Producer Association's concerns. The Commission, therefore, is vacating the revision to the General Terms and Conditions which the November 1 order required. Within 15 days after issuance of this order, National Fuel shall file a revised tariff sheet deleting reference to the ten receipt point limitation in section 3.1(b) of National Fuel's tariff. D. Extensions and Renewals of Service In its tariff filing, National Fuel proposed to treat an extension of a primary FT term as a new request for service15 and a renewal or extension of the IT term as a continuation of the original term without loss of priority.16 In the November 1 order, the Commission required National Fuel to revise section 2.5 of its proposed FT Rate Schedule to treat extended FT service the same as National Fuel proposed to treat extended IT service, i.e., as a continuation of existing service under which the shipper does not lose priority by the renewal or extension of the underlying service agreement. National Fuel states that the Commission should require National Fuel to revise the IT Rate Schedule to conform to its proposed FT Rate Schedule. According to National Fuel, such a revision will encourage FT and IT customers to be realistic in their initial service requests. Consolidated Edison opposes the clarification because it is contrary to the conclusion reached in the November 1 order. National Fuel essentially asks the Commission to treat extensions of FT and IT service as new service. The problem with that approach, as opposed to treating service extensions as a continuation of existing service, is that it would interrupt existing service arrangements and would require an existing customer to forfeit its service priority merely because its agreement has expired. The Commission, as stated in the November 1 order, is requiring National Fuel to treat FT service extensions as a continuation of existing service to ensure that FT service doesn't have less advantageous terms than IT service. Extensions of FT service are entitled to no less advantageous treatment because FT service is a higher priority service than IT service.17 National Fuel's concern about realis 15 Section 2.5 of the FT Rate Schedule. 16 Section 3.6 of the IT Rate Schedule. 17 On December 3, 1990, National Fuel filed, inter alia, Original Sheet No. 41 concerning the extension of FT/IT service in purported compliance with the November 1 order. The filing is pending Commission review. tic requests for service can be handled by charging rates that ration capacity to the extent necessary. National Fuel's requested clarification is denied. E. Vague IT Terms and Conditions Section 1.2 of National Fuel's Pro Forma IT Rate Schedule provided that National Fuel shall not be required to grant any request for transportation service: (i) which could in Transporter's judgment interfere with the integrity of its system or with service to firm sales, firm transportation or storage customers; (ii) which would require the construction, modification, expansion or acquisition of any facilities; or (iii) if Transporter determines that Shipper does not possess sufficient financial stability to make it reasonably likely that service provided hereunder will be paid for on a timely basis. The November 1 order required National Fuel to revise section 1.2 of the IT Rate Schedule to establish identifiable criteria to: (1) specify what requests for service it would accept and what requests it would reject; (2) determine whether or not to build facilities for IT service; (3) avoid unduly subjective determinations of customer creditworthiness on National Fuel's part. In its clarification request, National Fuel asks the Commission to delete section 1.2 of the IT tariff instead of requiring its revision. National Fuel may delete this provision if it prefers rather than clarifying it as directed. However, National Fuel will continue to have the obligation to serve in a nondiscriminatory manner. National Fuel's requested clarification is granted. 18 [¶ 61,122] Mississippi River Transmission Corporation, Docket No. CP90-78-001 Order Denying Rehearing (Issued February 7, 1991) Before Commissioners: Martin L. Allday, Chairman; Charles A. Trabandt, On June 18, 1990, Mississippi River Transmission Corporation (Mississippi River) filed a request for rehearing of an order issued May 18, 1990, in Docket No. CP90-78-000, 51 FERC 61,188. The May 18, 1990 order issued a certificate of public convenience and necessity, pursuant to section 7(c) of the Natural Gas Act (NGA), to Mississippi River authorizing (1) the increased sale of gas to Associated Natural Gas Company, (2) the transportation and delivery of gas for direct sale on a firm basis to ASARCO, Inc., GAF Corporation, Amoco Petroleum Additives Company, and River Cement Company and (3) the transportation and delivery of increased volumes of gas for firm direct sale to Pfizer Pigments, Inc. Mississippi River contends that the Commission erred in imposing a condition that requires that the transportation component of the rates for direct sales service not be less than the applicable maximum rate for transportation service pursuant to the pipeline's open-access transportation tariff. For the reasons explained below, we will deny Mississippi River's request for rehearing. Rehearing Request In its rehearing request, Mississippi River argues that the Commission has