United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 1, 2002 Decided August 6, 2002
No. 00-1355
ExxonMobil Gas Marketing Company,
a Division of Exxon Mobil Corporation,
Petitioner
v.
Federal Energy Regulatory Commission,
Respondent
ANR Pipeline Company, et al.,
Intervenors
Consolidated with 00-1357,
00-1361, 00-1363, 00-1364, 00-1365
On Petition for Review of Orders of the
Federal Energy Regulatory Commission
Jon L. Brunenkant and Stephen L. Teichler argued the
causes for petitioners Amerada Hess Corporation, et al.
With them on the briefs were David G. Stevenson, Frederick
T. Kolb, Stanley P. Geurin, John P. Beall, Douglas W.
Rasch, and Mickey J. Lawrence. Cheryl J. Walker entered
an appearance.
James M. Costan argued the cause for petitioner Producer
Coalition and intervenor Independent Petroleum Association
of America. With him on the briefs were T. Alana Deere and
David M. Sweet. Bruce W. Neely and John W. Wilmer, Jr.,
entered appearances.
Timm Abendroth, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With him on
the brief were Cynthia A. Marlette, Acting General Counsel,
and Dennis Lane, Solicitor.
Brian D. O'Neill argued the cause for intervenors Sea
Robin Pipeline Company and Williams Gas Processing-Gulf
Coast Company. With him on the brief were David P.
Sharo, Merlin E. Remmenga, James T. McManus, Joseph S.
Koury and Mari M. Ramsey.
Before: Ginsburg, Chief Judge, Edwards and Sentelle,
Circuit Judges.
Opinion for the Court filed by Circuit Judge Sentelle.
Dissenting opinion filed by Circuit Judge Edwards.
Sentelle, Circuit Judge: ExxonMobil Gas Marketing
Company, et al.,1 (hereinafter "ExxonMobil") and the Produc-
er Coalition2 petition for review of Federal Energy Regulato-
__________
1 Joining ExxonMobil Gas Marketing Co.'s brief are: Amerada
Hess Corp., Amoco Production Co., BP Energy Co., Anadarko
Petroleum Corp., Marathon Oil Co., Murphy Exploration and Pro-
duction Co., Phillips Petroleum Co., and Texaco Natural Gas, Inc.
2 The Producer Coalition consists of Forest Oil Corp., the Hous-
ton Exploration Co., Newfield Exploration Co., Ocean Energy, Inc.,
Dominion Exploration & Production, Inc., and TotalFinaElf E&P
U.S.A., Inc. Intervenor Independent Petroleum Association of
America joins the Producer Coalition's brief.
ry Commission ("FERC" or "the Commission") orders in
which FERC reclassified portions of Sea Robin Pipeline
Company's pipeline system on the Outer Continental Shelf as
non-jurisdictional "gathering" facilities for natural gas, rather
than jurisdictional "transportation" facilities, pursuant to sec-
tion 1(b) of the Natural Gas Act, 15 U.S.C. s 717(b). FERC
argues that in developing and applying its reformulated "pri-
mary function" test the Commission followed the suggestion
of the United States Court of Appeals for the Fifth Circuit in
Sea Robin Pipeline Co. v. FERC, 127 F.3d 365 (5th Cir. 1997)
("Sea Robin I"), and reasonably identified the demarcation
point between gathering and transportation in Sea Robin's
pipeline system. Because the Commission did not act unrea-
sonably in determining that portions of Sea Robin's system
were non-jurisdictional, we deny the petitions for review.
I. Background
A. Statutory and Regulatory Framework
Section 1(b) of the Natural Gas Act ("the Act"), 15 U.S.C.
s 717 et seq., governs "the transportation of natural gas in
interstate commerce." 15 U.S.C. s 717(b). However, in sec-
tion 1(b) of the Act Congress prescribed not only "the intend-
ed reach of the Commission's power, but also specified the
areas into which this power was not to extend." Federal
Power Comm'n v. Panhandle E. Pipe Line Co., 337 U.S. 498,
503 (1949) (emphasis added). Section 1(b) expressly exempts
from the Commission's jurisdiction "the production or gather-
ing of natural gas." 15 U.S.C. s 717(b). Thus, Congress
"carefully divided," Northwest Central Pipeline Corp. v. State
Corp. Comm'n, 489 U.S. 493, 510 (1989), energy regulatory
authority and "did not envisage federal regulation of the
entire natural-gas field to the limit of constitutional power.
Rather it contemplated the exercise of federal power as
specified in the Act." Panhandle Eastern, 337 U.S. at 502-
03.
The Natural Gas Act does not define either "transporta-
tion," which falls within the Commission's jurisdiction, or
"gathering," which is exempt from FERC authority under the
Act. The Supreme Court has, however, held that "[e]xcep-
tions to the primary grant of jurisdiction in the section are to
be strictly construed." Interstate Natural Gas Co. v. Federal
Power Comm'n, 331 U.S. 682, 690-91 (1947) (construing 15
U.S.C. s 717(b)). Thus, the Supreme Court has "consistently
held that 'production' and 'gathering' are terms narrowly
confined to the physical acts of drawing the gas from the
earth and preparing it for the first stages of distribution."
Northern Natural Gas Co. v. State Corp. Comm'n, 372 U.S.
84, 90 (1963). The Commission's long-held definition of gath-
ering, taken as consistent with the Supreme Court's pro-
nouncements on the Act, is "the collecting of gas from various
wells and bringing it by separate and several individual lines
to a central point where it is delivered into a single line."
Barnes Transp. Co., 18 F.P.C. 369, 372 (1957); see also
Conoco Inc. v. FERC, 90 F.3d 536, 539 n.2 (D.C. Cir. 1996)
("Gathering is the process of taking natural gas from the
wells and moving it to a collection point for further movement
through a pipeline's principal transmission system.") (citing
Northwest Pipeline Corp. v. FERC, 905 F.2d 1403, 1404 n.1
(10th Cir. 1990)).
Despite these attempts to clarify the Natural Gas Act, this
Court has observed that "[t]he line between jurisdictional
transportation and nonjurisdictional gathering is not always
clear." Conoco, 90 F.3d at 542. For many years the Com-
mission employed two principal tests to differentiate trans-
portation from gathering. Developed in the on-shore context,
these tests were the "behind-the-plant" test and the "central-
point-in-the-field" test. The "behind-the-plant" test presumes
that all facilities located between the wellhead and a process-
ing plant are non-jurisdictional gathering lines, while facilities
downstream of the processing plant are presumptively trans-
portation facilities. See Phillips Petroleum Co., 10 F.P.C.
246, 276-78 (1951), rev'd on other grounds, Wisconsin v.
Federal Power Comm'n, 205 F.2d 706 (D.C. Cir. 1953), aff'd,
Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672 (1954).
For gas that requires no processing the "central-point-in-the-
field" test applied, under which lateral lines collecting gas
from separate wells that then converge into a single larger
line (typically at the point where the gas is compressed for
transportation by the pipeline), were classified as gathering
facilities. E.g., Barnes Transp. Co., 18 F.P.C. 369, 372 (1957).
Since 1983, the Commission has subsumed these two tests
into its "primary function" test to determine "whether a
facility is devoted to the collection of gas from wells--gather-
ing--or to the further ('downstream') long-distance movement
of gas after it has been collected--interstate transportation."
Conoco, 90 F.3d at 543 (citing Farmland Industries, Inc., 23
F.E.R.C. p 61,063, at 61,143 (1983); Amerada Hess Corp., 52
F.E.R.C. p 61,268, at 61,987-88 (1990)).
The "primary function" test generally employs the follow-
ing six physical criteria: (1) the length and diameters of the
lines; (2) the extension of the facility beyond the central point
in the field; (3) the geographic configuration of the facility;
(4) the location of compressors and processing plants; (5) the
location of wells along all or part of the line facility; and (6)
the operating pressure of the lines. Lomak Petroleum, Inc.
v. FERC, 206 F.3d 1193, 1196 (D.C. Cir. 2000). In addition,
FERC considers the following "non-physical" criteria: (1) the
purpose, location and operation of the facility; (2) the general
business activity of the owner of the facility; (3) whether a
jurisdictional determination, i.e., gathering versus transmis-
sion, is consistent with the objectives of the Natural Gas Act
and other legislation; and (4) the changing technical and
geographic nature of exploration and production activities.
