UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Spire STL Pipeline LLC ) ) ) Docket No. CP17-40-000 PROTEST OF ENABLE MISSISSIPPI RIVER TRANSMISSION, LLC Jonathan Christian Assistant General Counsel Enable Midstream Partners, LP 1111 Louisiana St. Houston, TX 77002-1700 Telephone: (346) 701-2146 Fax: (346) 701-2905 Email: jonathan.christian@enablemidstream.com Mark F. Sundback Kenneth L. Wiseman William M. Rappolt Andrews Kurth Kenyon LLP 1350 I Street, NW Suite 1100 Washington, DC 20005 Tel: (202) 662-2700 Fax: (202) 662-2739 Email: msundback@andrewskurth.com Email: kwiseman@andrewskurth.com Email: wrappolt@andrewskurth.com Lisa D. Yoho Senior Director, Regulatory & FERC Compliance Enable Midstream Partners, LP 1111 Louisiana Street Houston, TX 77002 Tel: (346) 701-2539 Email: lisa.yoho@enablemidstream.com February 27, 2017 WAS:300337.8 TABLE OF CONTENTS I. EXECUTIVE SUMMARY AND BACKGROUND ...................................................................1 A. Executive Summary .............................................................................................................1 B. Background ..........................................................................................................................3 1. MRT’s System ...............................................................................................................3 2. Spire’s Project ................................................................................................................4 II. THE CERTIFICATE POLICY STATEMENT ..........................................................................5 A. The Standards Under the Certificate Policy Statement........................................................5 B. Spire’s Application Fails the Certificate Policy Statement Criterion ................................11 1. Spire Will Harm Existing Pipelines And Increase Costs To Their Ratepayers And Ultimate Consumers ..........................................................................11 C. Spire’s Affiliation with Laclede Requires Increased Scrutiny of their Arrangement to Prevent Subsidization ..............................................................................27 D. The Chief Beneficiary Of The Project Is Spire’s Owner ...................................................31 E. Laclede Gas Has Denied it Needs Greater Access To Supplies on REX When Considering Projects in Which It Does Not Hold An Equity Interest.....................32 F. Unfair Competition ............................................................................................................37 G. Spire’s Other Make-Weight Arguments Have No Merit ...................................................39 H. Spire Cites to Readily-Distinguished Case Law ................................................................43 I. The “No Action” Alternative Analysis Is Wholly Inadequate...........................................45 III. PANHANDLE ISSUES ...........................................................................................................48 A. Consequences To MRT’s System From Spire ...................................................................48 B. The Path Forward ...............................................................................................................52 IV. TARIFF ISSUES .....................................................................................................................53 V. CONCLUSION .........................................................................................................................57 Appendix A Appendix B WAS:300337.8 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Spire STL Pipeline LLC ) ) ) Docket No. CP17-40-000 PROTEST OF ENABLE MISSISSIPPI RIVER TRANSMISSION, LLC Pursuant to the February 6, 2017 notice of the Federal Energy Regulatory Commission (“Commission”) in the captioned docket, Enable Mississippi River Transmission, LLC (“MRT”)1 hereby protests Spire STL Pipeline LLC’s (“Spire”) certificate application (“Spire Application” or “Application”).2 In support hereof, MRT respectfully states: I. EXECUTIVE SUMMARY AND BACKGROUND A. Executive Summary Spire seeks a certificate of public convenience and necessity to construct, own and operate a new, 400,000 Dth/day natural gas pipeline to serve the St. Louis market. The sole precedent agreement used to support the new pipeline is with Laclede Gas Company (“Laclede”), Spire’s affiliated local distribution company (“LDC”). MRT submits this Protest to make the Commission and other stakeholders aware of the adverse effects the new project would have, including on MRT and MRT’s ratepayers, as well as on Laclede’s ratepayers and all consumers of natural gas in the St. Louis market area. A project’s adverse effects, according to the Certificate Policy 1 MRT moved to intervene in this proceeding on February 2, 2017. Motion to Intervene of Enable Mississippi River Transmission, LLC, Spire STL Pipeline LLC, Docket No. CP17-40-000 (filed Feb. 2, 2017). 2 Application of Spire STL Pipeline LLC for Certificates of Public Convenience and Necessity, Spire STL Pipeline LLC, Docket No. CP17-40-000 (filed Jan. 26, 2017). 1 WAS:300337.8 Statement,3 are to be balanced against the public benefits of the project in determining the public convenience and necessity. The Commission’s policy, which MRT supports, is to allow a competitive market to decide whether additional capacity is necessary. However, this project has been shielded from a truly competitive market since Laclede’s retail ratepayers will ultimately bear the primary burden for any uneconomic decisions. If the project is approved, MRT’s ratepayers also will face economic consequences that must be weighed. MRT believes that Spire’s project does not satisfy the Commission’s threshold no-subsidy requirement. While there are no existing customers on the proposed Spire STL Pipeline, there will be substantial subsidization at play – without which, this project makes no economic sense. As demonstrated below, this project requires subsidization by existing retail ratepayers of Laclede, as well as other ratepayers of MRT, to be economically justified. Laclede’s existing retail ratepayers will be asked to foot the bill for the higher gas supply (including transportation) costs associated with the proposed project to serve a market with flat gas demand, that will be depressed by the additional, unnecessary costs of the Spire Project. MRT’s existing ratepayers, including Laclede, also will be asked to pay for the cost of existing facilities that will be de-subscribed when demand is re-contracted on Spire’s unnecessary capacity. There are also additional adverse impacts associated with the interconnection of the new pipeline with MRT, the costs of which have neither been fully identified by Spire nor considered in any economic analysis. 3 Certification of New Interstate Natural Gas Pipeline Facilities, 88 FERC ¶ 61,227 (1999), order on clarification, 90 FERC ¶ 61,128, order on clarification, 92 FERC ¶ 61,094 (2000) (“Certificate Policy Statement”). 2 WAS:300337.8 Spire justifies the need for the new pipeline with vague assertions that it will increase supply diversity and reliability, allegedly providing access to gas supplies that are presumed to have a lower cost than supplies currently available to the St. Louis market. While initially appealing, these claimed benefits are illusory. As Laclede has previously contended, Laclede and other St. Louis customers already have access to the supply basins that Spire would provide. Spire’s arguments are at odds with the facts and show that the only apparent benefit of the Spite STL Pipeline is to fulfill Spire’s corporate strategy to accelerate investment in regulated assets and earnings growth. Spire’s Application is inconsistent with the public convenience and necessity. The public benefits of the Spire STL Pipeline project as proposed do not outweigh the project’s adverse impacts, and it therefore should be rejected. B. Background 1. MRT’s System MRT’s system provides St. Louis, Missouri with gas supplies from east Texas, Oklahoma, and Louisiana including the Haynesville, Fayetteville, and SCOOP (South Central Oklahoma Oil Province) and STACK (Sooner Trend Anadarko Basin Canadian and Kingfisher Counties) shales as well as production from the Gulf Coast and Northeast Marcellus/Utica plays. The MRT system is an approximately 670-mile natural gas pipeline system with pipeline facilities in five states (Texas, Louisiana, Arkansas, Missouri, and Illinois). A map of MRT’s system is provided in Exhibit No. MRT-0009. The portion of MRT’s facilities running northward from Perryville, Louisiana to St. Louis is known as the “Main Line.”4 From the Glendale Compressor Station, in Lincoln 4 The “West Line” portion of the pipeline extends from gas production fields in Texas to Perryville, Louisiana. 3 WAS:300337.8 County, Arkansas, natural gas flows north on MRT’s Main Line towards St. Louis. MRT’s Main Line facilities were looped and compression was added periodically, for instance in 1947, 1957 and 1976, to increase capacity to the St. Louis area. MRT’s “East Line” is located in its Market Zone. It was built to run, and bring supplies, from pipeline interconnections in central Illinois westward to St. Louis. Moreover, the MRT East Line can receive volumes that flow on Rockies Express Pipeline LLC (“REX”) (e.g., Marcellus and Utica (“Marcellus/Utica”) and Rockies production). The East Line’s western terminus is a delivery point into Laclede at Chain of Rocks. Natural gas on MRT’s East Line generally flows from east to west. MRT’s Main Line and East Line were built principally to serve a single market, the St. Louis area. MRT does not have any other major alternative markets for that capacity. 2. Spire’s Project As filed, Spire’s Application sought authority to (1) construct approximately 59 miles of greenfield 24-inch diameter natural gas pipeline originating at an interconnection with REX facilities in Scott County, Illinois and (2) acquire from Spire’s affiliate, Laclede, an existing 20-inch diameter state-regulated natural gas pipeline approximately 7 miles in length (“Line 880”). Laclede and Spire are both wholly-owned subsidiaries of Spire Inc. The greenfield portion of the project would proceed southward from REX until it ties into Line 880 in St. Louis County, Missouri. Line 880 proceeds southward and interconnects to the western terminus of MRT’s East Line at Chain of Rocks. Alternatively, in a February 16, 2017 pleading filed with the Missouri Public Service Commission (“Missouri Commission”), Spire suggests that it might not acquire Line 880 from Laclede, but would instead construct additional greenfield pipeline in lieu of using 4 WAS:300337.8 that existing facility.5 MRT reserves its right to supplement or modify the instant pleading once the scope of any project ultimately has been resolved. The combined greenfield pipeline and Line 880 would be approximately 66 miles long and initially would provide up to 400,000 Dth/day of capacity (the “Project”). The results of Spire’s open season were that a single shipper subscribed to Spire’s capacity, namely its affiliate Laclede. Not all of Spire’s capacity was subscribed; only 350,000 Dth/day of the Project’s 400,000 Dth/day capacity was contracted. None of the Project’s capacity has been subscribed at the proposed maximum recourse rate. The Spire Application also contemplates construction of a new bi-directional interconnection with MRT’s existing facilities at the Chain of Rocks location.6 Spire states in its Application that Spire “plans to make” the necessary modifications to Chain of Rocks.7 However, that statement is incomplete. Changes at Chain of Rocks will directly impact MRT’s system, as described in Part III, infra. II. THE CERTIFICATE POLICY STATEMENT A. The Standards Under the Certificate Policy Statement Under the Certificate Policy Statement the Commission assesses whether there is a need for a proposed project and whether the proposed project will serve the public interest.8 Generally the Certificate Policy Statement seeks to screen projects that are subsidized, and avoid construction and attendant disruptions of such projects. As the Commission explained, “[e]xisting pipelines should not have to compete against new 5 6 7 8 See Exhibit No. MRT-0010 (“Motion to Stay Proceedings,” In the Matter of Laclede Gas Co., Missouri Public Service Commission Case No. GM-2017-0018 (filed Feb. 16, 2017)). Spire Application at p. 12. Id. E.g., Sabal Trail Transmission, LLC, 154 FERC ¶ 61,080 at P 62 (2016). 5 WAS:300337.8 entrants into their markets whose projects receive a financial subsidy (via rolled in rates), and neither pipeline’s captive customers should have to shoulder the costs of unused capacity that results from competing projects that are not financially viable.”9 “Companies willing to invest in a project, without financial subsidies, will have shown an important indicator of market-based need for a project.”10 Non-subsidized price signals provide “the appropriate incentive for the optimal level of construction. This can avoid unnecessary adverse impacts on landowners or existing pipelines and their captive customers.”11 “[I]nefficient investment and contracting decisions . . . can cause pipelines to build capacity for which there is not a demonstrated market need.”12 Under the Certificate Policy Statement the Commission also must determine “whether the applicant has made efforts to eliminate or minimize any adverse effects the project might have on . . . existing pipelines in the market and their captive customers . . .”13 Those interests require two separate analyses. First, the Commission has “an obligation to ensure fair competition.”14 Spire’s Application admits the Commission must find that Spire’s project “was the product of fair competition” in order to conclude that an effect on an existing pipeline is not adverse.15 Second, the Commission must consider the interests of ratepayers using existing capacity who “can 9 10 11 12 13 14 15 Certificate Policy Statement, 88 FERC ¶ 61,227 at 61,746 (emphasis added). Id. at 61,747 (emphasis added). Id. (emphasis added). Certification of New Interstate Nat. Gas Pipeline Facilities, 90 FERC ¶ 61,128 at 61,391 (2000). Certificate Policy Statement, 88 FERC ¶ 61,227 at 61,745. Id. at 61,748. Spire Application at p. 19 (citing Ruby Pipeline, L.L.C., 128 FERC ¶ 61,224 at P 37 (2009) (“Ruby”); Guardian Pipeline, L.L.C., 91 FERC ¶ 61,285 at 61,977 (2000) (“Guardian”)). 