The National Association of Regulatory Utility Commissioners(NARUC) and Wyoming and Colorado regulators last week urged theFERC majority to throw in the towel in its effort to re-cast itsauthority as it relates to the Hinshaw amendment.
At the eye of the storm is a Tenth Circuit Court of Appealsdecision that reversed and remanded Commission orders authorizingKN Wattenberg Transmission LLC, an interstate pipeline, toconstruct a lateral in Colorado to directly serve two in-stateindustrial customers. The municipal LDC that was bypassed arguedthat FERC exceeded its jurisdiction because the lateral met therequirements for being a Hinshaw line exempt from the Natural GasAct (NGA).
The court found that FERC’s justification for assertingjurisdiction over the lateral appeared to be “inconsistent bothwith the plain language of the Hinshaw amendment…..and with itsprior published decisions.” The ruling has caused quite a stir atthe Commission, and has prompted a close review of the Hinshawprovision.
“The court’s decision is correct. Accordingly, the Commissionshould abandon any effort to breathe new life into the ‘wholeperson’ analysis on remand in this proceeding,” NARUC told the FERCmajority [CP87-256]. FERC had argued the Hinshaw amendment mustapply to the “whole” pipeline system, or not at all; it cannotapply to discrete facilities. Based on that logic, which some havecalled circular, the Commission said it was justified in assertingjurisdiction over the lateral, which is unconnected to KN’smainline. In rejecting FERC’s theory, the court pointed out therewere numerous companies that operated both FERC jurisdictionalpipelines and intrastate Hinshaw lines.
The Wyoming Public Service Commission (WPSC) called FERC’sinterpretation of the Hinshaw amendment both “novel and strained,”saying that in the end the Commission could “vitiate it, renderingit a nullity.” FERC is sweeping the Hinshaw amendment “aside forthe convenience of expanding its reach into matters of localconcern,” the state commission noted.
NARUC’s and the WPSC’s comments were in response to theCommission’s order on remand requesting interested parties to givetheir views on the “scope and application” of the Hinshaw amendmentto the NGA in this proceeding. FERC took this unusual step becausehow it ultimately decides the case on remand, it said, will be”important for [its] mandate under both the Natural Gas Act and itsopen-access program.”
In the order, Commissioner William Massey dissented from themajority, saying the court’s decision was “unequivocal” in itsconclusion that the initial FERC orders approving the KN Wattenberglateral were inconsistent with the Hinshaw amendment. He urged theCommission to “accede to the court’s determination that ourprevious orders were in error.”
Many believe the Commission is hesitant to accept the TenthCircuit’s decision because it fears it may signal an erosion of itsauthority to the states. “Nowhere in the court’s opinion is there asuggestion that interstate pipelines will now be subject to statejurisdiction,” said the Colorado Public Utility Commission in itsbrief.
If not FERC, then who has jurisdiction over the disputed line?Colorado regulators say they do, and are in the process ofexercising such jurisdiction over the rates and service on KNWattenberg’s lateral. NARUC said it deferred to Colorado on thisissue.
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