Id. No one factor is determinative in the primary function
test, and not all factors apply in all situations. See Williams
Field Servs. Group, Inc. v. FERC, 194 F.3d 110, 116 (D.C.
Cir. 1999); Conoco, 90 F.3d at 543. The Commission "gives
consideration to all of the facts and circumstances of the case
rather than mechanically applying a facilities configuration
standard." West Tex. Gathering Co., 45 F.E.R.C. p 61,386, at
62,219 n.4 (1988); see also Conoco, 90 F.3d at 543.
When these physical factors were developed, most jurisdic-
tional questions involved onshore facilities. As an increasing
number of facilities have been constructed offshore on the
Outer Continental Shelf ("OCS"), where the pattern of gath-
ering and distribution differs, the applicability of the factors
has been questioned. See, e.g., EP Operating Co. v. FERC,
876 F.2d 46 (5th Cir. 1989). Specifically, it is often not
feasible to process raw gas on open water. As a result,
pipelines on the OCS typically do not gather gas at a local,
centralized point within a field as they would onshore, to
prepare it for traditional transportation. Rather, on the
OCS, relatively long lines are constructed to carry the raw
gas from offshore platforms, where "[o]nly the most rudimen-
tary separation and dehydration operations" are conducted,
EP Operating, 876 F.2d at 47, to the shore or a point closer
to shore, where it can be processed into "pipeline quality"
gas. Id. at 48. In EP Operating Co., the Fifth Circuit
discounted FERC's ruling that the offshore platform where
initial gas treatment took place constituted a "central point in
the field" where the gathering function was complete, and
reversed FERC's decision that the 51-mile long, 16-inch
diameter OCS pipeline downstream of that platform was a
jurisdictional transportation facility. See id. at 49. Follow-
ing EP Operating Co., FERC noted that "because of recent
advances in engineering and available technology, offshore
drilling operations continue to move further offshore and
further from existing interstate pipeline interconnections"
and therefore the Commission would assess "the continuing
viability and relevance of the 'primary function' test to cur-
rent industry conditions." Amerada Hess, 52 F.E.R.C. at
61,988. FERC then modified its primary function test to
apply a sliding scale, "allow[ing for] the use of gathering
pipelines of increasing lengths and diameters in correlation to
the distance from shore and the water depth of the offshore
production area," id. at 61,988, and to consider the "non-
physical" criteria described above. This "modified" primary
function test was applied by FERC when Sea Robin peti-
tioned in 1995 for a declaration that its facilities perform a
gathering function, rather than transportation, thus entitling
Sea Robin to exemption from the Commission's jurisdiction
under section 1(b) of the Act.
B. Sea Robin's Pipeline System3
Sea Robin's pipeline system is located entirely offshore in
the Gulf of Mexico and approximately 90 percent of its
facilities lie in water depths of less than 140 feet. It is one of
numerous competing pipeline systems located in the Gulf.
The Sea Robin system is configured roughly in the form of an
inverted "Y" with two arteries stretching roughly southwest
and southeast from a central point about fifty miles south of
the Louisiana coast. These two pipelines collect raw gas
from sixty-seven offshore production platforms. Sea Robin's
Vermilion 149 Compressor Station stands at the intersection
of these two pipelines. It compresses the gas from the sixty-
seven platforms for travel north, up the inclined seabed, to
the Erath Compressor Station on the mainland. After col-
lecting gas from four more platforms, the system terminates
near Erath, Louisiana, where the gas is separated, dehy-
drated and processed. The Erath Compressor Station then
prepares the gas for delivery to downstream transmission
pipelines at five nearby entry points.
The Sea Robin system consists of 438 miles of dual-phase
pipelines with a capacity to transport 1.26 billion cubic feet of
gas per day (Bcf/day) and includes around 69,500 horsepower
(hp) of compression. The pipeline is "dual-phase" in that it
carries a raw stream of unpurified natural gas and liquid
hydrocarbons taken directly from the gas wells. The total
compression horsepower at the Vermilion 149 Station is
37,050 hp and is 32,490 hp at Erath, Louisiana. Of the 438
miles of pipes, 339 miles are larger than twenty inches in
diameter. The remaining ninety-nine miles of pipes, mostly
running from individual platforms to the larger pipes, are
between four and sixteen inches in diameter.
Along the two arms of the inverted "Y," which extend out
in the Outer Continental Shelf, 45 lateral lines with diameters
ranging from 4.5 to 30 inches are connected to 67 receipt
points located on production platforms, or at subsea taps
__________
3 This discussion is largely taken from Sea Robin I, 127 F.3d at
367-68. See also Sea Robin Pipeline Co., 87 F.E.R.C. p 61,384, at
62,430 (1999).
where Sea Robin's facilities intersect with short lateral lines
of producers or pipelines. Through these upstream arms,
Sea Robin moves the raw gas to the Vermilion 149 Station at
the fork of the "Y," a manned platform with two turbine
compressor units of 12,350 horsepower each. From there,
the gas moves along the Vermilion 149-Erath segment. That
segment is the longest portion of the pipeline, consisting of
66.3 miles of 36-inch diameter pipeline running in a straight
line from Sea Robin's Vermilion compressor station to on-
shore processing facilities. Gas from four additional plat-
forms is mingled with the gas traveling the Vermilion 149-
Erath segment. The four platforms along this section are
within twenty-five miles of the Vermilion compressor station,
which means that the last forty-one miles of the thirty-six
inch diameter pipeline are uninterrupted by lateral pipe
segments. The gas and liquefiables delivered by Sea Robin
meet the merchantable natural gas quality standards of
downstream transmission pipelines.
FERC issued the original certificate for the Sea Robin
system in 1969, pursuant to section 7(c) of the Natural Gas
Act, 15 U.S.C. s 717f(c), authorizing the system to both sell
and transport gas from the Outer Continental Shelf. Sea
Robin Pipeline Co., 41 F.P.C. 257 (1969). In later years the
Commission certificated extensions of the Sea Robin system
farther out on the OCS. See Sea Robin Pipeline Co., 87
F.E.R.C. at 62,429 n.26. Subsequently, Sea Robin became a
transportation-only pipeline, and its shippers today consist of
producers and marketers that transport gas onshore for
ultimate delivery to markets on connecting interstate pipe-
lines. Id. at 62,428.
C. Prior Proceedings
In 1995, the Sea Robin Pipeline Company petitioned FERC
for a declaration that its facilities perform a "gathering"
function, rather than "transportation," and are thus not sub-
ject to the Commission's jurisdiction under section 1(b) of the
Natural Gas Act. See Sea Robin I, 127 F.3d at 367. FERC
denied Sea Robin's petition, determining that its pipelines
were engaged in jurisdictional transportation activities. See
id.; Sea Robin Pipeline Co., 71 F.E.R.C. p 61,351 (1995),
order denying reh'g, 75 F.E.R.C. p 61,332 (1996). In reaching
its conclusion, FERC emphasized the "very large size of [Sea
Robin's] system." Sea Robin Pipeline Co., 71 F.E.R.C. at
62,398 (emphasis in original). According to the Commission,
"the length and diameter of the system's components, as well
as its overall size, [we]re not outweighed by other elements of
the 'primary function' test." Id. Further, FERC "repeated-
ly emphasized that the non-physical criteria in its test sup-
ported its conclusion that Sea Robin was a transporter,
particularly Sea Robin's prior certification as a jurisdictional
pipeline and its ownership by an interstate pipeline." Sea
Robin I, 127 F.3d at 369-70. Sea Robin petitioned for review
of FERC's order in the U.S. Court of Appeals for the Fifth
Circuit. The Fifth Circuit granted that petition for review,
vacated the order, and remanded to the Commission. Sea
Robin I, 127 F.3d at 372.
