{"operation":"document","citation":"PI-82-003","title":"Panhandle Eastern Pipe Line Co. — Pipeline Safety Interpretation","source_type":"guidance","agency":"Pipeline and Hazardous Materials Safety Administration","status":"guidance","official":true,"published_on":"1982-02-05","effective_on":null,"summary":"PI-82-003 response to Panhandle Eastern Pipe Line Co. concerning 192.1.","machine_formats":{"json":"https://regulus.evalyn.ai/document/phmsa-interpretation-pi-82-003.json","markdown":"https://regulus.evalyn.ai/document/phmsa-interpretation-pi-82-003.md"},"app_url":"https://regulus.evalyn.ai/document/phmsa-interpretation-pi-82-003","source_url":"https://www.phmsa.dot.gov/sites/phmsa.dot.gov/files/legacy/interpretations/Interpretation%20Files/Pipeline/1982/PI82003.pdf","body":"<<<PAGE 1>>>\n\nFeb 5 1982\nMr. Kenneth W. Haile, Esq.\nAttorney at Law\nPanhandle Eastern Pipe Line Co.\n3444 Broadway\nKansas City, Missouri 64141\nDear Mr. Haile:\nYour letter of January 15 seeks an interpretation of the classification of Panhandle Eastern's\nSneed Compressor Station, Moore County, Texas. You seek a determination that the Sneed\nStation falls within the pipeline safety jurisdiction of the Department of Transportation (DOT)\nunder the Natural Gas Pipeline Safety Act of 1968 (49 U.S.C. 1671 et seq.), and more specifically\nthat it does not fail within the gathering exclusion contained in 49 U.S.C. 1671(3).\nFrom your letter and attachments, it appears that the Sneed Station is at the upstream end of\nPanhandle Eastern's main transmission line originating in Texas and terminating at the Canadian\nborder. That station is connected to several gathering lines furnishing gas from numerous wells in\nthe area. Processing plants operated by Phillips Petroleum Company and Panhandle Eastern are\nlocated just downstream of the compressor, and the Phillips plant processes some 27% of the gas\ncompressed. The Panhandle Eastern plant only operates a few days each year during the winter\nand separates liquid from only and extremely small amount of gas going through Sneed annually.\nThe full stream going through the Sneed Station is later processed by Panhandle Eastern at\nLiberal, Kansas. Between the Sneed and Liberal, Panhandle Eastern makes sales to some 35 farm\ntap, distributor, and small industrial customers, and numerous irrigation customers. Your\nattached exhibits reveal that the Sneed Station is the first of some 15 compressor stations along\nPanhandle Eastern's main line. You state that both the Phillips plant near the Sneed Station and\nthe Panhandle Eastern plant at Liberal are operated in order to extract liquid hydrocarbons for\nsale, and not for the purpose of purifying gas in order to make it marketable.\nIn general, the gathering process terminates when the gas is in a condition suitable for delivery to\ncustomers. Also, the determination may turn on the use of the facilities involved. The fact that\nsales are made prior to final processing at Liberal, Kansas, suggests that the gas passing through\nthe Sneed Station is suitable for such delivery. Further, from your letter, it appears that the only\nthing distinguishing the Sneed Station from other stations along the main line is that the Sneed\nStation is the first. This suggests that its primary function is to facilitate the transportation of gas,\nrather than its gathering. This is corroborated by the fact that twenty booster compressors are\nsituated upstream from Sneed to regulate gathering pressure. Sneed, on the other hand, regulates\nthe higher main line pressure downstream. From the facts as you have presented them, I conclude\non this basis that the Sneed Compressor Station is subject to our jurisdiction under the Natural\nGas Pipeline Safety Act of 1968 and the applicable regulations in 49 CFR Part 192.\ndal\\192.1-a\\1\\82-02-05\n1\n\n<<<PAGE 2>>>\n\nYou also urge in your letter that since the Sneed Station is considered \"transportation\" for\npurposes of Federal Energy Regulatory Commission jurisdiction under the Natural Gas Act, DOT\nshould treat it as \"transportation\" for purposes of the Pipeline Safety Act. In view of the\nconclusion that it is jurisdictional for other reasons, it is not necessary to reach this determination.\nI would note, however, that that fact would at the very least be persuasive in reaching the same\nconclusion.\nI trust that this has answered your inquiry. If we can be of further assistance in this matter, please\nlet us know.\nSincerely,\nMelvin A. Judah\nActing Associate Director for\nPipeline Safety Regulation\nMaterials Transportation Bureau\ndal\\192.1-a\\1\\82-02-05\n2\n\n<<<PAGE 3>>>\n\nJanuary 15, 1982\nMr. Melvin Judah\nAssociate Director For\nPipe Line Safety Regulations\nMaterial Transportation Bureau\nU.S. Department of Transportation\n400 7th Street, S.W.