FERC affirms decision revoking Targa oil pipe tariff waivers

The US Federal Energy Regulatory Commission revoked natural gas and NGL supplier Targa's temporary waivers of tariff filing and financial reporting requirements for oil pipelines on Aug. 7, a decision that could set a stricter reporting precedent for pipeline operators.

FERC's action accepted a March 2024 initial decision by FERC administrative law judge Patricia Hurt. Hurt's decision argued that Targa no longer qualified for temporary waivers, and that without them, "any movement of oil on its pipeline" would occur in violation of the Interstate Commerce Act.

"We affirm the Initial Decision's finding that Targa is providing jurisdictional service to third parties pursuant to the PSAs," FERC wrote. "We also affirm the Initial Decision's findings that Targa no longer qualifies for temporary waivers of the filing and reporting requirements of the Commission's regulations and ICA sections 6 and 20. Therefore, as detailed herein, we revoke Targa's temporary waivers and Targa must file a tariff for transportation service consistent with the ICA and the Commission's regulations to the extent Targa continues to offer jurisdictional transportation service to third parties."

The dispute stemmed from a 2020 complaint filed by Canadian oil and gas producer Enerplus, which alleged that a pipeline Enerplus needed to move its Bakken-produced crude to market was violating the ICA by forcing Enerplus to pay higher fees than other customers.

The pipeline, which is owned by Targa as part of its North Dakota-based Targa Badlands System, was operating under ICA waivers that allowed it to avoid filing tariffs or reporting fees to FERC, provided the pipeline or its affiliates owned 100% of throughput, there was no demonstrated third-party interest in gaining access to the line and none likely to materialize, and there was no stated opposition to granting the waivers.

FERC ruled that Targa no longer met these conditions, explicitly finding that there is already broad third-party interest in gaining access to the line and casting doubt that there is no opposition to Targa's continued use of waivers.

It also ruled that Targa failed to comply with the conditions of its waivers, noting that the line nearly doubled in size and connected to new wells and producers during the waiver period, none of which Targa disclosed.

The waivers allowed Targa to operate without publicly disclosing the rates it collected from its purchase and sales agreements, including with Enerplus, which entered into a PSA with Targa in 2013.

In 2020, Enerplus' complaint alleged that Targa was violating the non-discrimination provisions in the ICA after Enerplus discovered it was being charged higher rates than other Targa affiliates. Enerplus did not challenge Targa's waivers, but the complaint nonetheless initiated an investigation at FERC that ultimately led to Hunt's March 26, 2024, ruling.

Targa appealed that ruling, leading to the Aug. 7 final decision.

Section 6 of the ICA requires that interstate oil pipelines must file with FERC all rates, fares and charges for transportation on their system. As Hunt argued in her initial decision, waivers are designed to be temporary and meant to reduce "burdensome" oversight where no anti-competitive concerns exist -- but are subject to change due to changes in pipeline ownership or the ownership of the oil transported by it, among other reasons.

The revocation of Targa's waivers takes effect in 120 days.