Williams Gas Processing — Gulf Coast Co. v. F.E.R.C.

• Decision Date: 20 June 2003
• Docket Number: No. 02-1051.,No. 02-1075.,No. 02-1052.,No. 02-1007.,No. 02-1076.,No. 02-1006.,No. 02-1053.,No. 02-1074.,No. 01-1327.,No. 02-1072.,No. 02-1073.,01-1327.,02-1006.,02-1007.,02-1051.,02-1052.,02-1053.,02-1072.,02-1073.,02-1074.,02-1075.,02-1076.
• Citation: 331 F.3d 1011
• Parties: WILLIAMS GAS PROCESSING — GULF COAST COMPANY, L.P. and Transcontinental Gas Pipe Line Corporation, Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. Dynegy Marketing and Trade, et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

331 F.3d 1011

WILLIAMS GAS PROCESSING — GULF COAST COMPANY, L.P. and Transcontinental Gas Pipe Line Corporation, Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent Dynegy Marketing and Trade, et al., Intervenors.

No. 01-1327.

No. 02-1006.

No. 02-1007.

No. 02-1051.

No. 02-1052.

No. 02-1053.

No. 02-1072.

No. 02-1073.

No. 02-1074.

No. 02-1075.

No. 02-1076.

United States Court of Appeals, District of Columbia Circuit.

Argued May 12, 2003.

Decided June 20, 2003.

COPYRIGHT MATERIAL OMITTED

On Petitions for Review of Orders of the Federal Energy Regulatory Commission.

Thomas J. Eastment argued the cause for petitioners/intervenors Producer. With him on the briefs were Joshua B. Frank, James M. Costan, T. Alana Deere, Timothy J. Jacquet, Joseph E. Mixon, Frederick T. Kolb, Douglas W. Rasch, and Charles J. McClees, Jr. Linda L. Geoghegan entered an appearance.

Joseph S. Koury argued the cause for petitioners/intervenors Williams Gas Processing — Gulf Coast Company, L.P., et al. With him on the briefs were James T. McManus, Mari M. Ramsey, Gisela B. Cherches and David A. Glenn.

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

Before: GINSBURG, Chief Judge, and ROGERS and TATEL, Circuit Judges.

Opinion for the Court filed by Circuit Judge ROGERS.

ROGERS, Circuit Judge.

Transcontinental Gas Pipe Line Corp. ("Transco") petitioned the Federal Energy Regulatory Commission ("FERC") for approval to transfer some of its pipeline facilities to its affiliate, Williams Gas Processing — Gulf Coast Co. ("WGP"), and to certify that the facilities serve gathering rather than transmission functions. FERC approved the applications in part and denied them in part, and Transco and WGP now challenge the portions of the orders that denied the requests, contending that FERC's assertion of jurisdiction is contrary to precedent regarding the exemption of gathering facilities under the Natural Gas Act ("NGA"), 15 U.S.C. § 717(b) (2000). A coalition of natural gas producers ("the Producers") also petitions the court for review, objecting to those portions of FERC's orders that granted the abandonment and reclassification of facilities as gathering for lack of a reasoned determination and as contrary to the public interest. Our review of these petitions is instructed by ExxonMobil Gas Marketing Co. v. FERC, 297 F.3d 1071, 1084 (D.C.Cir.2002), where the court stated that it will defer to FERC's reasonable determinations regarding gathering status under NGA section 1(b), 15 U.S.C. § 717(b). We hold that petitioners fail to demonstrate that FERC's choices are "unreasonable and its chosen line[s] of demarcation [are] not within a `zone of reasonableness' as distinct from the question of whether the line[s] [are] `precisely right.'" ExxonMobil, 297 F.3d at 1084; see Conoco Inc. v. FERC, 90 F.3d 536, 544 (D.C.Cir. 1996). Accordingly, we deny the petitions inasmuch as FERC considered the appropriate factors under the primary function test and sufficiently explained its reasoning.

I.

Section 1(b) of the NGA distinguishes between facilities that are used for "the transportation of natural gas in interstate commerce," which are subject to FERC's jurisdiction, and those used for "gathering," which are not. 15 U.S.C. § 717(b). "Gathering" is generally defined as "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." Conoco, 90 F.3d at 539 n. 2 (citing Northwest Pipeline Corp. v. FERC, 905 F.2d 1403, 1404 n. 1 (10th Cir.1990)). Although "[t]he line between jurisdictional transportation and nonjurisdictional gathering is not always clear," Conoco, 90 F.3d at 542, it is central to this case.

