Order: In the matter of Unauthorized laying of spu...

2008, to GSPL India Gasnet Limited (hereinafter referred to "GIGL"), for laying spur-line of Mehsana Bhatinda Natural Gas Pipeline (hereinafter referred to "MBPL") with length of 61.5 km from Rohtak to Panipat without seeking requisite approvals under the relevant provisions of NGPL authorization Regulations from the Board.

BRIEF FACTS

2. Vide public notice dated 16.10.2009, PNGRB invited bids from interested parties for the development of MBPL under Regulation 5 (5) of PNGRB NGPL Authorization Regulations. Bids were submitted by the following participant entities.

i. Gujarat State Petronet Limited led consortium

ii. Consortium of Welspun Infratech Limited, IL & FS and Adani Gas Limited.

3. Vide PNGRB's letter 07.07.2011, grant of authorization for laying, building, operating or expanding MBPL was issued to Gujarat State Petronet Limited as the lead partner of the consortium. Subsequently, on request of GIGL, PNGRB vide letter dated 31.05.2012, amended the authorization for MBPL in favour of GIGL. The salient features of this pipeline are below:

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4. In Quarterly Progress Report (QPR) of December, 2019, GIGL has reported that they have issued Engineering Procurement and Construction (EPC) contracts for laying of DT Rohtak to Panipat RT pipeline section. It was informed that the length of pipeline is 18" x 50 km.

5. GIGL in its all subsequent QPR mentioned Rohtak - Panipat spurline as 18" x 50 km.

6. On 15.02.2022, during the progress review meeting, the Board enquired GIGL about development of pipeline beyond Rohtak till Panipat, without permission of PNGRB. In response to this, GIGL submitted that the section between end point of the pipeline in Rohtak till Panipat is within 50 km and therefore permission was not sought from the Board. The Board directed GIGL to submit the justification and details regarding the said section for further examination.

7. Vide letter dated 08.04.2022, GIGL submitted its response, inter alia, including the justification on Rohtak to Panipat spur line. GIGL submitted that the distance from Rohtak to Panipat is around 61.5 km and the final length increased from earlier estimated 50 km due to re-routing. In this regard, GIGL requested the Board to regularize Rohtak to Panipat spur line without submitted any formal application/fee.

8. PNGRB vide letter dated 12.07.2022 issued a notice to GIGL under Regulation 16 of NGPL Authorization Regulations to appear for a hearing to explain the reasons as to why action be not initiated in terms of Regulation 16 for the following:

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i. Unsatisfactory progress of the project.

ii. Reduction of diameter over major portion of the trunk pipeline from 36" to 30".

iii. Laying of 61.5 km pipeline section from Rohtak to Panipat, without authorization of PNGRB.

9. Upon issuance of the above notice, vide letter dated 13.07.2022, GIGL requested PNGRB to approve already laid 18" x 61.5 km Rohtak to Panipat pipeline as last mile connectivity. In support of its request, GIGL submitted that Indian Oil Corporation Limited (IOCL) has booked regasification capacity in Swan LNG Terminal being commissioned at Jafrabad, Gujarat. To transport this gas from Jafrabad to its Panipat refinery, IOCL has requested GIGL to lay a pipeline to their Panipat refinery from the nearest point of MBPL. Accordingly, GIGL agreed for providing last mile connectivity by extending the existing pipeline from Rohtak to Panipat (at initially estimated pipeline length of ~50 km). GIGL submitted that after doing route survey, the length to IOCL Panipat Refinery has changed to around 61.5 km from Rohtak so as to provide connectivity to various CGDs along the route.

10. During the hearing held on 21.07.2022, GIGL re-iterated that vide its earlier letter dated 08.04.2022, they had requested the Board to approve 18" x 61.5 km Rohtak-Panipat as a spur line. However, GIGL in its letter dated 13.07.2022 had requested PNGRB to approve Rohtak-Panipat pipeline as a last mile connectivity.

11. Considering the violation of PNGRB Act, NGPL Authorization Regulations and Terms & Conditions of Authorization issued for MBPL pipeline by GIGL (for laying unauthorized spurline with length of 61.5 km), a show-cause notice dated 12.04.2023 under Section 23 and 28 of the PNGRB Act was issued to GIGL seeking justification as to why action should not be initiated against them

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under Section 23 and 28 of the PNGRB Act.

12. In response, vide letter dated 03.05.2023, GIGL submitted that the spur line from Rohtak to IOCL, Panipat (from start point terminal to its end point terminal) is within 50 km tariff zone of MBPL and therefore GIGL understand that no separate authorization / prior approval of the Board is required under Regulation 21(3) NGPL Authorization Regulations, 2008.

