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Pipelines fight FERC affiliate regulation

10 Jan 2018 14:28 GMT
Pipelines fight FERC affiliate regulation

Houston, 10 January (Argus) — Oneok yesterday became the latest pipeline operator to intervene in Magellan Midstream's intensifying campaign to get the US to crack down on how marketing affiliates operate on their parent companies' systems.

Magellan last month sought a rehearing of the Federal Energy Regulatory Commission's (FERC) November ruling that a pipeline's marketing affiliate cannot resell capacity for less than the tariff rate under the Interstate Commerce Act (ICA). The order came in response to Magellan's application to form such an affiliate, which several of its peers have developed over the years without first going to FERC.

The rehearing request did not seek a reversal, but rather clarifications that could further clamp down on how other companies' affiliates do business. Magellan wants FERC to rule on whether affiliates with transportation services agreements (TSAs) can buy crude on one end and sell it on the other if the differential between the two prices is below the stated tariff rate. Previously FERC did not address the TSA matter specifically.

Magellan also asked FERC if carriers can structure open seasons that only make them viable for marketing affiliates, potentially threatening their common carrier status. And it seeks to prohibit pipelines from offering non-jurisdictional services to marketing affiliates at discounts to what other shippers would pay.

And lastly, Magellan asked that the order be applied to all liquids pipelines, not just crude infrastructure. That could impact companies like Oneok, a major natural gas liquids carrier.

"The commission order in this proceeding enunciated new and potentially broad rules regarding the lawfulness of actions by pipelines and their affiliated shippers, in the context of a narrowly drawn petition for declaratory order," Oneok said. "The Magellan rehearing seeks to further expand the rulings in the order to include issues well beyond the initial Magellan (filing) and its spare framework of supporting facts."

Enterprise Products Partners this week accused Magellan of seeking to expand the previous "limited, fact-specific" ruling into a full regulatory overhaul.

"A declaratory order proceeding is not the appropriate forum for the commission to promulgate industry-wide regulations," Enterprise said. Magellan previously said applying for the marketing affiliate in the first place was the only way it could test the legality of such structures because it did not have standing to challenge rivals' operations.

Other companies, which have declined to comment on the matter, are expressing nervousness in FERC filings. Plains sought a clarification that the original Magellan order was based on hypothetical proposals and did not "automatically apply to any other transactions between a marketing affiliate and an affiliated pipeline", such as Plains'. Plains is a 50:50 partner with Magellan on the 400,000 b/d BridgeTex crude pipeline from west Texas to Houston.