COurse FERC Regulation of Liquids Pipelines Current Rules and Emerging Trends Houston Marriott West Loop by the Galleria EUCI is authorized by IACET to offer 1.0 CEUs for the course. 1
Overview This course will provide in-depth, practical coverage of how the Federal Energy Regulatory Commission (FERC) regulates liquids pipelines crude oil, refined products, and natural gas liquids and how that regulation impacts pipeline planning, operations and rate-setting. The course will analyze the scope and nature of FERC jurisdiction over liquids pipelines, at both a federal and state level, including a discussion of which activities by liquids pipelines would be subject to regulation. EUCI s FERC Regulation of Liquids Pipelines Current Rules and Emerging Trends course will discuss what obligations liquids pipelines have, how rates are set, which terms of service attract particular FERC and regulatory attention, how to meet FERC s standards for operating with affiliates, how FERC has recently developed ways of reviewing rates and service terms for new capacity. The course will show how FERC addresses disputes, as well as approaches to minimizing disputes with shippers, regulatory issues to consider when acquiring a pipeline asset, and areas in which FERC s policies and regulations are being challenged and may change. Who Should Attend Oil and gas attorneys and legal personnel Pipeline, storage, oil and gas engineers FERC lawyers, experienced and new Energy analysts Energy marketers Energy Financing firms and individuals Commodity and energy market individuals New employees of pipeline, oil and gas companies Regulators and overseers of energy operations and activities Individuals seeking a full picture of energy transit Learning outcomes Identify FERC regulations that govern transportation of crude oil, petroleum products and natural gas liquids by pipelines Identify how FERC regulation developed and how it has been changing Distinguish between what FERC regulates and what it does not regulate Illustrate how FERC sets rates, and how pipelines structure business planning around FERC s ratemaking policies Demonstrate how FERC regulates pipeline operations and shipper services Assess FERC s accounting and reporting requirements Analyze the impact of FERC regulations and policies on specific case studies Review how FERC s procedures work: setting rates, evaluating protests and complaints, and handling litigation Discuss hot topics and major new trends in liquids pipeline regulation Discuss how FERC regulations and policies will continue to affect liquids transportation 2
Agenda Monday, March 24, 2014 7:30 8:00 a.m. Registration and Continental Breakfast 8:00 a.m. 5:00 p.m. Course Timing 12:00 1:00 p.m. group Luncheon 1. industry Overview: Operations and the Scope of Regulation Types of liquids crude oil, refined products, NGLs and their differing contexts Production Processing/refining Transportation History of federal regulation nutshell version 2. Jurisdictional Overview Federal Level What commodities does FERC regulate? o scope of the Interstate Commerce Act ( ICA ) o What is, and is not, considered oil? o Overview of key FERC decisions Over what liquids movements does the Surface Transportation Board ( STB ) have jurisdiction? 3. Jurisdictional Overview State Level Interstate versus intrastate transportation states may or may not regulate particular liquids Dual FERC and state agency regulations: key issues 4. detailed Review of FERC s Jurisdiction Which pipelines are common carrier pipelines? What is transportation versus interstate commerce? What services does FERC regulate? o Is everything a pipeline does jurisdictional? o Is storage jurisdictional? If sometimes, when? o When can a pipeline abandon service without FERC approval? o How to determine whether a gray area service is jurisdictional Case studies: distinguishing common carrier from non-common carrier pipelines Case studies: distinguishing interstate from intrastate transportation 3
