The shift to increased gas market competition is creating problems for the U.S. industry's main research and development organization, the Gas Research Institute.
Since 1977, GRI has been funded through a surcharge on interstate gas shipments. Each year the Federal Energy Regulatory Administration approves the GRI budget, 5 year research plan, and surcharge.
This year the 1.51/Mcf surcharge-it has been 1.51 or less since 1988-will support a $200 million budget.
BALKING AT THE SURCHARGE
Pressured by marketplace competition, some pipelines are balking at the GRI surcharge.
The crack in the dam occurred last year when FERC let United Pipeline drop the fee to meet intrastate competition.
The crack widened considerably last month when ANR Pipeline Co. also asked to drop the surcharge, explaining that although it applauds GRI's research efforts, competition has forced it to discount rates.
ANR and other pipelines say GRI research is intended to benefit gas consumers, and the surcharge assures that consumers pay the bill. But they say when discounting is prevalent, pipeline stockholders pay the bill.
Concerned about a domino effect, GRI and pipelines have asked FERC to call a technical conference to find a funding method that will work in today's market.
The Interstate Natural Gas Association of America and American Gas Association have formed a task force to draft alternative funding proposals, which they will submit to the GRI board and then to FERC at the technical conference.
Last week Ronald Kuehn Jr., Sonat Inc. chairman, president, and CEO, said the current GRI funding mechanism was very appropriate for 15 years ago and very appropriate until 3-4 years ago. "But the world has changed."
Kuehn, also Ingaa chairman, said the gas pipeline industry agrees it should have a strong R&D program and GRI should be conducting that work.
He said the funding issue is only half the problem: Some pipelines also are concerned whether GRI is spending its budget efficiently. He noted that is a more difficult issue because R&D benefits always are hard to quantify.
Kuehn said, "Most people agree it's time to take a hard look at GRI's efficiency." He explained pipelines don't want to micromanage GRI's program, just to assure "GRI is headed where we want it to go in the most efficient way."
PRODUCERS SILENT
For the time being, producers are on the sidelines.
Some pipelines may resent GRI's added emphasis on gas production research in recent years. It likewise has increased producer representation on its board to one-third.
Kuehn admitted AGA and Ingaa didn't invite producer groups to participate in their task force. He said the GRI issue mainly is one for pipelines, and producers are free to come up with their own GRI funding ideas.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
