Airlines for America (A4A), the industry trade organization for the leading U.S. airlines, and the National Propane Gas Association (NPGA), the national trade association for the propane industry, today filed a Petition for Rulemaking at the Federal Energy Regulatory Commission (FERC) requesting that the agency extend its affiliate Standards of Conduct regulations to the multiproduct pipeline industry.
Over the last several years, the development of new technologies has increased the production of crude oil and associated petroleum products, with estimated production of crude oil rising to a record-setting 10.3 million barrels per day in 2018, according to the Energy Information Administration. Additionally, there has been a dramatic increase in domestic natural gas liquids production due in large part to advances in shale oil and gas development. Accompanying this boom in production, the multiproduct pipeline industry has gone through unprecedented restructuring, spinning off midstream transportation and storage assets and engaging in the marketing of these products through companies affiliated with the pipelines.
According to A4A and NPGA public information indicates that crude oil, natural gas liquid, and petroleum pipelines appear to have been engaged in offering preferential, discriminatory rates to their marketing affiliates not offered to non-affiliated shippers, and shared non-public transmission information with affiliated marketing entities. Such abuses violate the Interstate Commerce Act (ICA), the law intended to ensure that common carriers, including crude oil, natural gas liquid, and petroleum product pipelines, treat all shippers equally in terms of transportation access and price.
Applying FERC’s Standards of Conduct, currently applicable to the electric power and natural gas industries, to crude oil, natural gas liquid, and petroleum product pipelines is a common sense solution to limit these abuses that harm non-affiliated shippers and distort the market for pipeline transportation of refined products used daily by consumers and members of A4A and NPGA.
“With billions of gallons of jet fuel shipped and consumed annually, the U.S. airline industry has a vested interest in ensuring that interstate pipelines provide reliable, cost-effective jet fuel transportation enabling affordable, on-time airline operations for passengers and cargo,” said David Berg, senior vice president and general counsel for Airlines for America. “FERC must take appropriate action to promote pricing transparency, market efficiency and competition among pipelines and prevent unlawful coordination between pipelines and marketing affiliates to ensure equal access to pipelines and fair, non-discriminatory pricing.”
“Propane marketers and consumers rely upon liquids pipelines as an essential part of a supply chain that heats homes, businesses, and farms. A fair, efficient, and transparent market requires that there be no improper exchanges of information between pipelines and their affiliates that are market participants,” said Jeffrey Petrash, vice president and general counsel for the National Propane Gas Association.
“Propane marketers and the customers they serve will have increased confidence that markets are operating freely and efficiently if our proposals are adopted by the Commission.”
More information can be found in the Airlines for America and the National Propane Gas Association’s Petition for Rulemaking. The FERC will now review the Petition for Rulemaking and decide whether to initiate procedures for a rulemaking whereby interested parties can comment on the proposed regulation.