National Ass'n of Regulatory Utility Com'rs v. F.E.R.C.
| Decision Date | 10 July 1987 |
| Docket Number | Nos. 83-2491,84-2108,s. 83-2491 |
| Citation | 823 F.2d 1377 |
| Parties | The NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS and the State of Utah Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION Respondent, Mountain Fuel Supply Company, Mountain Fuel Resources, Inc., Wexpro Company and Celsius Energy Company, Intervenors. |
| Court | U.S. Court of Appeals — Tenth Circuit |
A. Robert Thorup of Ray, Quinney & Nebeker, Salt Lake City, Utah (Paul Rodgers, Gen. Counsel, Charles D. Gray, Asst. Gen. Counsel, Nat. Ass'n of Regulatory Utility Com'rs, Washington, D.C., James S. Jardine of Ray, Quinney & Nebeker, Salt Lake City, Utah, David L. Wilkinson, Atty. Gen. and Craig R. Rich, Asst. Atty. Gen. of the State of Utah, were also on brief), for petitioners Nat. Ass'n of Regulatory Utility Com'rs.
Joanne Leveque, Washington, D.C. (William H. Satterfield, Gen. Counsel, and Jerome M. Feit, Sol., Washington, D.C., were also on brief), for respondent Federal Energy Regulatory Com'r.
Ray G. Groussman, Gen. Counsel, Mountain Fuel Supply Co., Salt Lake City, Utah, Gary G. Sackett, Div. Counsel, Mountain Fuel Resources, Inc., Salt Lake City, Utah, George J. Meiburger, Frank X. Kelly, Peter C. Lesch and Steve Stojic of Gallagher, Boland, Meiberger and Brosnan, Washington, D.C., and Ruland J. Gill, Jr., Wexpro Co., Salt Lake City, Utah, were on brief, for intervenors Mountain Fuel Supply Co., Mountain Fuel Resources, Inc., Wexpro Co., and Celsius Energy Co.
Before HOLLOWAY, Chief Judge, and SEYMOUR and BALDOCK, Circuit Judges.
The petitions for review under Sec. 19 of the Natural Gas Act, 15 U.S.C. Sec. 717r, present the principal issue whether Mountain Fuel Supply Company's (Mountain Fuel) transportation of natural gas in interstate commerce through its own pipeline from its producing reserves in Colorado and Wyoming for sale by Mountain Fuel to residential, commercial and industrial users in Utah subjects those producing reserves to the jurisdiction of the Federal Energy Regulatory Commission (the Commission) with respect to the initiation, curtailment, quality, quantity and termination of service in connection with delivery of Mountain Fuel's gas. 1 We hold that the Commission acted properly when it ruled that for such purposes, Mountain Fuel's producing reserves were dedicated to interstate commerce and within its jurisdiction and deny the petitions for review.
Mountain Fuel Supply Company is a natural gas distribution company which makes direct sales of natural gas from its pipeline and through its distribution network to retail customers in Utah, Wyoming, and, apparently, Colorado. J.A. A:3-4. Mountain Fuel operates two high pressure pipelines for moving this gas to its distribution facilities in Utah and Wyoming. Its major high pressure pipeline moves gas from Colorado and Wyoming from the north to its distribution network in Utah. Because this northern pipeline crosses state lines, Mountain Fuel obtained a certificate of public convenience and necessity under Sec. 7 of the Natural Gas Act to operate the line and related facilities. 2 However, the Commission has never exercised jurisdiction over the rates charged for sale or transportation of Mountain Fuel's gas transported in this pipeline because that gas has always been destined for Mountain Fuel's Utah and Wyoming retail distribution systems.
In the mid 1950's Mountain Fuel acquired and built a second high-pressure pipeline which runs west from the Utah-Colorado border to the southern end of Mountain Fuel's Utah distribution system near Payson, Utah. In 1964 the Commission exempted this pipeline from its jurisdiction pursuant to the Hinshaw Amendment, Section 1(c) of the Act, 15 U.S.C. Sec. 717(c). J.A. A:4; Mountain Fuel Supply Co., 32 F.P.C. 535 (1964). Mountain Fuel originally purchased gas at the Utah-Colorado border from Cascade Pipeline Company to feed into this southern pipeline. However, in 1976 Mountain Fuel Resources Company (Resources), then a wholly owned subsidiary of Mountain Fuel and now a subsidiary of Mountain Fuel's affiliate, Entrada Industries, acquired Cascade, and Resources now makes these sales to Mountain Fuel. Mountain Fuel Resources, Inc., 55 F.P.C. 2322 (1976). Mountain Fuel sells approximately 90 percent of the gas it transports to retail customers in Utah. J.A. A:6. For approximately forty five years Mountain Fuel has met much of its customers' demand by producing its own gas from wells in Colorado and Wyoming. 3 It also purchases gas in the field and along its own pipelines from independent producers and interstate pipelines, J.A. A:2, and commingles this gas together with its own gas in its pipelines for sale to its retail customers. 4
Mountain Fuel's retail rates in Utah are under the jurisdiction of the Utah Public Service Commission (P.S.C.), but it has also obtained a number of certificates from the Commission under Section 7 of the Act, 15 U.S.C. Sec. 717f, for expansion, extension and modification of its northern pipeline and associated facilities. These certificates are usually needed to allow Mountain Fuel to connect its wells to and transport its gas in its northern pipeline. J.A. A:2-3. However, except in a limited number of instances not pertinent here, the Commission has never regulated the rates for Mountain Fuel's transportation and sale of gas. J.A. A:5.
