Williams Field Serv. Group v. Fed. Energy Comm'n.
| Decision Date | 26 October 1999 |
| Docket Number | No. 98-1241,98-1241 |
| Parties | (D.C. Cir. 1999) Williams Field Services Group, Inc., et al.,Petitioners v. Federal Energy Regulatory Commission, Respondent Salt River Project Agricultural Improvement and Power District, et al., Intervenors Consolidated with98-1329, 98-1330, 98-1331, 98-1352 |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
On Petitions for Review of Orders of theFederal Energy Regulatory Commission
Richard C. Green argued the cause for petitioners Amoco Production Company, et al. on the jurisdictional issue. With him on the briefs were Judy A. Johnson, Kenneth M. Minesinger, Robert M. Lamkin, James R. McCotter, Frederick T. Kolb, Katherine B. Edwards, and Bruce A. Connell.
Katherine B. Edwards argued the cause for petitioners Amoco Energy Trading Corporation, et al. on the nonjurisdictional issues. With her on the briefs were Frederick T. Kolb and Bruce A. Connell.
Joseph S. Koury argued the cause for petitioner Williams Field Services Group, Inc. With him on the briefs was Mari M. Ramsey.
Judith A. Albert, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With her on the brief were, Jay L. Witkin, Solicitor, and Susan J. Court, Special Counsel.
Richard C. Green, Judy A. Johnson, Kenneth M. Minesinger, Robert M. Lamkin, and James R. McCotter were on the brief for intervenor El Paso Natural Gas Company in partial support of respondent.
Joseph S. Koury and Mari M. Ramsey were on the brief for intervenor Williams Field Services Group, Inc. in partial support of respondent.
Before:Edwards, Chief Judge, Sentelle and Randolph, Circuit Judges.
Opinion for the Court filed by Chief Judge Edwards.
Numerous issues have been raised in this case. The principal issue before the court, however, is whether a natural gas compressor, the Chaco compressor station, is a "gathering" facility or a "transmission" facility. A transmission facility is subject to the regulatory jurisdiction of the Federal Energy Regulatory Commission ("FERC" or "Commission"), whereas a gathering facility is not. El Paso Natural Gas ("El Paso") sought to transfer all of its gathering facilities to its subsidiary, El Paso Field Services ("Field Services"), but it did not transfer the Chaco compressor station. El Paso claims the Chaco compressor station is a transmission facility. Williams Field Services ("Williams"), a competitor of Field Services and a petitioner in this case, disagrees. FERC also now disagrees and, after initially deciding otherwise, has found that the Chaco compressor station is a gathering facility because its pressure is necessary both to process the natural gas and to overcome the pressure on the mainline to deliver the natural gas. El Paso argues that this decision was arbitrary and should be overturned. Because FERC's decision is consistent with its precedent and well-reasoned, we uphold it.
The related issue in this case is whether and how FERC's decision that the Chaco compressor station served a gathering function should have affected El Paso's rates. Before FERC rendered its decision regarding the Chaco compressor station, El Paso entered into a Rate Settlement ("Settlement") with various shippers. In 15.2 of this Settlement, the parties agreed to treat the Chaco compressor as a transmission facility for the purpose of the rates agreed to in the Settlement. FERC approved the Settlement.
As mentioned above, FERC initially decided that the Chaco compressor station served a transmission function. This decision was consistent with the Settlement. Its decision to reverse that finding caused problems. Williams argued that because the Commission had determined that the Chaco compressor was a gathering facility, it was unfair to allow El Paso to include Chaco's costs in its transmission rates. Williams argued that FERC should remedy this inconsistency by forcing El Paso to remove the costs of the Chaco compressor from its transmission rates. The Indicated Shippers, the third set of petitioners in this case, had the opposite complaint. (The Indicated Shippers who appear before this court are: petitioners Amoco Energy Trading Corp., Amoco Production Co., Burlington Resources Oil & Gas Co., and Conoco Inc., and intervenor Marathon Oil Co). They argued that 15.2 precluded FERC from adjusting any of El Paso's rates, including fuel rates, as a result of its decision that the Chaco compressor was a gathering facility.
