Steptoe and Johnson Update: Pennsylvania Regulation of Natural Gas Gathering and Midstream Activity

Steptoe and Johnson Update: Pennsylvania Regulation of Natural Gas Gathering and Midstream Activity


By Kurt Krieger


On August 25, 2011, the Pennsylvania Public Utility Commission ("PaPUC") provided additional clarification in the Laser Northeast Gathering Company, LLC ("Laser") proceeding regarding the criteria used to determine when a natural gas gathering and midstream company's activities constitute service "for the public" potentially causing that company to be subject to "public utility" regulation by the PaPUC. The Laser proceeding is a precedent setting proceeding of great interest to landowners, consumers, natural gas producers and gathering and midstream companies operating in Pennsylvania.

As background, Laser proposes to construct a gathering system in Pennsylvania extending into New York where it is to interconnect with an interstate natural gas pipeline. Its purpose is to provide gathering service to producers. At Laser's request, the Federal Energy Regulatory Commission ("FERC") previously agreed that the system performs a gathering function under FERC's applicable test. In Pennsylvania, Laser is seeking "public utility" status under Pennsylvania law, which, if granted, would also provide Laser with the power of eminent domain.

In an August 25, 2011 Commission order ("August 25 Order"), the Commission denied a request for reconsideration of its earlier June 2011 decision holding that Laser's activities met the definition of "public utility." However, the Commission reiterated that not all gathering and transportation service providers will be considered public utilities subject to the Commission's jurisdiction. "Indeed, the Commission has no intention of seeking to impose economic regulation on gathering and transportation service providers as a general matter." August 25 Order at 19. The Commission offered some clarification on the criteria it uses to make its assessment:  

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