The FERC majority has reaffirmed a noteworthy ruling to reassert jurisdiction over a portion of gas gathering facilities on North Padre Island (NPI) that Transcontinental Gas Pipe Line had spun down to its gathering affiliate, Williams Field Services Co. (WFS). But Commissioner Nora M. Brownell, who voted in favor of the order last year, signaled a change of heart.

The agency order in September 2002 marked the first and only time the Commission has reasserted its authority over gathering since it turned the responsibility over to the states a few years back. FERC took this unprecedented action after finding Transco and WFS “acted in concert” to push gathering rates to monopolistic levels on the NPI offshore Texas facilities and to frustrate effective FERC regulation of Transco’s interstate transportation system [RP02-99-006] (see Daily GPI, Sept. 16, 2002; Aug. 15, 2002).

“I have not been persuaded that the rates proposed to be charged by WFS for non-jurisdictional [gathering] service have so compromised our ability to regulate the jurisdictional service on the interstate pipeline [Transco] that we should reassert rate jurisdiction over these gathering facilities,” said Brownell in her dissent, which accompanied the rehearing order that was voted out last week but just made public.

She seriously questioned whether the cooperative actions of Transco and WFS were meant to foil FERC regulation. “The evidence of cooperative action between Transco and WFS is mixed. The fact that Transco and WFS worked together in planning and implementing the spin-down of the facilities pending transfer is not surprising nor fatal. To me, such cooperation pending the spin-down is a practical, efficient transitional step…The evidence indicates that Transco did not, after the transfer of assets, manage, operate or provide service on the gathering facilities.” However, Brownell noted, “the fact that WFS operated Transco’s production-area facilities…is more problematic and we should require complete separation.”

She also rationalized the higher gathering rates that ensued following the spin-down. “When we authorized the spin-down, the Commission recognized…that shippers may pay a higher rate. This is neither inequitable nor unwarranted rate stacking. In this case, there is evidence that the unbundled gathering is simply the going competitive rate.”

The September 2002 order was in response to a complaint brought by Shell Offshore Inc., accusing Transco and its affiliates — WFS, Williams Gulf Coast Gathering Co., and Williams Gas Processing-Gulf Coast Co. LP — of acting in concert in an anticompetitive manner to push Shell and other captive customers into agreeing to “unreasonable and unjust” gathering rates for service on NPI. Transco and WFS were so closely linked that FERC said “WFS acted as if it were a division of Transco, rather than a separate company.”

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