Agenda Monday, March 24, 2014 (Continued) 5. Basic Obligations of FERC Regulated Pipelines Pipelines must file tariffs specifying rates and terms of service o Commodity specifications and banks o Capacity must be allocated on a not unduly discriminatory basis o All rates and terms of service must be just and reasonable and not unduly discriminatory or preferential o What is meant by unduly discriminatory terms of service or practices? Pipelines must provide service upon reasonable request what does this mean for shipper and pipeline connections? Pipelines must not disclose shipper information and generally separate pipeline from marketing functions to prevent undue discrimination how is that implemented? Pipelines must file reports at FERC, including the annual Form 6 Pipelines have other accounting and recordkeeping obligations, among others 6. Practical Impact of Regulation on Transactions with Affiliates 7. Overview of Ratemaking How to set initial rates o Unaffiliated third-party shipper o Cost of service o Declaratory order/agreements Methods of changing existing rates o Indexing - How indexing works - Protests and complaints against indexed rates o Cost-of-service rates - Major elements of cost of service o Market-based rates - Standards - Procedures o Settlement rates EUCI 4601 DTC Blvd., Suite 800 Denver, CO 80237 WWW.EUCI.COM P: 303-770-8800 F: 303-741-0849 4
Agenda Monday, March 24, 2014 (Continued) 8. Cost of Service Ratemaking at FERC How FERC determines a pipeline s overall cost of service under Op. No. 154-B o Principal cost of service components: return of and on investment and expenses - rate base how it is established, role of original cost, transition rate base, and trending under FERC s trended original cost approach - return on rate base FERC s DCF methodology - expenses overall principal and major flash points a. Income taxes pass through entities and C-corps b. Allocated expenses from affiliated service companies c. Allocated overhead from parent entities d. Non-jurisdictional costs and revenues - Test year principle projection of past costs into the future 9. Rate Design: How the overall cost of service is reflected in rates Billing determinants (or volume) o How to project volumes for an existing pipeline? For new pipelines? Allocating cost over multiple systems, segments and movements o Allocating costs between operating segments o Distance-based rates o Postage Stamp rates and alternatives Impact of competition on rate setting o The conceptual problem with fully allocated costs in a competitive industry o Differential pricing -- the theoretical ideal o revenue crediting and iterative discounting Other factors Tuesday, March 25, 2014 7:30 8:00 a.m. Continental Breakfast 8:00 a.m. 12:30 p.m. Course Timing 10. how FERC Addresses Disputes Typical sources of dispute rates, connections, service, quality How disputes arise FERC hot line, complaints, protests FERC litigation nature, timing and cost Pathways to Settlement Case studies: two paths in resolving a protest settlement and litigation EUCI 4601 DTC Blvd., Suite 800 Denver, CO 80237 WWW.EUCI.COM P: 303-770-8800 F: 303-741-0849 5
Agenda Tuesday, March 25, 2014 (Continued) 11. Acquisition Due Diligence A Regulatory Perspective state regulated assets FERC regulated assets Major issues for acquiring companies o How will the asset be valued? Original cost vs. acquisition cost o Does the acquired pipeline have grandfathered rates? o Documentation issues: acquiring full property records o Past regulatory history 12. developing Rates for New Pipelines and Expansion Capacity on Existing Pipelines Development of the declaratory order approach to obtaining regulatory certainty for new capacity Benefits and limits to declaratory orders o Assurance that contracts will govern contract shipper rates o Firm capacity rights and current standards o Effect in the event of later protests/complaints Open season without a declaratory order Case study: steps in planning and implementing rates and terms for a new pipeline 13. major Pending Policy and Regulatory Developments and Uncertainties Contract Rates: Continued Challenges o Seaway, Colonial proceedings Cost-Based Rates: Shippers continue to allege a need or more scrutiny of pipeline earnings, based on Form 6 Page 700 and over-earnings o FERC rulemaking proceeding on Form 6, Docket No. IS12-18 Indexed rates: Looming 2015 review of the current PPI-FG +2.65% standard Market-Based Rates: Pending cases raise questions as to FERC standards for market power, as well as how to challenge market power o Enterprise TEPPCo, Seaway, Buckeye proceedings Future course of FERC regulation o Emphasis on infrastructure development o Potentially greater shipper activism o Need for careful planning and greater reliance on agreed-upon rates where possible EUCI 4601 DTC Blvd., Suite 800 Denver, CO 80237 WWW.EUCI.COM P: 303-770-8800 F: 303-741-0849 6
INSTRUCTORs Matthew J. Agen / Associate / Post & Schell PC Mr. Agen is a senior Associate in Post & Schell s Energy Practice Group with more than ten years of experience in energy regulation. He represents clients in a variety of federal regulatory and transactional matters arising under the Interstate Commerce Act, the Natural Gas Act and the Federal Power Act before the FERC. Mr. Agen has also represented energy clients before the U.S. Court of Appeals for the District of Columbia, Pennsylvania Public Utility Commission, the U.S. Department of Energy (DOE) and the U.S. Department of State (DOS). Mr. Agen has represented and counseled a number of interstate oil pipelines regarding a full range of regulatory issues, in litigation, project planning, tariff administration and regulatory compliance matters, including those involved in rate cases, disputes as to the prorationing and allocation of capacity, open seasons, interconnections, common carrier status, repurposing of pipeline facilities and preparation of transportation service agreements. He has worked on a number of petitions for declaratory orders for major new oil pipeline projects, as well as on other project planning issues. He also advises oil pipelines on presidential permit matters related to cross border facilities and the jurisdiction of the DOS. Mr. Agen also has extensive experience in natural gas pipeline and electric utility regulation. Prior to entering private practice, Mr. Agen was an attorney-advisor in FERC s Office of Administrative Law Judges where he assisted in all aspects of litigated electric, natural gas and oil pipeline proceedings. Specifically, he advised the judges on all legal and financial aspects of contested interstate oil pipeline rate proceedings. Publications Dodd-Frank and Electric Utilities: Understanding the New Mosaic of Commodities Trading Regulations, Public Utilities Fortnightly (December 2013) Transmission Tug-of-War: From EPAct to Order 1000, Siting Authority Continues Evolving, Public Utilities Fortnightly (November 2011) Short Cut or Short Circuit? The 2005 Act, Designed to Streamline Projects, May Fall Short of that Goal, Public Utilities Fortnightly (August 2007) Christopher J. Barr / Principal / Post & Schell PC Mr. Barr is a Principal in the Firm s Energy Practice Group. His practice focuses on the regulation of natural gas utility and oil pipeline companies and trade associations under the Natural Gas Act, Interstate Commerce Act, the Hazardous Liquids Pipeline Safety Act, the Federal Power Act and a variety of other federal statutes. His broad-based experience includes participation in business planning in light of federal regulations, planning and development of new services and facilities, rate cases, enforcement proceedings, declaratory order proceedings, rulemakings, certificate proceedings, as well as appellate proceedings. Mr. Barr regularly appears before the Federal Energy Regulatory Commission (FERC). He played an important role in the development of market- based rates at FERC in the oil pipeline and natural gas pipeline contexts. He has successfully guided clients proposals for innovative service and rate proposals through the FERC approval process, and has extensive experience in assisting in the pre-filing processes with the FERC s staff to ensure that the proposed projects and rate filings meet with FERC approval. Publications Unfinished Business: FERC s Evolving Standard For Capacity Rights On Oil Pipelines, Energy Law Journal, Vol. 32, No. 2 (2011) Regulation of the Natural Gas Industry, Chapters 8, 8-A and 8-B of the American Gas Association s Treatise Energy Markets Face Expanded Enforcement, Business Crimes Bulletin (December 2007) EUCI 4601 DTC Blvd., Suite 800 Denver, CO 80237 WWW.EUCI.COM P: 303-770-8800 F: 303-741-0849 7
INSTRUCTORs continued Michael Webb / Director / Regulatory Economics Group (REG) Dr. Webb has over fifteen years of oil industry experience. He has extensive experience in all aspects of oil pipeline rate regulation at the Federal and State levels. Dr. Webb has participated in numerous projects involving the calculation of cost-based rates, filed written and oral testimony at the FERC and various state agencies on numerous occasions. He has also prepared several applications for authority to charge market-based rates on interstate oil pipelines. Additionally, Dr. Webb has prepared whitepapers and met with FTC Staff to gain approval for mergers on behalf of several oil companies. He earned his Ph.D. in Economics from George Mason University. Market-Based Rate Filings Assisted in the preparation of an application for market-based ratemaking authority and associated exhibits consistent with 18 CFR 348 on behalf of Sunoco Pipeline, LP s market-based rate filing, filed in docket No. OR05-7-000. Assisted