Court Opinion

ID: 184971
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:26:20+00
Date Added: 2024-06-11T17:26:12.309244
License: Public Domain

194 F.3d 110 (D.C. Cir. 1999)
Williams Field Services Group, Inc., et al.,Petitionersv.Federal Energy Regulatory Commission, RespondentSalt River Project Agricultural Improvement and Power District, et al., Intervenors
No. 98-1241 Consolidated with98-1329, 98-1330, 98-1331, 98-1352
United States Court of AppealsFOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 8, 1999Decided October 26, 1999

On Petitions for Review of Orders of theFederal Energy Regulatory Commission
Richard C. Green argued the cause for petitioners Amoco  Production Company, et al. on the jurisdictional issue.  With him on the briefs were Judy A. Johnson, Kenneth M. Minesinger, Robert M. Lamkin, James R. McCotter, Frederick T.  Kolb, Katherine B. Edwards, and Bruce A. Connell.
Katherine B. Edwards argued the cause for petitioners  Amoco Energy Trading Corporation, et al. on the nonjurisdictional issues.  With her on the briefs were Frederick  T. Kolb and Bruce A. Connell.
Joseph S. Koury argued the cause for petitioner Williams  Field Services Group, Inc.  With him on the briefs was Mari  M. Ramsey.
Judith A. Albert, Attorney, Federal Energy Regulatory  Commission, argued the cause for respondent.  With her on  the brief were, Jay L. Witkin, Solicitor, and Susan J. Court,  Special Counsel.
Richard C. Green, Judy A. Johnson, Kenneth M. Minesinger, Robert M. Lamkin, and James R. McCotter were on  the brief for intervenor El Paso Natural Gas Company in  partial support of respondent.
Joseph S. Koury and Mari M. Ramsey were on the brief  for intervenor Williams Field Services Group, Inc. in partial  support of respondent.
Before:Edwards, Chief Judge, Sentelle and Randolph,  Circuit Judges.
Opinion for the Court filed by Chief Judge Edwards.
Edwards, Chief Judge:

1
Numerous issues have been raised  in this case.  The principal issue before the court, however, is  whether a natural gas compressor, the Chaco compressor  station, is a "gathering" facility or a "transmission" facility. A transmission facility is subject to the regulatory jurisdiction  of the Federal Energy Regulatory Commission ("FERC" or  "Commission"), whereas a gathering facility is not.  El Paso  Natural Gas ("El Paso") sought to transfer all of its gathering  facilities to its subsidiary, El Paso Field Services ("Field  Services"), but it did not transfer the Chaco compressor  station.  El Paso claims the Chaco compressor station is a  transmission facility.  Williams Field Services ("Williams"), a competitor of Field Services and a petitioner in this case,  disagrees.  FERC also now disagrees and, after initially  deciding otherwise, has found that the Chaco compressor  station is a gathering facility because its pressure is necessary both to process the natural gas and to overcome the  pressure on the mainline to deliver the natural gas.  El Paso  argues that this decision was arbitrary and should be overturned.  Because FERC's decision is consistent with its  precedent and well-reasoned, we uphold it.

2
The related issue in this case is whether and how FERC's  decision that the Chaco compressor station served a gathering function should have affected El Paso's rates.  Before  FERC rendered its decision regarding the Chaco compressor  station, El Paso entered into a Rate Settlement ("Settlement") with various shippers.  In  15.2 of this Settlement,  the parties agreed to treat the Chaco compressor as a transmission facility for the purpose of the rates agreed to in the  Settlement.  FERC approved the Settlement.

3
As mentioned above, FERC initially decided that the Chaco  compressor station served a transmission function.  This  decision was consistent with the Settlement.  Its decision to  reverse that finding caused problems.  Williams argued that  because the Commission had determined that the Chaco  compressor was a gathering facility, it was unfair to allow El  Paso to include Chaco's costs in its transmission rates. Williams argued that FERC should remedy this inconsistency  by forcing El Paso to remove the costs of the Chaco compressor from its transmission rates.  The Indicated Shippers, the  third set of petitioners in this case, had the opposite complaint.  (The Indicated Shippers who appear before this court  are:  petitioners Amoco Energy Trading Corp., Amoco Production Co., Burlington Resources Oil & Gas Co., and Conoco  Inc., and intervenor Marathon Oil Co).  They argued that   15.2 precluded FERC from adjusting any of El Paso's  rates, including fuel rates, as a result of its decision that the  Chaco compressor was a gathering facility.

4
FERC split the baby.  It agreed with the Indicated Shippers that  15.2 precluded any change to El Paso's rates as a result of the Chaco compressor's changed status.  It found,  however, that fuel charges were not part of the rates referred  to in  15.2 and so could be adjusted to reflect the Chaco  compressor's new status.  In the meantime, this court remanded FERC's order approving the very Settlement that  justified FERC's decision regarding the rate issues.  See  Southern California Edison Co. v. FERC, 162 F.3d 116 (D.C.  Cir. 1999) ("Edison").  As a result of the remand, the status  of the Settlement is unclear.  Because FERC's orders are  dependent on an interpretation of a Settlement that is no  longer settled, we vacate those orders as they relate to El  Paso's Settlement and remand the issues raised by Williams  and the Indicated Shippers.