6 WAS:300337.8 be asked to pay for the unsubscribed capacity in their rates.”16 For both sets of issues, “the Commission will review the efforts made by the applicant and could assist the applicant in finding ways to mitigate the [adverse] effects . . .”17 A project will only be further evaluated after the applicant has made an effort to minimize the adverse effects.18 If despite mitigation efforts the new project would produce residual adverse effects on relevant interests, the project may only be approved “where the public benefits to be achieved from the project can be found to outweigh the adverse effects.”19 “This is essentially an economic test. Only when the benefits outweigh the adverse effects on economic interests will the Commission proceed to complete the environmental analysis where other interests are considered.”20 The Commission will consider “all relevant factors reflecting on the need for the project. These might include, but would not be limited to, precedent agreements, demand projections, potential cost savings to consumers, or a comparison of projected demand with the amount of capacity currently serving the market.”21 Depending upon the adverse effects of the project on relevant interests, the Commission may require different amounts of evidence. “However, the evidence necessary to establish the need for the project will usually include a market study.”22 Generally available market studies such as those by the U.S. Energy Information 16 Certificate Policy Statement, 88 FERC ¶ 61,227 at 61,748. 17 Id. at 61,745. 18 Id. at 61,747. 19 20 21 22 Id. Id. (emphasis added). Id. Id. at 61,748. 7 WAS:300337.8 Administration (“EIA”) showing projections of market growth, are acceptable.23 While market studies are not required in every instance (e.g., where a project is fully subscribed by non-affiliated parties),24 where a proposed project does not have precedent agreements for all of the capacity of the project and the project’s only precedent agreement is with a single affiliated shipper with predominantly captive retail customers, the mere existence of such a precedent agreement is insufficient to show adequate market demand. As the Commission has explained, a “project that has precedent agreements with multiple new customers may present a greater indication of need than a project with only a precedent agreement with an affiliate.”25 “With respect to the impact on the other relevant interests, a project built on speculation (whether or not it will be used by affiliated shippers) will usually require more justification than a project built for a specific new market when balanced against the impact on the affected interests.”26 “Vague assertions of public benefits will not be sufficient.”27 While Spire states that the Project “does not include bypass of any existing pipelines in the region . . .”,28 Spire has made no showing of “a specific new market” for its project in lieu of “bypass of existing pipelines” once its project is placed in service. 23 24 25 26 27 28 Id. See Myersville Citizens for a Rural Cmty., Inc. v. FERC, 783 F.3d 1301, 1311 (D.C. Cir. 2015) (pipeline was fully subscribed); Minisink Residents for Envtl. Pres. and Safety v. FERC, 762 F.3d 97, 111 n. 10 (D.C. Cir. 2014) (relying on existing contracts with unaffiliated shippers to show market need); Millennium Pipeline Co., 140 FERC ¶ 61,045 at P 6 (2012) (project at issue in Minisink was fully subscribed); Dominion Transmission Inc., 141 FERC ¶ 61,240 at P 10 (2012) (project at issue in Myersville was fully subscribed). Certificate Policy Statement, 88 FERC ¶ 61,227 at 61,748 (emphasis added). Id. at 61,749 (emphasis added). Id. at 61,748. Spire Application at p. 18. 8 WAS:300337.8 When assessing the balance between public interests and adverse effects, the “more interests adversely affected or the more adverse impact a project would have on a particular interest, the greater the showing of public benefits from the project required to balance the adverse impact.”29 As the Commission explained, a project that adversely impacts customers of another pipeline: may require evidence of additional benefits to consumers, such as lower rates for the customers to be served. The Commission might also consider how the proposal would affect the cost recovery of the existing pipeline, particularly the amount of unsubscribed capacity that would be created and who would bear that risk, before approving the project. This evaluation would be needed to ensure consideration of the interests of the existing pipeline and particularly its captive customers. Such consideration does not mean that the Commission would always favor existing pipelines and their captive customers. For instance, a proposed project may be so efficient and offer substantial benefits, such as significant service flexibility, so that the benefits would outweigh the adverse impact on existing pipelines and their captive customers.30 While the Commission’s focus is not intended to protect a competitor from competition or loss of market share, the Commission must “take the impact into account in balancing the interests. In such a case the evidence of benefits will need to be more specific and detailed than the generalized benefits that arise from the availability of competitive alternatives.”31 Regardless of whether the effects of unsubscribed capacity on an existing pipeline’s rates are addressed in that pipeline’s next rate case, “the 29 30 31 Id. at 61,749. Id. (emphasis added). Id. at 61,750. 9 WAS:300337.8 potential impact on these captive customers is a factor to be taken into account in the certificate proceeding of the new entrant.”32 In Opinion No. 524-A,33 Portland Natural Gas Transmission System (“PNGTS”) learned that it would lose capacity due to facilities changes proposed to be constructed by a competing pipeline at an existing point of interconnection between the two pipelines. However the Commission later concluded that PNGTS nonetheless did not tell the Commission about the capacity loss by the time the Commission certificated the facilities changes. The Commission certificated the facilities changes requested by the competing pipeline, stating they would not displace service on another pipeline (e.g., PNGTS) and that no pipeline had objected.34 After the certificate was issued, the Commission was informed of the loss of the capacity on PNGTS occasioned by the changed facilities at the interconnection point. However, contracts associated with the lost capacity already had terminated. Had PNGTS told the Commission in the certificate proceeding that the proposed facilities change at the pipelines’ point of interconnection would diminish PNGTS’ capacity while its prior service obligations were still intact, “the Commission could not have approved the [facilities change] as proposed, because such an adverse effect on existing shippers on [PNGTS] could not have been found to be in the public interest.”35 Here, as shown, infra at Part III, there can be no mistake that MRT will have informed the Commission that the proposed facilities’ change will diminish MRT’s ability to receive on a firm basis supplies previously received by MRT on the east side of its East Line. 32 33 34 35 Id. Portland Natural Gas Transmission Sys., 150 FERC ¶ 61,107 at PP 40, 46, 49, 53 (2015) (“PNGTS”). Id. at P 58. Id. at P 102 (emphasis added). 10 WAS:300337.8 B. Spire’s Application Fails the Certificate Policy Statement Criterion 1. Spire Will Harm Existing Pipelines And Increase Costs To Their Ratepayers And Ultimate Consumers a. No New Incremental Demand Has Been Demonstrated For Spire’s Capacity The Certificate Policy Statement requires Spire to identify and attempt to address adverse consequences created by its proposed Project. Spire asserts in its Application that there are “no known or cognizable adverse effects on other existing pipelines or the captive customers of those pipelines.”36 Spire’s Application claims that the “Project’s stated purpose does not include bypass of any existing pipelines in the region, nor will it affect existing contract rights and obligations of those pipelines or their shippers. Further, Laclede’s contractual commitments will be unaffected by approval of the Project.”37 These claims are not consistent with Spire’s own public statements in other venues. A Spire Inc. executive confirmed in a conference call with analysts that once Spire’s Project is operational, Laclede will be “letting go [of] capacity on other pipelines” bringing Gulf Coast supplies to St. Louis.38 As discussed in the Affidavit of Mr. Ditzel, during a period of over a year, Laclede proposed turnbacks of its capacity on MRT, in conjunction with constructing a new pipeline that would interconnect with REX. Existing pipelines and their ratepayers will be adversely affected by the Spire project.39 Spire’s own Application rebuts its claim that there will not be an adverse effect. Spire projects that “as transportation contracts expire, the availability of multiple pipeline 36 37 38 39 Spire Application at p. 18. Id. (emphasis added). See Exhibit No. MRT-0003 at P 24 (Affidavit of Dr. Carpenter). Exhibit No. MRT-0008 at P 11 (Affidavit of Mr. Ditzel). 11 WAS:300337.8 alternatives will create a more competitive bidding process for renewal of future pipeline capacity resulting in a lower overall cost of gas for the consumer.”40 It is not possible to leave “contractual commitments . . . unaffected” while at the same time seeking to reduce the rate that is part of those “contractual commitments,” much less the level of capacity subscribed as part of those commitments. In the event of discounting due to competition, existing pipelines are entitled to seek discount adjustments in the volumes used to derive their maximum rates.41 Spire’s Application also refers to capturing additional load with its as yet unsubscribed capacity.42 Spire has not indicated any intention to turn away a potential load that is currently served by an existing pipeline.43 The foregoing statements suggest that Spire (and its affiliate Laclede) anticipate capacity de-subscriptions on existing pipelines, which will diminish the value of pipeline capacity already serving St. Louis. These consequences apparently are anticipated by, and their cause is attributable to, Spire and its affiliates. The negative cost consequences of the Project, if it is approved, will be borne by ratepayers. Presently Laclede holds contracts for about 753,000 Dth/d of firm transmission service directly serving St. Louis loads. Those contracts are on MRT, MoGas Pipeline LLC (“MoGas”) and Southern Star Central Gas Pipeline, Inc. (“Southern Star”). 40 41 42 43 Spire Application at p. 23. E.g., Policy for Selective Discounting by Nat. Gas Pipelines, 111 FERC ¶ 61,309 at P 14 (2005). See Spire Application at p. 10. Indeed, Laclede would be placed in an awkward position with state regulators if it could release unneeded Spire capacity to load served by existing pipelines, but chose not to. 12 WAS:300337.8 • Laclede has contracts on MRT, the largest of which (No. 3310) is for 660,329 Dth/d of firm transport in MRT’s Market Zone, of which 437,240 Dth/d expires in 2018 and the remaining 223,089 Dth/d expires in 2020.44 • Laclede holds a contract for 62,800 Dth/d on MoGas. Most of the MDQ attributable to Laclede is covered by contractual provisions that appear to be rolled over annually, their primary term having concluded in 2014 (Contract Nos. 1001, 1010, 1060, 1070, 1080, 1090, 2000 and 2010). • Laclede holds two contracts on Southern Star (Contract Nos. TA1003 and TA7620) both of which expire on October 1, 2017 and are for 28,300 and 2,000 Dth/d of firm transportation in Southern Star’s market zone. Additionally, interconnections between MRT’s East Line and each of Natural Gas Pipeline Company of America LLC (“NGPL”) and Trunkline Gas Company, LLC (“Trunkline”) allow volumes to be delivered into MRT’s East Line and then to the St. Louis area. Currently Laclede holds a total of 170,000 Dth/d of capacity from NGPL and Trunkline.45 NGPL and Trunkline can access supplies flowing on REX, as well as from the Gulf Coast. NGPL also operates a St. Louis lateral. Gas supply from REX and Gulf Coast sources could be purchased on a delivered basis at the interconnection between NGPL’s mainline and its St. Louis lateral for consumption in St. Louis. Spire presents no evidence concerning future demand growth. It has presented no data supporting anything like the need for 400,000 Dth/d to meet incremental demand. Laclede’s average day demand in the St. Louis area is about 192,000 Dth/d.46 Spire’s application provided no data on St. Louis peak day consumption. 44 45 46 Laclede and its affiliate also hold MRT Contract Nos. 3311 (for 150,000 Dth/d, 75,000 Dth/d expiring 2018, 75,000 Dth/d in 2020) and 3777 (436 Dth/d expiring 2018). Laclede holds two contracts on Trunkline, under Rate Schedule EFT. One of those contracts expires in 2018 (for 80,000 MMbtu/d), the other in 2021 (for 10,000 MMbtu/d). Laclede also holds two contracts on NGPL, including one with a delivery point on MRT’s East Line, for a total of 80,000 MMbtu/d (Nos. 14711 and 147119), which expire in 2018. See NGPL Index of Customers. Spire Marketing Inc. holds an FTS contract (No. 147742) with an expiration date of February 28, 2017 for 20,000 MMbtu/d on NGPL. Exhibit No. MRT-0003 at Figure 2 (Affidavit of Dr. Carpenter). 13 WAS:300337.8 According to EIA data, consumption of natural gas within Missouri has been essentially flat for the past two decades,47 as shown by the following graph: Total Missouri Natural Gas Consumption (MMcf/d) The foregoing historical consumption data include the effects of the January, 2014 Polar Vortex in the St. Louis market. Laclede’s Estimated System Sendout on Design Day (or “Zero Day” according to earlier Laclede Group Annual Reports) has been declining. 47 See Exhibit No. MRT-0011. 14 WAS:300337.8 Table 148 Annual Report Million Therms (as reported) Dekatherms (conversions) notes 2016 Not Reported 2015 Not Reported 2014 10.6 1,060,000 2013 10.6 1,060,000 2012 10.6 1,060,000 2011 10.6 1,060,000 1.9% reduction from prior year 2010 10.8 1,080,000 2009 10.8 1,080,000 1.8% reduction from prior year 2008 11.0 1,100,000 2007 11.0 1,100,000 There currently exists serving substantial pipeline capacity available to serve Laclede and the St. Louis market: TABLE 2 49 Entity Unsubscribed Capacity Available to St. Louis Area MRT 7,637 Dth/d MoGas 9,264 Dth/d NGPL St. Louis Lateral 255,000 Dth/d IIT 40,000 Dth/d IIT can deliver supplies that are flowing on REX to MRT’s Reticulated System50 in the St. Louis area.51 In total, there is substantial pipeline capacity not under firm contract 48 49 50 51 Exhibit No. MRT-0016 at pp. 2, 4, 6, 8, 10, 12, 14, 16, 18, 20 (“Estimated System Sendout on Design Day,” or “Zero Day”) (Spire Inc. was formerly known as The Laclede Group, Inc.). See Exhibit No. MRT-0003 at P 21 (Affidavit of Mr. Ditzel); Exhibit No. MRT-0012. See Section 34.2(c) of the General Terms and Conditions of MRT’s tariff for a definition of the Reticulated System. See Exhibit No. MRT-0008 at PP 16-19 (Affidavit of Mr. Ditzel). 