exceeded its authority under section 1(b) of the NGA by establishing a minimum rate for the transportation component of Mississippi River's direct sales service. Mississippi River contends that by imposing the subject condition, the Commission has expressly engaged in the prohibited practice of fixing rates for direct sales. Relying on FPC v. Louisiana Power & Light Co., 406 U.S. 621 (1972), Mississippi River argues that section 1(b) of the NGA prohibits the Commission from setting rates for direct sales. Further, Mississippi River avers that the fact that the condition is only applicable to the transportation component of the direct sales service is a distinction without a difference and, therefore, cannot save the Commission's action. Mississippi River contends that the order will effectively regulate the price Mississippi River may charge the industrial customers and, conse 1 50 FERC 61,268 (1990). quently, it constitutes ratemaking for its direct sales service, which is beyond the Commission's jurisdiction. Mississippi River also avers that the fact that the Commission is attempting to accomplish this proscribed ratemaking by conditioning the sales service certificate rather than by approving the sales rate tariffs is of no consequence, for it is well-established that the Commission is prohibited from accomplishing indirectly what it is prohibited from doing directly. Citing Central West Utility Company v. FPC, 247 F.2d 306 (3rd Cir. 1957), Mississippi River contends that the Commission may not condition a certificate in contravention of a specific provision of the NGA. In addition, Mississippi River avers that it should be able to discount its rates without having to exercise the option of restructuring its direct sales agreement such that the transfer of title to the gas occurs at the pipeline's receipt point; such restructuring would allow Mississippi River to provide its direct sales customers transportation under its blanket transportation certificate and, thereby, permit selective discounting. Mississippi River argues that it should be able to discount its rates to direct sales customers under its bundled service agreements, just as it can offer selective discounting for the transportation of gas for third parties under its blanket certificate. Otherwise, Mississippi River contends, it cannot compete with other entities, e.g., intrastate pipelines, to retain its direct sales customers. Mississippi River avers that the Commission's goal of encouraging the development of competitive markets is defeated by prohibiting Mississippi River from competing to provide a delivered sales service to its direct sales customers and by preventing these customers from receiving the service they have selected. Discussion In United Gas Pipe Line Company, the Commission enunciated the following policy in requiring United to charge the maximum applicable rate under its Part 284 transporta tion tariff as the transportation component of a direct sale: The Commission is particularly concerned that direct sales should not be offered under conditions that would unduly prefer the pipeline's sales over its transportation services. (This concern is of greater significance now than before, inasmuch as almost all the major pipelines now offer transportation services unbundled from sales.) Such preference could arise if a pipeline offered to sell gas directly with a lower imbedded transportation rate than it was willing to offer separate transportation service for an equivalent amount to gas. Since other section 7(c) transporters are required to charge the maximum applicable rate under their Part 284 transportation tariff, the section 7(c) authority requested herein should be consistent.2 (Footnotes omitted.) Contrary to Mississippi River's contention, the Commission has not fixed rates for the direct sale of gas in the instant proceeding. Rather, the Commission has added a condition requiring that the minimum rate for the transportation component of the gas may not sink so low as to make the transaction unduly preferential. Mississippi River may charge any direct sales rate it wishes so long as the portion of the rate attributable to transportation, which is within the Commission's jurisdiction, is not so low as to render the entire transaction unduly preferential and thus not in the public interest. The condition imposed by the Commission will prevent Mississippi River from establishing a preferential rate for direct sales customers over transportation under its blanket certificate. Further, we disagree with Mississippi River's assertion that we are thwarting the Commission's goal of encouraging competition by not allowing the direct sales customers to be able to take advantage of selective discounting under the bundled services they have selected. Selective discounting is limited to unbundled services, which the Commission in Order No. 436 recognized as promoting greater competition than the traditional bundled services: the final rules generally seek to provide additional market options for suppliers, pipelines and customers. Thus, where a pipeline offers transportation as an "unbundled" service, the customer will be able to purchase gas in what Congress has determined (and which experience increasingly demonstrates) to be a workably competitive market.3 With respect to bundled services, Order No. 4364 states the following: where an