Subject: Upstream Capacity
From: [email-masked]
To: [email-masked], [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Date: Mon, 18 Dec 2000 04:21:00 -0800 (PST)

On Thursday last week the Commission eliminated the old "Texas Eastern" rule 
that required pipelines to obtain prior FERC approval before contracting for 
transportation and storage capacity on upstream or downstream pipelines.  The 
new rule allows pipelines to acquire and use such capacity without going to 
FERC first.  The rule does reiterate that bundled sales of gas are still 
prohibited, and further provides that the acquiring pipeline will be 
financially at risk for the costs of the acquired capacity.  Interestingly, 
the acquiring pipeline apparently has the option of selling the acquired 
capacity under its own rate schedules or of releasing the capacity pursuant 
to its capacity release program.  The order is silent on whether the price 
cap applies to short term releases of acquired capacity.   While we are still 
reviewing the order and may provide additional guidance at  a later time, I'd 
emphasize for now that our normal contract approval procedures and authority 
thresholds should be deemed to apply to capacity contracts.   For example, 
the "Approval Authorization for Cash Expenditures" dated Feb. 3, 2000 
provides Dave and Steve with authority up to $250,000 on operating expense 
obligations.  

Please contact me if you have any questions on this matter.  DF