Midship Pipeline Company, LLC Submits Amended Non-Conforming/Negotiated Rate Service Agreement

Strategic Insights -

The Midship Pipeline Company, LLC has submitted an amended non-conforming/negotiated rate service agreement to the Federal Energy Regulatory Commission (FERC) for review and approval. The proposed changes aim to revise the existing agreement between Midship and Gulfport Energy Operating Corporation, successor to Gulfport Energy Corporation, under Contract No. 06002. The amendments focus on modifying credit provisions, eliminating the most favored nations (MFN) provision, and updating contact information. The Commission has accepted similar proposals in the past, demonstrating its willingness to adapt to changing market conditions and shipper requirements.

Key Takeaways:

  • The amended agreement proposes to revise the letter of credit provisions, eliminating the provision that triggers an increase in Gulfport's Maximum Daily Transportation Quantity (MDTQ) if it fails to provide or maintain certain credit assurances.
  • The MFN provision will be deleted, putting Gulfport on equal footing with other shippers on the Midship system and allowing Midship additional latitude in negotiating firm service agreements.
  • The required amount of Gulfport's letter of credit will be based on its long-term credit rating, as opposed to the current scheduled increases during specific time periods.
  • Provisions addressing Gulfport's pre-payment obligations, future expansions, and MDTQ quantities for lapsed periods will be removed.
  • The Commission has accepted similar proposals to amend agreements, removing or modifying construction-related provisions.
  • The proposed tariff records will become effective by no later than September 1, 2025.

Statistics:

  • The agreed-upon pre-payment by Gulfport under the Amended Gulfport TSA was effective on October 1, 2020.
  • The 2020 Gulfport TSA reduced Gulfport's MDTQ, subject to certain contingencies, modified credit requirements, and included a new guarantee of Gulfport's obligations effective on January 25, 2021.
  • The MFN provision has hindered Midship's efforts to execute additional firm TSAs for unsubscribed capacity on the Midship system.
  • The Commission's Policy Statement on Creditworthiness allows pipelines to enter into alternative credit arrangements in support of new pipeline construction.

Sources:

  • 18 C.F.R. Part 154 (2024)
  • U.S. Code, Title 15, Chapter 73
  • Policy Statement on Creditworthiness for Interstate Natural Gas Pipelines and Order Withdrawing Rulemaking Proceeding, 111 FERC P 61,142 (2005)
  • Ruby Pipeline, L.L.C., Non-Conforming Negotiated Rate Amendments, Docket No. RP22-508-000 (Jan. 28, 2022)