Eureka Pipe Line Co. v. Public Service Commission

• Decision Date: 30 June 1964
• Docket Number: No. 12313,12313
• Citation: 148 W.Va. 674,137 S.E.2d 200
• Court: West Virginia Supreme Court
• Parties: , 55 P.U.R.3d 178 EUREKA PIPE LINE COMPANY et al. v. The PUBLIC SERVICE COMMISSION of West Virginia et al.

Page 200

137 S.E.2d 200

148 W.Va. 674, 55 P.U.R.3d 178

EUREKA PIPE LINE COMPANY et al. v. The PUBLIC SERVICE COMMISSION of West Virginia et al.

No. 12313.

Supreme Court of Appeals of West Virginia.

Submitted May 19, 1964.

Decided June 30, 1964.

Syllabus by the Court

1. The Public Service Commission of West Virginia has no inherent jurisdiction, power or authority and can exercise only such jurisdiction, power or authority as is authorized by statute.

2. The jurisdiction, power and authority of the Public Service Commission of West Virginia are confined to the regulation of public utilities.

Charles E. Anderson, Charleston, Robert B. McDougle and John R. Morris, Parkersburg, for petitioner Eureka Pipe Line Co.

T. D. Kauffelt, Charlestone, for intervenors below--Independent Oil & Gas Ass'n. of W. Va. and J and B Oil Co.

Charles C. Wise, Jr., and Robert E. Magnuson, Charleston, Charles E. McGinnis, Pittsburgh, Pa., for Pennzoil Co.

Robert L. Steward, Charleston, for respondents The Public Service Commission of W. Va.

Spilman, Thomas, Battle & Klostermeyer, Howard R. Klostermeyer, R. Page Henley, Jr., Charleston, for protestant Devonian Gas and Oil Co.

CALHOUN, Judge.

This case is before the Court for review of a final order entered by the Public Service Commission of West Virginia on November 22, 1963, which rejected and struck from the files of the commission a proposed tariff submitted by Eureka Pipe Line Company (which will be referred to in this opinion as Eureka), which proposal embodied new and additional rules and regulations for the conduct of Eureka's business. The proposed amendment of an existing tariff was rejected by the commission on the ground that, because of the provisions of Code, 1931, 22-5-2, Eureka had no authority to make the proposed rules and regulations and the commission has no jurisdiction or power to confer such authority. The effect of the order is to hold that the commission, under the law of this state, has no jurisdiction, power or authority to act upon such proposed rules and regulations.

Eureka is a public utility which has been in the business of transporting petroleum by pipeline since before the turn of the present century. Its intrastate operations have been subject to the jurisdiction and control of the public service commission since that regulatory body was created by statute in 1913. Eureka's principal pipeline extends from a point in Kanawha County northward to the Pennsylvania--West Virginia state line in Monongalia County. From that line a spur or branch pipeline leads from Braden, Tyler County, westward to the Ohio River. This branch line receives and transports oil produced in the State of Ohio. The balance of the oil transported by Eureka is produced by wells located in West Virginia. In addition to the pipelines referred to above, Eureka has about 2,000 miles of feeder lines in West Virginia to gather petroleum from the wells and to carry it to the main transportation lines.

The petroleum transported by Eureka is a distinct type and of prima quality, known as Pennsylvania-grade crude oil. It is produced only in Ohio, New York, Pennsylvania and West Virginia; but at this time more of it is produced in West Virginia than in any other state. There are but ten refineries by which this oil is processed. Two of them are in West Virginia and eight are in Pennsylvania. The market for the petroleum is, therefore, limited by the volume thereof which is received and processed by the ten refineries. Eureka's pipeline facilities are far more than adequate to receive and transport all the petroleum for which there is a market.

For years Eureka has had and now continues to have a provision in its tariff giving it the right to refuse to take oil for transportation unless the shipper has provided the necessary facilities for receiving the oil as it arrives at its destination.

In recent years, the volume of production of oil in West Virginia has increased to such an extent that, it coupled with the oil coming from Ohio, is considerably in excess of the volume which the ten refineries can receive and process. This situation created a crisis which has given rise to the case presented for decision. Eureka is merely a transportation utility. It has no storage facilities other than such as are incidental to its primary business of transporting. The refineries have no storage facilities other than such limited storage facilities as are incidental to their business of processing the crude oil delivered to them.

As a consequence of the crisis created by the excess of the volume of production over the volume of oil for which there is a market, Eureka and the independent producers of oil in this state undertook a cooperative effort to find a satisfactory solution to the problem presented. A study group was formed and the services of a petroleum expert were engaged. The rules and regulations embodied in the proposed amendment of the existing tariff were formulated as a result of the cooperative effort and study.

Hearings were had before the public service commission at which Eureka and the intervenors produced testimony, supplemented by exhibits, to establish the reasonableness and propriety of the rules and regulations. Devonian Gas and Oil Company (which will be referred to in this opinion as Devonian) appeared as the sole protestant and participated in the hearings before the commission. Devonian offered no testimony before the commission to establish that the proposed rules and regulations are unreasonable or discriminatory. It simply takes the position that they cannot lawfully be approved by the commission. The final order entered by the commission states that a previous practice of Eureka in allocating its transportation facilities among the producers 'may have performed a useful and even laudable function,--but nevertheless we can find no authority for it in the law.'

The commission did not undertake to determine whether the rules are unjust, unreasonable or unjustly discriminatory. It merely decided that it had no jurisdiction and no legal power or authority to consider the rules. There is no substantial dispute concerning the pertinent facts. The order of the commission, therefore, is not one based on a finding of fact but rather it is based on the commission's understanding and interpretation of applicable law.

The proposed amendment of Eureka's existing tariff divides oil wells into three categories for the purposes of the proposed tariff. Stripper wells are classified as wells which produce monthly no more than ninety barrels of oil each or three barrels a day. Secondary recovery wells are those involving the production of oil by artificial means, such as gas injection or water flooding. The wells in the third category are, generally speaking, the never wells with a high production capacity.

During the early months of 1963, there were 11,658 stripper wells. That total includes approximately 1,800 secondary recovery wells which have an average daily production of less than one barrel each. During the same period in 1963, there were 488 wells in the third category having a monthly production in excess of ninety barrels each. The 488 wells produced 50.42% of the oil, while the remainder was produced by the 11,658 wells in the stripper category. Devonian, the sole protestant, has a total of ten wells. Three of the ten are stripper wells.

The rules and regulations contained in the proposed tariff are as follows:

'(a) This company will first accept for transportation from each stripper well served by its system that quantity of oil produced and purchased equal to ninety (90) barrels per month, or so much of said quantity as said well shall produce.

'(b) It will then accept for transportation that quantity of oil produced and purchased from leases operated in a program of secondary recovery or pressure maintenance by means of gas injection, water flood or other method, up to a total equal to the maximum rate per well established for this company's system as hereinafter provided, times the number of wells being actively operated in such a program. This company will accept an amount in excess of the maximum established rate only when it is demonstrated that such restriction will reduce the ultimate recovery of said project.

'(c) It will then accept for transportation the remaining oil produced and for which there are purchasers available from all wells served by its system capable of producing such oil to a maximum monthly limit per well which will be determined monthly for the system, as hereinafter provided, and may vary from month to month. This production will be ratably taken from all such wells capable of producing above the maximum rate.

'(d) Any determinations required to be made under these regulations will be made on the basis of data and information available to this company from producers, purchasers and other sources considered reliable. This company will not be held responsible to any person or company for any such determination made in good faith on the basis of such information. This company will give careful attention to data and information provided it by ...