127 F.3d 365 (5th Cir. 1997), 96-60536, Sea Robin Pipeline Co. v. F.E.R.C.

Docket Nº:96-60536.
Citation:127 F.3d 365
Party Name:SEA ROBIN PIPELINE COMPANY; Petitioner, Williams Gas Processing-Gulf Coast Company; Transcontinental Gas Pipe Line Corporation, Intervenors, v. FEDERAL ENERGY REGULATORY COMMISSION; Respondent, Producer-Marketer Transportation Group; Independent Petroleum Association of America; Total Minatome Corporation; Energy Development Corporation; Exxon Corp
Case Date:October 23, 1997
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 365

127 F.3d 365 (5th Cir. 1997)

SEA ROBIN PIPELINE COMPANY; Petitioner,

Williams Gas Processing-Gulf Coast Company;

Transcontinental Gas Pipe Line Corporation, Intervenors,

v.

FEDERAL ENERGY REGULATORY COMMISSION; Respondent,

Producer-Marketer Transportation Group; Independent

Petroleum Association of America; Total Minatome

Corporation; Energy Development Corporation; Exxon

Corporation; Texaco Natural Gas Inc.; Shell Gas Trading

Company; Phillips Petroleum Company and Phillips Gas

Marketing Company ("Phillips"); Murphy Exploration and

Production Company; Marathon Oil Company; Amoco Production

Company and Amoco Energy Trading Corporation ("Amoco")

Anadarko Petroleum Corporation, Intervenors.

No. 96-60536.

United States Court of Appeals, Fifth Circuit

October 23, 1997

Page 366

John Nowell Estes, III, William Scott Scherman, Skadden, Arps, Slate, Meagher & Flom, Washington, DC, James J. Cleary, Patricia Shaud Francis, Birmingham, AL, for Petitioner.

Mari Michelle Ramsey, The Williams Companies, Tulsa, OK, for Intervenor Williams Gas Processing-Gulf Coast Co.

James T. McManus, Joseph S. Koury, Washington, DC, for Williams Gas Processing-Gulf Coast Co. and Transcontinental Gas Pipe Line Corp., Intervenors.

Gisela Blohm Cherches, Transcontinental Gas Pipe Line Corporation, Houston, TX, for Transcontinental Gas Pipe Line Corp., Intervenor.

Joel M. Cockrell, John Harris Conway, Washington, DC, Jerome M. Feit, Solicitor, Federal Energy Regulatory Commission, Office of the Solicitor, Washington, DC, for Federal Energy Regulatory Commission, Respondent.

Charles H. Shoneman, Randall S. Rich, Bracewell & Patterson, Washington, DC, for Producer-Marketer Transportation Group, Intervenor.

Richard Greer Morgan, Lane & Mittendorf, Washington, DC, for Independent Petroleum Association of America, Intervenor.

David Bancroft Robinson, Washington, DC, Thomas William Ryan, Houston, TX, for Total Minatome Corporation, Intervenor.

Page 367

C. Peck Hayne, Jr., Gordon, Arata, McCollam & Duplantis, New Orleans, LA, for Energy Development Corporation, Intervenor.

Jon L. Brunenkant, Cheryl Walker, Law Offices of Jon L. Brunenkant, Washington, DC, for Intervenors Exxon Corp., Texaco Natural Gas, Inc., Shell Gas Trading Co., Phillips Petroleum Company and Phillips Gas Marketing Company ("Phillips"), Murphy Exploration and Production Company, Marathon Oil Company and Amoco Production Company and Amoco Energy Trading Corporation ("Amoco").

Mark Richard Haskell, Travis & Gooch, Washington, DC, for Anadarko Petroleum Corporation, Intervenor.

Petition for Review of an Order of the Federal Energy Regulatory Commission.

Before POLITZ, Chief Judge, and HIGGINBOTHAM and SMITH, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

In 1995, the Sea Robin Pipeline Company petitioned the Federal Energy Regulatory Commission for a declaration that Sea Robin's facilities perform a "gathering" function rather than a "transportation" function, thus exempting them from the Commission's jurisdiction under Section 1(b) of the Natural Gas Act, 15 U.S.C. § 717(b). The Commission, in denying the petition, determined that Sea Robin was engaged in jurisdictional transportation activities as opposed to gathering. The Commission denied Sea Robin's petition for rehearing. Sea Robin then petitioned this Court for review. We are persuaded that the Commission gave inadequate attention to the physical and operational facilities of Sea Robin in applying its primary function test. We grant the petition for review, vacate FERC's order and remand the case to the Commission. On remand, the Commission may again consider the applicability of the primary function test to offshore pipeline systems and, if necessary, reformulate this test.

I.

The physical specifications of Sea Robin's pipeline system are central to deciding whether it is a transportation or a gathering facility. Sea Robin's pipeline system is located entirely offshore in the Gulf of Mexico and approximately 90% of its facilities lie in water depths of less than 140 feet. The system is configured in the form of an inverted "Y" with two arteries stretching roughly southwest and southeast from a central point about fifty miles south of the Louisiana coast. These two pipelines collect raw gas from fifty-seven offshore production platforms. Sea Robin's Vermillion 149 Compressor Station stands at the intersection of these two pipelines. It compresses the gas from the fifty-seven platforms for travel north, up the inclined seabed, to the Erath Compressor Station on the mainland. After collecting gas from four more platforms, the system terminates near Erath, Louisiana, where the gas is separated, dehydrated and processed. The Erath Compressor Station then prepares the gas for delivery to downstream transmission pipelines at five nearby entry points.

