[Federal Register Volume 63, Number 184 (Wednesday, September 23, 1998)]
[Notices]
[Pages 50895-50898]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-25374]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
[Docket Nos. PR95-9-000 and PR95-9-001]
Three Rivers Pipeline Company; Order Approving Settlement and
Instituting Proceeding
Issued September 17, 1998.
On August 17, 1995, Three Rivers Pipeline Company (Three Rivers)
filed an uncontested settlement of its rates for transportation service
rendered under Sec. 311(a)(2) of the Natural Gas Policy Act of 1978
(NGPA). Subsequently, staff sent Three Rivers data requests concerning
its transportation services and jurisdictional status. Based on our
review of the settlement and the record in this proceeding, the
Commission finds that the settlement is a reasonable resolution of the
issues concerning Three Rivers' rates in effect between April 1, 1995,
and the issuance of any future order approving superseding rates based
on the outcome of the proceeding instituted by this order. The
Commission also finds, however, that Three Rivers should be required to
explain why the Commission should not find Three Rivers to be an
interstate pipeline subject to the Commission's Natural Gas Act (NGA)
jurisdiction. In the alternative, Three Rivers may produce evidence
that it qualifies as a ``Hinshaw pipeline'' exempt from Commission
jurisdiction under the provisions of section 1(c) of the Natural Gas
Act.
I. Background and Related Proceedings
A. Facilities
In 1946, Mobil Oil Company (Mobil) constructed a 300-mile long, 8-
inch diameter oil-products pipeline extending from southwest
Pennsylvania, at Midland, to the border of New Jersey. Mobil currently
uses its pipeline east of Altoona, Pennsylvania, for the transportation
of oil products. On August 29, 1991, Three Rivers purchased
approximately 121 miles of Mobil's oil-products pipeline extending from
Midland to Altoona in order to render natural gas service. Three
Rivers, then owned by subsidiaries of GEMCO Gas Marketing, Inc. and
Pentex Petroleum, Inc., converted the oil products pipeline to natural
gas use. Subsequently, Three Rivers added compression on the eastern
portion of its system, main line valves, and interconnections with
National Fuel Gas Supply (National Fuel) at the Midland receipt point,
and delivery points at downstream locations in Pennsylvania
[[Page 50896]]
with Columbia Transmission Corp. (Columbia),\1\ Texas Eastern
Transmission Corp. (Texas Eastern), and Peoples Natural Gas (Co.
(Peoples), a local distribution company, at McKeesport, Rager Mt., and
Altoona, Pennsylvania. Three Rivers' system design capacity is 30,000
MMBtu/d, and its annual system design capacity is 10,950,000 MMBtu.
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\1\ On January 1, 1995, Three Rivers converted its
interconnection with Columbia from a receipt point to a delivery
point.
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On November 23, 1993, Parker & Paisley Gas Processing Co. purchased
Three Rivers and certain producing properties, all of which were
subsequently sold to Costilla Energy Inc. (Costilla). On January 1,
1997, Costilla sold Three Rivers to Equitable Resources, Inc.
(Equitable), Three Rivers' current owner. Equitable purchased Three
Rivers because of Three Rivers' ability to traverse major interstate
pipelines serving the Northeast market and to access Appalachian gas
supply through Equitrans, L.P., an affiliated interstate pipeline,
which operates and manages Three Rivers.
B. Three Rivers' Services
1. Intrastate Transportation/Sales
Three Rivers states it commenced gas service on January 17, 1992,
when it received intrastate (Pennsylvania-produced) gas from National
Fuel and commenced firm intrastate bundled sales service to Peoples for
its system supply. From January 17, through March 31, 1992, National
Fuel delivered 396,595 MMBtu of Empire Production Co.'s (Empire)
Pennsylvania production to Three Rivers for sale to Peoples. Empire's
gas supply contract with Three Rivers was for a one year term. Three
Rivers states that it has made no subsequent intrastate sales of
Pennsylvania production.\2\ During January, 1997, Three Rivers received
45,000 Dth of Pennsylvania production from National Fuel, which it
transported for two intrastate transportation customers, Howard Energy
and Atlas Gas Marketing.\3\
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\2\ Data responses (filed April 15, 1998).
\3\ Data responses (filed April 15, 1998).
