PacifiCorp v. Nw. Pipeline GP

• Decision Date: 16 July 2012
• Docket Number: No. 3:10–cv–00099–PK.,3:10–cv–00099–PK.
• Citation: 879 F.Supp.2d 1171
• Parties: PACIFICORP, an Oregon corporation, Plaintiff, v. NORTHWEST PIPELINE GP, a Delaware Partnership, and Gas Transmission Northwest Corporation, a California corporation, Defendants.
• Court: U.S. District Court — District of Oregon

879 F.Supp.2d 1171

PACIFICORP, an Oregon corporation, Plaintiff,

v.NORTHWEST PIPELINE GP, a Delaware Partnership, and Gas Transmission Northwest Corporation, a California corporation, Defendants.

No. 3:10–cv–00099–PK.

United States District Court,

D. Oregon.

July 16, 2012.

Bruce L. Campbell, Justin C. Sawyer, Joshua M. Sasaki, Miller Nash LLP, Portland, OR, for Plaintiff.

Jessica A. Skelton, Kymberly K. Evanson, Matthew J. Segal, Pacifica Law Group, LLP, Seattle, WA, Philip S. Van Der Weele, K & L Gates LLP, Portland, OR, David W. Elrod, Susan D. Nassar, Worthy W. Walker, Elrod, PLLC, Dallas, TX, Paul B. George, Lane Powell PC, Portland, OR, for Defendants.

OPINION AND ORDER

PAPAK, District Judge:

Plaintiff PacifiCorp brings this action alleging state law claims for negligence, negligence/res ipsa loquitor, trespass, and nuisance against Northwest Pipeline (“Northwest”) and negligence /res ipsa loquitor and breach of contract against Gas Transmission Northwest (“GTN”), arising from shut-downs of the natural gas power generation plant in Hermiston, Oregon purportedly caused by compressor oil in the gas supply that contaminated the generator turbines. Now before the court are motions for summary judgment by PacifiCorp, GTN, and Northwest, (# 253, # 251, # 243), motions for sanctions based on spoliation filed by GTN and Northwest, (# 284, # 279), GTN's motion to stay proceedings and refer issues to the Federal Energy Regulatory Commission (“FERC”) (# 240), and PacifiCorp's motions to compel against GTN and Northwest (# 196, # 194). For the reasons described below, Northwest's motion for summary judgment is granted, GTN's motion for summary judgment is granted in part and denied in part, PacifiCorp's motion for summary judgment is granted in part and denied in part, Northwest's spoliation motion is denied as moot, GTN's spoliation motion is granted in part and denied in part, GTN's motion to stay is granted, PacifiCorp's motion to compel evidence from Northwest is denied as moot while PacifiCorp's motion to compel evidence from GTN is granted in part and denied in part.

BACKGROUND

I. The Parties

Plaintiff PacifiCorp is an Oregon utility company that sells electricity to retail customers. (First Amend. Compl., # 61, ¶ 2.) PacifiCorp and Hermiston Generating Company, L.P. (“HGC”) each own a 50% undivided interest in the Hermiston Station, a natural gas power generation plant in Hermiston, Oregon. Id. at ¶ 5. Under a Long–Term Power Sales Agreement and an Ownership and Operating Agreement, PacifiCorp is entitled to purchase the electric power generated by the Hermiston Station from HGC. Id. The Hermiston plant consists of two General Electric (“GE”) 7FA gas turbines, referred to as Unit 1 and Unit 2, that generate power by combusting natural gas. PacifiCorp is responsible for providing all fuel for the plant. (Skelton Decl., # 248, Ex. 1) (Tenney Dep., at 153:20–154:12.)

In general, gas combusted by the plant originates in Canada, travels through pipelines owned and operated by defendant GTN, flows into a seven-mile-long local pipeline system operated by Cascade Natural Gas Corporation (“Cascade”) at the Hermiston Meter Station, and arrives at the Hermiston plant. GTN provides gas to the Hermiston Meter Station through two parallel pipelines, the “A” and “B” lines. GTN's predecessor entered into a transportation agreement with HGC (the “FT agreement”) providing for the transport of natural gas from Canada to the Hermiston Meter Station. (Roscher Aff., # 23, Ex. 1.) The FT agreement incorporated the terms and conditions of GTN's FERC gas tariff. Id., Ex. 1 at ¶ 1.2. The tariff sets certain quality standards for the gas that GTN transports on behalf of the “shipper” of the gas. Id., Ex. 2, at ¶ 3.1. In general, the tariff requires the gas to be “merchantable.” Id. The tariff also requires that the gas: “Shall be commercially free from sand, dust, gums, crude oil, impurities and other objectionable substances which may be injurious to pipelines or which may interfere with its transmission through pipelines or its commercial utilization.” Id. at ¶ 3.1(b)(1). In addition to these general requirements, the tariff sets more specific gas quality standards, such as for hydrocarbon dew-point, temperature, hydrogen sulfide, sulpher, carbon dioxide, water vapor, and oxygen. Id. at ¶ 3.1(b).

