operated under blanket certificate authority to include 
mainline facilities, certain LNG and synthetic gas facilities, and 
certain storage facilities. In addition, the Commission clarifies that 
a natural gas company is not necessarily engaged in an unduly 
discriminatory practice if it charges different customers different 
rates for the same service based on the date that customers commit to 
service.
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    \4\ Upon the effective date of this Final Rule, these higher 
project cost limits will be substituted for the amounts that now 
appear for the current calendar year in 18 CFR 157.208(d), Table I, 
with these higher amounts then subject to the annual inflation 
adjustment.
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II. Notice and Comment

A. Petition To Expand the Blanket Certificate Program and Clarify 
Criteria Defining Just and Reasonable Rates

    4. On November 22, 2005, the Interstate Natural Gas Association of 
America (INGAA) and the Natural Gas Supply Association (NGSA) jointly 
filed a petition under Sec.  385.207(a) of the Commission's regulations 
proposing that the blanket certificate provisions be expanded to 
include mainline facilities, LNG takeaway facilities, and certain 
underground storage field facilities which are currently excluded from 
the blanket certificate program, and that the cost limits for all 
categories of blanket projects be raised. Petitioners also argue in 
favor of preferential rate treatment for ``foundation shippers,'' i.e., 
customers that sign up early for firm service and thereby establish the 
financial foundation for a new project, and seek assurance that 
providing customers that commit early to a proposed project a more 
favorable rate than customers that seek service later will not be 
viewed as unduly discriminatory.
    5. Notice of the INGAA/NGSA petition was published in the Federal 
Register on December 9, 2005,\5\ and comments on the petition were 
filed by the American Gas Association (AGA); American Public Gas 
Association (APGA); Anadarko Petroleum Corporation (Anadarko); Devon 
Energy Corporation (Devon); Duke Energy Gas Transmission Corporation 
(Duke); Enstor Operating Company, LLC (Enstor); Honeoye Storage 
Corporation (Honeoye Storage); Illinois Municipal Gas Agency (Illinois 
Municipal); Independent Petroleum Association of America (IPAA); Kinder 
Morgan Interstate Gas Transmission, LLC (Kinder Morgan); NiSource Inc. 
(NiSource); Process Gas Consumers Group (Process Gas Consumers); Public 
Service Commission of New York (PSCNY); and Sempra Global (Sempra).
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    \5\ 70 FR 73232 (Dec. 9, 2005).
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B. Notice of Proposed Rulemaking

    6. After consideration of the petition and comments thereto, the 
Commission issued a NOPR that (1) proposed adopting the petitioners' 
requested regulatory revisions, with relatively minor modifications, 
and (2) clarified that the petitioners' hypothetical tiered rate 
structure for a new project could be accepted under the Commission's 
current policies. Notice of the NOPR was published in the Federal 
Register on June 29, 2006.\6\ Comments on the NOPR were filed by the 
AGA; APGA; Boardwalk Pipeline Partners, LP (Boardwalk); Consolidated 
Edison Company of New York, Inc. (Con Ed) jointly with Orange and 
Rockland Utilities, Inc. (Orange and Rockland); Dominion Transmission, 
Inc., Dominion Cove Point LNG, LP, and Dominion South Pipeline Company, 
LP (Dominion); Duke; HFP Acoustical Consultants Inc. (HFP Acoustical); 
INGAA; IPAA; NGSA; Process Gas Consumers; Sempra; and Williston Basin 
Interstate Pipeline Company (Williston). Further comments were filed by 
INGAA jointly with NGSA, and by AGA.
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    \6\ 71 FR 36276 (June 26, 2006).
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III. Discussion

    7. The blanket certificate program was designed to provide an 
administratively efficient means to authorize a generic class of 
routine activities, without subjecting each minor project to a full, 
case-specific NGA section 7 certificate proceeding. In 1982, in 
instituting the blanket certificate program, the Commission explained 
the new program as follows:

    [T]he final regulations divide the various actions that the 
Commission certificates into several categories. The first category 
applies to certain activities performed by interstate pipelines that 
either have relatively little impact on ratepayers, or little effect 
on pipeline operations. This first category also includes minor 
investments in facilities which are so well understood as an 
established industry practice that little scrutiny is required to 
determine their compatibility with the public convenience and 
necessity. The second category of activities provides for a notice 
and protest procedure and comprises certain activities in which 
various interested parties might have a concern. In such cases there 
is a need to

[[Page 63682]]

provide an opportunity for a greater degree of review and to provide 
for possible adjudication of controversial aspects. Activities not 
authorized under the blanket certificate are those activities which 
may have a major potential impact on ratepayers, or which propose 
such important considerations that close scrutiny and case-specific 
deliberation by the Commission is warranted prior to the issuance of 
a certificate.\7\

    \7\ 47 FR 24254 (June 4, 1982).
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    8. The Commission continues to apply the above criteria in an 
effort to distinguish those types of activities that may appropriately 
be constructed under blanket certificate authority from those projects 
that merit closer, case-specific scrutiny due to their potentially 
significant impact on rates, services, safety, security, competing 
natural gas companies or their customers, or on the environment. The 
Commission believes the regulatory revisions put in place by this Final 
Rule are consistent with the above-described rationale for and 
constraints on the blanket certificate program.
    9. In addition, ``[u]nder section 7 of the NGA, pursuant to which 
the blanket certificate rule is promulgated,'' the Commission has ``an 
obligation to issue certificates only where they are required by the 
public convenience and necessity. The blanket certificate rules set out 
a class of transactions, subject to specific conditions, that the 
Commission has determined to be in the public convenience and 
necessity.'' \8\ As discussed in the NOPR, and as further explained 
below, the Commission believes that the class of blanket-eligible 
transactions can be enlarged consistent with its statutory obligation 
to affirm that each new project or service is required by the public 
convenience and necessity.
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    \8\ Regulation of Natural Gas Pipelines After Partial Wellhead 
Decontrol, Order No. 436, 50 FR 42408 (Oct. 18, 1985), FERC Stats. & 
Regs. ] 30,665 at 31,554 (1985), vacated and remanded, Associated 
Gas Distributors v. FERC, 824 F.2d 981 (D.C. Cir. 1987), cert. 
denied, 485 U.S. 1006 (1988), readopted on an interim basis, Order 
No. 500, 52 FR 30334 (Aug. 14, 1987), FERC Stats. & Regs. ] 30,761 
(1987), remanded, American Gas Association v. FERC, 888 F.2d 136 
(D.C. Cir. 1989), readopted, Order No. 500-H, 54 FR 52344 (Dec. 21, 
1989), FERC Stats. & Regs. ] 30,867 (1989), reh'g granted in part 
and denied in part, Order No. 500-I, 55 FR 6605 (Feb. 26, 1990), 
FERC Stats. & Regs. ] 30,880 (1990), aff'd in part and remanded in 
part, American Gas Association v. FERC, 912 F.2d 1496 (D.C. Cir. 
1990), cert. denied, 111 S.Ct. 957 (1991).
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A. Proposed Regulatory Revisions, Comments, and Commission Response

    10. The Commission proposes to expand the scope of blanket 
certificate activities to include facilities and services that have 
heretofore been excluded from the blanket program and to expand the 
scale of blanket certificate activities by raising the current project 
cost limits.

B. Expanding Blanket Authority to Cover Currently Excluded Facilities

    11. The Final Rule adds Sec. Sec.  157.210, .212, and .213 to 
include, respectively, certain mainline, LNG and synthetic gas, and 
storage facilities within the blanket certificate program. As discussed 
in the NOPR, these facilities were initially barred from the blanket 
program out of concern that their cost and operation could adversely 
impact existing customers' rates and services. These concerns remain 
valid, and in addition, there has been increased attention to the 
environmental, safety, and security implications of all natural gas 
facilities. To ensure these matters receive appropriate review, all 
projects involving the additional types of facilities now permitted 
under the expanded blanket certificate program (with the exception of 
the remediation and maintenance of underground storage field 
facilities) will be subject to the prior notice provisions of the 
regulations regardless of their estimated costs. As explained in the 
NOPR, the Commission expects that by requiring prior public notice for 
blanket projects involving these previously excluded facilities, and by 
providing for more information to be included in notices to affected 
landowners and the public, and by providing additional time to assess 
proposed blanket projects, the Commission, affected landowners, and 
others will be afforded a reasonable opportunity to review the 
potential impacts of proposed projects prior to construction.
    12. APGA asks that the Commission affirm these measures will ensure 
adequate staff review of prior notice submissions. The Commission 
expects that the revised regulations will enable staff to make a 
meaningful assessment of proposed blanket projects--and as appropriate, 
protest pursuant to Sec.  157.205(e) of the Commission's regulations--
prior to a project going forward.
1. Section 157.210, Mainline Natural Gas Facilities
    13. The Final Rule adds Sec.  157.210 to allow blanket certificate 
holders to acquire, construct, modify, replace, and operate mainline 
gas facilities. The Final Rule makes the following modifications. At 
the end of the first sentence of this section, the phrase ``natural gas 
mainline facilities,'' is qualified by adding ``including compression 
and looping, that are not eligible facilities under Sec.  
157.202(b)(2)(i).'' This clarifies that blanket certificate authority 
can be employed for mainline projects that include compression and loop 
line facilities, and also clarifies, in response to INGAA's request, 
that this new section does not displace, but is in addition to, the 
existing provisions which state that certain mainline facilities are 
eligible to be replaced or rearranged under blanket authority. In 
addition, the reference in the NOPR to the authority to ``abandon'' is 
removed, since as Williston observes, blanket abandonment provisions 
are described in Sec.  157.216 of the Commission's regulations. 
Instead, a cross-reference to Sec.  157.210 will be added to Sec.  
157.216, so that the blanket abandonment authority and procedure now in 
place will be extended to new mainline facilities and services.
    14. INGAA, Duke, and Dominion insist there is no need for prior 
notice for mainline projects that come under the automatic 
authorization cost limit, asserting that the Commission already has the 
capability to monitor mainline projects for adverse impacts, abuses, 
and segmenting by means of a review of annual reports and post-
construction audits. On the other hand, APGA and IPAA argue in favor of 
prior notice for all Sec.  157.210 mainline activity, regardless of 
cost.
    15. Although the Commission is comfortable with its capability to 
assess and monitor the variety of activities currently included within 
the blanket certificate program, this Final Rule draws into the blanket 
program facilities which heretofore have been deliberately excluded due 
to the expectation that the limited regulatory oversight provided under 
the blanket program would be inadequate to properly review such 
facilities. Oversight via review of annual reports and post-
construction audits, as suggested in comments, would only identify 
transgressions after the fact, whereas prior notice functions as a 
preventive measure. Given the Commission's lack of experience under the 
blanket program in supervising mainline, LNG and synthetic gas, and 
storage facility projects, the NOPR reasoned it would be prudent to 
provide prior notice for all projects involving these newly blanket-
enfranchised facilities. The Commission affirms that reasoning here, 
with an exception described below for certain storage facilities.
    16. In the NOPR, in response to a query by Kinder Morgan Interstate 
Gas Transmission, LLC (Kinder Morgan), the Commission stated its 
expectation that the proposed regulatory revisions would provide 
certificate holders with the