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2. Interstate Transportation
On April 1, 1992, Three Rivers, considering itself to be an
intrastate pipeline not regulated by the Pennsylvania Public Service
Commission, commenced interstate transportation service on an
interruptible basis on behalf of National Fuel pursuant to NGPA
Sec. 311(a)(2).\4\ Three Rivers transported under NGPA Sec. 311(a)(2)
456,876 MMBtu in 1994; 2,313,284 MMBtu in 1995; 1,930,673 MMBtu in
1996; and 3,336,983 MMBtu in 1997. Three Rivers currently receives all
of this gas from National Fuel near Midland, pursuant to NGPA
Sec. 311(a)(2) and 18 CFR Sec. 284.122, and transports the gas on a
firm and interruptible basis for interstate shippers, such as National
Gas Clearinghouse, Carnegie Natural Gas Co., and Duke Energy, for
delivery at interconnections with Texas Eastern and Columbia.\5\
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\4\ NPA Sec. 2(16) defines an intrastate pipeline as any person
engaged in natural gas transportation (not including gathering)
which is not subject to the jurisdiction of the Commission under the
Natural Gas Act (other than any such pipeline which is not subject
to the jurisdiction of the Commission solely by reason of section
1(c) of the Natural Gas Act).
\5\ Three Rivers annually reports, pursuant to 18 C.F.R.
Sec. 284.126(b), the identity and volumes transported under NGPA
Sec. 311(a)(2).
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Three Rivers also purchases interstate gas from marketers for sale
to Peoples. For example, between February and November, 1994, Three
Rivers purchased interstate volumes from Meridian Marketing and
Transportation Corp., which volumes Three Rivers resold to Peoples in
unregulated sales for delivery at McKeesport.\6\
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\6\ Data responses (filed October 10, 1995).
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C. Part 284 Rate Proceedings
On January 28, 1992, Three Rivers filed a petition for rate
approval in Docket No. PR92-9-000 for interruptible transportation
service under NGPA Sec. 311(a)(2) to become effective on April 1, 1992.
On May 12, 1992, the Secretary of the Commission issued a letter order
approving a settlement in Three Rivers' last rate proceeding
authorizing Three Rivers to charge, effective April 1, 1992, a maximum
interruptible transportation rate of $0.284 cents per MMBtu plus a
maximum 2.5 percent fuel charge.\7\ The settlement required Three
Rivers to file an application for rate approval on or before April 1,
1995, to justify the current systemwide rate or to establish a new
systemwide rate.
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\7\ See Three Rivers Pipeline Co., 59 FERC para.61,181 (1992)
(NGPA Sec. 311(a)(2) rate settlement approved).
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On April 3, 1995, Three Rivers filed a petition for rate approval
in Docket No. PR95-9-000 for authorization to charge, effective April
1, 1995, a maximum interruptible transportation rate of $0.2374 per
MMBtu, a firm demand rate of $4.0514 per MMBtu, a maximum firm
commodity charge of $.1042 per MMBtu plus a maximum fuel charge of 2.5
percent. The Commission extended the time for acting on Three Rivers'
petition, pursuant to 18 C.F.R. Sec. 284.123(b)(2)(ii), to enable the
Commission to determine whether the proposed rates are fair and
equitable.\8\ Staff sent data requests to Three Rivers concerning its
proposed rates. On June 2, 1995, Three Rivers responded to staff's data
requests. Under the Part 284 regulations, Three Rivers is authorized to
collect its proposed rates subject to refund upon the filing of its
petition.
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\8\ Three Rivers Pipeline Co., 72 FERC para. 61,107 (1995).
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On August 17, 1995, Three Rivers filed an uncontested settlement
that addressed staff's concerns. The settlement would authorize a
maximum interruptible rate of $0.1648 per MMBtu, a firm demand rate of
$3.08 per MMBtu, a maximum firm commodity charge of $.0635, and a
maximum fuel charge of .9 percent. Under the settlement, Three Rivers
agreed to refund, with interest, amounts previously collected above
settlement rates. Three Rivers agreed to file, on or before April 1,
1998, an application for rate approval pursuant to 18 C.F.R.
Sec. 284.123(b)(2) to justify the current systemwide rate or to
establish a new systemwide rate. Three Rivers did not file the required
rate application because of the pendency of its settlement.
Discussion
A. Rate Settlement
The Commission's Part 284 regulations (Subpart C) require an
intrastate pipeline to apply for Commission approval of its proposed
Part 284 rates by filing its rates and information showing that the
proposed rates are fair and equitable.\9\ On August 17, 1995, Three
Rivers filed an uncontested settlement that purports to establish fair
and equitable rates for interruptible and firm transportation by Three
Rivers under NGPA Sec. 311(a)(2), effective on April 1, 1995.
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\9\ 18 C.F.R. Sec. 284.123(b)(2)(I).
