Recent decisions by FERC and Utah regulators involving theextent of their jurisdiction over the interstate transportationactivities of Questar Gas, a Utah-based LDC, don’t appear to becontradictory, say lawyers and company officials. In fact, the tworulings complement each other, particularly on the issue of states’authority over the interstate function of Hinshaw-exempt gasdistributors.

“I don’t think there was any conflict,” said Charles F. WheatleyJr., who represented an Arizona municipality, Colorado City, in itscase against Questar Gas at FERC. In the order, the Commissiondisclaimed jurisdiction over a dispute in which Questar Gas refusedto transport interstate gas for resale over its facilities in Utahfor consumption in Colorado City. Consequently, the Arizona muniwas denied its bid for a declaratory ruling, which would haveenabled it to ask FERC to order the service so it could establishits own distribution system [CP99-37].

The Questar Corp. affiliate refused service to Colorado City,which is located just south of the Utah-Arizona border, because itargued transporting gas to be consumed out of state would havejeopardized the immunity from federal regulation that it enjoysunder the Hinshaw Amendment. Specifically, the measure exempts anLDC’s sale for resale of interstate gas received within or at thestate boundary as long as all of the gas is consumed within thestate. FERC found that Questar Gas still met all of thequalifications for a Hinshaw pipeline, which meant that it wassubject to the regulatory purview of the state.

However, FERC urged Questar Gas and Colorado City to continuenegotiations to resolve their dispute. As one option, itrecommended that parties consider seeking a limited jurisdictionblanket certificate under which Questar Gas would be able toprovide interstate service to the Arizona muni and maintain itsHinshaw exemption with respect to its other non-jurisdictionalactivities.

In a separate yet related decision, the Utah Public ServiceCommission (PSC) ruled that it had the jurisdiction to orderQuestar Gas to transport gas for resale to Colorado City’s sisterborder city, Hildale. The Jan. 15th decision was a hard-foughtvictory for Hildale, which earlier had been denied such service toform its own municipal gas distribution system. It also wassomething of a Pyrrhic win since the PSC did not actually orderQuestar Gas to begin providing the service, but left that issue tobe decided another time. Hildale has since filed a petition seekinga ruling on the merits of such service, according to a PSCspokeswoman.

The PSC ruling was favorable to Hildale because, in contrast tothe Colorado City case, it is located within Questar Gas’s serviceterritory and the gas transported to it would be consumed withinUtah boundaries. This would enable the LDC to keep its Hinshawexemption. Questar Gas not surprisingly objected to the PSCdecision, saying it would force the company into a new business -sale for resale. Essentially Utah regulators said “they have theright to tell us what business we can and can’t be in,” accordingto Chad Jones, spokesman for the LDC.

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 municipalities, and even if it did, “I don’t know that thatwould be any concern of theirs [Questar Gas].” If Hildale shoulddecide to resell any gas to Colorado City in the future, Questar’sJones argued, it should “put them [Hildale] under the jurisdictionof FERC.” It shouldn’t “put us under any additional constraints.”

Susan Parker

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