Westlake Ethylene Pipeline Corporation v. Railroad Commission of Texas

ACCEPTED
03-15-00728-CV
12689127
THIRD COURT OF APPEALS
AUSTIN, TEXAS
9/14/2016 10:12:33 AM
JEFFREY D. KYLE
CLERK
NO. 03-15-00728-CV
IN THE THIRD COURT OF APPEALS FILED IN
AUSTIN, TEXAS 3rd COURT OF APPEALS
AUSTIN, TEXAS
9/14/2016 10:12:33 AM
JEFFREY D. KYLE
Clerk
Westlake Ethylene Pipeline Corporation,
Appellant,
v.
Railroad Commission of Texas and
Eastman Chemical Company,
Appellees.
On Appeal from the
398th Judicial District Court of Travis County, Texas
WESTLAKE ETHYLENE PIPELINE CORPORATION’S
ORAL ARGUMENT EXHIBITS
Lindsay Hagans Dale Wainwright
State Bar No. 24087651 State Bar No. 00000049
lindsay.hagans@bracewelllaw.com dale.wainwright@bracewelllaw.com
BRACEWELL LLP BRACEWELL LLP
711 Louisiana Street, Suite 2300 111 Congress Avenue, Suite 2300
Houston, Texas 77002 Austin, Texas 78701
Telephone: (713) 223-2300 Telephone: (512) 472-7800
Facsimile: (800) 404-3970 Facsimile: (800) 404-3970
ATTORNEYS FOR APPELLANT WESTLAKE ETHYLENE PIPELINE CORPORATION
CERTIFICATE OF SERVICE
I certify that a copy of Appellant's Oral Argument Exhibits for the
September 14, 2016 Oral Argument was served on counsel of record by using the
Court’s CM/ECF system on the 14th day of September 2016, addressed as follows:
Prerak Shah
prerak.shah@texasattorneygeneral.gov
Daniel Wiseman
OFFICE OF THE ATTORNEY GENERAL
P.O. Box 12548
Austin, Texas 78711
Tel.: (512) 936-2923
Fax: (512) 474-2697
Attorneys for the Railroad Commission of Texas
James Mann Wallace B. Jefferson
Marnie McCormick wjefferson@adjtlaw.com
mmccormick@dwmrlaw.com J. Woodfin Jones
Leslie Padilla Dana Livingston
DUGGINS WREN MANN & ROMERO, LLP ALEXANDER DUBOSE JEFFERSON &
600 Congress, Suite 1900 TOWNSEND LLP
Austin, Texas 78701 515 Congress Avenue, Suite 2350
Tel.: (512) 744-9300 Austin, Texas 78701
Fax: (512) 744-9399 Tel.: (512) 482-9300
Fax: (512) 482-9303
Attorneys for Eastman Chemical Company
/s/ Dale Wainwright
Dale Wainwright
INDEX
Railroad Commission’s Final Order Exhibit A
Key Rulings In Railroad Commission’s Final Order Exhibit B
Eastman’s Case Is Built On Speculation Exhibit C
No Evidence To Support Claims Of Discrimination Or Stranded Exhibit D
Ethylene
Amici Letters In Support Of Westlake Pipeline Exhibit E
1. Howard Energy Partners
2. The Williams Companies
3. Kinder Morgan Energy Partners, L.P.
4. Enlink Midstream Operating, LP and Howard Midstream
Energy Partners, LLC
5. Seminole Pipeline Company
Ex. A
BEFORE THE
RAILROAD COMMISSION OF TEXAS
COMPLAINT FILED BY EASTMAN §
CHEMICAL COMPANY AGAINST §
WESTLAKE ETHYLENE CORP., § GAS UTILITIES DOCKET NO. 10296
(WESTLAKE 3,3(/,aREGARDING §
WESTLAKE PIPELINE'S SYSTEM T4 §
PERMIT NO. 05253 §
FINAL ORDER
· Notice of Open Meeting to consider this Order was duly posted with ·the Secretary of
State within the time period provided by law pursuant to TEX. Gov'T CODE ANN. Chapter 551, et
seq. (Vernon 2008 & Supp. 2014). The Railroad Commission of Texas adopts the following
findings of fact and conclusions of law and orders as follows: ·
FINDINGS OF FACT
1. Westlake Ethylene Pipeline Corporation (Westlake Pipeline) operates a pipeline pursuant
to T4 Permit No. 05253.
2. The pipeline that is subject to T4 Permit No. 05253 runs from Mont Belvieu, Texas to
Longview, Texas and traverses seven counties: Chambers, Liberty, Polk, Angelina,
Nacogdoches, Rusk and Gregg, Counties.
3. The pipeline is currently operated by Buckeye Development & Logistics I LLC
(Buckeye) on behalf of Westlake Pipeline.
4. On July 29, 2013, Eastman Chemical Company (Eastman) filed a complaint against
Westlake Ethylene Pipeline Corporation (Westlake Pipeline) alleging that a tariff
published and tiled by Westlake Pipeline in 2013 (2013 Westlake Pipeline Tariff) was
discriminatory.
5. A notice of hearing on jurisdictional issues was issued on September 13, 2013, and a
hearing on jurisdictional issues was held on September 27, 2013.
6. A notice of hearing on the merits was issued on March 24, 2014. The notice of hearing
bifurcated the hearing in this matter into two phases. Phase 1 addressed all
discrimination and non-rate issues. All rate issues have been severed into Phase II.
7. Phase II was severed into a separate proceedings docketed as GUD No. 10358, Rate-
Setting Proceeding Regarding Westlake Pipeline Severed from GUD No. 10296.
GUD Docket No. 10296 Final Order Page2 of9
8. On May 2, 2014, Westlake Pipeline filed an affidavit attesting that notice was served on
the entity that operates the pipeline on behalf of Buckeye and all current customers of the
pipeline that is the subject of this proceeding.
9. The hearing on Phase I, GUD No. 10296, was held on May 6, 2014.
10. Westlake Pipeline is subsidiary of Westlake Chemical Corporation (Westlake Chemical).
Another Westlake Chemical subsidiary, Westlake Longview Corporation (Westlake
Longview) is located in Longview.
11. The facilities of Westlake Longview are connected to ethylene supplies at Mt. Belvieu
through Eastman's ethylene distribution system at Longview and the Westlake Ethylene
Pipeline.
12. Westlake Longview consumes large TaWLWLHVof ethylene in Longview.
13. Westlake Longview, or its ethylene supplier, is a shipper on the pipeline operated by
Westlake Pipeline.
14. Eastman owns and operates ethylene producing facilities in Longview.
15. Eastman's Longview facility converts natural gas liquids (NGLs) feedstock, such as
ethane and propane, to ethylene and propylene.
16. Eastman currently produces about 1,400 million pounds of ethylene annually from its
crackers at Longview.
17. Eastman uses about 600 million pounds of ethylene annually at Longview, leaving about
800 million pounds of ethylene that must either be sold in Longview or transported to, or
exchanged at, Mont Belvieu each year.
18. Other than Eastman's own use, the only substantial market for ethylene in Longview is
Westlake Longview.
19. Eastman is a shipper on the pipeline operated by Westlake Pipeline.
20. In 1995, Eastman began planning a "common carrier" pipeline to provide ethylene to its
Longview plant and construction began in December 1996.