Specifically, the Fifth Circuit questioned FERC's reliance
on the size of Sea Robin's system as "presumptively" determi-
native, as well as the apparent abandonment, without rea-
soned consideration, of the "sliding scale" approach an-
nounced by the Commission in Amerada Hess, 52 F.E.R.C.
p 61,268 (1990). See Sea Robin I, 127 F.3d at 370. The Fifth
Circuit concluded that FERC had "reverted to its single
factor, bright-line approaches that it had previously rejected
as unworkable for offshore pipelines." Id. (citing Northwest
Pipeline Corp., 905 F.2d at 1409; EP Operating Co., 876 F.2d
at 48). The Court also faulted the Commission for the
reliance it placed on non-physical considerations, such as Sea
Robin's ownership and shipper expectations. See 127 F.3d at
370-71 ("If the Commission is to remain tethered to the
statute, as it must, that inquiry must be based primarily on
physical criteria and the realities of the field."). The Fifth
Circuit "intend[ed] that [non-physical criteria] be put in its
place as considerations secondary to the physical factors."
Id. at 371. Finally, the Fifth Circuit found FERC's "regula-
tory gap" argument, that a regulatory gap might arise if Sea
Robin was held to be a gathering system, wanting: "Need for
regulation cannot alone create authority to regulate." Id.
In remanding to the Commission, the Fifth Circuit ac-
knowledged that "Sea Robin's system resists easy categoriza-
tion because the logistics of offshore pipelines obscures dif-
ferences between gathering gas from Gulf platforms and
transporting it to the mainland." Sea Robin I, 127 F.3d at
370. It also observed that "the pattern of gathering and
distribution on shore differs from the pattern of transporta-
tion and gathering of gas from the middle of the Gulf to the
mainland," id., and suggested that FERC "again consider the
applicability of the primary function test to offshore pipeline
systems and if necessary, reformulate this test." Id. at 367.
The Court noted that on remand, "Sea Robin may choose to
respond to the Commission's invitation to offer portions of its
system as predominantly involved in a gathering or a trans-
portation function." Id. at 371 (footnote omitted). In doing
so, the Court specifically admonished the Commission that
"[d]iscomfort in drawing the jurisdictional line at points inter-
nal to an overall system may be soothed with the reminder
that Congress did not intend to extend FERC's jurisdiction
to all natural gas pipelines; indeed it demands the drawing of
jurisdictional lines, even when the end of gathering is not
easily located." Id. The Court opined that the Commission
could "consider, for example, a distinction between the field
south of the Vermilion Compressor Station and the pipelines
leading north to Erath, Louisiana." Id.
On remand, FERC accepted the Fifth Circuit's invitation to
reformulate its primary function test. Sea Robin Pipeline
Co., 87 F.E.R.C. p 61,384 (1999) ("Remand Order"). In refor-
mulating its primary function test, the Commission concluded
that the "behind-the-plant" factor is not necessarily determi-
native of where gathering ends when applied to offshore
facilities. See id. at 62,425. Further, FERC determined that
it would "assess the physical configuration of offshore pipeline
systems to determine if there exists a central location where
gas is aggregated for further transportation to shore." Id.
Such a location would be the "offshore analogue of the
onshore 'central-point-in-the-field' criterion." Id. In cases
where a pipeline system is configured to deliver gas collected
from upstream wells to a centralized location through several
relatively small diameter lines for further delivery onshore
through a single larger diameter pipeline, that centralized
aggregation location is considered by FERC to be analogous
to the central-point-in-the-field factor and "given weight in
identifying the demarcation point between gathering and
transportation on OCS pipeline systems." Id. at 62,426.
Thus, the Commission was willing to consider, as suggested
by the Fifth Circuit, that the demarcation point between
gathering and transmission on a system like Sea Robin's
could be determined to be at a point internal to an overall
pipeline system. See Sea Robin Pipeline Co., 92 F.E.R.C.
p 61,072, at 61,285 (2000) ("Rehearing Order").
Applying its reformulated primary function test, the Com-
mission concluded that Sea Robin's pipeline facilities comprise
two distinct components: a jurisdictional transportation sys-
tem from the Vermilion 149 Station to Erath, and a non-
jurisdictional gathering system upstream of the Vermilion 149
Station. See Remand Order, 87 F.E.R.C. at 62,426. FERC
found that the primary function of the Vermilion-Erath line
"is to transport to shore natural gas that has been delivered
from many areas through a network-like configuration of
relatively smaller diameter lines to a centralized point where
gas is aggregated and compressed," namely the Vermilion 149
Station. Id. at 62,432.
In support of its decision to draw the jurisdictional line at
the Vermilion 149 Compressor Station, the Commission em-
phasized certain key aspects of the system's overall physical
configuration. Specifically, FERC found that the "straight-
shot" geographical configuration of Sea Robin's system down-
stream of the Vermilion 149 Station, interconnecting with
only two laterals delivering gas from only four wells along its
66.3-mile length, and the line's large 36-inch diameter are
indicative of transportation. See id. at 62,430. In contrast,
the facilities upstream of the Vermilion 149 Station intercon-
nect with 45 laterals connected to 67 production platforms,
and the lines are 30 inches or less in diameter. See id. at
62,431. Moreover, FERC found that the compression that
occurs at Vermilion 149 "is typical of compression found on
large diameter transportation lines transporting high volumes
of gas over relatively long distances," rather than "field
compression" associated with production. Id. at 62,430. Ac-
cording to FERC, the Vermilion 149 Station thus represented
a central aggregation location highly suggestive of the demar-
cation point between gathering and transportation. See id. at
62,431. The Commission concluded that in the "most funda-
mental meaning of the 'primary function' test, the 'totality of
the circumstances' demonstrates that the primary function of
the Vermilion-Erath Line is to transport to shore natural gas
that has been delivered from many areas through a network-
like configuration of relatively smaller diameter lines to a
centralized point where the gas is aggregated and com-
pressed," and these smaller lines upstream of Vermilion 149
are engaged in non-jurisdictional gathering. Id. at 62,432.
On rehearing, the Commission adhered to its position. See
Rehearing Order, 92 F.E.R.C. at 61,284. FERC reiterated
that its reformulated primary function test included: (1)
consideration of an additional analytical element applicable
where OCS pipeline facilities exhibit a "centralized aggrega-
tion point"; (2) adjustment in the weight to be afforded the
behind-the-plant criterion on the OCS; and (3) a primary
focus on physical factors. Id. at 61,285. It addressed argu-
ments from the petitioners that all of Sea Robin's system was
engaged in jurisdictional transportation, and arguments from
Sea Robin that its system was engaged entirely in non-
jurisdictional gathering.4 Specifically the Rehearing Order
identifies 13 physical factors considered in concluding that the
facilities upstream of the Vermilion 149 Station are engaged
in non-jurisdictional gathering. See id. at 61,291. These
physical factors are:
(1) the 66.3 mile length of the Vermillion-Erath line;
(2) the 36-inch diameter of the Vermillion-Erath line;
__________
4 Sea Robin no longer challenges FERC's Remand Order and
supports the Commission's decision to draw the line between juris-
dictional transportation and non-jurisdictional gathering at the Ver-
milion 149 Station.
(3) the straight-line configuration of the Vermillion-Er-
ath line;
(4) the inverted-Y configuration of the Sea Robin Sys-
tem;
(5) the existence of only four platforms along the length
of the Vermillion-Erath line as compared to the
connections to 71 production platforms upstream
of the Vermillion 149 Compressor Station;
(6) the abrupt change in physical attributes and configu-
ration in the system occurring at the Vermillion
149 Compressor Station;
(7) the concentration of compression at the Vermillion
149 Compressor Station;
(8) the existence of a centralized aggregation location at
the Vermillion 149 Compressor Station;
(9) the 4.5 to 24 inch diameters of the lines upstream of
the Vermillion 149 Compressor Station;
(10) the existence of 45 laterals feeding into the two
upstream arms of the inverted-Y upstream of the
Vermillion 149 Compressor station;
(11) the presence of 71 production platforms connected
to the system upstream of the Vermillion 149
Compressor station;
(12) the network configuration of Sea Robin's facilities
upstream of the Vermillion 149 Compressor Sta-
tion; and
(13) the onshore location of processing plants, which was
not considered a determinative factor due to the
geographic and technical characteristic of pro-
duction and transportation offshore.
