assess, or impose fees on interstate operators. Based upon this interpretation, it is the Department's position that in adopting the Act Congress did not either expressly or impliedly preempt the power of the States to raise funds. The General Counsel did note that there may be other legal bases upon which States statutes could be found invalid, such as, for example, imposition of an unreasonable burden on interstate commerce or discriminatory taxation. However, these are not matters which hinge on his interpretation of the Act. Our primary concern is to assure that the State agencies who are acting as our agents with respect to interstate facilities do so in accordance with the authority which the Department has given to them. Other quesions which may arise between the State agencies and the interstate operators are best left to resolution between those parties. The Department does not intend to become involved in such questions except to the extent that it appears necessary for our administration of the Natural Gas Pipeline Safety Act. I trust that you will find this a satisfactory response to the points raised in your letter to General Davis. In particular, I hope that you will find it evidence of our sincere desire to work cooperatively with the States. If you have any further questions on this subject or in any other aspects of our Federal/State relations, please let me know. Sincerely, JOSEPH C. CALDWELL, Acting Director, Office of Pipeline Safety. NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS, Hon. BENJAMIN O. DAVIS, Jr. DEAR GENERAL DAVIS: Congratulations upon your appointment as the Assistant Secretary for Safety and Consumer Affairs. I wish you Godspeed in your great quest to significantly improve the safety of our national transportation system and to enhance the role of the consumer therein. I am confident that your dedicated efforts in this endeavor will fulfill the high expectations of the Secretary and your other colleagues in government. I pledge to you the wholehearted cooperation and support of the National Association of Regulatory Utility Commissioners (NARUC) in the accomplishment of your mission. STATE INSPECTION COSTS FOR INTERSTATE PIPELINES I wish to respectfully bring to your attention at this time a matter of pressing concern which seriously affects the ability of State commissions to adequately finance their efforts to cooperate with you in the enforcement of Federal safety standards applicable to interstate gas pipelines. The enclosed copies of correspondence document the latest effort by Joseph C. Caldwell, Acting Director of the Office of Pipeline Safety (OPS), Department of Transportation, to in effect undermine the programs of West Virginia and other States to enforce the Federal safety standards applicable to interstate gas pipelines. Although Mr. Caldwell only has two field inspectors to police approximately 224,000 miles of interstate gas pipelines nationwide, he nevertheless has sided with the big pipelines by contending that the States do not have the inherent authority to assess them to defray the cost of State safety inspections of the pipelines. Mr. Caldwell's support of the interstate pipeline industry's position on this issue has discouraged the States from enforcing Federal safety standards and has resulted in one large State-Pennsylvania-ceasing altogether to enforce such standards as applied to the interstate pipelines. LEGISLATIVE HISTORY The Natural Gas Pipeline Safety Act of 1968 (49 U.S.C.A., Sec. 1671, et seq.) required the Secretary of Transportation to adopt minimum safety standards applicable to all distribution, interstate pipeline and non-rural gathering systems within the Nation. Under Section 5 of the Act, a State agency which adopts the Federal safety standards as a minimum and which has the ability to effectively enforce these standards, is permitted to administer a comprehensive safety program within that State with respect to gas systems other than interstate pipelines. State adoption and enforcement of the Federal standards are reflected by a State agency annually submitting to the Secretary of Transportation a certificate accompanied by supporting information depicting the State program. If the Secretary finds that the State performance is inadequate, he may reject the certificate and assert direct Federal regulation. EFFORT TO ENFORCE FEDERAL INTERSTATE PIPELINE SAFETY STANDARDS DOT on November 7, 1968, issued the first Federal safety standards governing gas systems. 49 CFR, Part 190. Since DOT did not have an effective field enforcement staff at that time (or since then), it invited the State agencies not only to participate through Section 5 certification procedures as to distribution systems, but also to act as the agent of DOT in exercising surveillance over the safety programs of the interstate pipelines. 49 CFR, Sec. 190.6. At the present time the following twenty-two jurisdictions have assumed this added responsibility: However, these State safety programs for the interstate pipelines have been dealt a severe blow by several letters written by Mr. Caldwell advising State agencies that they no longer possess the authority to assess fees against interstate pipelines to defray the cost of their inspection and surveillance activities. THE TEN NECO-WEST VIRGINIA INCIDENT The latest incident involves a dispute between Tenneco, Inc., and the West Virginia Public Service Commission. The Secretary of the West Virginia Commission by letter of August 3, 1971, transmitted an order to the Tennessee Gas Pipeline Company, a wholly owned subsidiary of Tenneco, Inc., requiring it to show cause why it should not pay an annual license fee in the amount of $2,321.93 for the support of the Commission's Gas Pipeline Safety Division. On August 9, 1971, Jerry P. Fortenberry, Assistant General Counsel for the Tennessee Gas Transmission Company, another wholly owned subsidiary of Tenneco, Inc., wrote a letter to Mr. Caldwell complaining of the West Virginia assessment of $2,321.93 and requesting his intercession to overturn the assess ment. 3 Although under no obligation to intercede, Mr. Caldwell by letter of September 1, 1971, advised West Virginia that there was no legal basis for the assessment. Mr. Caldwell made two points. 