* District Judge for the Northern District of Texas, sitting by designation. 1 United States Court of Appeals Fifth Circuit 

## FILED March 15, 2007 Charles R. Fulbruge III Clerk IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 05-61173

JUPITER ENERGY CORPORATION, Petitioner,

versus FEDERAL ENERGY REGULATORY COMMISSION, Respondent.

On Petition for Review of Orders of the Federal Energy Regulatory Commission
Before DAVIS and STEWART, Circuit Judges, and GODBEY, District Judge. * CARL E. STEWART, Circuit Judge: Jupiter Energy Corporation (“Jupiter”) applied to the Federal Energy Regu l atory Com

missio n (the “Com

missio n”) for a determination that its two natural gas pipelines gather as oppo sed to transport natural gas. In May 2003, the Commission denied Jupiter’s application, concluding that Jupiter engages in jurisdictional transportation. S ee Jupiter Energy Corp. , 103 F.E.R.C. ¶ 61,184 (2003), reh’g denied , 105 F.E.R.C. ¶ 61,243 (2003), reh’g denied , 106 F.E.R.C. ¶ 61,170 (2004) (the “2003 Jupiter Jurisdictional Order”). The Fifth Circuit grant ed review, vacated the1 Prior to 2000, the 10-inch line connected to the Tennessee pipeline, and then the gas traveled

twenty -two m

iles to a separation and dehydration facilit y owned by Jupiter. At this facilit y, Jupiter separated the gas condensate f rom the water and metered the gas prior to its continuing on the Tennessee system. 2 Com missio n’s decision, and remanded the case. S ee Jupiter Energy Corp. v. F.E.R.C. , 407 F.3d 346 (5th Cir. 2005) [hereinafter Jupiter I]. On remand, the Commission reaffirmed its original determ inat io n and denied Jupiter’s request for rehearing. See Jupiter Energy Corp. , 111 F.E.R.C. ¶ 61,497, reh’g denied , 113 F.E.R.C. ¶ 61,103 (2005). Aft er careful review, we once again remand this case to the Commission for further proceedings consistent with this opinion.

I. FACTUAL AND PROCEDURAL BACKGROUND The natural gas indu stry divides a company’s operations into three functions: production, gathering, and transportation. The Natural Gas Act (“NGA”), 15 U.S.C. § 717(b), authorizes the Com missio n to regulate the transportation of natural gas in int erstate com merce. The Jupiter system consists of two natural gas pipelines lo cated approximately ten miles of fsho re from Loui siana in the Vermilio n Blo ck 39 (“Platform 39A”). The gas arriving at Platform 39A comes from sixt een wells lo cated in Vermilio n Blo c ks 23, 38, and 39. The gas travels from the wells to Platform 39A over Unocal-owned gathering facilit ies. The first Jupiter pipeline is 3.2 miles and 8-5/8 inches in diameter (the “8-inch line”). The second Jupiter pi peline is 10.2 miles and 10-3/4 inches in diameter (the “10-inch line”). Jupiter’s 8-inch line moves gas fro m P latform 39A to a sub-sea line owned by Transcontinental Gas Pi

pe Line Corp. (“Transco”), and the 10-inch l ine mo ves gas from Platform 39A to a land-based pipeline owned by Tennessee Gas Transmission Com pany ( “Tennessee”). 1 Unocal com

presses som

e of the gas to create sufficient pressure fo r transportation th rough the Jupiter syst em to the downstream int erstate pipelines . Oth erwise, the gas moved on the Jupiter system2 Since 1992, Jupiter facilit ies only ship gas fo r it s parent com pany, Unocal. In previous years, Jupiter transported gas for Kerr-McGee, Phillips Petroleum Company, and Unocal. 3 remains unprocessed. In 1997, Jupiter became a wholly-owned subsidiary of Unocal, and Uno cal produ ces a large portion of the gas moved through the Jupiter system. 2 Unocal’s production and gathering operations in the Gulf of Mexico are exempt from the Commission’s jurisdiction. In 1966, the Federal Power Commission (a federal administrative predecessor of F.E.R.C.) determ ined that Jupiter provided a transportation function. T he Jupiter Corp. , 35 F. P.C. 1091 (1966). On November 4, 2002, Jupiter requested that the Commission relinquish jurisdiction because it s facilities primarily perform a gathering function. On May 16, 2003, the Commission issued an order stating th at Jupiter’s pipelines are transmission facilit ies subject to the Commission’s jurisdiction. See 103 F.E.R.C. ¶ 61,184. The Commission reasoned th at Pl atf orm 39A constitutes