Id. Further, FERC rejected the argument that it had substi-
tuted the new "centralized aggregation point" criteria for its
prior impermissible reliance on a single-factor test. Rather,
it explained, "the centralized-aggregation-point is more ap-
propriately viewed as a descriptive label for a set of a number
of individual physical characteristics." Id. "Just as the
historical behind-the-plant and central-point-in-the-field fac-
tors are based on the existence of a confluence of individual
elements, the new centralized-aggregation-point factor also is
an example of an additional physical factor that can arise as
the result of the combination of several individual physical
components...." Id. at 61,292. Relying on the Fifth Cir-
cuit's Sea Robin I decision, the Commission rejected the
suggestion that various production platforms, rather than the
Vermilion 149 Station, are centralized aggregation points.
See id.
Similarly, the Commission relied on the Fifth Circuit's
decision to reject the suggestion that the reformulated pri-
mary function test would create an unlawful "regulatory gap"
on the Outer Continental Shelf. See id. at 61,293 (citing Sea
Robin I, 127 F.3d at 371). Moreover, FERC claimed to have
addressed such "regulatory gap" concerns in its separate
decision to promulgate regulations under the Outer Continen-
tal Shelf Lands Act ("OCSLA"), 43 U.S.C. s 1331 et seq., to
ensure that natural gas is transported in an open and nondis-
criminatory manner. Rehearing Order, 92 F.E.R.C. at 61,293
(citing 65 Fed. Reg. 20,354 (Apr. 17, 2000)).
FERC also addressed arguments that it had given inade-
quate attention to the impact of the jurisdictional determina-
tion on the settled expectations of customers and on new
upstream deepwater systems. The Commission found that
the "remanding Court's directions on this point were clear.
The Court ruled that while the practical effect of the determi-
nation of gathering is relevant, the primary consideration in
formulating a jurisdictional test must be the physical charac-
teristics that distinguish gathering from transmission." Id. at
61,293-94 (citing Sea Robin I, 127 F.3d at 371). Thus,
although FERC considered these non-physical factors, the
primary focus, as required by the Fifth Circuit, had to be the
physical factors, and those factors supported drawing the
jurisdictional line at the Vermilion 149 Station. See id. at
61,294.
Finally, FERC considered and rejected arguments that:
(1) a 1978 amendment to OCSLA purportedly equated the
scope of the "gathering" exemption in the Natural Gas Act
with the concept of "feeder lines," see id.; (2) certificates
issued to Sea Robin for the reclassified non-jurisdictional
facilities must be subject to "abandonment" proceedings pur-
suant to section 7(b) of the Natural Gas Act, 15 U.S.C.
s 717f(b), see id. at 61,294-95; and (3) the fact that a
jurisdictional upstream pipeline (the Garden Banks pipeline)
delivers gas into the east leg of Sea Robin's system upstream
of the Vermilion 149 Station prevents the Commission from
reclassifying the Sea Robin system as non-jurisdictional. See
id. at 61,295. On this last issue, petitioners contended that
FERC had violated its prior ruling in Tarpon Transmission
Co., 60 F.E.R.C. p 61,041 (1992), which they read as preclud-
ing pipeline facilities that carry gas delivered by a jurisdic-
tional transportation pipeline from being classified as gather-
ing facilities. FERC noted that this issue was raised for the
first time on rehearing; however, the Commission went on to
hold that the petitioners' reliance on Tarpon was misplaced.
See Rehearing Order, 92 F.E.R.C. at 61,295. Although the
presence of upstream transportation facilities was one factor
considered in Tarpon, the real concern in that proceeding was
that finding Tarpon's facilities to be engaged in non-
jurisdictional gathering would have left shippers and produc-
ers unprotected from the exercise of monopoly power. See
id. FERC concluded that such concerns were no longer
relevant for facilities exempt from the Natural Gas Act
because of the Commission's new OCSLA anti-discrimination
regulations. Id. at 61,295-96.
ExxonMobil and the Producer Coalition filed timely peti-
tions for review challenging the Remand Order and the
Rehearing Order in this Court.
II. Analysis
The challenged orders are subject to reversal if the
FERC's action was "arbitrary, capricious, an abuse of discre-
tion, or otherwise not in accordance with law." 5 U.S.C.
s 706(2)(A). In making this determination, "[t]he court must
consider whether the decision was based on a consideration of
the relevant factors and whether there has been a clear error
of judgment.... The court is not empowered to substitute
its judgment for that of the agency." Citizens to Preserve
Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971); see
Motor Vehicle Manufacturers Ass'n v. State Farm Mutual
Automobile Insurance Co., 463 U.S. 29, 43 (1983). To the
extent that the petitioners are challenging FERC's interpre-
tation of section 1(b) of the Natural Gas Act, 15 U.S.C.
s 717(b), we apply the two-step approach of Chevron U.S.A.
Inc. v. Natural Resources Defense Council, 467 U.S. 837
(1984). When Congress has spoken, we are bound by that
pronouncement and that ends this Court's inquiry. Chevron,
467 U.S. at 842-43 (Chevron step one). Where "the statute is
silent or ambiguous with respect to the specific issue, the
question for the court is whether the agency's answer is
based on a permissible construction of the statute." Id. at
843 (footnote omitted) (Chevron step two).
In reviewing the Commission's determinations, we are
mindful that "[t]he line between jurisdictional transportation
and non-jurisdictional gathering is not always clear." Cono-
co, 90 F.3d at 542. The jurisdictional determination under
section 1(b) of the Act is "a line-drawing problem for which
there is no easy answer." Williams Field Servs., 194 F.3d at
118. Thus, "it is not this court's role to interpose its judg-
ment." Id. Rather, we are mindful that in "evaluating and
balancing the several factors under the primary function test,
the Commission brings to bear its considerable expertise
about the natural gas industry." Conoco, 90 F.3d at 544; see
also Lomak, 206 F.3d at 1196-97; Williams Field Servs., 194
F.3d at 118. "Accordingly, we will uphold the Commission's
application of the test as long as it gives 'reasoned consider-
ation to each of the pertinent factors' and articulates factual
conclusions that are supported by substantial evidence in the
record." Lomak, 206 F.3d at 1197 (quoting Conoco, 206 F.3d
at 544); see 15 U.S.C. s 717r(b) ("The finding of the Commis-
sion as to the facts, if supported by substantial evidence, shall
be conclusive."). The burden is on the petitioners to show
that the Commission's choices are unreasonable and its cho-
sen line of demarcation is not within a " 'zone of reasonable-
ness' " as distinct from the question of whether the line drawn
by the Commission is "precisely right." Hercules Inc. v.
EPA, 598 F.2d 91, 107 (D.C. Cir. 1978) (quoting Federal
Power Comm'n v. Conway Corp., 426 U.S. 271, 278 (1976)).
We cannot say that the Commission acted unreasonably
either in interpreting the Natural Gas Act or declining to
exercise jurisdiction over portions of Sea Robin's system.
Therefore petitioners have failed to carry their burden, and
the petitions must be denied.
A.
ExxonMobil challenges FERC's determination that the
Vermilion 149 Station is a reasonable point at which the
Commission may draw the line between non-jurisdictional
gathering and jurisdictional transportation. It contends that
the added compression at Vermilion 149 only serves to push
and pull gas along an "integrated" transportation system.
Petitioner proposes that the individual production platforms
mark the point at which gathering ends and transportation
begins. However, petitioner's differing interpretation of the
physical factors present on the Sea Robin system does not
provide us with a basis to upset the Commission's order.
Reasonable people may disagree as to where gathering ends
and transportation begins. Were we the Federal Energy
Regulatory Commission, we might draw the line at Erath.
Others might draw it at the production platforms themselves.