[[Page 63683]]

option to construct mainline facilities under blanket certificate 
authority. This Final Rule does so. Accordingly, this rule renders moot 
Kinder Morgan's and Northern Natural Gas Company's joint petition in 
Docket No. CP06-418-000 for a temporary waiver of the blanket 
certificate program's exclusion of mainline facilities pending revision 
of the blanket regulations to permit the construction of mainline 
projects.\9\ As of the effective date of this rule, mainline facilities 
may be constructed pursuant to a project sponsor's blanket certificate 
authority, provided the proposed facilities comply with the cost limits 
and other requirements of the blanket certificate program.
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    \9\ The Commission will issue a separate notice to dismiss 
Kinder Morgan's and Northern Natural Gas Company's petition in 
Docket No. CP06-418-000.
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2. Section 157.212, LNG and Synthetic Natural Gas Facilities
    17. The Final Rule adds Sec.  157.212 to allow certificate holders 
to acquire, construct, modify, replace, and operate facilities used to 
transport LNG or synthetic gas. The Final Rule removes the reference in 
the NOPR to the authority to ``abandon,'' and instead adds a cross-
reference to the blanket abandonment authority described in Sec.  
157.216 of the Commission's regulations. In addition, Sec.  157.212 
will be revised to clarify that it applies to facilities that transport 
a mix of synthetic and natural gas and to facilities that transport 
exclusively revaporized LNG.\10\
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    \10\ The Commission's jurisdiction over the interstate 
transportation of natural gas does not extend to facilities that 
transport exclusively synthetic gas. See, e.g., Henry v. FPC, 513 
F.2d 395 (D.C. Cir. 1975).
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    18. As was the case regarding the issue of prior notice for 
mainline facilities, comments both favor and oppose applying prior 
notice to all LNG and synthetic gas facilities that are now newly 
subject to authorization under the blanket program. In accord with the 
above discussion regarding mainline facilities, the Commission will 
retain the prior notice requirement. In the NOPR, the Commission added 
that automatic authorization was unsuited to LNG and synthetic gas 
facilities because these projects raised fact-specific issues of 
safety, security, and gas interchangeability.
    19. In opting for prior notice, INGAA contends the Commission is 
being ``unduly cautious,'' since ``LNG supplies are not new to the 
natural gas industry and have been flowing into the U.S. grid for a 
long time now.'' \11\ INGAA's observation, while not wrong, overlooks 
the difficulties developers, producers, pipelines, LDCs, and gas 
consumers have encountered in trying to reach consensus on national 
natural gas quality and interchangeability standards. The concerted 
effort by representatives of these sectors of the gas industry to 
establish such standards, ongoing since 2004, was prompted by the 
prospect of increasing supplies of LNG, leading the industry and the 
Commission to consider whether revaporized LNG could contribute to the 
physical deterioration of existing gas lines and whether the 
substitution of one gaseous fuel for another in a combustion 
application could materially change operational safety, efficiency, 
performance, or air pollution emissions. In June 2006, the Commission 
denied an NGSA petition to establish natural gas quality and 
interchangeability standards \12\ and issued a policy statement 
declaring its intent to address disputes over gas quality and 
interchangeability on a case-by-case basis.\13\ Given the potential 
impact that a change in the makeup of a longstanding gas supply profile 
could have, the Commission believes that to the extent requiring prior 
notice for Sec.  157.212 facilities may be characterized as cautious, 
caution is in order. Thus, the Commission will adopt the prior notice 
requirement for all LNG and synthetic gas facilities.\14\
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    \11\ INGAA's Comments at 9 (Aug. 25, 2006).
    \12\ 115 FERC ] 61,327 (2006).
    \13\ 115 FERC ] 61,325 (2006).
    \14\ In view of the issues that have arisen in the Commission 
proceeding regarding gas quality and interchangeability standards, 
Duke is incorrect in stating that ``there are no construction, 
environmental, operational, or safety considerations that 
distinguish regasified LNG pipelines from other natural gas 
pipelines.'' Duke's Comments at 9 (Aug. 25, 2006).
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    20. The NOPR states that ``blanket certificate authority will not 
apply to the outlet pipe of an LNG or synthetic gas plant, but only to 
those facilities that attach to the directly interconnected pipe.'' 
\15\ APGA endorses this approach. INGAA, NGSA, Duke, and Dominion do 
not, and advocate extending blanket certificate authority to include 
takeaway lateral lines that connect directly to existing LNG terminals. 
AGA seeks clarification on this point. NGSA asserts that if a new 
lateral from an existing LNG terminal does not require modifying the 
terminal to accommodate the new lateral, the new lateral should not be 
subject to the mandatory prefiling specified in Sec.  157.21 of the 
Commission's regulations. Dominion goes further, and recommends 
enlarging the blanket certificate program to include improvements and 
modifications to existing LNG terminals and LNG storage facilities that 
do not alter the facility's capacity. Duke goes further still, and 
claims that ``if the Commission continues to believe that it is 
necessary to evaluate an LNG terminal and take-away pipeline in tandem, 
there is no reason why such pipeline facilities could not be both 
constructed pursuant to blanket authority and evaluated in connection 
with the construction of a new LNG terminal or expansion of an existing 
LNG terminal.'' \16\
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    \15\ 71 FR 36276 at 36279 (June 26, 2006); FERC Stats. & Regs. ] 
32,606 at 32,876 (2006); 115 FERC ] 61,338 at P 28 (2006).
    \16\ Duke's Comments at 10 (Aug. 25, 2006).
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    21. The Commission views Duke's suggestion as incompatible with the 
statutory and regulatory requirements applicable to LNG terminal 
facilities. In the NOPR, the Commission explained that:

    LNG plant facilities are not within the class of minor, well-
understood, routine activities that the blanket certificate program 
is intended to embrace; LNG plant facilities necessarily require a 
review of engineering, environmental, safety, and security issues 
that the Commission believes only can be properly considered on a 
case-by-case basis.\17\ [Thus, b]ecause an LNG terminal and the 
facilities that attach directly to it are interdependent--
inextricably bound in design and operation--a terminal and its 
takeaway facilities must be evaluated in tandem; both merit a 
similar degree of regulatory scrutiny.'' \18\

    \17\ 71 FR 36276 at 36279-80 (June 26, 2006); FERC Stats. & 
Regs. ] 32,606 at 32,877 (2006); 115 FERC ] 61,338 at PP 29-30 
(2006).
    \18\ Id.
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    22. In view of the complexity of the issues raised by LNG 
terminals, Sec.  157.21 requires that proposals to construct a new LNG 
terminal, or to make certain modifications to an existing LNG terminal, 
be subject to a mandatory 180-day prefiling procedure. The 180-day 
prefiling procedure conflicts with the expedited nature of the blanket 
certificate program. Thus, facilities subject to mandatory prefiling 
cannot be authorized under the blanket certificate program.
    23. For example, in the case of a planned, but not yet authorized, 
LNG terminal, if the facilities that attach directly to the new 
terminal are ``related jurisdictional natural gas facilities,'' as 
defined by Sec.  153.2(e)(1) of the Commission's regulations, they must 
be considered in conjunction with the LNG terminal in a 180-day 
mandatory prefiling procedure. In the case of an existing LNG terminal, 
if the construction or modification of facilities that attach directly 
to the terminal will result in modifications to the terminal, and those 
modifications to the terminal

[[Page 63684]]

are subject to mandatory prefiling under Sec.  157.21(e)(2), then the 
facilities that attach directly to the terminal are ``related 
jurisdictional natural gas facilities'' and must be considered along 
with the terminal modifications as part of a mandatory 180-day 
prefiling procedure. Because ``related jurisdictional natural gas 
facilities'' are to be reviewed in tandem with LNG terminals in a 180-
day prefiling, these facilities are excluded from the blanket 
certificate program.
    24. However, blanket certificate authority can be applied to 
facilities that attach directly to an existing LNG terminal if the 
construction and operation of the attached facilities will not involve 
any modifications to the terminal, or if there are modifications to the 
terminal, they are not significant modifications that trigger the 180-
day mandatory prefiling process. In view of this latter category of 
facilities, the Commission qualifies its description in the NOPR on the 
applicability of the blanket program. Provided the construction and 
operation of facilities that attach directly to an existing LNG 
terminal do not involve modifications to the terminal that result in a 
mandatory prefiling process, blanket certificate authority extends to 
such facilities.
    25. Sempra complains that an existing blanket certificate holder, 
in seeking to build a pipeline to attach to an LNG terminal, would have 
a competitive advantage over a new entrant compelled to seek case-
specific authority. Sempra asks the Commission to preclude any project 
sponsor from using blanket certificate authority to gain a timing 
advantage over a new entrant in seeking to serve the same LNG supply 
source or market.
    26. As discussed above, a new line to a new LNG terminal could not 
be built under the expanded blanket certificate authority, and 
depending on circumstances, neither could a new line to an existing LNG 
terminal. That notwithstanding, the Commission acknowledges that, to 
the extent proceeding under the blanket program provides an expedited 
authorization compared to a case-specific applicant, new entrants could 
be placed at a competitive disadvantage. However, the Commission notes 
that any timing-related advantage is diminished because a blanket-
eligible line interconnecting directly with an LNG terminal will be 
subject to prior notice, and thus to protest, and an unresolved protest 
would cause the prior notice blanket application to be treated as an 
application for case-specific NGA section 7(c) authorization.\19\ 
Further, while this Final Rule increases cost limits under the blanket 
certificate regulations, the cost limits nevertheless will continue to 
ensure that blanket authority extends only to relatively modest 
projects; hence, there would not necessarily be a substantial disparity 
in time in building under a blanket certificate and obtaining case-
specific authorization for a modest proposal. The Commission concludes 
that the benefit the blanket certificate program provides in terms of 
administrative efficiency and cost savings outweigh any accompanying 
market distortion. Accordingly, Sempra's request to selectively revoke 
blanket certificate authority is denied.
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    \19\ See 18 CFR 157.205(f) (2006).
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3. Section 157.213, Underground Storage Field Facilities
    27. The Final Rule adds Sec.  157.213 to allow certificate holders 
to acquire, construct, modify, replace, and operate certain underground 
storage facilities. As with Sec.  157.210 and Sec.  157.212, Sec.  
157.213 is revised to remove the reference in the NOPR to the authority 
to ``abandon,'' and instead a cross-reference is added to the blanket 
abandonment authority described in Sec.  157.216 of the Commission's 
regulations. The Commission will further revise this section as 
described below.
    28. Comments again both favor and oppose applying prior notice to 
all underground storage projects. However, in this instance, the 
Commission finds it appropriate to permit automatic authorization for 
certain types of storage projects. Dominion contends that automatic 
authorization should be allowed for storage projects limited to 
remediation and maintenance, on the grounds that such activities have 
little impact on customers or operations compared to projects to 
improve a storage facility. The Commission concurs and will provide for 
automatic authorization for storage remediation and maintenance 
activities under revised Sec.  157.213(a).\20\
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    \20\ The Commission consequently will modify 18 CFR 157.207 to 
include storage remediation and maintenance as an activity subject 
to the annual reporting requirements applicable to blanket projects 
undertaken pursuant to automatic authorization.
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    29. The NOPR states that ``the proposed expanded blanket 
certificate authority is not intended to include storage reservoirs 
that are still under development or reservoirs which have yet to reach 
their inventory and pressure levels as determined from their original 
certificated construction parameters.'' \21\ Dominion asks the 
Commission to extend blanket certificate authority to activities at 
existing storage reservoirs that are not operated at their originally 
certificated maximum inventory and projected performance levels. 
Dominion argues that unlike a new storage reservoir, reliable 
operational data are available for existing storage facilities, even if 
an existing field has yet to reach its certificated maximum capacity or 
original projected performance.
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    \21\ 71 FR 36276 at 362782 (June 26, 2006); FERC Stats. & Regs. 
] 32,606 at 32,880 (2006); 115 FERC ] 61,338 at P 43 (2006).
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    30. The Commission disagrees. While it may be true that reliable 
operational data are available for some existing fields that have yet 
to reach capacity, this is not always the case. Thus, the Commission 
does not believe that the blanket program, which permits an expedited 
and generic approval following a limited prior notice period, is the 
appropriate means to review and approve such projects. As stated in the 
NOPR, storage reservoirs that are still under development or reservoirs 
which have yet to reach their inventory:

