[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