GTI, PRCI feel the pinch

Pipeline & Gas Journal, August, 2004

The Gas Technology Institute (GTI) is scrambling to compensate for a $60 million annual stipend from the Federal Energy Regulatory Commission (FERC) which disappeared on Aug. 1. That FERC contribution, funded by a mandatory surcharge assessed by FERC on all interstate pipelines, has declined from $164.3 million in 1998. The payments were established as part of a lawsuit settlement with the Gas Research Institute which combined with the Institute of Gas Technology in 2001 before both were subsumed under GTI.

GTI's revenues for 2004 total $125 million, including the $60 million FERC contribution, according to spokesman Jim Albrecht. GTI has been sending $7.35 million of the FERC total to the Pipeline Research Council International, Inc. (PRCI) each year. George Tenley, president of PRCI, says his 2004 budget, including the GTI contribution, is $21 million. "We will have to find alternative revenue streams," he explains.

Making up the lost FERC revenue by tapping pipeline companies won't be easy for GTI or PRCI. Tenley explains that while the pure pipeline companies of a decade ago understood the need for R&D and considered it an investment, the same is not always true for the holding companies which today own more and more of the nation's gas pipeline assets. "To these companies, everything is a cost, and a contribution to PRCI has to be justified just like everything else in the operating budget," Tenley states. Having said that, though, Tenley acknowledges that his non-FERC budget and membership total are both at all-time highs.

While Tenley intends to "market" his way out of the upcoming budget shortfall, GTI is hopeful that FERC will approve a successor arrangement to the one it signed in 1998 with GRI. But FERC won't make that decision for some time. At hearings in the Senate Commerce, Science and Transportation Committee on June 15, Earl Fischer, senior vice president, utility operations of Atmos Energy Corporation, said the American Gas Association and American Public Gas Association, for whom he was speaking, "are hopeful that either the regulatory or legislative R&D funding proposal will become a reality. Either would solidify industry contributions to research." But he noted pointedly that "additional contributions for R&D are needed."

Meanwhile, GTI continues the scrambling for new revenue that has characterized its actions over the past year. For example, in July 2003 a number of companies, each contributing between $250,000-$750,000, formed an Operations Technology Development company. Initial hopes were for between 15 and 25 members. The OTD subsidiary was set up to do research in areas such as trenchless technology, keyhole excavation, and pipe/leak location; remote monitoring and secure communications and corrosion control. Then, in April 2004, GTI set up the Utilization Technology Development Company (UTD). It, too, is funded on a subscription basis--five companies have anted up--and run by GTI. The UTD focuses on high-value, end-use technologies such as advanced gas equipment for homes, businesses and factories.

Albrecht declines to provide the number of companies active in as well as the budgets for either OTD and UTD. "We want to keep that information confidential," he explains. GTI has also sought companies for single research projects such as one announced last March to address common ergonomics concerns. "Maybe a dozen companies have signed up," Albrecht says. "But I am not sure whether they have done any research yet."