Daily GPI / NGI All News Access

Court Overturns FERC on Colorado Bypass

Court Overturns FERC on Colorado Bypass

The U.S. Court of Appeals for the 10th District has reversed and remanded an order in which FERC asserted jurisdiction over two KN Wattenberg Transmission laterals that provide connecting service from Colorado Interstate Gas to two food-processing plants in Fort Morgan, CO., thus bypassing the municipal gas provider.

Fort Morgan, the party that was bypassed, challenged the Commission's jurisdiction in approving construction of the KN Wattenberg laterals, arguing that the facilities were exempt from FERC authority under the Hinshaw Amendment, which made them subject to the jurisdiction of the Colorado Public Utilities Commission [No. 98-9512]. A pipeline is exempt under the Hinshaw Amendment if it receives gas within the boundary of the same state in which the gas is ultimately consumed.

But FERC responded that "individual pieces of segments" of a jurisdictional interstate pipeline, such as KN Wattenberg, could not be exempt from Commission regulation under the Hinshaw Amendment. Pipeline companies were either jurisdictional or Hinshaw; they couldn't be both, the Commission said.

"...[T]his view seems contrary to prior FERC decisions where Hinshaw exemptions were granted to separate facilities which were nonetheless owned by an interstate pipeline," the court ruled in its June 25th decision. "Courts interpreting the Hinshaw Amendment have similarly acknowledged that the same company can engage in both Hinshaw-exempt activities and FERC-regulated activities, at least as long as the intrastate and interstate activities and/or facilities are not clearly a part of a single integrated system." The KN Wattenberg laterals are located 57 miles away from the rest of the pipeline's system, the decision said.

"...[F]ERC's position in this case does appear inconsistent both with the plain language of the Hinshaw Amendment and with its prior published decisions," the court said.

The two food-processing companies in Fort Morgan, Leprino Foods Co. and Excel Corp., approached KN Wattenberg about building the laterals after the municipality "trebled" the transportation rate for gas service in 1995. The laterals receive gas from Colorado Interstate and transport it to the two companies' facilities, completely bypassing Fort Morgan's gas service. The bypass cost the municipality 19% of its annual gas revenues.

©Copyright 1999 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1231
Comments powered by Disqus