The interstate natural gas pipeline system transports more than 36 trillion cubic feet a year.
May the Federal Energy Regulatory Commission cap prices that interstate pipelines may charge shippers for moving natural gas but allow the shippers to resell at market prices?
The interstate pipelines thought not. And so they petitioned the D.C. Circuit to toss a FERC order that, they argued, discriminated against them for No Good Reason.
Last week, the pipelines took a beating. The court noted that pipelines, unlike shippers, can use their control over transportation facilities to reap monopoly profits — by, for example, limiting pipeline capacity to drive up market prices – in the absence of price caps. Shippers, on the other hand, contract with pipelines for long-term transportation services mainly to assure that they can get the gas where they want it to go. That the shippers might also profit from reselling part of the capacity to other shippers on a short-term (less than a year) basis didn't pose enough of a problem to overcome the court's duty to defer to FERC's expertise. The court denied the petition for review of FERC Order No. 712. Interstate Natural Gas Pipeline Ass'n of Am. v. Federal Energy Regulatory Comm'n, No. 09-1016 (D.C. Cir. Aug. 13, 2010).
(Hat tip to Mike Shepard for pointing us to INGAA.)