15 WAS:300337.8 available to provide service to the St. Louis area. Indeed, MRT has been for the past month conducting an open season for capacity in the Market Zone. There have been no expressions of interest on the capacity as of February 26, 2017. See Exhibit MRT-0039. Moreover, according to EIA’s data, aggregate natural gas consumption for the census region containing Missouri will not exceed the 2015 level for another decade, until 2024.52 During an earnings conference call, a Spire Inc. executive was queried in connection with Spire STL about whether “supply diversity is kind of the big driver here. Would you say that is the main one and that there’s very little incremental volume needs that are driving this thing?”53 The executive responded “Yes, the predominant reason, as you said, is supply diversity.”54 There is no market need for a project that increases costs and suppresses demand in a low load-factor market that already has flat demand. Laclede’s decision to reject the St. Louis Natural Gas Pipeline project (sponsored by entities not affiliated with Laclede), and not subscribe to the MoGas proposed capacity expansion discussed in Part II. E, infra, is effective market evidence of that proposition. Laclede is proposing to acquire Spire capacity of 350,000 Dth/d to serve its average consumption of about 200,000 Dth/d. Laclede holds existing transmission capacity of 753,000 Dth/d into the St. Louis market. Laclede also operates the Lange storage facility in the St. Louis market area. According to the Laclede Group’s 2015 Form 10-K,55 Lange has peak day withdrawal capacity of about 300,000 Dth/d56. Thus, Laclede has combined existing pipeline capacity and market area storage capacity of 52 53 54 55 56 See Exhibit No. MRT-0013. Exhibit No. MRT-0014 at p. 2 (emphasis added). Exhibit No. MRT-0014 at p. 3. Exhibit No. MRT-0015 at p. 4. See Exhibit No. MRT-0003 at P 19 (Affidavit of Dr. Carpenter). 16 WAS:300337.8 approximately 1,053,000 Dth/d. Thus Laclede has combined existing capacity and market area storage capacity of approximately 1,053,000 Dth/d. According to Laclede Gas Group/Spire Inc.’s Annual Reports from 2006 through 2016, Laclede’s peak day natural gas consumption has averaged about 890,000 Dth during that period.57 Laclede’s maximum peak day delivery from 2007 through 2014 (the year of the Polar Vortex) was 1,050,000 Dth.58 Thus Laclede has 1,053,000 Dth/d to serve peak day needs (i.e., 753,000 Dth/d of existing pipeline capacity and approximately 300,000 Dth/d of storage deliverability), without Spire or the propane capacity that Spire indicates Laclede proposes to abandon.59 If Spire is constructed and Laclede acquires 350,000 Dth/d of capacity on that pipeline, and retains all of its existing capacity subscriptions, it would have about 1,400,000 Dth/d of transmission and market area storage capacity to satisfy peak day needs of 1,060,000 Dth/d, again ignoring its propane capability. The foregoing numbers corroborate Laclede’s admission that it will be “letting go” of capacity on existing pipelines if Spire is constructed.60 As the Commission has stated, “[t]he NGA requires the Commission to approve rates that permit a pipeline an opportunity to recover 100 percent of its costs.”61 In Opinion No. 528, shippers argued the pipeline “should be required to share in the cost of 57 58 59 60 61 Exhibit No. MRT-0016 at pp. 2, 4, 6, 8, 10, 12, 14, 16, 18, 20 (average of line “Peak Day System Sendout”) (Spire Inc. was formerly known as The Laclede Group, Inc.). Id. Laclede’s “Estimated System Sendout on Design Day,” or “Zero Day,” was 1,060,00 Dth in 2014, a decline from 1,100,00 Dth in 2007. Id. at pp. 6, 8, 10, 12, 14, 16, 18 and 20. Spire has not provided any study demonstrating the economic benefits arising from Laclede switching from propane capacity to use of its Project. See Exhibit No. MRT-0003 at P 24 (Affidavit of Dr. Carpenter). Opinion No. 528, El Paso Natural Gas Co., 145 FERC ¶ 61,040 at P 393 (2013) (“Opinion No. 528”); id. at P 375; see also 18 C.F.R. § 284.10(c)(2) (2016) (“Any rate filed for service subject to this section must be designed to recover costs on the basis of projected units of service”). 17 WAS:300337.8 its unsubscribed and discounted capacity.”62 The Commission found that “approximately 50 percent of the pipeline’s total long-term firm capacity [was] subscribed on something less than an annual basis,”63 with a portion being “unsubscribed” even once short-term contracts were accounted for. The pipeline at issue was found to have done all that could be reasonably expected to remarket capacity, albeit at a discount; consequently, the Commission rejected any “sharing” by pipeline investors of costs of discounted contracts or unsubscribed capacity.64 The cost of capacity de-subscribed on existing pipelines (i.e., turnback), consistent with Opinion No. 528, may be recovered from the remaining billing determinants on those systems. That would include both remaining billing determinants associated with serving Laclede and those billing determinants associated with other customers. The costs likely will be quite substantial, given the amount of de-subscription implied by Laclede’s agreement with Spire, and the relative proportion of such desubscription in relation to market area peak demand. Through this pleading, MRT is alerting the Commission and other interested stakeholders regarding these substantial and foreseeable negative impacts. While Spire has, in representations to investors, indicated it will be letting go of capacity on existing pipelines,65 and has so informed MRT,66 its Application provides no quantification of the resulting amount of capacity desubscribed or the cost associated with that capacity. Consequently, MRT has estimated unit rate impacts based on 3 62 63 64 65 66 Opinion No. 528, 145 FERC ¶ 61,040 at P 359. Id. at P 377. Id. at P 389. Exhibit No. MRT-0014 at p. 5. Exhibit No. MRT-0008 at P 11 (Affidavit of Mr. Ditzel). 18 WAS:300337.8 different scenarios. Adjusting billing determinants from MRT’s last Section 4 general rate case settlement, Table 3 shows estimated rate impacts of as much as approximately 55%, depending on how Spire impacts MRT’s level of capacity subscriptions. Table 3 reflects results under (1) a 170,000 Dth/d Market Zone turnback only (i.e., Laclede’s current contractual entitlement to receipts from NGPL and Trunkline on MRT’s East Line); (2) a 250,000 Dth/d Market Zone turnback and an 80,000 Dth/d Field Zone turnback; and (3) a 350,000 Dth/d Market Zone turnback and a 180,000 Dth/d Field Zone turnback. TABLE 3 1 2 3 Rates per the 2012 Rate Case Settlement Turnback of 170,000 Dth/d in Market Zone Turnback of 250,000 Dth/d in Market Zone and 80,000 Dth/d in Field Zone Turnback of 350,000 Dth/d in Market Zone and 180,000 Dth/d in Field Zone Market 2.1105 FT ($Dth/mo) Usage Field 0.0051 3.1955 Usage 0.0049 IT (100% LF) Market Field 0.0745 0.1100 2.5650 0.0057 3.1955 0.0049 0.0900 0.1100 2.8544 0.0062 3.6078 0.0050 0.1000 0.1236 3.3232 0.0070 4.2995 0.0053 0.1163 0.1467 It is simply incorrect to say that Spire will not affect contracts on existing pipelines and that its purpose is not to promote bypass of existing pipelines. Spire will adversely affect existing pipelines serving St. Louis, as well as their ratepayers.67 67 As described in Part III, infra, without substantial facilities modifications on MRT, receipt of firm volumes at Chain of Rocks into MRT will adversely affect MRT’s operations due to (1) the reconfiguration of the Chain of Rocks delivery point into a bi-directional delivery and receipt point and (2) the change in operations if firm volumes enter MRT at Chain of Rocks. 19 WAS:300337.8 b. Spire Fails To Support Its Allegations That The Project Will Produce Savings For Laclede’s Customers The Certificate Policy Statement requires Spire to demonstrate that the Project’s public benefits outweigh the adverse effects.68 The Commission repeatedly has held that “[t]his is essentially an economic test. Only when the benefits outweigh the adverse effects on economic interests will the Commission proceed to complete the environmental analysis where other interests are considered.”69 Spire argues that it will provide “more competitively priced natural gas supplies to” St. Louis, which it conjectures will “enhance the economic vitality of additional natural gas conversions.”70 Analyzing the Project from the perspective of the publiclyavailable rate data shows that Spire’s assertion rests on faulty assumptions.71 Laclede dismissed parallel claims advanced by unaffiliated project sponsors (see Part II.E., infra), and the same claims are no more credible when advanced by its affiliate Spire. Spire has failed to submit documentation to support its assertion that its proposed pipeline will produce cost savings,72 and failed to produce data quantifying the benefits, if any, to facilitate a determination if those outweigh the project’s adverse effects. Spire’s Application fails to carry its burden of proof under the Certificate Policy Statement. 68 Certificate Policy Statement, 88 FERC ¶ 61,227 at 61,747 (explaining that “[t]he public benefits could include, among other things, . . . access to new supplies, lower costs to consumers . . . [and] providing competitive alternatives . . . .”). 69 Tennessee Gas Pipeline Company, 124 FERC ¶ 61,198 at P 9 (2008) (emphasis added) (“Tennessee”); Colorado Interstate Gas Company, 123 FERC ¶ 61,099 at P 24 (2008); Kinder Morgan Interstate Gas Transmission LLC, 122 FERC ¶ 61,154 at P 18 (2008) (emphasis added). 70 Spire Application at p. 23. 71 72 As a single day “snapshot,” according to Gas Daily for February 14, 2017, spot prices at REX Zone 3 were $2.825; in contrast, on the Columbia Gulf Transmissions, LLC mainline (a good proxy for prices in producing basins traditionally serving St. Louis) spot process were lower - they averaged $2.80. See, e.g., Spire Application at p. 43 (referencing Exhibit H). 20 WAS:300337.8 Spire’s claims regarding savings apparently presume that for a decade or more Marcellus/Utica shale production will have a price advantage over supply basins currently serving the St. Louis area.73 That presumption ignores data showing that sources of supply now serving St. Louis have compelling economics. Among supply sources serving St. Louis today are the SCOOP and STACK natural gas formations. The most active driller in the STACK and SCOOP plays has disclosed that the oil-rich wells in those formations are producing returns of 20-70% even at $45/bbl WTI and $2.50/Mcf natural gas prices at Henry Hub.74 These highly attractive economics will fuel continued drilling. Another source supplying St. Louis today is the Haynesville Shale. The EIA’s January 2017 Drilling Productivity Report shows that the Haynesville region’s month over month growth in natural gas production from a single average rig is comparable to that in the Marcellus region.75 That material shows that the legacy gas production of Haynesville has rebounded from a prior steep fall. In contrast, the legacy gas production in the Marcellus has fallen 300 MMcf/d since 2008. MRT Witness Dr. Paul Carpenter demonstrates that producing basins such as Marcellus/Utica may experience transmission constraints that temporarily reduce prices. But those price-reducing circumstances are transitory, if not illusory. Transmission capacity historically has been constructed which brings prices in the 73 74 75 See, e.g., Spire Application at pp. 22-23. See Exhibit No. MRT-0017. Compare Exhibit No. MRT-0018 at p. 1 with p. 2. 21 WAS:300337.8 previously export-constrained basin into step with prices in other markets. That is precisely what is happening with Marcellus/Utica production.76 As the Commission is well aware, there have been a plethora of applications filed by pipelines to transport Marcellus/Utica shale supplies to various markets around the country. In 2015-2016 alone, the Commission has approved 18 projects that will compete to transport a total of 3.23 Bcf/d from the Marcellus/Utica Shale to geographically diverse markets. These projects are listed in Appendix A hereto. On top of the capacity certificated in 2015-2016, projects that are now pending at, or authorized in February 2017 by, the Commission (not counting Spire’s project) would represent 18 Bcf/d of additional transmission capacity for Marcellus/Utica production. These projects are listed in Appendix B hereto. That amount of capacity (and associated demand) will surely affect Marcellus prices; it is illogical to presume that two years hence Marcellus/Utica basis differentials will be as advantageous as today relative to other production regions’ basis differentials. In addition, many of the approved and proposed projects will be capable of bringing Marcellus/Utica production to the Perryville Hub area that is a major source of supply for MRT. Increasing the level of supply in this area will place downward pressure on pricing to the benefit of MRT shippers. Pipeline capacity to export Marcellus/Utica volumes is not the only source of increasing demand for that supply. The demand for natural gas to generate electricity in markets currently served by Marcellus/Utica production is surging as well. In Pennsylvania, as of December 31, 2015, 6,546.6 MWs of natural gas-fired power plants 76 See Exhibit No. MRT-0003 at PP36-37 (Affidavit of Dr. Carpenter). 