FERC split the baby. It agreed with the Indicated Shippers that 15.2 precluded any change to El Paso's rates as a result of the Chaco compressor's changed status. It found, however, that fuel charges were not part of the rates referred to in 15.2 and so could be adjusted to reflect the Chaco compressor's new status. In the meantime, this court remanded FERC's order approving the very Settlement that justified FERC's decision regarding the rate issues. See Southern California Edison Co. v. FERC, 162 F.3d 116 (D.C. Cir. 1999) ("Edison"). As a result of the remand, the status of the Settlement is unclear. Because FERC's orders are dependent on an interpretation of a Settlement that is no longer settled, we vacate those orders as they relate to El Paso's Settlement and remand the issues raised by Williams and the Indicated Shippers.
In January of 1994, pursuant to 7(b) of the Natural Gas Act ("NGA" or the "Act"), El Paso applied to abandon all of its non jurisdictional gathering, treating, and processing facilities. See 15 U.S.C. 717f(b) (1994). FERC has jurisdiction over the transmission of natural gas, but it does not have jurisdiction over the gathering, treating, or processing of natural gas. See 15 U.S.C. 717(b) (1994). The line between the two is not always clear, but it is important. If a facility is "functionalized" as transmission, the regulated company--in this case, El Paso--may incorporate the cost of that facility into its rates. If it is functionalized as gathering, it may not.
El Paso intended to abandon all of its non jurisdictional facilities by transferring them to its wholly owned subsidiary, Field Services. The Chaco plant, located in the San Juan basin, was one of the systems that El Paso intended to transfer to Field Services. The Chaco plant consists of liquid extraction, dehydration, and compression facilities. El Paso transferred most of these facilities to Field Services. But one of the compressor stations, the Chaco compressor station, was not transferred to Field Services. The Chaco compressor station consists of 16 compressor units that have a total of 77,960 hp and that generate more than 800 pounds of pressure. See El Paso Natural Gas Co., 81 F.E.R.C. p 61,209, at 61,890 (1997). The Chaco compressor pressurizes gas coming in from the fields before it enters a liquid extractor. Liquid extraction is a part of natural gas processing and the extractor is a nonjurisdictional facility. El Paso did not transfer the Chaco compressor station to Field Services because it believed that Chaco was necessary to preserve mainline capacity and so served a jurisdictional transmission function. Williams argued that the Chaco compressor was a gathering facility and should have been transferred to Field Services.
In September 1995, FERC approved El Paso's application to abandon its gathering facilities. See El Paso Natural Gas Co., 72 F.E.R.C. p 61,220 (1995). In that same order, however, FERC also required El Paso to show cause why it did not abandon the Chaco compressor. See id. at 62,020. After El Paso transferred the Chaco plant facilities to Field Services, Field Services replaced the liquid extractor, which used a "lean oil" method, with a new cryogenic liquid extractor. The relevant difference between the two is that, to function efficiently, the cryogenic extractor needs the large amounts of pressure produced by the Chaco compressor station.
Meanwhile, before the show cause proceeding regarding the Chaco compressor was completed, El Paso sought a rate increase in an entirely separate proceeding. In 1996, El Paso submitted a Settlement in that rate proceeding, which contained a provision relating to the pending dispute over the Chaco compressor. This provision, 15.2, provides:
15.2 Refunctionalization Issues. In consideration of the other provisions of this Stipulation and Agreement, all El Paso facilities underlying the rates in Docket No.RP95-363-000, are properly functionalized as transmission facilities solely for the term of this Stipulation and Agreement. Accordingly, (i) the show cause proceeding in Docket No. CP94-183-002 shall be terminated without prejudice to later filings after the term of this Stipulation and Agreement; (ii) during the term of the Stipulation and Agreement, no party shall contest, in any Commission proceeding, the functionalization of El Paso's facilities; and (iii) regardless of any actions taken by the Commission or by non-consenting parties to this Settlement Agreement, the settlement rates established herein will not be subject to change during the term of this Stipulation and Agreement based on any refunctionalization issue.
Stipulation and Agreement in Settlement of Rate and Related Proceedings, reprinted in Joint Appendix ("J.A.") 661.Williams objected to 15.2, arguing that if the Chaco compressor was later found to be nonjurisdictional, this provision would improperly allow El Paso to continue to incorporate Chaco's costs into its transmission rates. Williams complained that the effect of this provision is to subsidize Field Services because Field Services would not have to pay the compressor's costs.
Despite Williams' objections, FERC approved the Settlement on April 16, 1997, finding that it was a "fair and reasonable resolution of difficult issues." El Paso Natural Gas Co., 79 F.E.R.C. p 61,028, at 61,131 (1997), reh'g denied, 80 F.E.R.C p...
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