interstate pipeline offers a "bundled" service...which includes a transportation component, the Commission presently concludes that the potential for market dominance by the pipeline is so great that more traditional utility-type regulation is required to satisfy the Congressional mandate set out in the NGA. We have approved the certificate to provide the direct sales service selected by Mississippi River's customers, albeit with conditions. Mississippi River has the option (but is not required) to restructure the contract such that the services are unbundled, which would not only allow for selective discounting but also promote greater competition and flexibility in negotiating separate rates for the sale and transportation of the gas. The Commission orders: Mississippi River's request for rehearing is denied. [¶ 61,123] Phillips Petroleum Company, Docket No. CI86-165-000 (Issued February 7, 1991) Before Commissioners: Martin L. Allday, Chairman; Charles A. Trabandt, Elizabeth Anne Moler, Jerry J. Langdon and Branko Terzic. On January 15, 1986, Phillips Petroleum Company (Phillips) filed a petition pursuant to Rule 207 of the Commission's Rules of Practice and Procedure, requesting that the Commission waive the filing requirements of Parts 154 2 Id. at p. 61,851 (1990). 3 Regulation of Natural Gas Pipelines After Partial Wellhead Decontrol, Order No. 436, FERC Statutes and Regulations, Regulations Preambles and 157 of the Commission's regulations to allow the continuation of sales of natural gas for resale in interstate commerce from Phillips to Phillips 66 Natural Gas Company (Phillips 66) under certificates issued to other working 1982-198530,665, at p. 31,474 (1985), et seq., vacated and remanded, sub nom., Associated Gas Distributors v. FERC, 824 F.2d 981 (D.C. Cir. 1987). 4 Id. interest owners or small producers. Phillips requests the waiver so that it will not be required to make numerous certificate and rate filings for transactions which were previously intracompany transfers between Phillips' operating groups but now involve sales to Phillips 66 as the result of the assignment by Phillips of its natural gas processing facilities and related gathering systems to Phillips 66. Alternatively, Phillips requests that the Commission grant it a blanket certificate of public convenience and necessity authorizing sales of jurisdictional natural gas to Phillips 66. For the reasons discussed below, we will grant Phillips' request for a blanket certificate to authorize the sales to Phillips 66 and we will waive Part 154 of the regulations so that Phillips will not have to file and maintain rate schedules. Background Effective January 1, 1986, Phillips assigned its natural gas processing facilities and related gathering systems, which were previously managed by its Gas and Gas Liquids Group, to Phillips 66.1 Phillips retained its oil and gas producing properties, however, and continues to operate as a large producer. Where Phillipsproduced gas is handled in Phillips 66-owned gathering systems, new gas contracts between Phillips as seller and Phillips 66 as buyer will replace previous intracompany transfers between Phillips' Exploration and Production and Gas and Gas Liquids Groups. Phillips indicates that it will continue sales to Phillips 66 as follows: (1) Production from leases operated and 100% owned by Phillips will be sold under percentage-of-proceeds type contracts. (2) Production from leases partially owned by Phillips will be sold through ratification of co-owners' contracts. (a) Some of the ratified contracts will be percentage-of-proceeds type contracts. (b) Other ratified contracts will be "flat rate" contracts where the co-owner is the operator. (c) Still other ratified contracts will be contracts where the co-owner is not the operator of the producing property. (d) The remaining group of ratified contracts will be contracts where the co-owner is a small producer and where total large producer interests in the property exceed twenty percent. 1 Phillips 66, which is engaged in the business of purchasing, gathering, processing and selling natural gas and natural gas liquids, was authorized to con Phillips is not required to file applications for certificates and rate schedules to cover the sales in (1) and (2)(a) above because section 154.91(e) of the regulations requires the plant operator to make all filings for producers who sell to the plant operator under a percentageof-proceeds contract and prohibits producers making sales under percentage-of-proceeds contracts from filing rate schedules or certificate applications to cover such sales. In addition, Phillips is not required to file applications for certificates and rate schedules to cover the sales in (2)(b) above because section 154.91(b) of the regulations requires the operator of a natural gas producing property which is signatory to a gas sales contract to make all rate schedule filings and certificate applications for all signatory parties to the contract. However, Phillips would be required to make its own certificate and rate schedule filings to cover its sales in (2) (c) and (2)(d) above. Therefore, Phillips requests waiver of the regulations to relieve it of the burden of making such filings to continue sales which were previously intracompany transfers requiring no certificate authorization or rate schedule filings. Specifically, for sales