22 WAS:300337.8 (22 projects) were under construction (approximately 80% of the total MWs under construction (8,201.5 MW)), and an additional 15,273.7 MWs (55 projects) were under PJM’s study phase in the interconnection queue.77 According to UBS, 15,000 MW of combined-cycle generation is under construction within PJM.78 Obviously power plant conversions and replacements outside of Pennsylvania and PJM Interconnection, L.L.C. (“PJM”) also will consume Marcellus/Utica production. For instance, the 2,000 MW Indian Point nuclear plant near New York City is scheduled to shut one unit in 2020, and the second unit by 2021.79 The 680 MW Pilgrim nuclear plant is scheduled to close in 2 years, in 2019. Part or all of their output may be replaced by gas-fired generation. Thus, Spire’s concern that the St. Louis market will face increased natural gas price risk due to increased competition for supplies would be quite correct regarding Marcellus/Utica production. Spire also incorrectly implies that the Project will avoid “rate stacking” it associates with accessing gas supplies from traditional supply basins.80 “Rate stacking” to the St. Louis market is not a feature unique to accessing St. Louis’ traditional supply basins, as opposed to the Appalachian region. Appalachian natural gas supplies can be brought to the St. Louis market only by incurring stacked interstate transportation rates. Any “rate stacking” analysis must start with the fact that Spire’s maximum recourse rates substantially exceed those of MRT, and Spire’s rate continues to increase. For instance, Spire’s Open Season Announcement posted August 1, 2016 provided an 77 78 79 80 Exhibit No. MRT-0019 at p. 2. While not all of the projects in the study phase may be built, the natural gas projects account for nearly all of the MWs that are listed as active. Id. Exhibit No. MRT-0020. Pursuant to an agreement between its owner and New York State officials, Indian Point will close no later than April 2021. The first of the two units must close in three years, i.e., by March 2020. Spire Application at p. 9. 23 WAS:300337.8 estimated $0.23-0.27 Dth/d maximum recourse rate.81 Just six months later, the estimate of that rate has increased by 11-30% (to about $0.30/Dth/d).82 (And while intervenors in this docket do not have access to the terms of Laclede’s agreement with Spire, we know that GT&C Subsection 18.5 of Spire’s proposed tariff affords Spire the right in a later rate case filing to seek to recover from other shippers the rate reductions it negotiated with its affiliate Laclede.) Similarly, the estimated capital cost of Spire is increasing. In a 2016 presentation to investors, Spire estimated construction could be completed for $170-$200 million.83 Four months ago the estimate increased to $190-210 million.84 As of the end of January the estimate has grown to $220 million,85 or 29.4% more than the $170 million figure. It is not clear whether Spire’s Exhibit K estimate of costs includes all of the relevant costs of the Project, such as the cost of making the proposed Spire/MRT Chain of Rocks interconnect a two-way interconnect. Further, on February 16, 2017, Laclede informed the Missouri Public Service Commission (“PSC”) that Spire was “strongly considering” not buying Line 880 from Laclede;86 instead, Spire would build greenfield pipeline facilities to take the place of Line 880. According to Laclede’s testimony at the PSC, use of Line 880 would have resulted in “avoiding millions of 81 82 83 84 85 86 See Exhibit No. MRT-0021 at p. 3. See Spire Application, Exhibit N at p. 1. Exhibit No. MRT-0022 at p. 2. Exhibit No. MRT-0023 at p. 2. See Spire Application, Exhibit K at line 11, col.(d). Exhibit No. MRT-0010 at P 2 (“Motion to Stay Proceedings,” In the Matter of Laclede Gas Co., Missouri Public Service Commission Case No. GM-2017-0018 (filed Feb. 16, 2017)). 24 WAS:300337.8 dollars in new construction costs that would otherwise have to be paid for by Laclede and its customers.”87 On a delivered cost basis, Spire’s project is not an economic alternative to use of MRT’s East Line capacity.88 Shippers on Spire could purchase gas for delivery at REX Zone 3. Forward prices for the summer of 2019 are approximately $2.39/Dth (the price of gas at the Chicago city gate minus $0.05/Dth). Then the shipper would need to transport the gas on Spire’s pipeline. The only publicly-available rate information for Spire’s transmission service (i.e., Spire’s recourse rate as proposed in this proceeding) is approximately $0.3055/Dth including fuel (assuming no further increase in Spire’s construction cost). The total cost of delivery would equal approximately $2.70/Dth on a 100% load factor basis.89 In contrast, the total delivered cost using MRT’s East Line would be just $2.53/Dth.90 Forward prices for the summer of 2019 for deliveries at NGPL are approximately $2.44/Dth (the price of gas at the Chicago city gate).91 MRT’s Market Zone recourse rate would cost $0.0892/Dth including fuel. Using MRT’s existing East Line would save shippers approximately $0.17/Dth as opposed to Spire’s project (i.e., $2.70/Dth less $2.53/Dth). The savings would also be $0.17/Dth using forward 87 88 89 90 91 Exhibit No. MRT-0024 at p. 4 (“Direct Testimony of Scott E. Woley,” In the Matter of Laclede Gas Co., Missouri Public Service Commission Case No. GM-2017-0018, a p. 6, lines 20-23 (filed Oct. 31, 2016)). See Exhibit No. MRT-0025; Exhibit No. MRT-0003 at P 20 (Affidavit of Mr. Ditzel). See Exhibit No. MRT-0025; Exhibit No. MRT-0003 at P 20 (Affidavit of Mr. Ditzel). See Exhibit No. MRT-0025; Exhibit No. MRT-0003 at P 20 (Affidavit of Mr. Ditzel). Section 10 of the General Terms and Conditions of MRT’s tariff provides that cashouts of imbalances are valued based on the index utilized by MRT. For the East Line, MRT uses Chicago city gate prices. The applicable index is posted on MRT’s website. 25 WAS:300337.8 prices for Winter 2018/19.92 Immediately upon going into service, gas supply costs via Spire will be higher than on incumbent service providers. Only if Spire’s ratepayers could find and lock in lower prices at some point in Spire’s life cycle would Spire make any economic sense. Spire’s suggestion that St. Louis ratepayers will save money by using its facilities as opposed to other available capacity in the market is not supported in its Application and by the evidence. Moreover, as noted above, existing pipeline capacity available to Laclede already accesses Marcellus/Utica volumes flowing on REX. See p. 4, supra. The other benefits claimed by Spire are necessarily contingent upon the Project delivering lower priced gas to the St. Louis market. Spire claims that the Project will induce conversion to methane from other fuels.93 The facts described above show that Spire will increase rather than decrease costs for natural gas consumers in St. Louis. Spire will increase fixed transmission costs, discouraging, rather than encouraging, conversions from other fuels to natural gas.94 Spire also claims that the Project will eliminate Laclede’s reliance on propane facilities to meet critical peak system requirements.95 Spire fails to provide any substantive evidence regarding Laclede’s current use of propane facilities and why the Project, as opposed to other solutions including existing pipeline capacity, would 92 93 94 95 See Exhibit No. MRT-0025; Exhibit No. MRT-0003 at P 20 (Affidavit of Mr. Ditzel). Spire Application at pp. 5 and 23. Moreover, Spire does not disclose how much capacity is available at Laclede’s Lange Station to receive any volumes in excess of those Laclede would be contractually entitled to demand there. See Spire Application at p. 12. If no spare capacity exists, then shippers other than Laclede could not access gas supplies at the Lange Station. As noted in Part III, MRT’s existing facilities cannot receive significant volumes at Chain of Rocks and meet existing firm receipt obligations from NGPL and Trunkline absent significant system modifications. Spire Application at p. 24. 26 WAS:300337.8 eliminate Laclede’s use of propane. Consistent with the no-action discussion in Part II.I, infra, there has been no showing that Laclede cannot meet its peak day needs using existing resources and available options. For all these reasons, Spire’s claim that its project will produce cost savings for the St. Louis market is unsupported. The Commission cannot rely upon vague allegations of benefits in Spire’s Application to trump concrete adverse effects demonstrated above. See Certificate Policy Statement, 88 FERC at 61,748 (“Vague assertions of public benefits will not be sufficient”). Thus, Spire, like other project sponsors, should have quantified public benefits of their project in their application to meet the requirements of the Certificate Policy Statement as part of the applicant’s prima facie showing. C. Spire’s Affiliation with Laclede Requires Increased Scrutiny of their Arrangement to Prevent Subsidization The Certificate Policy Statement adopted a “no-subsidy” policy. The Policy Statement requires as a threshold matter that project sponsors be prepared to financially support an expansion project without relying on subsidization from existing customers.96 The Commission ruled that “removal of the subsidy is necessary to ensure that the market finds the project is viable because either the pipeline or its expansion shippers are willing to fully fund the project.”97 96 97 See, e.g., Tennessee, 124 FERC ¶ 61,198 at P 9. Certification of New Interstate Pipeline Facilities, 90 FERC ¶ 61,128 at 61,392. The no-subsidy policy does recognize “that existing customers should pay the costs of projects designed to improve their service by replacing existing capacity, improving reliability, or providing additional flexibility.” Certification of New Interstate Pipeline Facilities, 90 FERC ¶ 61,128 at 61,393. However, even in that context, raising existing customers’ rates would be inappropriate if it constituted a subsidy by the existing customers. Even where such benefits exist and notwithstanding that existing customers should pay for the costs of obtaining those benefits, they should not bear the entire costs of a project “simply because the existing customers receive ‘some benefit from the construction of the new 27 WAS:300337.8 Spire’s contractual support for the project is based solely on one agreement with a single affiliated LDC (Laclede) that has predominantly captive retail customers. As an LDC with captive retail customers, Laclede can pass through to those customers the costs associated with its contract with Spire. Rather than pay lower rates to receive gas from an unaffiliated pipeline, Spire and Laclede can maximize the revenue and return earned by their corporate parent by having Laclede pay to receive service from Spire’s Project. As a result, Laclede’s captive retail customers would subsidize Spire’s construction by being forced into a twenty year transportation arrangement supporting the Project even though such an agreement is not economically efficient (compared to the much shorter contract durations Laclede has entered into with existing non-affiliated pipelines discussed at pp. 13-14, supra). Without Laclede’s captive retail customers, Spire would not be a financially viable alternative when facing other lower-cost interstate transportation options. To the extent a capacity subscription was negotiated at arms-length between two parties that are unaffiliated and lack captive retail customers, the results presumably reflect hard bargaining and efficiency-seeking market dynamics. Economic theory assumes that under competitive conditions, a buyer would opt for the most cost-effective method of achieving the desired natural gas supply. But the form of negotiated rate agreement here at issue was arranged between two contract counter-parties that are wholly-owned by the same owner and can rely on captive retail ratepayers to backstop them. The concerns that form the basis for the no-subsidy policy are present here. The costs of Spire’s failure to meet the same type of market test as arms’ length transactions facilities’ . . . [and that any] increase in rates [must be] related to the improvements in service . . .” Id. at 61,394. 28 WAS:300337.8 between non-affiliated entities will be borne by Laclede’s captive retail ratepayers. This is particularly troubling where the project has had no takers at maximum recourse rates. Spire’s inefficiencies will increase the retail price of natural gas (and potentially electricity) paid by ratepayers above competitive levels, who are overcharged for the natural gas they use by having the inefficient costs of Spire built into retail prices. See Part II.B.1.b, supra. Retail ratepayers will also be seeing wholesale transmission rate increases filed by pipelines serving St. Louis that have experienced capacity desubscription due to Spire. In contrast, if Spire is not built Laclede could have transferred savings (achieved by its use of more-efficient alternatives to Spire) to retail ratepayers in the form of lower rates. Spire’s form of negotiated rate agreement (“NRA”) is not public and Spire refused to provide the complete NRA even to MRT’s outside counsel subject to protective order. Spire’s contractual underpinnings are also being questioned by the Office of the Public Counsel at the Missouri Commission (“OPC”). Like MRT, OPC has been denied access to the NRA between Laclede and Spire. OPC notes that it is better to understand the proposed contract in advance of the Project’s construction than to try to examine the contract after the operation has commenced.98 Nonetheless, the public description of the NRA’s cost pass-through feature for overruns in Spire’s costs (see Application at p. 29) suggests that burdens of underwriting Spire’s greenfield pipeline have been readily accepted by Laclede. Moreover, any economic inducement afforded Laclede to acquire the capacity on Spire in the NRA may not cost Spire Inc., the ultimate parent of Spire and Laclede, 98 Exhibit No. MRT-0026 at pages 4-5 and PP 8-9 (“Motion to Compel,” In the Matter of Laclede Gas Co., Missouri Public Service Commission Case No. GM-2017-0018 at PP 8-9 (filed Feb. 23, 2017)). 29 WAS:300337.8 anything. Spire has included a provision in its pro forma tariff that would allow it to seek to recover the difference between its negotiated rates and maximum recourse rates from other shippers (should other shippers ever materialize).99 That type of provision certainly makes economic sense on a system that is already constructed and for which costs are sunk; but in the context of an under-subscribed proposed project resting exclusively on one contract between affiliates, with speculative capacity built into the Project, it presents another potential subsidy. There is an additional concern. As discussed below, construction of Spire’s proposed pipeline, interconnection of that pipeline with MRT at Chain of Rocks, and the transportation of 150,000 Dth/d on a firm basis in furtherance of the project, only can be accomplished consistent with MRT’s existing firm service obligations by the construction of facilities modifications on MRT’s system. Those facilities include: a new Metering and Receipt station at Chain of Rocks; facilities modifications to MRT’s system to make flows at Chain of Rocks bi-directional; and new metering and receipt facilities that Spire identifies in Exhibit K to its Application. It is not clear that all the necessary facilities are reflected in Spire’s estimated cost of $28 million.100 See Part III, infra. Currently Laclede’s customers are entitled to revenues ranging from 70% to 100% of the income from certain off-system sales and capacity releases by Laclede. If Spire is built it would diminish the value of interstate pipeline capacity serving the then over-piped St. Louis Market.101 To the extent that the income stream from released 99 100 101 See GTC Subsection 18.5. Exhibit No. MRT-0008 at PP 13-15 (Affidavit of Mr. Ditzel). See, e.g., Spire Application at p. 23. 