In November, the Federal Energy Regulatory Commission denied Magellan’s proposal to establish a marketing affiliate to buy, sell and ship crude oil – which many other major midstream companies already operate.
FERC said Magellan’s arm would be “essentially offering capacity below cost,” which Magellan had said in its initial 2016 proposal was necessary for competitive reasons. Magellan requested a rehearing on Dec. 22.
Marketing arms are common in the pipeline industry, but FERC said Magellan’s plans on how it would charge its own affiliate for pipeline space would violate the Interstate Commerce Act, which requires identical rates for the same services.
Magellan’s rivals’ objections stem from a number of new points raised by Magellan in its request that these companies believe would jeopardize their own marketing operations.
Reuters first reported in June that pipeline companies were offering steep discounts through their marketing arms, thus undercutting FERC-mandated shipping rates.
Among those which supported Magellan initially were TransCanada Corp’s Marketlink LLC, Plains All American’s Plains Marketing LP, Enterprise Product Partners LP and Medallion Pipeline Co LLC.
The three companies – Enterprise, Energy Transfer Partners , and Plains Marketing – said in filings that a FERC rehearing could broaden the scope of the proposal and potentially endanger the business of shipping crude oil.
“These new requests … may all have serious implications for and impacts upon the liquids pipeline industry as a whole,” Plains said in its filing.
Energy Transfer said new issues raised by Magellan risks a chance that FERC could issue “broad policy pronouncements,” and said that it and other market participants should be allowed to study and comment on the proceeding.
Magellan’s rehearing request seeks to expand FERC’s “limited, fact-specific holding into sweeping, industry-wide regulations and should be rejected,” Enterprise said.
Most of the top 10 largest U.S. pipeline operators, including Enbridge Inc and Enterprise, have already established their own marketing or trading arms.
(Reporting by Devika Krishna Kumar in New York; Editing by Leslie Adler)