Western Refining Southwest, Inc. v. Federal Energy Regulatory Commission

636 F.3d 719, 180 Oil & Gas Rep. 139, 2011 U.S. App. LEXIS 5994, 2011 WL 1053362
CourtCourt of Appeals for the Fifth Circuit
DecidedMarch 24, 2011
Docket09-60947
StatusPublished
Cited by7 cases

This text of 636 F.3d 719 (Western Refining Southwest, Inc. v. Federal Energy Regulatory Commission) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Western Refining Southwest, Inc. v. Federal Energy Regulatory Commission, 636 F.3d 719, 180 Oil & Gas Rep. 139, 2011 U.S. App. LEXIS 5994, 2011 WL 1053362 (5th Cir. 2011).

Opinion

JENNIFER WALKER ELROD, Circuit Judge:

The Interstate Commerce Act vests the Federal Energy Regulatory Commission with jurisdiction over common carriers engaged in “the transportation of oil ... by pipe line.” 49 U.S.C. app. § l(l)(b) (1988). This case concerns the extent of the Commission’s jurisdiction under the Act, and whether it includes a dispute over a capacity lease agreement regarding the use of an oil pipeline. We AFFIRM.

I.

This case arises from a contractual dispute between Western Refining Southwest, Inc., Western Refining Pipeline Company (collectively, Western) and Enterprise Crude Pipeline, LLC, formerly known as TEPPCO Crude Pipeline, LLC (Enterprise). In order to transport crude oil to its refineries, Western 1 entered into *721 a capacity lease agreement with Enterprise. Under the capacity lease agreement, Western would lease capacity on Enterprise’s pipeline between Midland, Texas and Hobbs, New Mexico. The agreement also required Enterprise to set aside sufficient capacity in its pipeline to enable Western to transport 15,000 barrels a day of crude oil from Midland, Texas to Hobbs, New Mexico. The agreement set out a monthly rental payment system, whereby Western would be required to pay for base capacity on the pipeline at a set rate, regardless of whether Western used the base capacity in a given month.

Enterprise also agreed to construct a new pipeline between Hobbs, New Mexico and Lynch, New Mexico. Moreover, as part of the overall arrangement, Western contracted to purchase a minimum of 10,-000 barrels of crude per day from Enterprise for the first two years, with declining requirements over the length of the agreement. The agreement states that Texas law governs any dispute over the interpretation, validity, or performance of the lease. The agreement became effective in June 2007 for a ten-year term.

Significantly, the capacity lease agreement expressly states that Western “shall use its Leased Capacity in the Pipeline solely as an individual common carrier facility. [Western] shall separately maintain tariffs in its own name in accordance with any applicable state and federal laws and regulations .... [Enterprise] shall not be an agent for [Western] in connection with acceptance of tenders from shippers for shipment of crude oil.” That is, Western agreed to act as the common carrier for the leased capacity in the pipeline and maintain tariffs with the Commission for that purpose. In accordance with the agreement, Western filed a request with the Commission for waiver of the Act’s tariff filing and reporting requirements on the ground that its affiliate would be the only shipper on the leased capacity. The Commission granted the waiver. 2

The capacity lease agreement required Western to notify Enterprise, by the 25th day of each month, of its planned transportation activity in its leased capacity for the following month. In May 2008, Western failed to notify Enterprise of any transportation activity for June 2008. Therefore, Enterprise decided to use Western’s leased capacity in the Midland, Texas-to-Hobbs, New Mexico pipeline for its own benefit and reversed the flow of the fine. To facilitate this change, Enterprise pumped the line fill belonging to Western into a storage tank in Midland, Texas. In response to Enterprise’s actions, Western sought to pull 46,200 barrels from its inventory on the Enterprise pipeline system. Enterprise advised Western that it could pull 20,200 barrels from the system but that the remainder (26,000) was the required minimum inventory under the agreement. Throughout 2008, Western continued to pay the monthly rental fee under the agreement.

On February 9, 2009, Western filed a complaint against Enterprise before the Commission. The complaint explained that Western had contracted with Enterprise to lease capacity on Enterprise’s pipeline facilities. Western alleged that Enterprise acted in an unjust, unreasonable manner, thereby violating § 1(6) of the Act, by reversing the flow of one of the pipelines at issue and illegally retaining crude oil belonging to Western, while continuing to collect lease payments. Fur *722 ther, Western asserted that Enterprise failed to provide any notice that it was reversing the line or that it was diverting Western’s line fill to an Enterprise storage tank. Western sought damages under § 8 of the Act, which provides that a “common carrier shall be liable to the person or persons injured thereby for the full amount of any damages sustained in consequence of any violation of the provisions of this chapter.”

The Commission determined that the allegations in the complaint did not invoke “the Commission’s jurisdiction over oil pipeline transportation,” but rather arose from “a private contract governing property rights that is solely within the jurisdiction of the appropriate state court to resolve.” Western sought rehearing, which the Commission denied. The Commission reaffirmed its earlier decision, noting that “the contract in question is for the lease of pipeline facilities and not for the ‘transportation of oil,’ [and therefore] the Commission has no jurisdictional authority [under the Act] over the contractual dispute between [Western and Enterprise].” The Commission also stated that, even if it had jurisdiction under the Act, it would decline to exercise jurisdiction over the contractual claims because no primary jurisdiction exists in this case.

II.

Before we review the Commission’s order on appeal, we must first address the Commission’s ripeness argument. The Commission asserts that the current appeal is not ripe for review because the outcome of ongoing state proceedings between the two parties may obviate the need for federal appellate review of the jurisdictional issue raised in the petition. In evaluating the ripeness of a claim, a court must “evaluate both the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration.” Abbott Labs. v. Gardner, 387 U.S. 136, 149, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967), abrogated on other grounds by Califano v. Sanders, 430 U.S. 99, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977).

This appeal concerns the scope of the Commission’s jurisdiction under the Interstate Commerce Act. That issue is not being considered by any state court, including the state court that is hearing Enterprise’s complaint against Western. Here, the Commission considered its jurisdiction and that issue is properly and squarely before this court on appeal. Thus, it is fit for judicial decision. In addition, Western would suffer hardship by not having access to a judicial forum to review the adverse agency action in question. See Abbott Labs., 387 U.S. at 156, 87 S.Ct. 1507.

Several other circuits have rejected similar ripeness arguments. The Ninth Circuit, addressing the Commission’s jurisdiction on appeal, rejected the Commission’s request that it dismiss the appeal on ripeness grounds, stating that “[i]t is difficult to postulate an issue more proper for judicial decision than that of the statutory authority of an administrative agency.” See Cal. State ex rel. Water Res.

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636 F.3d 719, 180 Oil & Gas Rep. 139, 2011 U.S. App. LEXIS 5994, 2011 WL 1053362, Counsel Stack Legal Research, https://law.counselstack.com/opinion/western-refining-southwest-inc-v-federal-energy-regulatory-commission-ca5-2011.