43716 Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Notices

1 18 C.F.R. § 284.224 (1996).

2 15 U.S.C. 717c (a), (b) (1994).

3 15 U.S.C.A. § 3371(a)(2) (1994).

4 18 C.F.R. §§ 284.9(b), 284.123(a), 284.123(e)

(1996).

5 15 U.S.C. 717c, 717d, 717o, 3371, 3411 (1994).

6See AOG’s March 22, 1995 filing in Docket No.

PR95–4–000, AOG’s most recent rate case before the

Commission.

7 Id.

8FERC Stats. & Regs. (Regulations Preambles

1977–1981) ¶ 30,118 (1980).

9Arkansas Oklahoma Gas Corporation, 33 FERC

¶ 61,197 (1995).

10 15 U.S.C. § 3371(a)(2) (1994).

11When AOG received its Order No. 63 blanket

certificate, the Commission regulated AOG as a

‘‘natural gas company’’ pursuant to the NGA. As

such, AOG had received certificates under NGA

section 7 for constructing and operating facilities

within this Commission’s jurisdiction. In 1989, the

Commission held that the Uniform Regulatory

Jurisdiction Act of 1988 transferred exclusive

jurisdiction over AOG’s transportation of gas to

ultimate consumers from the Commission to the

Arkansas Public Service Commission and the

Oklahoma Corporation Commission. Arkansas

Oklahoma Gas Corporation, 48 FERC ¶ 61,338

(1989). As a result, except for the blanket certificate,

the Commission vacated all NGA section 7

certificates it had previously issued to AOG,

effective October 6, 1988. Nonetheless, AOG

remains subject to the Commission’s jurisdiction to

the extent necessary to enforce the terms and

conditions of the blanket certificate. Id.

12AOG’s May 9, 1995 filing in Docket No. PR95–

4–000, Answer to Item (2), p. 2 of 2.

13This requirement applies to AOG’s

transportation by virtue of section 284.224(e)(1) of

the Commission’s regulations.

14 18 C.F.R. § 284.123(e).

15 18 C.F.R. § 1b.18, 19 (1996). These rules permit

a person to submit a memorandum setting forth its

position on matters relevant to an investigation.

availability of appropriated funds from

which payment for contract purposes

can be made.

Dated: August 8, 1997.

Randolph L. Kesling,

Supervisory Contract Specialist, Acquisition

and Assistance Division.

[FR Doc. 97–21659 Filed 8–14–97; 8:45 am]

BILLING CODE 6450–01–P

DEPARTMENT OF ENERGY

Federal Energy Regulatory

Commission

[Docket No. IN97–3–000]

Arkansas Oklahoma Gas Corporation;

Order Instituting Proceeding

Issued August 8, 1997.

Before Commissioners: James J. Hoecker,

Chairman; Vicky A. Bailey, William L.

Massey, and Donald F. Santa, Jr.

Arkansas Oklahoma Gas Corporation

(AOG) is a local natural gas distribution

company in the Fort Smith, Arkansas

area. It provides interruptible

transportation (IT) of natural gas in

interstate commerce subject to a blanket

certificate issued under section 284.224

of the Commission’s regulations.1 In a

complaint to the Enforcement Task

Force, a potential shipper stated that

AOG’s IT service agreements contain a

‘‘sales provision’’ requiring the shipper

to sell gas to AOG when AOG

determines that the gas is needed to

protect AOG’s sales to its local

customers. The sales provision in AOG’s

IT agreements may violate sections 4 (a)

and 4(b) of the Natural Gas Act (NGA),2

section 311 (a)(2) of the Natural Gas

Policy Act of 1978 (NGPA),3 and

sections 284.9(b)(1), 284.123(a) and

284.123(e) of the Commission’s

regulations relating to transportation

under the blanket certificate.4

This order establishes a proceeding

pursuant to NGA sections 4, 5 and 16

and NGPA sections 211 and 501.5 We

are requiring AOG to sow why it has not

violated NGA sections 4(a) and 4(b),

NGPA section 311(a)(2), or sections

284.9(b)(1), 284.123(a) and 284.123(e) of

the Commission’s regulations. We are

also directing AOG to respond to data

and document requests that relate to

AOG’s blanket certificate transportation.