I.  Background

5
A. The Abandonment Proceeding and the Settlement

6
In January of 1994, pursuant to  7(b) of the Natural Gas  Act ("NGA" or the "Act"), El Paso applied to abandon all of  its non jurisdictional gathering, treating, and processing facilities.  See 15 U.S.C.  717f(b) (1994).  FERC has jurisdiction  over the transmission of natural gas, but it does not have  jurisdiction over the gathering, treating, or processing of  natural gas.  See 15 U.S.C.  717(b) (1994).  The line between the two is not always clear, but it is important.  If a  facility is "functionalized" as transmission, the regulated company--in this case, El Paso--may incorporate the cost of that  facility into its rates. If it is functionalized as gathering, it  may not.

7
El Paso intended to abandon all of its non jurisdictional  facilities by transferring them to its wholly owned subsidiary,  Field Services.  The Chaco plant, located in the San Juan  basin, was one of the systems that El Paso intended to  transfer to Field Services.  The Chaco plant consists of liquid  extraction, dehydration, and compression facilities.  El Paso  transferred most of these facilities to Field Services.  But one  of the compressor stations, the Chaco compressor station, was  not transferred to Field Services.  The Chaco compressor  station consists of 16 compressor units that have a total of 77,960 hp and that generate more than 800 pounds of pressure.  See El Paso Natural Gas Co., 81 F.E.R.C. p 61,209, at  61,890 (1997).  The Chaco compressor pressurizes gas coming  in from the fields before it enters a liquid extractor.  Liquid  extraction is a part of natural gas processing and the extractor is a nonjurisdictional facility.  El Paso did not transfer  the Chaco compressor station to Field Services because it  believed that Chaco was necessary to preserve mainline capacity and so served a jurisdictional transmission function. Williams argued that the Chaco compressor was a gathering  facility and should have been transferred to Field Services.

8
In September 1995, FERC approved El Paso's application  to abandon its gathering facilities.  See El Paso Natural Gas  Co., 72 F.E.R.C. p 61,220 (1995).  In that same order, however, FERC also required El Paso to show cause why it did not  abandon the Chaco compressor.  See id. at 62,020.  After El  Paso transferred the Chaco plant facilities to Field Services,  Field Services replaced the liquid extractor, which used a  "lean oil" method, with a new cryogenic liquid extractor.  The  relevant difference between the two is that, to function efficiently, the cryogenic extractor needs the large amounts of  pressure produced by the Chaco compressor station.

9
Meanwhile, before the show cause proceeding regarding  the Chaco compressor was completed, El Paso sought a rate  increase in an entirely separate proceeding.  In 1996, El Paso  submitted a Settlement in that rate proceeding, which contained a provision relating to the pending dispute over the  Chaco compressor.  This provision,  15.2, provides:

10
15.2 Refunctionalization Issues.  In consideration of the other provisions of this Stipulation and Agreement, all El Paso facilities underlying the rates in Docket No.RP95-363-000, are properly functionalized as transmission facilities solely for the term of this Stipulation and Agreement.  Accordingly, (i) the show cause proceeding in Docket No. CP94-183-002 shall be terminated without prejudice to later filings after the term of this Stipulation and Agreement;  (ii) during the term of the Stipulation and Agreement, no party shall contest, in any Commission proceeding, the functionalization of El Paso's facilities;  and (iii) regardless of any actions taken by the Commission or by non-consenting parties to this Settlement Agreement, the settlement rates established herein will not be subject to change during the term of this Stipulation and Agreement based on any refunctionalization issue.

11
Stipulation and Agreement in Settlement of Rate and Related  Proceedings, reprinted in Joint Appendix ("J.A.") 661.Williams objected to  15.2, arguing that if the Chaco compressor was later found to be nonjurisdictional, this provision  would improperly allow El Paso to continue to incorporate  Chaco's costs into its transmission rates.  Williams complained that the effect of this provision is to subsidize Field  Services because Field Services would not have to pay the  compressor's costs.

12
Despite Williams' objections, FERC approved the Settlement on April 16, 1997, finding that it was a "fair and  reasonable resolution of difficult issues."  El Paso Natural  Gas Co., 79 F.E.R.C. p 61,028, at 61,131 (1997), reh'g denied,  80 F.E.R.C. p 61,084 (1997).  With regard to the pending  show cause proceeding, the Commission noted that was "issuing an order in that docket concluding that El Paso appropriately did not include the Chaco facilities among the facilities  to be transferred to its gathering affiliate because the primary function of that facility is jurisdictional transmission."Id.  Soon after, FERC issued an order in the show cause  proceeding finding that the Chaco compressor functioned as a  transmission facility and was therefore properly functionalized as jurisdictional by El Paso.  See El Paso Natural Gas  Co., 79 F.E.R.C. p 61,079 (1997).  This order was consistent  with FERC's order approving the Settlement:  Both orders  provided that the Chaco compressor was a jurisdictional  facility.

