Tennessee Gas Pipeline gets green light from FERC on certified gas pooling points

Kinder Morgan has launched voluntary pooling points for producer-certified gas on Tennessee Gas Pipeline, the company said July 1, after the Federal Energy Regulatory Commission approved a revised proposal from the midstream operator.

FERC's decision allows Tennessee to list its certified gas criteria on its interactive website, instead of including the criteria in its tariff, as had been proposed in an earlier filing.

In the accepted filing, Kinder Morgan kept most of the changes that it had made in its March 31 amended filing, including the expansion of the pooling point plan from five to twenty points and the elimination of the qualification requirement that gas must be physically sourced from a certified gas-production facility.

Certified gas definition

FERC had rejected an earlier certified gas aggregation proposal "without prejudice" April 29, largely due to Tennessee's intentions to include certified gas criteria in its tariff.

The April 29 rejection had expressed the agency's discomfort with becoming the arbitrator of how to define certified gas, especially in the absence of an industry-accepted formal definition. The agency also conveyed concern in its response that, by codifying certified gas standards in a tariff, the decision could impede the dynamic growth of the market, as new standards and emissions thresholds emerge and gain popularity.

Some shippers have advocated for the inclusion of the definition in the pipeline's tariff, arguing that if the criteria for qualification can be posted at any time on the pipeline's electronic bulletin board, the definition could shift suddenly while producers are mid-certification. To answer this, Kinder Morgan proposed in its amended filing May 11 to give at least 30 days' notice before posting any changes.

As of July 1, a shipper's gas can qualify for Tennessee's pooling locations if it has been certified as meeting low methane emissions standards from Project Canary or MiQ. Gas that has been registered with Xpansiv's Digital Fuels Program can also qualify, depending on qualifications.

Market design

Kinder Morgan's certified gas aggregation plan could shape market design, not just for certified gas, but also for the larger physical natural gas market.

Industry players have not coalesced around a single market design for certified gas, with questions remaining about whether the product will be traded as certificates unbundled from production—similar to a renewable energy credit in electricity markets—or as physical production that is traded alongside non-certified gas.

More than 20% of all US gas production could be certified by the end of 2022. As this volume grows, it will have implications for the physical trading of traditional gas. Certified gas certificates would trade in a market of their own, however, existing alongside the traditional physical gas market.