13. The reply of GIGL was examined and prima facie it was appearing that the laying of 61.5 kms Rohtak- Panipat pipeline by GIGL is a violation of the PNGRB Act and extant Regulations framed thereunder and the Terms & Conditions of the authorization issued for MBPL.

14. Vide letter dated 21.06.2023, PNGRB directed GIGL to appear before the Board on 28.06.2023, for a hearing and to explain why penal action should not be taken under Section 23 and 28 of the PNGRB Act, 2006 read with Regulation 21 of the NGPL Authorization Regulations, 2008 for extending the authorized 124 kms spur line to Rohtak by laying 76 kms additional spur line without approval from PNGRB.

15. Due to unavoidable circumstances, the above hearing was rescheduled and subsequently it was held on 11.07.2023. During the hearing, the Board advised GIGL to take a consistent stand with regards to subject pipeline. In this regard, GIGL had sought few days' times to review their stand and accordingly file a further submission. The Board allowed the same to GIGL.

16. Vide letter dated 26.07.2023, IOCL informed PNGRB that Dadri Panipat Pipeline (DPPL) had suffered a leak between SV 3 and SV 4 on 26.07.2023 which severely impacted the natural gas flow to various CGDs, NFL Panipat, NTPC Power Plant and IOCL's Panipat refinery among other customers.

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17. IOCL further submitted that GIGL has a connectivity from Rohtak to Panipat in DPPL with an 18" spur line of GIGL's MBPL and by using this connectivity and GAIL connectivity at Dadri, DPPL shall be able to cater most of domestic and industrial customers. In view of this, IOCL had requested to allow injection of Natural Gas through this connectivity on provisional basis till restoration of

DPPL.

18. Although the GIGL's Rohtak-Panipat Pipeline was unauthorized and legal proceedings were underway, however considering the fact that various CGDs, domestic, industrial/commercial, CNG customers and Refinery at Panipat will be severely impacted due to the rupture of IOCL's Dadri-Panipat Pipeline, vide letter dated 26.07.2023, PNGRB informed that the un- authorized pipeline from Rohtak to Panipat may take care this emergency situation and supply the consumers of DPPL through GIGL's pipeline, hence without prejudice to the on-going case of laying of unauthorized pipeline by GIGL from Rohtak to Panipat, the supply to DPPL's consumers may be taken care of by GIGL/IOCL, as an emergency and one time measure for a time period up to 3 months or restoration of supply through DPPL, whichever is earlier. However, this shall not be in any way presumed as acceptance or consent or otherwise of PNGRB towards the un-authorized pipeline from Rohtak to Panipat.

19. Subsequently, due to the demise of the Member (Legal) on 26.09.2023, further hearings in the matter were not conducted.

20. IOCL vide letter dated 28.09.2023 informed that probable completion schedule of the restoration work is 04 months i.e. January, 2024. Therefore. IOCL requested to grant them additional time up to April, 2024 for completion of restoration works in view of any unforeseen circumstances.

21. In response, considering that the three-month time period was expiring on

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26.10.2023, PNGRB vide letter dated 26.10.2023 instructed IOCL to present before the Board. IOCL informed the status of restoration works being undertaken at the site of leakage/burst. Further, it was also informed by PNGRB that the existing supply arrangement through GIGL's un-authorized pipeline may be continued till 05.11.2023.

22. A meeting with IOCL was held with PNGRB on 02.11.2023 wherein IOCL presented the current status of restoration works being undertaken at the site of leakage / burst. During the said meeting the Board agreed to grant further extension of the existing natural gas supply arrangement through GIGL's un- authorized pipeline up to January, 2024.

23. On 31.07.2023, a meeting was called to discuss IOCL's request of Unified Tariff Path due to the above emergency shutdown in DPPL. During the meeting, PNGRB asked IOCL and GIGL whether the Rohtak - Panipat Pipeline is connected to DPPL network. Both IOCL and GIGL confirmed that both lines are connected near Panipat Refinery. However, the interconnection point is outside the refinery premises and the gas flowing from MBPL via the un- authorised Rohtak-Panipat section has to travel through DPPL to reach IOCL refinery.

24. During the meeting, PNGRB pointed that GIGL in its earlier submission has claimed that Rohtak to Panipat section is a spur-line to supply gas to Panipat refinery. However, as per extant regulatory provisions a spur line is laid to connect a consumer and not another trunk line and hence connecting Rohtak - Panipat section to DPPL is a violation of section 2(1)(o) of PNGRB (Determining Capacity of Petroleum, Petroleum Products and Natural Gas Pipeline) Regulations, 2010. GIGL and IOCL further submitted that the Rohtak - Panipat pipeline is connected with DPPL outside Panipat Refinery and gas is also flowing to other customers of DPPL.

