In This Issue

FERC Guidance on PIM Cost Treatment for Gas Pipelines

On June 30, 2005, the Federal Energy Regulatory Commission provided guidance on how jurisdictional natural gas companies should account for costs associated with implementation of new pipeline integrity management requirements. OPS estimates the cost of compliance with the IM Regulations for jurisdictional and non-jurisdictional entities will be $4.7 billion over 20 years. The Commission found that the costs to: (1) prepare a plan to implement the program; (2) identify high consequence areas; (3) develop and maintain a record keeping system; and (4) inspect affected pipeline segments should be expensed. The Commission further clarified that costs of modifying pipelines to permit in-line inspections, such as installing pig launchers and receivers, should be capitalized consistent with the Commission’s existing rules for plant additions. Similarly, certain costs associated with developing or enhancing computer software or costs incurred to add or replace other items of plant also should be capitalized. However, minor items of property replaced as part of a remedial action should continue to be expensed. The order makes this guidance effective January 1, 2006, and prospective in application. Amounts capitalized in periods prior to January 1, 2006, will be permitted to remain as recorded. For more information, see the Commission’s website  at, docket No. AI05-1-000.