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The settlement rates are based on calendar year 1994 costs, and
volumes are based on design capacity. The projected throughput,
proposed by Three Rivers, will place the burden of underutilization on
Three Rivers. The settlement rates are less than the filed rates, and
Three Rivers agrees in the settlement to refund the excess and to file
a refund report with the Commission. No customer protests the
settlement, which we find reflects a reasonable resolution of the
issues raised. We find that Three Rivers' proposed settlement rates in
Docket No. PR95-9-000 are fair and equitable for Part 284 services
rendered between April 1, 1995, and any future
[[Page 50897]]
Commission order approving superseding rates based on the outcome of
the proceeding instituted by this order. The proceeding does not affect
the propriety of Three Rivers' rendition of Part 284 services or
collection of Part 284 rates from April 1, 1995 until a future order of
the Commission. The settlement is approved subject to one
clarification.
Article II(A)2 of the settlement requires Three Rivers to have
filed, by April 1, 1998, a petition for rate approval pursuant to 18
C.F.R. Sec. 284.123(b)(2) to justify its settlement rates or to propose
new Part 284 rates. As noted, Three Rivers did not make the required
rate filing because of the pendency of its settlement. The outcome of
this order's proceeding on Three Rivers' jurisdictional status could
affect the rate design and thus the level of Three Rivers'
transportation rates. Accordingly, Article II(A)(2) is clarified to
defer the settlement's requirement that Three Rivers file a new
petition for approval of Part 284 rates, subject to the outcome of the
proceeding.
B. Requirement for Further Proceeding
Three Rivers' pending rate settlement and the Secretary's letter
order approving Three Rivers' last rate settlement assume that Three
Rivers is an intrastate pipeline. While no intervenor in Three River's
pending rate proceeding disputed Three Rivers' status as an intrastate
pipeline, Three Rivers' responses to staff's data requests suggest that
Three Rivers transports natural gas exclusively in interstate commerce
under NGPA Sec. 311(a)(2). Thus, Three Rivers' interstate
transportation activities require us to scrutinize its status as an
intrastate pipeline and to raise the issue whether Three Rivers has
made itself subject to the Commission's NGA jurisdiction. If a bona
fide intrastate pipeline, Three Rivers may continue to provide
transportation service pursuant to NGPA Sec. 311(a)(2) subject to the
Commission's regulation of Part 284 rates, but exempt from the
Commission's NGA jurisdiction.\10\ Or, if Three Rivers is a Hinshaw
Pipeline that is regulated by the Pennsylvania Public Utilities
Commission it would be exempt from Commission regulation pursuant to
section 1(c) of the NGA.\11\ In such a case, however, Three Rivers
would be required to file an application for a certificate under
section 284.224, 18 C.F.R. Sec. 284.224, of the Commission's
regulations to conduct its interstate services. If Three Rivers is not
exempt from the Commission's NGA jurisdiction as a bona fide intrastate
pipeline, local gas distributor, or Hinshaw, Three Rivers would be
subject to NGA Secs. 4, 5, and 7 as an interstate pipeline.
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\10\ 18 C.F.R. Sec. 284.123 and 18 C.F.R. Sec. 284.3(a).
\11\ Midcoast Ventures I, order granting interventions and
issuing certificates, 62 FERC para. 61,029 (1992); order disclaiming
jurisdiction and terminating proceedings, 66 FERC para. 61,285
(1994) (Midcoast).
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Before an intrastate pipeline is eligible to provide open access
transportation under NGPA Sec. 311(a)(2) on behalf of an interstate
pipeline, it must first be a bona fide intrastate pipeline.\12\ The
Commission looks to all the facts and circumstances of a particular
case to determine if the pipeline is eligible to offer interstate
services under NGPA Sec. 311. Essentially, an intrastate pipeline
rendering intrastate service is constructed within the borders of one
state and delivers gas produced in the same state to end-users or an
LDC to be consumed within the same state.
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\12\ In Midcoast Ventures I, 61 FERC para. 61,029 at p. 61,158
(1992), the Commission stated that it has never ruled that a company
could qualify as an intrastate pipeline without doing any intrastate
business in the state where it claims intrastate status * * * The
service provided by Midcoast's facilities in Kansas is intrinsically
interstate in character, since the sole service performed on these
facilities is the transportation of gas from another interstate
pipeline [Williams Natural Gas Co] to an end-user.