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25. IOCL vide letter dated 25.01.2024 informed that re-alignment work of DPPL by HDD had been mechanically completed on 19.01.2024. They shall start the supply of gas in DPPL through GAIL connectivity to Dadri as soon as clearance will be received from PESO, Nagpur. In this regard, IOCL submitted a request for grant of additional time up to February, 2024 for supply of Natural Gas in DPPL through GIGL's pipeline.

26. Accordingly, PNGRB vide its letter dated 30.01.2024, agreed to grant extension of the existing natural gas supply arrangement through GIGL's un- authorized pipeline up to 29.02.2024 as requested by IOCL.

27. In response, IOCL vide its letter dated 19.02.2024 informed PNGRB that 100% flow has been diverted from GIGL to original path is restored by utilizing GAIL' HVJ-GREP network through DPPL at 0535 hrs on 16.02.2024 and changeover was done successfully.

28. Subsequently, IOCL vide letter dated 04.03.2024 informed that they are planning to launch Pig from Dadri on 08.03.2024 for retrieval of the stuck-up tool. During the process, IOCL apprehends a possibility of flow restriction, even stoppage of flow on account of MBCT followed by Foam Pig. This may affect the gas supply to customers.

29. In view of the above, IOCL has requested to allow for injection of natural gas in DPPL through GIGL network on a temporary basis from 08.03.2024 to

23.05.2024.

30. In view of the above request, a meeting was held on 14.03.2024 with IOCL to present the details of the incident happened on 20.02.2024 and mitigation measures taken and planned for retrieval of the stuck-up tool. During the meeting, the Board has directed IOCL that in the event of a situation necessitating a complete halt in gas supply from Dadri end, they should

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promptly approach PNGRB with an application. PNGRB will then evaluate the request in accordance with the prevailing regulatory provisions.

31. Since the hearing on Rohtak-Panipat Pipeline was on hold due to unavailability of Member (Legal), vide letter dated 09.07.2024, GIGL requested PNGRB to issue authorization of Rohtak - Panipat spurline from MBPL connecting to IOCL's DPPL. GIGL in its instant communication referred to writ petition filed by them against PNGRB and informed that the relief sought in the writ petition is essentially to achieve the recognition of Rohtak - Panipat spurline as authorized pipeline and consequent recognition of the unified contractual path forming part of the national gas grid system. GIGL further informed that the following proceedings are pending before the Board:

i. The proceedings under Regulation 16 of PNGRB Authorization Regulations that had been initiated by the Board vide communication dated 12.07.2022.

ii. The proceedings under Section 28 of the PNGRB Act that had been initiated by the Board vide communication dated 12.04.2023 in relation to Rohtak - Panipat pipeline.

32. GIGL further requested the Board to issue authorization of Rohtak - Panipat pipeline by levying the nominal penalty subject to maximum of Rs. 1 Crore under the provisions of the PNGRB Act & Regulations to settle the dispute that has resulted in the above proceedings and the writ petition referred above. GIGL further mentioned that the recognition of Rohtak - Panipat spurline as a spurline of MBPL or its authorization as being part of MBPL can be undertaken with the existing composition of the Board and without presence of Member (Legal).

33. The Board has noted that GAIL has also filed a complaint under Section 25 of

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PNGRB Act against GIGL for Rohtak - Panipat pipeline. However, due to vacancy of Member (legal) the notice to the parties for proceeding the case is not issued till date.

34. On 30.07.2024, considering the above, a meeting was held with IOCL, GAIL and GIGL to discuss the matter. During the meeting, GIGL claimed that Rohtak - Panipat pipeline is spurline of MBPL. In response, PNGRB has pointed out relevant regulatory provisions which classify that Rohtak - Panipat pipeline is not a spurline. GAIL has raised a concern about financial losses due to Rohtak - Panipat spurline. IOCL highlighted Rohtak - Panipat pipelines role in maintaining uninterrupted natural gas supply during disruptions in DPPL. Further, the Board has suggested the following actions:

i. Whether IOCL can give confirmation that they will continue to take natural gas supply of average volume of last 5 - 10 years, which is 4-

5 MMSCMD in its DPPL, from GAIL's Vijaipur - Dadri pipeline for IOCL's Panipat refinery. IOCL submitted that they will inform the same after consulting its management.

ii. The Board also informed GAIL that any loss in capacity utilisation of their Vijaipur to Dadri pipeline due to under utilisation of DPPL should be taken care off by them by enrolling new customer.

iii. Whether GAIL, after consulting with its management, can agree to amicably settle the complaint filed under Section 25 of PNGRB Act regarding alleged loses.