30 WAS:300337.8 capacity and interruptible transportation is diminished by Spire’s construction, that would be yet another cost borne by Laclede’s ratepayers. Additionally, subsidization will also occur when the costs of capacity desubscribed by Laclede on existing pipelines (following Spire’s in-service date) would be charged to Laclede’s retail ratepayers. See Part II.B.1.a, supra. In addition to Laclede’s retail ratepayers, other ratepayers served by contracts remaining on the pipeline that has lost load will also be adversely impacted. See Opinion No. 528, discussed, supra. These circumstances are inconsistent with the no-subsidy policy. D. The Chief Beneficiary Of The Project Is Spire’s Owner While Spire’s Application contains at best assertions of speculative benefits to ratepayers from the Spire project, there is no question about the existence of benefits to the sponsor of the Project. In a June 28, 2016 investor presentation, Spire stated it has had a 5-year growth in utility earnings of 14% driven in significant part by infrastructure upgrades.102 Its growth in earnings has allowed it to increase its dividend by 6.5% since 2011.103 It targeted growth of 5 to 8% in net economic earnings per share (“NEEPS”) in 2016 over 2015, and its long-term annual NEEPS growth target is 4-6% driven in significant part by its proposed Spire STL pipeline.104 Spire Inc. also specifically advised investors that its projected growth in NEEPS was supported by the proposed pipeline’s “AFUDC 102 103 104 See Exhibit No. MRT-0027 at p. 2. Id. at p. 3. Id. at p. 4. 31 WAS:300337.8 contribution ramp[ing] up to FY19 in-service date.”105 And it advised investors that its “focus remains squarely [inter alia] on [m]oving forward with Spire STL Pipeline.”106 Seeking growth in and of itself is not objectionable, when achieved by meeting market demands. Spire Inc.’s unquantified and vague allegations of (non-existent) benefits to ratepayers contrast sharply with the very specific, material benefits that Spire’s owner sees for itself and its investors from constructing the project. E. Laclede Gas Has Denied it Needs Greater Access To Supplies on REX When Considering Projects in Which It Does Not Hold An Equity Interest Laclede has already rejected the type of contentions found in Spire’s Application when made by un-affiliated pipelines. Laclede was approached by an unaffiliated developer, the St. Louis Natural Gas Pipeline LLC (“SLNGP”), proposing to construct a short (e.g., 11 mile long) pipeline with far lower capital costs than Spire to access REX supplies, including Appalachian production. SLNGP summarized its project as enhancing access to REX gas, transport service competition, lower gas prices, protection against supply interruption and safer, more reliable infrastructure. . . . . [R]efusal of interconnection will deprive Missouri ratepayers of the above-stated benefits and . . . cause artificially higher gas prices, decreased safety and greater risk of service interruptions.107 105 106 107 Exhibit No. MRT-0028 at p. 2. Id. at p. 3. Exhibit No. MRT-0029 at p. 7 (“St. Louis Natural Gas Pipeline LLC’s Response in Opposition to Laclede Gas Co.’s Motion to Dismiss,” St. Louis Natural Gas Pipeline LLC v. Laclede Gas Co., Missouri Public Service Commission, Case No. GC-2011-0294 at p. 14 (filed May 12, 2011) (citations omitted)). 32 WAS:300337.8 SLNGP contended that their pipeline serving Laclede would bring Appalachian supplies with lower costs to St. Louis and thereby provide increased supply security, and economic development:108 The increased supply made possible by [the project’s] pipeline would permit natural gas to be provided to Laclede’s customers at a cost lower than currently being charged. **** SLNGP’s proposed pipeline offers numerous additional advantages . . .: a. The source of SLNGP’s natural gas is located in a different region of the United States than Laclede’s current source(s); therefore, the risk of interruption in gas supply resulting from disruption by weather or natural disaster or terrorism in the Gulf, Laclede’s current source, would be minimized; b. SLNGP’s pipeline will increase the supply of gas to the St. Louis area served by Laclede, thereby permitting both increased development and lower costs to existing rate payers; c. SLNGP’s pipeline will be new construction, thereby providing lower maintenance costs, lower levels of lost gas costs and less risk of interruption in service; and d. as new construction, SLNGP’s pipeline also would be safer, and therefore more reliable, because of the decreased risk of infrastructure failings as compared to aging infrastructures currently used by Laclede. [Failure to construct the] proposed pipeline, will necessarily result in the charging of higher prices to Laclede’s customers than would otherwise be necessary, the risk of shut downs for maintenance, decreased safety 108 Exhibit No. MRT-0030 at p. 2 (P 8), p. 4 (P 17) (“Complaint, Request For Investigation And Motion For Expedited Treatment,” St. Louis Natural Gas Pipeline LLC v. Laclede Gas Co., Missouri Public Service Commission, Case No. GC-2011-0294 at p. 2 and P 8, and p.4 and P 17 (Mar. 22, 2011)). 33 WAS:300337.8 and other interruptions of service, which would not result if SLNGP’s pipeline is constructed and interconnected.109 Laclede’s response denied without qualification or condition each of SLNGP’s assertions quoted above.110 Instead, Laclede stated “the proposed pipeline did not make operational or economic sense for either the Company or its customers. . . .” “[E]xisting pipeline transporters that currently deliver gas to Laclede today already provide the Company with access to the same gas supplies on the Rocky Mountains Express pipeline (“REX”) that would be sourced through the Complainant’s proposed pipeline, but without the proposed pipeline’s incremental cost. **** Laclede had recently reviewed and rejected a similar proposal by another party . . . . Notably, no other potential customers appeared to express any interest in taking service off of the proposed pipeline during the open season meetings conducted by [the proposed project] and indeed none of Laclede’s existing transportation customers have expressed an interest to Laclede of taking service through the proposed pipeline.111 Laclede stated that SLNGP’s assertions regarding the supposed superiority of its pipeline project all rest on the assumption that its proposed interconnection with NGPL will provide Laclede with cheaper access to gas sourced off the REX pipeline. Laclede already has access to gas from REX through NGPL and . . . Mississippi River Transmission at a more 109 110 111 Exhibit No. MRT-0030 at p. 4 (P 17), p. 5 (PP 19-20) (“Complaint, Request For Investigation And Motion For Expedited Treatment,” St. Louis Natural Gas Pipeline LLC v. Laclede Gas Co., Missouri Public Service Commission, Case No. GC-2011-0294 at p. 4 and P 17, and p. 5 and PP 19-20 (Mar. 22, 2011)) Exhibit No. MRT-0031 (“Motion to Dismiss,” St. Louis Natural Gas Pipeline LLC v. Laclede Gas Co., Missouri Public Service Commission, Case No. GC-2011-0294 at p. 22 (filed April 21, 2011)) (emphasis added). Id. at p. 1-2 (emphasis added). 34 WAS:300337.8 favorable rate and without the incremental cost of Complainant’s proposal.112 According to Laclede, earlier efforts to jointly develop an interstate pipeline into St. Louis were rejected because “the proposal offered neither access to new sources of gas nor an attractive price.”113 For instance, according to Laclede: Southern Star Central Pipeline (“SSC”) filed a pleading informing the [Missouri] Commission that [the project] had failed to identify SSC as a pipeline that already provides natural gas to Laclede off of the Rockies Express Pipeline . . . .114 The project’s sponsor responded by asserting benefits that are replicated in Spire’s current Application, such as: Simply having access to gas from other major producing locations creates competition, helping to equalize natural gas prices. The alternate source of supply and delivery also will benefit Missouri ratepayers as a hedge against supply disruption from the Gulf region, from where Laclede and those on its distribution network obtain a significant amount of their current supply. [W]ith the development of additional gas supplies in the East to be channeled westward on the REX pipeline, increased and better access to REX gas can only be a positive development for Missouri consumers. **** Installation of new infrastructure . . . for an alternate route from NGPL will significantly lessen the danger and constraints of transport on MRT-Centerpoint’s insufficient east line. The SLNGP line will have capacity of 200,000 MMBtu per day. This capacity could be increased to 550,000 MMBtu per day by adding compression at NGPL’s main line. More 112 113 114 Id. at p. 2 n.1. Exhibit No. MRT-0033 at p. 2 (P 4)(“Motion of Laclede Gas Company to Modify Discovery Time Limits,” St. Louis Natural Gas Pipeline LLC v. Laclede Gas Co., Missouri Public Service Commission Case No. GC-2011-0294 at p. 2 (P 4) (filed June 9, 2011)). Id. at p. 2 (P 3). 35 WAS:300337.8 and better access to REX gas will have a major, positive effect for Missouri ratepayers, as it is expected to become the lowest cost natural gas supply in the Midwest. **** [T]he lower price for a portion of its supply would benefit Laclede and its customers. Additional routes of direct access to major interstate pipelines for Laclede would be a positive increasing competition, lowering prices and improving reliability and safety, rather than a negative, as Laclede suggests.115 Laclede rejected these contentions: [SLNGP’s project] would have added nothing of value for Laclede or its customers. . . . Laclede and its customers would have received nothing more than redundant pipeline access to the same gas supplies that Laclede can already access through the CenterPoint-MRT East line. **** Although [SLNGP] currently claims that the project would cost about $32 million, a prior proposal that Laclede rejected . . . for a similar pipeline project estimated that such a pipeline would cost . . . about $56.0 million . . . due to the need to go around certain historically significant areas, use extensive timber matting, etc. . . . [SLNGP’s] own estimate has already escalated by some 25% in the past seven months alone (i.e., from $25.7 million in October 2010 to $30.0 million in February 2011, to $32 million in May 2011).116 Laclede noted it might enter into a settlement concerning an interconnection with SLNGP’s project, but that settlement would have to include an express provision that 115 Exhibit No. MRT-0029 at pp. 3-5 (“St. Louis Natural Gas Pipeline LLC’s Response In Opposition to Laclede Gas Company’s Motion To Dismiss,” St. Louis Natural Gas Pipeline LLC v. Laclede Gas Co., Missouri Public Service Commission Case No. GC-2011-0294 at pp. 5-7 (filed May 12, 2011) (emphasis added: citations/footnotes omitted)). 116 Exhibit No. MRT-0034 at p. 2 (P 3) and n.2 (“Laclede Gas Company Response To Staff Report,” St. Louis Natural Gas Pipeline LLC v. Laclede Gas Co., Missouri Public Service Commission Case No. GC-2011-0294 at 2 and n. 2 (filed July 11, 2011) (emphasis added)). 36 WAS:300337.8 Laclede and its customers would “not be responsible for . . . any unanticipated cost overruns” from the project’s interconnection.117 Ultimately, the project was not built after Laclede refused to subscribe to it. The same fate befell another project accessing REX supplies sponsored by a pipeline not affiliated with Laclede. MoGas, which connects with REX and Panhandle, announced an open season ending March 31, 2015 to solicit interest in a system expansion by up to 300,000 Dth/d of take away capacity from REX and Panhandle, including 50,000 Dth/d to flow throughout MoGas’ system. MoGas indicated the minimum bid would be $0.15 Dth/d, for at least 15 years.118 In other words, the unit cost of the MoGas project was about half of Spire’s currently proposed recourse rate, and the required contract commitment of the MoGas project would have been shorter. Apparently Laclede did not enter into a contract for MoGas’ project, which was never built. F. Unfair Competition The Certificate Policy Statement discusses the importance of fair competition to serve markets.119 The Commission has noted that efforts by a certificate applicant to mitigate adverse impacts of its proposal would be relevant to determining whether unfair competition occurred.120 Spire has completely failed to address mitigation, although in another forum its owner has admitted what the Application denies, namely that Laclede would be “letting go” of existing capacity. See Part II.B.1.a., supra. There has been no RFP for 350,000 Dth/d of load conducted by Laclede. Instead, Laclede and its corporate 117 118 119 120 Id. at p. 4 ((“Laclede Gas Company Response To Staff Report,” St. Louis Natural Gas Pipeline LLC v. Laclede Gas Co., Missouri Public Service Commission Case No. GC-2011-0294 at p. 6 (filed July 11, 2011)). See Exhibit No. MRT-0035 at pp. 3-5. Certificate Policy Statement, 88 FERC ¶ 61,227 at 61,748. Certificate Policy Statement, 88 FERC ¶ 61,227 at 61,745. 