May or may not have reliable information available on geological 
confinement or operational parameters via data gathered throughout 
the life of a storage field, whereas new storage zones lack data 
collected over time on physical and operational aspects of a field. 
Therefore, for such facilities, the Commission finds it necessary to 
individually examine each reservoir to determine its potential 
operating parameters (capacity, cushion and working gas, operational 
limits, well locations, etc.) and to review data essential to 
understand and predict how modifications might affect the integrity, 
safety, and certificated parameters of the facility.\22\

    \22\ Id.
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    31. Dominion questions whether the Commission needs an inventory 
verification study, shut-in reservoir pressures, and cumulative gas-in-
place data, which would be required for blanket projects under proposed 
Sec. Sec.  157.213(b)(7) and (8), since the Commission does not 
currently require submission of this information in case-specific NGA 
section 7(c) applications for storage projects.\23\ Dominion requests 
the Commission either remove these information requirements or require 
the data described in Sec. Sec.  157.213(c)(1) through (9) only to the 
extent necessary to demonstrate that the proposed project will not 
alter a storage

[[Page 63685]]

reservoir's total inventory, maximum pressure, or buffer boundaries.
---------------------------------------------------------------------------

    \23\ Note the regulatory revisions proposed in the NOPR as 18 
CFR 157.213(b)(1) through (9), are codified in this Final Rule, and 
referred to hereafter, as 18 CFR 157.213(c)(1) through (9).
---------------------------------------------------------------------------

    32. Dominion is correct in observing that the information specified 
in Sec. Sec.  157.213(c)(1) through (9) is not now required to be 
submitted under the existing regulations for case-specific certificate 
applications. However, the Commission considers this information 
necessary to make an informed decision on storage projects. Therefore, 
when this information is not included in a case-specific application, 
Commission staff, as a matter of routine practice, will request the 
data from the project sponsor. Section 157.213(c)(1) through (9) merely 
codifies this practice. Were this information not included in a prior 
notice filing, in all likelihood, Commission staff would request this 
data from the project sponsor, and in the event the response was 
incomplete or staff lacked time to assess the information by the 
conclusion of the prior notice period, staff could be compelled to 
protest the filing. Thus, to ensure the timely consideration of a prior 
notice request for a storage project, the filing must contain the 
information specified in Sec. Sec.  157.213(c)(1) through (9). However, 
the Commission acknowledges that not all the information specified in 
Sec. Sec.  157.213(c)(1) through (9) will be relevant in all cases, and 
will thus adopt Dominion's suggestion and qualify Sec.  157.213(c) to 
state that the information requirements apply ``to the extent necessary 
to demonstrate that the proposed project will not alter a storage 
reservoir's total inventory, reservoir pressure, reservoir or buffer 
boundaries, or certificated capacity, including injection and 
withdrawal capacity.''
4. Blanket Project Cost Limits
    33. The NOPR proposes raising the blanket certificate program's 
2006 cost limits from $8,200,000 to $9,600,000 for each automatic 
authorization project and from $22,700,000 to $27,400,000 for each 
prior notice project. AGA, APGA, Con Ed, and Orange and Rockland urge 
the Commission not to raise the cost limits, cautioning that permitting 
more expensive projects would risk transforming the nature of the 
blanket program from one intended to cover small and routine 
construction activities into a program under which projects with 
potentially significant rate and environmental impacts could be 
built.\24\ On the other hand, INGAA, NGSA, and pipelines propose to 
raise the cost limits to $16,000,000 for an automatic authorization 
project and $50,000,000 for a prior notice project, repeating the claim 
that construction costs have risen faster than the overall rate of 
inflation, and noting that these higher cost limits have been in effect 
since November 2005, as a post-hurricane relief measure, with no 
apparent adverse impact.
---------------------------------------------------------------------------

    \24\ AGA stresses that if a certificate holder with a relatively 
modest rate base relies on blanket certificate authority to 
undertake additional construction, then even a project that falls 
well within the blanket cost limits has the potential to alter 
existing customers' rates. AGA, Con Ed, and Orange and Rockland 
speculate that in the case of a large company, a blanket project 
could have a disproportionate impact if project costs are assigned 
to a limited number of customers, e.g., customers in a single rate 
zone. The Commission expects such concerns to be raised in protest 
to the notice of a proposed blanket project. If concerns regarding 
disproportionate rate impacts are not resolved, the proposed project 
and its rate impacts would then be treated as a case-specific NGA 
section 7(c) certificate proceeding. For blanket projects which 
qualify for automatic authorization, and as a result, do not require 
public notice prior to construction, concerns about rate treatment 
can be raised when the certificate holder seeks to roll in the cost 
of the automatically authorized project in a future NGA section 4 
rate proceeding.
---------------------------------------------------------------------------

    34. While gas project costs, including environmental compliance and 
public outreach, have trended up since 1982, so have the blanket 
program cost limits, almost doubling since 1982.\25\ Since 1982, the 
Commission has relied on the Department of Commerce's GDP implicit 
price deflator as a measure to make annual adjustments to the blanket 
cost limits. In the NOPR, the Commission applied an alternative price 
tracker that is focused more narrowly on gas utility construction 
costs,\26\ and as a result proposed to raise the cost limits to account 
for the discrepancy between the two different inflation indicators. The 
comments do not propose any alternative criteria or methodology for 
affirming or altering the blanket project cost limits.
---------------------------------------------------------------------------

    \25\ In considering how to gauge project costs over time, the 
NOPR observed that recently ``certain project components--notably 
the price of steel pipe--have risen far faster than any measure of 
overall inflation. However, although steel prices have run up over 
the past several years, in looking back to 1982, there were periods 
during which steel prices fell substantially. Further, changing 
regulatory requirements and construction techniques, to which 
Petitioners attribute cost increases, do not always add to project 
costs, and may well contribute to cost reductions and 
efficiencies.'' 71 FR 36276 at 36283 (June 26, 2006); FERC Stats. & 
Regs. ] 32,606 at 32,884 (2006); 115 FERC ] 61,338 at P 57 (2006).
    \26\ The Commission employed the Handy-Whitman Index of Public 
Utility Construction Costs, Trends of Construction Costs, Bulletin 
No. 162, 1912 to July 1, 2005. In doing so, the Commission 
cautioned, and reiterates here, that even if it were possible to 
mirror 1982 costs to costs today, the dollar amounts would not 
reflect proportionate impacts on pipeline customers' rates, since in 
1982 the commodity cost of gas was a significant portion of pipeline 
customers' merchant service rate, whereas today, gas sales costs are 
no longer bundled with transportation service costs.
---------------------------------------------------------------------------

    35. INGAA and NGSA propose making permanent the doubled project 
cost limits that are currently in place temporarily.\27\ However, the 
currently effective cost limits for the blanket certificate program 
were put in place temporarily to expedite construction of projects that 
would increase access to gas supply to respond to the damage to gas 
production, processing, and transportation brought about by hurricanes 
Katrina and Rita. In temporarily doubling blanket project cost limits, 
the Commission did not assess alternative inflation trackers or the 
costs associated with construction. Rather, the decision to expand the 
blanket program was based on the Commission's assessment of the damage 
done by the hurricanes and the magnitude of the effort that would be 
required to recover. There was no expectation that the temporary 
expansion of the blanket certificate program might be made permanent. 
If the blanket certificate program were expanded by approximately 
doubling the project cost limits as requested, the nature of the 
program would be changed such that the Commission could not be 
confident that far more expensive and extensive projects would not have 
adverse impacts on existing customers, existing services, competitors, 
landowners, or the environment. Accordingly, the Commission adopts an 
increase to $9,600,000 for each automatic authorization project and 
$27,400,000 for each prior notice project, and denies requests for a 
further increase at this time, other than annual inflation adjustments 
as provided for under Sec.  157.208(d) of the Commission's regulations.
---------------------------------------------------------------------------

    \27\ The current temporary increase in blanket cost limits 
expires on February 28, 2007.
---------------------------------------------------------------------------

5. Rate Treatment for Blanket Project Costs
    36. Blanket services are provided at a certificate holder's 
existing Part 284 rates, and blanket project costs are afforded the 
presumption that they will qualify for rolled-in rate treatment in a 
future NGA section 4 proceeding. Since blanket costs are presumed to be 
so small as to have no more than a de minimis rate impact, the proposal 
to increase cost limits calls this presumption into question. 
Therefore, the NOPR sought comment on whether to permit project 
sponsors the option of requesting an incremental rate for a particular 
blanket certificate project.
    37. Commenters generally support this option, and note that 
applying an incremental rate to blanket projects would address the 
worry that existing customers might be made to subsidize new projects. 
INGAA argues that

[[Page 63686]]

because most incremental rate proposals are consensual, there is no 
need for the Commission to review an agreed-upon rate. To preclude 
existing customers from making unwarranted contributions to cover the 
costs of blanket projects, NGSA suggests requiring a project sponsor to 
file a tariff sheet in a limited NGA section 4 filing proposing an 
incremental rate, which the Commission will then act on as a normal 
tariff matter by accepting, rejecting, or suspending the rate at the 
end of the 30-day tariff notice period. In considering an incremental 
rate for a proposed blanket project, AGA, Con Ed, and Orange and 
Rockland urge the Commission to verify that each project will be 
consistent with the Policy Statement on New Facilities.\28\
---------------------------------------------------------------------------