As a result of a dispute, whose substance is not relevant here, with the Division of Public Utilities of the Utah Department of Business Regulation (the Division), the Utah Committee of Consumer Services (the Committee) and the staff of the Wyoming Public Service Commission over the manner in which Mountain Fuel conducted its production activities and allocated exploration costs, 5 Mountain Fuel undertook to reorganize its retail distribution, transmission and production activities along functional lines. To reorganize its production activities, which are the primary focus here, Mountain Fuel made its affiliate, Wexpro Company, a field operator which would conduct production activities on its currently productive oil and gas properties and gave its other wholly-owned subsidiary, Celsius Energy Company, its exploratory drilling activities. J.A. M:3.
On March 7, 1980, Mountain Fuel, Resources, Wexpro and Celsius applied to the Commission for authority under the Natural Gas Act to implement the reorganization. However, before the Commission could act on the applications, Mountain Fuel, the Division, the Committee, and the staff of the Wyoming Public Service Commission entered into a settlement (the Wexpro Settlement) and a stipulation which resolved their litigation over Mountain Fuel's production activities. J.A. J:2. Prior to the Wexpro Settlement, Mountain Fuel's own natural gas supply came in part from wells it owned or in which it held an interest, and which produced primarily natural gas, and in part from wells which it owned or in which it held an interest, producing primarily other hydrocarbons. The natural gas reserves underlying these two classes of wells constituted Mountain Fuel's producing reserves and are the subject of this proceeding. Mountain Fuel also had undeveloped and unexplored properties, and Wexpro had acquired other property prior to the settlement, which Mountain Fuel never owned.
In broad terms, under the Wexpro Settlement Mountain Fuel has become a natural gas distribution company, but it retains ownership of wells and related facilities which produce primarily natural gas and the gas from these wells. All the natural gas and liquid hydrocarbon production from these wells remains under the Utah PSC's regulatory jurisdiction. Wexpro owns and operates the leases underlying Mountain Fuel's productive gas wells, and it owns and operates the other productive hydrocarbon wells which Mountain Fuel owned previously. Wexpro sells the gas from the liquid hydrocarbon wells to Mountain Fuel at a cost of service, rather than market rate, and it sells gas from the properties it acquired before the settlement at market rates. Celsius explores those properties not yet in production, giving Mountain Fuel the right to purchase natural gas production at market prices. The Utah P.S.C. and the Supreme Court of Utah have both approved the Wexpro Settlement. 6
The Commission was never a party to the Wexpro Settlement or the related stipulation, and neither was ever submitted to the Commission for approval. However, as required by the stipulation, Mountain Fuel amended its applications before the Commission to bring its request for authority to reorganize its production functions into conformity with the stipulation's terms. J.A. M:4. 7
Utah, Wyoming and the National Association of Regulatory Utility Commissioners intervened in the proceedings before the Commission 8 and moved to dismiss the amended applications for reorganization of production on the ground the Commission has no jurisdiction over Mountain Fuel's own production and related facilities or over leasehold and property interests owned by Mountain Fuel and its affiliates, Wexpro and Celsius. After requesting briefs on the jurisdictional issue, Mountain Fuel Supply Co., 21 FERC p 61,316, (1982), J.A. M, the Commission, on July 22, 1983, ruled, over the dissent of one commissioner, that:
... Mountain Fuel's pipeline production, which flows and is transported in interstate commerce, and all leasehold and property interests associated with that production are dedicated to interstate commerce and are subject to our jurisdiction under the Natural Gas Act except to the extent that Section 601(a)(1) of the [Natural Gas Policy Act] eliminates the Commission's Natural Gas Act jurisdiction for certain first sales. All leasehold and property interests, which contain only undeveloped natural gas reserves, are not subject to our jurisdiction under the...
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