[Federal Register Volume 62, Number 116 (Tuesday, June 17, 1997)]
[Notices]
[Pages 32771-32772]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-15819]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
[Docket No. CP96-596-000]
El Paso Natural Gas Company; Order To Show Cause
June 11, 1997.
On June 25, 1996, El Paso Natural Gas Company (El Paso) filed a
prior notice request to construct and operate a delivery point on its
Santan Line in Maricopa County, Arizona to deliver natural gas to
Southwest Gas Corporation (Southwest).
Thereafter, El Paso filed a notice of withdrawal of its prior
notice request, citing a 1981 Gas Sales Agreement between El Paso and
Salt River Project Agricultural Improvement and Power District (Salt
River). The 1981 Gas Sales Agreement provides that the Santan Line will
not be used without Salt River's consent for any purpose except the
transportation of gas to Salt River.
On August 16, 1996, Southwest filed in opposition to El Paso's
notice of withdrawal. Southwest contends that the Santan Line
facilities have been incorporated into El Paso's jurisdictional open-
access interstate transmission system and that El Paso's decision not
to proceed with the construction of the delivery point constitutes
discriminatory denial of access.
For the reasons discussed below, the Commission is requiring El
Paso to show cause why it should not be required to construct and
operate the delivery point for and provide the proposed transportation
service to Southwest if capacity is available.
I. Procedural Matters
Notice of El Paso's prior notice request for authorization to
construct and operate a delivery point to permit the transportation and
delivery of natural gas to Southwest under El Paso's blanket
certificate was published in the Federal Register on July 8, 1996 (61
FR 35729).\1\ Eight parties filed timely, unopposed motions to
intervene.\2\ Timely, unopposed motions to intervene are granted by
operation of rule 214 of the Commission's regulations.
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\1\ El Paso was granted a Part 157 blanket certificate in El
Paso Natural Gas Co., 20 FERC para. 62,454 (1982).
\2\ They are: Amoco Production Co., Arizona Public Service Co.,
Citizens Utilities Co., Colorado Interstate Gas Co., Conoco, Inc.,
El Paso Municipal Customer Group, Southern Union Gas Co., and
Southwest Gas Corp.
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On August 7, 1996, El Paso filed a notice of withdrawal of its
prior notice request. Salt River filed in support of El Paso's notice
of withdrawal on August 14, 1996; at the same time it filed a
conditional protest opposing El Paso's prior notice request should the
notice of withdrawal not become effective. On August 16, 1995,
Southwest filed a motion opposing El Paso's notice of withdrawal.
Thereafter, Salt River and Southwest filed a series of pleadings in
the nature of answers and responses to answers. While our rules do not
permit answers to answers,\3\ we may, for good cause, waive a rule.\4\
We find good cause to do so in this instance. Accordingly, to achieve a
complete and accurate record, we will accept and consider all tendered
pleadings.
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\3\ See 18 CFR Sec. 835.213(a) (1) and (2) (1996).
\4\ 18 CFR Sec. 385.101(e) 1996).
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II. Background
On January 11, 1982, the Commission issued an order authorizing El
Paso to construct and operate 9.9 miles of 12.75-inch diameter pipeline
to extend from El Paso's existing 16-inch Ocotillo Pipeline eastward to
Salt River's Santan combined-cycle generating station (Santan Plan) for
the transportation and delivery of natural gas for direct salt to Salt
River.\5\ This order provided that ``[c]osts associated with the
construction and operation of the facilities authorized herein shall
not be allocated to jurisdictional customers under a Natural Gas Act,
Section 4 filing by El Paso.'' \6\
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\5\ El Paso Natural Gas Co., 18 FERC para. 61,015 (1982).
\6\ Id. at 61,021 (Ordering Paragraph D).
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The 1981 Gas Sales Agreement between El Paso and Salt River, under
which the direct sales were initiated, states that the Santan Line will
not be used without Salt River's consent for any purpose except the
transportation of gas to Salt River.
In 1990, El Paso and Salt River entered into a Transportation
Service Agreement regarding the use of the Santan Line. Under the
Transportation Service Agreement, Salt River, pursuant to Subpart A of
Part 284 of the Commission's regulations, converted its full natural
gas requirements under the existing Gas Sales Agreement to firm
transportation service. The 1990 Agreement provides that El Paso will
continue the same quality of service El Paso provided under the
existing Gas Sales Agreement, with only those modifications that are
necessary to reflect the conversion of service from sales to
transportation.
III. The Parties' Position
Southwest, stating that the 1981 Gas Sales Agreement between Salt
River and El Paso has been converted to full requirements firm
transportation service, contends that the Santan Line has been
incorporated into El Paso's jurisdictional open-access interstate
transmission system. Southwest states that El Paso has informed it that
Salt River has not paid a surcharge for the sole use of the Santan Line
for some time; Southwest infers from this that operation and
maintenance costs associated with the Santan Line are recovered by El
Paso through its systemwide rates. Southwest contends that all open-
access transportation customers should have an equal right of access to
any part of the pipeline's integrated transmission system on a non-
discriminatory, non-preferential basis subject to the pipeline's
operating tariff provisions and delivery and receipt point priorities.