    \28\ Certification of New Interstate Natural Gas Pipeline 
Facilities, 88 FERC ] 61,227 (1999), orders clarifying statement of 
policy, 90 FERC ] 61,128 and 92 FERC ] 61,094 (2000), order further 
clarifying statement of policy, 92 FERC ] 61,094 (2000).
---------------------------------------------------------------------------

    38. Commenters present no compelling reason to modify the current 
practice of presuming, initially, that blanket project costs will 
qualify for rolled-in rate treatment, then evaluating the validity of 
this presumption, subsequently, in an NGA section 4 rate proceeding. 
Accordingly, for the time being, the Commission will continue to apply 
a presumption that blanket costs will qualify for rolled-in rate 
treatment. However, the Commission will revisit this question if there 
is evidence that the enlargement of the blanket certificate program to 
permit additional facilities and higher cost limits materially alters 
the manner in which project sponsors employ their blanket certificate 
authority or otherwise undermines the basis for the presumption of 
rolled-in rate treatment. Absent any such indication, the Commission 
hesitates to put in place a procedure to assess and approve initial 
rates for proposed blanket projects, since the additional time 
necessary to complete such a review will inevitably stretch the span 
between notice of a project and commencement of construction. To the 
extent practicable, the Commission aims to retain the benefit of an 
expedited project authorization available under the current blanket 
certificate program.
    39. Emphasizing that revised blanket certificate regulations do not 
require project sponsors to demonstrate that a proposal conforms to the 
Policy Statement on New Facilities, Con Ed and Orange and Rockland 
request that the Commission (1) require that the prior notice of a 
proposed blanket project quantify impacts on existing customers and 
verify that the project will be fully functional without any additional 
construction; (2) allow protests to a blanket project that raise 
legitimate rate-related issues to be resolved in a case-specific 
proceeding; (3) extend the presumption of rolled-in rate treatment to a 
blanket project's costs only if the blanket project sponsor 
demonstrates the project will be fully subscribed or provide benefits 
to existing customers; and (4) find that the presumption favoring 
rolled-in rate treatment is rebutted if a blanket project is 
subsequently determined to be a segmented portion of a larger 
undertaking. Sempra suggests requiring project sponsors that undertake 
blanket storage projects and that have an existing cost-based recourse 
rate to discuss the rate implications of a proposed project in the 
prior notice of the project in order to demonstrate that existing 
customers will not subsidize the new facilities.
    40. The Commission believes that the existing blanket certificate 
regulations are adequate to address the matters Con Ed, Orange and 
Rockland, and Sempra raise. The existing prohibition against 
segmentation is intended to preclude projects that would not be 
functional without additional construction. The rate impacts of a 
blanket project, while not now reviewed in advance, are considered in a 
future rate proceeding--and in the rate proceeding, the issues of 
subsidization and system benefits can be addressed. The regulations 
permit any interested person to protest a blanket project subject to 
the prior notice provisions; each protest, whether rate related or 
otherwise, will be considered on its merits on a case-by-case basis.
    41. Con Ed, Orange and Rockland complain that the presumption 
favoring rolling in blanket costs is rarely rebutted.\29\ APGA contends 
certificate holders resist filing rate cases ``due primarily to the 
fact that they are permitted under the current regime to over-recover 
their costs with impunity, [thus] by the time that most pipelines do 
file for increased rates, the cumulative dollar impact of the numerous 
no-notice and prior notice projects will be quite substantial, with no 
viable customer recourse.'' \30\ APGA requests the Commission compel 
certificate holders to file rate cases regularly, suggesting a three-
year cycle.
---------------------------------------------------------------------------

    \29\ The parties assert that the Commission is reluctant to 
reverse a presumption in favor of rolled-in rate treatment, citing 
Transcontinental Gas Pipe Line Corp. (Transco), 106 FERC ] 61,299 
(2004) and 112 FERC ] 61,170 (2005). Transco did not focus on 
blanket project costs, but on the impact of a change in Commission 
rate policy, and how the changed policy should apply in an NGA 
section 4 proceeding to case-specific expansion projects built under 
the Commission's prior rate policy regime. In Transco, and in its 
policy statements, the Commission discussed its aspiration to 
provide as much up-front assurance as possible of how an expansion 
would be priced so that the pipeline and prospective shippers could 
make informed investment decisions. This holds true regardless of 
whether a project is constructed under blanket or case-specific 
authority; consequently, the Commission is reluctant to reverse 
either a predetermination or a presumption regarding future rate 
treatment. Nevertheless, in a subsequent NGA section 4 rate 
proceeding, the Commission may determine that its initial, 
provisional assessment of what the appropriate rate treatment would 
be was in error, and so reverse the predetermination or presumption.
    \30\ APGA's Comments at 8 (Aug. 25, 2006).
---------------------------------------------------------------------------

    42. The Commission acknowledges that in the vast majority of rate 
proceedings, the outcome affirms the presumption favoring rolling in 
blanket costs. The Commission notes that in rate proceedings, there is 
rarely any effort to rebut the presumption, which the Commission takes 
to be an indication of the legitimacy of the presumption. The 
Commission recognizes that a certificate holder is likely to weigh its 
own self interest when considering whether to initiate an NGA section 4 
rate proceeding. However, if a company fails to initiate a rate 
proceeding in a timely manner, such that distortions over time have 
rendered its rates unjust and unreasonable, a complaint can be filed 
under NGA section 5.

C. Changes in the Notice Procedures, Environmental Compliance 
Conditions, and Reporting Requirements

    43. In initiating the blanket certificate program in 1982, the 
Commission explained that Sec.  157.206(a)(1) was intended to ``reserve 
the Commission's right to amend Subpart F so as to add, delete or 
modify the standard conditions and any procedural requirements * * * if 
changing circumstances or experience so warrant.'' \31\ In this case, 
increasing the scope and scale of the blanket certificate program 
increases the odds that projects authorized under the expanded blanket 
certificate program could have significant adverse impacts on the 
quality of the human environment. In view of this, the Commission 
proposed in the NOPR, and is adopting in this Final Rule, additional 
procedures and mitigation measures to adequately ensure against the 
potential for adverse environmental impacts due to the enlargement of 
the blanket certificate program. The current environmental requirements 
described in Sec.  157.206(b), and the revisions to the environmental 
requirements implemented by this Final

[[Page 63687]]

Rule, apply to all projects authorized under the blanket certificate 
program.
---------------------------------------------------------------------------

    \31\ Interstate Pipeline Certificates for Routine Transactions, 
Order No. 234-A, 47 FR 38871 (Sept. 3 1982); FERC Stats. & Regs. ] 
30,389 (1982).
---------------------------------------------------------------------------

1. Notification Requirements
a. Content of Landowner Notification
    44. The NOPR proposed revising Sec.  157.203(d)(2)(iv) to state 
that in the notice to affected landowners of a proposed project, the 
project sponsor include the most recent edition of the Commission 
pamphlet titled ``An Interstate Natural Gas Facility on My Land? What 
Do I Need to Know?'' INGAA and Williston point out that the current 
edition of the pamphlet describes the Part 157, Subpart A, case-
specific certificate process generally, but does not describe the Part 
157, Subpart F, blanket program specifically, and suggest the pamphlet 
be revised or a separate pamphlet be prepared to cover the blanket 
certificate procedures. The Commission will adopt the latter approach, 
and to enhance administrative efficiency and ensure information remains 
up-to-date, rather than a pamphlet, the Commission will require that 
notice include blanket-specific information that will be available on 
the Commission's Web site. Accordingly, Sec.  157.203(d)(2)(iv) of the 
Commission's regulations is revised to read as follows: ``A general 
description of the blanket certificate program and procedures, as 
posted on the Commission's website at the time the landowner 
notification is prepared, and the link to the information on the 
Commission's website.''
    45. In response to Williston, the Commission clarifies that the 
information requirements stated in Sec.  157.203(d)(1), including the 
additional requirements of revised Sec.  157.203(d)(1)(iii), are 
applicable to landowner notification for proposed blanket certificate 
projects that qualify for automatic authorization. The information 
requirements stated in Sec.  157.203(d)(2), including the additional 
requirements of revised Sec.  157.203(d)(2)(i), (ii), (iv), (v), and 
(vii), are applicable to public notice for proposed blanket certificate 
projects that do not qualify for automatic authorization.
Summary of Rights
    46. Revised Sec.  157.203(d)(2)(v) requires that in the notice to 
affected landowners of a proposed project, the project sponsor include 
a brief summary of the rights the landowner has in Commission 
proceedings and in proceedings under the eminent domain rules of the 
relevant state(s). INGAA contends affected landowners will perceive any 
discussion of eminent domain ``as a threat that their property will be 
condemned if they do not consent to an easement agreement,'' an 
interpretation that ``could cause more harm than good,'' \32\ and 
comments that the description of state eminent domain rules may prove 
misleading if a project sponsor proceeds with condemnation actions 
under federal eminent domain law. Duke worries discussing landowner 
rights would ``constitute the provision of legal advice in most 
jurisdictions,'' and because ``[m]any bar associations prohibit lawyers 
from giving advice to unrepresented third parties,'' this could create 
a ``potential legal conflict for natural gas companies.'' \33\ Duke 
recommends the contents of the notice be limited to informing affected 
landowners of their right to obtain local counsel.
---------------------------------------------------------------------------

    \32\ INGAA's Comments at 16 (Aug. 25, 2006).
    \33\ Duke's Comments at 15 (Aug. 25, 2006).
---------------------------------------------------------------------------

    47. As INGAA recognizes, discussions concerning the potential to 
acquire property rights by means of eminent domain can be disconcerting 
to affected landowners. It has been the Commission's experience that 
such discussions are most prone to be perceived as threatening when the 
initial contact with landowners is made in person by a project 
sponsor's representative seeking physical access to the property. The 
Commission believes a far less provocative means to inform affected 
landowners is to present them with a brief, clear, and candid 
description of the eminent domain process in written form. Landowners 
cannot be expected to engage in negotiations and reach decisions 
regarding their property without such information. The Commission 
concurs with INGAA's apprehension that landowners may be confused by a 
description of state condemnation if federal condemnation is employed; 
accordingly, Sec.  157.203(d)(2)(v) of the Commission's regulations is 
revised to omit the reference to state proceedings and to instead 
require a ``brief summary of the rights the landowner has in Commission 
proceedings and in proceedings under the relevant eminent domain 
rules.''
    48. The Commission agrees with Duke's observation that affected 
landowners ought to be informed of their right to obtain counsel, and 
this fact should be included in the required summary of landowner 
rights. In response to Duke's concern that complying with Sec.  
157.203(d)(2)(v) could constitute the practice of law or place project 
sponsors with an ethical quandary, the Commission clarifies that the 
required brief summary of rights and procedures is descriptive, not 
interpretative. Project sponsors are expected to summarize or recite 
applicable law, and no more. Not only need no advice be proffered, none 
should be. Finally, the Commission notes similar arguments were 
presented when the original landowner notification rule was instituted 
in 1999;\34\ subsequently, there has been no evidence of significant 
difficulties in complying with the requirements of the rule.
---------------------------------------------------------------------------