13
B. The Refunctionalization of Chaco and the Ensuing Disputes

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.

II.  Analysis

21
A. The Functionalization of the Chaco Compressor

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.

B.The Rate Issues

33
Both the Indicated Shippers and Williams argue that  FERC has improperly addressed the effect of the refunctionalization on El Paso's rates.  The Indicated Shippers argue  that FERC has gone too far by modifying the fuel charges;Williams argues that FERC has not gone far enough because  it has not modified the remaining costs.  In response, FERC  relies on an interpretation of El Paso's Settlement.  Because  the status of that Settlement is no longer clear after this  court's remand in Edison, FERC's orders under review are  vacated insofar as they rely on an interpretation of the  Settlement.

34
The Indicated Shippers argue that FERC's orders on  review are inconsistent with its order approving the Settlement, specifically  15.2.  The Shippers argue that FERC  was wrong to find that fuel charges could be adjusted to  reflect the refunctionalization of the Chaco compressor because  15.2 stipulated otherwise.  As an initial matter, we  note that FERC's interpretation of the Settlement is questionable.  Section 15.2 stipulated that "all El Paso facilities  underlying the rates in Docket No. RP95-363-000," which  includes the Chaco compressor, "are properly functionalized  as transmission facilities."  Stipulation and Agreement, reprinted in J.A. 661.  Section 15.2(i) emphasized that the show  cause proceeding for the Chaco compressor was to be terminated.  Given these provisions, it is not clear that FERC  could adjust the fuel charges with that Settlement in place.We need not decide the issue, however, because that Settlement may no longer be in place.

35
In 1998, this court remanded FERC's order approving the  Settlement that underlies the disputes here.  See Edison, 162 F.3d 116.  As a result, the status of that Settlement is no  longer clear.  As FERC counsel noted,

36
if on remand, the Commission determines to modify the settlement agreement--the interpretation of which un-derpins [the Indicated Shippers'] arguments here--based on the Edison Court's mandated areas of factual inquiry, litigation over the terms of the settlement agreement would yield nothing but an advisory opinion.

37
Br. for Respondent at 50.  FERC's decision making must be  "reasoned, principled, and based upon the record."  Western  Resources, Inc. v. FERC, 9 F.3d 1568, 1572 (D.C. Cir. 1993)  (citation and quotation marks omitted).  Without the Settlement in place, FERC's decisions relying on that Settlement  have no reasoned, principled basis.  Thus, insofar as FERC's  orders depend on an interpretation of that Settlement, they  are vacated.  In other words, FERC's orders finding that the  fuel charges can be modified at El Paso's next adjustment  period are vacated and remanded to FERC.

38
Likewise, FERC's order denying Williams' request for a  remedy is also vacated because it depends on an interpretation of the Settlement.  Williams argues that FERC failed to  order an adequate remedy after it refunctionalized Chaco  from a transmission facility to a gathering facility.  Specifically, Williams argues that FERC should have ordered El Paso  "to remove the Chaco 'gathering' costs from El Paso's jurisdictional 'transmission' rates."  Reply Br. of Petitioner  Williams at 3.  FERC denied Williams' request because it  had approved El Paso's rate in the order approving the  Settlement and it determined it would not upset that Settlement.  First, it noted that the cost-of-service underlying the  settlement rates is a "black box" number making it impossible  to determine what costs of a particular facility were reflected  in the settlement cost of service.  See 82 F.E.R.C. p 61,337, at  62,340.  FERC then noted that settlements like this "involve  a complex exchange of risks and benefits among the parties"  and that it would "respect these quid pro quos because the  results are in the public interest."  Id.  The very Settlement  that FERC is purporting to respect is no longer settled, so  FERC's justifications no longer hold weight.  In addition, we  note that at the time when FERC approved the Settlement,  the Commission had decided to functionalize the Chaco compressor as a jurisdictional facility.  Williams did not have a  chance to challenge that Settlement because at that time it  was not injured.  Now that FERC has refunctionalized the  Chaco compressor, Williams should be allowed to challenge the Settlement.  Thus, the order denying Williams full consideration of its claims is vacated.

39
On remand, FERC must consider, in light of Williams'  challenges, whether to again approve  15.2.  If it does  uphold  15.2, FERC must then consider the challenges  raised by the Indicated Shippers.  FERC is already in the  process of reexamining these issues in the context of the  remand in Edison.  The parties in Edison have proposed a  new settlement that specifically relies on the approval of the  Settlement.  Obviously FERC cannot simply rubberstamp  this new settlement without reconsidering the issues raised  by the parties in this case.  Indeed, Williams apparently has  filed a complaint against El Paso, raising some of the same  issues raised before this court.

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On remand, it would be well for FERC to consolidate all  these related matters to reach a single, coherent disposition  of the outstanding issues.  We vacate those portions of  FERC's order that rely on an interpretation of the Settlement and remand the case to the agency to reconsider these  issues in light of our opinion.  We deny the petitions for  review in all other respects.

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So ordered.