Exxonmobil Gas Marketing Co. v. F.E.R.C.

Citation297 F.3d 1071
Decision Date06 August 2002
Docket NumberNo. 00-1365.,No. 00-1355.,No. 00-1361.,No. 00-1357.,No. 00-1363.,00-1355.,00-1357.,00-1361.,00-1363.,00-1365.
PartiesEXXONMOBIL GAS MARKETING COMPANY, a Division of Exxon Mobil Corporation, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. ANR Pipeline Company, et al., Intervenors.
CourtU.S. Court of Appeals — District of Columbia Circuit

Jon L. Brunenkant and Stephen L. Teichler argued the causes for petitioners Amerada Hess Corporation, et al. With them on the briefs were David G. Stevenson, Frederick T. Kolb, Stanley P. Geurin, John P. Beall, Douglas W. Rasch, and Mickey J. Lawrence. Cheryl J. Walker entered an appearance.

James M. Costan argued the cause for petitioner Producer Coalition and intervenor Independent Petroleum Association of America. With him on the briefs were T. Alana Deere and David M. Sweet. Bruce W. Neely and John W. Wilmer, Jr., entered appearances.

Timm Abendroth, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With him on the brief were Cynthia A. Marlette, Acting General Counsel, and Dennis Lane, Solicitor.

Brian D. O'Neill argued the cause for intervenors Sea Robin Pipeline Company and Williams Gas Processing-Gulf Coast Company. With him on the brief were David P. Sharo, Merlin E. Remmenga, James T. McManus, Joseph S. Koury and Mari M. Ramsey.

Before: GINSBURG, Chief Judge, EDWARDS and SENTELLE, Circuit Judges.

Opinion for the Court filed by Circuit Judge SENTELLE.

Dissenting opinion filed by Circuit Judge EDWARDS.

SENTELLE, Circuit Judge:

ExxonMobil Gas Marketing Company, et al.,1 (hereinafter "ExxonMobil") and the Producer Coalition2 petition for review of Federal Energy Regulatory Commission ("FERC" or "the Commission") orders in which FERC reclassified portions of Sea Robin Pipeline Company's pipeline system on the Outer Continental Shelf as non-jurisdictional "gathering" facilities for natural gas, rather than jurisdictional "transportation" facilities, pursuant to section 1(b) of the Natural Gas Act, 15 U.S.C. § 717(b). FERC argues that in developing and applying its reformulated "primary function" test the Commission followed the suggestion of the United States Court of Appeals for the Fifth Circuit in Sea Robin Pipeline Co. v. FERC, 127 F.3d 365 (5th Cir.1997) ("Sea Robin I"), and reasonably identified the demarcation point between gathering and transportation in Sea Robin's pipeline system. Because the Commission did not act unreasonably in determining that portions of Sea Robin's system were non-jurisdictional, we deny the petitions for review.

I. Background
A. Statutory and Regulatory Framework

Section 1(b) of the Natural Gas Act ("the Act"), 15 U.S.C. § 717 et seq., governs "the transportation of natural gas in interstate commerce." 15 U.S.C. § 717(b). However, in section 1(b) of the Act Congress prescribed not only "the intended reach of the Commission's power, but also specified the areas into which this power was not to extend." Federal Power Comm'n v. Panhandle E. Pipe Line Co., 337 U.S. 498, 503, 69 S.Ct. 1251, 1255, 93 L.Ed. 1499 (1949) (emphasis added). Section 1(b) expressly exempts from the Commission's jurisdiction "the production or gathering of natural gas." 15 U.S.C. § 717(b). Thus, Congress "carefully divided," 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), energy regulatory authority and "did not envisage federal regulation of the entire natural-gas field to the limit of constitutional power. Rather it contemplated the exercise of federal power as specified in the Act." Panhandle Eastern, 337 U.S. at 502-03, 69 S.Ct. at 1255.

The Natural Gas Act does not define either "transportation," which falls within the Commission's jurisdiction, or "gathering," which is exempt from FERC authority under the Act. The Supreme Court has, however, held that "[e]xceptions to the primary grant of jurisdiction in the section are to be strictly construed." Interstate Natural Gas Co. v. Federal Power Comm'n, 331 U.S. 682, 690-91, 67 S.Ct. 1482, 1487, 91 L.Ed. 1742 (1947) (construing 15 U.S.C. § 717(b)). Thus, the Supreme Court has "consistently held that `production' and `gathering' are terms 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). The Commission's long-held definition of gathering, taken as consistent with the Supreme Court's pronouncements on the Act, is "the collecting of gas from various wells and bringing it by separate and several individual lines to a central point where it is delivered into a single line." Barnes Transp. Co., 18 F.P.C. 369, 372 (1957); see also Conoco Inc. v. FERC, 90 F.3d 536, 539 n. 2 (D.C.Cir.1996) ("Gathering is the process of taking natural gas from the wells and moving it to a collection point for further movement through a pipeline's principal transmission system.") (citing Northwest Pipeline Corp. v. FERC, 905 F.2d 1403, 1404 n. 1 (10th Cir.1990)).

