What is line space on the Colonial Pipeline?
Line space is how shippers and the trade press often refer to a shipper’s capacity to move product on the pipeline in a cycle; Colonial’s own documents use the terms nomination, capacity and shipping history instead.
Colonial is a common carrier. In its 2020 order, FERC describes it as “a common carrier refined products pipeline system that extends from Houston, Texas, to Linden, New Jersey,” carrying gasoline and distillates such as jet fuel and heating oil. A common carrier is required to provide transportation on reasonable request. When more is requested than fits, it follows a published allocation method. (This is a different use of “common carrier” from trucking; the common vs contract carrier post covers the hauling side.)
How does the nomination cycle work?
Each shipper requests space ahead of time, and Colonial schedules batches in repeating five-day cycles. Colonial’s shipper manual says its cycles “are scheduled for five (5) day periods during which a sequence of all in-season products are pumped.” A nomination is “a request for space to ship petroleum products from an origin location to a destination location.”
There are two deadlines to know:
- Monthly notice: Nominations for the following month are due no later than the first Tuesday of the current month.
- Cycle closing date: A batch must be nominated and confirmed by any third parties, such as a supplier or tankage provider, about six to eight business days before the cycle lifting date. Colonial sets the actual dates three weeks ahead in bulletins.
The practical point for a supplier: the barrels that reach your terminal in a given week were requested well before they were pumped, so a shortage shows up in the schedule before it shows up at the rack.
What happens when nominations exceed capacity?
Colonial prorates, meaning it divides the available space among shippers by a set formula. FERC defines prorationing as “the process an oil pipeline uses to allocate capacity among nominating shippers during nominating periods when the volume of shipper nominations exceeds the pipeline’s available capacity.”
Colonial does not split space in proportion to what each shipper nominates. FERC says it “uses a historical allocation method as opposed to a pro rata method,” where a shipper’s history is “its average shipment by volume for a five-day shipment cycle calculated over a rolling base period of the prior 12 months.” Shippers fall into two groups. Regular Shippers get space by history. New Shippers share a reserved slice, which FERC puts at 5% on larger segments and 10% on smaller ones, as of that order.
Colonial’s manual walks through the math. The figures below are Colonial’s own example, not a real shipper:
| Step | Value |
|---|---|
| Shipper’s ticketed history in the base period | 1,671,096 bbl |
| Total ticketed volume in the base period | 420,000,000 bbl |
| Share of total history | 0.3979% |
| Available capacity for the cycle | 6,100,000 bbl |
| Raw allocation (share x capacity) | 24,270 bbl |
| Rounded to Colonial’s 25,000 bbl multiple | 25,000 bbl |
So a shipper in that position could move up to 25,000 barrels in the cycle, however much more it nominated. The rest waits, moves another way, or comes from someone who has space.
Allocations are announced to shippers by notice. In October 2024, Pipeline & Gas Journal reported Colonial was “allocating space for Cycle 61 shipments on Line 2,” the distillate line from Houston to Greensboro, North Carolina, and noted that Colonial typically announces allocations when requests exceed its capacity to meet the five-day lifting cycle.
Is there a secondary market for line space?
Yes. Colonial lets a shipper transfer its shipping history to another shipper, and that is how space changes hands. FERC notes that near the end of 2015 Colonial had been prorating for nearly three years. Colonial told FERC the number of shippers rose from about 140 in 2013 to over 210 in 2015, and FERC adds that “Some shippers sold or sought capacity to take advantage of economic opportunities in secondary markets.”
The manual says a transfer “is merely providing the receiving shipper the opportunity to ship the transferring shipper’s ticketed volume during the transfer period.” The buyer keeps the benefit only if it actually ships the volume. A 100% history transfer takes fourteen months to complete, and FERC describes a lockout policy under which the seller stays a Regular Shipper and cannot use New Shipper status during that time.
FERC says the primary purpose of history transfers is to let a shipper convey its rights to a buyer of its business or assets. Trading space for profit is a use of that mechanism. Colonial told FERC that a combination of unrestricted history trading and its rounding and minimum-tender provisions was undermining the allocation process. Colonial’s manual now points to its FERC tariff for the allocation rules themselves, so read the current tariff before relying on any of this.
How does a tight pipeline reach your terminal and your price?
When space is scarce, fewer barrels tend to arrive at pipeline-fed terminals, and prices at those terminals tend to rise. Whether you feel it depends on how close you are to the line and how much of your supply is committed.
Say, as an illustrative example and not market data, that a Southeast terminal is fed by a line that gets allocated, and the shippers who supply it receive 60% of what they nominated. The sequence typically looks like this:
- Spot moves first. Traders who hold space or can buy it ask more for barrels delivered to the terminal. Say terminal spot rises 12 cents per gallon relative to Gulf Coast spot plus the pipeline tariff.
- Terminal inventory tightens. Suppliers who received less than their customers need start rationing. That can mean fuel allocation at the terminal itself.
- Rack follows, with a lag. The rack price is a posted price and does not move tick by tick, so for a stretch it can sit below what a replacement barrel costs.
If you buy at rack under a contract, you may not see the spike until the supplier reprices. If you buy spot, you pay it right away. Either way, compare quotes on the same basis and the same date, as covered in how to compare bulk fuel quotes.
What to watch if you buy from Colonial-fed terminals:
| Signal | What it suggests | Where to look |
|---|---|---|
| An allocation notice on a line | Fewer barrels in coming cycles | Your supplier, trade press |
| Terminal spot well above Gulf Coast plus freight | Space may be tight | Your supplier’s or broker’s spot quote |
| Rack unchanged while spot jumps | Rack may be lagging | Compare quote dates |
| Supplier limits lifts | Allocation has reached you | Supplier notice |
Trucking from the terminal to your site is a separate cost; see fuel hauling cost per gallon. Taxes ride on top; see federal fuel excise tax.
How Energy Connect handles it
When rack prices move, suppliers on Energy Connect can schedule each price with a start date and an optional end date, and a price scheduled for the future is not shown to buyers until it takes effect.