    \34\Landowner Notification, Expanded Categorical Exclusions, and 
Other Environmental Filing Requirements, Order No. 609, 64 FR 57374 
(Oct. 25, 1999); FERC Stats. & Regs. ]31,082 (1999).
---------------------------------------------------------------------------

c. Landowner Contact
    49. As proposed, Sec.  157.203(d)(1)(B) requires that in a notice 
to affected landowners of a proposed project, the project sponsor 
include a local contact to call first with problems or concerns. INGAA 
points out that for certain projects, the personnel best able to 
respond to problems or concerns may be remotely located, e.g., at a 
company's central office. Therefore, INGAA asks that the ``local'' 
specification be removed, and in its place, project sponsors be 
required to include the toll-free telephone number of a company 
representative responsible for responding to affected landowners. The 
Commission accepts INGAA's argument that its alternative procedure will 
provide the same protections for landowners. Therefore, Sec.  
157.203(d)(1)(B) of the Commission's regulations is revised to read as 
follows: ``Provide a local or toll-free phone number and a name of a 
specific person to be contacted by landowners and with responsibility 
for responding to landowner problems and concerns, and who will 
indicate when a landowner should expect a response.''
2. Notification Times
    50. Currently, under Sec.  157.203(d)(1) of the Commission's 
regulations, before commencing construction of an automatically 
authorized blanket project, project sponsors are required to give 
affected landowners 30 days notice in advance of construction. For 
blanket projects that do not qualify for automatic authorization, under 
Sec.  157.203(d)(2), project sponsors are required to provide a 45-day 
prior notice to the public, during which any person, or the Commission, 
can protest the proposal. The Final Rule extends each of these time 
frames by 15 days. INGAA, NGSA, and pipelines object to offering 
additional notice time, arguing that (1) the proposed increase in 
project

[[Page 63688]]

costs should not change the nature of the projects undertaken pursuant 
to blanket authority; (2) there is no evidence the current notice 
periods are too short; and (3) affected landowners and the public 
should be able to reach a decision on whether to protest well within 
the current notice periods.\35\
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    \35\ As an alternative, Williston proposes that blanket projects 
that qualify for automatic authorization retain a 30-day landowner 
notification time period, with only larger, prior notice projects 
subject to a 45-day notice. Williston claims its suggestion will 
ensure that those parties affected by major projects, which are more 
likely to raise landowner concerns, will be afforded additional 
time, while minor and routine projects will be permitted to move 
forward faster.
---------------------------------------------------------------------------

    51. The NOPR stated:

    In view of the proposed expanded scope and scale of blanket 
certificate authority, which can be expected to increase the number 
of automatic authorization projects undertaken and the number of 
people impacted, an additional 15 days offers greater assurance that 
there will be adequate time for landowners to state their concerns 
and for project sponsors and the Commission to respond * * * [T]he 
additional time will provide the Commission with a more reasonable 
period of time to conduct and conclude its environmental assessment 
(EA) of a proposal. This NOPR contemplates an increase in the 
number, extent, kind, and complexity of facilities subject to 
blanket certificate authority, yet even for the types of projects 
currently permitted, 45 days has proved to be, on occasion, an 
unrealistically short time for the consultation and analysis 
required to complete an EA. The additional time will ensure the 
Commission is not forced to protest a prior notice project merely as 
a means to gain time to finish an EA. The Commission does not expect 
the extended landowner and public notice periods to unduly delay 
blanket certificate projects, since natural gas companies, in large 
part, can dictate when a blanket certificate project may begin 
construction by when the company elects to initiate the notice 
process.

    52. It is not only the increase in project costs, i.e., an 
expansion in scale of blanket authorized activities, it is also the far 
wider range in the types of projects permitted under the blanket 
authority that warrant adding time to allow for adequate consideration 
of what the Commission anticipates will be blanket proposals that are 
both more complex and more numerous. The Commission notes that to the 
extent issues raised by a prior notice proposal cannot be addressed in 
the time provided, a protest is the probable outcome, which if not 
resolved, would result in the proposal being treated as a case-specific 
NGA section 7(c) application necessitating the preparation and issuance 
of a Commission order on the merits. The Commission affirms the need to 
add 15 days to the notice periods, for the reasons stated in the NOPR.
3. Annual Report on Automatic Authorization Projects
    53. Revised Sec. Sec.  157.208(e)(4)(ii) and (iii) require that the 
annual report filed for automatic authorization projects document the 
progress toward restoration and discuss problems or unusual 
construction issues and corrective actions. INGAA, Duke, and Williston 
contend that providing this information will be burdensome, especially 
for large pipelines that might rely on automatic authorization for 
numerous projects each year, and may require placing additional 
personnel on site to monitor progress on each project.
    54. The Commission has a different perspective. Certificate holders 
are currently required to comply with all the conditions in Sec.  
157.206(b) of the Commission's blanket certificate regulations. Section 
157.206(b), in addition to setting forth specific conditions, makes 
blanket certificate activities subject to the conditions in Sec.  
380.15 of the Commission's regulations implementing NEPA, as well as 
requiring that all blanket certificate activities be consistent with 
all applicable law implementing the Clean Water Act, the Clean Air Act, 
and other statutes relating to environmental concerns. Consequently, in 
order to satisfy all the conditions applicable to blanket certificate 
activities, it is already necessary for project sponsors (1) to have 
plans and procedures in place to ensure compliance with environmental 
conditions, and (2) to have environmental inspectors in place to record 
a project's construction's compliance with environmental conditions. 
Hence, the Commission does not view the new Sec.  157.208(e)(4)(ii) and 
(iii) requirements as asking companies to gather and report new 
information, but rather, as having companies submit information that 
they are already obliged to compile. Similarly, to the extent project 
sponsors find they have to place personnel at construction sites to 
monitor a project's progress, this does not constitute a new 
requirement, but rather, is a means to fulfill an ongoing obligation to 
verify that projects are built in accord with all applicable 
environmental conditions. Consequently, the Commission adopts the 
expanded annual reporting requirements.
4. Environmental Conditions
(a). Noise Levels
(1). Compressor Station Site Property Boundary
    55. Revised Sec.  157.206(b)(5)(i) states that noise attributable 
to a compressor station ``must not exceed a day-night level 
(Ldn) of 55 dBA at the site property boundary.'' In 
contrast, the current regulations specify that noise attributable to a 
compressor station is to be measured ``at any pre-existing noise-
sensitive area.''
    56. Duke contends this new noise criterion could compel companies 
to expand compressor site boundaries, which would add to the cost of 
new or additional compression and, potentially, an increase in 
environmental impacts associated with adding acreage to existing and 
new sites. INGAA argues that compressors were installed in anticipation 
of meeting noise level requirements as measured at the nearest noise 
sensitive area, and that it is inequitable to institute this change and 
compel ratepayers to bear the cost of compliance. Boardwalk objects to 
the revision. HFP Acoustical asks if compressor noise is to be measured 
as an average of noise levels at several spots on the perimeter of the 
property line or if every point on a site's property boundary must meet 
the 55 dBA standard. HFP Acoustical seeks clarification on whether 
there will be any acknowledgment of existing sources of noise unrelated 
to compressor operations.
    57. The Commission clarifies that this new noise measurement 
criterion only applies to facilities placed in service after the 
effective date of this rule;\36\ thus, existing compressor stations 
continue to be required to meet the 55 dBA standard as measured at pre-
existing noise-sensitive areas, not at the site's property boundary. 
However, any increase in noise due to additions or modifications to an 
existing compressor station undertaken subsequent to the effective date 
of this rule will require that the noise attributable to additions or 
modifications be measured at the site's boundary. The Commission 
further clarifies that when measuring noise at new stations, the 55 dBA 
standard must be met at every point on

[[Page 63689]]

a site's property boundary.\37\ Finally, with respect to existing noise 
levels at the property boundary, the certificate holder will only be 
responsible for taking measures to reduce noise in excess of the 55 dBA 
standard that is attributable to the operation of the compressor 
station.
---------------------------------------------------------------------------

    \36\ In enacting the blanket certificate program, the Commission 
expressed its expectation that any ``amendments would most likely 
not affect facilities constructed or service undertaken before the 
effective date of an amendment, but would apply prospectively.'' 
Order No. 234-A, 47 FR 38871 (Sept. 3, 1982); FERC Stats. & Regs. ] 
30,389; 20 FERC ] 61,271 (1982).
    \37\ As a practical matter, the Commission expects noise 
readings to be taken at the boundary closest to the compressors or 
where noise is estimated to be loudest and at the site's ordinal 
points.
---------------------------------------------------------------------------