I. Background

AOG makes direct sales to 60,000

residential and industrial customers in

four Oklahoma and five Arkansas

counties surrounding Fort Smith.6 AOG

obtains system supply from more than

450 local production input points

scattered throughout its system.7

AOG received its Order No. 63 8

blanket certificate from the Commission

on November 13, 1985.9 In particular,

this certificate permits AOG to transport

gas in interstate commerce under the

same conditions as apply to

transportation by intrastate pipelines

under section 311(a)(2) of the Natural

Gas Policy Act of 1978 (NGPA).10 These

conditions are set forth in Part 284,

Subpart C of the Commission’s

regulations. Section 284.224(e)(1) of the

regulations provides that, as relevant

here, any transportation transaction

under an Order No. 63 blanket

certificate is subject to the Subpart C

terms and conditions and reporting

requirements.11 In 1994, AOG

transported 8,334,725 MMBtu pursuant

to its Order No. 63 authority, as

compared to 13,698,875 MMBtu that

AOG distributed to retail customers.12

In discussions with the Task Force,

AOG stated that its IT agreements under

its blanket certificate contain the

following ‘‘sales provision’’ or a similar

provision:

Shipper agrees to sell to Transporter gas

from the wells listed in the Exhibit ‘‘A’’, on

a best efforts basis, when, in Transporter’s

judgment, the purchase of such gas is

necessary to protect the continuity of gas

service to Transporter’s gas purchasing

customers. Such a right to purchase from

Shipper shall be up to the volumes sufficient

for Transporter to cease curtailment. Any

volumes in excess of those required to enable

Transporter to meet its customers [sic] needs

which Shipper can deliver to Transporter

and which Transporter can transport will

thereupon be transported pursuant to other

provisions of the gas transportation

agreement. Transporter will first balance gas

deliveries and redeliveries and if Transporter

is unable to balance them it will purchase the

gas at the greater of the W.A.COG [sic] as

filed with the Arkansas Public Service

Commission for AOG system purchases or

the ‘‘net back’’ price plus Transporter’s

transportation attributable to Purchaser’s

contract. (Use average W.A.COG for

preceding twelve months.) Transporter

further has the right to purchase

transportation gas not currently flowing.

These pricing provisions can be changed by

mutual consent between the parties. This

pricing provision is also subject to other

pricing provisions set forth in any gas

purchase contracts between Shipper and

Transporter. Transporter’s right to purchase

gas hereunder shall be in effect as to any well

listed in Exhibit ‘‘A’’ so long as this

agreement is in effect.

Pursuant to 18 C.F.R. § 284.123(e),

AOG was required to file an operating

statement concerning its transportation

under the blanket certificate.13 The

statement must ‘‘describe [ ] how the

pipeline will engage in these

transportation arrangements, including

operating conditions, such as, quality

standards and financial viability of the

shipper.’’ 14 On March 22, 1988, AOG

filed an amended operating statement

with the Commission that does not refer

to the sales provision.

On June 23, 1997, AOG submitted a

‘‘Statement of Position and Offer of

Settlement’’ (statement), pursuant to

Rules 1b.18 and 1b.19 of the

Commission’s Rules Relating to

Investigations.15 AOG requests

confidential treatment for the statement.

The statement (apart from the offer of

settlement) is a legal argument that does

not contain proprietary or otherwise

privileged information that would be

protected from disclosure under the

Freedom of Information Act. AOG has

not provided any reason why its legal

analysis should not be made public.

Therefore, the Commission grants

AOG’s request for confidential treatment

for the offer of settlement and otherwise

denies its request for confidential

treatment of the remainder of the

statement. The Commission addresses
Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Notices 43717

16Southwestern Public Service Co. v. Red River

Pipeline, 74 FERC ¶ 61,133 at 61,473 (1996)

(Southwestern).

17See Order No. 436, FERC Stats. & Regs. [Regs.

Preambles 1982–1985] ¶ 30,655 at 31,511 (1985)

(‘‘arrangements by pipelines that tie or ‘‘bundle’’

gathering, production, storage or other services not

requested by shippers to self-implementing

transportation service offered under this rule would

constitute undue discrimination in violation of the

non-discriminatory access condition * * * if the

costs of such services are not properly allocable to

a fully-allocated transportation rate.’’)

18 Id. at 31,505 (‘‘[R]easonable operating

conditions imposed routinely by pipelines or

shippers do not per se violate the nondiscriminatory access provision, provided that such

conditions are stated ‘up-front’ in the pipeline’s

transportation tariffs on file with the Commission

and are applied by the pipeline fairly to all

similarly-situated shippers and shipments.’’

