LEWIS GLASSER. January 18,2019

Transcription

1 LEWIS GLASSER Hand Deliverv Ms. Ingrid Ferrell, Executive Secretary Public Service Commission of West Virginia 201 Brooks Street Charleston, West Virginia January 18,2019 Re: RE: Case No GT-C EDC Operating Company V. K Petroleum Inc. - E-ZAD Energy Corporation Dear Ms. Ferrell: Enclosed please find for filing in the above-referenced matter the original and twelve (1 2) copies of DEFENDANTS RESPONSE AND OBJECTIONS TO COMMISSION STAFF S FINAL MEMORANDUM. Thank you for your attention in this matter. RLG/dc Enc. cc: Wendy Braswell, Esquire (via Hand Delivery) Frank E. Simmerman, 111, Esq. James V. Kelsh, Esq. L 300 Summers Street I BB&T Square, Suite 700 I Post Office Box 1746 I Charleston, WV

2 PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON CASE NO GT-C EDC OPERATING COMPANY, V. Complainant K. PETROLEUM INC. AND E-ZAD ENERGY CORPORATION Defendants DEFENDANTS RESPONSE AND OBJECTIONS TO COMMISSION STAFF S FINAL MEMORANDUM Comes now the Defendants K. Petroleum Inc. ( KPI ) and E-Zad Energy Corporation ( E-ZAD ) (collectively referred to herein as Defendants ) and hereby respond to and object to the Commission Staff s Final Joint Staff Memorandum issued on January 8,2019: INTRODUCTION AND SUMMARY As set forth in Defendants Initial Response to EDC s complaint, the Commission s jurisdiction over gathering lines is strictly limited under the applicable statutes and regulations- transporting natural gas for others in return for compensation. The Defendants use of the subject line is limited to gathering and transporting its own gas to the Cranberry Pipeline, an intrastate pipeline, for ultimate delivery to the market. Defendants Initial Response further explained that its purchase of the subject gathering line in 2015 from Hayden Harper was only a small part of its acquisition of a number of other facilities and gas wells in West Virginia. It was only after purchasing the subject line, the Defendants became aware of the fact that EDC operated wells that had delivered gas into the

3 gathering line. At the same time, the Defendants came to understand two very significant facts which EDC s complaint and the Commission Staffs Final Memorandum ignore: 1) that the gathering line was losing approximately 50% of the natural gas entering the pipeline causing the Defendants to shut-in the line and spend considerable amount of its own money to repair the line; and 2) that EDC did not have a transportation agreement with either the Defendants or, based on its inquiry, a transportation agreement with the Defendants predecessors in interest. It is axiomatic in the natural gas industry that there must first be an agreement reached which includes the basic terms and conditions of the transportation including the applicable rate before there is an obligation to transport gas for another. At the time of the shut-in and realizing that it would have to expend considerable funds to repair the line, the Defendants approached EDC regarding entering into an agreement under which the Defendants would move EDC s gas on the gathering line. EDC did not enter into any such agreement. Accordingly, the Commission Staffs conclusion that the Defendants unilaterally discontinued service is at war with the facts of this matter. Moreover, the Defendants respectfully submit that the Commission Staffs conclusion that the subject gathering facility is an intrastate pipeline for purposes of the Commission s transportation rules is legally and factually flawed. I. E-ZAD AND KF I DENY THAT THEY ARE SUBJECT TO PSC JURISDICTION As set forth below, neither E-ZAD nor KPI is a public utility nor an intrastate pipeline for purposes of the Commission s rules pertaining to Gas Transportation, et seq. as the subject line is a gathering facility as defined in S.6. 2

