ALJ recommends against public utility status for midstream/gathering pipelines

ALJ recommends against public utility status for midstream/gathering pipelines

Summary
Should natural gas midstream and gathering pipelines, and related processing facilities, be regulated as public utilities in Pennsylvania? Administrative Law Judge Susan D. Colwell recommends against it…again. Her recommendation was rejected by the PUC in the earlier case of Laser Northeast Gathering Company, LLC, and we now wait to see what the PUC will do with her 106-page rejection of the application of Peregrine Keystone Gas Pipeline, LLC for public utility status.

In a Recommended Decision at PUC Docket No. A-2010-2200201, Administrative Law Judge Susan D. Colwell recommended denial of the application of Peregrine Keystone Gas Pipeline, LLC for a Certificate of Public Convenience and Necessity to supply natural gas gathering, compression, dehydration and transportation or conveying service by pipeline in western Pennsylvania. Peregrine claimed it was a public utility entitled to a Certificate under the four-part test developed by the PUC in the earlier case of Laser Northeast Gathering Company, LLC, Docket No. A-2010-2153372, a case which was never fully litigated because Laser withdrew its application after it was able to build its pipeline without the benefits of public utility status.1 Judge Colwell, who had also recommended against approval of Laser's application, found that Peregrine should not be certificated as a public utility because:

  1. The services and facilities it is planning will be used to provide service to affiliated producers, and there was no evidence in the record of a demand for Peregrine's services by unrelated entities. Peregrine admitted, and intervenors supplied evidence of operations of competing midstream companies in the areas Peregrine proposes to serve.
  2. The application failed to meet the four-part Laser test because Peregrine is serving only a "single customer" (its affiliates) and its tariff is inadequate;
  3. The proposed tariff was inadequate because Peregrine has reserved its right to select its customers by contractual agreement;
  4. The type of service to be offered cannot meet the stated intent to serve the public indiscriminately because Peregrine can select its customers by contractual agreement;
  5. "The market is providing robust competition that eliminates the claim that this service is necessary or proper within the meaning of the Public Utility Code;" and
  6. Newly enacted legislation "provides Commission oversight for pipeline safety issues while eliminating the need for the exemption from the restrictions of local zoning laws."

Judge Colwell summarized her views of the dangers of approval of the Peregrine application on page 56 of her Recommended Decision:

It is, therefore, prudent to take a step back and to consider that approval of this Application under these circumstances would be to permit a private company to drill the wells, and then to use an affiliate for the purpose of transporting that gas to market – with the right to take real property by eminent domain under the guise of "public use," when no such public use exists. Then, after establishing its network through any method it chooses, including severely restricting the property ownership rights of tax-paying, voting citizens of this Commonwealth, who are not members of the class (specifically, contracted affiliated producers) which benefit from the service, a gathering company could tell the Commission that it has changed its business plan and no longer wishes to provide that service to all takers, just to those it chooses. As a matter of consistency and regulatory certainty, there should be a finding that all gathering companies are – or are not – public utilities.

The Public Utility Commission can accept Judge Colwell's recommendation, modify it, or reject it.  

1. http://www.saul.com/media/site_files/2576_pdf_2990.pdf

View Document(s):