\nWashington, D.C. 20590\nAttn: Mr. L.M. Furrow\nRe: Panhandle Eastern Pipe Line Company -\nDOT Jurisdiction over Sneed Compressor Station\nDear Mr. Furrow:\nAs you may recall, I spoke with you over the telephone January 13 concerning\nwhether the Department of Transportation would exercise jurisdiction over the Sneed\nCompressor Station (Sneed) of Panhandle Eastern Pipe Line Company (Panhandle Eastern), with\nparticular reference to the gathering exemption contained in §2(3) of the Natural Gas Pipeline\nSafety Act, 49 U.S.C. 1671(3). This letter follows up on that conversation, and gives facts and\narguments why Panhandle thinks Sneed is jurisdictional.\nI. Facts\nAttached are Exhibits 1 through 3 which show the relationship of Sneed to the\ngathering system and to the remainder of Panhandle Eastern's transmission system. As shown on\nExhibit 1, the inlet side of Sneed is the beginning of the main line; upstream of the compressor\nstation is an extensive gathering system in Hutchison, Carson, Potter and Moore Counties, Texas.\nExhibit 2 shows a schematic of the lines and rated capacity of compression on the gathering\nsystem, as well as the Blair line connected to the main line just downstream of Sneed. The rated\ncapacity of the boosters in the gathering lines is small compared to the 11952 rated horsepower of\nSneed; the boosters only regulate pressure for gathering lines whereas Sneed primarily regulates\nthe higher pressure required in the main transmission line. Exhibit 3 shows Sneed in relation to\nthe remainder of Panhandle Eastern's transmission system (each of the red dots on this exhibit is a\nmainline compressor station).\nPanhandle Eastern purchases gas at the wellhead from an affiliated producer and\nindependent producers. All gas going through Sneed is owned by Panhandle Eastern except\napproximately 20% which is owned by Phillips Petroleum Company (Phillips) and sold to\nPanhandle Eastern at the tailgate of the Phillips processing plant. Phillips owns and operates the\ngas processing plant on one of the segregated lines downstream of Sneed. By virtue of\ndal\\192.1-a\\1\\82-02-05\n3\n\n<<<PAGE 4>>>\n\nprocessing rights under various gas purchase contracts, Phillips processes only that part of the gas\nto which it has processing rights, approximately 27% of the gas coming through Sneed; the\nremaining 70 to 75% of the gas bypasses the Phillips plant. The full stream is then processed at a\nPanhandle Eastern plant at Liberal, Kansas. See Exhibit 4 which is a gas process diagram\ndepicting the foregoing movement of gas.\nLiquid accumulation is not normally a problem downstream from Sneed except for\na few days in the winter when low temperatures increase the \"fall out\" rate of the liquids.\nTherefore, Panhandle Eastern has a separation plant immediately downstream of Sneed which\noperates only a few days a year. An extremely small amount of the gas annually flowing through\nSneed goes through the plant. In fact, it is anticipated the plant will not be operated at all during\nthe 1981/1982 winter because of low volumes of gas and its relative dryness. In 1981, one-half of\n1% of the gas flowing through Sneed passed through the Panhandle Eastern plant.\nBetween Sneed and Liberal, Panhandle Eastern makes sales of gas to some 35\ncustomers, including 32 farm taps (residential use); numerous irrigation taps; and two municipal\ndistribution companies and one small industrial customer. See Exhibits 5 and 6.\nSneed is jurisdictional under §§1(b) and 7(c) of the Natural Gas Act, 15 U.S.C.\n717(b), 717f(c). Attached to demonstrate this fact are the order of October 17, 1945, of the\nFederal Poser Commission in Docket No. G-254 (Exhibit 7), and the underlying application listing\nin part Sneed as the subject of a certificate application (Exhibit 8). Also, enclosed as Exhibit 9 is\nan order of September 21, 1945 of the FPC authorizing in part additional horsepower at Sneed.\nII. Discussion\nPanhandle Eastern believes the Sneed Station is jurisdictional under the Pipeline\nSafety Act for at least three reasons:\nA. Readiness for Market\nFrom our telephone conversation, it appears that the primary DOT criterion is\nwhether the gas being transported is in a condition ready for market, or whether further\nprocessing is required to make it market-ready. If the former, the facilities in question would be\njurisdictional under the Pipeline Safety Act.\nPanhandle Eastern's plant immediately downstream of Sneed is operational only a\nfew days out of each year; less than 1% of the gas that went through Sneed in 1981 went through\nthe plant and the plant is, therefore, not a significant factor in determining DOT jurisdiction.