37 WAS:300337.8 parent decided upon the project and subsequently Spire held an open season. Spire received no capacity subscriptions. Laclede then requested 350,000 Dth/d. Further, when addressing an unaffiliated project developer (i.e., the St. Louis Natural Gas Pipeline) Laclede refused to accept as valid allegations of benefits that Spire now relies upon, and Laclede also refused to accept any responsibility for project cost overruns on the St. Louis Natural Gas Pipeline Project; yet when dealing with its affiliate Spire, Laclede agreed to bear rate consequences of cost overruns. Spire’s market showing consists of a single non-public NRA it has with its affiliate Laclede, the only agreement related to firm transportation on the system. According to Spire’s Application, the non-public NRA’s “terms . . . are detailed in Section 6.18 in the GT&C of Spire’s Tariff.”121 However, there is no GT&C Section 6.18 in Spire’s tariff - GT&C Section 6 ends at subsection 6.4.122 Spire does disclose, however, that if its initial authorized maximum recourse rate further increases due to construction cost overruns, the same percentage increase would apply to the rate under its NRA with Laclede.123 Spire asserts that “[i]n this way Spire and the Foundation Shipper have allocated between themselves the risks associated with cost overruns . . . .”124 That statement does not acknowledge that ultimately risks likely will not be borne by Laclede, but effectively by its captive retail ratepayers, and by remaining billing determinants on existing pipelines (also including those serving Laclede retail ratepayers). Moreover, 121 122 123 124 Spire Application at p. 29. Id. GT&C Subsection 18.5 affords Spire the right to seek to recover from other shippers the rate reductions it negotiated with its affiliate Laclede. Spire Application at p. 29. As noted supra, Laclede has informed the PSC that Line 880, which it claims would have saved millions of dollars in construction costs had it been transferred to Spire, instead may be retained by Laclede, forcing Spire to build from scratch additional more costly new pipeline facilities. Id. 38 WAS:300337.8 GT&C Subsection 18.5 affords Spire the right to seek to recover from other shippers the costs of any rate reductions it negotiated with its affiliate Laclede. As a result, the risks of Spire are not borne by the project sponsor, but by unaffiliated parties (e.g., Laclede’s captive retail ratepayers, and unaffiliated shippers on Spire, and the billing determinants associated with ratepayers that would remain on existing pipelines if Spire were to become operational). Moreover, as shown in Part II.B.1.b. supra, Laclede selected a more expensive option than existing alternatives. When presented with a project in which Laclede or its affiliates would not own equity that would access REX supplies, Laclede aggressively opposed the project. See Part II.E, supra. Further, as described in Part IV below, Spire’s proposed tariff would provide additional advantages in marketing capacity not consistent with Commission policy. The result is skewed and unfair competition. G. Spire’s Other Make-Weight Arguments Have No Merit Spire attempts to finesse the issues of unnecessary expense associated with its project and costs of unsubscribed capacity on other systems that will be recovered from reduced post-Spire billing determinants, by claiming that supply diversity will be enhanced by Spire.125 The claimed justification for Spire based on supply diversification is a red herring. Laclede already has ample access to volumes flowing on REX and supply diversity, if Laclede were to elect to use it. At present, Laclede could access supplies flowing on REX by using: • 170,000 Dth/d subscribed by Laclede on MRT’s East Line from points of interconnection with NGPL and Trunkline; 125 See e.g., Spire Application at pp. 5, 22-25. 39 WAS:300337.8 • 62,800 Dth/d subscribed by Laclede on MoGas; • 9,264 Dth/d of available capacity on MoGas; • 40,000 Dth/d of available capacity on IIT; • 7,637 Dth/d of available capacity on MRT’s East Line. The foregoing list says nothing of past projects that would have increased Laclede’s access to REX supplies but which Laclede rejected. Laclede repeatedly rejected claims of the St. Louis Natural Gas Pipeline that St. Louis consumers would benefit by increasing supplies from REX, such as from the Rockies or Appalachia (see Part II.E, supra). Laclede elected not to participate in a project accessing REX supplies, prior to the SLNGP, according to Laclede’s statements quoted at p. 36, supra, as well as declining to participate in MoGas’ proposed 2015 expansion to increase access to REX, described at p. 37, supra. As described in Part III infra, access by St. Louis markets on MRT’s East Line to volumes flowing on Trunkline and NGPL will be substantially diminished if MRT accepts firm deliveries of 150,000 Dth/d at Chain of Rocks, absent changes to MRT’s existing facilities.126 As noted in Part III, infra, firm receipts on the East Line from NGPL and Trunkline (which interconnect with REX) will be impaired if MRT receives 150,000 Dth/d of firm supply at Chain of Rocks. Access to 40,000 Dth/d of unsubscribed capacity on IIT and all of MoGas on a firm basis on MRT’s system will be eliminated if MRT provided firm service to Spire volumes at Chain of Rocks without extensive facility modifications. Without the adverse impacts from Spire, IIT can deliver 40,000 Dth/d of REX supplies into MRT for transportation to Laclede. Of course, if supply diversity had been the primary driver of the Spire project, it would make little 126 Exhibit No. MRT-0001 at PP 7-10 (Affidavit of Dr. Kytomaa). 40 WAS:300337.8 sense to reduce other pipelines’ access to St. Louis markets. In addition, Southern Star also already accesses supplies in the Rockies. Spire’s justification that it will enhance supply diversity is further undercut by Laclede’s repeated statements in Annual Reports to shareholders, such as this language from the 2016 Annual Report: Laclede Gas focuses its gas supply portfolio around a number of large natural gas suppliers with equity ownership or control of assets strategically situated to complement its regionally diverse firm transportation arrangements. In eastern Missouri, Laclede Gas utilizes both Mid-Continent and Gulf Coast gas sources to provide a level of supply diversity that facilitates the optimization of pricing differentials as well as protecting against the potential of regional supply disruptions. . . . In fiscal year 2016, Laclede Gas purchased natural gas from 35 different suppliers to meet its total service area current gas sales and storage injection requirements. Laclede Gas entered into firm agreements with suppliers including major producers and marketers providing flexibility to meet the temperature sensitive needs of its customers.127 Spire’s other justification, namely avoiding earthquake risk,128 is equally without merit. MRT has served St. Louis for over 80 years without a service interruption caused by seismic activity, despite the fact that the area experiences low level seismic activity periodically. According to Laclede, it subscribes to “Mid-Continent and Gulf Coast gas sources . . . protecting against the potential of regional supply disruptions.”129 As noted in Part II.E., prior projects (not affiliated with Laclede) approaching St. Louis from the north and east claimed to provide “[a]dditional routes . . . improving 127 128 129 Exhibit No. MRT-0036 at p. 3 (emphasis added). Spire Application at pp. 24-25. See Exhibit No. MRT-0036 at p. 3 (Spire’s 2016 Annual Report). 41 WAS:300337.8 reliability” that would minimize “the risk of interruption in gas supply resulting from . . . natural disaster” hence presenting “less risk of interruption of service” and “decreased risk of infrastructure failings as compared to aging infrastructures currently used by Laclede.”130 Laclede concluded those goals were far from compelling. See pp. 33-37, supra. To justify its about-face in this case, Spire’s Application contains a selective citation to USGS statements that omits language necessary to understand those statements. For instance, Spire offers a fragmentary quote that could lead one to conclude that there is a 7 to 10 percent chance of a large quake in the next year in the relevant region. The USGS study actually states: “It was the consensus of [a] broad group of scientists that . . . the evidence indicates that we can expect large earthquakes similar to the 1811-12 earthquakes to occur . . . with an average recurrence time of 500 years . . . .”131 One way to envision the chances of a once every 500 year large magnitude earthquake is that there is a one in 182,500 (or a five thousandth of one percent) chance that it will occur on a particular day. Spire also does not disclose that relying on its project rather than MRT’s system would have little effect. That is because portions of Laclede’s own service territory are within the New Madrid seismic zone and the St. Louis area could also be affected by earthquakes.132 Laclede’s argument on this score is without merit. 130 131 132 Exhibit No. MRT-0029 at pp. 3-5, 7 (“St. Louis Natural Gas Pipeline LLC’s Response In Opposition to Laclede Gas Company’s Motion To Dismiss,” St. Louis Natural Gas Pipeline LLC v. Laclede Gas Co., Missouri Public Service Commission Case No. GC-2011-0294 at pp. 5-7, 14 (filed May 12, 2011)). Exhibit No. MRT-0037 at p. 1 (emphasis added) (USGS study). Id.; Exhibit No. MRT-0038. 42 WAS:300337.8 H. Spire Cites to Readily-Distinguished Case Law Spire’s Application cites to Commission determinations that actually highlight the need for additional scrutiny here. The Commission frequently has conducted a reality check on signed precedent agreements to assess market support where less than 100% of the project has been subscribed and capacity was subscribed to project affiliates.133 Unlike here, in the cases Spire cites to support its argument (e.g., Ruby and Guardian), the proposed pipeline either (1) entered into numerous precedent agreements with nonaffiliated customers or (2) was pursued or approved in advance by the state regulatory body, including approving the affiliate relationship between the shipper and the proposed pipeline.134 In contrast to cases cited by Spire, Missouri does not have a prospective review of an LDC’s decision to subscribe to capacity of a greenfield interstate pipeline. Missouri had been undertaking a limited review of the proposed transfer of Laclede’s Line 880 to Spire, but on February 16, 2017, Laclede proposed to stay that review until Spire decided whether it wanted to acquire Line 880.135 Should Spire be constructed, an after-the-fact 133 For instance, where a project is subscribed for less than 100% of capacity and an affiliate is backstopping the subscription, the Commission also has relied on state commission determinations or legitimate third party growth estimates. See also Millennium Pipeline Co., 100 FERC ¶ 61,277 at PP 82-85 (2002) (“Millennium”) (citing high levels of use of existing pipelines and data from public agency sources showing robust demand growth in the relevant market); Guardian, 91 FERC ¶ 61,285 at p. 61,959 (noting that Guardian provided a market study from a third party that projected growth in gas demand in the Wisconsin and northern Illinois markets in support of its project). 134 Ruby, 128 FERC ¶ 61,224 at P 5 & Appendix A (noting that Ruby had entered into 14 precedent agreements) and P 37; Guardian, 91 FERC ¶ 61,285 at 61,966-68, 61,971-72 (explaining that the LDC’s decision was approved by the appropriate state regulatory body); Florida Southeast Connection, LLC, 154 FERC ¶ 61,080 at P 85 (2016) (“Florida Southeast Connection”) (the Florida Commission “issued an order finding that [the utility] had demonstrated a need for additional capacity”). 135 Exhibit No. MRT-0010 (“Motion to Stay Proceedings,” In the Matter of Laclede Gas Co., Missouri Public Service Commission Case No. GM-2017-0018 (filed Feb. 16, 2017)). The Missouri Commission issued an order denying, at least for the time being, Laclede’s request for a stay, to at least allow for resolution of the dispute over access to the NRA. See “Order Denying Motion to Stay, 43 WAS:300337.8 prudence review, if that were to take place, would confront an existing 20 year contract on a potentially unnecessary but already constructed pipeline, rather than avoiding the harm in advance, as was undertaken in the prospective state reviews in the cited cases. Spire cites to Eastern Shore for support for the proposition that the Commission gives equal weight to contracts between affiliates and non-affiliates.136 Spire fails to acknowledge, however, that in Eastern Shore the Commission found a general consensus of increased natural gas consumption.137 The record here shows historically flat demand and no growth in Missouri natural gas consumption for years to come. Laclede’s estimates of peak day load have been decreasing, not increasing. See Part II.B.1.a., supra. Moreover, the Eastern Shore case acknowledged that the evidentiary showing necessary to substantiate a project would depend on the potential for adverse consequences.138 In that case there was “no indication the project will affect [incumbent pipeline] Transco’s market for firm transportation service on transport gas,”139 and there was a “lack of identified significant adverse effects on Eastern Shore’s existing customers, other pipelines in the market and their captive customers or landowners and communities . . . .”140 The instant case, in contrast, involves at least 59 miles of greenfield pipeline project that will impair MRT’s operations and existing service (see Part III, infra), and impose additional costs on Laclede’s captive retail ratepayers and the But Relieving Staff of the Obligation To Respond,” In the Matter of Laclede Gas Co., Missouri Public Service Commission Case No. GM-2017-0018 (issued Feb. 24, 2017). 136 137 138 139 140 Spire Application at p.22 n.19 (citing Eastern Shore Natural Gas Co., 128 FERC ¶ 61,204 (2010) (“Eastern Shore”). Eastern Shore, 128 FERC ¶ 61,204 at 62,055 n.13. Eastern Shore, 128 FERC ¶ 61,204 at 62,055. Id. at p. 62,057. Id. at p. 62,058. See also Florida Southeast Connection, 154 FERC ¶ 61,080 at P 74 (“No transportation service provider or captive customer in the same market has protested”). 44 WAS:300337.8 billing determinants attributable to MRT’s ratepayers. Spire also cites to operations on and commercial circumstances of Florida Southeast Connection141 but fails to note the Commission’s assertion in that case that it will consider a wide array of evidence reflecting on the need for the project, including demand projections, cost consequences for customers, and a comparison of the projected demand with the amount of capacity currently serving the market.142 Applying those factors to the record in this case shows that Spire does not yield public benefits outweighing costs. Spire also asserts there is no subsidization issue, citing to three readilydistinguishable cases143 in which none of the sponsors of the new projects conscripted captive retail ratepayers of their wholly-owned affiliate to backstop the new project’s economics. In this sense, cases such as Millennium cited by Spire144 are substantially different. In Millennium, the entity subscribing to its affiliate’s project was a wholesale marketer; the Commission noted that “in a competitive environment, the marketer still must offer its commodity at competitive prices to attract customers.”145 An LDC with an exclusive franchise to serve, inter alia, retail ratepayers does not face the same level of market pressure when imposing an affiliate’s costs on its residential customers. I. The “No Action” Alternative Analysis Is Wholly Inadequate Spire’s Resource Report No. 10 discussion of “Alternatives” provides an inadequate assessment of the “no action” alternative. While Spire notes that the some of the impacts of the Project would be avoided if Spire was not constructed, it fails to 141 142 143 144 145 Spire Application at p. 22 n.19. Florida Southeast Connection, 156 FERC ¶ 61,160 at P 5. Spire Application at p. 18 (citing ETC Tiger Pipeline, LLC, 131 FERC ¶ 61,010 (2010); Fayetteville Express Pipeline, LLC, 129 FERC ¶ 61,235 (2009); Ruby, 128 FERC ¶ 61,224). Spire Application at p. 17 (citing Millennium, 100 FERC ¶ 61,277). Millennium, 100 FERC ¶ 61,277 at P 57. 