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Order By:

Pa. PUC May Exercise Jurisdiction Over Marcellus Developer

12/31/1969

In an Order entered on June 14, 2011, the Pennsylvania Public Utility Commission ("PUC") remanded to the administrative law judge a request for a Certificate of Public Convenience filed by Laser Northeast Gathering Company, LLC ("Laser") to act as a "public utility" within the Commonwealth of Pennsylvania. With the order, however, the PUC did find that Laser may be subject to PUC jurisidction. Although there are two additional cases pending before the PUC on similar issues, the PUC's order thus constitutes the first potential exercise of jurisdiction over a Marcellus Shale developer, and it signifies a potential new realm of governmental oversight and regulation that all similar developers should carefully consider.

Laser, a "midstream" natural gas gathering, treating, and processing entity, initially submitted its application in January 2010, seeking PUC approval for the construction of a natural gas gathering and transportation pipeline in Susquehanna County primarily targeting the growing production of natural gas from Marcellus Shale. The fundamental question posed by Laser's application was whether such a midstream natural gas developer, serving only a limited number of natural gas producers, constitutes a "public utility" subject to the PUC's jurisdiction. Despite fairly broad opposition to Laser's application (stemming in part from natural gas producers and other parties likely seeking to avoid PUC entanglement in Marcellus Shale development industry), the PUC found that Laser's operations satisfied the statutory definition of a "public utility" and that approval of Laser's application may be "necessary [and] proper for the service, accommodation, convenience, or safety of the public." According to the PUC, this finding was appropriate by reason of Laser's stated intent and willingness to provide pipeline services to all potential natural gas producers, even though this necessarily limits the definition of "public" for purposes of Laser's services to a specific, exclusive class.   

Although the PUC carefully crafted its decision to apply only to the specific facts of Laser's application, the Laser decision clearly reflects PUC Chairman Powelson's often-stated belief that the PUC should have an increased role in the Marcellus Shale industry. Considering that the Governor's Marcellus Shale Advisory Commission's recent report clearly contemplates PUC jurisdiction in some form or another, this decision appears to portend PUC regulatory control over issues pertaining to pipeline safety, eminent domain powers, reporting requirements and the collection of PUC assessments for all midstream developers. 

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