FERC Issues New Policy Statement On Recovery Of Pipeline Modernization Costs

On April 16, 2015, FERC approved a new policy statement that will allow interstate natural gas pipelines to recover certain capital costs used to modernize or replace the pipeline's existing facilities through the use of a surcharge mechanism.  FERC explained that the new policy statement was created in anticipation of new, future requirements from the Pipeline and Hazardous Materials Safety Administration that will likely require interstate pipelines to upgrade their pipeline systems for improved safety and reliability.  Although FERC's policy statement discusses the framework that interstate pipelines must meet generally in order to recover such costs, FERC also clarified that such proposals will be evaluated on a case-specific basis.