On October 21, 2010, the Federal Energy Regulatory Commission affirmed that open-access regulations prohibit "buy-sell" transactions on transportation services provided by intrastate and Hinshaw pipelines. In a companion order, FERC established a Notice of Inquiry seeking comment on whether intrastate and Hinshaw pipelines (1) should be permitted to make use of their firm interstate capacity and (2) to what extent buy-sell transactions should be permitted.
By prohibiting buy-sell transactions on interstate pipelines, FERC bans a shipper that holds interstate pipeline capacity from buying gas from or at the direction of a third party, shipping the gas and then selling the gas back to the same third party. The prohibition against such "buy-sell" transactions also applies to intrastate pipelines and Hinshaw pipelines, which are predominantly regulated by the states and otherwise have limited FERC oversight. The FERC's prohibition of buy-sell transactions is important because it expands FERC's reach in its ongoing efforts to promote transparency and eliminate discrimination in the natural gas markets. FERC stated that it would, on a case-by-case basis, waive the buy-sell prohibition where it can be shown that a particular transaction provides significant benefits to the market.
The Notice of Inquiry seeks comments on a variety of topics, including (1) the extent to which buy-sell transactions occur on intrastate and Hinshaw pipelines; (2) experiences or concerns with undue discrimination related to such buy-sell transactions; (3) whether a buy-sell prohibition is necessary on interstate and Hinshaw pipelines or whether other less intrusive measures could be taken; and (4) if a capacity release program should be developed for intrastate and Hinshaw pipelines. Significantly, the Notice of Inquiry grants a blanket waiver allowing buy-sell transactions on intrastate and Hinshaw pipelines to continue while FERC considers the policy issues.