    58. Although existing compressor stations are grandfathered, the 
Commission concurs with comments that anticipate the new standard may 
compel companies to extend existing compressor station boundaries if 
additions or modifications are made that increase noise at the site 
boundary. However, while this may entail additional costs, the 
Commission does not view it as adding to adverse environmental impacts. 
Indeed, overall environmental impacts may diminish, since land within a 
station boundary is frequently set aside for benign environmental use. 
Further, the Commission does not accept the contention that this 
revision will induce the development of new compressor stations, since 
the cost to mitigate noise attributable to adding compression at an 
existing site is likely to be less than acquiring a new site.
(2). Noise Attributable to Drilling
    59. In Sec.  157.206(5)(ii), the Commission establishes the goal 
that perceived noise from drilling in between 10 p.m. and 6 a.m. be 
kept at or below 55dBA in any preexisting noise-sensitive area. INGAA 
contends adherence to this goal would be impractical and costly. In 
particular, INGAA contends that suspending a horizontal directional 
drill (HDD) at night to adhere to noise restrictions would be a poor 
engineering practice, creating a substantial risk of failure. INGAA 
asks that the Commission (1) clarify the 55 dBA standard only applies 
if ambient noise at night is below that level; (2) clarify that where 
the existing noise level is 55 dBA or more, the noise standard be that 
a new project produces no appreciable increase in the ambient noise; 
and (3) clarify that mitigation measures may be employed to meet the 55 
dBA noise level, such as temporarily relocating occupants of a noise 
sensitive area.
    60. HFP Acoustical asks the Commission to clarify (1) whether the 
nighttime noise constraint impacts daytime drilling noise standards; 
(2) whether recirculation or other stabilizing activities could proceed 
at night; and (3) whether the reference to nighttime as from 10 p.m. to 
6 a.m. should be changed to 10 p.m. to 7 a.m. to conform to the period 
during which a 10 dBA penalty currently applies. HFP Acoustical 
suggests that if the Commission intends to set a nighttime noise level 
limit, it state the limit in terms of the Leq night or 
Ln value, rather than the Ldn value, which covers 
a 24-hour period.
    61. In response to a request by Williston, the Commission clarifies 
that the noise standard for drilling at night is a goal, not a 
regulatory requirement. The Commission also clarifies that the Sec.  
157.206(5)(ii) reference to ``perceived noise from the drilling'' has 
the same meaning as the Sec.  157.206(5)(i) reference to ``noise 
attributable to'' compression. Consequently, where the existing ambient 
noise level at night is below 55 dBA, and drilling activity boosts it 
above that threshold, the goal is to reduce the level down to 55 dBA; 
where the ambient noise level at night is above 55 dBA, and drilling 
activity causes that level to rise, the goal to take action to bring 
noise back to its pre-drilling level. As an alternative to reducing the 
noise from drilling, the Commission agrees that appropriate mitigation 
measures can include temporarily relocating or compensating people 
residing in areas affected by drilling activities.
    62. The Commission acknowledges that reaching the stated goal may 
involve incurring additional costs, and recognizes that at times the 
goal may be impractical. Further, reaching the goal should not be 
achieved at the expense of adding to a project's risk. For example, the 
Commission does not necessarily expect an ongoing HDD to be suspended 
at night if the interruption could cause the drill to fail, but does 
expect project sponsors to explore mitigation measures, such as 
erecting barriers so that continuous drilling can meet the 55 dBA goal. 
In response to HFP Acoustical, the Commission clarifies that all 
activities associated with drilling, such as recirculation or other 
stabilizing activities, are subject to the noise level goal; the 
Commission leaves it to the project sponsor's discretion when, during a 
24-hour cycle, to undertake a particular activity. The Commission will 
adopt HFP Acoustical's suggestion and clarify that the nighttime noise 
goal will apply between the hours of 10 p.m. and 7 a.m., and will be 
expressed as a nighttime level, Ln, of 55 dBA.
b. Environmental Inspector Report
    63. Revised Sec.  157.208(c)(10) requires the project sponsor to 
commit to have the Environmental Inspector's report filed weekly with 
the Commission for prior notice projects. INGAA, Duke, and Williston 
maintain this is unnecessary given blanket projects' relatively short 
construction time, and is impractical given that inspectors may not be 
on site on a weekly basis. INGAA proposes compliance be ensured by 
having a completion report filed within 30 days of a project's in-
service date. INGAA believes this is adequate since the Commission 
``hotline'' is available during construction to resolve allegations of 
improprieties. Williston suggests weekly reporting only be required 
when the Commission determines a particular blanket project merits such 
scrutiny.
    64. The Commission does not believe that it can judge whether a 
particular project merits weekly reporting before the fact, or that its 
hotline can serve as a means to monitor ongoing construction progress, 
or that an after-the-fact summary can identify, prevent, or remedy 
irregularities in construction. The only practical means to monitor 
compliance with environmental requirements is to monitor progress 
during construction, hence the existing requirement that an 
Environmental Inspector be on site during a project's construction. The 
Commission views revised Sec.  157.208(c)(10) as a clarification of how 
certificate holders are to verify their fulfillment of this existing 
obligation. Neither the additional cost or inconvenience of having an 
inspector available to review construction at multiple small project 
sites, nor the length of the construction phase of a project, has any 
bearing on the need for the regulatory requirement that a project 
sponsor have an inspector present. The Commission notes that an 
Environmental Inspector need not be an additional individual brought in 
to review a construction site; this function can be performed by 
someone on site, provided that individual has been properly trained and 
charged with inspecting and reporting on compliance with environmental 
plans and procedures and can perform all the Environmental Inspector's 
responsibilities.

D. Different Rates for Different Customers for the Same Service

    65. In the NOPR, the Commission expressed the belief that its 
existing policies permit a project sponsor to offer a rate incentive as 
an inducement to get customers to commit to a proposed project early 
(i.e., ``foundation shippers''), while offering a less favorable rate 
to customers that commit later. Few comments take issue with the 
Commission's conclusion.

[[Page 63690]]

    66. However, Process Gas Consumers stress the need for procedural 
fairness, e.g., that all prospective customers receive the same notice 
of a proposal, so as to preclude parties from making private bi-lateral 
agreements in advance of a public offer of new capacity. Boardwalk asks 
that pipelines be permitted to set rules for open seasons, provided 
there is no discrimination in the announcement and application of the 
rules. The Commission affirms that there must be no discrimination in 
announcing an open season for new capacity and in accepting bids--all 
potential customers must have an equal opportunity to obtain firm 
capacity. Provided this condition holds, a project sponsor has the 
flexibility to set the parameters of the open season.
    67. In the NOPR, the Commission observed that:

[u]nder the Petitioners' proposal, the rate incentives a project 
sponsor offers to obtain early commitments to a project will be 
based solely on the timing of each shipper's contractual commitment 
to the project. However, the Commission can envision that different 
project sponsors may prefer to offer rate incentives based on 
something other than the timing of contractual commitments. Because 
Commission policies permit rate differentials among customers based 
on a number of grounds--including differing elasticities of demand, 
volumes to be transported, and length of service commitments--a 
project sponsor might wish to offer preferential rates to shippers 
who contract for larger volumes of service.\38\

    \38\ 71 FR 36276 at 36289 (June 26, 2006); FERC Stats. & Regs. ] 
32,606 at 32,894 (2006); 115 FERC 61,338 at P 101 (2006) (footnote 
omitted). See, e.g., Rockies Express Pipeline LLC, 116 FERC ] 61,272 
at P 69-73 (2006).
---------------------------------------------------------------------------

    APGA challenges the Commission's conclusion that it is appropriate 
to permit project sponsors to offer preferential rates to customers 
willing to commit to greater capacity. APGA argues this is unfair 
because ``a large LDC that gets a preferential rate can, for example, 
compete for new loads by offering lower delivery rates than the smaller 
LDC despite that fact that both entities committed for capacity at the 
same time.''\39\
---------------------------------------------------------------------------

    \39\ APGA's Comments at 12 (Aug. 25, 2006).
---------------------------------------------------------------------------

    68. The Commission stresses that the foregoing discussion in the 
NOPR regarding rates constitutes a statement of the Commission's 
existing policies and practices and this rulemaking proceeding does not 
contemplate altering existing policies, practices, or regulations 
affecting rates. Indeed, with respect to rates, the Commission 
emphasized it did not intend to disturb the status quo, stating that:

[g]iven the variety of rate incentives that might be offered 
consistent with Commission policy, the Commission believes it would 
be premature to go beyond our general finding above and seek to 
itemize every rate incentive that might be offered in an open season 
without risk of undue discrimination. Instead, the Commission 
prefers to review different rate incentives on a case-by-case 
basis.\40\
---------------------------------------------------------------------------

    \40\ 71 FR 36276 at 36289 (June 26, 2006); FERC Stats. & Regs. ] 
32,606 at 32,894 (2006); 115 FERC ] 61,338 at P 102 (2006).

    Thus, in the NOPR, the Commission made no determination beyond its 
general observation that currently there are a variety of rate 
incentives available to project sponsors to induce potential customers 
to commit to a new proposal. As one such incentive, quantity can be a 
legitimate basis for awarding new capacity at a lower rate during an 
open season. When a project sponsor is weighing market conditions in 
order to determine whether to invest in the construction of a new 
pipeline or storage field, a lower rate bid by a potential customer can 
nevertheless represent a significant incentive for the company to go 
forward with the project if the customer is willing to commit at an 
early stage to a large quantity.
    69. Given the fact-specific circumstances associated with a 
particular project proposal, the Commission stated its intent to review 
rate incentives on a case-by-case basis. If APGA believes a project 
sponsor has employed an unduly discriminatory rate preference in a 
particular case, APGA may raise this issue in the case in question, and 
the Commission will address the merits of the matter in the context of 
that case.
    70. As a general observation, a project sponsor can diminish its 
risk of being charged with undue discrimination if its announcement of 
an open season clearly specifies the parameters of the bidding 
provisions and the available rate options so that all potential 
customers have an equal opportunity to sign up for new service. For 
example, in their petition, INGAA and NGSA describe the eligibility 
standard for Group I foundation shippers variously as (1) the date 
established in the open season for executing contracts or (2) the date 
the project sponsor makes a ``go/no go'' decision for the project. The 
first date would appear to involve less risk of discrimination, since 
it would be announced and set at the start of the open season, whereas 
the second date appears to give the project sponsor considerable 
discretion as to when to terminate eligibility for Group I.

E. Additional Regulatory Revisions

    71. To implement the above revisions, the Commission will make the 
following minor conforming revisions: (1) Sec.  157.203(b) of the 
Commission's regulations is expanded to reference automatically 
authorized storage remediation and maintenance projects under Sec.  
157.213(a); (2) Sec.  157.203(c) of the Commission's regulations is 
expanded to reference prior notice blanket projects under Sec. Sec.  
157.210, .212. and 213(b); \41\ (3) Sec.  157.205(a) of the 
Commission's regulations is expanded to reference prior notice blanket 
projects under Sec. Sec.  157.210, .212. and 213(b); (4) Sec.  157.207 
of the Commission's regulations is expanded to reference automatically 
authorized storage remediation and maintenance projects under Sec.  
157.213(a); and (5) Sec.  157.216 of the Commission's regulations is 
expanded to provide for abandonment of facilities described by the 
expanded blanket certificate authority.
---------------------------------------------------------------------------

    \41\ The revisions to 18 CFR 157.203 clarify, in response to a 
question raised by Dominion, that all the provisions of this section 
apply to projects proceeding under 18 CFR 157.210, .212. and .213.
---------------------------------------------------------------------------

IV. Information Collection Statement

    72. The Office of Management and Budget (OMB) regulations require 
that OMB approve certain reporting, record keeping, and public 
disclosure requirements (collections of information) imposed by an 
agency.\42\ Therefore, the Commission is providing notice of its 
information collections to OMB for review in accordance with section 
3507(d) of the Paperwork Reduction Act of 1995.\43\ Upon approval of a 
collection of information, OMB will assign an OMB control number and an 
expiration date. The only entities affected by this rule would be the 
natural gas companies under the Commission's jurisdiction. The 
information collection requirements in this Final Rule are identified 
as follows:
---------------------------------------------------------------------------

    \42\ 5 CFR 1320.11 (2006).
    \43\ 44 U.S.C. 3507(d) (2005).
---------------------------------------------------------------------------

    73. FERC-537, ``Gas Pipeline Certificates: Construction, 
Acquisition and Abandonment,'' identifies the Commission's information 
collections relating to Part 157 of its regulations, which apply to 
natural gas facilities for which authorization under NGA section 7 is 
required, and includes all blanket certificate projects.
    74. FERC-577, ``Gas Pipeline Certificates: Environmental Impact 
Statements,'' identifies the Commission's information collections 
relating to the requirements set forth in NEPA and Parts 2, 157, 284, 
and 380 of the Commission's regulations. Applicants have to conduct 
appropriate studies which are necessary to determine the impact of the 
construction and operation of proposed

