Major gas producers have called on FERC to reject Transcontinental Gas Pipe Line’s application to spin off its South Texas pipeline facilities to an unaffiliated Texas intrastate pipeline, a move that critics argue would bifurcate Transco’s system into jurisdictional and non-jurisdictional segments and force shippers to deal with a patchwork of rates, schedules and nomination procedures.

Commission approval of the spin-off would force shippers “seeking to continue transportation on the entirety of Transco’s system to hopscotch through a series of pipeline segments that alternate between interstate and intrastate regulatory regimes,” said the producers, which included Shell Offshore, Chevron U.S.A., Texaco Exploration, BP America, BP Energy Co. and ExxonMobil Corp.

As part of an “ongoing comprehensive restructuring” effort, Transco is seeking to sell about 357 miles of small diameter transmission and gathering facilities (ranging from 10 to 26 inches, located upstream of its Station 30 compressor station) to Texas-based Enbridge Pipelines, as well as a number of gathering laterals — Starr, North Rucias, Driscoll, LaGloria and McMullen. By selling these facilities, Transco said it was positioning itself as a transporter.

Under its application, Transco would retain the portion of its system from the Gulf of Mexico to onshore Texas, and all facilities downstream of Station 30 through Georgia to New York. In effect, the Transco system would be severed into three segments — two of which would be FERC jurisdictional, and one subject to state oversight [CP02-141].

As a result of the proposed spin-off, “shippers will be forced to schedule and nominate on each segment of the balkanized facilities in accordance with the contracts, tariff, and regulatory regime applicable to each…For a single haul, a shipper will be forced to separately schedule and nominate on gathering facilities, offshore transmission, intrastate transportation, and downstream transmission facilities,” the producers said.

“The purpose of this peculiar segmentation is clear: Enbridge does not wish to be an interstate pipeline regulated by the Commission,” they contend. Producers urged FERC, however, to treat Enbridge as an interstate pipeline if it should permit the sale of Transco’s South Texas facilities.

They pointed out that natural gas flowing over the Enbridge-acquired Transco facilities “would be commingled with gas flowing in interstate commerce,” which would give FERC the authority to retain jurisdiction.

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