A federal appeals court in Washington, DC, on Friday dismissed as “unripe” a petition to review FERC orders denying producers’ request for Southern Natural Gas pipeline to include in its tariff a safe harbor gas quality standard that specifies a hydrocarbon dew point at which Southern would guarantee the transportation of natural gas.
“Because the producers may yet secure that very relief in a proceeding now pending before the Commission, we dismiss the present petition as unripe,” a three-judge panel for the U.S. Court of Appeals for the District of Columbia Circuit opined [Court Case No. 04-1135].
“The challenged orders…appear to present a ‘final agency action’…but in the peculiar circumstances of this case we do not think the agency’s action is ‘sufficiently final,” the court said. “The Commission has yet to pass conclusively upon whether the producers are entitled to the only relief they now seek, namely, that Southern’s tariff be revised to include an objective gas quality specification standard.”
The court went on to say that “the proceeding in FERC Docket RP04-02 could result in a tariff modification that [the producers] seek, thus resolving the issues raised in this appeal. There is therefore substantial ‘judicial interest in deferring resolution’ of the petition.”
The affected producers operate upstream from three gas processing plants near Toca, LA, that are owned in part by affiliates of some of the producers. All of the producers supply Southern’s pipeline, at receipt points upstream of the plants, with gas that has a relatively high liquefiable hydrocarbon content. Because the high hydrocarbon content could threaten the operation of the pipeline, Southern’s tariff specifies that it will not accept gas containing more than 0.3 gallons per thousand cubic feet of isopentane and heavier hydrocarbons.
Ordinarily would be a non-issue because producers typically find it in their economic interest to extract hydrocarbons at processing plants for the purpose of selling them separately as liquid natural gas. However, with the run-up in natural gas prices in December 2000, producers found it more profitable to leave the hydrocarbons in the gas stream rather than pay for the processing to extract and sell them.
In response, the operators of the processing plants at Toca informed Southern that they would shut down their plants. Concerned about the effect on the reliability of its pipeline, Southern threatened to enforce its tariff, which would require producers to reduce or shut in their gas production if they did not meet the quality specifications.
The producers petitioned FERC for a temporary restraining order to prevent Southern from refusing their gas and later filed a complaint against the pipeline, both of which were dismissed by the agency. The Commission did, however, condition its dismissal of the producers’ complaint upon Southern making a Section 4 filing to include in its tariff an “aggregation methodology, including [a] flexible [gas quality specification] standard,” the court said.
Southern filed a proposal to revise its tariff, “and that proceeding, in which producers’ have intervened, is still pending,” the opinion noted.
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