On November 18, 2010, the Federal Energy Regulatory Commission, known as “FERC,” instituted a second round of investigations into interstate natural gas pipeline rates charged by Kinder Morgan Interstate Natural Gas Transmission LLC (“KMIGT”) and Ozark Natural Gas Transmission, L.L.C. (“Ozark”).1 Together with three investigations last year into interstate natural gas pipeline rates undertaken for the first time since the FERC streamlined the regulation of natural gas pipelines in 1992, these new investigations demonstrate FERC’s commitment to an active oversight role in natural gas interstate pipeline rates. The investigations target the rates of two important suppliers of natural gas to the central United States. After examining the revenue and costs of service reported by these pipeline systems in their respective annual reports to the FERC for 2008 and 2009, the Commission determined that these two pipelines may be substantially over-recovering their respective costs of service, causing their respective existing rates to be unjust and unreasonable.

KMIGT’s interstate gas transportation system extends for 5,100 miles through Colorado, Wyoming, Kansas, Nebraska, and Missouri. KMIGT also operates a gas storage facility in Cheyenne County, Nebraska, that has firm capacity commitments of an estimated 10 billion cubic feet of gas. Ozark’s interstate gas transportation system extends for approximately 565 miles through Arkansas, Missouri and Oklahoma and provides transportation access for Fayetteville Shale production.

FERC’s action demonstrates its commitment to oversight of natural gas pipelines, which is driven in large part by recent changes in regulatory reporting requirements. In March 2008, the Commission issued Order No. 710, changing the filing requirements for the Form No. 2 filed annually by interstate natural gas pipelines. The new requirements increased the transparency of financial reporting and cost information so as to reflect more accurately a pipeline’s cost of service. An analysis of the new Form No. 2 information for these two companies demonstrated that each company is over-recovering its cost of service by a significant margin: KMIGT may be over-recovering by 29%; and Ozark may be over-recovering by 31%.

The NGA provides that any person whose participation in the proceeding may be in the public interest may intervene and participate as a party to the investigation.2 All entities wishing to intervene in these proceedings must file a timely motion to intervene by December 20, 2010.