UNITED STATES OF AMERICA 70 FERC 61, 035 FEDERAL ENERGY REGULATORY COMMISSION Before Commissioners: Elizabeth Anne Moler, Chair; Vicky A. Bailey, James J. Hoecker, William L. Massey, and Donald F. Santa, Jr. Hunt Refining Company and ) Docket No. OR94-7-000 East Mississippi Pipeline Company ) ORDER DENYING PETITION FOR EXEMPTION FROM JURISDICTIONAL STATUS AND GRANTING PARTIAL WAIVER OF FILING AND REPORTING REQUIREMENTS (Issued January 18, 1995) On March 17, 1994, Hunt Refining Company (Hunt) and East Mississippi Pipeline Company (East Mississippi) (jointly, Petitioners), filed a petition for exemption from the Commission's jurisdiction on the basis that their oil pipeline facilities are not jurisdictional within the meaning of the Interstate Commerce Act (ICA). Alternatively, in the event the Commission finds that Petitioners operate jurisdictional facilities, Petitioners request an exemption from the filing and reporting requirements of the ICA. Public notice of the filing was issued on April 6, 1994. No one filed to intervene or protest the filing. For the reasons discussed below, Petitioner's request is granted in part and denied in part. I. Background Petitioners state that Hunt owns and operates a refinery in Tuscaloosa, Alabama, and that as part of its refinery operations, Hunt owns and operates three pipeline facilities identified as the Choctaw Gathering System, the Melvin Line, and the Choctaw Pipeline System. Petitioners state that the Choctaw Gathering System consists of approximately 102 miles of 3-inch to 8-inch diameter pipeline facilities which are used to gather crude oil produced in Choctaw County, Alabama, and Clarke and Wayne counties in Mississippi to be used as feedstock in its refinery. Further, Petitioners state that crude oil to which Hunt holds title is also delivered into the Choctaw Gathering System from local sources of production and through pipeline facilities operated by Amerada Hess Corporation. Petitioners state that Hunt holds title to all the crude oil flowing through the Choctaw Gathering system, and has never gathered oil for third parties. The Melvin Line, Petitioners state, consists of approximately 105 miles of 12-inch diameter pipeline, and extends from an interconnection with the Choctaw Gathering System in Docket No. OR94-7-000 - 2 - Melvin, Alabama to its terminus at the Tuscaloosa refinery. Petitioners state that it is used solely to deliver crude oil to the refinery, that all the oil transported through the line is owned by Hunt, and that it has never been used to transport oil for third parties. Further, Petitioners state that since no third party facilities interconnect with the Melvin Line, the only possible destination of crude oil transported through this line is the Hunt refinery. Petitioners state that the Choctaw Pipeline System consists of approximately 19 miles of 6-inch, 4-inch, and 3-inch diameter pipeline and is used to gather crude oil exclusively from wells located in Alabama. Again, Petitioners assert, all the oil delivered into the Choctaw System is owned or purchased by Hunt for ultimate delivery to the Hunt refinery. East Mississippi is a wholly owned subsidiary of Hunt. Petitioners state that, effective December 29, 1993, Hunt purchased all the pipeline assets of Clarco Pipeline Company (Clarco) and assigned these assets to East Mississippi. Petitioners further state that Clarco maintained a FERC tariff for third party deliveries from several receipt points to an interconnection with facilities of the Exxon Pipeline Company, and that at the time East Mississippi acquired the system, only one shipper was transporting crude oil pursuant to this tariff. East Mississippi initially adopted the Clarco tariff but then reversed the flow of the line. Petitioners state that during this initial period, no third party requested service on East Mississippi pursuant to this tariff. Petitioners state that the East Mississippi system is approximately 90 miles in length and is located entirely within the state of Mississippi. Petitioners state that, after the acquisition, minor facilities were constructed by Hunt to interconnect the East Mississippi system with Hunt's existing gathering facilities near the Quitman Station in Mississippi. Petitioners assert that the interconnection of these two pipeline facilities was intended to integrate them into the proprietary gathering facilities of Hunt, thereby enabling Hunt to use these facilities solely to gather crude oil for delivery to Hunt's refinery in Tuscaloosa. II. Jurisdictional Status Petitioners argue that the facilities of East Mississippi and Hunt are private, proprietary systems and are thus not subject to the ICA. They state that in The Pipe Line Cases, 1/ the Court held that private carriers are not subject to the ICA, and defined a private carrier as a pipeline serving the sole 1/ 234 U.S. 548 (1914). Docket No. OR94-7-000 - 3 - purpose of moving the owner's oil from its own wells to its own refinery, even if