FERC Halts Colonial Pipeline Tariff Change

The Federal Energy Regulatory Commission has suspended a revised tariff for the Colonial Pipeline after two small shippers complained it would squeeze access and limit competition, according to regulatory filings.

 

The tariff would change how space is used on the jam-packed gasoline and distillate system, and small shippers said it would have made it harder to fight for space with bigger users.

 

Colonial declined comment on Thursday, saying it would respond in a FERC filing on Friday. FERC suspended the tariff to consider the challenges and allow Colonial to explain why it wants the change.

 

The issue is shipper history. The Colonial system, which moves more than 3 million barrels of gasoline and distillates from the U.S. to the Northeast daily, has been full for three years. Both main lines routinely allocate space based on shipper history, or how many barrels shippers regularly move.

 

Such history is a hot commodity, as it ensures regular shippers receive consistent allocations. Colonial defines a regular shipper as moving an average of 18,750 barrels per each of the 72 cycles in a year.

 

Those who move smaller or intermittent amounts, called new shippers, often transfer their histories to each other to move higher in the allocations pecking order.

 

Doing that allows them to avoid being forced to scramble for space in the 10 percent of or less of capacity set aside for the smallest users.

 

Colonial's revision would prohibit that practice of transferring histories.

 

"Colonial's tariff change will severely constrain access to the pipeline and impede competition," new shippers Nova Energy and Concept Petroleum Marketing LLC said.

 

BP Plc transferred its 50,000 bpd Colonial shipping history to Marathon Petroleum Corp when Marathon acquired its 451,000 bpd Texas City refinery, now known as the Galveston Bay plant, for $2.5 billion in 2013. Marathon added that to its own history, getting a bigger piece of the Colonial pie.

 

With the revision, that could still happen - if a regular shipper buys another regular shipper's business. But if a new shipper buys another's business, it gets the greater of either history - not both.

 

York River Fuels LLC, a New York Harbor marketer with Western Refining Yorktown Inc, said in a filing this week that it has a deal with another company to swap histories as needed.

 

Colonial should allow such deals already in place to continue, York River said.