Pa. PUC Developments on Regulation of Midstream Operators

In two recent developments, the Pennsylvania Public Utility Commission (“PUC” or “Commission”) appears to have settled, at least for the time being, the long outstanding question of whether midstream natural gas services might generally be regulated as “public utility” services. As summarized below, these developments indicate that, until specific facts and circumstances dictate otherwise, the PUC will not, as a rule, exercise its “public utility” jurisdiction over these operations.

On August 20, 2012, the PUC entered into a Joint Stipulation (“Stipulation”) with the Pennsylvania Independent Oil and Gas Association (“PIOGA”) in a case before the Commonwealth Court of Pennsylvania that centered on this “public utility” regulatory question. By way of background, PIOGA initiated the Commonwealth Court proceeding in late 2011 with a Petition for Review of two PUC Orders that, in the context of a PUC proceeding by Laser Northeast Gathering Company, LLC (“Laser”), arguably would have provided the basis for characterizing all midstream natural gas gathering services as “public utility” services. Specifically, as argued by PIOGA, although Laser ultimately withdrew its application for “public utility” status, the Commission’s Orders in the underlying case ultimately could have established precedent for future determinations by the PUC that all other such midstream developers are “public utilities” subject to the PUC’s jurisdiction. For this reason, PIOGA sought the Commonwealth Court’s reversal of the PUC’s Laser orders on the grounds that natural gas gathering services do not meet the definition of “public utility” services under the Commission’s regulations.

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