45 WAS:300337.8 properly assess the need for the Project from the perspective of its only proposed customer, Laclede. Laclede previously rejected non-affiliated facilities to be built north, either to the east or the west, of St. Louis because there was no need for such facilities. For example, Spire’s analysis fails to mention or discuss the 11-mile SLNGP project that Laclede previously rejected, much less consider Laclede’s reasons for the action, namely that the facilities would have no value to Laclede’s ratepayers, even though the facilities’ claimed benefits are echoed in Spire’s Application. The same is true regarding MoGas’ proposed 2015 expansion. Nor does the analysis methodically review the existing transmission capacity options. See pp. 16-17 supra. The SLNGP project would have extended from NGPL to Laclede, providing Laclede with supplies from REX. Laclede rejected that project because “the proposed pipeline did not make operational or economic sense for either the Company or its customers.”146 Laclede noted that existing interstate pipelines already provided it with access to the gas supplies on REX without the incremental cost, including NGPL and MRT.147 Laclede explained that “putting eleven miles of pipeline in the ground to provide Laclede with another indirect source of REX gas supplies was . . . something that ‘does not fit Laclede’s current gas supply needs.’ ”148 Spire does not explain in its “no action” alternative why Laclede’s assessment of the need for access to supplies on REX has changed, or acknowledge the prior rejection of the SLNGP project. 146 Exhibit No. MRT-0031 at p. 1 (“Motion to Dismiss,” St. Louis Natural Gas Pipeline LLC v. Laclede Gas Co., Missouri Public Service Commission, Case No. GC-2011-0294 at p. 1 (filed April 21, 2011)). 147 Id. at p. 2. 148 Id. 46 WAS:300337.8 In fact, Laclede has stated that it has substantial supplies and diversity of supply from its existing interconnections. See Part II.G., supra. Spire does not explain why Laclede’s gas supply needs cannot be met through existing infrastructure. In particular, existing interstate pipelines have firm transportation services available for purchase from both the pipeline and on the secondary market. Such capacity is available to access supply basins available to REX, as Laclede noted in its 2011 opposition to SLNGP. MRT’s East Line offers the same supply optionality. IIT has 40,000 Dth/d of capacity available that could provide Laclede with access to REX and NGPL. MoGas also connects to REX. Spire also fails to fully explain the net effect that the Project’s construction would have on Laclede’s access to other supply basins. While Laclede would subscribe to 350,000 Dth/d of firm interstate transportation capacity, Laclede’s future use of MRT’s system to receive firm volumes from Spire, as described in Part III, infra, will limit or eliminate Laclede’s ability to use the 170,000 Dth/d it holds on NGPL and Trunkline through the East Line absent significant facilities modifications. In that case the result is that less supply from NGPL and Trunkline, including access to REX supplies, will be available to the St. Louis market area through those systems than currently is available. See Part III, infra. When considering not only the supply access provided by Spire but also the impact that Laclede’s future use of MRT’s system will have on supplies from the East Line, on a net basis, the Project will only add approximately 140,000 Dth/d of supply diversity to Laclede’s access to REX supplies, not 350,000 Dth/d (i.e., 170,000 Dth/d lost on NGPL and Trunkline, and 40,000 Dth/d on IIT). Any perceived need for more gas supply in St. Louis would be dampened by the increased costs 47 WAS:300337.8 discussed in Part II, supra, caused by Spire. Consequently, the proposed “no action” analysis is simply inadequate. III. PANHANDLE ISSUES A. Consequences To MRT’s System From Spire The Commission observed in the Certificate Policy Statement that it considers the impact upon (among others) existing pipelines, and their customers (who can be asked to pay for unsubscribed capacity in their rates), when deciding whether to certificate a new project.149 In reviewing steps the applicant has made to minimize or eliminate such adverse impacts, the Commission “could assist the applicant in finding ways to mitigate the effects.”150 The Commission’s offer in the Certificate Policy Statement to assist in finding ways to mitigate the effects of a new project on existing capacity serving the market and on customers using that existing capacity is especially important here. Absent a commercially reasonable resolution of Spire’s cost consequences, and an operationally feasible disposition in this case consistent with the law, the Spire project cannot meet the Panhandle criterion because it would impair MRT’s operations and existing services to customers. MRT’s receipt of firm deliveries at Chain of Rocks from Spire without significant modifications to MRT’s facilities would adversely affect MRT’s operations and existing services. Currently, Chain of Rocks is the western terminus of MRT’s East Line. It is a unidirectional point of deliveries from MRT into Laclede’s Line 880. A map of the East Line is contained in Exhibit No. MRT-0009 at page 2. Spire’s proposal would require 149 150 Certificate Policy Statement, 88 FERC ¶ 61,227 at p. 61,748. Id. at p. 61,745. 48 WAS:300337.8 that MRT’s Chain of Rocks delivery point be changed into a bi-directional interconnection so that gas could be received by MRT from Spire at that location.151 To effectuate firm deliveries from Spire at Chain of Rocks, MRT would have to (among other changes) remove the existing delivery facility and build a new bi-directional receipt/delivery station, in the vicinity of Chain of Rocks, likely not at the same site as the existing delivery station.152 Additional significant modifications would be required to other MRT facilities further downstream of flows received at Chain of Rocks to provide for transportation on a firm basis. Absent those significant modifications, MRT’s existing operations and services to existing customers would be impaired. MRT does not believe the costs of these significant modifications have been adequately reflected in Spire’s quantification of costs. The costs ultimately incurred in making these modifications will be influenced by the costs of facilities that would be changed or retired, as necessary, once Spire’s plans are further refined.153 MRT’s East Line currently transports, in a westward direction (towards Chain of Rocks), volumes that MRT receives on the East Line from Trunkline and NGPL. The East Line’s current capacity is about 261,000 Dth/d. In addition to 170,000 Dth/d of firm receipts from NGPL and Trunkline on the east side of the East Line that MRT transports to Laclede at Chain of Rocks, MRT directly serves customers with 407 Dth/d of firm service off of the East Line and indirectly serves another 82,942 Dth/d through operation of the East Line. 151 152 153 Those customers are serviced by supplies MRT receives from Spire Application at p. 12. Exhibit No. MRT-0008 at P 13 (Affidavit of Mr. Ditzel). According to Laclede, Line 880 may not be transferred to Spire. See Exhibit No. MRT-0010 (“Motion to Stay Proceedings,” In the Matter of Laclede Gas Co., Missouri Public Service Commission Case No. GM-2017-0018 (filed Feb. 16, 2017)). 49 WAS:300337.8 [Trunkline] and [NGPL] on the eastern side of the East Line. Contract obligations for those services have durations through 2027.154 Introducing into existing MRT facilities 150,000 Dth/d on a firm basis from Spire at Chain of Rocks will render a portion of the traditional path for capacity from Trunkline, NGPL and St. Jacob storage to the St. Louis area contractually unavailable. These points are shown on Exhibit No. MRT-0009 at page 2. Eliminating the ability to use this capacity on a firm basis to receive volumes from the east side of the East Line to be redelivered to points further west would prevent MRT from meeting existing service obligations that currently are met, both directly and indirectly, from the East Line. It also could result in de-subscription at existing points of interconnection between MRT and (a) NGPL and (b) Trunkline. Receipt of 150,000 Dth/d of firm deliveries at Chain of Rocks would materially reduce volumes that could be received by MRT’s existing facilities from Trunkline and NGPL. MRT’s engineering witness Dr. Kytomaa attests that MRT’s existing pipeline cannot receive on a firm basis 150,000 Dth/d at Chain of Rocks while maintaining existing maximum firm receipt entitlements at the NGPL and Trunkline interconnects with MRT’s East Line.155 Receipts of 150,000 Dth/d of firm volumes at Chain of Rocks also would eliminate the ability to receive volumes from MoGas and IIT in lower volume circumstances,156 absent significant facilities modifications. IIT has 40,000 Dth/d of capacity that is available that could be used to transport to MRT volumes 154 155 156 See Exhibit No. MRT-0008 at P 10 (Affidavit of Mr. Ditzel). See Exhibit No. MRT-0001 at PP 7-10 (Affidavit of Dr. Kytomaa). Exhibit No. MRT-0008 at P 16 (Affidavit of Mr. Ditzel). 50 WAS:300337.8 from NGPL.157 MRT believes it is important for the Commission to be aware of and consider these circumstances. Other additional costs associated with the proposed Spire pipeline include almost $28 million in estimated costs of new metering and receipt stations that Spire identifies in Exhibit K to its Application. Spire’s Application does not identify the party that would be responsible for these latter costs. MRT has advised Spire that the existing delivery point at Chain of Rocks could not accommodate Spire’s delivery of 150,000 Dth/d on a firm basis into MRT, and that a new station would have to be constructed.158 Thus, MRT does not agree with Spire’s assertion that “[b]ased on discussions with MRT, Spire anticipates that any reconfiguration/ reconstruction necessary to convert the Chain of Rocks to a bi-directional point would be minimal in nature.”159 Absent an adequate commercial resolution, MRT would not agree to bear facilities costs that arise on MRT’s system because of Spire’s Project.160 Increasing MRT’s costs (due to facilities modifications) while potentially blocking heretofore firm capacity on the east side of the East Line would require careful consideration by and mutual agreement between Spire and MRT and a review and approval of likely consequences by this Commission (e.g., explicit Commission authorization of abandonment, assurances of recovery of the cost of any facilities modifications required to accommodate Spire deliveries, and assistance in mitigating other adverse effects of Spire). Cf. Opinion No. 524-A, 150 FERC ¶ 61,107 at PP 40, 46, 49, 53, 58 and 102. 157 158 159 160 Exhibit No. MRT-0008 at PP 16-19 (Affidavit of Mr. Ditzel). Exhibit No. MRT-0008 at P 12 (Affidavit of Mr. Ditzel). Spire Application at p. 12. Exhibit No. MRT-0008 at P 11-15 (Affidavit of Mr. Ditzel). 51 WAS:300337.8 B. The Path Forward The Commission’s interconnection policy, established in Panhandle Eastern Pipeline Company, 91 FERC ¶ 61,037 (2000) (“Panhandle”)161 “enables a party desiring access to a pipeline to obtain an interconnection if it satisfies five conditions.” 162 Condition number two is that “the proposed interconnection must not adversely affect the pipeline’s operations.”163 Condition number three is that “the proposed interconnection and any resulting transportation must not diminish service to the pipeline’s existing customers.”164 In discussing the Panhandle interconnection standard, the Commission has “emphasized that it did not require a pipeline [to] construct or acquire facilities” under that standard.165 Of course, MRT welcomes proposals to introduce new billing determinants to its system, when resulting costs are addressed on a commercially reasonable basis, and MRT is granted adequate abandonment, certificate and related authorizations to implement such a resolution. That resolution would depend upon (1) clarifying Spire’s plans for deliveries at the interconnection with MRT at Chain of Rocks and (2) Commission determinations in this case. As part of that resolution, it is essential to address the issue that without substantial facilities modifications on MRT’s facilities, Spire’s proposed 161 162 163 164 165 Panhandle Eastern Pipe Line Co., 79 FERC ¶ 61,016, order denying reh’g, 81 FERC ¶ 61,295 (1997), remanded Panhandle Eastern Pipe Line Co. v. FERC, 196 F. 3d (D.C. Cir. 1999), order on remand, 91 FERC ¶ 61,037 (2000) (“Panhandle”). Panhandle, 91 FERC at 61,141 (emphasis added). Id. Id. Tennessee Gas Pipeline Co., 143 FERC ¶ 61,143 at P 59 (2013) (“Tennessee”). Part 284.7(f) of the Commission’s regulations for open access pipelines specifies that a “person providing service under Subpart B, C or G of this part is not required to provide any requested transportation service . . . that would require the construction or acquisition of any new facilities.” 18 C.F.R. § 284.7(f) (2016). 52 WAS:300337.8 Chain of Rocks deliveries on a firm basis into MRT would conflict with two of the Panhandle conditions, namely condition numbers two and three. Thus, active engagement by Spire and the Commission in mitigating the harms of the proposed Spire project is necessary to achieve a solution that promotes the public interest. IV. TARIFF ISSUES Spire proposes tariff provisions that conflict with Commission precedent and would provide Spire with a competitive advantage. If Spire’s proposed project is not rejected, the Commission should either indicate all pipelines serving St. Louis should have the same provisions, to ensure fair competition, or direct that Spire’s proposed tariff provisions should be amended. Spire requests that Commission allow it to potentially indefinitely avoid complying with North American Energy Standards Board (“NAESB”) standards related to Electronic Data Interchange (“EDI”) and Electronic Data Management (“EDM”), pooling, and index based capacity release.166 proposed non-compliance. Spire claims that its size justifies its Spire states that it would only implement the NAESB standards “following the receipt of a bona fide request from a Spire shipper.” 