1 Third Annual Report of the Secretary of Transportation on the Administration of the Natural Gas Pipeline Safety Act of 1968, Calendar Year 1970, Appendix 8. 2 Standard and Poor's Corporation Records, p. 5355. 3 Ibidem. First, he said that, since DOT had no authority to assess interstate pipelines, State agencies could not thereby obtain authority to assess interstate pipelines because under the agency relationship an agent could not be delegated authority which the principal did not possess. This point is not contested. However, Mr. Caldwell made a second point which is vigorously contested by West Virginia and other States. He said, "Similarly, if the fee is intended for safety purposes of the Commission in its own right, there can be no legal basis for it because the Natural Gas Pipeline Safety Act of 1968 preempted safety jurisdiction over all interstate gas facilities and vested that jurisdiction in the Department of Transportation." We disagree. West Virginia, as agent of DOT, has the right to inspect the safety of interstate pipelines. This requires the expenditure of State revenues and the State has the inherent right to raise this revenue by taxes or assessments. There is no significant difference between deriving the needed revenues from the State treasury or from State assessments of interstate pipelines to defray the cost of safety regulation. West Virginia advised Mr. Caldwell by letter of September 13, 1971, that "Should DOT and the interstate companies insist upon forcing this prohibition, this Commission may have to reconsider its decision to participate in the federal gas pipeline safety program." Mr. Caldwell responded on September 28, 1971, to this probable loss of any government gas safety regulation in West Virginia by succinctly reaffirming the views stated in his September 1st letter. Aside from its highly controversial legal aspects, the letter also reflects inpropriety by Mr. Caldwell as the Federal official directly in charge of the national gas safety program. Here Mr. Caldwell has voluntarily intervened at the request of the mammoth Tenneco to overturn a $2,321.93 assessment vitally needed by West Virginia to protect the safety of its people with respect to gas pipelines. Tenneco is ranked by Fortune Magazine as the 34th largest industrial corporation in the Nation. Tenneco is currently described in Standard and Poor's Corporation Records as being "a natural gas pipeline operator with diversified interests in integrated oil, chemical, packaging, manufacturing, shipbuilding, and land use businesses and holds related investments in the insurance and banking fields." Tenneco has a capitalization of $1.8 billion, total assets of $4.4 billion," and consolidated earnings of over $79 million for the six months ending June 30, 1971.8 CONCLUSION In view of the enormous resources of Tenneco as contrasted with the thin resources of government committed to strengthening national gas pipeline safety, we respectfully urge your intervention to reverse the position taken by Mr. Caldwell in this important matter of public safety. With warm personal regards and best wishes, I am PAUL RODGERS, General Counsel. Fortune Magazine, Directory of The 500 Largest U.S. Industrial Corporations, May 1971, p. 172. Page 5355. This report on Tenneco further states that "Of 1970 revenues, pipeline operations provided 23.2%. integrated oil 16.7%, chemicals 9.7%, packaging 9.9%, manufacturing and shipbuilding 34.4%, land use and other 6.1%." Standard and Poor's Corporation Records, p. 5355. 7 Consolidated Balance Sheet as of June 30, 1971, as reported in Moody's Public Utility News Reports, September 24, 1971, p. 1892. The exact figure is $4,391,009,000 and six months earlier (December 31, 1970) its total assets were reported at $4,343,792.842 which means an increase of over $48 million in only six months! Moody's Public Utility News Reports, March 12. 1971. p. 1610; Standard and Poor's Corporation Records, 5364. The exact figure is $79,120,743 and for the same period ending June 30, 1970, its consolidated earnings were reported at $67,193,233 which reflects an increase of approximately $12 million. Moody's Public Utility News Reports, August 24, 1971, p. 1935; Standard and Poor's Corporation Records, p. 4757. Mr. JOSEPH C. CALDWELL, TENNESSEE GAS TRANSMISSION CO., Acting Director, Office of Pipeline Safety, Department of Transportation, Washington, D.C. DEAR MR. CALDWELL: Attached is a copy of a letter dated April 1, 1971, to me from Mr. T. K. Spalding, Director, Gas Pipeline Safety Division, of the Public Service Commission of the State of West Virginia. Also enclosed is a copy of a letter to me dated April 22, 1971, from Mr. Augustine A. Mazzei, Jr., Assistant Chief Counsel, of the Public Service Commission of the State of West Virginia. Mr. Mazzei's letter attributes a change of position to the Office of Pipeline Safety with