21. Mustang Pipeline Company (Mustang), an Eastman subsidiary, started construction on
the pipeline.
22. In 2002, Eastman constructed the "Williams Connection."
23. The Williams Connection connected Eastman's Mont Belvieu terminal to contracted
storage owned by the Williams Company, the first fungible ethylene storage facility in
OUD Docket No. I 0296 Final Order Page3 of9
Mont Belvieu, and added the compression necessary to ship ethylene south to Mont
Belvieu.
24. At the time of the construction of the Williams Connection, Eastman sought the ability to
sell surplus ethylene produced in Longview and allow Eastman to maintain ethylene
production when ethylene-consuming facilities were down in Longview.
25. In 1997, Mustang Pipeline issued the original tariff for the pipeline (1997 Mustang
Tariff}.
26. The 1997 Mustang Tariff identified the "origin point" as Mont Belvieu and the "delivery
point" as Longview.
27. The 1997 Mustang Tariff did not include provisions for the exchange of ethylene.
28. In 2002, after adding compression necessary to deliver ethylene from Longview to Mont
Belvieu, Mustang Pipeline issued a revised tariff (2002 Mustang Tariff}.
29. The 2002 Mustang Tariff identified Mont Belvieu as both an origin and delivery point.
30. The 2002 Mustang Tarlff identified Longview as both an origin and delivery point.
31. The 2002 Mustang Tariff also indicated that Mustang, the operator of the pipeline, would,
in addition to physical deliveries of ethylene, offer exchange services.
32. On November 10, 2006, Eastman and Westlake Chemical entered into an acquisition
agreement.
33. As part of the sales agreement the Mustang pipeline assets were transferred to Westlake
Pipeline.
34. As part of the acquisition agreement certain ethylene-consuming facilities owned by
Eastman were sold to Westlake Longview.
35. The purchase agreement between Mustang Pipeline and Westlake Pipeline included the
sale of the pipeline conduit.
36. :HaDNHPipeline's ownership of the pipeline at the southern end begins just outside the
two meters belonging to Equistar and Williams and a, check meter and pipeline belonging
to Eastman. The pipeline extends from that ownership point at Mont Belvieu to a point
that connects the Eastman plant to distribution facilities in Longview. The pipelines'
connection at Longview is on property that is owned by Eastman.
3 7. The pipeline purchase agreement also included all right of ways, easements, privileges
and grants upon and under which the pipeline system was laid and installed.
GUD Docket No. 10296 Final Order Page 4 of9
38. Westlake Pipeline did not acquire any terminals in the sale, the pipeline terminals, nor
any of the compression necessary to operate the pipeline.
39. The overall sales agreement between Eastman and Westlake Chemical included the
acquisition, by Westlake Longview, of three polyethylene units that are located within the
Eastman's plant in Longview.
40. As part of the overall sale, on November 10, 2006, Eastman Chemical and Westlake
Chemical Corporation entered into the Ethylene Sales and Exchanges Contract (ESA).
41. The ESA is a ninety-nine year ethylene contract that sets a market price using a pre-
determined formula agreed to by both parties in the contract.
42. Pursuant to the ESA, Eastman Chemical secured a guaranteed market for ethylene, and
Westlake Longview Corporation secured an ethylene supplier.
43. The ESA also provided Eastman with the ability to exchange any excess ethylene that
Westlake Longview did not purchase from Eastman.
44. In 2013, Westlake Pipeline published and filed a new tariff for the pipeline (2013
Westlake Tariff).
45. Pursuant to the 2013 Westlake Pipeline Tariff, Mont Belvieu was no longer designated as
both an origin and delivery point. Mont Belvieu was designated as an origin point.
46. Pursuant to the 2013 Westlake Pipeline Tariff, Longview was no longer designated as
both an origin and delivery point. Longview was designated as a delivery point.
47. The 2013 Westlake Pipeline Tariff removed all references to ethylene exchange as
Westlake Pipeline determined that exchange services would no longer be offered.
48. Mont Belvieu is the largest market for ethylene producers in the United States.
49. Pipeline transport is among the most important factors that determine regional prices,
supply, and demand.
50. It is reasonable to conclude that the ethylene producers in Longview would require access
to the ethylene market in Mont Belvieu.
51. It is reasonable to conclude that ethylene consumers that engage in transactions in Mont
Belvieu would desire access to ethylene produced in Longview
52. Eastman produces large quantities of ethylene in Longview and has a physical necessity
to move ethylene to Mont Belvieu.
GUD Docket No. 10296 Final Order Pages of9
53. Ethylene was transported from Longview to Mont Belvieu on several occasions in the
following years: 2005, 2006, 2007, 2008, and 2013.
54. The necessity for southbound flow predates the purchase of the system by Westlake
Pipeline. It is the reason that compression was added in 2002 to allow backhaul and to
permit Eastman to sell surplus ethylene that it produced in Longview to customers on the
Gulf Coast.
55. Eastman has demonstrated a demand for exchanges as Eastman has engaged in exchanges
with Westlake Pipeline's affiliate, Westlake Longview since entering into the ESA.
56. Backhaul service is physically possible on the pipeline operated by Westlake Pipeline.
57. The pipeline system was configured in 2002 to accept bidirectional flow.
58. Backhaul on the pipeline occurred in 2005, 2006, 2007, 2008, and 2013.
59. The 2013 Westlake Pipeline Tariff removed the backhaul service previously offered in
the 2002 Mustang Tariff.
60. The record in this case does not provide evidence of the impediment to the continued
provisions of backhaul service.
61. Any concern that this operator lacks the compression necessar)' to provide backhaul
service is addressed by the language in the preexisting 2002 Mustang Tariff, which
requires shippers to deliver and receive product at the necessary pressures.
62. Additional language may be added to further protect the common carrier;
The paragraph means that a shipper is responsible for providing or arranging
sufficient compression or services to effectuate the entry of the product into the
pipeline at an Origin Point and delivery of the product out of the Pipeline at a
Delivery Point.
63. There is no impediment for a pipeline to provide exchange service and the risks
associated with that service may be mitigated by appropriate language in the tariff.
64. The 2002 Mustang Tariff contained language that protected the pipeline operator and is
included in the 2013 Westlake Pipeline Tariff. Additional language may be added to
protect'the operator as follows:
Carrier is not obligated to transport or exchange any volumes of ethylene unless
Shipper delivers those volumes to the common stream out of which deliveries are
made to Pipeline Customers.
GUD Docket No. 10296 Final Order Page 6of9
65. Due to the unique circumstances of the ethylene market in Longview, without an
exchange provision in the applicable pipeline tariff the only alternative for Eastman is to
engage in exchanges with Westlake Longview, the pipeline operator's affiliate.
66. If exchange service is included in the applicable pipeline tariff Eastman may engage in
exchanges with market participates in Mont Belvieu and will no longer be a captive to
Westlake Longview.
67. Eastman, Westlake Longview, and Westlake Longview's ethylene suppliers (other than
Eastman), are potential shippers on the pipeline operated by Westlake Pipeline.
68. Eastman and Westlake Longview are located in Longview.
69. Eastman and Westlake- Longview each require movement of ethylene between Mont
Belvieu and Longview.
70. Eastman and Westlake Longview require access to the ethylene market in Mont Belvieu
and the ethylene market in Longview.
