What is unusual about pipelines is that pipeline companies do not usually own the products they are transporting. Pipeline companies are simply intermediaries that move the product from the producers and shippers to the marketplace.

Producers and shippers, those who actually own the product, pay pipeline companies to transport their product from oil fields to refineries, manufacturers, and distribution centers. In order to move their product, shippers use a nominations process to reserve a specific amount of space per month on the pipeline to transport their products. As a common carrier engaged in interstate commerce, the fees charged by liquid petroleum pipelines are regulated by the Federal Energy Regulatory Commission. Some states also regulate the rates charged for pipelines that only transport within the state, or intrastate pipelines. The product shipped on each specific pipeline must meet the specifications for safe transport established by the company, known as the tariff.

Many liquid petroleum pipelines can transport different types of liquid petroleum in the same pipeline in batches. The process of tracking the customer’s batch or product through the pipeline is done through scheduling. Once the product has been scheduled and actually transported, a ticket is written that shows the type of product transported, the amount, where it is being transported to and from, and the owner.

Throughout the process, the product is measured at the receipt point in the pipeline and again upon delivery to document the amount of product moved from point A to point B. The amount charged to the customer depends on the product, the amount transported and the distance between receipt and delivery points.

This process isn’t really much different than how you ship a package from one part of the country to another. You choose a carrier, confirm the pick up and delivery point, account for the weight and pay a pre-established fee for the service. and like shipping packages, transporting different batches of petroleum can encounter unexpected delivery changes. However, unlike the package tracking with tracking numbers, tracking and measuring pipeline volumes are real challenges. To learn more about the transportation service pipelines offer see the sections on nominations, scheduling, tariffs, and pipeline accounting.

More information on the liquid petroleum pipeline industry is continually being developed and added to Pipeline 101. Please visit us often.