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

Heading: The Refunctionalization of Chaco and the Ensuing Disputes

Text: 14 Subsequently, in response to objections from Williams and others, FERC requested more information from El Paso about the functions of the Chaco compressor. On November 14, after receiving that new information, FERC granted a rehearing of its April 23 order, reversed its position, and declared that the Chaco compressor performed a nonjurisdictional gathering function. See El Paso Natural Gas Co., 81 F.E.R.C. p 61,209. FERC based this decision on two grounds: (1) the Chaco compressor station's compression is required to increase the pressure of the natural gas stream ... to ensure an efficient cryogenic liquids extraction process, id. at 61,891, a process that all agree is nonjurisdictional; and (2) Chaco's compression is necessary to overcome the pressure in the mainline, which, pursuant to El Paso's tariffs, is the gatherer's (in this case, Field Service's) responsibility. See id. at 61,892. FERC rejected El Paso's contention that the Chaco compressor was necessary to maintain capacity on the pipeline. See id. FERC noted that, because high compression is required to satisfy the delivery pressure to El Paso's system, pursuant to El Paso's effective tariff, reclassification of the Chaco Compressor Station from transmission to gathering would not reduce the capacity of the San Juan Triangle System ... Id. 15 This order failed to satisfy anyone. While Williams agreed with the refunctionalization of Chaco, it was not satisfied with FERC's failure to address this order's impact on El Paso's rates. Williams requested a clarification, or a hearing, addressing its claim that the Chaco compressor should be removed from El Paso's transmission rates. See Request for Clarification, or Alternatively Rehearing, of Williams Field Services Group, Inc., reprinted in J.A. 818. Williams argued that the Commission should clarify that El Paso must now include the Chaco compressor station among the facilities transferred to Field Services and completely remove those facilities from El Paso's jurisdictional transmission services and rates. Id. at 822. In a footnote, Willliams noted that the Commission had the authority and the responsibility to remedy the discrepancy under 5 of the NGA. Id. at 822 n.3 (citing 15 U.S.C. 717d (1994)). 16 El Paso and the Indicated Shippers objected to the refunctionalization of the Chaco compressor and requested a rehearing. In addition, El Paso understood FERC's order to mean that the location of or operation at the cryogenic plant did not impact the Chaco compressor's jurisdictional status. El Paso asked FERC to clarify this point. The Indicated Shippers requested clarification on the rate issue. Specifically, they asked FERC to clarify that the settlement rates embodied in the Settlement, including transportation and fuel, would not change as a result of the refunctionalization. The Indicated Shippers were particularly concerned about possible modifications to fuel rates and emphasized that fuel charges are part of the settlement rates covered in Section 15.2 of the parties' Settlement. 17 On rehearing, FERC affirmed its decision to functionalize the Chaco compressor station as a nonjurisdictional gathering facility. See El Paso Natural Gas Co., 82 F.E.R.C. p 61,337 (1998). In response to El Paso's request for clarification, FERC noted that its decision that the Chaco compression performs a gathering function is affected by both the location of and the operations at the cryogenic plant. Id. at 62,336.With regard to the rate issue, FERC determined that it would not upset the Settlement and that settlement rates would not change despite the Chaco refunctionalization. See id at 62,340. It also found, however, that the fuel charges are not part of the settlement rates and would be adjusted to reflect the refunctionalization of Chaco during the next modification period. See id. FERC determined that there will be no fuel costs associated with the Chaco facilities to include in the calculation of the fuel charges to take effect January 1, 2001 and thereafter. Id. 18 Williams filed the instant appeal arguing that FERC did not provide an adequate remedy for the refunctionalization of the Chaco compressor. El Paso and the Indicated Shippers requested another rehearing. El Paso contested FERC's finding that the relationship between the cryogenic liquid extractor and the Chaco compressor supported functionalizing the compressor as a gathering facility. The Indicated Shippers contested FERC's finding that the fuel costs could be adjusted to reflect the refunctionalization of the Chaco compressor. They noted that the Settlement stipulated that the show cause proceeding was to be terminated for the settling parties, so FERC's decision in the show cause proceeding cannot impact the fuel rates for settling parties. 19 On July 20, FERC denied these requests for rehearing. See El Paso Natural Gas Co., 84 F.E.R.C. p 61,048 (1998).In this order, FERC reiterated its view that because fuel charges are not a part of the settlement rates, fuel rates could be adjusted. Id. at 61,203. FERC found that this decision was consistent with the stipulation in 15.2 that the show cause proceeding was to be terminated. It reasoned that the purpose of terminating the show cause proceeding was to ensure that settlement rates did not change as a result of any refunctionalization; and because settlement rates did not change as a result of the refunctionalization, its order in the show cause proceeding was consistent with the Settlement. See id at 61,204. With regard to the functionalization of Chaco, FERC reaffirmed its prior decision noting that the location and operation of the cryogenic plant were two of a number of factors that weigh against a finding that the compression performs a transmission function. Id. at 61,205. El Paso and the Indicated Shippers filed their petitions for review. 20 In the meantime, this court remanded FERC's April 1997 order approving El Paso's Settlement. See Edison, 162 F.3d 116. The court in Edison found that FERC had failed to provide for the interests of indirect consumers in the Settlement and remanded the case to FERC for reconsideration. As a result of this remand, the Settlement, which underlies the rate disputes in this case, is no longer settled. It has come to the court's attention that the parties involved in the Edison case have reached a tentative agreement resolving the issues that concerned the Edison court. The court is also aware that Williams is pursuing another complaint with FERC regarding the same rate concerns addressed in this case.