Here at RBN, we’ve built our analytics around the concept that hydrocarbon commodity markets — crude oil, natural gas, and NGLs — are fundamentally and closely linked. That’s why in all that we do, we emphasize that, in order to have an understanding of one market, you must also be competent in the others. That can be difficult at times when not only the market structure, but the very rules governing the upstream, midstream, and downstream sectors of oil and natural gas transportation are so different from each other. For example, consider the many contrasts between how oil and natural gas pipelines are regulated. Today, we look at how federal oversight of pipelines has evolved and why it matters for folks trying to move a barrel of crude oil or an Mcf of natural gas from Point A to Point B.
Regulation is a funny thing (as in “funny-peculiar,” not “funny-ha-ha”). Some see the legalities and nuances of regulations as issues for pipeline attorneys to stay up late worrying about, but that’s not how it really works for a heavily regulated sector like interstate pipelines. For midstream companies and the shippers that use their pipelines, regulation matters as much as gravity does to an airline — it’s not something that the CEO wants to think about every day, but it’s a set of rules that can be lethal if not adequately appreciated. Cheap fares may get people on an airliner, but if the airline forgets about gravity, the outcome may not be good. In the case of regulation, forgetting about it can put a pipeline company out of business (or at least make it pay some humongous penalties).
With all the action in the oil sector these days, of course, lots of natural gas attorneys are scrambling to make sure they understand the differences in regulation between oil and natural gas pipelines. But businesspeople, who constitute most of RBN’s readership, also should do the same. You don’t want to have to ask an attorney every time you do something, you want to stay in the mainstream of compliant pipelines and shippers. We began discussing the impacts of each system of regulation way back in Hey Crude – The Costs and Challenges of Building Crude Oil Pipelines and we revisited the subject when some serious questions arose regarding the governance of crude oil carriers in Please Don’t Throw Me In That Briarpatch, Will U.S. Markets be Roiled by a New FERC Order?
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