35. In response, IOCL vide letter dated 27.08.2024 informed that they have a binding GTA with GAIL for committed annual quantity and they are committed to the contractual obligations. IOCL has also signed a long-term GTA with GSPL - GIGL with committed annual quantity.

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36. In response, GAIL vide letter dated 27.08.2024 raised concern that the development of GIGL's Rohtak- Panipat pipeline without following the due regulatory process, may result in to likely diversion of gas volumes from GAIL's Integrated Network to Rohtak-Panipat pipeline and thus has potential adverse long-term commercial ramifications for GAIL. Further, GAIL requested PNGRB to assure long-term protection of the requisite gas volumes from GAIL's integrated network into DPPL by way of allowing gas flows through GIGL's Rohtak- Panipat pipeline, only after the requisite flow levels into DPPL from GAIL's integrated network is fully achieved.

37. Meanwhile, the Board received directions from the Hon'ble Delhi High Court on 14.08.2024 in the matter titled GSPL India Gasnet Limited V. Petroleum and Natural Gas Regulatory Board, W.P. (c) 8780/2024, CM Appl. 35775/2024 to conclude the process already initiated by the Board and resolve the matter within 4 weeks. Following this and in light of GIGL's consent as above, the Board issued notice bearing no. PNGRB/Auth/2-NGPL(04)/2022 (E-3987), dated 04.09.2024, calling GIGL for a hearing on 09.09.2024, at 12:00 hrs. at PNGRB Office.

SUBMISSIONS MADE BY GIGL

38. At the outset of hearing on 11.07.2023, GIGL had stated that they had received a show cause notice under Section 23 and 28 of the PNGRB Act on 12.04.2024 to which a reply dated 03.05.2023 had already been submitted to PNGRB wherein GIGL had stated that laying of subject pipeline from the end point of Rohtak spur line to Panipat did not require any authorization from PNGRB since the same falls under the tariff zone of their MBPL.

39. GIGL had submitted that the only difference is that the Board is calculating the tariff corridor from the trunk line of MBPL whereas GIGL has calculated the

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same from the end point of Rohtak spur line.

40. The current pipeline supplying the refinery is IOCL's own DPPL and IOCL is also a joint venture partner in GIGL. Although spur line up to Panipat was not part of DFR, plans were made for connecting MBPL with IOCL's refinery to increase the viability of MBPL. GIGL also added that they did not consider the infructuous nature of the pipeline as they were more concerned about increasing the viability of MBPL.

41. GIGL further stated that the length of Rohtak spur line i.e. 124 kms as mentioned in the show cause notice dated 21.06.2023 is incorrect as the correct length of Rohtak spur line as submitted in the simulation case along with DFR is 144 kms. The Board responded that in the map attached with the DFR indicates the length as 124 kms, to which GIGL informed that the same was an error on the part of GIGL. GIGL further submitted that the length of Rohtak spur line laid from MBPL trunk line to Rohtak is 147.5 kms and from Rohtak to Panipat, including pipeline inside the refinery terminal is 61.5 kms. Hence the total length is 209 kms. Rohtak - Panipat spur pipeline was conceptualized only on request from IOCL and prior consent from IOCL was also taken.

42. GIGL vide letter dated 09.07.2024 requested PNGRB to regularize the pipeline connectivity from Rohtak to IOCL's Panipat Refinery. GIGL also acknowledged that their interpretation of the PNGRB Regulations was flawed.

43. At the outset of hearing on 09.09.2024, the Board highlighted that GIGL's letter dated 09.07.2024 includes other issues beyond the laying of spur pipeline of MBPL from Rohtak to Panipat such as reduction of diameter over major portion of pipeline from 36" to 30", change of starting point of pipeline laying from Mehsana to Palanpur, non-completion of various spur lines as per authorization including Jodhpur etc. The Board clarified that the present proceeding is limited

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to the issue of laying of unauthorized pipeline of MBPL from Rohtak to Panipat, to which, authorized representatives of GIGL provided their consent. The Board has also clarified that the separate proceedings will be held for other matters mentioned in the aforesaid letter.

44. GIGL reiterated its submission from the letter dated 09.07.2024, requesting the Board to approve and regularize the authorization to Rohtak Panipat pipeline connecting IOCL's DPPL by levying nominal penalty subject to maximum of Rs. 1 Crore under the provisions of the PNGRB Act and the Regulations made thereunder. GIGL further confirmed that it has no additional submissions to make in this matter.

