Opinion ID: 184971
Heading Depth: 2
Heading Rank: 1

Heading: The Functionalization of the Chaco Compressor

Text: 22 In the orders under review, FERC found that the Chaco compressor station was a nonjurisdictional gathering facility. We review FERC's orders under the Administrative Procedure Act's arbitrary and capricious standard. 5 U.S.C. 706(2)(A) (1994). See Sithe/Independence Power Partners v. FERC, 165 F.3d 944, 948 (D.C. Cir. 1999). El Paso argues that FERC's decision was arbitrary because: (1) FERC misapplied the primary function test; (2) FERC was wrong to consider the operation at the cryogenic processor; (3) FERC misapprehended the relationship between mainline capacity and the Chaco compression; and (4) this decision is inconsistent with FERC's precedent functionalizing similar compressors. El Paso's arguments fail. FERC applied the primary function test as well as it could have in this situation, properly considered the operation of the cryogenic processor, made a reasonable decision regarding the relationship between Chaco's compression and mainline capacity, and correctly distinguished this case from the precedents El Paso cites. We therefore uphold FERC's decision to functionalize the Chaco compressor station as a gathering facility. 23 El Paso argues that FERC misapplied the primary function test. Under the NGA, the Commission has jurisdiction over the transportation, but not the processing or gathering of, natural gas. See 15 U.S.C. 717(b) (1994). However, [t]he line between jurisdictional transportation and nonjurisdictional gathering is not always clear. To draw that line, the Commission employs the 'primary function test,' which examines various factors to determine whether a facility is primarily devoted to gathering or to interstate transportation. Conoco Inc. v. FERC, 90 F.3d 536, 542 (D.C. Cir. 1996). No single factor of the primary function test is determinative, and not all factors apply in every situation. See id. at 543.This is especially true here where the facility at issue is a compressor station. As El Paso itself noted, [m]any if not most of these factors typically are present when the facility in question is a pipeline. They have less direct application, however, when the facility is a compressor. Joint Initial Br. of Petitioners at 12. The six factors of this test include: (1) the length and diameter of the relevant lines; (2) the extension of the facility beyond the central point in the field; (3) the lines' geographic configuration; (4) the location of compressors and processing plants; (5) the location of wells along all or part of the facility; and (6) the operating pressure of the lines. Conoco, 90 F.3d at 544 n.16. FERC considered the test, but found only the fourth factor to be truly weighty. 24 In particular, FERC noted that the compression's location upstream of the processing plant was the factor under the primary function test that weighed heavily in favor of finding that the Chaco compressor was a gathering facility. 82 F.E.R.C. p 61,337, at 62,336. This is a reasonable determination: The Commission's precedent establishes that a facility located behind a processing plant is more likely to perform a gathering function. See Williams Natural Gas Co., 71 F.E.R.C. p 61,115, at 61,375 (1995) (noting that the fact that the facilities are located behind the plant strongly supports a finding that they are gathering). 25 Significantly, El Paso challenges FERC's application of the primary function test, but it offers no counter analysis. Thus, this is not a case where FERC has ignored applicable parts of the primary function test. Cf. Louisiana Intrastate Gas Corp. v. FERC, 962 F.2d 37, 42-43 (D.C. Cir. 1992) (remanding consideration of a facility because FERC failed to apply the primary function test, which was indisputably applicable to that facility). Rather, the Commission here gave reasoned consideration to each of the pertinent factors of the primary function test ... Conoco, 90 F.3d at 544. However, because most of the factors of the primary function test do not apply to the Chaco compressor station, FERC's decision properly rests on additional considerations. 26 El Paso next argues that to the extent that FERC relied on the operation of the cryogenic liquid extractor to determine the jurisdictional status of the Chaco compressor station, it was wrong to do so. The cryogenic liquid extractor is a nonjurisdictional processing facility that prepares the gas to go into El Paso's mainline. It replaced a lean-oil extractor in 1996, long after the Chaco compressor was built. It requires the high pressure produced by the Chaco compressor in order to operate efficiently. El Paso argues that the Chaco compressor was operating before the cryogenic liquid extractor was installed and therefore installing the cryogenic extractor cannot change the function of the Chaco compressor. Selection of the cryogenic method played no role whatsoever in determining the amount of compression to be constructed, because the compression was constructed long before the cryogenic plant was built, in an amount determined solely by the needs of mainline transmission. Joint Initial Br. of Petitioners at 22. 27 As FERC notes, what El Paso misses is the point that the cryogenic liquid extractor changed the purpose of the Chaco compressor. Prior to the installation of the cryogenic extractor, the Chaco compressor simply pressurized the gas to enter the mainline. After the installation of the cryogenic processor, the Chaco compressor's purpose changed to include assisting in the efficient (nonjurisdictional) processing of gas. Thus, because the cryogenic liquid extractor changed the purpose of the Chaco compressor station, it was reasonable for FERC to determine that the operation of the cryogenic processor weighs in favor of finding that the Chaco compressor is a gathering facility. 