a point of delineation where gathering ends and jurisdictional transmission begins; therefore, Jupiter’s facilit ies lo cated downstream of Pl atf orm 39A serve a transmission function. 103 F.E.R.C. ¶ 61,184 at 61,713. On November 20, 2003, the Commission reaffirmed its previous order and denied Jupiter’s request for rehearing. 105 F.E.R.C. ¶ 61,243 at 62,285. In Jupiter I, the Fift h Circuit vacated the 2003 Jupiter Jurisdictional Order and remanded the

case. 407 F.3d at 351. This court reasoned that Jupiter’s facilities were located upstream from a gathering pipelin e , the Transco line; therefore, the Com missio n could not classify the facilit ies as performing a transmissio n function. I d. Meanwhile, the Commission issued an order asserting jurisdiction over the Transco line, concluding th at Transco’s syst em also serves a trans missio n function. S ee Transcon. Gas Pipe Line Co. , 111 F.E.R.C. ¶ 61,090, reh’g denied , 111 F.E.R.C.3 In 2001, th e Com missio n determined that the Transco line served a gathering function. Transcon.Gas Pipe Line Corp ., 96 F.E.R.C. ¶ 61,246 at 61,976 (2001), reh’g denied in relevant part , 97 F.E.R.C. ¶ 61,298 (2001) (the “2001 Transco Jurisdictional Order”). The Commission then held a separate proceeding determ ining th at Jupiter’s lines performed a transmission function. Prior to th e Fift h Circuit’s opinion in J upiter I, the Com

missio n issued an order fo r Williams Gas Processing -Gulf Coast Com pany (“WGP”) and Transco to show cause why the 2001 Transco Jurisdictional Order should not be reversed in light of the 2003 Jupite r Jurisdictional Order. Transcon. Gas Pipe Line Corp ., 107 F.E.R.C. ¶ 61,122 at 61,411 (2004). The Fifth Circuit entered it s judgment in Jupiter I, however, prior to the Commission’s addressing the show cause order.

4 WGP and Transco peti

tioned the D.C. Circuit fo r review of the 2005 Transco Jurisdictional Order. The D.C. Circuit acknowledged the pendency of J upiter II in this court and com ment ed th at “t he challenges to the Com missio n’s 2005 Transco Jurisdictional Order and 2005 Transco Rehearing Order are at the heart of the peti tion fo r review in this case.” W illiams Gas Processing-Gulf Coast Co., L.P. v. F.E.R.C. , 475 F.3d 319, 2006 WL 3716638 at *2 (D.C. Cir. 2006). The court vacated the Com missio n’s 2005 Transco Jurisdictional Order fo r further proceedings and concluded th at any “decision on the merit s must await reasoned decisionmaking from the Com missio n.” I

d. at *11. The D.C. Circuit’s vacatur effectivel y r ecreated the same anomalous scenario that existed in J upiter I wherein a transportation line sits upstream of a pipeline classified as a gathering line.
4 61,498 (2005) (the “2005 Transco Jurisdictional Order”). 3 Based on its 2005 Transco Jurisdictional Order, th e Com

missio n reaffirmed its jurisdiction over Jupiter’s lines, reasoning that the Fift h Circuit’s contentions were no lo nger applicable. 111 F.E.R.C. ¶ 61,497 at 63,112

. On the same date, the Com missio n denied a request fo r rehearing of it s 2005 Transco Jurisdictional Order. T ranscon. Gas Pipe Line Corp. , 111 F.E.R.C. ¶ 61,498 (2005). On October 28, 2005, the Commission also denied Jupiter’s request fo r rehearing. 113 F.E.R.C. ¶ 61,103 (2005). Jupiter filed a timely appeal. 4 The central issue before this court is whether the Com missio n erred in finding th at Jupiter’s pipelines transport natural gas, thus requiring termination of the Commission’s regulatory jurisdiction under § 1(b) of the NGA, 15 U.S.C. § 717(b).5 II. STANDARD OF REVIEW This court reviews an administ rative order un der the arbi trary and capricious standard. 5 U.S.C. § 706(2)(A); Acadian Gas Pipeline Sys. v. F.E.R.C. , 878 F.2d 865, 868 (5th Cir. 1989). The court will uphold the Commission’s application of the mult i- factor primary function test so long as it gives “reasoned consideration to each of the pertinent factors and articulates factual conclusions th at are supported by substantial evidence in the record.” E xxonMobil Gas Mktg. Co. v. F.E.R.C. , 297 F.3d 1071, 1084 (D.C. Cir. 2002) (citing Lomack Petroleum, Inc. v. F.E.R.C. , 206 F.3d 1193, 1197 (D.C. Cir. 2000)). III. DISCUSSION To determ

ine the primary function of a natural gas facilit y, the Com missio n applies a multifactor test, which includes the fo llo wing factors: (1) length and diameter of the pipeline; (2) proximity to the central point in a field; (3) geographic configuration of the facilit y; (4) proximity to processing plants and com

pressors; (5) lo cation of wells alo ng all or part of th e facilit ies; and (6) operating pressure. F

armland Indus., Inc. , 59 F.E.R.C. ¶ 61,063 (1983). The Commission applies this multifactor test to the unique facts and circumstances of each case without any one factor deemed as outcom e determ inat ive. E