71. The only difference is that Eastman requires deliveries from Longview to Mont Belvieu
and Westlake Longview requires deliveries from Mont Belvieu to Longview.
72. Eastman and Westlake Longview, or its other potential suppliers of ethylene, are
VLPLODUO\aVLWXDWHGshippers.
73. The tariff changes in the 2013 Westlake Pipeline Tariff related to backhaul eliminated a
service that was previously provided to Eastman on this pipeline.
74. The tariff changes in the 2013 Westlake Pipeline Tariff related to backhaul physically
shut Eastman out of the pipeline.
75. Longview is no longer designated as an "Origin Point" and Mont Belvieu is no longer
designated as a "Delivery Point.''
76. Due to the operation of the filed tariff Eastman would no longer be able to demand
backhaul service
77. Due to the operation of the filed tariff, Westlake Pipeline would be unable to treat those
points as Origin and Delivery points.
78. Westlake Longview will continue to have access to the pipeline and the Mont Belvieu
ethylene market.
79. Eastman would be shut out of the Mont Belvieu market by the changes in the 2013
Westlake Pipeline Tariff.
GUD Docket No. 10296 Final Order Page 7 of9
80. Westlake Pipeline has offered no reasonable basis for the disparate treatment as regards
to physical deliveries on the pipeline.
81. The tariff change in the 2013 Westlake Pipeline Tarif.frelated to exchanges eliminates a
pre-existing service offered by the pipeline operator.
82. Once that service is eliminated, EaStman must engage in exchanges with Westlake
Longview, an affiliate of the pipeline operator.
83. The removal of exchange service further limits Eastman's access to the Mont Belvieu
market through the pipeline.
84. The elimination of backhaul and exchanges, pre-existing service offered by the common
carriers of this pipeline, provides an unreasonable preference in favor of Westlake
Longview.
85. Whether discrimination by a common carrier exists depends on the facts of a particular
case. The discriminatory act found to have occurred in this docket is the cancellation of
pre-existing backhaul and exchange services so that .one shipper, Eastman Chemical, is
forced to sell or exchange the ethylene it produces to the only other shipper on the
pipeline, Westlake Longview, the parent company of the pipeline.
CONCLUSIONS OF LAW
1. Westlake Pipeline is a "common carrier" as that term is defined under TEX. NAT. REs.
CODE ANN. § 111.020(d) (Vernon 2001 & Supp. 2014) and is therefore subject to the
jurisdiction of the Railroad Commission of Texas (Commission).
2. As a common carrier Westlake Pipeline is subject to all provisions of the Common
Carrier Act, TEX. NAT. RES. CODE ANN. §§ 111.002, 111.003, 111.011 - 111.025,
111.131, 111.133 - 111.142, 111.181 - 111.190, 111.221 - 111.227, & 111.261 -
111.262.
3. In addition to the powers provided by other sections of Chapter 2, Subchapter B of the
Business Organization Act, TEX. BUSINESS CORP. ACT ANN. § 2.105 provides that a
corporation, such as Westlake Pipeline engaged as a common carrier in the pipeline
business for the purpose of transporting oil products has all of the rights and powers
conferred on a common carrier by Sections 111. 019 - 111. 022.
4. The Commission has jurisdiction over Westlake Pipeline, associated affiliates, and the
matters at issue in this proceeding pursuant to TEX. NAT. REs. CODE ANN. §§ 81.051 and
§§ 111.002, 111.003, 111.011 - 111.025, 111.131, 111.133 - 111.142, 111.181 -
111.190, 111.221 -111.227, & 111.261-111.262.
5. As required by TEX. NAT. RES. CODE ANN. § 111.014 Westlake Pipeline shall make and
publish their tariffs.
GUD Docket No. 10296 Final Order Page 8 of9
6. A common carrier's obligations to its customers cannot exceed its duties under a
published tariff and published tariffs govern the relationship of the common carrier with
its customers. Common carriers may not vary a tariff's terms with individual customers,
discriminate in providing services, or charge rates other than those included in properly
published tariffs. The published tariffs and the eonstraints related to those tariffs provide
predictability and certainty for all potential shippers and enable shippers to make
decisions based upon the rates and services reflected in the published tariff. CenterPoint
Energy Entex v. R.R. Commn'n of Tex, 208 S.W. 3rd 608 (Tex. - Austin 2006, pet.
dism'd)
7. Westlake Pipeline, as a common carrier, is required to receive and transport ethylene
delivered to it for transportation and perform its other related duties without
discrimination as required by TEX. NAT. RE:s. CODEANN. § 111.015.
8. Westlake Pipeline, as a common carrier, shall not discriminate between or against
aSSHUVwith regard to facilities furnished, services rendered, or rates charged under the
same or similar circUmstan.ce in the transportation of ethylene as required by TEX. NAT.
RE:s. CODEANN. § 111.015.
9. Westlake Pipeline, as a common carrier, may not charge, demand, collect, or receive
either directly or indirectly from anyone a greater or lesser compensation for a service
rendered than from another for a like and contemporaneous service.
10. Westlake Pipeline's 2013 tariff terminated pre-existing backhaul and exchange services
and provided an unreasonable preference and advantage to its affiliate, Westlake
Longview.
11. The Commission has the authority to require that tariffs published by a common carrier
and filed with the Commission are not discriminatory.
12. Tariffs that provide disparate treatment to similarly-situated shippers or provide an
unreasonable preference or advantage to an affiliate at the expense of other shippers are
discriminatory.
13. There is no general duty· for a common carrier to provide backhaul and exchange
services. Neither is there a general duty to maintain services previously offered by a
common carrier. Jt is discriminatory, however, for a common carrier to cancel previously
existing services and cut off access to a market so that all other shippers on the pipeline
are forced to sell or exchange their product with a shipper on that same pipeline which is
affiliated with the pipeline.
IT IS THEREFORE ORDERED that the 2013 Westlake Pipeline Tariff is rejected and may not
be enforced by Westlake Pipeline.
GUD Docket No. 10296 Final Order Page 9 of9
IT IS FURTHER ORDERED that Westlake Pipeline publish and file with the Commission a
revised tariff that is not discriminatory and conforms to the tariff attached to this Final Order as
Exhibit A.
IT IS FURTHER ORDERED that, in accordance with TEX. NAT. RESOURCE CODE ANN.
§ 111.015, within 30 days of the date this Order is signed, Westlake Pipeline shall file the
approved tariff with the Director of the Oil and Oas Division. The tariffs shall reflect the
findings of fact and conclusions of law herein.
IT IS FURTHER ORDERED that all proposed findings of fact and conclusions of law not
specifically adopted in this Order are hereby DENIED.
IT IS ALSO ORDERED that all pending motions and requests for relief not previously granted
or granted herein are hereby DENIED.
This Order will not be final and effective until 20 days after a party is notified of the
Commission's order. A party is presumed to have been notified of the Commission's order three
days after the date on which the notice is actually mailed. If a timely motion for rehearing is
filed by any party at interest, this order shall not become final and effective until such motion is
overruled, or if such motion is granted, this order shall be subject to further action by the
Commission. Pursuant to TEX. Gov'T CODE ANN. § 2001.146(e), the time allotted for
Commission action on a motion for rehearing in this case prior to its being overruled by
operation of law, is hereby extended until 90 days from the date the order is served on the
parties.