But see EP Operating Co., 876 F.2d at 49. But after consid-
ering the inherent ambiguity in the statute and the fact that
"[t]he line between jurisdictional transportation and non-
jurisdictional gathering is not always clear," Conoco, 90 F.3d
at 542, (as it is not clear here) we simply cannot conclude that
the Commission's choice of the Vermilion 149 Station as the
dividing line was unreasonable, especially in light of the Fifth
Circuit's decision on remand. See Sea Robin I, 127 F.3d at
371. We therefore hold that the Commission's choice, if not
unassailable, is at least defensible, and survives the arbitrary-
and-capricious review of the Administrative Procedure Act.
FERC relied on the smaller dimensions of the upstream
lines in contrast to the 36-inch Vermilion-Erath line; the 45
laterals feeding into the two upstream arms; the 67 produc-
tion platforms connected to the upstream facilities compared
with only four downstream; the network configuration of the
upstream facilities; and the need for added compression at
the Vermilion 149 Station to move gas to shore. See Rehear-
ing Order, 92 F.E.R.C. at 61,291-92. All of these physical
factors show a meaningful distinction between the facilities
upstream and downstream of Vermilion 149 and make it
reasonable to define it as the central aggregation point.
Obedient to the Fifth Circuit's suggestion, FERC examined
Sea Robin's system in parts, rather than as a whole, and
reasonably concluded that different parts of the system re-
quired different jurisdictional treatment. Moreover, as de-
scribed by the Commission, the central aggregation test is not
a new, bright-line test, but rather is an amalgamation of
physical factors, and in any event, is wholly consistent with
past FERC precedent. It has long been the Commission's
view, upheld by this Court, among others, that when gas from
separate wells is collected by several lines which converge at
a single location in the producing field for delivery into a
single line for transportation, the separate lateral lines behind
the central point are classified as non-jurisdictional gathering
facilities. Accord Barnes Transp. Co., 18 F.P.C. 369, 372
(1957). That aptly describes the Sea Robin system. At
Vermilion 149 gas from several lateral lines is brought togeth-
er and propelled to shore. The dissent is critical of FERC's
determination because in its view, "[s]urely a 'fork in the
road' cannot be the demarcation line between unregulated
production/gathering and regulated transportation." Dis. Op.
at 5. But why not? Cannot two roads diverging (or in this
case, converging) make all the difference? Indeed, has that
not always been the thrust of the Commission's "central-
point-in-the-field" test? In this case, the forks of the "Y"
gathered gas from production platforms at 67 receipt points,
whereas the straight segment received gas at only four such
points; the forks were pipes of smaller diameter than that of
the straight segment; and the forks required less compres-
sion to move the gas along. Moreover, the line between
gathering and transportation is inherently elusive, see, e.g.,
Conoco, 90 F.3d at 542, and FERC "has wide discretion to
determine where to draw administrative lines." AT&T Corp.
v. FCC, 220 F.3d 607, 627 (D.C. Cir. 2000). It is for the
Commission, in the first instance, to determine the patterns
of gathering and transportation in the offshore context. "We
are generally 'unwilling to review line-drawing performed by
the Commission unless a petitioner can demonstrate that
lines drawn ... are patently unreasonable, having no rela-
tionship to the underlying regulatory problem.' " Cassell v.
FCC, 154 F.3d 478, 485 (D.C. Cir. 1998) (quoting Home Box
Office, Inc. v. FCC, 567 F.2d 9, 60 (D.C. Cir. 1977)). We
conclude that petitioner has failed to carry its burden.
ExxonMobil makes much of the Supreme Court's language
in Northern Natural Gas Co. v. State Corp. Comm'n of
Kansas, 372 U.S. 84, 90 (1963), in which the Court held that
" 'production' and 'gathering' are terms narrowly confined to
the physical acts of drawing the gas from the earth and
preparing it for the first stages of distribution." Thus,
petitioner essentially contends that given the length and size
of the upstream portion of Sea Robin's system, it cannot
possibly be involved in gathering, as described by the Su-
preme Court. However, the Fifth Circuit expressly rejected
FERC's per se reliance on length of a pipeline, holding that a
51-mile pipeline was non-jurisdictional. EP Operating Co.,
876 F.2d at 49. This same decision weighs against FERC's
treating the production platforms as central aggregation
points as well. See id. Rather, the Fifth Circuit required
the Commission to recognize that "the pattern of gathering
and distribution on shore differs from the pattern of transpor-
tation and gathering of gas from the middle of the Gulf to the
mainland." Sea Robin I, 127 F.3d at 370; see also Amerada
Hess, 52 F.E.R.C. at 61,988 (adopting the "modified primary
function test" in response to EP Operating Co., and in
recognition of the "changing technical and geographic nature
of exploration and production"). Given these different physi-
cal realities, what might not seem "narrowly confined" in the
on-shore context, may well be on the Outer Continental Shelf.
Cf. West v. Gibson, 527 U.S. 212, 218 (1999) ("Words in
statutes can enlarge or contract their scope as other changes,
in the law or in the world, require their application."); Oncale
v. Sundowner Offshore Servs., Inc., 523 U.S. 75, 79 (1998)
(statutory provisions often go beyond "the principal evil Con-
gress was concerned with"). Given this backdrop, we cannot
conclude that FERC's determination is unreasonable here.
Moreover, we have previously recognized the limited reach
of the Supreme Court's holding in Northern Natural. In
each case in which the Supreme Court "has applied this
narrow definition of 'production' and 'gathering' to uphold the
Commission's jurisdiction, the regulated entity was engaged
in a jurisdictional activity." Conoco, 90 F.3d at 545. Thus,
"when a natural gas company provided bundled sales and
interstate transportation from its own wells to consumers and
distributors, the Commission could properly include the com-
pany's production and gathering costs in its rate base for the
bundled service." Id. We found that it was in the "context"
of bundled jurisdictional and non-jurisdictional activities that
"the Court defined 'gathering' narrowly, as limited to activi-
ties preceding sales for resale." Id. at 546 (citing Phillips
Petroleum, 347 U.S. at 678). But we now live in an unbun-
dled world. See id. at 539-40 (observing that in Order No.
636, FERC "mandat[ed] the unbundling of gas sales and
interstate transportation ... in order to give pipeline custom-
ers unimpeded access to the competitive wellhead market and
to permit all gas sellers to compete on an equal basis"). Sea
Robin is no longer involved in the sales of gas from the OCS-
it is now strictly a transportation system. Remand Order, 87
F.E.R.C. at 62,428. Therefore the Supreme Court's restric-
tive definition of "gathering," while clearly relevant, must be
considered in context. In the context of unbundled, off-shore
pipeline systems, "the physical acts of drawing the gas from
the earth and preparing it for the first stages of distribution,"
Northern Natural Gas, 372 U.S. at 90, cannot be as narrowly
construed as on-shore. Accord Sea Robin I, 127 F.3d at 370;
EP Operating Co., 876 F.2d at 49; Amerada Hess, 52
F.E.R.C. at 61,988.
ExxonMobil faults the Commission for failing to give
weight to the previously "settled status" of the classification
of Sea Robin's pipeline as engaged in jurisdictional transpor-
tation. However, as alluded to above, these petitions, like
those in Conoco, "arise in the wake of major regulatory
changes in the natural gas industry." Conoco, 90 F.3d at 539.
Whereas Sea Robin was once involved in sales and transpor-
tation, now it is strictly a transportation-only pipeline. When
interstate gas pipelines served the multi-function role of
purchasing, gathering, transporting, and re-selling natural
gas, i.e. bundled sales, the transportation/gathering jurisdic-
tional question may have been of less consequence. See, e.g.,
El Paso Natural Gas Co., 72 F.E.R.C. p 61,219, at 62,002
(1995) ("Under [a] bundled sales regulatory environment, the
gathering/transmission function distinction was not as impor-
tant as it is in a post-Order 636 environment [requiring
unbundling].... Consequently, many facilities that actually
perform a gathering function originally were construed under
[Natural Gas Act] section 7 certificates."); CNG Transmis-
sion Corp., 67 F.E.R.C. p 61,330, at 62,177 (1994). Thus, the
historical classification of Sea Robin's system is of limited
utility. Moreover, the Fifth Circuit expressly instructed
FERC in this case to relegate non-physical factors, such as
the "settled status" of a pipeline, and the expectations of
shippers to secondary status: "If the Commission is to re-
main tethered to the statute, as it must, that inquiry must be
based primarily on physical criteria and the realities of the
field." Sea Robin I, 127 F.3d at 371. The Fifth Circuit held
that "general business activity and prior certification are
relevant, but they are only part of the mix." Id. We agree.