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Based upon Three Rivers' data responses, Three Rivers has primarily
transported out-of-state gas in interstate commerce and has not
functioned predominately as an intrastate pipeline exempt from the
Commission's NGA jurisdiction. Nor does it appear that Three Rivers
provides local gas distribution service. To date Three Rivers has not
represented that it qualifies for a Hinshaw exemption. Three Rivers
states that it currently receives out-of-state gas, some volumes
purchased for its system supply resale, and consumption in Pennsylvania
and the rest transported and delivered to interconnecting pipelines for
further transportation out-of-state in interstate commerce. Thus, in
both situations, Three Rivers engages in interstate commerce because it
receives out-of-state gas delivered by National Fuel operating in
interstate commerce. The interstate nature of Three Rivers' operations
is further supported by the fact that Three Rivers has added
interconnections with Columbia and Texas Eastern to move gas owned by
others beyond Three Rivers's system further downstream in interstate
commerce.
Three Rivers sold and delivered 396,595 MMBtu of exclusively
Pennsylvania production to Peoples from the commencement of operations
on January 17, 1992, until April 1, 1992, when Three Rivers because an
open access transporter under NGPA Sec. 311(a)(2). In 1994, Three
Rivers sold Peoples 1,491,467 MMBtu of interstate volumes purchased by
Three Rivers from a marketer, delivered by National Fuel to Three
Rivers, and commingled with the interstate gas stream. There is no
indication in the record, however, that Three Rivers continues to
purchase Pennsylvania production for resale to Peoples.\13\ In its
April 15, 1998 data responses, Three Rivers identifies 45,000 Dth of
intrastate transportation of Pennsylvania gas in January 1997 as the
only intrastate service provided by Three Rivers since 1995. Yet Three
Rivers data responses indicate that it receives out-of-state natural
gas prior to transporting that gas to Columbia and Texas Eastern for
delivery out of Pennsylvania.
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\13\ Data responses (filed October 10, 1995 and April 15, 1998).
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Three Rivers may be an interstate pipeline based on the apparent
absence of any ongoing intrastate transportation service and its
current receipt of exclusively out-of-state volumes from National Fuel
for delivery to Pennsylvania customers and interconnection
jurisdictional pipelines.
Three Rivers was sold and acquired several times since its
conversion in 1991 to natural gas service. Neither Three Rivers nor its
owners/transferees sought NGA Sec. 7 authorization to acquire operate,
or abandon Three Rivers, because it appears that they assumed that
Three Rivers was an intrastate pipeline not regulated by the
Commission.\14\
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\14\ In a similar situation, the Commission required
certification to operate existing interstate storage and connecting
pipeline facilities, previously constructed under NGPA Sec. 311,
where there were no intrastate customers and the facilities only
provided interstate storage services to and from several interstate
pipeline systems. See Egan Hub Partners, L.P., 72 FERC para.61,224
(1995), order on show cause, 73 FERC para.61,334 (1995), and order
denying stay, 74 FERC para.61,021 (1996). See also Petal Gas Storage
Co., 64 FERC para.61,190 (1993), as amended, 67 FERC para.61,135
(1994).
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The regulatory purpose of the NGA of ensuring consumers access to
an adequate supply of gas at a reasonable price may have been
frustrated because Three Rivers has not had to comply with Order No.
636. If Three Rivers were found to operate as an interstate pipeline,
Three Rivers would be subject to Secs. 4, 5, and 7 of the NGA, and
Three Rivers would be required to file initial rates and to comply with
Order No. 636, including the filing of a pr forma FERC tariff stating
its terms and conditions of service, and GISB requirements.
[[Page 50898]]
Accordingly, for these reasons, the Commission is instituting a
proceeding pursuant to NGA Secs. 5, 7, and 16. The Commission is
requiring Three Rivers, within 30 days after the issuance of this
order, to establish why the Commission should not find it to be an
interstate pipeline subject to the Commission's NGA jurisdiction.
The Commission Orders
(A) Three Rivers' settlement in Docket No. PR95-9-001 is approved,
as clarified.
(B) Three Rivers is directed to make refunds to its customers,
within 30 days after the issuance of this order, and to file a refund
report, consistent with its settlement.
(C) A proceeding is institute concerning Three Rivers'
transportation services and operations. Within 30 days after the
issuance of this order, Three Rivers is directed to provide evidence
concerning its jurisdictional status as discussed in the body of this
order.
(C) Notice of this proceeding will be published in the Federal
Register. Interested persons will have 20 days from the date of
publication to intervene.
By the Commission.
David P. Boergers,
Secretary.
[FR Doc. 98-25374 Filed 9-22-98; 8:45 am]
BILLING CODE 6717-01-M