ISSUE FOR CONSIDERATION

45. Whether GIGL has violated the Terms & Conditions of grant of authorization issued for MBPL by laying 61.5 km Rohtak - Panipat pipeline connecting DPPL and whether the Board should regularize the Rohtak - Panipat pipeline by levying suitable penalty under Section 28 of the PNGRB Act.

DELIBERATION

46. For the decision of this case, it is necessary to look into relevant provisions of the PNGRB Act, 2006 and Regulations framed thereunder:

Section 16 of the PNGRB Act Authorization

No entity shall-

(a) lay, build, operate or expand any pipeline as a common carrier or contract carrier,

(b) lay, build, operate or expand any city or local natural gas distribution network, without obtaining authorisation under this Act : Provided that

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an entity :-

(i) laying, building, operating or expanding any pipeline as common carrier or contract carrier; or

(ii) laying, building, operating or expanding any city or local natural gas distribution network, immediately before the appointed day shall be deemed to have such authorisation subject to the provisions of this Chapter, but any change in the purpose or usage shall require separate authorisation granted by the Board.

Section 16 provides that, after enactment of the Act, necessary authorizations must be obtained from the Board for lay, build, operate or expand any pipeline as common carrier.

In the instant case, GIGL had extended the authorized Rohtak Spur line in MBPL from Rohtak to Panipat connecting with DPPL without obtaining authorization from PNGRB as per the provisions of the Act and PNGRB (Authorizing entities to lay, build, operate or expand NGPL) Regulations, 2008.

Section 19 of the PNGRB Act

"Grant of authorization :-

(1) When, either on the basis of an application for authorisation for laying, building, operating or expanding a common carrier or contract carrier or for laying, building, operating or expanding a city or local natural gas distribution network is received or on sue motto basis, the Board forms an opinion that it is necessary or expedient to lay, build, operate or expand a common carrier or contract carrier between two specified points, or to lay, build, operate or expand a city or local natural gas distribution network in a specified geographic area, the Board may give wide publicity of its intention to do so and

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may invite applications from interested parties to lay, build, operate or expand such pipelines or city or local natural gas distribution network.

(2) The Board may select an entity in an objective and transparent manner as specified by regulations for such activities." Section 19 provides that any applications received for authorization should be processed in an objective and transparent manner. This section states that every application should be given a wide publicity so that

objections/comments/suggestions etc. should be reached to Board. The Board analyses such objections/comments/suggestions etc. in holistic manner before finalizing the applications for authorization. Wide publicity of application helps PNGRB to take informed decision.

In the instant case, if GIGL would have applied for Rohtak - Panipat spur line, as per the provisions of the PNGRB Act and Regulations, PNGRB would has webhosted the application and after receiving comments from the stakeholders, would have taken informed decisions. GAIL (India) Ltd. has already filed a complaint under Section 25 of the Act, before the Board for laying of Rohtak- Panipat Spur Pipeline. The instant pipeline may utilize volume which is flowing from GAIL's pipeline and GIGL along with IOCL as one of the promoter of GIGL are aware that if GIGL applied for spur line from Rohtak to Panipat, GAIL would have oppose it on the pretext of infructuous investments. Accordingly, GIGL misinformed the Board that they are laying a spurline of 50 kms length. Initially this fact was also hide by GIGL and IOCL that they are connecting Rohtak-Panipat Pipeline to DPPL.

Section 23 of PNGRB Act

"Suspension or cancellation of authorization:-

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If the Board, on an application of an affected party or on its own motion, is satisfied that the entity in favour of which authorisation has been granted under section 19 has failed to

comply with any conditions of authorisation, it may, after giving an opportunity to such entity of being heard, either suspend the authorisation for such period as the Board may think fit or cancel the authorisation: Provided that where the Board is of the opinion that an authorised entity persistently acts in a manner prejudicial to the interests of consumers, it may take action for the suspension of the authorisation immediately subject to the opportunity of hearing being given subsequently, after which action so taken may be confirmed or revoked."

Section 28 of PNGRB Act

"Civil penalty for contravention of directions given by the Board :-

In case any complaint is filed before the Board by any person or if the Board is satisfied that any person has contravened a direction issued by the Board under this Act to provide access to, or to adhere to the transportation rate in respect of a common carrier, or to display maximum retail price at retail outlets, or violates the terms and conditions subject to which registration or authorisation has been granted under section 15 or section 19 or the retail service obligations or marketing service obligations, or does not furnish information, document, return of report required by the Board, it may, after giving such person an opportunity of being heard in the matter, by order in writing, direct that, without prejudice to any other penalty to which he may be liable under this Act, such person shall pay, by way of civil

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penalty an amount which shall not exceed one crore rupees for each contravention and in case of a continuing failure with additional penalty which may extend to ten lakh rupees for every day during which the failure continues after contravention of the first such direction : Provided that in the case of a complaint on restrictive trade practice, the amount of civil penalty may extend to five times the unfair gains made by the entity or ten crore rupees, whichever is higher."

