Data centers relying on gas to generate electricity for data center operations usually take the gas directly from a pipeline rather than from the local gas company.
There are multiple potential pipeline scenarios.
Each involves construction of a lateral line to connect the power plant to an interstate or intrastate gas pipeline. The owner of the lateral line will have to deal with various regulatory issues. The issues vary by pipeline scenario.
The gas-fired power plant supplying electricity to the data center may be owned by the same company that owns the data center or by a separate company.
Pipelines that operate wholly within a state are regulated by the state public utility commission. Interstate pipelines are regulated by the Federal Energy Regulatory Commission.
The regulated pipeline will have to construct facilities, including a gas pipeline extension, a meter station and maybe flow control.
Before committing to do so, the pipeline company will require the company owning the power plant to enter into either an agreement to pay for the facilities (with the amount "grossed up" for taxes ) or a "precedent agreement" obligating the company owning the power plant, upon the satisfaction of conditions precedent, to subscribe for natural gas transportation service on the pipeline on a long-term basis at a pre-negotiated rate and subject to providing credit support such as a letter of credit.
If the lateral line from the power plant to a regulated intrastate or interstate pipeline is owned by the same company that owns the power plant, the new gas line will not be subject to FERC regulation provided the gas line is wholly in the state in which the power plant is located.
It is not settled whether FERC would assert jurisdiction over a power plant company-owned gas line that receives gas from an interstate pipeline and crosses state lines.
Depending on the state, there is some possibility that the gas line owned by the power plant company, if not regulated by FERC, may be regulated by the state under state public utility law.
A new company (which may or may not be affiliated with the data center or power plant company) could be set up to build and own the new gas lateral line from the power plant to the regulated gas pipeline.
If the new lateral line is owned by a separate company and receives the gas from an interstate pipeline at a point of interconnection in the same state as the power plant, all the gas is consumed in the state and the state public utility commission regulates the pipeline, then the new gas pipeline company will not be regulated by FERC. Gas lawyers call this the “Hinshaw pipeline” exemption.
If a new company (which may or may not be affiliated with the data center or power plant company) constructs and owns the new lateral line from the power plant to a regulated pipeline, and the new lateral line receives the gas from a pipeline at a point of interconnection in a different state than the power plant, then the new lateral line will be regulated by FERC. It will not be regulated by a state public utility commission.
In all cases, the company owning the new lateral line to connect the power plant to the pipeline will have to enter into an interconnection agreement with the pipeline company identifying the responsibilities of each party to install certain facilities on its side of the interconnection point, the cost responsibility for the facilities and obligations related to the operation of the facilities.
To the extent that a state public utility commission or FERC regulates the new company owning the lateral line, the regulator might by law require a certificate or other approval before the construction of the line can start. It can take six to 12 months after preparation of the application (including preparing an extensive environmental report) to receive the required approvals. However, it is possible that the state or FERC may only engage in light-handed regulation of the lateral line owner.
The state public utility commission or FERC could also regulate the rates and terms of service of the lateral line, including requiring the owner of the line to provide service to others if requested.
The lateral line owner will also be subject to safety regulation by the state or the Pipeline and Hazardous Materials Safety Administration of the United States Department of Transportation.