The Sea Robin system consists of 438 miles of dual-phase 1 pipelines with a capacity to transport 1.26 billion cubic feet of gas per day (Bcf/day) and includes around 69,500 hp of compression. The total compression horsepower at the Vermillion 149 Station is 37,050 hp and is 32,490 hp at Erath, Louisiana. Of the 438 miles of pipes, 339 miles are larger than twenty inches in diameter. The remaining ninety-nine miles of pipes, mostly running from individual platforms to the larger pipes, are between four and sixteen inches in diameter. The longest segment is the Vermillion 149-Erath section, consisting of 66.3 miles of thirty-six inch diameter pipeline running in a straight line from Sea Robin's Vermillion compressor station to onshore processing facilities. The four platforms along this section are within twenty-five

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miles of the Vermillion compressor station, which means that the last forty-one miles of the thirty-six inch diameter pipeline are uninterrupted by lateral pipe segments. The gas and liquefiables delivered by Sea Robin meet the merchantable natural gas quality standards of downstream transmission pipelines.

II.

Section 1(b) of the Natural Gas Act, 15 U.S.C. § 717 et seq., governs "the transportation of natural gas in interstate commerce." See 15 U.S.C. § 717(b) (1988). In Section 1(b) Congress prescribed not only "the intended reach of federal power, but also specif[ied] the areas into which this power was not to extend." Northwest Central Pipeline Corp. v. State Corp. Comm'n, 489 U.S. 493, 510, 109 S.Ct. 1262, 1274, 103 L.Ed.2d 509 (1989) (quoting FPC v. Panhandle E. Pipe Line Co., 337 U.S. 498, 503, 69 S.Ct. 1251, 1255, 93 L.Ed. 1499 (1949)). This Section expressly exempts from the Commission's jurisdiction "the production or gathering of natural gas." 2 Thus, Congress "carefully divided" FERC's regulatory power and "did not envisage federal regulation of the entire natural-gas industry field to the limit of constitutional power. Rather it contemplated the exercise of federal power as specified in the Act." Id.

Further, the Supreme Court has consistently held that "exceptions to the primary grant of jurisdiction in Section 1(b) are to be strictly construed," Interstate Natural Gas Co. v. FPC, 331 U.S. 682, 690-91, 67 S.Ct. 1482, 1487, 91 L.Ed. 1742 (1947), and the terms "production" and "gathering" are to be "narrowly confined to the physical acts of drawing the gas from the earth and preparing it for the first stages of distribution." Northern Natural Gas Co. v. State Corp. Comm'n, 372 U.S. 84, 90, 83 S.Ct. 646, 649-50, 9 L.Ed.2d 601 (1963) (collecting cases); see also Transcontinental Gas Pipe Line Corp. v. State Oil and Gas Bd., 474 U.S. 409, 418, 106 S.Ct. 709, 714-15, 88 L.Ed.2d 732 (1986); Natural Gas Pipeline Co. v. Railroad Comm'n, 679 F.2d 51, 53-54 (5th Cir.1982); Hamman v. Southwestern Gas Pipeline, Inc., 721 F.2d 140, 143 (5th Cir.1983).

In the past, the Commission has employed three different tests, namely, the behind-the-plant test, the central-point test, and the primary function test, to determine whether a company's facilities qualify for the gathering exemption. Angela S. Chitwood-Beehler, A Conflict in the Circuits: The FERC's Jurisdiction Over Gathering Rates, 13 Energy L.J. 375, 382 (1992). The behind-the-plant test treats a system as a gathering facility if it is located behind the gas processing plant which treats the product coming from that area. Id.; In re Phillips Petroleum Co., 10 F.P.C. 246, 277 (1951), overturned on other grounds by Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035 (1954). The central-point test involves a determination of where the separate and various lateral lines bring gas to a central point for delivery into a single line. Angela S. Chitwood-Beehler, supra at 382; Barnes Transportation Co., Inc., 18 F.P.C. 369 (1957).

More recently, the Commission rejected any bright-line approach that employs a single, dispositive factor in favor of a multi-factor, primary function test that analyzes the totality of the facts and circumstances in a given case. In other words, under the primary function test, the Commission determines whether, with reference to the specific facts and circumstances of the particular facility in question, its primary function is gathering. EP Operating Co. v. FERC, 876 F.2d 46, 48 (5th Cir.1989). Applying this test in Farmland Industries, Inc., 23 FERC p 61,063 (1983), the Commission identified five salient factors in determining whether a pipeline is a gatherer or a transporter:

(1) the diameter and length of the facility;

(2) the location of compressors and processing plants;

(3) the extension of the facility beyond the central point in the field;

(4) the location of wells along all or part of the facility; and

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(5) the geographical configuration of the...

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