Section 23 and 28 of the Act provides power to the Board to take necessary penal actions which includes suspension or termination of authorization and civil penalty. The present proceedings are under Section 23 and section 28 of the Act.

Regulation 2 (1) (o) of PNGRB (Determining Capacity of Petroleum, Petroleum Products and Natural Gas Pipeline) Regulations, 2010

""spur-line" means a pipeline necessarily originating or branching out from the trunk or transmission pipeline or sub- transmission line or another spur line or from a terminal station on the existing transmission or trunk pipeline with diameter and capacity not greater than the trunk or transmission pipeline but having no compression facility for supply of natural gas to one or more consumers. Any pipeline having a separate gas source or a compressor shall not be treated as a spur-line. The length of spur-line may not depend upon the length of the trunk pipeline. A spur-line must use the capacity of trunk pipeline in order to transport gas. Spur line includes branch line also"

Regulation 2 (1) (f) of PNGRB (Determining Capacity of Petroleum,

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Petroleum Products and Natural Gas Pipeline) Regulations, 2010

""extension of pipeline" means increase in length of pipelines in either direction for transportation of natural gas from an existing transmission or trunk pipeline or sub-transmission pipeline or spur line to another geographical location without increase in authorized capacity of the pipeline."

Regulation 2 (1) (g) of PNGRB (Determining Capacity of Petroleum, Petroleum Products and Natural Gas Pipeline) Regulations, 2010

""expansion of pipeline" means increase in the capacity of existing pipeline beyond its previously authorized capacity due to installation of additional facilities such as compression facilities, addition of compressor stations or loop lines or extension to new sources of gas to tap additional volumes etc. Expansion of pipeline may also include extension of the existing pipeline in either direction as long as it increases the capacity of the pipeline and in that case it may be treated as expansion of the pipeline not extension."

Regulation 2 (1) (h) (ii) of PNGRB (Determination of Natural Gas Pipeline Tariff) Regulations, 2008

"a corridor along the natural gas pipeline with a width of up to ten percent of the total length of the natural gas pipeline without including the length of the spur lines or fifty kilometers measured from the nearest point on the surface of the natural gas pipeline on both sides, and includes the point of origin and the end point of the natural gas pipelines, whichever is less….."

Regulation 21 (3) of PNGRB (Authorizing Entities to Lay, Build, Operate or

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Expand Natural Gas Pipelines) Regulations, 2008

"No separate authorization is required for laying spur-lines originating from the authorized natural gas pipelines within its tariff zone as per clause (h) of sub-regulation (1) of regulation (2) and during its economic life, so long as the usage or purpose of the pipeline already authorized is not changed subject to the spur-lines meeting all requirements provided in clause (o) of regulation 2 of the Petroleum and Natural Gas Regulatory Board (Determining Capacity of Petroleum, Petroleum Products and Natural Gas Pipeline) Regulations, 2010, defining spur-line:

Provided that if a spur-line is proposed beyond the limits of tariff zone, the admissible tariff shall be the applicable tariff of the tariff zone from which the tap-off for the spur-line is taken:

Provided further that in such instances beyond tariff corridor, the entity initiating the request shall inform the Board of its intentions along with the full details on the spur-line length, route, capacity and details of the customers to be served and the Board after public consultation shall give its decision to the entity within sixty days of the receipt of the request. In case, no communication is sent by the Board in the aforesaid sixty days, the above request shall be deemed to be approved for authorization."

47. On combined reading of Section 2 (1) (f) (g) (h) & (o) and Regulation 21(3), followings are observed:

i. A spur line, as defined under Regulation 2(1)(o) of PNGRB (Determining Capacity of Petroleum, Petroleum Products and Natural Gas Pipeline) Regulations, 2010, means a pipeline necessarily

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originating or branching out from the trunk or transmission pipeline or sub transmission line or another spur line or from a terminal station on the existing transmission or trunk pipeline with diameter and capacity not greater than the trunk or transmission pipeline but having no compression facility for supply of natural gas to one or more consumers. Any pipeline having a separate gas source or a compressor shall not be treated as a spur-line. A spur-line must use the capacity of trunk pipeline in order to transport gas. Spur line includes branch line also.

ii. Regulations 2(1)(h)(ii) defines the tariff corridor, as a corridor along the natural gas pipeline with a width of up to ten percent of the total length of the natural gas pipeline without including the length of the spur lines or fifty kilometres measured from the nearest point on the surface of the natural gas pipeline on both sides, and including the point of origin and the end point of the natural gas pipeline, whichever is less.

