Several affiliate issues appear on the Sunshine Notice for this week’s Open Meeting, suggesting a FERC majority may have reached some conclusion on a framework related to both oil and gas affiliate agreements. We’ll be tuning in and providing follow-up impact analysis of any decisions or policies issued; meanwhile, a brief summary of each docket and some background reading…
.png?width=740&height=398&name=sunshine_dec2022-png%20(1).png)
Oil Pipeline Affiliate Committed Service
(and Magellan Midstream Partners)
In late 2017, Magellan sought a declaratory order from FERC granting permission to create a marketing affiliate. This action appeared to have been designed to obtain a negative decision in order to sow uncertainty about common industry practices undertaken by its competitors. FERC denied the order and Magellan immediately filed seeking clarification or rehearing — unusually, seeking a broader scope for the findings. On the same day, Enterprise Products Partners, Medallion Pipeline Company and Plains all asked FERC to either vacate the order, clarify it or grant rehearing (seeking to narrow the ruling). FERC issued a tolling order on January 22, 2018 but has not acted since then.
Background reading:
Magellan v. Occidental - Playing Devil's Advocate?
Magellan, Plains, Among Others, Request Marketing Affiliate Clarification
Enerplus vs. Targa
In September 2020, Enerplus filed a complaint with FERC, alleging that a crude pipeline it needs to move its Bakken-produced crude to market — a Targa affiliate — is violating the Interstate Commerce Act (ICA) by charging it higher fees than other customers. Enerplus always used a buy-sell agreement to avoid public scrutiny of its relationship with Targa, but then became “aware that Targa has entered into agreements with other producers to deliver barrels to points on its gathering system for fees that are materially less than the amount charged to Enerplus for transportation to the same delivery points,” and proposed FERC treat the fees under that agreement as a rate charged for tariff services under the ICA. FERC dismissed the complaint and both Targa and Enerplus sought rehearing of the order. FERC issued a tolling order on May 20, 2021 but has not acted since then.
More detail:
Enerplus and Targa Start a Fight That Could Impact All Liquids Pipelines
Spire STL Pipeline Certificate
In April 2020, Spire STL pipeline’s certificate was appealed in the DC Circuit by the Environmental Defense Fund (EDF), which argued FERC should have looked beyond the single precedent agreement between the pipeline and its affiliate to determine if there was truly a market need for the capacity. (The project was approved in 2017 by the Commission, 3-2 with the vote splitting along party lines — three Republicans in favor and two Democrats, including now Chairman Glick, voting against. In his dissent, Glick objected to the majority’s reliance on the affiliated contract for the pipeline’s capacity as being sufficient evidence of the need for the project.) On June 22, 2021, the DC Circuit ruled in EDF’s favor and voided Spire’s certificate of public convenience and necessity allowing it to operate the pipeline. On September 14, 2021, and December 3, 2021, FERC issued Spire temporary certificates to allow continued operation of the pipeline until it could issue a final decision in response to the DC Circuit decision concerning FERC’s reliance on the affiliate contract. It appears that FERC will finally issue that decision tomorrow.
Previous Coverage:
Gas Pipeline Industry Dodges a Bullet with PennEast Win, But Spire STL May Lose Its Certificate