Opinion ID: 184925
Heading Depth: 3
Heading Rank: 1

Heading: Marginal Use

Text: 24 Exxon argues that FERC erred again, as it did in the 1993 Order in not employing the marginal use of resid as a blending agent for fuel oil rather than its value as coker feedstock in establishing the valuation methodology for that cut. Exxon contends that the error is a fundamental one in that the ALJ's finding, adopted by the Commission, that there is no active market for resid is flawed. In Exxon's view, although there are few trades of resid, there is in fact a market, and a sparsity of open trades is only due to the fact that the refiners who use resid rarely need to purchase it from others because they already obtain it as a byproduct of their own refining operation. Exxon further argues that there are formulae that can be used to derive resid's value as a blend stock despite the absence of market trades. Thus Exxon prays the court to vacate the relevant portion of FERC's order and remand the controversy for valuing of resid as a blend stock. 25 FERC responds that there was conflicting evidence regarding the existence of a market for ANS resid, and the ALJ and the Commission reasonably adopted the testimony of Nine Party witnesses A.L. Gualtieri and Benjamin Klein, who testified that resid was rarely traded, and was instead used as a coker feedstock. See 1997 Opinion, 80 FERC p 63,015, at 65,238-41. The ALJ also determined, based on the record, that it was inappropriate to value resid based on its marginal use as fuel oil blend stock because most of the refineries did not seek to purchase resid but created it as part of their refinery process. See id. 65,240. The absence of an active market for resid made the economic principle of marginal use, which depends on a liquid market, unreasonable in this circumstance. See id. 65,240-41. 26 We see no reason to disturb FERC's adoption of the ALJ's determination that resid is best valued based on the market value of its constituent products. The expert testimony of Klein constitutes substantial evidence in support of FERC's decision that marginal use analysis does not require the valuation of resid as a blendstock.