FERC Issues Order Asserting Jurisdiction over Ethane Pipelines Under the Interstate Commerce Act

by K&L Gates LLP

On December 31, 2013, the Federal Energy Regulatory Commission (“FERC”), in a case of first impression, confirmed its jurisdiction over and its intention to regulate the economic and operational aspects of the interstate pipeline transportation of purity liquid ethane regardless of the intended use of the ethane being transported. In light of the burgeoning development of ethane infrastructure in the Marcellus and Utica Shale regions, as well as throughout other shale- producing basins in the United States, FERC’s use of the Interstate Commerce Act (“ICA”) in this context confirms an additional level of regulatory supervision -- and potential cost -- to the transportation of purity liquid ethane, an indispensable commodity for a variety of petrochemical facilities currently in operation and in the development phase.

FERC’s Declaratory Order [1] responded to an August 6, 2013 petition (“Petition”) filed by Williams Olefins Feedstock Pipelines, LLC (“Williams”). In the Petition, Williams requested that FERC issue a declaratory order finding that FERC’s jurisdiction under the ICA does not apply to Williams’ proposed unbatched, interstate pipeline transportation of purity liquid ethane, which the company stated will be used entirely for non-energy purposes. 

In its declaratory order, FERC denies the Williams Petition and finds that FERC does, in fact, have jurisdiction over the transportation of the purity liquid ethane because that natural gas liquid is “a naturally-occurring hydrocarbon product with current energy uses and future undeveloped energy uses.” Importantly, FERC for the first time states that it will not consider an applicant’s assertion of the intended end-use of the purity liquid ethane when making a jurisdictional determination related to the pipeline.

The declaratory order arguably refines FERC’s test in this area of FERC’s ICA jurisdiction. Williams argued that prior case law generally centered on whether the product being transported served an energy-related function, as opposed to merely being a feedstock. In its declaratory order, FERC explains that this characterization of its test is incomplete and restated the test for whether it has jurisdiction over the transportation of a particular hydrocarbon product under the ICA as turning on “whether the product being transported is a naturally-occurring hydrocarbon that is used or can be used for energy-related purposes, as opposed to having only a non-fuel, feedstock function.”

Also, FERC explicitly states in the declaratory order that it will not disclaim jurisdiction over interstate ethane transportation based on an applicant’s assertion of the intended end-use of the ethane. FERC states that it believes this will avoid a “balkanized ethane pipeline system” in which some ethane pipelines are considered jurisdictional where others are not. FERC also is wary of basing its jurisdiction on an applicant’s stated intended use because it perceives this to be an environment where the intended use of the product could change rapidly.  Using Williams as an example, FERC notes that (1) Williams does not have title to the ethane in its pipeline, so Williams cannot be certain of the ultimate use of the ethane it transports; and (2) some of the ethane Williams delivers will be placed into storage from which the product could be delivered to serve a variety of energy purposes.

Additional Points
In analyzing the Petition under this test, FERC rejects the assertion that, although purity liquid ethane theoretically could be burned, the product’s practical or commercial use is not an energy or fuel use. Instead, FERC focuses on several current energy uses for purity ethane, as well as future undeveloped energy uses for the product. It is worth noting that FERC restates and confirms that it has disclaimed jurisdiction over the transportation by pipeline of anhydrous ammonia, polymer- grade propylene, and chemical-grade propylene.

Next Steps
Under FERC regulations, Williams will have 30 days from the date of the declaratory order to file a request for rehearing with FERC, which is a prerequisite to filing an appeal in federal court.  No other entities intervened in the proceeding and, therefore, Williams is the only entity that will have a legal right to file such a request.

[1] Williams Olefins Feedstock Pipelines, LLC, 145 FERC ¶ 61,303 (2013).

Written by:

K&L Gates LLP

K&L Gates LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.