SIGNED day of December 2014.
RAILROAD COMMISSION OF TEXAS
CHAIRMAN CHRISTI CRADDICK
COMMISSIONER BARRY T. SMITHERMAN
Westlake Ethylene Pipeline Corporation-T.R.R.C. No. _ _ __
[Cancels Mustang Pipeline Company- Texas Local Tariff. -3]
WESTLAKE ETHYLENE PIPELINE CORPORATION
Mont Belvieu to Longview Pipeline
LOCAL TARIFF
Applying on
PETROLEUM PRODUCTS
As Defined in This Tariff
TRANSPORTEDOREXCBANGEDBY PIPELINE
Between Poirits Within the State of Texas
Subject to the Regulations
Set Forth Herein
ISSUED: _ _ __ EFFECTIVE: _ _ __
Filed with the Railroad Commission
DATE:
Issued and Compiled By:
WESTLAKE ETHYLENE RIPELINE CORPORATION
2801 Post Oak %RXOHYDUaSU;ite a
Houston, Texas 77056
1
WESTLAKE ETHYLENE PIPELINE CORPORATION, hereinafter called "Carrier," will
receive Product, as hereinafter defined, for its Mont Belvieu to Longview pipeline, for
transportation or exchange under the conditions set forth below in Section III, "Rules and
Regulations," at the rates set forth in Section II, "Product Specifications and Local Rates."
I. DEFINITIONS
a) The term "barrel" as used herein, means forty-two (42) United States gallons at sixty
degrees Fahrenheit (60° F).
b) The term "day," as used herein, means a period of twenty-four (24) hours,
commencing at 7:00 a.m. on one calendar day (the date of which shall be taken as the
date of the day in questions) and extending until 7:00 a.m. on the following calendar
day.
c) The term "Delivery Point," as used herein, means one of the locations defined ID:
Section IT, "Product Specifications and Local Rates," for delivery of Product by
Carrier to Shipper.
d) The term "gallon," as used herein, shall mean one (1) United States gallon at sixty
degrees Fahrenheit (60° F).
e) The term "Origin Point," as used herein, means one of the locations defined in
Section II, "Product Specifications and Local Rates," for introducing Product into the
respective pipelines. ·
f) The term "pound," as used herein, means one (1) pound avoirdupois.
g) The term "Product" as used herein, means the liquid petroleum gas products defined
in Section II, "Product Specifications EJ.Ild Local Rates," for the respective pipelines.
h) The term "Shipper,'' as used herein, means the party or parties who contract with
Carrier for the transportation or exchange of Product Under the terms of this tariff.
As the context may require, the plural form shall be construed to include the singular, and
the singular form shall be construed to include the plural.
II. PRODUCT SPECIFICATIONS AND LOCAL RATES
a) The rates published in this tariff are for transportation or exchange within the State of
Texas through Carrier's Mont Belvieu to Longview pipeline and such transportation
or exchange is subject to the rules and regulations contained herein and to all
applicable rules, regulations, and orders of the Railroad Commission of Texas and
other governmental authorities having jurisdiction.
b) Rates apply to specified petroleum products from the established receiving facilities
to the established delivery facilities at points named below.
2
Product: Liquefied petroleum gas meeting the following specifications:
Components Specifications Test
Method
Ethylene (Minimum) 99.90mol % ASTMD2505
Methane 350ppmV ASTMD2505
Ethane 465 ppmV ASTMD2505
Acetylene 1.5 ppmV ASTMD2505
Propylene & Heavier 5ppmV ASTMD2505
Carbon Dioxide 1 ppmV ASTMD2505
Carbon Monoxide 0.15 ppmV ASTMD2504
Water 2ppm wt Panametrics
Total Sulfur 1 ppm wt ASTMD3246
Oxygen 4ppmwt ASTMD2504
Hydrogen 5ppmV ASTMD2504
Ammonia 1 ppm wt ASTMD5234
Methanol 1 ppm wt ASTMD 5234
Origin/Deliverv Point: Carrier's stations located at or adjacent to the terminals of Equistar
Chemicals, Williams Storage, and Flint Hills Resources at Mont Belvieu, Texas, when such
points of origin are practicable and consistent with the operation of the pipeline, or such other
points as the Carrier may designate and publish from time to time.
Origin/Delivery Point: Carrier's station in Gregg County, Texas, located adjacent to the Texas
Operations Eastman Chemical Company facility (in Gregg and Harrison Counties, Texas), when
such point of delivery is practicable and consistent with the operation of the pipeline, or such
other points as the Carrier may designate and publish from time to time.
Rate: a. $1.90 per 100 pounds for the first 320,000 pounds transported or
exchanged in a single day.
b. $0. 70 per 100 pounds for each additional amount transported or
exchanged in a sing day.
ID. RULES AND REGULATIONS
1. Testing
Product accepted for transportation or exchange under this tariff shall be delivered to
Origin Point by Shipper and shall conform to the applicable Product definition. Shipper
may be required to furnish Carrier with a certificate setting forth in detail specifications
of each shipment offered for transportation or exchange hereunder, and Shipper shall be
liable for any contamination or damage to other Product in Carrier's custody or to
Carrier's pipeline or other facilities caused by failure of the shipment tendered to meet
the specifications stated in Shipper's certificate.
3
Carrier may, but shall not be required to, sample and/or test any shipment prior to
acceptance or during receipt of shipment and, in the event of variance between said
certificate and Carrier's test, Carrier's test shall prevail. In the event that any test
indicates that the Product offered for transportation or exchange does not conform to
applicable Product definition, Shipper agrees, either voluntarily or upon notification by
Carrier, to case delivery of off-specification Product to Carrier until such time as it is
determined by additional testing that the Product conforms to the applicable Product
definition.
2. rvteasurement
Carrier will utilize meters located at the Origin Point and Delivery Point whereby the
quantities of Product tendered by Shipper to Carrier will be measured and the
temperature and pressure of such Product be recorded. The volume of Product delivered
each day will be determined by reference to daily readings of such meters. Correction
factors and calculations from such meter readings for the purpose of determining the
daily quantities of Product delivered will conform with the standard procedures utilized
by the owner or operator of such meters.
If for any reason the custody transfer meters are out of service so that the quantity of
material delivered through such meters cannot be ascertained, the quantity of material
delivered during the period the meters are out of service will be estimated by Carrier
based upon the best available data, using in order of preference the following methods:
a. By using the registration of any check measuring equipment of Carrier.
b. By using any measurement equipment which Carrier may have in the flowing
stream.
c. By any independent third party chosen by Carrier and generally recognized in
the industry as competent to perform such estimate.
Carrier shall have the right to go upon the premises where Shipper's Product is metered
and tested for quality assurance before delivery to Carrier's pipeline. Carrier shall have
access to any and all such metering and testing equipment for the purpose of making any
examination, inspection, or test.
Product will be received and delivered on the basis of volume corrections from observed
temperatures to temperatures on the basis of sixty degrees Fahrenheit (60° F) using
gravities, correction factors, and volume corrections for compressibility appearing in
American Petroleum Institute (API) Manual of Petroleum rvteasurement Standards (latest
edition) or other method agreed to by Shipper and Carrier.
