Natural Gas

The natural gas industry, despite increasing competition, retains many characteristics of a monopoly. To protect the public interest, the Federal Energy Regulatory Commission (FERC) regulates the sale and the transportation of natural gas and the construction of pipeline facilities. FERC has tried to stop pipeline companies from engaging in potentially discriminatory practices that favor their own unregulated subsidiaries, but FERC's efforts could be even more effective. For example, FERC needs to aggressively enforce pipeline bulletin board and other reporting requirements used to detect and deter discriminatory practices. FERC also needs to target audits of pipeline companies on the basis of information suggesting that discriminatory practices may exist. FERC recently tried to beef up its enforcement of environmental regulations by hiring more inspection staff and by better informing its inspection staff and the industry of FERC's environmental requirements. GAO suggests that FERC (1) require companies to give FERC advance notice of construction scheduled for environmentally sensitive areas, (2) require companies to submit periodic environmental compliance reports for all major construction projects requiring environmental mitigation measures, and (3) formally seek civil penalty authority from Congress to enforce FERC's requirements for projects approved under the Natural Gas Act.

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

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Team: Phone: