11 Sep Asset Management Agreements Natural Gas
FERC prohibited the so-called buy/sell transactions in the context of the restructuring of gas pipelines required by Regulation No 636.  When implementing the new capacity-sharing program on that date, FERC prohibited prospective purchase/sale agreements.  In 2008, FERC adopted Regulation No. 712, which exempted from the general prohibition buying/selling transactions concluded under an AMA, but only with respect to quantities of gas “delivered” to the emitting shipper.  On October 15, 2015, the Federal Energy Regulatory Commission (FERC or the Commission) issued an injunction clarifying the extent to which natural gas asset management (AMA) agreements provide for a waiver of the Commission`s prohibition on buying and selling. In response to a request for a judgment by Rice Energy Marketing, LLC, the Commission clarified that the exception to the prohibition of buy/sell transactions for certain transactions with asset managers applies to both delivery AMAs and delivery AMAs, whereas the Commission had previously dealt with the derogation in respect of delivery AMAs only. Under an AMA, a capacity owner may provide pipeline capacity to an asset manager without subjecting the capacity to FERC`s tendering requirements, provided that WADA imposes an obligation to deliver goods (in the case of an AMA on the supply side) or an obligation to purchase goods (in the case of an AMA on the supply side).  If the capacity to engage with the liberal shipper is not required, the asset manager may release it or use it for sales to third parties, allowing the asset manager to efficiently optimise pipeline capacity and thus make more efficient use of natural gas transmission facilities. The clarification of FERC is important for both intergovernmental capacity holders and asset managers and should provide parties with greater flexibility in structuring their asset management contracts and commodity transactions. For example, producers and other supplyloaders may use asset managers to manage their intergovernmental pipeline capacity, while continuing to sell gas at downstream points under contracts they do not wish to subcontract to the asset manager. The October 15 regulation assures market operators that a free charger can buy gas from asset managers at the downstream end of its capacity to make such sales without violating FERC`s buy/sell ban.
In its October 15 order, FERC confirmed that Order 712 asset management agreements provided excludes from the prohibition of buying/selling, as exempt transactions did not constitute the type of buying and selling transactions prohibited by Order 636. FERC clarified that the prohibition on buying/selling also does not apply to the quantities of natural gas that the asset manager purchases from its issuing shipper in an asset management contract on the offer side and then resells them to that shipper. . . .