[emphasis in original]). In lieu of tariffs, holders of

Order No. 63 blanket certificates file operating

statements setting forth the conditions under which

they will provide interstate transportation. Order

No. 436–A, FERC Stats. & Regs. ¶ 30,675 at 31,692–

93. Thus, even if AOG’s sales provision were

reasonable, it appears that AOG is violating section

284.9(b)(1) because its operating statement does not

disclose the provision.

19Southwestern, supra n. 16 and Transok, Inc., 54

FERC ¶ 61,229 at 61,673 (1991).

20Order No. 63, FERC Stats. & Regs. ¶ 30,118, at

30,825 (1980). The Commission established these

conditions pursuant to NGA section 7(e), 15 U.S.C.

§ 717f(e), which granted the Commission authority

to attach to the certificate ‘‘such reasonable terms

and conditions as the public convenience and

necessity may require.’’

21See, e.g., Associated Gas Distributors v. FERC,

824 F.2d 981, 1016 (D.C. Cir. 1987) (‘‘the authority

of § 311(c) * * * allows [the Commission] to

prescribe ‘terms and conditions’ ’’ for section 311

transportation).

22Conference Committee Report; Joint

Explanatory Statement, H. Rept. 95–1752, at 106–

109 (1978); S. Rept. 95–1126, at 106–109 (1978),

reprinted at 5 Natural Gas Policy Act Information

Service ¶ 311:210 at p. 4.

23E.g., Missouri Gas Energy v. Williams Natural

Gas Company, 79 FERC ¶ 61,204 (1997) (section

311 construction projects must comply with the

environmental requirements of section 157.206(d)

of the Commission’s regulations); Pacific Gas and

Electric Company, 69 FERC ¶ 61,140 at 61,505

(1994) (acceptance of an Order No. 63 blanket

certificate authorizes the Commission to enforce

terms and conditions of the certificate).

24See, e.g., Order No. 63, at 30,827.

below the substantive arguments

contained in the statement.

II. Discussion

With respect to its transportation

under its blanket certificate, AOG is

subject to section 4 of the NGA. NGA

section 4(a) requires that all rules and

regulations affecting or pertaining to

rates or charges for AOG’s blanket

certificate transportation be just and

reasonable. The transportation service

for which shippers pay AOG’s rates

includes a requirement that shippers

sell gas to AOG, at AOG’s discretion, to

help it meet its own system supply

requirements. AOG’s sales provision

appears to be an unreasonable rule or

regulation relating to its rates for

interstate IT service. Moreover, in

determining its rates for transportation

service, AOG does not appear to have

addressed the value of the ‘‘back-up’’

supply service it requires of shippers.

Therefore, to the extent AOG has

required interstate shippers to agree to

the sales provision, AOG appears to

have imposed an unreasonable

regulation relating to its rates for blanket

certificate transportation, in violation of

NGA section 4(a).

NGA section 4(b) prohibits AOG from

any undue preference or discrimination

with respect to its transportation under

the Order No. 63 blanket certificate. The

Commission has implemented this

prohibition by subjecting AOG’s blanket

certificate transportation to section

284.9(b)(1) of the Commission’s

regulations. Under this provision, AOG

must provide interruptible service

‘‘without undue discrimination, or

preference, including undue

discrimination or preference in the

quality of service provided, the duration

of service, the categories, prices, or

volume of natural gas to be transported,

customer classification, or undue

discrimination or preference of any

kind.’’ With respect to its interruptible

transportation, AOG is ‘‘held essentially

to the same non-discriminatory access

standards as an interstate pipeline

providing NGA section 7 service.’’ 16

By tying its interstate transportation

to the sales provision, AOG appears to

have unduly discriminated against

current and potential shippers, in

violation of NGA section 4(b) and

section 284.9(b)(1) of the Commission’s

regulations.17 In addition, AOG appears

to have violated section 4(b) and section

284.9(b)(1) by failing to disclose the

sales provision in the operating

statement AOG filed with the

Commission.18

AOG’s blanket certificate subjects

AOG’s interstate IT service to the terms

and conditions under which intrastate

pipelines provide transportation

pursuant to NGPA section 311(a)(2).

This transportation, which must be

subject to fair and equitable rates and

charges pursuant to section 284.123(a)

of the Commission’s regulations, carries

the same nondiscriminatory conditions

as transportation by interstate

pipelines.19 AOG’s tying of its

transportation to the sales provision

appears to be an unjust and inequitable

condition on its interstate transportation

service, in violation of NGPA section

311(a)(2) and section 284.123(a) of the

Commission’s regulations.