iii. As per proviso 21(3) of NGPL Authorization Regulations, if a spur line is proposed beyond the limits of tariff zone, the admissible tariff shall be the applicable tariff of the tariff zone from which the tap-off for the spur-line is taken.

iv. GIGL is estimating the allowable length of Panipat spur line from the end point of Rohtak spur line, however from the definitions it is clear that a corridor is always measured from the nearest point on the surface of the natural gas pipeline, in the instant case that would be the tap off point on MBPL for Rohtak spur line which is approx. 200 km from the IOCL's refinery. Therefore, GIGL's understanding is wrong. Additionally, the objective of spur lines is to provide flexibility to a pipeline operator to supply natural gas to customers/

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demand centres along the route of pipeline without re-routing the trunk line.

v. At the time of bidding, GIGL in the feasibility report for MBPL had indicated total trunk line length as 933 kms and additional 678 kms length for spur lines, including 124 kms of Rohtak spur line. However, as per QPR (Oct, 2019 to Dec, 2019) submitted by GIGL on 04.02.2020, the length of Rohtak spur line from MBPL's trunk line (IP-05, Ajeetpura) was 150 kms and further 50 kms of pipeline from Rohtak to IOCL, Panipat had been added, making the cumulative length from MBPL trunk line as 200 kms. It was construed that GIGL had laid an additional 76 kms of pipeline connectivity to IOCL, Panipat instead of 61.5 kms as claimed in GIGL's earlier submission dated 13.07.2023.

vi. Further, if we consider the latest submission made by GIGL during the hearing that actual length of Rohtak Spur line is 147.5 km and further the length of Rohtak Panipat is 61.5 km then, the total length becomes 209 km.

vii. Further, the pipeline at Panipat connects to another common carrier, IOCL's DPPL. As a result, the entire 209 km pipeline (including the Rohtak spur line and the Rohtak-to-Panipat spur line) transitions from being classified as a spur line to either an interconnecting pipeline (Tie-in) or potentially an expansion of the MBPL network.

48. It is pertinent to refer to para 13 of Judgement dated 18.11.2022 passed by the Board with respect to review petition filed by the GSPL under Section 13(1)(h) of PNGRB Act, 2006, pursuant to order dated 14.09.2022 passed by Hon'ble APTEL in Appeal No. 150 of 2022 titled 'GSPL vs PNGRB', seeking review of letter dated 19.08.2021 as also request letter 26.08.2021, issued by the Board to GSPL, regarding the proposal to lay 296.1 km spur pipeline connecting Anjar

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terminal at GSPL's HP Gas Grid in Gujarat with MBPL at Antroli Village located in Palanpur Taluka.

"After deliberating the contents of the Review Petition and oral arguments made by the Ld. Counsel of the Review Petitioner, the Board is if view that the revised proposal made by the Review Petitioner, do not fulfil the criteria to be qualified to lay down the spur pipeline, as per the provisions laid down under Regulation 21(3) of the NGPL Authorization Regulations, as proposed pipeline is forming a nature of 'loop line' of the existing high pressure Gujarat Gas Grid, and if the said proposal is accepted, it would lead to capacity expansion of the existing network under regulation 12(2) of the NGPL Authorization Regulations."

49. It is well settled issue that a pipeline connecting to a trunk pipeline cannot be considered as a spur pipeline as it would lead to capacity expansion of the existing network. GSPL, a stakeholder in MBPL, accepted the above decision and subsequently applied for capacity expansion of its HP Gas Grid.

50. The Board has carefully considered the facts and circumstances surrounding the unauthorized laying of the 61.5 km Rohtak to Panipat pipeline by GIGL. The laying of the Rohtak-Panipat pipeline violates the defined parameters of GIGL's authorization, as the distance of the spur line surpasses the allowable limit of the tariff zone without prior approval of the Board.

51. The legal interpretation of a "spur-line" under Regulation 2(1)(o) of the PNGRB (Determining Capacity of Petroleum, Petroleum Products, and Natural Gas Pipeline) Regulations, 2010, was pivotal. According to the definition, a spur-line must branch out from a trunk or transmission pipeline without exceeding the trunk line's capacity, and without any compression facility.

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However, Rohtak to Panipat pipeline does not meet these requirements, as it connects to another trunk line, namely DPPL, which contravenes the regulatory framework. GIGL's understanding of the spur line's length and permissible zones is flawed.

