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Court Vacates FERC's Jurisdictional Determination for Transco

A federal court in Washington, DC, Tuesday vacated a 2005 FERC decision that found part of Transcontinental Gas Pipe Line's network offshore Louisiana to be jurisdictional transmission and ineligible to be spun down to affiliate Williams Gas Processing Gulf Coast Co.

Williams and Transco challenged the 2005 orders, which reversed a 2001 ruling by the agency that held Transco's Louisiana lateral facilities performed a gathering function and were not subject to FERC jurisdiction. The Federal Energy Regulatory Commission changed its position in the 2005 orders after learning that Unocal's Jupiter Energy offshore pipeline system, a jurisdictional pipeline located upstream of Transco, fed natural gas to the Transco lateral offshore Louisiana, which was then shipped ashore to Transco's downstream facilities.

In justifying the reversal, the Federal Energy Regulatory Commission said the 2001 orders on Transco were issued "on the basis of incomplete information" about the jurisdictional nature of the upstream Jupiter pipeline system. It further noted that "no gas is collected along the length of Transco's downstream line" to justify a determination of FERC-exempt gathering.

"But FERC never explained why the classification of the Jupiter facility is relevant to the jurisdictional status of the Transco lateral under existing precedent," the U.S. Court of Appeals for the District of Columbia Circuit said in a 19-page ruling.

"FERC argues that it revisited its 2001 Transco jurisdictional order to eliminate a 'fundamental inconsistency' in its case law. The Commission could have stated as much in its 2005 orders and justified the policy shift, for an agency is free to change course in a regulatory regime provided that it offers a reasoned explanation for so doing and is not otherwise constrained by statutory limitation," the appellate court said. But FERC didn't do this, it added.

As a result, "we are forced to vacate the 2005 orders...because in those decisions FERC neither explained its action as consistent with precedent nor justified it as a reasoned and permissible shift in policy. Although these orders ultimately may prove to be justified on the merits, they are presently wanting for lack of reasoned decisionmaking," the three-judge panel said.

"We offer no judgment on the merits of FERC's choice to reverse the Transco lateral's jurisdictional determination. The decision on the merits must await reasoned decisionmaking from the Commission," it noted.

The D.C. appellate ruling did not address an aspect of the 2005 orders in which FERC affirmed its jurisdictional determination for Jupiter Energy's pipeline system following a remand from the Fifth Circuit Court of Appeals. That decision is currently pending before the Fifth Circuit.

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