Despite these attempts to clarify the Natural Gas Act, this Court has observed that "[t]he line between jurisdictional transportation and nonjurisdictional gathering is not always clear." Conoco, 90 F.3d at 542. For many years the Commission employed two principal tests to differentiate transportation from gathering. Developed in the on-shore context, these tests were the "behind-the-plant" test and the "central-point-in-the-field" test. The "behind-the-plant" test presumes that all facilities located between the wellhead and a processing plant are non-jurisdictional gathering lines, while facilities downstream of the processing plant are presumptively transportation facilities. See Phillips Petroleum Co., 10 F.P.C. 246, 276-78, 1951 WL 1832 (1951), rev'd on other grounds, Wisconsin v. Federal Power Comm'n, 205 F.2d 706 (D.C.Cir.1953), aff'd, Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035 (1954). For gas that requires no processing the "central-point-in-the-field" test applied, under which lateral lines collecting gas from separate wells that then converge into a single larger line (typically at the point where the gas is compressed for transportation by the pipeline), were classified as gathering facilities. E.g., Barnes Transp. Co., 18 F.P.C. 369, 372 (1957). Since 1983, the Commission has subsumed these two tests into its "primary function" test to determine "whether a facility is devoted to the collection of gas from wells — gathering — or to the further (`downstream') long-distance movement of gas after it has been collected — interstate transportation." Conoco, 90 F.3d at 543 (citing Farmland Industries, Inc., 23 F.E.R.C. ¶ 61,063, at 61,143, 1983 WL 39391 (1983); Amerada Hess Corp., 52 F.E.R.C. ¶ 61,268, at 61,987-88, 1990 WL 1241336 (1990)).

The "primary function" test generally employs the following six physical criteria: (1) the length and diameters of the lines; (2) the extension of the facility beyond the central point in the field; (3) the geographic configuration of the facility; (4) the location of compressors and processing plants; (5) the location of wells along all or part of the line facility; and (6) the operating pressure of the lines. Lomak Petroleum, Inc. v. FERC, 206 F.3d 1193, 1196 (D.C.Cir.2000). In addition, FERC considers the following "non-physical" criteria: (1) the purpose, location and operation of the facility; (2) the general business activity of the owner of the facility; (3) whether a jurisdictional determination, i.e., gathering versus transmission, is consistent with the objectives of the Natural Gas Act and other legislation; and (4) the changing technical and geographic nature of exploration and production activities. Id. No one factor is determinative in the primary function test, and not all factors apply in all situations. See Williams Field Servs. Group, Inc. v. FERC, 194 F.3d 110, 116 (D.C.Cir.1999); Conoco, 90 F.3d at 543. The Commission "gives consideration to all of the facts and circumstances of the case rather than mechanically applying a facilities configuration standard." West Tex. Gathering Co., 45 F.E.R.C. ¶ 61,386, at 62,219 n.4, 1988 WL 246728 (1988); see also Conoco, 90 F.3d at 543.

When these physical factors were developed, most jurisdictional questions involved onshore facilities. As an increasing number of facilities have been constructed offshore on the Outer Continental Shelf ("OCS"), where the pattern of gathering and distribution differs, the applicability of the factors has been questioned. See, e.g., EP Operating Co. v. FERC, 876 F.2d 46 (5th Cir.1989). Specifically, it is often not feasible to process raw gas on open water. As a result, pipelines on the OCS typically do not gather gas at a local, centralized point within a field as they would onshore, to prepare it for traditional transportation. Rather, on the OCS, relatively long lines are constructed to carry the raw gas from offshore platforms, where "[o]nly the most rudimentary separation and dehydration operations" are conducted, EP Operating, 876 F.2d at 47, to the shore or a point closer to shore, where it can be processed into "pipeline quality" gas. Id. at 48. In EP Operating Co., the Fifth Circuit discounted FERC's ruling that the offshore platform where initial gas treatment took place constituted a "central point in the field" where the gathering function was complete, and reversed FERC's decision that the 51-mile long, 16-inch diameter OCS pipeline downstream of that platform was a jurisdictional transportation facility. See id. at 49. Following EP Operating Co., FERC noted that "because of recent advances in engineering...

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