[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]


-----------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \3\ See 18 CFR Sec. 835.213(a) (1) and (2) (1996).
    \4\ 18 CFR Sec. 385.101(e) 1996).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \5\ El Paso Natural Gas Co., 18 FERC para. 61,015 (1982).
    \6\ Id. at 61,021 (Ordering Paragraph D).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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