28 El Paso argues in the alternative that the Commission did not rely on the operation of the cryogenic extractor in making its decision about Chaco. El Paso noted that it is far from clear that consideration of the cryogenic plant ... has any material impact on the Commission's jurisdictional analysis.Joint Reply Brief of Petitioners at 14. Admittedly, the Commission has been less than clear on this point. In the first rehearing before FERC, the Commission noted that the operation of the cryogenic liquid extractor weighs against a finding that the compression performs a transmission function. 82 F.E.R.C. p 61,337, at 62,336. And while it reiterated that point in the second rehearing, noting that the operation of the cryogenic plant is one of a number of factors that weigh against a finding that the compressor performs a transmission function, it also stated that the Chaco Compression would be nonjurisdictional gathering regardless of whether the cryogenic plant or any other nonjurisdictional processing facilities were located immediately downstream of the compression facilities. 84 F.E.R.C. p 61,048, at 61,205.Despite this language, in the three orders under review, FERC has explained extensively that the operation of the cryogenic liquid extractor impacts the jurisdictional status of the Chaco compressor. Thus, although some language in FERC's last order suggests otherwise, it is this court's understanding that the functionalization of Chaco as a gathering facility relies in part on the operation of the cryogenic liquid extractor. 29 El Paso's third argument is that because the Chaco compression is necessary to maintain its jurisdictional mainline capacity, the Chaco compression station is necessarily a jurisdictional facility. El Paso contends that the Chaco compression is absolutely required as a matter of physics if the San Juan Triangle capacity is going to remain available to El Paso's jurisdictional transmission customers. Joint Initial Br. of Petitioners at 16. As a matter of physics, and a matter of fact, FERC does not disagree. As a legal matter, however, FERC comes to a different conclusion. Under FERC's view, the Chaco compressor is a gathering facility because it is necessary to overcome the pressure of El Paso's mainline system to deliver the natural gas. 81 F.E.R.C. p 61,209, at 61,892. In other words, FERC never directly disputes that the compression is necessary for capacity, it simply finds that the compression will be there because the natural gas gatherer, in this case Field Services, will supply it. 30 El Paso argues that this cannot be the basis for finding that the Chaco compressor is nonjurisdictional because that puts the responsibility for maintaining certified,jurisdictional mainline capacity in nonjurisdictional, i.e., unregulated hands. FERC has two responses. First, it notes that some of El Paso's mainline capacity is already in the hands of nonjurisdictional facilities. See 82 F.E.R.C. p 61,337, at 62,336. Second, it notes that El Paso's tariff requires the producer to deliver the gas to the pipeline at a pressure high enough to overcome the pressure in the pipeline. See 81 F.E.R.C. p 61,209, at 61,892. FERC reasons that because this responsibility rests with the producer, the facility that enables the producer to meet it, here, the Chaco compressor, is necessarily a part of the production process, which is nonjurisdictional. Thus, FERC argues, the Chaco compressor is nonjurisdictional. 31 This is a line-drawing problem for which there is no easy answer. The Chaco compressor sits at the very edge between gathering and transmission. In such a situation, it is not this court's role to interpose its judgment. As this circuit has noted, the Commission brings to bear its considerable expertise about the natural gas industry when deciding whether a facility is jurisdictional or nonjurisdictional. Conoco, 90 F.3d at 544. El Paso has pointed to no significant evidence or reasoning that undermines FERC's decision here.This decision is further supported because it is consistent with recent cases in which FERC has decided that the pressure necessary to overcome mainline capacity is the last stage of the gathering process. See GPM Gas Corp. v. El Paso Natural Gas Co., 81 F.E.R.C. p 61,208, at 61,888 (1997) (In addition, a significant boost in pressure is often necessary to enable gas to move from the lower pressure gathering system into transmission lines. The Commission has stated that this type of compression is also integral to the gathering function.). Thus, the Commission's reasoning here is not arbitrary. 32 As a final matter, El Paso argues that FERC's decision here is inconsistent with its precedent. This argument has no weight for the reason FERC gives: All of the cases El Paso cites can be distinguished from this one. The compressors in those cases fed directly into a pipeline without going through or assisting a nonjurisdictional processor, see Colorado Interstate Gas Co., 75 F.E.R.C. p 61,324, at 62,039 (1996); Panhandle Eastern Pipe Line Co., 70 F.E.R.C. p 61,178, at 61,583 (1995); Amerada Hess Corp., 52 F.E.R.C. p 61,268, at 62,01213 (1990); Williston Basin Interstate Pipeline Co., 33 F.E.R.C. p 61,211, at 61,439 (1985); United Gas Pipe Line Co., 29 F.E.R.C. p 61,164, at 61,345 (1984), or were part of an outer continental shelf facility, which the Commission has determined to be different from on-shore facilities. See Sea Robin Pipeline Co., 87 F.E.R.C. p 61,384, at 62,428 (1999).Thus, FERC's functionalization of the Chaco compressor as a nonjurisdictional gathering facility is upheld.