What’s the issue?
FERC regulates both interstate natural gas pipelines and interstate liquids pipelines, but does so under very different statutes passed by Congress.
Why does it matter?
The difference in statutes leads to very different approaches when it comes to disclosing information about the shippers on a pipeline. For natural gas pipelines, disclosure is complete; the pipeline publishes each shipper’s name, the points of receipt and delivery, and the term and the price being paid. For liquids pipelines, a pipeline is prohibited from making any such information about its shippers public.
What’s our view?
In both cases — complete disclosure and no disclosure — our Gas Asset Analytics Platform and Liquids Commerce Platform offer help for commercial teams seeking shipper data. Our software helps to organize and make actionable the overwhelming amount of available natural gas shipment information, and we have also begun working with East Daley to bring some light to the dark corners of the liquids world, to help subscribers understand the contractual and flow information for crude pipelines in the Permian Basin.
FERC regulates both interstate natural gas pipelines and interstate liquids pipelines, but does so under very different statutes passed by Congress. The difference in statutes leads to very different approaches when it comes to disclosing information about the shippers on a pipeline. For natural gas pipelines, disclosure is complete; the pipeline publishes each shipper’s name, the points of receipt and delivery, and the term and the price being paid. For liquids pipelines, a pipeline is prohibited from making any such information about its shippers public.
In both cases — complete disclosure and no disclosure — our Gas Asset Analytics Platform and Liquids Commerce Platform offer help for commercial teams seeking shipper data. Our software helps to organize and make actionable the overwhelming amount of available natural gas shipment information, and we have also begun working with East Daley to bring some light to the dark corners of the liquids world, to help subscribers understand the contractual and flow information for crude pipelines in the Permian Basin.
FERC Regulation for Liquids Pipelines
The Interstate Commerce Act (ICA) was first enacted in 1887 and primarily governed services offered by railroads and telegraph companies. In 1906, the ICA was amended to include “common carriers engaged in … [t]he transportation of oil … by pipeline.” Thus, from 1906 to 1977, oil pipelines were regulated by the Interstate Commerce Commission, which was the federal regulator responsible for enforcing the ICA. In 1977, the Department of Energy Organization Act created FERC and transferred jurisdiction over interstate oil pipelines to FERC. In 1978, the ICA was amended to remove oil pipelines from its provisions, but in an interesting twist, the amending statute provided that oil pipelines would continue to be governed by the ICA as it existed on October 1, 1977, the date of the statute that created the Department of Energy and FERC. A key provision of that statute prohibits a common carrier, including the pipelines regulated by the act to disclose “without the consent of such shipper,” any information concerning the “nature, quantity, consignee, or routing of any property tendered or delivered to such common carrier for Interstate transportation, which information may be used to the detriment or prejudice of such shipper or consignee or which may improperly disclose his business transactions to a competitor.”
Thus, not only are oil pipelines not required to disclose contractual information about their shippers or the amounts of volumes actually shipped, they are expressly prohibited from doing so. The statute, however, does not prohibit the shippers from disclosing such information. Our friends at East Daley track known commitments using the best available public data and validate that data by building out full pipeline financial models with rates and volume. These models are back tested and forecasts are determined using a balanced nodal supply demand model that integrates volumes on every major pipe from every major supply point across the U.S. Subscribers to Arbo’s Liquids Commerce Platform can view East Daley’s models for capacity and utilization, plus known contracted shippers and volumes across 17 Permian takeaway pipelines.
FERC Regulation of Gas Pipelines
Federal regulation of natural gas pipelines did not begin until the passage of the Natural Gas Act (NGA) in 1938. This statute charged the Federal Power Commission with the job of regulating the sale of natural gas in interstate commerce. At least initially, the NGA was not interpreted as controlling the price of the actual sale of the commodity, but rather was focused on the price to be charged for transporting that gas in interstate commerce and prohibited the construction of an interstate pipeline into a market already served by another pipeline.
In 1954, the Supreme Court ruled that the NGA also applied to the sale of gas by producers in interstate commerce, which led to a couple of decades where the Federal Power Commission tried various methods for regulating the price of natural gas. By 1978, Congress decided those efforts to protect consumers from monopoly pricing may have exacerbated a lack of supply of natural gas and so it passed the Natural Gas Policy Act that not only transferred power from the Federal Power Commission to the newly created FERC but also began another long process of essentially deregulating and unbundling the supply and transportation of natural gas in interstate commerce. This process culminated with FERC’s Order No. 636 in 1992, which was essentially designed to make sure that no shipper, and particularly the marketing arms of pipelines, would have an advantage over any other shipper.
One method for achieving this goal was to require very broad disclosure of information regarding the pipeline’s shippers, rates and services provided to those shippers. It required the pipelines to establish electronic bulletin boards, accessible by anyone, which show the available and contracted capacity so that anyone interested in the pipeline’s capacity, even if it is already held by another shipper, would know who to approach to obtain rights to that capacity. Order No. 636 also required pipelines to provide flexibility in receipt and delivery points, and to facilitate the ability of shippers to release their capacity to others interested in that capacity on a short or long term basis, so called “capacity release” programs.
With such a broad disclosure regime in place, the difficulty with gas pipeline capacity is not a lack of public information, as it is for liquids pipelines, but the problem is how to efficiently use that information to take advantage of opportunities. Our gas platform can provide help to our subscribers with this problem as well. First, with just a few clicks, it is possible to find all of the current contract holders on a pipeline, or to turn that information on its head and see how much pipeline capacity a particular shipper holds on all interstate pipelines.
In addition, capacity release and park and loan data provide critical market information and are difficult to access — they are spread across more than 100 electronic bulletin boards maintained by pipelines across the country. Our ETA alerting service is a once daily email which aggregates and lists the current day’s transactional reports for all of the interstate pipelines owned by Kinder Morgan, Williams, TC Energy, and Enbridge.
While the disclosure of pipeline capacity information is very different for liquids and gas pipelines, our platforms help Arbo’s midstream customers across different commodities confidently make well-informed commercial decisions.