FERC last week denied a complaint in which KN WattenbergTransmission LLC accused a western LDC and pipeline affiliates ofimproperly bifurcating their pipeline projects to sidestepCommission jurisdiction.

At issue are three different projects: Public Service Company ofColorado’s proposed Front Range pipeline, which would extend fromRockport, CO, to deliver gas to the Denver market; a compressionexpansion of Colorado Interstate Gas (CIG) and Wyoming InterstateGas Co. (WIC) that would increase deliveries of Wyoming gassupplies into the proposed Front Range pipeline; and KNWattenberg’s proposed Front Runner pipeline, which would paralleland compete with Public Service Company’s Front Range line.

The Public Service Company and WIC/CIG belong to otherwiseseparate corporate families, but are connected in that each has anownership interest in WYCO Development, which will own the FrontRange facilities. CIG will build the proposed facilities, whilePublic Service Company will operate and manage them.

KN Wattenberg contends the Front Range project, which is pendingbefore Colorado Public Service Commission, and the WIC/CIGcompression project, which is before FERC, are a single, integratedproject that was intentionally bifurcated. This was done, itclaims, to permit the Front Range project to take advantage of theexpedited review available from the Colorado PUC and to “leapfrog”KN Wattenberg’s competing Front Runner project to continue itsdominance over the Colorado gas market.

In its order, the Commission found that there was “coordination”between WIC/CIG and Public Service Company in the projects’development and ownership [CP98-271]. But, it added, “this providesno basis to declare the two projects to be a single interstateundertaking, since we find no evidence that the operation of thetwo expansions will work to frustrate our jurisdiction andregulatory oversight, or permit the project sponsors to engage indiscriminatory practices…”

Public Service Company envisioned an expansion similar to FrontRange in its 1994 long-range plan, FERC noted. And WIC and CIGcontend their project is needed to move anticipated increases inPowder River Basin gas production to markets east of Wyoming. “Wefind no reason not to accept these explanations for the separatelyproposed projects.”

The issue of “whether the two proposed projects should be viewedas one does not turn only on the question of whether they willoperate entirely independently,” the order noted. “Gas volumesmoved by means of WIC’s added compression may be delivered into theFront Range facilities without compelling us to find the twoexpansions to be one in the same.” Instead, the Commission lookedto the identities of the owners and operators of the proposedprojects to determine whether the actions of WIC/CIG and PublicService Company amounted to an “unwarranted evasion of ourregulatory oversight.”

If WYCO Development alone had sought authorization to own andoperate the two expansions, “we might deem it prudent to take ahard look at the projects’ independence,” FERC said. “But that isnot the proposal before us.” KN Wattenberg argues that WYCODevelopment should be the sole party seeking Commissionauthorization for both projects. “We disagree.”

The Commission reached an entirely different decision in itsprecedent-setting Kansas pipelines’ case in which it found thatthree affiliate pipelines had been acting in unison to evade FERCjurisdiction. The key difference in that case was that “the partiesthat sought (or held) the various authorizations and owned andoperated the facilities at issue were all affiliates of the sameparent corporation. The facts are different here.”

Susan Parker

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