4
Physical and legal transfer of custody of the Product from Shipper to Carrier shall be at
the point immediately downstream of applicable measuring and metering facilities at the
Origin Point. Physical and legal transfer of custody of the Product from Carrier to
Shipper shall be at the point immediately downstream of applicable measuring and
metering facilities at the Delivery Point.
3. Facilities at Origin and Delivery Point
Carrier will provide such facilities at Origin Point and at Delivery Point as it deems
necessary for the operation of the pipeline. Carrier will not provide tankage or storage
facilities or receiving, loading, or unloading facilities at either the Origin Point or the
Delivery Point. Shipments will be accepted for transportation or exchange hereunder
only:
a. When Shipper has provided facilities satisfactory to Carrier capable of
delivering shipments at Origin Point at pressures and at pumping rates
required by Carrier; and
b. When Shipper is capable of receiving shipments at Delivery Point by pipeline
at pressures and at pumping rates required by Carrier.
This.i, paragraph means that a shipper is res.ponsible for providing or arranging sufficient
compression or other services to effectuate the enpy of the Product into the pipeline at an
Origin Point and the deliveiy of the Product out of the Pipeline at the Delivery Point.
Carrier is not obligated to trans.port or exchange any volumes of ethylene unless Shipper
delivers those volumes into the common stream out of which deliveries are made to
Pipeline's customers.
Separate pipage contracts in accordance with this tariff and these Rules and Regulations
covering further details µiay be required of the proposed Shipper before any duty of
transportation or exchange shall arise.
4. Minimum and Maximum Shipments
The quantity of a Product which Carrier may be obligated to accept at Origin Point shall
be no less than 320,000 pounds delivered over a single day. Carrier may, at its sole
election, accept a lesser quantity tender upon Shipper's agreement to pay Carrier, for said
day, charges equal to those which would KaYHresulted from transportation or exchange of
said 320,000 pounds at the local rates provided herein.
5
5. Tender Deductions
A tender deduction of 1/2 percent by weight may be made on the quantity of Product
received at Origin Point. Except as otherwise provided in this tariff (including, but not
limited to, adjustments as provided in Paragraph 2, "Measurement''), Carrier will be
accountable for delivery at Delivery Point of the quantity remaining after deduction of
said tender deduction.
6. Payment of Trans.port or Exchange
The charges for transportation or exchange of Product accepted for shipment shall be
based on the applicable rate set forth above in Section II before tender deduction, if any,
is made. Shipments accepted for transportation or exchange shall be subject to a lien in
favor of Carrier for all lawful charges hereunder.
Transportation or exchange charges incurred during any month will be invoiced about the
10th day of the succeeding month and shall be paid within 10 days of receipt of invoice.
Carrier may require that charges:
a. be prepaid at time of acceptance, or
b. on demand be paid before release of Product from custody of Carrier. Carrier
may charge Shipper interest of 1apercent per month (18 percent per annum)
for overdue transportation or exchange charges.
Carrier shall have a lien on all Product until the charges are paid. If the charges shall
remain unpaid for more than five (5) days after notice of readiness to deliver, the Carrier
may sell the Product at public auction at the general office of the Carrier on any day not a
legal holiday. The date for the dale shall be not less than 48 hours after publication of
notice in a daily newspaper of general circulation published in the city where the general
office of the Carrier is located. The notice shall give the time and place of the sale and
the quantity of the Product to be sold. At said sale, Carrier shall have the right to bid, and
if the highest bidder, to become the purchaser. From the proceeds of such sale, Carrier
will pay itself the traiisportation or exchange and all other lawful charges, including
expenses incident to said sale, and the balance remaining, if any, shall be held for
whomsoever may be lawfully entitled thereto. The remedies set forth in this tariff are in
addition to, and not in limitation of, any statutory or common law remedy available to
Carrier pursuant to the laws of the State of Texas. Shipper agrees that the venue of any
suit regarding shipments shall be Gregg County, Texas.
6
7. Clear Title
Shipper shall notify Carrier when any Product tendered IaUtransportation or exchange is
involved in litigation or is the subject of disputed ownership or is encumbered by lien or
charge of any kind. Carrier shall have the right to reject any shipment, when offered for
transportation or exchange, which may be involved in litigation or the title of which may
be in dispute or which may be encumbered by lien or charge of any kind, and Carrier may
require of the Shipper satisfactory evidence of his perfect and unencumbered title or
satisfactory indemnity bond to protect Carrier against any and all loss.
8. Tenders
All Shippers desiring to tender Product for transportation or exchange on Carrier's
facilities shall furnish a written nomination to Carrier by the fifteenth (15th) day
(excluding Carrier KROaGD\V of the month prior to the month Shipper desires
transportation or exchange. Nominations shall specify the quantity of Product to be
transported or exchanged. the Origin Point, the Delivery Point, and any other information
required by Carrier. If Shipper does not furnish such written nomination, Carrier shall be
under no obligation to accept such Product for transportation or exghange.
Nominations shall be transmitted to Carrier to the attention of Westlake J?thylene Pipeline
Corporation Scheduler as follows:
a. by facsimile to the Westlake Ethylene Manager at (713) 960-8761, or
b. by electronic mail, as arranged between Carrier and Shipper.
Any nominations accepted by Carrier will be delivered on a ratable basis.
9. Identity of Shipments
In view of the impracticability of maintaining the identity of shipments, shipments will
not be segregated, but will be commingled and deliveries will be made at Delivery Point
from Carrier's common Product streams.
10. Disposition of Shipments
In the event that Shipper does not have adequate facilities available to receive or is not
capable of receiving any shipment at the Delivery Point in accordance with Carrier's
schedules,- Carrier may make whatever disposition of such undelivered shipment which is
necessary to order to free its pipeline. Carrier shall not be liable to Shipper because of
7
such disposition, and Shipper shall pay for all costs and fees thereof the same as if
Shipper had requested or authorized such disposition.
11. Ap_portionment of Tenders and Withdrawals
In the event Shipper's tenders at Origin Point or Shipper's withdrawal requirements at the
Delivery Point are greater than can be currently handled by Carrier, Carrier may restrict
or suspend tenders or withdrawals in order to apportion deliveries among all Shippers on
an equitable basis. The Carrier shall be considered as a Shipper of Product produced or
purchased by itself and held for shipment through its line and its product shall be entitled
to participate in such apportionment.
12. Transit Privileges
Carrier may not be required by Shipper to stop Product in transit for any reason.
13. Liability of Carrier and Indemnity
Carrier shall not be liable for any delay iii delivery or for any loss of Product caused by
an act of God, public enemy, quarantine, author!ty of law, order, rule or regulation of
federal, state or local government, strikes, riots, fire, explosion, equipment breakage,
floods or by act of default of Shipper, or resulting from any other cause outside of the
reasonable control of the Carrier, whether similar or dissimilar to the causes herein
enumerated. Any such loss shall be apportioned by Carrier to each shipment of Product
or portion thereof involved in such loss in the proportion that such shipment or portion
thereof bears to the total of all product in the loss, and each Shipper shall be entitled to
receive only that portion of its shipment remaining after deducting its proportion as above
determined of such loss. Carrier shall prepare and submit a statement to Shippers
showing the apportionment of any such loss.