[[Page 63691]]

jurisdictional facilities on human and natural resources, and the 
measures which may be necessary to protect the values of the affected 
area. These information collection requirements are mandatory.
    75. Because the expansion of the blanket certificate program will 
permit projects that are now processed under the case-specific NGA 
section 7(c) procedures to go forward under the streamlined blanket 
certificate program, although the burden under the expanded blanket 
certificate program will increase, the overall burden on the industry 
will decrease. The Commission estimates that the total annual hours for 
the blanket certificate program burden will increase by 7,727, whereas 
the total annual hours associated with case-specific application 
projects will decrease by 11,997. This represents an overall reduction 
of 4,270 hours. The Commission did not receive specific comments 
concerning the burden estimates in the NOPR, and uses the same 
estimates in this Final Rule. Several commenters did indicate that 
providing information for the Annual Report on Automatic Authorization 
Projects would be burdensome. However, as explained herein, the 
Commission believes that much of this information is already required 
to be compiled and therefore to report it to the Commission will not 
result in additional burdens to certificate holders.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of       Number of
                 Data collection                     Number of      responses/       hours per     Total annual
                                                    respondents       filings        response          hours
----------------------------------------------------------------------------------------------------------------
FERC-537 (Part 157).............................              76             206          -42.02           7,727
FERC-577 (Part 380).............................              76             -62          193.50         -11,997
----------------------------------------------------------------------------------------------------------------

    Information Collection Costs: The above hours reflect the total 
blanket certificate program reporting burden as expanded. Because of 
the regional differences and the various staffing levels that will be 
involved in preparing the documentation (legal, technical and support) 
the Commission is using an hourly rate of $150 to estimate the costs 
for filing and other administrative processes (reviewing instructions, 
searching data sources, completing and transmitting the collection of 
information). The estimated cost is anticipated to be $2,748,900, an 
amount that is $640,500 less than the current estimated cost.
    Title: FERC-537 and FERC-577.
    Action: Proposed Data Collection.
    OMB Control Nos.: 1902-0060 and 1902-0128.
    Respondents: Natural gas pipeline companies.
    Frequency of Responses: On occasion.
    Necessity of Information: Submission of the information is 
necessary for the Commission to carry out its NGA statutory 
responsibilities and meet the Commission's objectives of expediting 
appropriate infrastructure development to ensure sufficient energy 
supplies while addressing landowner and environmental concerns fairly. 
The information is expected to permit the Commission to meet the 
request of the natural gas industry, as expressed in the INGAA and NGSA 
petition, to improve the industry's ability to ensure adequate 
infrastructure is added in time to meet increased market demands. By 
expanding the scope and scale of the blanket certificate program, the 
industry is provided a streamlined means to build new and maintain 
existing infrastructure.
    76. Interested persons may obtain information on the reporting 
requirements or submit comments by contacting the Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington, DC 20426 
(Attention: Michael Miller, Office of the Executive Director, 202-502-
8415, or by e-mail to michael.miller@ferc.gov). Comments may also be 
sent to the Office of Management and Budget (Attention: Desk Officer 
for the Federal Energy Regulatory Commission, by fax to 202-395-7285, 
or by e-mail to oira_submission@omb.eop.gov.) (Re: OMB control nos. 
1902-0060 and 1902-0128.)

V. Environmental Analysis

    77. The Commission is required to prepare an environmental 
assessment (EA) or an environmental impact statement (EIS) for any 
action that may have a significant adverse effect on the human 
environment.\44\ In 1982, in promulgating the blanket certificate 
program, the Commission prepared an EA in which it determined that, 
subject to compliance with the standard environmental conditions, 
projects under the blanket program would not have a significant 
environmental impact. As a result, the Commission determined that 
automatic authorization projects would be categorically excluded from 
the need for an EA or EIS under Sec.  380.4 of the Commission's 
regulations. However, the Commission specified that prior notice 
projects should be subject an EA to ensure each individual project 
would be environmentally benign. For the reasons set forth below, the 
Commission continues to believe this would be the case under the 
blanket certificate program as modified by this rule.
---------------------------------------------------------------------------

    \44\ Regulations Implementing the National Environmental Policy 
Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs. 
] 30,783 (1987).
---------------------------------------------------------------------------

    78. First, the monetary limits on projects are simply being 
adjusted to account for inflationary effects which were not completely 
captured under the mechanism specified in the regulations (the gross 
domestic product implicit price deflator as determined by the 
Department of Commerce). As a result, the scale of projects which will 
be within the new cost limits will be comparable to those projects that 
were allowed when the blanket program was first created. Second, but 
for certain storage remediation and maintenance projects, all the 
additional types of projects permitted under the expanded blanket 
program will be subject to the prior notice provisions and will be 
subject to an EA. Finally, this Final Rule strengthens the standard 
environmental conditions applicable to all blanket projects. Therefore, 
the rule does not constitute a major federal action that may have a 
significant adverse effect on the human environment.

VI. Regulatory Flexibility Act Analysis

    79. The Regulatory Flexibility Act of 1980 (RFA) \45\ generally 
requires a description and analysis of regulations that will have 
significant economic impact on a substantial number of small entities. 
The Commission is not required to make such an analysis if regulations 
would not have such an effect.\46 \Under the industry standards used 
for purposes of the RFA, a natural gas pipeline company qualifies as 
``a small entity'' if it has annual revenues of $6.5 million or less. 
Most companies regulated by the Commission do not fall

[[Page 63692]]

within the RFA's definition of a small entity.\47\
---------------------------------------------------------------------------

    \45\ 5 U.S.C. 601-612 (2005).
    \46\ 5 U.S.C. 605(b) (2005).
    \47\ 5 U.S.C. 601(3) (2005) citing to section 3 of the Small 
Business Act, 15 U.S.C. 623 (2005). Section 3 of the Small Business 
Act defines a ``small-business concern'' as a business which is 
independently owned and operated and which is not dominant in its 
field of operation.
---------------------------------------------------------------------------

    80. The procedural modifications should have no significant 
economic impact on those entities--be they large or small--subject to 
the Commission's regulatory jurisdiction under NGA section 3 or 7, and 
no significant economic impact on state agencies. Accordingly, the 
Commission certifies that the revised regulations will not have a 
significant economic impact on a substantial number of small entities.

VII. Document Availability

    81. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to view and print the contents of this document via the 
Internet through FERC's Home Page (http://www.ferc.gov) and in FERC's 

Public Reference Room during normal business hours (8:30 a.m. to 5 p.m. 
Eastern time) at 888 First Street, NE., Room 2A, Washington DC 20426. 
From FERC's Home Page on the Internet, this information is available in 
the Commission's document management system, eLibrary. The full text of 
this document is available in eLibrary in PDF and Microsoft Word format 
for viewing, printing, and downloading. To access this document in 
eLibrary, type RM06-7 in the docket number field.
    82. User assistance is available for eLibrary and the Commission's 
Web site during normal business hours at (202) 502-8222 or the Public 
Reference Room at (202) 502-8371 Press 0, TTY (202) 502-8659. E-Mail 
the Public Reference Room at public.referenceroom@ferc.gov.

VIII. Effective Date and Congressional Notification

    This Final Rule will take effect January 2, 2007. The Commission 
has determined with the concurrence of the Administrator of the Office 
of Information and Regulatory Affairs, Office of Management and Budget, 
that this rule is not a major rule within the meaning of section 251 of 
the Small Business Regulatory Enforcement Fairness Act of 1996.\48\ The 
Commission will submit this Final Rule to both houses of Congress and 
the Government Accountability Office.\49\
---------------------------------------------------------------------------

    \48\ See 5 U.S.C. 804(2) (2005).
    \49\ See 5 U.S.C. 801(a)(1)(A) (2005).
---------------------------------------------------------------------------

List of Subjects in 18 CFR Part 157

    Administrative practice and procedure, Natural gas, Reporting and 
recordkeeping requirements

    By the Commission.
Magalie R. Salas,
Secretary.

0
In consideration of the foregoing, the Commission amends part 157, 
Chapter I, Title 18, Code of Federal Regulations, as follows:

PART 157--APPLICATIONS FOR CERTIFICATES OF PUBLIC CONVENIENCE AND 
NECESSITY AND FOR ORDERS PERMITTING AND APPROVING ABANDONMENT UNDER 
SECTION 7 OF THE NATURAL GAS ACT

0
1. The authority citation for part 157 continues to read as follows:

    Authority: 15 U.S.C. 717-717w.

0
2. In Sec.  157.6, paragraph (d)(2)(i) is revised to read as follows:

Sec.  157.6  Applications; general requirements.

* * * * *
    (d) * * *
    (2) * * *
    (i) Is directly affected (i.e., crossed or used) by the proposed 
activity, including all facility sites (including compressor stations, 
well sites, and all above-ground facilities), rights of way, access 
roads, pipe and contractor yards, and temporary workspace;
* * * * *

0
3. In Sec.  157.203,
0
a. In paragraph (b), the phrase ``Sec.  157.213(a),'' is added 
immediately after the phrase ``Sec.  157.211(a)(1),'';
0
b. In paragraph (c), the phrase ``Sec.  157.210,'' is added immediately 
after the phrase ``Sec.  157.208(b),'' and the phrase ``Sec.  157.212, 
Sec.  157.213(b),'' is added immediately after the phrase ``Sec.  
157.211(a)(2),'';
0
c. In paragraph (d)(1) introductory text, the phrase ``30 days'' is 
removed and the phrase ``45 days'' is added in its place, and the 
phrase ``30-day'' is removed and the phrase ``45-day'' is added in its 
place;
0
d. In paragraph (d)(1)(ii), the phrase ``; and'' is removed and a semi-
colon is added in its place;
0
e. Paragraph (d)(1)(iii) is redesignated as paragraph (d)(1)(iv) and a 
new paragraph (d)(1)(iii) is added;
0
f. Paragraphs (d)(2)(i) and (d)(2)(ii) are revised;
0
g. In paragraph (d)(2)(iii), the word ``and'' is removed;
0
h. Paragraph (d)(2)(iv) is redesignated as paragraph (d)(2)(vi), and 
the phrase ``45 days'' is removed and the phrase ``60 days'' is added 
its place, and the final period is removed and the phrase ``; and'' is 
added in its place;
0
i. Paragraphs (d)(2)(iv) and (d)(2)(v) are added; and
0
j. A new paragraph (d)(2)(vii) is added to read as follows:

Sec.  157.203  Blanket certification.

