Power & Pipes

FERC, CFTC, and State Energy Law Developments

On January 19, 2012, FERC granted a request for jurisdictional determination filed By Kenai Pipe Line Company (Kenai), Tesoro Alaska Company (Tesoro Alaska), and Tesoro Logistics Operations, LLC (collectively, Tesoro).[1] Tesoro sought a determination that the two intrastate pipelines that deliver crude oil to the Tesoro refinery from producing areas entirely within the State of Alaska, several crude oil and refined products spur lines, and the related tankage and marine dock are integral to and are ancillary facilities to the refinery over which FERC does not exercise jurisdiction under the Interstate Commerce Act.

Tesoro Alaska purchased Kenai from Chevron in March 1995. Pursuant to a provision in the purchase agreement, Tesoro was required to maintain the original Kenai tariff until March 3, 2005. Tesoro complied with this provision and did not revise the tariff to remove all of the assets in the Kenai tariff from interstate common carrier service. Tesoro maintained that its inaction should not be interpreted as Tesoro’s holding itself out as a common carrier service from the tankage to the marine dock and argued that it may still cancel the Kenai tariff because interstate common carrier services are no longer offered on the Kenai pipelines or facilities.

In support of its request, Tesoro asserted that the pipeline spurs at issue, which transport crude oil and petroleum products among the refinery, marine dock, and tankage, are integral to the operation of Tesoro’s refinery and could never be used By a third party.[2] Additionally, it noted that the marine dock and tankage provide terminalling services that are neither integral nor necessary for the transportation function.

Several companies protested the request for jurisdictional determination, noting that although such companies currently do not ship on Kenai, they do have crude oil sales contracts with Tesoro that are either currently being renegotiated or up for renewal in the near future. The protesting companies asserted that they would consider the possibility of shipping on Kenai in the event that their contracts with Tesoro were not extended. They argued that Tesoro’s facilities should remain available to other shippers.

Consistent with prior decisions, FERC held that it cannot compel a pipeline to offer services it does not provide or require transportation in a direction the pipeline does not offer.[3] Further, FERC noted that it does not have jurisdiction over oil pipeline abandonments.[4] Because Tesoro has not provided interstate common carrier services on the Kenai facilities for the last 16 years and does not intend to hold itself out as a provider of interstate common carrier services, FERC granted Tesoro’s request for a jurisdictional determination that all of the facilities are not within FERC’s jurisdiction because they are only used to support Tesoro’s refining operations.

[1]. 138 FERC ¶ 61,034 (2012).

[2]. As further support, Tesoro stated that requiring a tariff filing for short pipeline spurs that are necessary for refinery operations would likely result in a large number of additional tariff filings throughout the petroleum industry.

[3]. ConocoPhillips Co., 134 FERC ¶ 61,174 (2011); Western Refining Pipeline Co., 123 FERC ¶ 61,271 (2008).

[4]. Arco Pipe Line Co., 55 FERC ¶ 61,420 (1991).