the movement crossed state boundaries. Petitioners assert that Hunt is engaged in this very function, i.e., drawing oil from wells where it has purchased the available production across a state line to its own refinery for its own use. 2/ They assert that all crude oil that is delivered into its facilities and ultimately delivered to the refinery is owned by Hunt. Contrary to Petitioners' assertions, the operation of these facilities does not fall within the definition of private carriage as set forth in The Pipe Line Cases. In that decision, the Court defined a private carrier narrowly as a company that "is simply drawing oil from its own wells across a state line to its own refinery for its own use...." 3/ As the Court explained in Valvoline Oil Company v. United States, 4/ the fact that the oil transported belongs to the owner of the pipeline does not mean that the pipeline is not subject to the ICA. In Valvoline, the Court stated that it was the purchase of oil from many sources and subsequent carriage that determined the applicability of the ICA to Valvoline and distinguished it from the private pipeline carrier discussed in The Pipe Line Cases. Here, as in Valvoline, other producers are connected to the pipeline system, and oil is delivered into the Choctaw Gathering System through facilities owned by Amerada Hess. Thus, Petitioners' facilities do more than merely move their own oil from their own wells to their own refinery, and are not engaged in strictly private carriage. Petitioners acknowledge that Hunt does not own each and every well capable of delivering crude oil into its system. However, they argue, the refinery, pipeline, and oil producing industries have matured considerably since the Court's decision in The Pipe Line Cases. Petitioners state that crude oil production, gathering, and transportation have been developing in this area for nearly 50 years, and that alternative outlets for crude oil production are available to producers in this region and to the producers on the facilities owned by Petitioners. 2/ Petitioners state that the East Mississippi line and Choctaw Gathering System are the only facilities that are involved in the transportation of oil across a state line. Thus, they claim, the Melvin Line and the Choctaw Line, being located and operated entirely within Alabama, are exempt from the ICA. As the petition indicates, however, all the facilities operate as an integrated gathering system. 3/ 234 U.S. at 562. 4/ 308 U.S. 141, 145 (1939). Docket No. OR94-7-000 - 4 - Further, Petitioners argue that crude oil from the numerous wells available to these systems is produced at relatively low rates of production, and historically, transportation to markets by truck has been economically feasible and readily available. These circumstances provide no basis for a finding that Petitioners' facilities are nonjurisdictional. The ICA provides that common carriers engaged in the transportation of oil by pipeline are subject to that statute, and, as explained above, the Court has held that the term common carrier includes all but a narrowly defined category of truly private carriers. The existence of adequate transportation alternatives is irrelevant to a pipeline's jurisdictional status. However, as discussed below, this factor may be considered in determining whether an exemption from the filing and reporting requirements is appropriate. III. Exemption From Filing and Reporting Requirements Petitioners further request that, if the Commission determines that they operate jurisdictional facilities subject to the ICA, the Commission grant them an exemption from the filing and reporting requirements similar to the exemption granted in Sinclair Oil Corporation. 5/ In Sinclair, Petitioners argue, the Oil Pipeline Board (OPB) based its decision to exempt Sinclair from the filing and reporting requirements on several factors. First, Petitioners argue, the OPB found that the gathering, trunkline, and refined products systems were owned entirely by Sinclair and utilized to transport only oil or products to which Sinclair held title. Second, no other refinery or pipeline interconnected with Sinclair's system. Third, the OPB determined that due to Sinclair's geographic location and the operational characteristics of its system, no shipper was likely to request access to its system. Petitioners state that these factors relied upon by the OPB in Sinclair are present here. They state that the facilities for which an exemption is sought are owned entirely by Petitioners and will be used solely to transport crude oil to which Hunt holds title. Petitioners state that no other refinery interconnects with the Petitioners' facilities and due to the location and service performed by these facilities, requests for access by any third party are extremely unlikely. Specifically, Petitioners request that they be exempted from the duty to file a schedule of rates pursuant to section 6 of the ICA, the duty to comply with the