in the preparation of expert testimony and exhibits filed in Shell Pipe Line Company LP in marketpower case, Docket No. OR02-10-000. Participated in the development of applications for market-based ratemaking authority on behalf of Chase Pipeline Company, Inc. West Shore Pipeline Company, Inc., and Marathon-Ashland Pipe Line LLC. Rate Regulation Issues Prepared cost-of-service filings, consistent with FERC regulations in 18 CFR 346.2 on behalf of numerous oil pipelines. Assisted counsel in preparing cross examination regarding cost-based ratemaking and regulatory theory in FERC Docket Nos. IS98-1 et al and OR96-2-000 et al. Assisted multiple witnesses in drafting testimony regarding FERC requirements for cost-based ratemaking in Docket No. IS02-384 et al. This testimony included traditional cost-based ratemaking, rate design and the theoretical implications of Stand-Alone Cost theory. Assisted in all phases of Mid-America s filing (Docket No. IS05-216-000) from the initial cost-of-service filing to assisting counsel during the hearing. EUCI 4601 DTC Blvd., Suite 800 Denver, CO 80237 WWW.EUCI.COM P: 303-770-8800 F: 303-741-0849 8
Instructional Methods Case studies, PowerPoint presentations and classroom discussion will be used. Requirements for Successful Completion of Program Participants must sign in/out each day and be in attendance for the entirety of the course to be eligible for continuing education credit. iacet Credits EVENT LOCATION EUCI has been approved as an Authorized Provider by the International Association for Continuing Education and Training (IACET), 1760 Old Meadow Road, Suite 500, McLean, VA 22102. In obtaining this approval, EUCI has demonstrated that it complies with the ANSI/IACET Standards, which are widely recognized as standards of good practice internationally. As a result of its Authorized Provider membership status, EUCI is authorized to offer IACET CEUs for its programs that qualify under the ANSI/IACET Standards. EUCI is authorized by IACET to offer 1.0 CEUs for the course. A room block has been reserved at the Houston Marriott West Loop by the Galleria, 1750 W Loop S Fwy, Houston, TX 77027, for the nights of March 23-24, 2014. Room rates are $182, plus applicable tax. Call 1-713-960-0111 for reservations and mention the EUCI course to get the group rate. The cutoff date to receive the group rate is February 23, 2014, but as there are a limited number of rooms available at this rate, the room block may close sooner. Please make your reservations early. PROCEEDINGS The proceedings of the course will be published, and one copy will be distributed to each registrant at the course. 9
EVENT LOCATION please register the following A room block has been reserved at the Houston Marriott West Loop by the Galleria, 1750 W Loop S Fwy, 77027, for the nights of March 23-24, 2014. Room rates are $182, plus applicable tax. Call 1-713-960-0111 for reservations and mention the EUCI course to get the group rate. The cutoff date to receive the group rate is February 23, 2014, but as there are a limited number of rooms available at this rate, the room block may close sooner. Please make your reservations early. FERC Regulation of Liquids Pipelines Current Rules and Emerging Trends march 24-25, 2014: US $1395, Early bird on or before march 14, 2014: US $1195 EUCI s E EUCI has gathered during its 26 years organizing conferences. Sign me up for Energize Weekly. How did you hear about this event? (direct e-mail, colleague, speaker(s), etc.) Print Name Job Title Company What name do you prefer on your name badge? Address City State/Province Zip/Postal Code Country Telephone Email List any dietary or accessibility needs here CREDIT CARD Name on Card Account Number Billing Address Billing City Billing State Billing Zip Code/Postal Code exp. Date Security Code (last 3 digits on the back of Visa and MC or 4 digits on front of AmEx) OR Enclosed is a check for $ to cover registrations. All cancellations received on or before January 3, 2014, will be subject to a US $195 processing fee. Written cancellations received after this date will create a credit of the tuition (less processing fee) good toward any other EUCI event or publication. This credit will be good for six months. In case of event cancellation, EUCI s liability is limited to refund of the event registration fee only. For more information regarding administrative policies, such as complaints and refunds, please contact our offices at 303-770-8800. (201) 871-0474. EUCI reserves the right to alter this program without prior notice. 10