* * * * *
    (d) * * *
    (1) * * *
    (iii) A description of the company's environmental complaint 
resolution procedure that must:
    (A) Provide landowners with clear and simple directions for 
identifying and resolving their environmental mitigation problems and 
concerns during construction of the project and restoration of the 
right-of way;
    (B) Provide a local or toll-free phone number and a name of a 
specific person to be contacted by landowners and with responsibility 
for responding to landowner problems and concerns, and who will 
indicate when a landowner should expect a response;
    (C) Instruct landowners that if they are not satisfied with the 
response, they should call the company's Hotline; and
    (D) Instruct landowners that, if they are still not satisfied with 
the response, they should contact the Commission's Enforcement Hotline.
* * * * *
    (2) * * *
    (i) A brief description of the company and the proposed project, 
including the facilities to be constructed or replaced and the location 
(including a general location map), the purpose, and the timing of the 
project and the effect the construction activity will have on the 
landowner's property;
    (ii) A general description of what the company will need from the 
landowner if the project is approved, and how the landowner may contact 
the company, including a local or toll-free phone number and a name of 
a specific person to contact who is knowledgeable about the project;
* * * * *
    (iv) A general description of the blanket certificate program and 
procedures, as posted on the Commission's Web site at the time the 
landowner notification is prepared, and the link to the information on 
the Commission's Web site;
    (v) A brief summary of the rights the landowner has in Commission 
proceedings and in proceedings under the relevant eminent domain rules; 
and
* * * * *
    (vii) The description of the company's environmental complaint 
resolution

[[Page 63693]]

procedure as described in paragraph (d)(1)(iii) of this section.
* * * * *

0
4. In Sec.  157.205:
0
a. In paragraph (a) introductory text, the phrase ``Sec.  157.210,'' is 
added immediately after the phrase ``Sec.  157.208(b),'' and the phrase 
``Sec.  157.212, Sec.  157.213(b),'' is added immediately after the 
phrase ``Sec.  157.211(a)(2),''and
0
b. In paragraph (d)(1), the phrase ``45 days'' is removed and the 
phrase ``60 days'' is added in its place.

0
5. In Sec.  157.206, paragraph (b)(5) is revised to read as follows:

Sec.  157.206  Standard conditions.

* * * * *
    (b) * * *
    (5)(i) The noise attributable to any new compressor station, 
compression added to an existing station, or any modification, upgrade 
or update of an existing station, must not exceed a day-night level 
(Ldn) of 55 dBA at the site property boundary.
    (ii) Any horizontal directional drilling or drilling of wells which 
will occur between 10 p.m. and 7 a.m. local time must be conducted with 
the goal of keeping the perceived noise from the drilling at any pre-
existing noise-sensitive area (such as schools, hospitals, or 
residences) at or below a night level (Ln) of 55 dBA.
* * * * *

0
6. In Sec.  157.207, paragraphs (c), (d), (e), (f), (g), and (h) are 
redesignated, respectively, as paragraphs (d), (e), (f), (g), (h), and 
(i), and a new paragraph (c) is added to read as follows:

Sec.  157.207  General reporting requirements.

* * * * *
    (c) For each underground natural gas storage facility remediation 
and maintenance activity authorized under Sec.  157.213(a), the 
information required by Sec.  157.213(d);
* * * * *

0
7. In Sec.  157.208,
0
a. Paragraph (c)(9) is revised;
0
b. Paragraph (c)(10) is added;
0
c. In paragraph (d), Table I, ``Year 2006,'' in column 1, titled 
``Automatic project cost limit,'' the phrase ``8,200,000'' is removed 
and the phrase ``9,600,000'' is added in its place, and in column 2, 
titled ``Prior notice project cost limit,'' the phrase ``22,700,000'' 
is removed and the phrase ``27,400,000'' is added in its place; and
0
d. Paragraph (e)(4) is redesignated as (e)(4)(i) and paragraphs 
(e)(4)(ii) through (e)(4)(iv) are added to read as follows:

Sec.  157.208  Construction, acquisition, operation, replacement, and 
miscellaneous rearrangement of facilities.

* * * * *
    (c) * * *
    (9) A concise analysis discussing the relevant issues outlined in 
Sec.  380.12 of this chapter. The analysis must identify the existing 
environmental conditions and the expected significant impacts that the 
proposed action, including proposed mitigation measures, will cause to 
the quality of the human environment, including impact expected to 
occur to sensitive environmental areas. When compressor facilities are 
proposed, the analysis must also describe how the proposed action will 
be made to comply with applicable State Implementation Plans developed 
under the Clean Air Act. The analysis must also include a description 
of the contacts made, reports produced, and results of consultations 
which took place to ensure compliance with the Endangered Species Act, 
National Historic Preservation Act and the Coastal Zone Management Act. 
Include a copy of the agreements received for compliance with the 
Endangered Species Act, National Historic Preservation Act, and Coastal 
Zone Management Act, or if no written concurrence is issued, a 
description of how the agency relayed its opinion to the company. 
Describe how drilling for wells or horizontal direction drilling would 
be designed to meet the goal of limiting the perceived noise at NSAs to 
an Ldn of 55 dBA or what mitigation would be offered to 
landowners.
    (10) A commitment to having the Environmental Inspector's report 
filed every week.
* * * * *
    (e) * * *
    (4) * * *
    (ii) Documentation, including images, that restoration of work 
areas is progressing appropriately;
    (iii) A discussion of problems or unusual construction issues, 
including those identified by affected landowners, and corrective 
actions taken or planned; and
    (iv) For new or modified compression, a noise survey verifying 
compliance with Sec.  157.206(b)(5).
* * * * *

0
8. Section 157.210 is added to read as follows:

Sec.  157.210  Mainline natural gas facilities.

    Subject to the notice requirements of Sec. Sec.  157.205(b) and 
157.208(c), the certificate holder is authorized to acquire, construct, 
modify, replace, and operate natural gas mainline facilities, including 
compression and looping, that are not eligible facilities under Sec.  
157.202(b)(2)(i). The cost of a project may not exceed the cost 
limitation provided in column 2 of Table I of Sec.  157.208(d). The 
certificate holder must not segment projects in order to meet this cost 
limitation.

0
9. Sections 157.212 and 157.213 are added to read as follows:

Sec.  157.212  Synthetic and liquefied natural gas facilities.

    Subject to the notice requirements of Sec. Sec.  157.205(b) and 
157.208(c), the certificate holder is authorized to acquire, construct, 
modify, replace, and operate natural gas facilities that are used to 
transport either a mix of synthetic and natural gas or exclusively 
revaporized liquefied natural gas and that are not ``related 
jurisdictional natural gas facilities'' as defined in Sec.  153.2(e) of 
this chapter. The cost of a project may not exceed the cost limitation 
provided in column 2 of Table I in Sec.  157.208(d). The certificate 
holder must not segment projects in order to meet this cost limitation.

Sec.  157.213  Underground storage field facilities.

    (a) Automatic authorization. If the project cost does not exceed 
the cost limitations provided in column 1 of Table I in Sec.  
157.208(d), the certificate holder may acquire, construct, modify, 
replace, and operate facilities for the remediation and maintenance of 
an existing underground storage facility, provided the storage 
facility's certificated physical parameters--including total inventory, 
reservoir pressure, reservoir and buffer boundaries, and certificated 
capacity remain unchanged--and provided compliance with environmental 
and safety provisions is not affected. The certificate holder must not 
alter the function of any well that is drilled into or is active in the 
management of the storage facility. The certificate holder must not 
segment projects in order to meet this cost limitation.
    (b) Prior Notice. Subject to the notice requirements of Sec. Sec.  
157.205(b) and 157.208(c), the certificate holder is authorized to 
acquire, construct, modify, replace, and operate natural gas 
underground storage facilities, provided the storage facility's 
certificated physical parameters--including total inventory, reservoir 
pressure, reservoir and buffer boundaries, and certificated capacity, 
including injection and withdrawal capacity, remain unchanged--and 
provided compliance with environmental and safety provisions is not 
affected unchanged.

[[Page 63694]]

The cost of a project may not exceed the cost limitation provided in 
column 2 of Table I in Sec.  157.208(d). The certificate holder must 
not segment projects in order to meet this cost limitation.
    (c) Contents of request. In addition to the requirements of 
Sec. Sec.  157.206(b) and 157.208(c), requests for activities 
authorized under paragraph (b) of this section must contain, to the 
extent necessary to demonstrate that the proposed project will not 
alter a storage reservoir's total inventory, reservoir pressure, 
reservoir or buffer boundaries, or certificated capacity, including 
injection and withdrawal capacity:
    (1) A description of the current geological interpretation of the 
storage reservoir, including both the storage formation and the 
caprock, including summary analysis of any recent cross-sections, well 
logs, quantitative porosity and permeability data, and any other 
relevant data for both the storage reservoir and caprock;
    (2) The latest isopach and structural maps of the storage field, 
showing the storage reservoir boundary, as defined by fluid contacts or 
natural geological barriers; the protective buffer boundary; the 
surface and bottomhole locations of the existing and proposed 
injection/withdrawal wells and observation wells; and the lengths of 
open-hole sections of existing and proposed injection/withdrawal wells;
    (3) Isobaric maps (data from the end of each injection and 
withdrawal cycle) for the last three injection/withdrawal seasons, 
which include all wells, both inside and outside the storage reservoir 
and within the buffer area;
    (4) A detailed description of present storage operations and how 
they may change as a result of the new facilities or modifications. 
Include a detailed discussion of all existing operational problems for 
the storage field, including but not limited to gas migration and gas 
loss;
    (5) Current and proposed working gas volume, cushion gas volume, 
native gas volume, deliverability (at maximum and minimum pressure), 
maximum and minimum storage pressures, at the present certificated 
maximum capacity or pressure, with volumes and rates in MMcf and 
pressures in psia;
    (6) The latest field injection/withdrawal capability studies 
including curves at present and proposed working gas capacity, 
including average field back pressure curves and all other related 
data;
    (7) The latest inventory verification study for the storage field, 
including methodology, data, and work papers;
    (8) The shut-in reservoir pressures (average) and cumulative gas-
in-place (including native gas) at the beginning of each injection and 
withdrawal season for the last 10 years; and
    (9) A detailed analysis, including data and work papers, to support 
the need for additional facilities (wells, gathering lines, headers, 
compression, dehydration, or other appurtenant facilities) for the 
modification of working gas/cushion gas ratio and/or to improve the 
capability of the storage field.

0
10. In Sec.  157.216:
0
a. Paragraph (a)(2) is amended by adding the phrase ``or Sec.  
157.213(a)'' immediately after the phrase ``Sec.  157.211'';
0
b. Paragraph (b)(2) is amended by adding the phrase ``or a facility 
constructed under Sec.  157.210, Sec.  157.212, or Sec.  157.213(b),'' 
immediately after the phrase ``paragraph (a)(2) of this section,''; and
0
c. Paragraph (c)(5) is amended by adding, at the end, the phrase ``and 
a concise analysis discussing the relevant issues outlined in Sec.  
380.12 of this chapter.''
[FR Doc. E6-18027 Filed 10-30-06; 8:45 am]

BILLING CODE 6717-01-P