Therefore, as FERC adequately considered non-physical fac-
tors, but properly relied primarily on physical factors, again,
we cannot find its decision to decline jurisdiction over a
portion of Sea Robin's system unreasonable.
Similarly, we find ExxonMobil's argument that FERC's
jurisdictional ruling has created an "utterly illogical situa-
tion," wherein gas is transported on a jurisdictional pipeline
(the Garden Banks pipeline) into a non-jurisdictional gather-
ing leg of Sea Robin's pipeline, unavailing. Petitioners rely
on Tarpon Transmission Co., 60 F.E.R.C. p 61,041 (1992),
and Trunkline Gas Co., 70 F.E.R.C. p 61,163 (1995), for the
proposition that the presence of an interconnection with an
upstream jurisdictional facility compels a finding that the
downstream facility is likewise jurisdictional. First, reliance
on these orders for such a proposition is inherently suspect as
in both instances the classification of the upstream system
was in dispute, and in both cases the upstream system was
reclassified as non-jurisdictional. If anything, this suggests
that it is the Garden Banks pipeline, rather than Sea Robin,
that has been erroneously classified. To hold that the Gar-
den Banks pipeline's jurisdictional status compelled FERC to
classify Sea Robin's system as jurisdictional would create a
classic example of circular reasoning. When Garden Banks
requested a non-jurisdictional gathering classification, FERC
ruled that it was jurisdictional because it was located "proxi-
mate to jurisdictional lines." Shell Gas Pipeline Co., 74
F.E.R.C. p 61,277, at 61,897 (1996) (emphasis added). Thus,
proximity to Sea Robin, among other pipelines, resulted in
Garden Banks's jurisdictional classification. To now hold that
Garden Banks's interconnection with Sea Robin requires the
latter to also be jurisdictional, is for the tail to wag the dog.
Perhaps the present inconsistent treatment of the Garden
Banks pipeline and the Sea Robin pipeline is "positively
absurd," as suggested by the dissent, Dis. Op. at 7, but that
does not mean that the problem is necessarily with Sea
Robin's classification. FERC has been struggling with the
reclassification of facilities in the wake of the unbundling of
gas sales and interstate transportation in Order No. 636. See
Conoco, 90 F.3d at 539-41. As it is entirely appropriate for
FERC to proceed on a case-by-case basis, see SEC v. Chen-
ery Corp., 332 U.S. 194, 202-03 (1947), then "the reform may
take one step at a time." Williamson v. Lee Optical of
Oklahoma, Inc., 348 U.S. 483, 489 (1955). We do not mean to
pre-judge how FERC might apply its reformulated primary
function test to Garden Banks. We only conclude that the
status of the Garden Banks pipeline does not render the
Commission's reclassification of portions of Sea Robin's sys-
tem unreasonable.
We turn now to ExxonMobil's least persuasive argument-
that FERC's determination that portions of Sea Robin's
system are engaged in non-jurisdictional gathering results in
a "regulatory gap." We find this argument no more persua-
sive than did the Fifth Circuit. We emphatically agree that
"[n]eed for regulation cannot alone create authority to regu-
late." Sea Robin I, 127 F.3d at 371. Rather it is statutory
authorization alone that gives FERC the authority to regu-
late, and in the absence of such authority, FERC's action " 'is
plainly contrary to law and cannot stand.' " Atlantic City
Elec. Co. v. FERC, No. 97-1097, --- F.3d ----, slip op. at 10
(D.C. Cir. July 12, 2002) (quoting Michigan v. EPA, 268 F.3d
1075, 1081 (D.C. Cir. 2001)). Here Congress clearly contem-
plates that the Commission will not have jurisdiction under
the Natural Gas Act over "the production or gathering of
natural gas." 15 U.S.C. s 717(b). The language could not be
any plainer. We have repeatedly admonished federal agen-
cies that jurisdiction may not be presumed based solely on
the fact that there is not an express withholding of jurisdic-
tion. E.g., Atlantic City Elec. Co., slip op. at 11; Michigan,
268 F.3d at 1082; American Petroleum Inst. v. EPA, 52 F.3d
1113, 1119-20 (D.C. Cir. 1995); Ethyl Corp. v. EPA, 51 F.3d
1053, 1060 (D.C. Cir. 1995). Where Congress has gone so far
as to expressly delineate the limits of agency jurisdiction, we
cannot fault the Commission for taking a conservative view of
its own authority.
Finally, we can quickly dispense with ExxonMobil's argu-
ment that Sea Robin's system was subject to abandonment
proceedings under section 7(b) of the Act, 15 U.S.C.
s 717f(b). Simply put, Sea Robin does not seek to abandon
any facilities or services. Rather, it merely seeks to be able
to continue operating previously certificated facilities as gath-
ering facilities, exempt from FERC's jurisdiction under the
Natural Gas Act. This is not "abandonment" within the
meaning of section 7(b). Cf. Conoco, 90 F.3d at 553. In
addition, section 7(b) only applies to jurisdictional facilities,
and "do[es] not expand the Commission's s 1(b) jurisdiction."
Id. Therefore it cannot be used to bootstrap FERC jurisdic-
tion here.
B.
The Producer Coalition argues that the scope of the "gath-
ering" exemption under section 1(b) of the Natural Gas Act is
defined by the concept of "feeder lines" in the Outer Conti-
nental Shelf Lands Act, 43 U.S.C. s 1331 et seq. Under
OCSLA, the Commission is responsible for ensuring open and
nondiscriminatory access to transportation of oil and gas for
all shippers on the Outer Continental Shelf. 43 U.S.C.
s 1334(f)(1)(A). FERC, however, may exempt from
OCSLA's requirements "any pipeline or class of pipelines
which feeds into a facility where oil and gas are first collected
or a facility where oil and gas are first separated, dehydrated,
or otherwise processed." 43 U.S.C. s 1334(f)(2). The Pro-
ducer Coalition contends that the scope of exemption for
"feeder lines" is coterminous with "gathering" facilities under
the Natural Gas Act. Thus, in essence the Producer Coali-
tion contends that FERC's reformulated primary function
test is unnecessary and that the Commission has stumbled
under Chevron step one.
In support of its position, the Producer Coalition relies on
bits and pieces of legislative history surrounding the 1978
Amendments to OCSLA. But snippets of legislative history
do not a law make. Accord Aldridge v. Williams, 44 U.S. (3
How.) 9, 24 (1845); In re Sealed Case, 237 F.3d 657, 669 (D.C.
Cir. 2001) ("The limits on the Commission's authority-like
that authority itself-are derived from statutory provisions,
not from loosely worded fragments extracted from congres-
sional reports and speeches"). Petitioners offer no direct
evidence of congressional intent to fill in the Natural Gas Act
definition of "gathering" sub silentio by reference to the
feeder line concept. Indeed, there is no definition of "gather-
ing" in the OCSLA, and it does not even use the term.
Rather the Producer Coalition relies on isolated excerpts
from the floor discussion by Congressman Sieberling. While
Congressman Sieberling may have spoken, Congress has not.
Morever, it would be anomalous to treat the "feeder line"
provision of OCSLA and the "gathering" exemption of the
Natural Gas Act as redundant. Under the Producer Coali-
tion's interpretation, in enacting the OCSLA Amendments,
Congress would have replicated the non-discriminatory provi-
sions already contained in the Natural Gas Act. Compare 43
U.S.C. s 1334(f)(a)(1)(A) (OCSLA), with 15 U.S.C. ss 717c(b),
717d(a) (Natural Gas Act). Likewise, there would have been
no need to authorize the Commission to exempt "feeder lines"
from FERC jurisdiction if they were already exempt as
gathering facilities. Rather, a more plausible inference is
that Congress amended OCSLA to make OCS facilities not
covered by the Natural Gas Act subject to similar non-
discriminatory requirements, with the exception of "feeder
lines." However, we do not decide whether it would be
reasonable for FERC to equate the feeder line and gathering
facilities exemptions. We simply hold that FERC's interpre-
tation of section 1(b) of the Natural Gas Act is not unreason-
able, and therefore Chevron deference is applicable.