52. GIGL is claiming that Rohtak - Panipat pipeline is as a spurline of MBPL and is not laid beyond the tariff zone. However, as per the existing definition of spurline, a Rohtak - Panipat pipeline is not a spurline as it is connecting another trunk pipeline, which is IOCL's DPPL. A pipeline connecting to another trunk pipeline cannot be considered as a spurline. Further, as per existing regulatory provisions, any pipeline cannot be laid as a spurline without prior approval of the Board, in case length of such pipeline is exceeding a maximum limit of 50 km. Therefore, GIGL's claim that Rohtak - Panipat pipeline is spurline of MBPL and can be laid without approval from the Board is flawed.

53. GIGL's submissions regarding the length of the spur line have been inconsistent. Initially, the spur line length was indicated as 50 km, but subsequent reports indicated a revised length of 61.5 km due to re-routing. This inconsistency was viewed as a serious breach of the regulatory compliance framework. GIGL claims that the increase in length resulted from necessary re- routing, it clearly a misleading statement. If for the sake of discussion, it is assumed that GIGL was under misconception of regulation laying a spurline of 50 kms, the moment it was exceeding 50 kms, GIGL should have approach to the Board. However, GIGL didn't act as a responsible entity and deliberately laid the pipeline beyond 50 kms and try to create a fait accompli situation. Further, it has changed the usage or purpose of Rohtak spur line which is already authorized, by extending it up to Panipat and connecting it to another common carrier pipeline thus making it inter connection leading to expansion of MBPL.

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54. GIGL stated that IOCL has booked regasification capacity in Swan LNG Terminal being commissioned at Jafrabad, Gujarat. To transport this gas from Jafrabad to its Panipat refinery, IOCL has requested GIGL to lay a pipeline to their Panipat refinery from the nearest point of MBPL. However, the terminal is not yet commissioned and the future of this terminal is also uncertain

55. Since Rohtak - Panipat pipeline was laid without valid authorization from PNGRB, which has violated relevant PNGRB NGPL regulations and terms and conditions of the authorization issued for MBPL, GIGL is liable for penalty for laying such pipeline without valid authorization from PNGRB.

56. It is duty of the concerned officers to appraise the management about the correct provisions of regulations & Act. In the instant case, it has been observed that the understanding of GIGL's officers regarding interpretation of PNGRB Act and regulations is flawed, which results in unauthorized activities by GIGL. It has been also observed that IOCL being one of the stakeholders in GIGL, was aware of the fact that Rohtak - Panipat pipeline is unauthorized pipeline, yet provided connectivity with DPPL. The officers of GIGL & IOCL involved in interpretation of PNGRB Act & Regulations are required to be more caution while doing interpretation of the same. In case of any doubt, they should seek clarification from the Board to avoid any such situations in future.

57. It is pertinent to mention that the Board, without prejudice to the proceedings under Sections 23 and 28 of the PNGRB Act, permitted the use of the unauthorized Rohtak-Panipat pipeline as an alternative source following the rupture of the DPPL. This pipeline serves as an emergency resource to secure gas supply during the rupture of DPPL. It is pertinent to mention that because of this pipeline customer in route of DPPL have not suffered during disruption in supply.

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58. It is essential to clarify that the nature of Rohtak - Panipat pipeline can't considered as a spur line as claimed by GIGL as it is connecting to another common carrier pipeline i.e. Dadri - Panipat natural gas pipeline of IOCL. The Board is of the opinion that it can be treated as expansion of MBPL considering entire line as trunk pipeline from emanating point of main trunk pipeline of

MBPL.

59. It is pertinent to mention that the pipeline has been used to provide an alternative supply route during emergencies, such as the disruption of the DPPL, this emergency arrangement does not mitigate the underlying violation. However, unified contractual path on national gas grid system for Rohtak - Panipat pipeline was not recognized at that time. The decision in this instance should not be interpreted as a precedent for similar unauthorized actions by other entities.

ORDER

60. In view of the deliberations above, the Board holds following:

i. For the foregoing reasons and deliberations, considering this as a violation of terms and conditions of the authorization, in accordance with the Section 28 of PNGRB Act, civil penalty of Rs. 1,00,000,00/- (Rupees One Crore Only) shall be paid by GIGL within 30 days from the date of this order, for undertaking unauthorized laying of Rohtak - Panipat pipeline.

ii. Upon compliance of the above directions, PNGRB may regularize the above pipeline upon compliance of the requisite requirements given in Regulation 12 of NGPL Authorization Regulations within 30 days.

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iii. Post regularization of Rohtak - Panipat pipeline, PNGRB shall issue supplementary tariff order recognizing the unified contractual path on the national gas grid system.

Sd/- Sd/- Sd/- Sd/- Anil Kumar Gajendra Singh A.K. Tiwari A. Ramana Jain (Member-I) (Member-II) Kumar (Chairperson) (Member-III)

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