The U.S. Federal Energy Regulatory Commission has set terms for the default contracts that it requires gathering pipelines to offer existing customers when the lines are sold to third parties or transferred to pipeline affiliates.
FERC requires the new owners of gathering lines to offer the pro forma default contracts in cases where the new owner and existing customers fail to negotiate terms for continued service.
CONTRACT TERMS
The commission said the contracts should be for at least 2 years to prevent arbitrary termination of service and to ease the transition to an unregulated environment for gathering lines and their customers.
It said 2 years also would give state regulatory commissions the opportunity to evaluate the effects of divestiture and develop any policies they deem necessary to regulate the gathering facilities.
FERC said default contracts must contain terms and provisions consistent with the existing contract between the pipeline and its customers.
The default contracts also must have a specific rate or rate formula that would apply during the term of the agreement to give the shipper some price certainty.
In a series of orders May 27, FERC said it would not regulate gathering facilities (OGJ, May 30, p. 39).
But it did move to require pipelines seeking permission to sell or spin off their gathering lines to show that existing customers would not lose service.
FERC clarified its default contract requirements in a case involving Arkla Gathering Service Co.'s request to acquire gathering facilities from its affiliate, NorAm, an interstate pipeline.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
Issue date: 12/12/94
