Williams Energy Marketing & Trading has petitioned FERC fora 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) royaltyin-kind projects.

Williams said it was seeking “guidance” from the Commission onthe buy-sell deals at the recommendation of its Enforcement Hotlinestaff, which was unable to render an “informal opinion” on theissue.

FERC barred buy-sell arrangements because it said they providedshippers an opportunity to circumvent the objectives of itscapacity-release program, which requires open bidding fortransportation capacity. In buy-sell deals, open bidding betweenshippers who value the capacity is eliminated. For example, an LDCcould buy gas in the production area from an end-user or someonedesignated by the end-user, transport the gas using its own firmcapacity and then sell it back to the end-user at the retaildelivery point.

Although prohibited by the Commission, Williams said thebuy-sell arrangements are being used routinely in MMS’ royaltyin-kind (RIK) projects. The buy-sell issue arises when an RIKcontractor buys gas from MMS at one or more receipt points in theOCS, transports (as well as processes or separates) the gas onbehalf of MMS to onshore delivery points, and sells the gas back toMMS once onshore. In exchange, the RIK contractor or contractorsretain 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 mayviolate the letter (but not the spirit of) the Commission’sbuy-sell policy.” As such, it’s seeking a declaratory ruling fromthe Commission that would grant an exception for buy-sell deals inthe OCS.

“While the Commission’s buy-sell policy was designed to preventcircumvention of its capacity-release program so as to establish auniform capacity-reallocation scheme, there simply is no need toimpose such uniform capacity-release requirements upon OCStransportation arrangements,” Williams argued.

It insists the “spirit” of the RIK buy-sell arrangements “isperfectly consistent with the Commission’s more fundamentalobjective to ‘maximize the benefits of the decontrol of natural gasat the wellhead and in the field’ by increasing the avenues formore buyers and sellers to reach each other.”

Moreover, “given the strategic, national importance of OCSdevelopment, excepting such OCS production-area transactions fromthe Commission’s buy-sell prohibitions is eminently reasonable. Andgiven the highly competitive character of the OCS production area,the Commission should promptly clarify its policy in this regard.”Such a “definitive resolution” would be consistent with FERC andcongressional objectives of an “expeditious, orderly development ofthe OCS.”

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