III. Conclusion
FERC's jurisdiction over natural gas pipelines "demands
the drawing of jurisdictional lines, even when the end of
gathering is not easily located." Sea Robin I, 127 F.3d at
371. Although we might draw a different line, we cannot say
that the Commission acted unreasonably in concluding that
the Vermilion 149 Station is the place where non-
jurisdictional gathering ends and jurisdictional transportation
begins. It is not our role to substitute our own judgment for
that of the agency. Given the instructions of the United
States Court of Appeals for the Fifth Circuit on remand, we
cannot say that FERC has failed to give appropriate consid-
eration to the primary physical factors and the secondary
non-physical factors of its reformulated primary function test.
Therefore the petitions for review are denied.
So ordered.
Edwards, Circuit Judge, dissenting. The issue in this case
focuses on the line between the "transportation" of natural
gas and the "gathering" of natural gas. For many years,
most of the Sea Robin Pipeline Company complex in the Gulf
of Mexico has been designated as a transportation facility,
and, thus, within the jurisdiction of the Federal Energy
Regulatory Commission ("FERC" or "Commission") under
the Natural Gas Act ("NGA"). Now, however, the Commis-
sion has partially reversed that settled status, reclassifying a
major segment of the Sea Robin pipeline as engaged in non-
jurisdictional gathering. In my view, FERC's decision is
devoid of reasoned decision making. I therefore dissent from
the court's decision denying the petition for review.
* * * *
Sea Robin operates a massive pipeline complex (438 miles
overall), almost all of which is located offshore on top of the
Outer Continental Shelf ("OCS") in the Gulf of Mexico. This
system is shaped like an inverted "Y," whose two arms sweep
across the OCS to meet at a point approximately 50 miles off
the coast of Louisiana. The Vermillion 149 Compressor
Station sits at this point of convergence. There, much of the
gas flowing from various production platforms that feed into
the system comes together for shipment 66 miles north to Sea
Robin's onshore processing plants near Erath, Louisiana.
During the journey to Erath, the aggregated gas is joined by
additional gas from four platforms located closer to the shore.
Once the gas reaches shore, it is separated, dehydrated, and
processed, then transported to the Erath Compressor Station
from whence it is pumped into interstate pipelines for down-
stream delivery. (See Appendix.)
Before the challenged reclassification of the Sea Robin
system, once the gas was produced and gathered at the
production platforms south (upstream) of Vermillion, it was
deemed to be in "transportation," and thus within FERC's
jurisdiction. In 1995, Sea Robin sought to undo this regulato-
ry situation. The company asked FERC for an order declar-
ing that its pipelines were gathering facilities exempt from
the Commission's jurisdiction under the s 1(b) of the NGA.
FERC refused, holding that the primary function of Sea
Robin's system was transportation. Sea Robin Pipeline Co.,
71 F.E.R.C. (CCH) p 61,351 (1995). Rehearing was sought,
but denied, Sea Robin Pipeline Co., 75 F.E.R.C. p 61,332
(1996), leading Sea Robin to petition for review in the Fifth
Circuit. The court granted the petition, remanding the case
to FERC for further consideration. Sea Robin Pipeline Co.
v. FERC, 127 F.3d 365 (5th Cir. 1997) ("Sea Robin I").
Sea Robin I held that the Commission's decision to deny
reclassification was arbitrary and capricious because the
agency did not fairly apply the "primary function" test that it
had adopted as the touchstone for its analysis. In Farmland
Industries, Inc., 23 F.E.R.C. p 61,063 (1983), and subsequent
decisions, FERC had identified six factors that were to guide
the functional inquiry into whether a pipeline is a gatherer or
a transporter:
(1) the diameter and length of the facility
(2) the location of compressors and processing plants
(3) the extension of facility beyond the central point in
the field
(4) the location of wells along the facility
(5) the geographical configuration of the field
(6) the operating pressure of the line
See EP Operating Co. v. FERC, 876 F.2d 46, 48 (5th Cir.
1989).
This test was developed for, and most readily applies to,
land-based pipeline facilities. In order to account for the
differences between onshore and offshore facilities, FERC
subsequently attempted to refine the above analysis. See
Amerada Hess Corp., 52 F.E.R.C. p 61,268 (1990). Because
technological advances had allowed drilling and gas produc-
tion to take place further and further from land, gathering
pipelines of increasing length and diameter were being used
in places such as the OCS. This reality suggested to FERC
that it adopt a "sliding scale" approach to the physical factors
identified in Farmland: the deeper and further from shore a
pipeline, the longer and wider it could be and still be deemed
a gatherer. Moreover, in order to ensure that such pipes
were properly classified, the agency announced that it would
consider certain non-physical factors when applying the pri-
mary function analysis. These include the (1) purpose, loca-
tion, and operation of the facility; (2) the general business
activity of the facility; and (3) the overall objectives of the
NGA and Natural Gas Policy Act. Id. at 61,988.
Sea Robin I held that the Commission erred in selectively
applying the Farmland factors, over-relying on the non-
physical factors described in Amerada Hess, and failing to
apply the "sliding scale." First, the court held that the
Commission impermissibly "reduced the primary function
analysis to a litmus test that turned on the length and
diameter of the overall system." 127 F.3d at 370. That is,
FERC classified Sea Robin's system as one engaged in
transportation simply because of the size of its pipes alone,
deeming the other Farmland factors inapplicable. In so
doing, the Commission abandoned, "without reasoned consid-
eration," its earlier recognition that the exigencies of moving
offshore gas long-distances to land may require larger pipe-
lines that should not necessarily be classified as transporters.
Id.
Second, Sea Robin I criticized the agency for treating the
non-physical factors as the equals of the physical factors in
making the gathering/transportation distinction. The Fifth
Circuit reminded FERC that this distinction, as understood
by Congress, was primarily a tangible, operational one. As
such, while non-physical criteria may be considered, they
must remain a secondary "part of the mix," not the starting
point for the rest of the analysis. See id. at 370-71. Because
FERC seemed to have misunderstood these points, the court
remanded the case, suggesting that the Commission
may reformulate its primary function test. It may
choose to discontinue criteria not relevant to the physical,
geographical, and operational characteristics of pipelines
in the OCS. The record suggests other criteria, such as
the quality of the gas in the pipelines and the depth of
the water in the offshore production area, that may be
relevant to the inquiry.
Id. at 371.
The court recognized that the agency might be able to
justify drawing the jurisdictional line between gathering and
transportation at a point internal to the Sea Robin system,
but this suggestion was offered merely in passing dicta.
Nothing in the Fifth Circuit's opinion in Sea Robin I in any
way compelled FERC to draw the jurisdictional line at a
point internal to Sea Robin's overall system. Nor did any-
thing in the court's opinion compel the Commission to select
the Vermillion Compressor Station as the dividing point
between non-jurisdictional gathering and jurisdictional trans-
portation. FERC, however, apparently threw up its hands in
dismay upon reviewing Sea Robin I - obviously having no
clue what to do to adhere to the court's mandate - and simply
opted for Vermillion as the jurisdictional dividing line because
it is "central" to the Sea Robin system.
This is the kind of case in which a judge welcomes the
opportunity to defer to the expert judgment of a regulatory
agency. However, I can find no evidence of FERC "exper-
tise" in operation in this case. Indeed, I view FERC's
decision as totally lacking in reasoned decision making. Be-
cause of the Commission's inexplicable reliance on some
passing dicta in Sea Robin I, its failure to offer a coherent
explanation for the choice of Vermillion as the jurisdictional
dividing line, and its complete failure to explain why it
ignored other choices open to it, I can find no basis upon
which to defer to the agency's decision. I therefore dissent.
* * * *
My starting point is the Supreme Court's oft-quoted state-
ment in Northern Natural Gas Co. v. State Corp. Comm'n of
Kansas, 372 U.S. 84, 90 (1963):
'[P]roduction' and 'gathering' are terms narrowly con-
fined to the physical acts of drawing the gas from the
earth and preparing it for the first stages of distribution.