respect to States assessing fees for pipeline safety regulation of interstate pipeline facilities. I am not aware of any change in the position of your office, since your distribution of the Guideline letter of October 30, 1970. Would you please advise as to whether there has been any change in the parameters and instructions of the Guideline letter. Very truly yours, Enclosures. TENNESSEE GAS PIPELINE Co., JERRY P. FORTENBERRY. Charleston, April 1, 1971. WEST VIRGINIA PUBLIC SERVICE COMMISSION, Tennessee Building, Houston, Tex. (Attention: Mr. Jerry P. Fortenberry, Associate General Attorney). DEAR SIR: Enclosed are the forms for reporting data on your pipelines, which data will be used to determine the special license fee to be assessed for the fiscal year beginning July 1, 1971. In a guideline letter of October 30, 1970, relating to interstate gas transmission facilities, Mr. Joseph C. Caldwell, Acting Director, Office of Pipeline Safety, stated in part, "a state agency will not have authority to assess such fees for their safety services as our agent." The National Association of Regulatory Utility Commissioners, in a statement of March 9, 1971, before the U.S. House of Representatives, Subcommittee on Communications and Power, urged a reversal of that decision. In view of the controversy, the Commission has therefore determined that rather than exclude interstate pipelines from assessment, which would in effect increase the assessment on intrastate pipelines, it would ask the oprators to voluntarily pay the fee on interstate pipelines. A favorable response would substantiate the preference of many of the large operators, expressed prior to the passage of Chapter 24B, that the state retain authority for administering the federal safety standards. Unless the operators elect to support the Commission's request, it will be necessary to confine our activities to intrastate pipelines and surrender our agent's agreement for the surveillance of interstate pipelines to the Department of Transportation. Very truly yours, T. K. SPALDING, Director, Gas Pipeline Safety Division. WEST VIRGINIA PUBLIC SERVICE COMMISSION, TENNESSEE GAS PIPELINE CO., Houston, Tex. (Attention: Mr. Jerry O. Fortenberry, Associate General Attorney). DEAR SIR: By letter dated April 1, 1971, T. K. Spalding, Director of the Gas Pipeline Safety Division of the West Virginia Public Service Commission, advised you that assessments on interstate facilites were not authorized and requested that assessments on the interstate facilities be paid on a volunary basis. This Commission has never accepted the above as a proper interpretation of Chapter 24-B of the West Virginia Code and subsequent to the April 1 letter, the Office of Pipeline Safety, through its Acting Director, Joseph C. Caldwell, rescinded its edict against states assessing interstate facilities. Therefore, be advised that unless Chapter 24-B is amended or our interpretation of said Chapter is altered through court decision, we will assess all pipeline facilities operating within the State of West Virginia regardless of their designation as inter- or intrastate pipeline. We hope that these conflicting letters have not caused any undue confusion and that we will receive full cooperation from all the pipeline companies operating within this State. Very truly yours, Mr. AUGUSTINE A. MAZZEI, Jr., Public Service Commission, AUGUSTINE A. MAZZEI, Jr., Assistant Chief Counsel. TENNESSEE GAS TRANSMISSION CO., DEAR SIR: Your letter of April 22, 1971 to me referring to the letter dated April 1, 1971 of Mr. T. N. Spalding, Director of the Gas Pipeline Safety Division of the West Virginia Public Service Commission to me attributed a change of policy to the Office of Pipeline Safety. I am not aware of Mr. Joseph C. Caldwell, Acting Director of the Office of Pipeline Safety, changing the position of that office with respect to States assessing fees to interstate facilities. This is a matter in which the position of the Office of Pipeline Safety should be unmistakable. Therefore, I am sending a copy of your letter and Mr. Spalding's letter to the Office of Pipeline Safety requesting a statement of their position. Very truly yours, JERRY P. FORTENBERRY. WEST VIRGINIA PUBLIC SERVICE COMMISSION, TENNESSEE GAS PIPELINE CO. Houston, Tex. GENTLEMEN: Pursuant to Chapter 24B, Article 5, Section 3 of the Code of West Virginia. 1931, as amended, there is hereby assessed against your company a special license fee for support of the Gas Pipeline Safety Division of the Public Service Commission. Information upon which this assessment is based was obtained from reports filed with the Public Service Commission by the respective companies. The total amount assessed for the 1971-72 fiscal year is $90,000, with the per mile rate established at $1.5176. Amount of your assessment__ $2321.93 This assessment is due and payable in one installation, without discount, on or before July 1, 1971. Please make your check payable to the Public Service Commission of West Virginia, and mail same to: Gas Pipeline Safety Division, Room E-217, Capitol Building, Charleston, West Virginia 25305, together with this form, to assure proper credit. Very truly yours, ELIZABETH V. HALLANAN, Chairman. WEST VIRGINIA PUBLIC SERVICE COMMISSION, Re GPS case No. 40, Tennessee Gas Pipeline Co. TENNESSEE GAS PIPELINE Co., Tennessee Building, Houston, Tex. GENTLEMEN: We are enclosing two copies of an order entered by the Commission on the 29th day of July, 1971, in the above captioned case. Very truly yours, Enclosure. S. GROVER SMITH, JR., Secretary. |