Opinion ID: 703151
Heading Depth: 2
Heading Rank: 5

Heading: The Prudhoe Bay Unit Dispute

Text: 90 The final challenge to FERC's 1993 Order relates only indirectly to the TAPS Quality Bank valuation methodology. The Prudhoe Bay Unit's petroleum stream (Unit stream), which flows into TAPS at Pump Station No. 1, is co-owned by eleven petroleum producers (Unit shippers) including petitioner BP. This petroleum is itself a combination of two feeder streams produced from different areas within the Unit, which are commingled at a location some 700 feet upstream of Pump Station No. 1. One of the two feeder streams consists primarily of NGLs; the other, known as the Separator Liquid Production (SLP) stream, does not. Under the assay methodology, the petroleum in the SLP stream has a higher value than does that in the NGL stream, Rehearing Order, 66 F.E.R.C. p 61,188 at 61,420, whereas under the gravity methodology the reverse was the case. 91 The Unit shippers own varying interests in the fields from which the two streams are produced. Because BP owns a larger interest in the SLP stream than in the NGL stream, its per barrel contribution to the Unit stream has a higher value under the new methodology than does the per barrel contribution of certain other shippers who own a larger interest in the NGL than in the SLP stream. Nevertheless, although the TAPS Carriers are aware of the Unit shippers' respective ownerships in the two feeder streams, they make Quality Bank payments to them on a pro rata basis; that is, payments are based on the total number of barrels a shipper contributed to the Unit stream rather than on their value. 92 BP complains that as a result of this payment practice, it does not receive its proper portion of the Quality Bank payments and objects to the Commission's refusal to require the Carriers to employ some practice that would allocate the payments among the Unit shippers based on the contribution that each of them makes to the value of the Unit stream. While not resolving the merits of BP's claim, the proposed settlement agreement spoke to it by containing a dispute resolution procedure that the TAPS Carriers would apply when confronted with a dispute among shippers over rights to Quality Bank payments resulting from their co-ownership of a single incoming stream. 1993 Order, 65 F.E.R.C. p 61,277 at 62,291; Rehearing Order, 66 F.E.R.C. p 61,188 at 61,420-21. 93 The Commission declined to approve the proposed dispute resolution procedure as part of the settlement for the following reasons: 94 The ownership dispute relates to events that occur before the petroleum is injected into TAPS. We agree that these provisions relate to a private contractual matter that is outside the scope of the Commission's jurisdiction. Accordingly, our approval of the settlement does not constitute approval of these provisions, and those procedures should not be part of the tariff filing made by the TAPS Carriers. 95 1993 Order, 65 F.E.R.C. p 61,277 at 62,291 (footnote omitted). On rehearing, FERC elaborated on the problem but maintained its initial position that [t]he Commission's jurisdiction applies to the streams transported on TAPS, and does not cover events that precede[d] it. Rehearing Order, 66 F.E.R.C. p 61,188 at 61,421. It reasoned that Quality Bank adjustments should be paid based on the assays of the streams tendered to TAPS. Id. at 61,421-22. If particular Unit shippers felt they were entitled to more than their pro rata payment, the Commission suggested that they renegotiate their private contracts with their co-owners or litigate against them. Id. at 61,422. 96 BP now argues that the Commission erred by finding it lacked jurisdiction over the dispute. Section 15(1) of the ICA provides, in pertinent part, that 97 [w]henever, ... the Commission shall be of [the] opinion that any ... practice whatsoever of ... carriers subject to the provisions of this chapter, is or will be unjust or unreasonable or unjustly discriminatory or unduly preferential or prejudicial, ... the Commission is authorized and empowered to determine and prescribe what ... practice is or will be just, fair, and reasonable.... 98 49 U.S.C.App. Sec. 15(1). BP believes that the TAPS Carriers' method of making Quality Bank payments to Unit shippers based on the quantity of the stream they owned without regard to the quality of what they owned constitutes a practice subject to the Commission's jurisdiction under this section. FERC continues to characterize the issue as a dispute among the Unit shippers as to how to allocate the Quality Bank payments that is not integral to the operation of the TAPS, Brief for Respondent at 47, and that the method of resolving it is not a proper subject for the TAPS Carriers' tariff filings. 99 The Commission has staked out an internally inconsistent and thus untenable position. On the one hand, it claims to lack jurisdiction over how the Quality Bank payment due the Unit shippers is to be divided. Yet at oral argument the Commission conceded that, as BP charges, it has approved the TAPS Carriers' current method of dividing payments among the co-owners of the Unit stream on a pro rata basis because that method is embodied in previous filings. FERC thus has acted in the past as if it has jurisdiction over the very issue that it now explicitly maintains it lacks the authority to consider. 100 Until the Commission articulates a consistent position on the limits of its jurisdiction, we are unable to resolve BP's specific challenge. We have held that an agency's interpretation of the limits of its jurisdiction is entitled to Chevron deference. Oklahoma Natural Gas Co. v. FERC, 28 F.3d 1281, 1283-84 (D.C.Cir.1994) (referring to deference due an agency's interpretations of statutes it is charged with administering, as set forth in Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-44, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984)). We cannot deferentially review both the Commission's explicit opinion that it lacks jurisdiction and its implicit opinion that it does not. Therefore, we remand the matter to the Commission with the instruction that it establish a consistent and reasoned position as to whether it has jurisdiction over the method by which the TAPS Carriers distribute Quality Bank payments among co-owners of streams delivered to TAPS.