Natural Gas:

FERC's Compliance and Enforcement Programs Could Be Further Enhanced

RCED-93-122: Published: May 27, 1993. Publicly Released: Jul 2, 1993.

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Pursuant to a congressional request, GAO reviewed the Federal Energy Regulatory Commission's (FERC) efforts to enforce the natural gas industry's compliance with applicable statutes and regulations, focusing on whether FERC: (1) efforts adequately detected pipeline companies' discriminatory practices and enforced transaction standards; and (2) environmental requirements were sufficient to monitor pipeline companies' efforts to mitigate environmental damage during new pipeline construction.

GAO found that: (1) FERC monitors pipeline companies' natural gas transportation services to ensure competition and prevent discriminatory practices; (2) FERC needs to increase its detection and enforcement efforts because of natural gas pipeline market deregulation; (3) FERC allows pipeline companies to monitor their own transactions and report industry discriminatory practices, since FERC resources are limited, pipeline companies can better monitor industry activities, and pipeline companies have a monetary incentive to monitor themselves; (4) FERC has not implemented transaction compliance standards and has not enforced reporting requirements for the timely submission of transaction reports; (5) FERC efforts to improve detection of pipeline companies' discriminatory practices and enforce standards of conduct include requiring pipeline companies to post timely transportation information on electronic bulletin boards and instituting an audit program to ensure compliance with FERC requirements; (6) although FERC has improved its ability to monitor and enforce its environmental requirements, FERC could not ensure that pipeline companies complied with environmental requirements, since it did not receive advance notification of pipeline construction in environmentally sensitive areas and lacked civil penalty authority to address violations; and (7) FERC could require advance notice of construction in environmentally sensitive areas, require companies to file compliance reports on pipeline areas it cannot inspect, and gain penalty authority to enforce requirements for repeat offenders to address its environmental concerns.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: FERC has begun to require that pipeline companies constructing major new facilities submit periodic (every 2 weeks) environmental compliance reports. FERC now requires pipeline companies to submit weekly environmental compliance reports for construction projects that required an environmental impact statement and biweekly reports when the project required a major environmental assessment.

    Recommendation: To further improve the FERC environmental compliance program, the Chairman, FERC, should develop a formal policy requiring all pipeline companies whose construction projects involve preparation of environmental impact statements or major environmental assessments to submit weekly or biweekly environmental compliance reports on all mitigation measures identified in the FERC order approving construction.

    Agency Affected: Federal Energy Regulatory Commission

  2. Status: Closed - Implemented

    Comments: FERC has begun to require that pipeline companies notify FERC when they cross streams. FERC now requires pipeline companies to notify it within 14 days of construction near such sensitive areas as major water bodies and coldwater fisheries.

    Recommendation: To further improve the FERC environmental compliance program, the Chairman, FERC, should require pipeline companies to provide FERC with notification similar to that already made to states in advance of construction affecting environmentally sensitive areas, such as streams and rivers, and give priority to inspecting such construction activity, particularly if it involves the first crossing of these areas.

    Agency Affected: Federal Energy Regulatory Commission

  3. Status: Closed - Implemented

    Comments: FERC's Chair has stated that staff will schedule and plan compliance audits of interstate pipeline companies based in part on complaints alleging discriminatory practices by a pipeline company.

    Recommendation: To better ensure that interstate pipeline companies do not engage in discriminatory practices, the Chairman, FERC, should direct the Office of the Chief Accountant, when scheduling audits of pipeline companies and determining the appropriate level of review for each audit, to consider all information available to the Commission that suggests potential discriminatory practices may be occurring.

    Agency Affected: Federal Energy Regulatory Commission

  4. Status: Closed - Implemented

    Comments: FERC has taken action in response to the recommendation that it ensure that pipeline companies do not discriminate unfairly when providing transportation services to their marketing affiliates. In particular, FERC now requires interstate pipeline companies to post on their electronic bulletin boards (EBBs) all discount offers to their marketing affiliates. Pipeline companies must also maintain logs showing how they have allocated pipeline capacity to marketing affiliates during periods when capacity is in short supply.

    Recommendation: To better ensure that interstate pipeline companies do not engage in discriminatory practices, the Chairman, FERC, should aggressively enforce pipeline companies' compliance with FERC requirements to provide: (1) complete, accurate, and timely information about available transportation capacity and transactions with marketing affiliates on publicly accessible electronic bulletin boards; and (2) related reports that FERC requires pipeline companies to file.

    Agency Affected: Federal Energy Regulatory Commission

  5. Status: Closed - Not Implemented

    Comments: FERC's Chair stated that she brought this issue to the authorizing committees of Congress in fall 1994, but there was no interest. She believes that the new Congress would have even less interest in providing FERC with civil penalty authority.

    Recommendation: To further improve the FERC environmental compliance program, the Chairman, FERC, should seek civil penalty authority from Congress to enforce compliance with requirements under the Natural Gas Act and use such authority, particularly in cases of repeated violations.

    Agency Affected: Federal Energy Regulatory Commission

 

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