Colonial Pipeline Company's Request for FERC Approval of Tariff Revisions

Strategic Insights -

The Federal Energy Regulatory Commission is currently considering Colonial Pipeline Company's proposed tariff revisions to its Capacity Allocation Program (CAP) and Nomination Integrity Program (NIP). Colonial argues that the revisions are necessary to deter over-nominations and late nomination changes, which have detrimental impacts on the company's operations and other shippers. The proposed changes aim to address the changing market and shipper base, which have undergone significant transformations in the last 20 years.

Key Takeaways:

  • The market and Colonial's shipper base have changed significantly in the last 20 years, with the shale revolution leading to a more than 50% increase in U.S. oil output by 2016.
  • Colonial has not made substantive changes to CAP or NIP for Lines 1 or 2 in 20 years, while the energy industry has fundamentally transformed since the early 2000s.
  • Colonial has tailored the changes to CAP and NIP to address and deter current behaviors, and through its tariff changes, the company is properly addressing the problems it faces today.
  • The proposed changes will deter over-nominations and late nomination changes, and Protestors do not present meaningful arguments or evidence that the targeted behaviors will not respond to the proposed fee level or structural changes in the CAP and NIP.
  • The Protestors' fundamental complaint boils down to the fact that they simply want to maintain the status quo, which results in lost capacity and unnecessary operational strain.
  • Colonial has more than met its burden to show these tariff revisions are necessary and that the programs are reasonably tailored to deter unfulfilled nominations and late nomination changes.

Statistics:

  • By 2016, fracking accounted for more than 50% of all oil output in the United States, up from less than 2% in 2000 (Source: U.S. Energy Information Administration).
  • Colonial Pipeline Company's tariff revisions aim to address and deter over-nominations and late nomination changes, which have detrimental impacts on the company's operations and other shippers.
  • The proposed changes will increase the fees for over-nominations and late nomination changes, making them a deterrent rather than a revenue generator (Source: Colonial Pipeline Company's Reply Comments).
  • The Energy Information Administration reports that the United States was a net exporter of crude oil and petroleum products since 2020 (Source: U.S. Energy Information Administration).

Sources:

  • A Brief History of Fracking, Oil & Gas, NES Forcroft (July 2022), https://www.nesfircroft.com/resources/blog/a-brief-history-of-fracking/
  • U.S. EIA Data: U.S. Field Production of Crude Oil Between 2000 - 2024
  • U.S. EIA Report: Market Changes in Crude Oil and Petroleum Product Imports to the United States between 1975 and 2025