Houston (Platts)--10Mar2011/657 pm EST/2357 GMT

Long-distance natural gas pipelines in the US that have seen the ground shift under their feet as shale gas supply has bloomed closer to high-demand markets markets may want to change direction to find new customers, Jon Wellinghoff, chairman of the Federal Energy Regulatory Commission, told reporters Thursday.

Asked how FERC is considering rates for long-distance lines given changes in the dynamic in favor of shorter-haul pipelines transporting shale gas, Wellinghoff said the CERAWeek industry gathering in Houston that maintaining the strength of the US gas pipeline complex and its traditional base is critical.

"We do have to look at the whole structure because I think it is so dynamic ... . Those long lines may find other suppliers and other needs for delivering gas -- maybe in a different direction ... to new gas generators because those generators are now much more competitive in the marketplace than other forms of supply," he said.

"So, I'm not sure exactly what will happen to some of those longer line pipes, but I'm hoping that there will be ways that they certainly can be utilized and maintain their economic viability and FERC certainly will be interested in looking at that because we want to maintain the deliverability of gas in this country," Wellinghoff added. "I think that's one of the biggest assets we have in this country is a very robust gas delivery system throughout the country, I think much more so than we do an electric transmission system."

The chairman, who devoted much of his speech to his objective of opening the competition playing field to new technologies and supply resources, such as demand-side management, plug-in car batteries for power regulation as well as gas and renewable power supply, was also asked during his press briefing about the possibility of demand-side participation in grid operator's capacity markets being double-counted. His answer indicated that just as Wellinghoff is pushing for open access to all resources, he is also an equal-opportunity enforcer.

"I'm very concerned that, in fact, that any entity whether it be a supply-side entity or a demand-side entity plays by the rules. And if anybody isn't playing by the rules, FERC will be the first ones to go after them with our enforcement division with both feet on their neck, I assure you of that," he said. "You can look at some of our past enforcement actions to see that we have gone after both DSM provides as well as suppliers on both sides."

Wellinghoff also clarified that FERC's interest in the February 2 rolling blackouts in Texas is an inquiry and not an enforcement action. The federal agency, though the regulator of interstate gas and power, lacks jurisdiction over Texas' island of a power grid. In discussing the Texas issue, however, he tied it to broader concerns about gas deliverability and power reliability in neighboring New Mexico and elsewhere in the Southwestern US.

In that regard, FERC will look at gas deliverability, weather effects and other factors to "determine if there are strategies that we can undertake and regulatory actions that we can put in place that would reduce the probability of that occurring again," Wellinghoff said. Also, he wants to use this as a platform to look at how gas delivery "may change and needs to change" as there is more gas generation in the country.

"So, I want to see if there are issues related to gas delivery that were relevant to this particular event or series of events that have some relationship to tariff rates and regulations that we oversee," he said.

Asked about a recent assertion by a Texas official that the state could keep gas in-state the next time there is a stress on its gas and power systems, Wellinghoff declined to discuss what he said was a hypothetical question. But he did say he was not sure "what kind of state and federal dust-up we could get into" if there was an attempt to keep gas in Texas that was contracted to go out of state.

--Katharine Fraser, katharine_fraser@platts.com

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