Defendant Northwest Pipeline also operates a pipeline transporting natural gas from Canada. Northwest's pipeline interconnects with GTN's “A” line at the Stanfield Interconnect, approximately 12 miles upstream from the Hermiston plant. Northwest can both deliver gas to GTN and receive gas from GTN at Stanfield. Northwest typically provides gas to GTN in the late spring through early fall and receives gas from GTN during the rest of the year. Northwest does not have a contract to provide fuel for HGC or PacifiCorp. However, Northwest and GTN have an Interconnect & Operating Agreement governing gas quality at Stanfield. (Richards Decl., # 246, Ex. 4.) That agreement provides that the gas quality tariff provision of the party receiving gas governs the quality of gas delivered at Stanfield—when GTN receives gas from Northwest, GTN's tariff applies, and when Northwest receives gas from GTN, Northwest's tariff applies. Id. at 8–9, 23–24.

II. Compressors and Compressor Oil

Because the Northwest pipeline operates at a lower pressure than the GTN pipeline, GTN must compress gas that it receives from Northwest at Stanfield using a wet seal compressor. (Sawyer Decl., # 265, Ex. 4, at 1). Northwest also employs reciprocating gas compressors on its pipeline, and some wet seal compressors not far from Stanfield. Id. Both the wet seal compressor and reciprocating compressors require oil for either lubrication or sealing. (Sawyer Decl., # 265, Ex. 5) (Zaitz Dep., at 117–118). By design, a small amount of compressor oil enters the gas stream such that compressor oil is known to be a normally occurring substance in natural gas pipelines. Id. (Zaitz Dep., at 101, 118, 141).

III. Gas Conditioning

Before arriving at the Hermiston plant, gas passes through several sets of gas conditioning equipment to remove liquids from the gas stream. GTN operates a scrubber at the Stanfield metering station within the Stanfield Interconnect to removed liquids. GTN also operates a gas heater and particulate filter at the Hermiston metering station. (Skelton Decl., # 248, Ex. 7) (Plaster Dep., at 57:5–19). In addition, the gas passes through Cascade's particulate filter before reaching the plant. Upon entering the plant, the gas passes through two fuel gas scrubbers, located upstream of each turbine. (Skelton Decl., # 248, Ex. 11, at 3) (Black & Veatch Report.)

IV. Oil and Fuel Nozzle Problems Before 2007

Hermiston plant manager Frank Glasgow states that, from the plant's opening in 1996 until January 2007, “the Plant had operated without any problems attributable to equipment associated with a fuel nozzle, and it had never experienced a forced outage attributable to gas quality.” (Glasgow Decl., # 325, ¶ 7.) However, Hermiston plant employees raised concerns to GTN about the presence of oil in the gas supply as early as 2001, but GTN reported no presence of oil in the white paper filters at the Hermiston meter station. (Skelton Decl., # 248, Ex. 24) (GTN submissions to FERC). Moreover, GE maintenance records starting in 2001 document a number of fuel nozzle problems. In 2001, GE inspections revealed burned fuel nozzle tips. (Skelton Decl., # 248, Ex. 25.) Similarly, an inspection in 2003 found “a couple of burned fuel nozzle tips.” (Walker Decl., # 305, Ex. 24, at 7.) Then, in 2005, GE found fuel nozzle assemblies to be in “poor condition” due to gas tip diffusion, erosion, end cover insert leakage, and end cover heavy hydrocarbon contamination. (Skelton Opp. Decl., # 310, Ex. 1, at 1.)

V. Claimed OutagesA. January 2007 Outage and Ensuing Investigation

From January 25, 2007 to January 28, 2007, the Hermiston plant experienced the first alleged forced outage of Unit 2. (Glasgow Decl., # 325, ¶ ¶ 19–20.) The plant initially detected high carbon monoxide emission levels. Id. at ¶ 25. When the plant could not reduce the levels through tuning, the plant shut down Unit 2 on January 26, 2007. Id. at Ex. 14, at 5 (GE Inspection Report). GE staff removed the Unit 2 burner assemblies, installed a spare set of assemblies that the plant had on hand, and restarted Unit 2 on January 28, 2007. Id. In late February 2007, Glasgow watched while GE conducted flow testing and disassembled the Unit 2 fuel nozzle assembly at GE's inspection facility. Id. at ¶¶ 25–26. Glasgow observed what he described as “coking” on the inner fuel nozzles. Id. at ¶ 26. Two photographs were taken of a burner and burner tube, representing the “average condition” of the inner fuel nozzles after the January outage, two photographs were taken of the inside of the fuel nozzle orifices, and a series of photographs were taken while a GE engineer used a boroscope to inspect the annulus ring within the fuel nozzle assembly. Id. at ¶¶ 26, 28, 29, Ex. 1, Ex. 3, Ex. 5. Given the “coking” downstream from the annulus and the dark substance Glasgow observed in the annulus ring, he concluded that stains visible in the annulus were likely dried compressor oil. Id. at ¶ 29. GE, however, did not mention compressor oil in its inspection report. Instead, GE noted the boroscope inspection found debris “resembling masking tape particles” in two end covers and concluded simply that “it is likely that contamination restricted the flow of fuel to the combustion chamber, causing abnormal combustion.” Id. at Ex. 14, at 9.

On March 14, 2007, HGC apparently convened a meeting with a GTN engineer, Doug Zaitz, and employees of Cascade and the Hermiston plant to discuss concerns about gas contamination. (Sawyer Decl., # 265, Ex. 5, at 13) (Zaitz Dep.) Representatives of the Hermiston plant told Zaitz that over the past few years they...