Enron Plea for Limited Waiver Elicits Boos
A plea by two Enron affiliates for a limited waiver of the
capacity-release regulations and the "shipper-must-have-title"
policy was met with a chilly reception from gas producers,
industrial customers and state interests at FERC.
Enron Capital & Trade Resources and Enron Energy Services are
seeking the waiver to allow them to transfer title to gas being
transported on five New York State-bound pipelines to end-use
customers prior to the gas actually reaching the state boundaries.
The waiver is needed, they insist, for them to compete on equal
footing with other gas suppliers that are transferring the title
outside of New York State to elude the state's gross receipts tax
and thus undercut competitors' gas prices.
Enron's petition is based on a "mistaken and faulty
interpretation" that a waiver is needed to permit "in-transit"
transfer titles, the Process Gas Consumers Group (PGC) said, adding
that no policy presently exists to prohibit the transfers. FERC
should either take no action at all on Enron's petition or simply
clarify the "permissibility" of in-transit title transfers, the
group of industrial customers noted [RP98-220].
"However, the last thing this Commission should be doing is
altering industry practices in order to cause state taxes to be
applied to natural gas transactions. The fact is that the New York
legislature is perfectly capable of addressing any perceived tax
disparity if it chooses to do so," the PGC told FERC in a limited
protest on May 29th [RP98-220]. Indeed, the legislature did this
when it imposed a "gas importers tax" on users of gas purchased
outside of the state.
"If state legislatures choose not to tax the seller in such
transactions, it is their business. Prohibiting in-transit title
transfers to address an alleged tax disparity would unnecessarily
and wrongly put the Commission into the state taxation business,,"
the industrial users warned. "If Enron does not approve of New
York's statutory taxation policy, then it should take this issue up
at the state level, not through a federal agency 'back door,'" the
Any Commission action "interfering" with in-transit title
transfers could conceivably have "tax implications" for gas
deliveries into other states served by the five pipelines, and
possibly others, the industrial customers said. Moreover, imposing
"new tax burdens on marketers could also interfere with marketers'
sales practices, and it could undermine the liquidity of gas
markets by discouraging sales to particular markets or triggering
The PGC further argued that there was nothing in the five
pipelines' tariffs that prohibited them from making in-transit
title transfers to their customers. The pipelines' tariffs only
required that they have title at the time of delivery into the
pipeline. The pipelines include CNG Transmission, Columbia Gas
Transmission, National Fuel Gas Supply, Tennessee Gas Pipeline and
Transcontinental Gas Pipe Line.
Producers also took issue with Enron's petition for a limited
waiver. They objected because it would require an exception to the
"shipper-must-have-title" policy, which they say is critical to
FERC's capacity-release program. "Such exceptions, if granted here,
could lead to such further additional waivers that the entire
capacity-release program could be severely undermined - essentially
resulting in a reversion to capacity brokering in fact, if not in
name," said Burlington Resources Oil & Gas and Exxon Corp.
Industrial customers disagreed with producers on this point.
"...[W]hether title transfers at the city or upstream within the
pipeline is not a capacity-release issue at all," the PGC said.
The New York Public Service Commission declined to take a
position on the requested waiver, but noted that an exception to
the "shipper-must-have-title" rule would have "far broader
implications" on retail-access programs than this limited request
by Enron, particularly given the "incipient nature" of retail
The Enron affiliates are seeking the waiver for gas being
shipped to their New York commercial and industrial customers on
the five pipelines. If the Commission should deny their waiver,
they have asked it to clarify that all shippers must have title in
the future, and to put an end to all in-transit transfers without a
capacity release. Susan Parker