Since 1983, FERC has used a multi-factor "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 Indus., 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)). Under the primary function test, FERC considers six physical criteria: (1) the pipelines' length and diameter; (2) the central point in the field; (3) the facility's geographic configuration or pattern; (4) the location of compressors and processing plants, particularly where the pipelines are located behind the plant; (5) the location of wells along all or part of the facilities; and (6) the line's operating pressure. ExxonMobil, 297 F.3d at 1077 (citing Lomak Petroleum, Inc. v. FERC, 206 F.3d 1193, 1196 (D.C.Cir.2000)). FERC also accounts for certain nonphysical factors, including: (1) the facility's purpose, location, and operation; (2) the pipeline owner's general business activity; (3) the objectives of the NGA and other pertinent legislation; and (4) the changing technical and geographic nature of exploration and production activities. ExxonMobil, 297 F.3d at 1077. No single criterion is dispositive, and not all of the factors apply in all situations. Id. (citing Williams Field Servs. Group, Inc. v. FERC, 194 F.3d 110, 116 (D.C.Cir.1999); Conoco, 90 F.3d at 543).

FERC initially developed the primary function test for classifying onshore facilities, and it later modified the test in considering the increasing number of pipelines that were being constructed offshore on the Gulf of Mexico's Outer Continental Shelf ("OCS"), where gathering and distribution patterns are somewhat different. ExxonMobil, 297 F.3d at 1077 (citing EP Operating Co. v. FERC, 876 F.2d 46 (5th Cir.1989)). Because offshore pipelines often must transport raw gas over longer distances, FERC adopted a "sliding scale" approach that permitted gathering pipelines of greater length and diameter in correlation with distance from shore and water depth. ExxonMobil, 297 F.3d at 1078 (citing Amerada Hess, 52 F.E.R.C. at 61,988). When FERC applied this modified approach in determining that the Sea Robin Pipeline Company's pipelines were jurisdictional transmission facilities, the Fifth Circuit reversed, questioning FERC's heavy emphasis on the facilities' size and on nonphysical factors and inviting FERC to reformulate its primary function test in light of the "physical, geographical and operational characteristics of pipelines in the OCS." Sea Robin Pipeline Co. v. FERC, 127 F.3d 365, 369-71 (5th Cir.1997). On remand, FERC determined that the "behind-the-plant" test is not determinative of the gathering question offshore, and that instead it would look at the offshore system's configuration to locate a central point where gas is aggregated for transportation onshore. Sea Robin Pipeline Co., 87 F.E.R.C. ¶ 61,384, at 62,425, 1999 WL 444654 (1999) (Sea Robin II). FERC explained that this central aggregation point is analogous to the "central-point-in-the-field" criterion for onshore systems and should be "given weight in identifying the demarcation point between gathering and transportation on OCS pipeline systems." Id. at 62,426. FERC also emphasized that it would focus primarily on physical factors, according only secondary importance to nonphysical factors. Sea Robin Pipeline Co., 92 F.E.R.C. ¶ 61,072, at 61,284, 2000 WL 1100267 (2000). This court subsequently held that FERC reasonably applied its reformulated primary function test to the Sea Robin system. ExxonMobil, 297 F.3d at 1087.

It was against the backdrop of the evolving primary function test and the distinction between jurisdictional transmission and exempt gathering facilities that Transco and WGP filed the applications at issue. In the parlance of the oil and gas industry, a "spindown" occurs when a natural gas transporter transfers operation of its facilities to a gathering affiliate. See Conoco, 90 F.3d at 541. In 1996, Transco sought FERC's authorization, pursuant to NGA section 7(b), 15 U.S.C. § 717f(b), to spin down a number of its facilities to WGP as part of a comprehensive corporate restructuring plan. Transco's application covered a large number of its facilities on seven different pipeline systems in Texas and Louisiana and offshore on the OCS. On the same day, WGP petitioned FERC for an order declaring that the facilities it intended to acquire from Transco — most of which FERC had previously certificated as transmission facilities under section 7(c) of the NGA — were gathering facilities exempt from its jurisdiction under section 1(b).

FERC dismissed the comprehensive application without prejudice. Transcon. Gas Pipe Line Corp., 76 F.E.R.C. ¶ 61,317, at 62,543, 1996 WL 544775 (1996) ("Comprehensive Order"). FERC observed that "[t]he physical parameters of the subject facilities are massive and complex, involving over 3,100 miles of pipeline," and that the number of facilities included in Transco's application "is without precedent in prior `spin-down' cases." Id. (footnote omitted). Explaining that important differences existed among the many pipelines that Transco included in its application, and that, "[a]t the very minimum, large portions of the facilities are clearly properly classified as jurisdictional transmission facilities," id. at 62,543, FERC also noted that "a decision to grant the requested abandonment in this case could set a precedent for ending NGA jurisdiction on the OCS, as it is likely that virtually every similar interstate pipeline on the OCS then would file a similar application." Id. at 62,542. Because "[n]either Transco nor WGP included in [its] pleadings an alternative request that [FERC] find specific parts of the facilities to be ... nonjurisdictional," FERC dismissed the comprehensive application while stating that Transco and WGP could still file "another proposal...