Operational Balancing Agreement
(Pipeline and Storage Operators)

Summary

This template is an operational balancing agreement used by a natural gas storage facility and a pipeline system operator to address issues arising from possible variants and imbalances of gas received and delivered to the storage facility from the pipeline. This template contains practical guidance, drafting notes, and an alternate clause. Natural gas is produced at the wellhead and transported via pipeline to processing facilities, where it is purified, with all water vapor and other elements removed. It is then transported to end users, which includes power plants and direct consumers. However, consumption is not linear throughout the year. Both power plants and individual consumers use less natural gas in the spring and fall, and more natural gas in the summer and winter. But, natural gas wells continue to produce relatively consistent amounts of natural gas each month, regardless of the season. Because of this, natural gas that is produced in times of lower demand must be stored underground until demand catches up with supply. Natural gas is delivered to these underground storage facilities via pipeline. A pipeline operator generally knows the volume of natural gas that needs to be delivered to or taken from a storage facility. This expected volume of gas is disclosed to the storage facility through a nomination report. The actual volume of natural gas is measured when it is physically delivered to, or removed from the storage facility. If there is a discrepancy between the nomination report and the actual volume of gas measured, the discrepancy is called an operational imbalance. This agreement between the pipeline operator and the storage facility helps the parties determine how to deal with operational imbalances. For more information on pipeline operations and transactions related to the same, see Midstream Oil & Gas Transactions and Agreements . For other templates related to natural gas transportation and storage, see Firm Storage Service Agreement (Gas), Gas Gathering Agreement (Midstream Energy), and Interconnect Agreement (Pipeline and Storage Operators).