provisions of section 19(a) of the ICA relating to reporting requirements, including submission of valuation data maps, charts, and other documents pertaining to pipeline operations, and the duty to file annual, periodic, and 5/ 4 FERC 62,026 (1978). Docket No. OR94-7-000 - 5 - special reports and to maintain a uniform system of accounts in accordance with section 20 of the ICA. Alternatively, Petitioners request, if the Sinclair exemption is not granted, at a minimum, petitioners should not be required to file and publish a schedule of rates and charges. They argue that the circumstances here are similar to those in United States v. Champlin Refining Company (Champlin II) 6/ where the Court held that the pipeline should not be required to publish a schedule of rates and charges. In Champlin II, the pipeline was used solely to carry its own refined petroleum products. No other refiner had connections with the line, none had ever shipped through it, and no other pipeline interconnected with its facilities. The Court did not require Champlin to publish rates as long as no other shippers were seeking access to the pipeline and sufficient alternative transportation existed. Petitioners argue that the situation is similar here because they have never transported for third parties, they have never held themselves out as common carriers, 7/ and all of the crude oil transported over their facilities is owned by Hunt and used in its refinery operation. Petitioners further assert that these facilities are unneeded by the independent producers from whom Hunt purchases crude oil, and that sufficient alternatives exist to producers. Moreover, Petitioners assert, it is improbable that any third party would request transportation service because the facilities only provide gathering service for Hunt's refinery, all the facilities terminate at the refinery, and Petitioners' facilities will not provide deliveries to any other refinery or pipeline. Petitioners' also state that in Champlin II, the Court indicated that the filing and reporting requirements of the ICA were intended to afford protection to pipeline shippers. Petitioners assert that given the physical characteristics and narrow operating scope of their facilities, this protection is unnecessary. The circumstances here indicate that the pipeline facilities at issue are used solely to transport oil owned by Hunt to Hunt's refinery in Tuscaloosa, Alabama. Hunt transports its own oil, and East Mississippi transports oil owned by its parent company. Neither Hunt nor East Mississippi transports oil for any third 6/ 341 U.S. 290 (1951). 7/ The only exception is when East Mississippi was required to offer common carrier service pursuant to Clarco's tariff. Petitioners state that during that brief period, no service was sought by any third party on the East Mississippi system. Docket No. OR94-7-000 - 6 - party and, because the facilities terminate at Hunt's refinery, it appears unlikely that any third party would request transportation service from Hunt or East Mississippi. Thus, there are no immediate or prospective shippers on Hunt other than itself and no other shippers on East Mississippi other than its parent company to protect under the provisions of the ICA. Moreover, no one has protested Petitioners' filing. The Commission concludes that, given the physical characteristics of the facilities and the limited nature of the pipeline operations, it is unnecessary to subject Petitioners to all of the filing and reporting requirements of the ICA. Thus, the Commission will grant Petitioners a temporary waiver of the filing and reporting requirements of sections 6, 19a, 8/ and 20 of the ICA. However, Petitioners must maintain all books and records in a manner consistent with the Uniform System of Accounts for Oil Pipelines, 18 C.F.R. Part 352, and make such books and records available to the Commission or its duly authorized agents upon request. These waivers are temporary, and any change in the circumstances which the Commission has found to warrant the waivers must be reported to the Commission immediately. Specifically, Petitioners must report to the Commission any changes including, but not limited to, (1) increased accessibility of other pipelines or refiners to its facilities, (2) changes in the ownership of the facilities, (3) changes in the ownership of the oil or by-products being shipped, and (4) shipment tenders or requests for service by any person. The Commission orders: (A) Petitioners are found to be jurisdictional pipeline carriers subject to the Interstate Commerce Act. (B) Petitioners are granted a temporary waiver from the filing and reporting requirements of sections 6, 19a, and 20 of the Interstate Commerce Act to the extent set forth in this order. By the Commission. ( S E A L ) Lois D. Cashell, Secretary. 8/ The Commission no longer conducts and issues pipeline valuations; thus, compliance with section 19a is unnecessary for all pipelines. Docket No. OR94-7-000 - 7 -