Opinion ID: 703151
Heading Depth: 3
Heading Rank: 2

Heading: Tariff violations

Text: 75 FERC has consistently maintained that shippers would be entitled to refunds from July 1, 1989, the effective date of the updated tariff filings, only if it were found that the NGLs were being shipped in violation of the tariffs or that Quality Bank debits and credits were being incorrectly calculated. 1993 Order, 65 F.E.R.C. p 61,277 at 62,292; see also 1990 Order, 51 F.E.R.C. p 61,062 at 61,137; 1989 Order, 49 F.E.R.C. p 61,349 at 62,264-65. The ALJ found no tariff violations or calculation errors. ALJ Decision, 57 F.E.R.C. p 63,010 at 65,041-45. Consistent with this finding, the proposed settlement did not call for refunds. FERC's approval of the settlement reiterated that the change in the Quality Bank methodology would be prospective only, presumably agreeing with the ALJ that no tariff violations had occurred. See 1993 Order, 65 F.E.R.C. p 61,277 at 62,291-92. OXY now challenges that determination. 76 Recognizing the Commission's technical expertise in the area of pipeline ratemaking, we owe substantial deference to its interpretation of the TAPS Carriers' tariff provisions. Natural Gas Clearinghouse v. FERC, 965 F.2d 1066, 1070 (D.C.Cir.1992). Deference does not imply abdication of our obligation to review the Commission's orders, however. We inquire whether the Commission's interpretations are amply supported both factually and legally and accept them only if they are the result of reasoned and principled decisionmaking that can be ascertained from the record. Tarpon Transmission Co. v. FERC, 860 F.2d 439, 442 (D.C.Cir.1988) (internal quotation marks omitted). The ALJ's interpretation of the TAPS Carriers' tariffs easily meets this standard. 77 OXY argues that the TAPS Carriers violated three provisions of their tariffs by transporting NGL-laden petroleum streams which increased the gravity of the common stream and thus increased the payments owed the Quality Bank by the owners of streams relatively low in NGLs. First, OXY claims the Carriers violated tariff provisions permitting them to transport only petroleum that had a gravity of between 17 and 40 degrees, which it believes effectively prohibits the direct shipment of the high-gravity NGLs. The ALJ pointed out, however, that [n]othing contained in the tariffs ... requires the carriers to separately test the components of the streams, ALJ Decision, 57 F.E.R.C. p 63,010 at 65, 043, and that all of the Carriers' tariffs specifically permit the shipment of unrefined liquid hydrocarbons including gas liquids--i.e., NGLs. Id. From these facts, the ALJ reasoned that the tariffs' gravity limitations pertain to petroleum streams as delivered to TAPS, not to the individual components of those streams. As OXY concedes that no petroleum shipped on TAPS has ever exceeded the gravity restrictions, the ALJ reasonably found that the inclusion of NGLs in the crude delivered to the pipeline did not violate the tariffs. 78 Second, OXY claims that the TAPS Carriers violated their tariffs by failing, on some occasions, to demand assays of tendered petroleum streams prior to shipment. It believes that the Carriers should have used the assays to determine that excessive NGL injections were devaluing the common stream and explore ways to address the problem. The ALJ determined that the purpose of the assay provisions is to help the Carriers transport petroleum safely and efficiently, not to benefit the shippers in any way. In support of this interpretation, he pointed out that some of the tariffs permit the Carriers to demand an assay but do not require that they do so. One tariff, for example, provides that the Carrier may require ... a suitable assay of the tendered Petroleum, while another permits a Carrier to reject any petroleum tendered without such an assay. Id. at 65,041. The ALJ was clearly justified in concluding that any failure to conduct assays prior to shipment on the part of the TAPS Carriers did not constitute a violation of their tariffs or harm the shippers. 79 Third, OXY contends that the shipment of NGLs violated tariff provisions that require the TAPS Carriers to reject petroleum whose characteristics will materially affect the quality or value of other shippers' petroleum unless the Quality Bank makes reasonable monetary adjustments. OXY argues that the ALJ's findings that the gravity valuation methodology no longer produces just and reasonable results demonstrates that the Quality Bank failed to compensate it for the loss it incurred as a result of the commingling of its petroleum with streams that had a high NGL content. The ALJ viewed this argument as essentially addressed to the propriety of the gravity methodology, which FERC had approved as just and reasonable in 1984, rather than to the manner in which the Carriers had implemented the Commission tariffs. He succinctly and appropriately reasoned that 80 [t]he concept of the transport of NGLs was anticipated at the time of the [1984] Settlement. The Quality Bank was established to provide reasonable monetary adjustments for the varying quality of shipments. The TAPS Carriers have the right to rely upon the Quality Bank to do so. I find no violation of this tariff provision. 81 ALJ Decision, 57 F.E.R.C. p 63,010 at 65,042. In other words, when FERC approved the gravity valuation methodology in 1984, the Quality Bank adjustments made pursuant to that methodology de facto became reasonable monetary adjustments. Cf. Montana-Dakota Utilities Co. v. Northwestern Public Service Co., 341 U.S. 246, 251, 71 S.Ct. 692, 695, 95 L.Ed. 912 (1951) ([T]he right to a reasonable rate is the right to the rate which the Commission files or fixes....) 82