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FERC Rules Against Preferential Provisions in Columbia Contract With Antero

FERC has ordered Columbia Pipeline Group to remove a series of contract provisions negotiated with Antero Resources that gave certain advantages to the Marcellus/Utica exploration and production (E&P) company as the only anchor shipper on the Smithfield III expansion.

In a filing last week, the Federal Energy Regulatory Commission concluded that the nonconforming contract provisions were unduly preferential and had not been explicitly offered to all prospective subscribers during Smithfield III’s open season in 2012. FERC ordered Columbia to remove the provisions or else offer them to other subscribers.

The nonconforming provisions included one-time contract extension rights and varying capacity entitlements scheduled to increase and decrease at certain intervals. The provisions also gave Antero the right to shift receipt and delivery points on Columbia Gas and Columbia Gulf, up to 93,000 Dth/d and up to 20% of any incremental capacity additions with protection against prorationing.

Columbia contended that the open season notice clearly outlined the availability of certain priorities for anchor shippers and that the specific nonconforming provisions of its contract with Antero had been negotiated under this framework.

The open season notice, as recorded in the FERC filing, stated that “anchor shippers will enjoy benefits such as priority for subscribing capacity available for early in-service and contract extension rights. [Columbia Pipelines] will also endeavor to limit proration risk for all anchor shippers.”

Antero argued that the provisions offered the E&P needed flexibility in order to sign on as an anchor for the Smithfield III project -- a north/south flow reversal to transport Marcellus/Utica production to the Gulf Coast on the Columbia Gas and Columbia Gulf pipelines.

According to the filing, “Antero contends that the interconnections with other pipelines in the Gulf Coast area were traditionally receipt points rather than delivery points. Antero states that it had few delivery point options as the north-to-south anchor customer on the newly revised Columbia Gulf. Antero further states that more options should arise as Columbia Gulf and other pipelines modify their operations in response to the changing supply and demand dynamics of the natural gas market, particularly Marcellus and Utica shale supply and LNG export demand.

“Antero states that, since it made possible the flow reversal, it should be permitted to obtain access to new points that become available on a priority basis.”

But FERC disagreed, concurring with other Columbia Gulf shippers that argued that Columbia could not “permissibly include a provision granting Antero, as an anchor shipper, a priority right with prorationing protection to future Columbia Gulf expansion capacity that was not the subject of the [Smithfield III] open season.”

ISSN © 2577-9877 | ISSN © 2158-8023

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