Recent decisions by FERC and Utah regulators involving theextent of their jurisdiction over the interstate transportationrole of Questar Gas, a Utah-based LDC, don’t appear to becontradictory, say lawyers and company officials.

“I don’t think there was any conflict,” said Charles F. WheatleyJr., who represented the Arizona municipality, Colorado City, inits case before the FERC. In the order, the Commission disclaimedjurisdiction over Questar Gas’ decision to refuse to transport gasfor resale over its facilities in Utah to Colorado City. TheArizona muni was seeking the sale-for-resale service to establishits own distribution system.

A Questar Corp. affiliate denied the service to Colorado City,which is located just south of the Utah-Arizona border, because itargued transporting gas out of state would have jeopardized theimmunity from federal regulation that it enjoys under the HinshawAmendment. Specifically, the measure exempts an LDC’stransportation of interstate gas or sale for resale of gas receivedwithin or at the state boundary as long as all of the gas isconsumed within the state. FERC found that Questar Gas still metall of the qualifications for a Hinshaw pipeline, which meant thatit was subject to the regulatory purview of the state.

On Jan. 15, the Utah Public Service Commission (PSC) ruled thatit had the jurisdiction to order Questar Gas to transport gas forresale to Colorado City’s sister border city, Hildale. The decisionwas a hard-fought victory for Hildale, which earlier had beendenied such service so it could form its own municipal gasdistribution system. It also was something of a Pyrrhic win sincethe PSC did not actually order Questar Gas to begin providing theservice, but left that issue to be decided another time. Hildalehas since filed a petition seeking a ruling on the merits of suchservice, according to a PSC spokeswoman.

The PSC ruling was favorable to Hildale because, unlike ColoradoCity, it is located within Questar Gas’s service territory and thegas transported to it would be consumed within Utah boundaries.This would enable the LDC to keep its Hinshaw exemption. QuestarGas not surprisingly objected to the PSC decision, saying it wouldforce the company into a new business – sale for resale.Essentially Utah regulators told Questar “they think they have theright to tell us what business we can and can’t be in,” said LDCspokesman Chad Jones.

Like Colorado City’s Wheatley, Jones and other Questar officialsdidn’t see any conflicts between the PSC and FERC decisions.However, they are worried the company’s Hinshaw status could becalled into question should any of the gas transported to Hildalefind its way over the Utah-Arizona border to Colorado City. Thisassumes state regulators in the end will order Questar Gas toactually provide the service to Hildale.

For Questar Gas, this threat to its Hinshaw status is very realconsidering that Hildale and Colorado City – while located indifferent states and legally separate – effectively “function asone community that stretches over the border,” Jones said. “Thatwas one of our concerns when we were talking to the PSC about beingforced to sell gas for resale. We wanted to make sure that if theydid put us in that business, and whoever we resold the gas todecided to transport it across state lines, that it [wouldn’t]affect our regulatory standing.”

Wheatley doesn’t foresee a transfer of gas occurring between thetwo municipals, and even if it did, “I don’t know that that wouldbe any concern of theirs [Questar Gas].” Questar Gas agreed. If Hildale should resell any to Colorado City in the future, it should”put them [Hildale] under the jurisdiction of FERC,” Jones said.”It wouldn’t put us under any additional constraints.”

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