FERC Ruling Sought on Buy-Sell Deals in OCS
Williams Energy Marketing & Trading has petitioned FERC to
issue a declaratory order stating that its ban against "buy-sell"
arrangements doesn't apply to the Outer Continental Shelf (OCS),
particularly to the Minerals Management Service's (MMS) royalty
Williams said it was seeking "guidance" from the full Commission
on the buy-sell deals at the recommendation of FERC's Enforcement
Hotline staff, which was unable to render an "informal opinion" on
FERC barred buy-sell arrangements because it said they provided
pipeline customers an opportunity to circumvent the objectives of
its capacity-release program, which requires open bidding by
shippers. In buy-sell deals, open bidding is eliminated. For
example, an LDC could buy gas in the production area from an
end-user or someone designated by the end-user, transport the gas
using its own firm capacity and then sell it back to the end-user
at the retail delivery point.
Although prohibited by the Commission, Williams said the
buy-sell arrangements are being used routinely in MMS' royalty
in-kind (RIK) projects. The buy-sell issue arises when an RIK
contractor buys gas from the MMS at one or more receipt points in
the OCS, transports (as well as processes or separates) the gas on
behalf of MMS to onshore delivery points, and sells the gas back to
MMS once onshore. In exchange, the RIK contractor or contractors
retain a portion of the gas, plus any processing revenues.
Williams said it is "keenly interested" in participating in MMS'
RIK projects, but it's also "concerned that such arrangements may
violate the letter (but not the spirit of) the Commission's
buy-sell policy." As such, it's seeking a declaratory ruling from
the Commission that would grant an exception for buy-sell deals in
the OCS, saying "there simply is no need to impose such uniform
capacity-release requirements upon OCS transportation
"Given the strategic, national importance of OCS development,
excepting such OCS production-area transactions from the
Commission's buy-sell prohibitions is eminently reasonable,"
especially in view of the "highly competitive character of the OCS
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