Williston Basin Interstate Pipeline (WBI), through its”surrogate” affiliate Frontier Gas Storage, has displayed a patternof preferential treatment by selling all of Frontier’s gas to itsmarketing affiliate, Prairielands Energy Marketing Inc., in anattempt to give the latter a competitive edge over non-affiliatedshippers, the pipeline’s customers charge.
They contend that WBI and Frontier have shown favoritism inseveral key areas: price, scheduling of transportation and storageservices, and gas supply. The customers have asked the FederalEnergy Regulatory Commission to prohibit WBI/Frontier from sellinggas to Prairielands while it undertakes an investigation ofallegations of affiliate abuse and undue discrimination.
Bear Paw Energy, which owns processing plants connected to theWBI system, said it inquired in April about purchasing Frontiergas, but was told by WBI, which acts as Frontier’s marketing agent,that all of its storage gas already had been reserved forPrairielands. It noted the contract with Prairielands has a maximumdeliverability of up to 5 Bcf.
Upon review of the WBI/Frontier-Prairielands transaction, “it isapparent that the planned sale to Prairielands is not consistentwith the Commission’s regulations, and in fact represents ananticompetitive action by WBI/Frontier. Moreover, WBI foreclosedBear Paw’s attempt to purchase Frontier gas before the contractwith Prairielands had been executed and without soliciting a bidfrom Bear Paw for these same volumes.”
By selling the gas to its affiliated marketer withoutsimultaneously giving notice and making those same terms availableto non-affiliated shippers, Bear Paw Energy contends thatWBI/Frontier may have violated the marketing-affiliate standards ofconduct. It called on the Commission to order the “immediatecessation” of gas sales by Frontier to Prairielands.
Rainbow Gas, a gas marketer in North Dakota, urged FERC to takesimilar action “until one or more of three remedies is in place.”These include 1) requiring the availability of Frontier gas to beposted on WBI’s electronic bulletin board and sold to the highestbidder in a fair auction; 2) removing the storage withdrawal andtransportation preferences allegedly attached to Frontier gas, andrequiring such gas to be sold at prevailing market prices; or 3)requiring WBI/Frontier to report pertinent Frontier salesinformation to FERC, and removing storage and transportation pricepreferences in any month in which Prairielands is the onlypurchaser of the Frontier gas.
Likewise, Rainbow Gas called on the Commission to establish anevidentiary hearing to explore the issue of affiliate abuse. “It’stime to examine the WBI/Frontier relationship. It’s time to askwhether the storage and transportation preferences are no longerappropriate in today’s competitive marketplace. It’s time toexplore how WBI uses the Frontier gas to provide its marketingaffiliate with a competitive advantage.”
WBI and Frontier effectively are one and the same entity, atleast for regulatory purposes, said Bear Paw Energy. Facilitiesused by Frontier to deliver gas to storage, store gas, and forredelivery of gas are all owned and operated by WBI.
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