FERC should require Rockies Express Pipeline Co. LLC (REX) to adopt a no-profit reservation charge crediting methodology for curtailments during force majeure events, a group of shippers said in a filing Monday.
In response to a filing made by REX on July 30, the shippers -- BP America Production Co., BP Energy Co., Chevron USA Inc., ConocoPhillips Co., ExxonMobil Gas & Power Marketing Co. (a division of ExxonMobil Corp.) and Shell Energy North America LP -- said REX paid reservation charge credits for only one of the 19 force majeure events that were reported on the system between Jan. 1, 2010 and July 1, 2012.
"The Commission's policy related to reservation charge crediting during force majeure events holds that the pipeline and shippers must share the burden of the force majeure because it is a no-fault occurrence," according to the shipper's filing. "The logical conclusion is that there should be no winners and no losers in force majeure situations, and that all parties bear an equitable portion of the loss of capacity in force majeure situations. But on REX, due to the frequency and shortened duration (i.e., less than 10 days) of 18 of the 19 force majeure outages, it has been REX's firm shippers alone that have borne the burden of paying for capacity that was not available due to force majeure events."
If the no-profit method had been in place on REX at the beginning of 2010, "REX would have borne some of the burden of the force majeure outages, while firm shippers would have received a portion of their reservation charges as a credit for capacity that was not available during the force majeure event[s]." the shippers said.
San Diego-based Sempra Energy last week said it took a significant hit in its 2Q2012 profits related to its 25% interest in REX, which is now on the sales block (see Daily GPI, Aug. 8). Majority REX owner Kinder Morgan Energy Partners LP plans to sell its interest in the pipeline as part of its recently completed acquisition of El Paso Corp. (see Daily GPI, May 25).
Fitch Ratings recently cut ratings on REX and revised its outlook on the pipeline's debt to "negative" from "stable" due to pushback from Marcellus and Utica shale gas supplies, which have cut the value of long-haul transportation capacity on REX from the Rockies to the East (see Daily GPI, May 9).
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