Further, AOG’s failure to include the

sales provision in its operating

statement appears to have violated

section 284.123(e), which requires the

statement to be filed. A requirement that

a shipper agree to sell gas to AOG

appears to be sufficiently central to

‘‘how the pipeline will engage in [Order

No. 63] transportation arrangements’’

that AOG must disclose it in its

operating statement.

In its statement, AOG asserts that the

Commission does not have any

authority over the sales provision. AOG

argues that because the sales provision

relates to AOG’s gas purchases for the

purpose of selling gas to its distribution

customers, the provision is exempted

from Commission jurisdiction pursuant

to NGA section 1(b).

Contrary to AOG’s argument, the

Commission has jurisdiction over the

sales provision because AOG conditions

Order No. 63 transportation on this

provision. AOG’s blanket certificate

permits the company to conduct

transportation permitted by NGPA

section 311.20 Under NGPA section

311(c), the Commission may prescribe

terms and conditions for such

transportation.21 The legislative history

indicates that section 311 ‘‘provides

authority for the Commission to

condition approval of the sale,

transportation, or exchange under this

section upon such specified terms and

conditions as it deems appropriate.’’ 22

The Commission has recognized its

authority to condition section 311

transportation in numerous decisions.23

Thus, the Commission has authority to

determine whether the sales provision is

an appropriate condition of AOG’s

transportation, and to require AOG to

delete the condition upon a finding that

it is not appropriate.

AOG also argues that the sales

provision is ‘‘directly tied to its LDC

state-regulated service obligation.’’

Statement at 9. The Commission would

have jurisdiction over the sales

provision as an encumbrance on

transportation in interstate commerce,

even if the state commission had

expressly authorized it, because Order

No. 63 preempts state law.24 In addition,

contrary to AOG’s assertion, the portion

of AOG’s Arkansas Public Service

Commission tariff that the company

provided at Exhibit B to its statement

makes no mention of the sales

provision. In any event, if AOG believes

that the sales provision contributes to its

ability to perform its state authorized

service obligations, it can remove the

provision from its interruptible

transportation contracts and execute

separate, voluntary sales agreements

that are not a prerequisite for receiving

Order No. 63 service.
43718 Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Notices

25 54 FERC ¶61,229 at 61,672 n.5 (1991).

26 Id. at 61,676. In response, Transok filed an

amended operating statement that deleted a

provision that the Commission determined might

discriminate against interstate shippers. 56 FERC

¶61,275 at 62,083 n.12 (1991).

27 55 FERC ¶61,189 at 61,627 (1991).

AOG also contends that its

interruptible transportation service is a

gathering service that has been regulated

by the Commission as a matter of

convenience. Statement at 15. This

argument proves too much, for if AOG’s

facilities are exempt gathering facilities,

it should not have a blanket certificate.

Indeed, AOG specifies that it does not

want the Commission to declare that

AOG’s facilities are ‘‘gathering.’’

Statement at 17 n.25.

AOG next argues that the Commission

cannot require it to amend its operating

statement by including the sales

provision, and adds that it is not aware

that the Commission has ever required

an intrastate pipeline or an Order No. 63

transporter to amend its operating

statement. Statement at 18–19. AOG

quotes from Transok, Inc.25 for the

proposition that, while the Commission

can reject or suspend proposed changes

in tariff provisions that interstate

pipelines file under NGA section 4, it

cannot reject or suspend an Order No.

63 transporter’s operating statement

filed under NGPA section 311. Here, the

Commission is not considering whether

to reject or suspend AOG’s operating

statement. Instead, the Commission is

exercising its authority to determine

whether AOG’s sales provision is lawful

and whether it should be included in

AOG’s operating statement. That is

consistent with our actions in Transok.

There, the Commission determined,

inter alia, that an intrastate pipeline that

provides section 311 service must

curtail firm shippers on a

nondiscriminatory basis. In that

proceeding, the Commission directed

Transok to amend its operating

statement to meet this requirement.26

AOG next cites CNG Transmission

Corporation 27 for the proposition that

the Commission can only recommend

(not require) the terms and conditions

under which an LDC transacts business

on its system. In that order, the

Commission declined to specify how an

LDC should broker transportation

capacity to end users receiving the

LDC’s non-jurisdictional distribution

service. Here, the Commission is

exercising its authority over the terms of

AOG’s jurisdictional transportation.