Accordingly, Southwest concludes that El Paso's failure to construct
the delivery point could constitute a discriminatory denial of access
to El Paso's open-access transmission system.
[[Page 32772]]
Salt River responds that El Paso designed and constructed the
Santan Line to serve the exclusive needs of Salt River's Santan Plant,
and that Salt River reimbursed El Paso for the construction and
operational costs of the Santan Line through an incremental surcharge
and minimum purchase obligation. It states that as a result of this
arrangement, El Paso was prohibited by the terms of the Santan Line
certificate from allocating costs associated with the construction and
operation of the Line to its jurisdictional customers.
Salt River adds that the 1990 Transportation Service Agreement
converting the 1981 Gas Sales Agreement to full requirements
transportation service provides for continuation of the same quality of
service as provided under the 1981 Gas Sales Agreement, modified only
as necessary to reflect the conversion of service from sales to
transportation. Thus, Salt River concludes that the Santan Line is not
part of El Paso's open-access transmission system, and that the
provision that the Santan Line will not be used by El Paso for any
purpose other than to serve the Santan Plant is legally enforceable.
Salt River states nonetheless that it is willing to consider a
proposal by El Paso to install a new tap for Southwest on the Santan
Line assuming adequate capacity exists to ensure that the peak
generating capability of the Santan Plant will not be adversely
affected. Salt River adds that it has advised Southwest that, because
the new tap would be located upstream of the Santan Plant, Salt River,
at a minimum, must have written assurance that it will receive adequate
notice of and be fully compensated in the event gas intended for Salt
River at the Santan Plant is otherwise diverted to Southwest.
IV. Discussion
Under section 5 of the Natural Gas Act (NGA), the Commission has
``broad power to stamp out undue discrimination,'' including the
authority to impose ``suitable remedies'' in an appropriate case.\7\
That authority includes the power to order an interstate pipeline to
add new delivery points.\8\
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\7\ Associated Gas Distributors v. FERC, 824 F.2d 981, 1001
(D.C. Cir. 1987), cert. denied sub nom. Interstate Natural Gas Ass'n
of Am., 485 U.S. 1006 (1988).
\8\ City of Gainsville, Fla. v. Florida Gas Transmission Co., 55
FERC para. 61,486, at p. 62,664 (1991).
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Under Part 284 of the Commission's regulations, an interstate
pipeline with a blanket certificate must provide service without undue
discrimination. Although the rules do not require that a pipeline
construct facilities,\9\ the pipeline cannot discriminate against any
shipper in constructing minor facilities to accept or deliver
supplies.\10\ The Commission consistently interprets this to mean that
if a pipeline decides to build facilities for one customer, it must
build facilities for other similarly situated shippers on a non-
discriminatory basis,\11\ unless there is some appropriate
justification not to do so.\12\
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\9\ Order No. 436, at p. 31,550.
\10\ Id., Order No. 636-A, at p. 30,585.
\11\ See, e.g., Texas Eastern Transmission Corp., 37 FERC para.
61,260, at p. 61,683 n. 114 (1986).
\12\ Id. at p. 61,679.
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Here, the dispute focuses on whether El Paso must provide non-
discriminatory open-access service to Southwest on the Santan Line
pursuant to Part 284 of our regulations, if capacity is available and
despite the sole-use provision in Salt River's Agreement.
Since El Paso is presently providing open-access service to Salt
River on the Santan Line, the Commission will require that El Paso show
cause why it should not be required to provide a delivery point for
Southwest. In doing so, El Paso should provide, in particular, all
information necessary to make a determination as to: (1) Why the
provisions of the 1981 Gas Sales Agreement and the 1990 Transportation
Service Agreement should be considered to override the terms and
conditions imposed on service rendered under Part 284 of the
Commission's regulations; (2) why the Commission should not require the
parties to amend their contract to remove the sole use provision; and
(3) why El Paso should not be required to construct and operate the
delivery point for and provide the proposed transportation service to
Southwest if capacity is available.
In its response, El Paso should address the specific concerns
raised above by the Commission. As stated, the Commission is accepting
considering all previously tendered pleadings. Therefore, the parties
should not reiterate any arguments from those pleadings.
The Commission Orders
(A) Within 30 days of the issuance of this order, El Paso is
ordered to show cause why it should not be required to provide a
delivery point for Southwest, as described above.
(B) Notice of this proceeding will be published in the Federal
Register. Interested parties will have 20 days from the date of
publication of the notice to intervene.
By the Commission.
Lois D. Cashell,
Secretary.
[FR Doc. 97-15819 Filed 6-16-97; 8:45 am]
BILLING CODE 6717-01-M
