Seminole Energy Services LLC is seeking an order from FERC guaranteeing the refund of contested penalty charges that were assessed by Kinder Morgan Interstate Gas Transmission LLC (KMIGT) in the event that the company’s challenge to the penalties is upheld by the Commission.

The Tulsa, OK-based marketer requested this action following the filing of KMIGT’s annual penalty revenue reconciliation report in which the pipeline asked FERC to approve the distribution of net penalty revenues to shippers on its system.

The penalty revenues include those that Seminole said it paid under protest for allegedly violating Directional Flow notices issued by KMIGT for the period of July 3-6, 2004. The penalties assessed against Seminole made up a “substantial majority of the total Directional Notice penalties collected for this period and a significant portion (more than one-third) of all the penalties collected by KMIGT and proposed to be refunded” in this proceeding. Seminole noted that the pipeline threatened to terminate its firm capacity if the penalties were not paid.

After sending a letter of objection, “KMIGT agreed to a minor reduction of the penalties assessed against Seminole, but otherwise rejected Seminole’s protests,” the company said. Seminole said it then raised the issue involving the legality of KMIGT’s penalties with FERC’s Office of Market Oversight and Investigations (OMOI).

“Seminole does not seek to litigate the validity of KMIGT’s Directional Notice penalties in this docket. Rather, Seminole protests KMIGT’s filing to the extent that [it] seeks to refund to shippers [the contested] penalty amounts paid by Seminole,” the marketing company told FERC [RP05-132]. “Seminole believes that if KMIGT distributes the contested penalty amounts, KMIGT does so at its risk.”

Seminole has asked FERC to issue an order “stating that the fact that KMIGT may no longer be in possession of the penalty funds paid by Seminole under protest, following the distribution of penalty proceeds to shippers under this docket, will not be a basis for KMIGT to fail to refund promptly to Seminole, with interest, any portion of the protested penalties paid by Seminole that are ultimately found to have been improperly or invalidly assessed by KMIGT.”

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