P Operating Co. v. F.E.R.C

. , 876 F.2d 46, 48 (5th Ci r. 1989). For of fsho re facilit ies, the Com

missio n also evaluates “no n-physical” criteria: (1) the purpose, lo cation, and operation of a facilit y; (2) the business of the owner; (3) whether the jurisdictional determ inat io n is consistent wit h the objectives of the NGA and other legislat io n; and (4) the changing technical and geographic nature of exploration and production. A merada Hess Corp. , 52 F.E.R.C. ¶ 61,268 at 61,987-88 (1990). Following Sea Robin Pipeline Co. , 92 F.E.R.C. ¶ 61,072 (2000), the Com missio n

mo dified the primary fu n ction test as fo llo ws: (1) it adopted an additional analyt ical element5 The central line of aggregation is a point where small lines carrying gas from various wells

converge and deliver their collective volumes in a single large line fo r transportation to shore. Transcon. Gas Pipe Line Corp. , 95 F.E.R.C. ¶ 61,396 at 62,479. 6 applicable to syst ems th at contain a centralize d aggregation point ; (2) it adjusted the weight to be affo rded the “behind-the-plant” criterion so that the location of processing plants is not necessarily determ inat ive and can be out weighed by other factors; and (3) when weighing the totality of the circumstances, the Com

missio n places greater fo cus on th e physical factors rather than the nonphysical factors. Jupiter I, 407 F.3d at 349. To successfully contest a jurisdictional determ inat io n, the peti

tioner must show th at the “Commission’s choices are unreasoned and its chosen line of demarcation is not within a zone of reasonableness as distinct from the question of whether the line drawn by the Com missio n is precisely right.” E xxonMobil , 297 F.3d at 1084 (quoting Hercules, Inc. v. E.P.A. , 598 F.2d 91, 107 (D.C. Cir. 1978)) (int ernal quotations om it ted). Jupiter argues that under circuit precedent, the Commission’s order should be set aside because it attr ibut ed undue weight to the central point factor. The Com missio n contends th at Jupiter cannot meet it s burden of proving the Com missio n’s jurisdictional line was a patently unreasonable determination. Moreover, the Com missio n reasonably reaffirmed it s functional analysis aft er resolving the inco ngruity in the status of Jupiter’s upstream facilit ies and Transco’s downstream facilities. The Com missio n’s jurisdictional determ inat io n hinged on the finding th at Pl atf orm 39A serves

as the central point of aggregation fo r the Jupiter syst em. 5 103 F.E.R.C. ¶ 61,184 at 61,713

. According to the Com

missio n, the physical attri

butes of the gas and geographic configuration of the syst em undergo a “marked change” at Pl atf orm 39A; therefore, Jupiter’s lines are jurisdictional transmission facilit ies. I

d. In its order on rehearing, the Commission maintained that “t he factor7

bearing the greatest weight is the lo cation of Jupite r’s pi peline facilit ies downstream of Unocal’s Pl atf orm 39A, which is both the last point at which gas is collected and the po int at which gas is

com pressed to transmission pressures before entering Jupiter’s two pipelines which transport the gas to shore.” 105 F.E.R.C. ¶ 61, 243 at 62,286. In Sea Robin , the Fift h Circuit vacated and remanded a jurisdictional determ inat io n because alt hough the Commission “purported to work through all the factors in the primary function test. .

. . Yet it excluded at least fo ur factors on grounds th at [the factors] did not shed light on the problem . . . .” Sea Robin v. F.E.R.C. , 127 F.3d 365, 370 (5th Cir. 1997). The court further stated that [t]he Com missio n must apply consistently it s primary function test and not discount, wit hout reasoned anal

ysis, application of any factor which points to a nonjurisdictional result. It may no t “ disregard those facts or issues that prove difficult or inco nvenient ” or “refus[e] to com e to gri ps” wit h certain resul

ts in applying the primary function test.

