In 2016 Crestwood Equity Partners formed a joint venture with New York City’s largest utility company, Consolidated Edison Inc., to operate a critical link of pipelines and storage facilities in the heart of the Utica/Marcellus, called Stagecoach Gas Services (see Con Ed & Crestwood Seal the Deal on Marcellus Pipeline/Storage JV). The Federal Energy Regulatory Commission (FERC) has launched an investigation into the fees charged by that service, which may now be too high following the Trump tax cuts.
The Stagecoach jv is operated by Crestwood and includes four natural gas storage facilities (Stagecoach, Thomas Corners, Steuben and Seneca Lake) with a combined storage capacity of approximately 41 billion cubic feet; and three natural gas pipelines (MARC I, North/South and the East Pipeline) with a combined throughput capacity of 2.96 billion cubic feet per day.
Here’s a map:
As you can see from the map, the Stagecoach pipelines and storage facilities (light blue), link together four key interstate natgas pipelines: Millennium, Dominion Transmission, Tennessee Gas Pipeline and the mighty Transco. The interconnections give drillers and buyers in the region all sorts of options for moving gas into and out of the area.
So why is FERC investigating the rates charged by Stagecoach? Following the Trump tax cuts passed in 2017, which went into effect in 2018 (but show up on tax returns in 2019), FERC asked pipeline companies to file reports outlining not only what they charge in fees, but also their expenses. Since pipelines are government-regulated monopolies (similar to your local utility company), the government (FERC in this case) determines how much money you can charge in order to make a comfortable profit. Following the Trump tax cuts, FERC figures some pipelines need to adjust their charges, lowering them, to account for the fact they will now pay less in taxes.
FERC has reviewed dozens (hundreds?) of pipelines, electing to launch official investigations into a number of them. Stagecoach is one of them being investigated.
NOTE: The Crestwood/Con Ed jv is officially called Stagecoach Gas Services, while the entity FERC has served notice on is Stagecoach Pipeline & Storage Co. We believe they are one and the same, but we are not 100% certain.
From NGI’s Daily Gas Price Index:
FERC has opened an investigation and ordered a hearing to determine if Stagecoach Pipeline & Storage Co. may be substantially over-recovering its cost of service, and also closed proceedings involving more than three dozen other companies.
The issue has been set for hearing before an administrative law judge, according to the Federal Energy Regulatory Commission [RP19-439].
At the same time, FERC said it has found 38 gas companies have complied with the filing requirements of Order 849 and terminated their Form 501-G proceedings without any further action.
The investigation and hearing evolved from a NOPR and associated policy statement issued by FERC one year ago in an effort to ensure that ratepayers receive the benefit of tax reductions from reform legislation adopted by the Trump administration in December 2017. The NOPR (RM19-5) required public utility transmission providers with transmission rates under an open access transmission tariff, a transmission owner tariff or a rate schedule to revise those rates to account for changes caused by the $1.5 trillion Tax Cuts and Jobs Acts bill. (1)
The official notice issued by FERC:
So why does any of this matter? Because Crestwood may be on the hook to lower its rates, and possibly reimburse for overcharges. According to the Stagecoach website, the following drillers, utilities and other companies are customers that reserve capacity along the system, potentially affected by lower rates:
Alta Energy Marketing
BKV Operating/Concord Energy
Chief Oil & Gas LLC
Citadel Energy Marketing LLC
Consolidated Edison of New York
Emera Energy Services
Engie Energy Marketing
ETG Aquisition Corp
J.Aron & Company LLC
Mercuria Energy America
Morgan Stanley Capital Group
New Jersey Natural Gas
Sequent Energy Management
Six One Commodoties LLC
South Jersey Resources Group LLC
Statoil Natural Gas
SWN Energy Services
Tug Hill Marcellus
Twin Eagle Resource Management
Valley Energy (2)
(1) NGI’s Daily Gas Price Index (Mar 21, 2019) – FERC Opens Another Natural Gas Pipeline Rate Investigation
(2) Stagecoach Pipeline & Storage Company (accessed Mar 22, 2019) – Index of Customers
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