167 Yet, Spire’s only shipper is its affiliated LDC, Laclede, which might never request Spire’s compliance with NAESB. Spire’s request for waiver of the NAESB standard should be denied. In each case Spire cites in support of its request, the proposed pipeline granted waiver was 166 167 Spire Application at pp. 31-33. Spire Application at pp. 31-33. 53 WAS:300337.8 considerably smaller than Spire.168 In contrast, Spire’s proposed pipeline has a capacity of 400,000 Dth/d, an annual cost of service underlying its proposed rates of $43,924,018, and a construction cost of approximately $220 million.169 Spire has failed to show it would be burdensome for it to implement the NAESB standards. Spire’s failure to comply with NAESB will adversely affect and disadvantage MRT. The Commission has noted the “importance of ensuring” implementation of the benefits of NAESB standards “across the national pipeline grid,” to avoid inter alia “confirmation problems with interconnected pipelines.”170 Moreover, failure to have this capability would dissuade the use of Spire by potential third party load that Spire conjectures will appear.171 Section 6.2 of the General Terms and Conditions of Spire’s Tariff, regarding Spire’s ability to reserve capacity for future expansion projects, is inconsistent with Commission precedent and presents competitive concerns. First, Section 6.2(a) fails to conform with the Commission policy that prior to reserving any capacity for an expansion, the pipeline must “post and award all of its available capacity”172 as set forth in Section 6.3 of its existing tariff (Open Seasons for Available Capacity). Second, neither Sections 6.2(a) nor 6.3(a) specify that the available capacity “must be posted for at least five business days before it can be reserved” so that shippers have “a reasonable opportunity to bid on and win available capacity before the pipeline reserves it.”173 168 See Missouri Interstate Gas, LLC, 119 FERC ¶ 61074 at PP 33 (2007) (capacity of 20,000 Mcf/d); Unocal Windy Hill Gas Storage, LLC, 115 FERC ¶ 61218 at P 5 (2006) (storage capacity of 1.5 Bcf of working gas); Rendezvous Gas Servs., L.L.C., 112 FERC ¶ 61,141 at PP 5 and 30 (2005) (capacity of 330,000 Dth/d and a total cost of $11 million). 169 Spire Application at pp. 13, 29. 170 171 172 173 Venice Gathering System, L.L.C., 153 FERC ¶ 61,321 at PP 11, 10 (2015). See Spire Application at pp. 23-25. Midwestern Gas Transmission Co., 106 FERC ¶ 61229 at P 10 (2004) (emphasis added). Id. at P 10. 54 WAS:300337.8 Third, Section 6.2 does not require Spire to provide the following information when attempting to reserve capacity: (a) a description of the expansion project for which the capacity will be reserved; (b) the total quantity of capacity to be reserved; (c) the location of the proposed reserved capacity on the pipeline system; (d) whether, and if so, when [Spire] anticipates that an open season for the capacity will be held or it will otherwise be posted for bids under the expansion; (e) the projected in-service date of the expansion project; and (f) on a rolling basis, how much of the reserved capacity has been sold on a limited term basis.174 Yet those conditions have been required of capacity in competition with Spire.175 Fourth, Section 6.2 failed to include “solicitation procedures to ensure that excess and turnback capacity is posted prior to determining the reserved capacity needed for future expansion projects”176 and that such procedures are used “within 90 days or less of the expansion open season.”177 The Commission requires that pipelines “planning to file applications for expansion projects. . . solicit turn-back capacity” but Spire did not include such reverse open season procedures in its tariff.178 Finally, contrary to longstanding Commission policy, Section 6.2(a) of its proposed tariff would allow Spire to reserve capacity for a period longer than “twelvemonths prior to filing for certificate approval.”179 As written, Section 6.2(a) permits Spire to reserve capacity for two reservation periods. Initially, Spire may reserve capacity for up to twelve months prior to holding an open season related to the expansion 174 175 176 177 178 179 MoGas Pipeline LLC, 126 FERC ¶ 61,064 at P 42 (2009) (“MoGas”). Id. N. Border Pipeline Co., 103 FERC ¶ 61,390 at P 20 (2003) (“N. Border”). MoGas, 126 FERC ¶ 61,064 at P 41. See N. Border, 103 FERC ¶ 61,390 at P 15. Transcon. Gas Pipe Line Corp., 118 FERC ¶ 61,234 at P 10 (2007) (“Transco”). See Gulf S. Pipeline Co., 132 FERC ¶ 61,145 at PP 9-16 (2010) (“Gulf South”). 55 WAS:300337.8 project. Then, “if the expansion project open season is held within such twelve (12) Month period, Spire may continue to reserve the capacity provided Spire submits its expansion project certificate application within twelve (12) Months of the close of the expansion project open season.”180 As a result, Spire could reserve capacity for potentially up to twenty four months prior to submitting a certificate application. The Commission policy is clear. Spire may only reserve capacity for twelve months from the date it reserves such capacity,181 not the date Spire closes the open season for the expansion project or an additional twelve month period prior to the open season for expansion project. As the Commission has stated, its policy regarding the reservation of capacity for future expansion projects is intended to limit discrimination.182 If Spire is permitted to ignore this policy, while competing pipelines serving the St. Louis market are not, then Spire will have a competitive advantage. This represents another example of unfair competition as well. See Part II. F, supra. Spire’s tariff language regarding the reservation of capacity should be rejected and Spire should be directed to comply with the Commission policy as described above. Additional Spire proposed pro forma tariff provisions may be inconsistent with Commission policy or unduly discriminatory. MRT’s analysis of Spire’s proposed tariff is continuing and MRT reserves the right to supplement its comments as a result. 180 181 182 Spire Tariff GTC Section 6.2(a) (emphasis added). Transco, 118 FERC ¶ 61,234 at P 10. See Gulf South, 132 FERC ¶ 61,145 at PP 9-16. Texas Eastern Transmission, LP, 146 FERC ¶ 61,086 at P 38 (2014). 56 WAS:300337.8 V. CONCLUSION WHEREFORE, for the foregoing reasons, MRT protests, and respectfully requests that the Commission deny, Spire’s Application, and find the project as proposed (1) conflicts with the Certificate Policy Statement, because Spire (a) has failed to provide the data necessary to meet the essentially economic test of the Certificate Policy Statement, (b) imposes costs in excess of benefits, and (c) would involve subsidies, as well, and (2) fails to conform with the Commission’s established Panhandle interconnection standards because absent substantial modifications to MRT’s facilities, Spire (a) will adversely affect MRT’s operations and (b) diminish service to MRT’s existing customers, as more fully described above. 57 WAS:300337.8 Respectfully submitted, /s/ Mark F. Sundback Mark F. Sundback Jonathan Christian Kenneth L. Wiseman Assistant General Counsel William M. Rappolt Enable Midstream Partners, LP Andrews Kurth Kenyon LLP 1111 Louisiana St. 1350 I Street, NW Houston, TX 77002-1700 Suite 1100 Telephone: (346)701-2146 Washington, DC 20005 Fax: (346)701-2905 Email: jonathan.christian@enablemidstream.com Tel: (202) 662-2700 Fax: (202) 662-2739 Email: msundback@andrewskurth.com Email: kwiseman@andrewskurth.com Email: wrappolt@andrewskurth.com Lisa D. Yoho Senior Director, Regulatory & FERC Compliance Enable Midstream Partners, LP 1111 Louisiana Street Houston, TX 77002 Tel: (346) 701-2539 Email: lisa.yoho@enablemidstream.com February 27, 2017 58 WAS:300337.8 APPENDIX A WAS:300337.8 • Paulsboro Natural Gas Company LLC, Docket No. CP16-27 (20.00 MMcf/day); • Tennessee Gas Pipeline Company, L.L.C., Docket No. CP15-148 (145.00 MMcf/day); • Tennessee Gas Pipeline Company, LLC, Docket No. CP15-77 (200.00 MMcf/day); • Dominion Transmission, Inc., Docket No. CP15-492 (155.00 MMcf/day); • Eastern Shore Natural Gas Company, Docket Nos. CP15-18-000 and -001 (45 MMcf/day); • Transcontinental Gas Pipe Line Company, LLC, Docket No. CP15-527 (115.00 MMcf/day); • First Midstream, LLC, Docket No. CP16-35 (152.00 MMcf/day); • UGI Sunbury, LLC, Docket No. CP15-525 (200.00 MMcf/day); • Equitrans, L.P., Docket No. CP15-41-000, -001 (850.00 MMcf/day); • Dominion Transmission, Inc., Docket No. CP15-7 (205.00 MMcf/day); • Columbia Gas Transmission, LLC, Docket No. CP15-87 (205.00 MMcf/day); • Dominion Transmission, Inc., Docket No. CP14-555 (130.00 MMcf/day); • Dominion Cove Point LNG, Docket No. CP15-24 (107.00 MMcf/day); • Dominion Cove Point LNG, LP, Docket No. CP15-22 (132.00 MMcf/day); • Transcontinental Gas Pipe Line Co., LLC, Docket No. CP14-504 (192.00 MMcf/day); • Empire Pipeline, Inc./National Fuel Gas Corp., Docket No. CP14-112 (55.00 MMcf/day); • National Fuel Gas Supply Corporation, Docket No. CP14-70 (175.00 MMcf/day); • Tennessee Gas Pipeline Company, L.L.C., Docket No. CP14-88 (158.00 MMcf/day). APPENDIX B Projects to transport Marcellus/Utica volumes: WAS:300337.8 • The Algonquin Incremental Market Project fully commenced service last month, January 2017, operating 342,000 Dth/d of capacity to serve New England. • The Rover project, representing 3,250,000 Dth/d of Marcellus/Utica production export capacity, was certificated February 2, 2017, and Rover accepted the certificate February 3, 2017. See Letter from Stephen T. Veatch to Ms. Kimberly D. Bose, Docket Nos. CP15-93, et al. (Feb. 3, 2017); Rover Pipeline LLC, 158 FERC ¶ 61,109 (2017). • Further, Transcontinental Gas Pipe Line Co. (“Transco”) received authorization last year to expand its capacity by 180,000 Dth/d to serve neighboring New Jersey. Gas-fired Generation Under Development in the Appalachian Region • The Northern Access project sponsored by National Fuel Gas Supply Corp. (for 497,000 Dth/d) and Empire Pipeline Inc. (for 350,000 Dth/d) also was certificated February 3, 2017, and its sponsors accepted their certificates the following business day. See National Fuel Gas Supply Corp., 158 FERC ¶ 61,145 (2017). This is on top of an expansion that commenced service in late 2015 of 140 MMcf/d. See National Fuel Gas Supply Corp., et al, 150 FERC ¶ 61,160 (2015), order granting and denying in part rehearing, 154 FERC ¶ 61,084 (2016). • On February 3, the 1.7 Bcf/d Atlantic Sunrise project sponsored by Transco was certificated in Docket No. CP15-138 by the Commission, facilitating transportation of Marcellus/Utica supplies from Pennsylvania to as far as Alabama. Transcontinental Gas Pipe Line Co., 158 FERC ¶ 61,125 (2017). Transco accepted its certificate the next business day. • Tennessee Gas Pipeline Company (“Tennessee”) received in 2016 authority to place in service its Broad Run Expansion Project and Broad Run Flexibility Projects, providing 790,000 Dth/d of takeaway capacity for West Virginia production to reach delivery points in Mississippi and Louisiana. See Tennessee Gas Pipeline Co., 156 FERC ¶ 61,157 (2016); Tennessee Gas Pipeline Co., 158 FERC ¶ 61,157 (2016). The projected in service date for the entirety of the facilities is January, 2018. • Tennessee’s 72,100 Dth/d Connecticut Expansion is scheduled to be placed in service this year, following its 2016 certification. Tennessee Gas Pipeline Co., 154 FERC ¶ 61,191 (2016). WAS:300337.8 • Tennessee’s 135,000 Dth/d Orion project was certificated February 2, 2017. Tennessee Gas Pipeline Company, L.L.C., 158 FERC ¶ 61,110 (2017). • On January 4, 2017, FERC issued a Notice to Proceed for Tennessee’s 145,000 Dth/d Susquehanna West Project. • According to Gas Daily for February 8, 2017, “Columbia Gas and Energy Transfer Partners have announced the addition of nearly 5 Bcf/d of new Northeast-to-Southeast transmission capacity with in-service dates between second-half 2017 and fourth-quarter 2018.” Exhibit No. MRT0032 at p. 2. The same article identified a total of 5.832 Bcf/d of projects to transport Marcellus and Utica supplies to the Southeast. Id. • Transco is also pursuing its Northeast Supply Enhancement Project, filing draft resource reports in Docket No. PF16-5 in November, 2016. That project would expand Marcellus takeaway capacity by 400 MMcf/d. • Transco has proposed a 448,000 Dth/d expansion from the Northeast to Mississippi (its “Dalton Project”). • The $2 billion Nexus project (Docket No. CP16-22), sponsored by Spectra Energy Corp. and DTE Energy Co., would carry 1.5 Billion Dth/d from eastern Ohio to Michigan, providing an outlet for Appalachian gas production. • PennEast’s project is currently pending at FERC Docket No. CP15-558, and would initially transport 1 Bcf/d of Marcellus volumes to New Jersey. • Mountain Valley Pipeline, LLC (“Mountain Valley”) initially, a 2 Bcf/d project to transport Marcellus volumes to the southeast, is projecting a fourth quarter 2018 in-service date (see Docket No. CP16-10). • Constitution Pipeline has been granted a certificate to build and operate a pipeline initially transporting 650,000 Dth/d from Pennsylvania to New York. • Spectra’s Atlantic Bridge project transporting 132,700 Dth/d is projected to be in service by December 2017 (see Docket No. CP16-9). • The Access Northeast Project would add 925,000 Dth/d of capacity, with a projected in-service date of December 1, 2018 (see Docket No. PF16-1). • Texas Eastern Transmission, LP’s (“Texas Eastern”) Access South Project (Docket No. CP16-3) with a projected in service date of November 2017 would add 320,000 Dth/d of take-away capacity for Marcellus production. • Texas Eastern also has sought additional authority to construct and operate 200,000 Dth/d of Marcellus/Utica take-away capacity in its Adair Southwest Project (see Docket No. CP16-3). While all of the certificated and proposed projects ultimately may not be constructed, the sheer number of such projects demonstrates the significant competition for Marcellus/Utica supplies. WAS:300337.8