4 A. This Commission s rules and regulations very narrowly circumscribe its jurisdiction with respect to the transportation of natural gas. B. Specifically, provides that gathering facilities shall be not be considered either public utilities or intrastate pipeline. C. This regulation further defines gathering facilities as all pipelines and related facilities used to collect the gas production of one or more wells for the purpose of moving such gas from the wells into the facilities of an interstate pipeline, a utility or an intrastate pipeline. D. This is precisely the purpose for which E-ZAD purchased the subject line---- gathering its own gas from various wells for the purpose of transporting such gas to an intrastate pipeline, Cranberry Pipeline, for ultimate delivery and sale. E. The Commission s regulations ( ) define Intrastate Pipeline as any entity engaged in natural gas transportation to an intrastate commerce to or for another person, firm or corporation for compensation. (emphasis supplied) F. Neither E-ZAD nor WI currently receive any compensation for moving their own gas or anyone else s gas on the gathering line to the delivery point on the Cranberry Pipeline system. G. Moreover, the fact that the line was used at one time to move third parties gas does not render it an intrastate pipeline in perpetuity. There was a considerable change in circumstances regarding this line after it was discovered that the Defendants were losing roughly 50% of its own gas through leaks before its gas could be sold downstream and thereby causing a considerable investment to upgrade the gathering line. 3

5 H. Thus, the Commission s rules and regulations pertaining to natural gas transportation on their face do not apply to E-ZAD s ownership and KPI s operation of the subject gathering line. WHEREFORE, E-ZAD and KPI respectfully request that the complaint be dismissed as the Commission has no jurisdiction over the subject gathering line. 11. ASSUMING ARGUENDO THAT THE COMMISSION CONSIDERS THE SUBJECT LINE AS AN INTRASTATE PIPELINE, EDC STILL HAS NOT STATED A CASE OF DISCRIMINATORY TRANSPORTATION IN VIOLATION OF THESE RULES. A. E-ZAD purchased the subject gathering line in 2015 from Hayden Harper Energy KA along with a number of other facilities and gas wells. As stated above, E-ZAD bought the gathering line for the purpose of transporting gas from its own wells to the intrastate pipeline, the Cranberry system, not for purpose of transporting gas for others for compensation. B. Sometime after purchasing the subject line, E-ZAD became aware of the fact that EDC operated wells that had delivered gas into the gathering line for delivery into the Cranberry Pipeline. C. In addition, E-ZAD realized that the subject line was leaking substantial amounts of natural gas and was in need of substantial amounts of repair. D. Accordingly, as of March 1,2018, E-ZAD closed the entire system so that its own wells had to be shut-in. E. When the pipeline was under repair, E-ZAD recognized that it did not have a written agreement of any kind with EDC for the purpose of moving EDC s gas from its wells to the Cranberry Pipeline. F. EDC has refused to sign an agreement or otherwise agree to the terms and conditions under which it would deliver gas on the subject gathering line. 4

6 G. Under the Commission s rules, there is no requirement that either E-ZAD or KPI accept delivery of EDC s gas without EDC signing an appropriate agreement. H. An appropriate gathering agreement sets out very specific terms and conditions regarding, among other things, line pressure, delivery points, interruptions in service, etc. along with the applicable rate. I. To legally require the Defendants to transport EDC s gas without such an agreement would be a violation of the Defendants rights. WHEREFORE, the Defendants respectfully request that the Commission reject the Commission Staffs recommendations and that EDC s complaint be dismissed with prejudice. K PETROLEUM INC. AND E-ZAD ENERGY CORPORATION, DEFENDANTS LEWIS GLASSER PLLC P.O. Box 1746 Charleston, WTV Telephone: (304) Facsimile: (304) mottlieb(u%lewisnlasser.com - 5

7 PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON CASE NO GT-C EDC OPERATING COMPANY a gas transporter, McDowell County, V. Complainant K PETROLEUM INC. E-ZAD ENERGY CORPORATION, Defendants CERTIFICATE OF SERVICE I hereby certify that the true copy of the foregoing DEFENDANTS RESPONSE AND OBJECTIONS TO COMMISSION STAFF S FINAL MEMORANDUM was served via US Mail on this 1 8 h day of January, to the following: Wendy Braswell, Esquire Public Service Commission 201 Brooks Street Charleston, West Virginia Frank E. Simmerman, 111, Esq. Simmerman Law Office, PLLC 254 East Main Street Clarksburg, WV James V. Kelsh, Esq. Bowles Rice LLP P.O. Box 1386 Charleston, WV Richard L. Gottlieb (WV Bar #1447) 6