Midweek Energy Updates: October 11, 2017

The full version of these articles will appear in The Foster Report No. 3169, published on Oct. 13, 2017.

 

Producers Gain Victory in Kinetica Deepwater Case, But FERC Defers Remedy to Court

October 10, 2017

Indicated Shippers gained a victory in an attempt to have Kinetica Deepwater Express LLC honor contracts for natural gas gathering service, with FERC in an October 5 order (RP16-900) finding that the pipeline may be in violation of contractual obligations with a pair of producers.

However, FERC declined to prohibit or condition Kinetica Deepwater from transferring gathering facilities to affiliate Kinetica Midstream Express LLC or to compel the companies to provide gathering service to the producers pursuant to their negotiated rate contracts. If the producers — Chevron U.S.A. Inc., and Fieldwood Energy LLC — incur damages because of Kinetica Deepwater’s breach of their contracts, they should pursue a monetary remedy in court, the Commission concluded.

Kinetica Deepwater had maintained that the gathering contracts provided for month-to-month terms and could be terminated at any time, but “that assertion was wrong,” as materials provided in response to a data request clearly show that three contracts with the two producers will continue to 12/31/2038, and switch to month-to-month after that, FERC said.

The order addressed rehearing requests following FERC’s 5/31/16 order that accepted Kinetica Deepwater’s tariff revisions and directed the pipeline to remove all references to gathering service from its tariff. That order also found that FERC had no authority to reject or condition Kinetica Deepwater’s transfer of gathering facilities to Kinetica Midstream, and approved Kinetica Deepwater’s elimination of an imbalance cashout mechanism.

 

FERC Issues Certificate for Gulf South’s St. Charles Parish Expansion Project

October 10, 2017

The Commission issued a certificate on October 6, for Gulf South Pipeline Co., LP’s (CP16-478) St. Charles Parish Expansion Project.

In the order approving the project, the Commission conditioned the certificate on Gulf South constructing the project and making it available for service within two years of the date of the order, and Gulf South complying with the environmental conditions in the order.

The Commission approved Gulf South’s request to use its system-wide recourse rates for firm transportation service under Rate Schedule EFT, and use its system-wide fuel rate.

The Commission granted Gulf South’s request for a predetermination of rolled-in rate treatment for the project costs in the next Natural Gas Act (NGA) section 4 proceeding. Gulf South must also maintain separate accounting and reporting costs, and file a written statement affirming it has executed firm contracts for capacity levels and terms of service in the precedent agreements before construction can commence.

Gulf South is also required to notify the Commission if any other agency notifies Gulf South of non-compliance with any environmental conditions. The Commission otherwise approved the certificate application.

 

Airlines, FERC Trial Staff Differ on Lease Obligations of Kinder Morgan Liquid Terminals

October 11, 2017

FERC trial staff on October 6 filed in support of an August 30 Motion for Summary Disposition by Kinder Morgan Liquid Terminals, LLC (KMLT) regarding a complaint (OR16-26) by airlines against KMLT.

The aircraft services and airline companies on the same day filed objections to KMLT’s motion.

The motion seeks summary disposition of the case regarding all claims against KMLT and Central Florida Pipeline LLC set forth in a 9/16/16 complaint filed by a party that includes Aircraft Service International Group, Inc., American Airlines, Inc., Delta Air Lines, Inc., Hooker’s Point Fuel Facilities LLC, Southwest Airlines Co., United Aviation Fuels Corp., and United Parcel Service, Inc. KMLT’s motion argues that even if the storage of jet fuel in five tanks at the KMLT Tampa terminal leased to the Airlines at Hooker’s Point is jurisdictional under the Interstate Commerce Act (ICA), KMLT’s lease of those facilities is not subject to the ICA.

In its motion, KMLT argues that its Airline Storage Agreement constitutes a “lease” that gives the complainants “exclusive control” over the capacity at the tanks. According to KMLT, the complainants admitted this in their pre-filed testimony, the complaint itself, and the Joint Statement of Stipulated Facts.[1]  In other words, the facts show that the claims at issue relate to KMLT’s actions as a lessor rather than the provider of common carrier service.

Based on the existence of this “lease” and “exclusive control,” the presiding administrative law judge (ALJ) should find that the complainants are the properly regulated party under the ICA and therefore dismiss KMLT as a party. KMLT also asserts that there are no disputed material facts.

The Commission’s trial staff agreed that KMLT’s motion should be granted. “Pursuant to the ICA and Commission and judicial precedent, KMLT is … not subject to the common carrier requirements of the ICA, with respect to the Hooker’s Point Leased Tanks, insofar as the tanks remain leased to the Complainants” FERC staff said.

[1]  Each affirming that the complainants manage the Hooker’s Point tanks pursuant to the Airline Storage Agreement, with purely operational involvement from KMLT.

 

ETP Moving More Gas, Ethane Out of Marcellus Shale on Two Different Systems

October 11, 2017

Two different subsidiaries of Energy Transfer Partners (ETP) are moving more resources out of the Marcellus Shale region, with Rover Pipeline LLC gaining FERC approval to begin partial service at its mainline compressor station in Ohio and Sunoco Partners Marketing and Terminals beginning to deliver ethane by trucks from its Marcus Hook Industrial Complex in Pennsylvania.

FERC staff on October 6 granted Rover’s request to start operating three compressor units at the mainline compressor station 1 in Carroll County, Ohio, which will boost the natural gas deliveries to be made in Phase 1A of the Rover project that began service at the end of August. With the approval to begin operating the compressor units, Phase 1A can transport more than 1 Bcf/d of gas from Cadiz, Ohio, to Defiance, Ohio, ETP said in an October 9 statement.

In its order (CP15-93), FERC staff reminded Rover that it must complete final cleanup of workspaces at the compressor station and a full-load condition noise survey for all noise-sensitive areas as analyzed in the final environmental impact statement for the project. “Rover must also complete the noise surveys that are required under environmental condition 43 of the order” approving the project, FERC staff said.

Rover has been under construction for several months to improve moving Marcellus and Utica Shale resources to different markets. It is designed as a 713-mile pipeline with several supply laterals stretching into production regions in the Marcellus and Utica Shale areas to move up to 3.25 Bcf/d through different pipeline connections and into Michigan, with deliveries to include the gas storage hub at Dawn, Ontario. Rover’s construction activities and its actions before FERC approved the $4.2 billion project are the subject of a FERC staff investigation and scrutiny from state authorities and Capitol Hill lawmakers.[1] The added scrutiny followed FERC staff rulings in May, when the Commission halted horizontal directional drill (HDD) construction activities after more than 2 million gallons of drilling mud was inadvertently released at HDD sites, one of which included the presence of oil-based susbstances into a wetland.

[1]   For past stories, see Ohio EPA, Rover Extend Spat on Compliance, Permit After Another Incident, FR No. 3167, pp. 14-16, Rover, Ohio EPA Tussle on Compliance as Chatterjee Answers Lawmaker, FR. No. 3165, pp. 5-8, FERC to Prepare EA for Rover Change; ETP Provides Update on Pipeline Activities, FR No. 3161, pp. 3-6, ETP Sells Stake in Rover Pipeline to Blackstone for $1.57 Billion; Answers Lawmakers, FR No. 3160, pp. 22-24 and Will Rover Construction Make it Harder for Other Pipeline Projects, FR No. 3159, pp. 1-5.

 

 

These articles will appear as published in The Foster Report No. 3169, being issued on October 13, 2017

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