\nThere are two chief reasons gas is processed - to remove impurities which would\nrender it undesirable for immediate consumption and to recover relatively more valuable heavier\ndal\\192.1-a\\1\\82-02-05\n4\n\n<<<PAGE 5>>>\n\nhydrocarbons for sale; in this case, the Phillips plant serves the latter. The Phillips plant processes\napproximately 27% of the gas after going through Sneed pursuant to processing agreements\ncontained in purchase contracts with independent producers. Although the gas could be marketed\nin its then-condition, the sellers insist on the right to strip out valuable liquids as a condition of the\nsale. This gas is processed for economic reasons, not for engineering reasons.\nThe same is true with respect to the Panhandle Eastern plant a Liberal, Kansas. As\ndescribed above, the full stream passes through this plant. However, this processing is again to\nrecover the liquids prior to sale of the gas, rather than to make the gas market-ready. In fact, the\nnumerous sales previously listed are made prior to the time the gas stream passes through the\nLiberal plant; it is, thus, by definition \"marketable\" because it is, in fact, marketed.\nThis being the case, the gas compressed through the Sneed Station is marketable in\nthe condition it passes through that station. The Sneed Station is an integral part of Panhandle\nEastern's transmission system and is a mainline station not unlike any of the other mainline\nstations shown on Exhibit 3. It is different both in function and capacity from the field\ncompressor units shown on Exhibit 2 in that it increases pressure in the mainline, not the gathering\nlines. Accordingly, it is part of Panhandle Eastern's transportation system, rather than a part of a\ngathering system.\nB. Natural Gas Act\nPanhandle Eastern believes that the treatment of a particular facility under the\nNatural Gas Act (15 U.S.C. 717, et seq.) should be dispositive of its treatment under the Pipeline\nSafety Act. The relevant sections provide as follows:\nThe Natural Gas Pipeline Safety Act provides in pertinent parts:\n49 U.S.C. §1672(a) (1) (last sentence)\ndal\\192.1-a\\1\\82-02-05\n5\n\n<<<PAGE 6>>>\n\n\"No State agency may adopt or continue in force any such standards applicable to\ninterstate transmission facilities, after the Federal minimum standards become\neffective.\"\nThis sentence implies the Secretary of Transportation will adopt minimum\nstandards for all interstate transmission facilities! This is why interstate transmission facilities are\ndefined:\n[49 U.S.C. 1671]\nAs used in this chapter--\n(8) 'Interstate transmission facilities' means pipeline facilities used in the\ntransportation of gas which are subject to the jurisdiction of the Federal Energy\nRegulatory Commission under the Natural Gas Act, except that it shall not include\nany pipeline facilities within a State which transports gas from an interstate gas\npipeline to a direct sales customer within such State purchasing gas for its own\nconsumption. (Emphasis provided).\nMoreover, in the case of United Gas Pipeline Co. v. Terrebonne Parish Police Jury,\n319 F. Supp. 1139 (D.C. La. 1970), aff'd 445 F.2d 301, the Court made the jurisdiction of the\nDepartment of Transportation clear by saying that Congress intended by the enactment of the\nNatural Gas Pipeline Safety Act to give it exclusive jurisdiction to regulate the safety of interstate\ntransmission facilities.\n\"Just as Congress intended by the Natural Gas Act to confer exclusive\njurisdiction to the Federal Power Commission [now Federal Energy Regulatory\nCommission] to regulate commerce in the interstate sale and transportation of\nnatural gas, so also it intended by the Natural Gas Pipeline Safety Act of 1968 to\ngive exclusive jurisdiction to the Department of Transportation to regulate the\nsafety of 'interstate transmission facilities.' 2/ (319 F. Supp. at 1140.)\nFootnote 2 is relevant; it read:\n\"2/ 'Interstate transmission facilities' means pipeline facilities used in the\ntransportation of gas which are subject to the jurisdiction of the Federal Power\nCommission under the Natural Gas Act; Section 1671(8) of the Safety Act.\"\nThis was clearly the intent of the Congress as reflected in a conference report on\nthe Safety Act:\ndal\\192.1-a\\1\\82-02-05\n6\n\n<<<PAGE 7>>>\n\n\"Additional or more stringent State standards are prohibited as to interstate\ntransmission facilities, that is, pipe line facilities used in transportation of gas which\nare subject to jurisdiction of FPC under the Natural Gas Act. With respect to\nthese facilities, the Federal Standard will apply providing for uniformity of\nregulation where the line of a single company may traverse a number of States.\"\nH.R. Rep. 1390, S.B. 1166, page 3236, 1968 USC Cong. and Adm. News, p.\n3223 (Emphasis provided).\nThus, the Department of Transportation has jurisdiction where the FERC has\njurisdiction! Sneed is clearly an interstate transmission facility under FERC jurisdiction by virtue\nof the orders issuing certificates of public convenience and necessity, Exhibits 7 and 9; therefore,\nDOT has jurisdiction over Sneed.