Id. (citing Tenneco Gas v. F.E.R.C. , 969 F.2d 1187, 1214 (D.C. Cir. 1992 )). Contrary to S ea Robin ’s inst ruction, the Com missio n’s init ial review of Jupiter’s jurisdictional stat us sum marily dismissed th e f

actors of length, diameter, and operating pressure, which all indicate a gathering function. The order reads that, “[w]e recognize that the length, diameter and operating pressures of Jupiter’s pipeline facilit ies may not necessarily be inco nsist ent wit h a gathering function. However, it appears that gas aggregation is complete once the gas reaches Unocal’s Platform 39A.” 103 F.E.R.C. ¶ 61,1 84 at 61,713. The di ssent argued that the Commission “failed to give adequate weight to factors other th an the central point of aggregation.” 105 F.E.R.C. ¶ 61,243 at 62,287. On rehearing, the Com

missio n included additional conclusory statem ents wit h no reasoned analysis fo r why it negated the impo rt of factors favoring a determ inat io n th at Jupiter’s lines serve a gathering8

f unction. For example, in Pacific Offshore Pipeline Co. , the Com missio n determ

ined th at “t he absence of wells lo cated alo ng POPCO’s line is not uncharacteristic fo r offshore gathering facilities .” 64 F.E.R.C. ¶ 61,167 at 62,509 (1993) (emphasis added). The 2003 Jupiter Rehearing Order states th at “[t]he Com

missio n also gave weight to the fact th at ther e are no wells o r gathering lines connecting to any of the subject pipeline facilit ies.” 105 F.E.R.C. ¶ 61,243 at 62,286. Yet, the Com missio n provides no further analysis fo r how the absence of wells or gathering lines affected it s determ inat io n. Jupiter’s syst em consists of two short, small-diamet er lines. Jupiter compresses the gas, using Unocal’s equipment, to a pr essure sufficient for moving the gas downstream toward processing plants. These physical factors, given short shrift in the Commission’s determination, support a jurisdictional determination opposite that of the Com missio n’s order. Thus, the Com missio n must provide a reasoned analysis fo r why these non-jurisdictional indicators were outweighed by the remaining physical factors. In the 2003 Jupiter Jurisdictional Order, the Commission expressly declined to consider the non-physical factors supporting a gathering function because “t his is not a case where the physical factors are so ambiguous as to necessitate such an analysis.” 103 F.E.R.C. ¶ 61,184 at 61,713

. T he non-physical factors, however, cannot be ignored when conducting the primary function test. The Fift h Circuit recognizes non-physical factors as “secondary to the physical factors” but still requires consideratio n when relevant to “t he determ inat ive question [of

] when did gathering cease and transportation com

mence.” Sea Robin , 127 F.3d at 371; s ee also ExxonMobil , 297 F.3d at 1087 (implying t hat the Commission should consider secondary factors in its jurisdictional analysis).9

Jupiter point s to the fo llo wing non-phy sical factors: (1) the parent company, Unocal, is Jupiter’s only shipper; (2) neit her Jupiter nor Unocal own any other jur isdictional facilit ies; (3) Unocal’s business activit y is gathering and production; and (4) Unocal would integrate the subject facilit ies int o it s own gathering syst em. 105 F.E.R.C. ¶ 61,243 at 62,287. In light of the these nonphysical factors, the Com missio n should at a minimum provide a reasoned explanation of why Jupiter’s lines fail to constitute an “integral part of [Unocal’s] natural gas gathering system.” Blue Dolphin Pipe Line Co ., 58 F.E.R.C. ¶ 61 103 at 61362 (1992) (holding that a similar system with larger lines and compressors performed a gathering function). To rece ive judicial deference, an agency’s interpretation of law must be consistent with previous agency determ

inat io ns. An agency must provide a “reasoned explanation for its departure from established case law.” E P Operating Co. , 876 F.2d at 48 (5th Cir. 1989) ( com paring the Com missio n’s quality of jurisdictional analysis fo r two lines owned by different com p anies to concl ude whether the Commission should receive judicial deference). The glaring shortfall in the Com missio n’s order is the lack of a reasoned explanation to support its di sregard of the length, diameter, operating pressure, and non-physical factors of Jupiter’s syst em, which all weigh in favor of a gathering function. In Williams , the D.C. Circuit expressly quest io ned the Com missio n’s policy that the jurisdictional status of an upstream pipeline determ ines the primary function of a downstream facilit y. 2006 WL 3716638 at *8, 10. In vacating the 2005 Transco Jurisdictional Order, the court intimated th at once the Com

missio n provided an ad equately supported expl anation for this policy, then the court would re-examine, if necessary, the merit s of the Com missio n’s decision. I

d. at *11. Similarly, the Com missio n may very well have reached an accurate functional determination of Jupiter’s10

pipelines; however, under applicable Fift h Circuit law, the Com missio n must articulate reasons fo r dismissing the impo rt of non-jurisdictional physical factors and relevant non-physical factors. S ee EP Operating Co. , 876 F.2d at 48; Sea Robin , 127 F.3d at 370. In this instance, we conclude that the Com missio n failed t o provide a sufficiently reasoned explanation. CONCLUSION For these reasons, we vacate the Com missio n’s Order and remand fo r further consideration consistent with this opinion.