Finally, AOG suggests that because

the Commission approved its rates three

times since it filed its operating

statement, the sales provision is

insulated from further review.

Statement at 19. But the Commission

never addressed the sales provision

when it approved AOG’s rates, and

there is no indication that the

Commission was aware of it.

The Commission will require AOG to

show why, by including the sales

provision in its interstate IT agreements,

and by not disclosing this provision in

its operating statement, it has not

violated and is not violating NGA

sections 4(a) and 4(b), NGPA section

311(a)(2) and sections 284.9(b)(1),

284.123(a) and 284.123(e) of the

Commission’s regulations.

The Commission orders:

(A) Within 30 days of the issuance of

this order, AOG shall:

(1) File an answer to the allegations of

violations that conforms to the

requirements of Rule 213 of the

Commission’s Rules, 18 C.F.R. § 385.213

(1996). In its answer, AOG shall admit

or deny, specifically and in detail, each

allegation set forth in Part II of this

order, and shall set forth every defense

relied on. If an allegation is only

partially accurate, AOG shall specify

that part of the allegation it admits and

that part of the allegation it denies.

(2) Show why, by including the sales

provision in its interstate IT agreements,

it has not violated and is not violating

NGA sections 4(a) and 4(b), NGPA

section 311(a)(2) and section 284.9(b)(1)

of the Commission’s regulations.

(3) Show why, by not disclosing the

sales provision in its operating

statement, it has not violated and is not

violating sections 284.9(b)(1) and

284.123(e) of the Commission’s

regulations.

(4) AOG shall separately state the

facts and the arguments that it advances.

AOG must support with exhibits,

affidavits and/or prepared testimony

any facts that it alleges. AOG’s

statement of material facts must include

citation to supporting data. In addition

to its answer, AOG must respond to the

following requests for information and

documents. All materials must be

subscribed and verified as set forth in

sections 385.2005 (a) and (b)(2) of the

Commission’s regulations, 18 C.F.R.

§§ 385.2005 (a) and (b)(2) (1996).

(a) State the full legal name and

business address of each entity with

which AOG has executed a currently

effective Order No. 63 transportation

agreement. For each entity identified,

provide a copy of the transportation

agreement, as amended. For each

transportation agreement provided, state

the expiration date of the agreement if

it is not clearly set forth in the copy of

the agreement.

(b) State whether AOG has ever

invoked the sales provision (or a similar

provision) for any transportation

agreement provided in response to (a).

(c) For each transportation agreement

for which AOG has invoked the sales

provision (or a similar provision),

provide the following information and

documents:

(i) The date on which AOG invoked

the provision;

(ii) The period during which the

shipper sold gas to AOG pursuant to the

provision;

(iii) The quantity and sales price of

the gas the shipper sold to AOG, and the

amount of the transportation charges

AOG refunded to the shipper; and

(iv) All documents relating to AOG’s

purchase of gas under the provision or

notification to the shipper that sales

would no longer be required under the

provision.

(B) AOG’s request for confidential

treatment for its June 23, 1997 statement

is granted with respect to the offer of

settlement contained therein and denied

with respect to the remainder of the

statement.

(C) 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.

Linwood A. Watson, Jr.,

Acting Secretary.

[FR Doc. 97–21613 Filed 8–14–97; 8:45 am]

BILLING CODE 6717–01–M

DEPARTMENT OF ENERGY

Federal Energy Regulatory

Commission

[Docket No. CP97–663–000]

CNG Transmission Corporation; Notice

of Request Under Blanket Authority

August 11, 1997.

Take notice that on July 23, 1997,

CNG Transmission Corporation (CNG),

445 West Main Street, Clarksburg, West

Virginia 26301, filed in Docket No.

CP97–663–000 a request pursuant to

Sections 157.205, 157.211 and 157.216

of the Commission’s Regulations under

the Natural Gas Act (18 CFR 157.205,

157.211 and 157.216) for authorization

to expand the facilities at the existing

Jefferson Measuring and Regulation

Station (Jefferson Station) near Jefferson,

Frederick County, Maryland, under

CNG’s blanket certificate issued in

Docket No. CP82–537–000 pursuant to

Section 7 of the Natural Gas Act, all as

more fully set forth in the request that

is on file with the Commission and open

to public inspection.