in (2)(c) above, Phillips is seeking waiver of sections 154.91(b) and (c) of the regulations. Section 154.91(b) requires Phillips, after ratifying a co-owner's contract, to make rate schedule and certificate application filings if it operates the producing property. In instances where neither Phillips nor the co-owner whose contract Phillips ratifies operates the producing property, section 154.91(c) requires Phillips to file rate schedules and applications for certificates unless the coowner makes filings to cover Phillips. Waiver of sections 154.91(b) and (c) would permit Phillips' sales under ratified nonoperators' contracts and sales where Phillips is the operator to be automatically covered under the co-owners' certificates and rate schedules. In addition, for the sales in (2)(d) above, Phillips is seeking waiver of section 157.40(b)(2) of the regulations, which provides that a small producer certificate may cover large producer interests only if the interests are covered under the small producer's contract, the small producer is the operator of the properties and the total large producer working interests do not exceed twenty percent. Waiver of section 157.40(b)(2) would permit Phillips' sales under ratified small producer agreements to be covered by the co-owners' small producer certificates. tinue sales previously made by Phillips by order issued September 4, 1986, in Docket No. G-2641-001 et al. In support of its request for waiver, Phillips states that its sales cover 2935 leases and a considerably higher number of producing wells and that approximately 952 of these leases produce gas subject to Natural Gas Policy Act of 1978 (NGPA) section 104 and 106(a) price categories and are subject to the Commission's Natural Gas Act (NGA) jurisdiction. Phillips also notes that there are additional leases producing NGPA section 108 gas subject to NGA jurisdiction and that it is presently unable to specify the leases to which the Commission's certificate and rate schedule filing requirements apply. Further, Phillips contends that production supplied to the plants from Phillips' leases has historically been transferred between the operating groups of Phillips at intracompany prices with only the plant tailgate sales being subject to NGA and NGPA jurisdiction and that these previous transfers did not constitute a "sale." In addition, Phillips argues that waiver of the Commission's certificate and rate schedule filing requirements for Phillips' sales to Phillips 66 will in no way impair the Commission's ability to protect the public interest since the resale rates of Phillips 66 will be subject to the Commission's jurisdiction. Notices and Interventions The Commission noticed the application in the Federal Register on June 16, 1986.2 The comment period expired on June 24, 1986.3 No petitions to intervene or protests to the application were filed. Discussion 4 The Commission has not previously granted a blanket waiver of sections 154.91 and 157.40 of its regulations based on a claim of potential filing burdens. However, in Sun Exploration and Production Company et. al. the Commission granted producers blanket certificates authorizing sales of uncommitted gas. Similarly, in Texaco Gas Marketing, Inc. et al. the Commission granted marketers blanket certificates authorizing sales of uncommitted gas.5 Furthermore, in Sun and Texaco Gas Marketing, the Commission also waived Part 154 of the regulations to eliminate burdensome rate schedule filing requirements. Phillips' alternative request herein seeks authorizations substantially similar to the authorizations granted in Sun and Texaco Gas Marketing. Consistent with those orders, the Commission will grant Phillips a certificate authorizing the sales to Phillips 66 as described above. In addition, we will waive Part 154 of the regulations so that Phillips will not be required to file and maintain rate schedules for those sales. The Commission orders: Phillips is granted a blanket certificate to continue sales to Phillips 66 to the extent discussed above. In addition, Part 154 of the Commission's regulations is waived so that Phillips will not be required to establish and maintain rate schedules. [¶ 61,124] Columbia Gas Transmission Corporation, Docket No. CP89-1205-000 Order Dismissing Request for Partial Abandonment Authority and Granting Request for Pregranted Abandonment Authority (Issued February 7, 1991). Before Commissioners: Martin L. Allday, Chairman; Charles A. Trabandt, On April 13, 1989, Columbia Gas Transmission Corporation (Columbia) filed in Docket No. CP89-1205-000 an application pursuant to section 7(b) of the Natural Gas Act for (1) permission and approval to partially abandon its sales service to Baltimore Gas and Electric (BG&E), effective November 1, 1988, and January 1, 1989, and (2) pregranted abandonment 251 Fed. Reg. 21,793 (June 16, 1986). 3 Phillips filed its petition on January 15, 1986. At the Commission staff's request, Phillips paid the filing fee for a producer certificate application on April 16, 1990. authority to make further reductions in sales service at specified times to BG&E. For the reasons discussed below, we are granting, in part, and dismissing, in part, Columbia's requests for abandonment authority. Sun Exploration and Production Company et al., 43 FERC ¶ 61,193 (1988). 5 Texaco Gas Marketing, Inc. et al., 42 FERC 61,394 (1988). |