The Carrier operates under this tari_ff solely as a provider of transportation or exchange
services and not as an owner, manufacturer, or seller of Product transported or exchanged
hereunder, and the Carrier expressly disclaims any liability for any expressed or implied
warranty for Product transported or exchanged hereunder including any warranties of
merchantability or fitness for intended use.
FOR ALL SERVICES PROVIDED FOR AND RECEIVED UNDER THIS TARIFF,
SHIPPER SHALL INDEMNIFY AND DEFEND CARRIER FROM ANY CLAIMS,
LIABILITIES, OR LOSSES (INCLUDING COSTS OF DEFENSE AND
REASONABLE ATTORNEY'S FEES), INCLUDING CLAIMS FOR PERSONAL
8
INJURY, DEATH OR PROPERTY DAMAGE INVOLVING THE CARRIER,
SHIPPER, CONSIGNEES, OR THIRD .PARTIES BASED ON OR ARISING OUT OF
CARRIER'S PERFORMANCE OF SUCH SERVICES. THIS INDEMNIFICATION
SHALL INCLUDE CLAIMS OF ANY NATURE, LEGAL, CONTRACTUAL OR
EQUITABLE, WHETHER BASED ON STRICT LIABILITY, NEGLIGENCE,
BREACH OF WARRANTY, OR ANY OTHER CAUSES OF ACTION. THE
INDEMNITY PROVIDED IN THIS TARIFF IS INTENDED TO BE APPLICABLE TO
THE FULL EXTENT ALLOWED BY LAW AND IS LIMITED ONLY IN
ACCORDANCE WITH STATUTORY OR COMMON LAW. TO THE EXTENT NOT
PROHIBITED BY LAW, THIS INDEMNITY APPLIES TO ANY ACT OR
OMISSION, WHETHER NEGLIGENT OR NOT, ARISING OUT OF OR RELATING
TO THE PERFORMANCE OF SERVICE BY CARRIER PURSUANT TO THIS
TARIFF, INCLUDING THE SOLE OR CONCURRENT NEGLIGENCE OR GROSS
NEGLIGENCE OF CARRIER.
14. Claims
Notice of claims for loss, damage, or delay in connection with the shipment of Product
must be made in writing to Carrier within 45 days after the damage, loss, or delay
occurred. If the claim is for failure to make delivery, the claim must be made within 15
days after a reasonable time for delivery has elapsed.
15. Additives. Dyes. and Odorization
a. Carrier may inject corrosion inhibitor compound in the Product to be transported or
exchanged, and Shipper will accept delivery of Product at Delivery Point containing
portions of corrosion inhibitor.
b. Carrier will assume no liability for discoloration, contamination, or deterioration of
Product transported or exchanged, unless negligent conduct by Carrier is determined
to be the sole, proximate cause of the cost, a[SHQVHdamage or liability incurred by
Shipper.
c. Except where required by law, Carrier will not inject dyes nor odorize any Product
tendered. Should Carrier be required by law to inject dyes or to odorize any Product
tendered, Shipper:
(1) Will furnish the dye to be injected and/or the malodorant to be added and
(2) May be required by Carrier to provide and/or install satisfactory
equipment to effect such injection and/or odorizing.
9
16. Imbalance Charges
In the event that Shipper fails to deliver to Carrier at the Origin Point the equivalent
volumes of Product which Carrier redelivers to Shipper at the Delivery Point during a
calendar month, then Shipper will pay Carrier an imbalance charge of one cent (1 ¢) per
pound per day for each day the imbalance continues. If Shipper delivers volumes to
Carrier in excess of those volumes which Carrier redelivers to Shipper in any calendar
month, then Shipper will pay an imbalance charge of one cent (1 ¢) per pound per day for
each day the imbalance continues. Carrier may waive such imbalance charges if Carrier,
in its sole discretion, determines that the imbalance is immaterial. The waiver of such
charges for any particular imbalance period is not to be construed as a waiver of such
charges for a\other imbalance and Carrier maintains the right to collect such charges
from Shipper for any imbalance not the subject of a written waiver.
17. Direction of Flow
In the event the pipeline is configured and equipped so that it is physically capable of bi-
directional flow, Carrier at its sole disc!etion will choose the direction of flow between
the Origin Point and Delivery Point Carrier will make a reasonable attempt to
accommodate Shippers through the exchange of product at Origin and Delivery Points.
Any exchanges will be subject to the same terms and conditions applicable to shipments
pursuant to this tariff. including the rate charged for such exchanges. The provisions of
this tariff apply . to all shipments or exchanges regardless of the direction of flow · or
whether the product shipped or received is physically moved from one point to another.
END OF DOCUMENT
10
Ex. B
KEY RULINGS IN RRC ORDER
Findings of Fact
84. The elimination of backhaul and exchanges, pre-existing
service offered by the common carriers of this pipeline, provides
an unreasonable preference in favor of Westlake Longview.
85. Whether discrimination by a common carrier exists
depends on the facts of a particular case. The discriminatory
act found to have occurred in this docket is the cancellation of
pre-existing backhaul and exchange services so that one shipper,
Eastman Chemical, is forced to sell or exchange the ethylene it
produces to the only other shipper on the pipeline, Westlake
Longview, the parent company of the pipeline.
Conclusions of Law
12. Tariffs that provide disparate treatment to similarly-situated
shippers or provide an unreasonable preference or advantage to
an affiliate at the expense of other shippers are discriminatory.
13. There is no general duty for a common carrier to provide
backhaul and exchange services. Neither is there a general
duty to maintain services previously offered by a common
carrier. It is discriminatory, however, for a common carrier to
cancel previously existing services and cut off access to a
market so that all other shippers on the pipeline are forced to sell
or exchange their product with a shipper on that same pipeline
which is affiliated with the pipeline.
Ex. C
EASTMAN’S CASE IS BUILT ON SPECULATION
“The uncertainty is already causing Eastman competitive
injury. If ethylene produced in Longview will not have access
to markets in Mont Belvieu, a subsequent owner of Eastman’s
crackers might be forced to sell only to Westlake Longview at
whatever price it is willing to pay. And, in a prolonged scenario
under the 2013 Tariff, Eastman could suffer a host of losses,
including continued uncertainty in the context of Eastman’s
announced sale of certain ethylene-producing facilities in
Longview. Thus, even if such a showing were required under
Texas law, the evidence here sufficiently demonstrated harm.”
- Eastman’s Brief at 30-31.
“When the ethylene consumers in Longview have insufficient
demand, the ethylene not being consumed must have a way to
leave Longview and go to Mont Belvieu. CR124. Eliminating
the ability to move ethylene out of Longview poses serious
problems and could cause Eastman to shut down its entire
production capacity.”
- Eastman’s Brief at 11.
“Eastman’s evidence included testimony from Mark Bogle that,
after it published the 2013 Tariff, Westlake showed itself ‘ready
and willing to leave Eastman’s ethylene stranded in Longview,’
CR2494, by refusing a request for exchange service under the
ESA.”
- Eastman’s Brief at 30.
Ex. D
EASTMAN WITNESS’ TESTIMONY THAT THERE
HAS NOT BEEN ANY DISPARATE TREATMENT
OF EASTMAN BY WESTLAKE PIPELINE AS TO
SERVICE, FLOW OR EXCHANGE
Eastman’s lead witness, Vice President Mark Bogle, did not
identify any disparate treatment of Eastman by Westlake
Pipeline. The following exchange occurred during his cross-
examination:
Q. So Eastman’s complaint in this proceeding is solely
the changes that Westlake Pipeline made to its tariff
and is not based on any actual refusal to provide
requested service to Eastman or any other shipper,
correct?
