Tennessee plan to offer pooling for certified gas spurs debate in FERC docket – S&P Global

A proposal by Tennessee Gas Pipeline to offer pooling services to encourage trading of responsibly sourced, or certified, gas is generating debate in the dockets at the Federal Energy Regulatory Commission over whether a technical conference is needed to assess the novel plan by a pipeline company.

The Kinder Morgan subsidiary Dec. 15 proposed changes to its tariff that would allow it to offer pooling service to encourage transportation and trading of gas from producers with third-party certification that their supply meets minimum environmental, social and governance standards. The option would allow for aggregation of certified supplies at any of five paper pooling points, with plans to use Project Canary and MiQ to certify the gas.

The creation of a liquid pool “is expected to greatly enhance the use of [responsibly sourced gas] supply in the US,” Tennessee told the commission.

A number of shippers, however, protested the original filing that eyed implementation of the tariff change as soon as Jan. 17, calling for careful review of a plan that raised novel questions about governance and the role of interstate pipelines as gatekeepers. Signalling strong interest in the potential precedent at FERC, dozens of parties have asked to intervene in the case (RP22-417).

Tennessee subsequently has proposed to extend that timeline until March 1 to allow time to address some of the concerns.

The debate comes amid a surge in interest among in certified gas among producers over the last year. As of Jan. 20, producers had announced that nearly 7 Bcf/d of US gas production had completed certification against standards from MiQ, Equitable Origin or Project Canary, according to company websites.

During an earnings call Jan.19, Kinder Morgan executives described the service as a potential value-added feature, responsive to customer interest.

“Depending on how well it goes and how quickly it takes off,” Kinder could use it as “sort of a blueprint” for future expansion, said Thomas Martin, Kinder Morgan president natural gas pipelines.

Kinder Morgan plans to work with shippers to come up with an approach that “gets as many people as possible on board with it,” added CEO Steven Kean.

Shippers’ questions

A handful of major gas suppliers have asked FERC to engage in a careful review, arguing the proposal “could fracture the market and impede development of ESG certification on an industry-wide basis.”

Indicated shippers including BP Energy, Chevron USA, Direct Energy Business Marketing and Shell Energy North America wrote FERC Dec. 27, asking it to suspend the effectiveness of the tariff change for five months and hold a technical conference.

They said the proposal raises substantial novel questions about appropriate governance of such trade, and that a plan to create a bundled physical market would be a significant departure from how buying and selling of environmental preferred resources typically has occurred.

More recently, the shippers said they appreciated Tennessee’s proposal to delay its requested start and seek to work out differences. But they did not withdraw their request for suspension and a technical conference.

Coterra Energy also raised a “fundamental concern” about a pipeline administering a program that requires a producer to meet ESG standards monitored by only two private companies selected by the pipeline. FERC should review and evaluate the certification and selection process, it said. It also raised concerns about whether the pipeline could revise nomination, quality and scheduling provisions to give preference to certified gas.

Urging support

Lending support to the plan, Project Canary Jan. 18 told FERC the proposal helps shippers take advantage of independent certification and is not a transportation service.

“Authorizing Tennessee’s new service without delay is consistent with commission’s longstanding policy, its preference for pipelines to rely on market drivers to support new services, and the current administration’s focus on reducing greenhouse gas emissions,” it said. “Moreover, it does not prejudice future developments in RSG or discriminate against similarly situated transportation customers.”

While two certification programs were tapped at this initial stage, there is nothing to prevent others from being added, it said.

Amid rapid growth in the market, Project Canary also suggested it would be a mistake for FERC to limit development to a fixed set of standards or certifiers.

Duke Energy and Tennessee Valley Authority each supported Tennessee’s request for an extension. They argued that interstate pipelines “are well-positioned to make supply available by creating RSG pooling points to facilitate transactions.”

Xpansiv Data Systems, an environmental attribute exchange, also supported the proposal as an initial step.

“We respectfully submit to the commission that this race to the top for certification standards should be encouraged as axiomatic for any successful market-based environmental solution,” it said Jan. 18.

Xpansiv has partnered with S&P Global Platts to host the registry for Platts Methane Performance Certificates, which launched Oct. 4.