In this case, Vermillion is a point where gas coming from
different production platforms comes together to be trans-
ported further north; but Vermillion is not a place where gas
is either produced or gathered. The production and gathering
is done at the many production platforms south of Vermil-
lion - this always has been FERC's understanding, and there
are no changed circumstances in this case to justify a differ-
ent conclusion.
Vermillion is merely a junction in the pipeline, where gas
from two preceding forks in the pipeline road come together
before the gas travels north in one pipe instead of two.
Nothing else of any consequence happens at Vermillion -
nothing. Surely a "fork in the road" cannot be the demarca-
tion line between unregulated production/gathering and regu-
lated transportation. Vermillion is not a place where Sea
Robin engages in any "physical acts of drawing the gas from
the earth and preparing it for the first stages of distribution";
it is not, therefore, a place of production and gathering as
those terms have been "narrowly" defined by the Supreme
Court.
* * * *
As I read the Commission's orders now under review, once
FERC identified what it thought was the central point in the
field, the Vermillion Station, it then largely ignored the
physical characteristics of the pipelines that lay upstream
(south) of that point. But, as petitioners rightly point out,
those characteristics (size, pressure, configuration) are entire-
ly compatible with a transportation function. If FERC
meant to view the Sea Robin system in terms of its consistent
parts, rather than as an integrated whole (as it had done
prior to the Fifth Circuit's decision), the Commission should
have applied its new analysis to each part of the facility that
it sought to exempt from its regulatory jurisdiction. That, at
least, seems to be the central holding of Sea Robin I. See
127 F.3d at 371 ("If the Commission is to remain tethered to
the statute, as it must, [the jurisdictional] inquiry must be
based primarily on physical criteria and the realities of the
field."). The court's suggestion that FERC might analyze the
various parts of the field was not an invitation to ignore the
relevant physical properties of the Sea Robin facility.
FERC's focus on the purported central point of the Sea
Robin field would have been plausible only if the agency had
carefully examined the specifications of the entire pipeline
system, both upstream and downstream of its designated
midpoint. Indeed, FERC apparently understood this. See
Sea Robin Pipeline Co., Order Denying Rehearing, 92
F.E.R.C. (CCH) p 61,072, at 61,291-92 (2000). FERC, howev-
er, failed to make good on this understanding. The Commis-
sion claims to rely on the size of the pipes, the number of
cross-connections, and the pressure of the gas in order to
distinguish the lines downstream of Vermillion from those
upstream. See id. However, none of these factors is rele-
vant, because not one supports the demarcation of gathering
and transportation at Vermillion. On the upstream trunk legs,
just as on the Vermillion-Erath line, raw highly pressurized
gas is propelled over long distances through relatively wide
pipes toward land. In other words, the so-called "central
point" of the field is utterly irrelevant to a determination of
the point where non-jurisdictional production and gathering
become regulated transportation.
While the downstream, northern portion of the line may be
punctuated by relatively few lateral connections (four), there
are also only four laterals interrupting the final stage of the
left trunk leg that runs toward Vermillion. Yet, FERC never
examined whether the primary function of that upstream
segment might be transportation.
FERC mentions the existence of compression at Vermil-
lion, as if to suggest that this is a relevant consideration for
purposes of comparison. It is not. The Sea Robin compres-
sors both push and pull gas through the system, pressurizing
lines both upstream and downstream. Indeed, in an earlier
order, the Commission explicitly noted that pressure up-
stream of Vermillion "is similar to that of other offshore
systems found to be transmission facilities." 71 F.E.R.C. at
62,402. FERC has never suggested that there is any greater
pressure in the downstream segment. In fact, the only
physical change that takes place at Vermillion is a marginal
increase in the diameter of the pipelines heading north, which
is hardly surprising in light of the fact that two upstream
pipelines converge into one at the Vermillion junction. And
while the pipes do get larger, the upstream trunk lines are
also quite wide; indeed, the Commission's previous decisions
recognize that those lines are just as compatible with trans-
portation as the final Vermillion-Erath line. See id. at 62,398
("Sea Robin's system is of the diameter and length that are
more typical of an interstate transportation system rather
than an exempt gathering system.").
FERC has thus asked this court to validate a determina-
tion that "gathering" ends where two large lines become one
and grow proportionately wider as a result. This proposition
is perplexing on its own terms, and it is unlawful in light of
what we have been told by the Supreme Court in Northern
Natural Gas Co., namely, that production and gathering
entail only "the physical act[] of drawing the gas from the
earth and preparing it for the first stages of distribution."
372 U.S. at 90. The gas itself undergoes no alteration at
Vermillion, nor does any event occur beyond the aggregation
of gas that has already been partially aggregated, and will be
further aggregated once it is processed for interstate distri-
bution. Given these facts, there is no basis that I can discern
for how the lines immediately upstream of Vermillion have as
their primary function the gathering of natural gas while
those immediately downstream do not.
The Commission's reclassification decision becomes posi-
tively absurd when it is considered in the light of the "Garden
Banks" transportation pipeline. The Garden Banks segment
of line is south (upstream) of Vermillion and it is concededly a
pipeline segment that is subject to FERC's regulatory juris-
diction. See Shell Gas Pipeline Co., 74 F.E.R.C. p 61,277
(1996). Yet, as a result of FERC's reclassification of the Sea
Robin system, a situation has been created in which a juris-
dictional "transportation" line (Garden Banks) flows into a
non-jurisdictional pipeline segment upstream of Vermillion.
Not surprisingly, FERC has previously disapproved of such
situations, for it is facially illogical to have gas being trans-
ported to where it is gathered only then to be transported
again. See Trunkline Gas Co., 70 F.E.R.C. p 61,163 (1995);
Tarpon Transmission Co., 60 F.E.R.C. p 61,041 (1992). The
Commission offers no reasonable justification for this un-
seemly situation, arguing meekly that this one factor should
not be considered because other factors support FERC's
judgment.
This all might make sense had FERC no other serious
options to consider in discharging its line-drawing responsibil-
ities. Such was not the case, however, as the Commission
had before it, and ignored, another viable division point: the
offshore production platforms. In previous decisions, FERC
has found such platforms to be "the central point in an
offshore gas field where numerous wells are produced on the
platform and raw production from other wells is transported
to the platform through short flowlines." Amerada Hess
Corp., 47 F.E.R.C. (CCH) p 61,187, at 61,623 (1989), modified
on reh'g on other grounds 52 F.E.R.C. p 61,268 (1990).
In this case, the Commission never explained away these
precedents, nor tried to justify its implicit - and by no means
obvious - decision to treat the entire Sea Robin system as a
single production field, with one central point, rather than as
an aggregation of smaller fields, each with a central point,
which in turn feed into the trunk lines for downstream
transportation. This approach was presented by the gas
producers below; FERC's decision to ignore it was, in my
view, arbitrary and capricious. See Farmers Union Cent.
Exchange, Inc. v. FERC, 734 F.2d 1486, 1511 (D.C. Cir. 1984)
("It is well established that an agency has a duty to consider
reasonable alternatives to its chosen policy, and to give a
reasoned explanation for its rejection of such alternatives.").
Indeed, ignoring this reasonable alternative allowed the Com-
mission to pay scant attention to the very thing that it was
supposed to rely on most heavily: the physical properties of
the facilities whose jurisdictional status it was endeavoring to
determine.
In sum, under FERC's new legal regime, "gathering" ends
where the widest pipe on a pipeline system starts and where
the gas begins to flow on a direct angle to its processing
plant. This approach takes insufficient account of those
physical realities that might suggest a different demarcation
point between gathering and transportation, and, as applied
here, led the Commission to a result that is difficult to square
with the language of the statute, with the language of the
Supreme Court, and with the holding (as opposed to the
dicta) of the Fifth Circuit. Because the agency neither
explains the discrepancy between its jurisdictional line and
the one described by Congress, nor why it ignored plausible
alternatives to that line, FERC is owed no deference in this
case. I respectfully dissent.
[Appendix not available electronically.]