A. That’s correct.
Q. And Eastman does not allege that Westlake Pipeline
has exchanged ethylene for someone else but refused
to exchange it for Eastman, correct?
A. That’s correct.
Q. And Eastman does not allege that Westlake Pipeline
has agreed to physically flow ethylene from Longview
to Mont Belvieu for someone else but refused to do so
for Eastman, right?
A. That’s correct.
CR.2464
EASTMAN’S WITNESS’ TESTIMONY THAT THERE HAS BEEN NO
STRANDED ETHYLENE
Eastman’s lead witness, Vice President Mark Bogle, testified on cross-examination
that no Eastman ethylene had been stranded in Longview:
Q. …during the time that the revised Westlake tariff was in effect from July
2013 until early February 2014, none of Eastman’s ethylene was stranded in
Longview, correct?
A. That’s correct.
***
Q. And during that same time that the Westlake tariff -- revised Westlake tariff
was in effect from July 2013 to February 2014, the revisions to the tariff did
not cause Eastman to have to reduce production from its crackers, correct?
A. That’s correct.
***
Q. …you testify, if Eastman cannot move the ethylene it produces at Longview
out of its facilities, it cannot operate those facilities or at least has to reduce
the operations of those facilities. Did I read that correctly?
A. Yes.
Q. Now, at the time you filed your testimony in this proceeding, the
hypothetical situation you describe… had never occurred, correct?
A. That’s correct.
***
Q. …You’re not aware of a situation following the sale of the pipeline to
Westlake Pipeline in which production from the crackers had to be reduced
as a result of anything that Westlake Pipeline had done or the result of any
changes to its tariff?
A. Correct.
CR.2467
Ex. E
~+,HOWARD
+ ENERGY PARTNERS
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November 25, 2014 - ,-, . )
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Chairman Chl'isti Crnddick
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Commissioner David Porter -. :.:;;
Commissioner Barry T. Smitherman if>:_:{: :"S ~
Railroad Commission of Texas
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1701 North Congress Avenue
Austin, TX 78701 -C?
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Re: Gas Utilities Docket No. I 0296, Complaint Filed by Eastman Chemical Company against Westlake
Pipeline Corporation (Westlake Pipeline) Regarding Westlake Pipeline's T-4 Permit No. 05253
Dear Chairman Craddick and Commissioners Porter and Smitherman:
I am a co-founder and the Chairman and CEO of Howard Energy Partners, and I am submitting this letter
to express concern with the proposal for decision (PFD) issued in the above-mentioned case. I have over
20 years of experience in the midstream industry, working for companies such as Enlink Midstream
Partnel's (formerly Crosstex) and, prior to founding Howard Energy Partners in 2011, as President of
Midstl'eam at Energy Transfer Partners. Howard Energy Partners owns and operntes more than 500 miles
of gas and liquids pipelines serving the Eagle Ford, Escondido, Olmos, and Pearsall formations among
others, employing more than 120 empfoyees in South Texas. We also operate liquids processing and storage
facilities and rely on the continued development of a robust liquids pipeline network in Texas. As such,
we have followed this proceeding with interest and have reviewed the submissions and testimony to keep
informed of the parties' positions and the issues.
On October 20, 2014, a PFD was issued in the proceeding. Several aspects of the PFD are troubling to us,
because it would impose on Westlake Pipeline, a common carrier, duties that exceed those imposed by
applicable Texas statutory regulations and case law, and more burdensome than those imposed on interstate
common carriers by the federal gove111ment.
The PFD attempts to limit itself to the specific facts presented in Eastman's complaint, and Eastman argues
strenuously that a decision regarding Westlake will have no precedential effect. However, the reality is that
of course a decision imposing unprecedented burdens on common carrier pipelines-that go beyond anything
that a common carrier has been ordered to do previously by the Railroad Commission or by federal
regulators-will be relied upon by other shippers to seek equally extraordinary relief in similar or different
circumstances. We are concerned that the broad principles set fotth in the PFD will simply encourage
litigation at the Commission. Other recent cases, including the Denbmy decision at the Texas Supreme
Court, were expressly limited in scope, but have nevertheless spawned a wave of litigation. The Texas
pipeline industry needs regulatory stability right now, not new ad hoc standards.
The PFD finds discrimination where the same tariff was applied to different parties in the same way. An
essential element of any discrimination analysis has always been that similarly situated shippers are treated
differently. The simple fact that equal implementation of the same tariff would affect different shippers
differently is not discrimination; rather, it is the real world where often tariff changes by a pipeline impact
some shippers favorably and others not. As we understand the facts and testimony presented in this docket,
Westlake Pipeline is not proposing to offer any service to its affiliates that it does not also offer to Eastman
or to deny any se1vice to Eastman that it does not also deny to its affiliates.
00283
2144
We are also concemed that the PFD focuses on how pipeline service affects shippers rather than whether
the service is offered without discrimination. A common carrier cannot control the business decisions of
other pipelines 01· pipeline shippers, and its actions will almost certainly affect different counterparties
differently. The PFD goes so far as to suggest that a common carrier discriminates if its actions have a
negative effect on the prior investments of a shipper. Common carriers have never been, and should not
now be, responsible for protecting the investment decisions of others. They should only be required to treat
similarly-situated customers the same.
Perhaps the most troubling aspect of the PFD is that it imposes a heightened and ad hoc regulatory burden
where competitive markets have been deemed sufficient in the past. The PFD recognizes that Eastman
Chemical and Westlake Longview have a commercial arrangement by which "Eastman secured a
guaranteed market for ethylene" as well as the "ability to exchange any excess ethylene that Westlake
Longview did not purchase." Given those facts, we see no reason to approve a PFD that will encourage
other parties to bring their commercial disputes to the Railroad Commission and will discourage the
development of much-needed common carrier pipelines in Texas.
Respectfully submitted, D
``:.;---~-~
Mike Howard
Chairman and CEO
Howard Energy Pat1ners
00284
2145
08: 10:20 09-16-2014 5/6
512 463 6264
(
20fq SEP I 2 ·'H 11: 52
Alan S. Al'lllstrong
President & CEO One Williams Center
The Williams Companies, Inc. P.O. Box 2400
918-573-2398 Tulsa, OK 74102-2400
Ala11.Armstrong@williams.com
September 11, 2014
Examiner Gene Montes
Examiner Christina Poole
Railroad Commission of Texas
1701 North Congress Avenue
Austin, Texas 78701
Re: Gas Utilities Docket No. 10296 - Complaint filed by Eastman Chemical Company against
Westlake Ethylene Pipeline Corporation regarding Westlake Pipeline's T-4 Permit No.
05253
Mr. Montes and Ms. Poole:
The Williams Companies, Inc. ("Williams") submits this letter to express concern
regarding the relief sought by Eastman Chemical Company ("Eastman") in the above-captioned
matter. Williams, through its subsidiary, .owns and operates ethylene storage facilities that are
capable of receiving ethylene from Westlake Ethylene Pipeline Corporation's ("Westlake")
ethylene pipeline. Williams' commodity handling subsidiaries are therefore potential shippers on
Westlake's pipeline. Additionally, Williams operates common carrier products pipelines in Texas
and frequently examines potential opportunities to develop new common carrier pipelines in
Texas.