\nDOT likewise has recognized its jurisdiction in regard to large compressor stations\nlike Sneed; the Department of Transportation has issued regulations concerning compressor\nstations. Such regulations appear in Title 49 of the Code of Federal Regulations, Part 192. The\nregulations incorporate in Subpart D - \"Design of Pipeline Components\" the essentials of\ndesigning, constructing, operating and ventilating compressor stations and their components. In\nfact, Panhandle Eastern's compressor stations at Liberal, Olpe and Louisburg, Kansas; and at\nHoustonia and Centralia, Missouri have been inspected by DOT! These stations serve the same\npurpose and are similar in size as Sneed. All the compressor stations are situated upstream of a\nlarge Panhandle processing plant located at Tuscola, Illinois; DOT, thus, does not strictly follow a\nrule that any facility upstream of a processing plant is gathering.\nC. Other Tests Applied by the FERC\nThe FERC applies four tests in determining whether facilities are jurisdictional\ntransmission facilities or nonjurisdictional gathering facilities under the Natural Gas Act. These\ntests might be of aid in determining DOT jurisdiction under the Natural Gas Pipe Line Safety Act.\na. The behind-the-plant test has not been applied to an interstate pipe line to this\nwriter's knowledge; it is natural to apply to a producer or a gathering company\nwhich gathers the gas and conditions the gas for sale at the tailgate of its\nprocessing plant to an interstate pipe line company. This test is therefore,\ninappropriate to Panhandle Eastern; the only sale made at the tailgate of any plant\nis by Phillips to Panhandle. If any facilities were to be considered gathering, it\nwould be only the facilities owned by Phillips behind the Phillips plant. Besides\nPhillips is not processing the gas to make it marketable; it is processing the gas to\nremove and sell valuable hydrocarbon liquids. [See Phillips Petroleum Company v.\nState of Wisconsin, 347 US 672 (1954)]\ndal\\192.1-a\\1\\82-02-05\n7\n\n<<<PAGE 8>>>\n\nb. On the other hand, Sneed complies with the central point test where gathering\nends at a central point in the field; all upstream gathering lines, Panhandle Eastern's\nand Phillips', converge at Sneed; downstream of Sneed, there is only one line!\n[See Barnes Transportation Co., 18 F.P.C. 69 (1957)]\nc. Sneed also complies with the central compressor station test where gathering\nends at the inlet side of a centrally located compressor station. [See Northern\nNatural Gas Co., 50 F.P.C. 177 (1973)]\nd. Of course, Sneed complies with the primary function test where a facility is not\ngathering if the primary function of the company is interstate transportation of gas\nrather than gathering of gas. [See Ben Bolt Gathering Co. v. F.P.C., 26 F.P.C.\n825 (1961), aff'd 323 F.2d 610 (5th Cir. 1963)]\nAlthough no one test is determinative, three out of four would be in those\nsituations where the gas is ultimately processed far downstream. Further, a distinction is drawn\nbetween compressor stations which deliver into a main line (jurisdictional) and those which are\nsimply field booster stations. Continental Oil Co., 16 F.P.C. 1 (1956)\nIn a doubtful case, DOT might consider the foregoing tests to resolve the issue of\nwhether a facility is or is not gathering. If the tests are applied in this case, the conclusion is\ncompelling that the Sneed Station is not a gathering facility.\nIII. Conclusion\nUnder both DOT's own interpretation of the gathering exemption contained in the\nNatural Gas Pipeline Safety Act, and under the closely analogous gathering exemption under the\nNatural Gas Act, the Sneed Compressor Station is not a \"gathering\" facility. As such, it falls\nwithin the DOT's responsibilities for the \"transportation of gas by pipeline.\"\nPanhandle Eastern seeks a letter from some person in DOT responsible for the\nadministration of the Pipeline Safety Act to the effect that its Sneed Compressor Station falls\nwithin the Act's ambit. The letter will be used only to urge an OSHA attorney to dismiss a\ncomplaint for lack of jurisdiction. OSHA is preempted where another Federal agency has\njurisdiction. If you agree with the above position, please send such a letter to me.\nI have included a draft letter and stamped envelope for your convenience. I do not\nnecessarily expect that you will accept that letter as is; however, if you feel any significant\nchanges are required, I would be grateful if you would consult with me by telephone. If you\nwould like additional information, I will make every effort to provide whatever is required.\nSincerely,\ndal\\192.1-a\\1\\82-02-05\n8\n\n<<<PAGE 9>>>\n\nKenneth W. Haile\ndal\\192.1-a\\1\\82-02-05\n9","truncated":false,"body_characters":18337}