In the current phase of the proceeding, Eastman seeks to impose duties upon Westlake that
exceed the duties imposed on Westlake by applicable statutes, regulations, and case law, Williams
is concerned about the precedent that might be set if Eastman is successful. This concern arises
from Williams' viewpoint as a shipper on common carrier pipelines, as well as from Williams'
viewpoint as a common carrier pipeline operator.
Williams' subsidiary buys, sells, and ships commodities that are transported on common
carriel' pipelines in Texas. The historical regulatory environment and business practices, in this
industry in Texas, have generally operated in a fair and successful manner and are not in need of
significant change. If the current proceeding results in precedent inappropriately expanding the
types of services, or levels of services that a common can·ier can be compelled to offer it is
conceivable that shippers would be harmed. For example, a compelled change in service may
affect other services already offered by the pipeline and thereby upset the reasonable expectations
00418
2279
08: 10:49 09-16-2014 6 /6
512 463 6264
Examiner Gene Montes
Examiner Christina Poole
September 1I, 2014
Page 2
of existing shippers. In fact, there is a potential risk that compelling a service may reduce available
service already offered by a pipeline.
In regard to the particular service that might be compelled in this proceeding, it is worth
noting that an exchange requires ownership of the commodity. The Williams' owned companies
that own and operate pipelines do not also buy or sell commodities and would not be able to
effectuate an exchange. This is not a wholly unusual business model among pipelines that are in
the business to provide transpo11ation for a fee. Therefore, a precedent compelling a pipeline to
provide a service of which it is incapable without changing its basic business model, is also a
potentially problematic res\1lt in this matter.
Additionally, Williams is concerned that a precedent requiring common carriers to provide
services that are not already being provided to other similarly situated shippers would result in
·unsound public policy. When making investment decisions, pipelines are likely to consider the
unce11ainty of such a precedent as a negative. Therefore, such a precedent would be a disincentive
for investment in common carrier pipelines in Texas.
Finally, in Williams view, the position asserted by Eastman, that a common carrier may be
compelled to provide services not already on offer, is not supported by statues or case law and
would inappropriately expand the obligations of a common carrier pipeline.
For all of these reasons Williams respectfully requests that the Conm1issio11 refrain from
imposing duties on common carrier pipelines that are not otherwise imposed by statute, rule, or
case law.
00419
2280
15:02:57 10-07-2014 2 /4
•KINDER,NJ,2!!§!\.~•
512 463 6264
September 8, 2014
Via Certified Mail
7009 oosq ~001 Q"680 2s12
r·
7) =
:s
Examiner Gene Montes
Examiner Christina Poole
Railroad Commission of Texas
1701 North Congress Avenue --o
::...::;:
Austin, Texas 78701
ry
Re: Gas Utilities Docket No. 10296 - Complaint filed by Eastman premi~
Company against Westlake Ethylene Pipeline Corporation regarding
Westlake Pipeline's T-4 Permit No. 05253
Mr. Montes and Ms. Poole;
Kinder Morgan Energy Partners, L.P. ("KMEP") submits this letter to express concern
with the relief sought by Eastman Chemical Company ("Eastman") in the above-captioned
matter. KMEP, in combination with its affiliates and subsidiaries, comprises the largest
midstream company in North America and owns numerous common carrier pipeline assets in
Texas. As such, we have followed this proceeding with interest and have reviewed the
submissions and testimony to keep informed of the issues and the parties' positions.
In the current phase of the proceeding, Eastman seeks to impose duties upon Westlake
Ethylene Pipeline Corporation ("Westlake"), which is a common carrier pipeline, that exceed the
duties imposed on Westlake by applicable statutes, regulations, and case law. KMEP opposes
Eastman's efforts to do so because we believe this does not reflect sound public policy. If
Eastman is afforded the relief is seeks, KMEP believes this would not only increase the
likelihood of future disputes between shippers and carriers over the scope of services offered on
existing common carrier pipelines, but it would also create a disincentive for investment in new
common carrier pipelines at a time when such investment is needed to handle the increased
amount of hydrocarbons being produced in our state.
The positions Eastman has taken in this case are troubling to KMEP for several reasons.
First, Eastman's argument that a common carrier should be required to provide bi-directional and
exchange services, even if the common carrier does not wish to offer such services, is not
supported by specific statutory authority. Common can-ier pipelines rely on the rules and
regulations that have been enacted by the Texas legislature when operating their pipeline
systems. A decision in Eastman's favor would inappropriately expand the services a common
carrier can be forced to provide by its shippers beyond those that it is required to offer by law,
and without an act of the legislature amending such laws.
Second, we believe that Eastman's position improperly expands the doctrine of
discrimination. The industry has always understood discrimination to mean that a common
carrier pipeline cannot offer ce1iain services and prices to one shipper while at the same time
refusing to offer those same services and prices to another similarly-situated shipper. Eastman
Active 15991Ml.l
00420
2281
15:03:28 10-07-2014 3 /4
•
512 463 6264
•
seeks to expand that definition by arguing that even if a common carrier pipeline offers the same
services and prices to all similarly-situated shippers, the common carrier pipeline would still be
guilty of discrimination if its refuses to offer a certain type of service (to any of its shippers) and
as a result, one of its shippers faces different commercial circumstances than another one of its
shippers. This position is antithetical to the industry's long-settled understanding of
"discrimination" and, if adopted, could require a common carrier pipeline to provide a variety of
services it otherwise is not required by statute or rule to offer based on the changing commercial
circumstances of its shippers.
Finally, the common carrier pipeline industry depends on certainty of the law and the
obligations that inure to each conunon canier. Eastman's arguments, if adopted, have the
potential to undo much of that certainty. Until now, a common carrier pipeline has had certainty
with regard to its obligations - it must provide the services required by law without
discrimination. If Eastman's position is adopted, that certainty would disappear because
common carrier pipelines would continually be at risk of litigation when shippers decide that
they are not content with the requirements of the laws regarding common carriage that exist at
any given point in time.
It is our view that a decision in Eastman's favor would not exist in a vacuum. The
Supreme Court's recent decision in the Denbury case has spawned a wave of litigation against
crude oil, NGL, and products pipelines, even though the pipeline at issue in that case was a C02
pipeline. We believe that a similar result could occur here if Eastman succeeds with its claim.
Thus, we respectfully request that the Commission refrain from imposing duties on common
carrier pipelines that are not otherwise imposed by statute or rule. To do so would encourage
future disputes between shippers and existing common carrier pipelines and discourage new
pipeline investments that are critical to our state's continued growth.
Respectfully submitted,
KINDER MORGAN ENERGY PARTNERS, L.P.
By Kinder Morgan G.P., Inc., its General Partner
By Kinder Morgan Management, LLC,
the Delegate of the General Partner
~.p'By:
/
Name: Ronald G. McClain
Title: -Vice
- - President
-----·--------
00421
2282
Fit;~ in !he District Court
o rav1s County, Texas
OCT 27 2015
At /O:~ ~
Velva l. Price, District Cle~
October 19, 2015
Honorable Tim Sulak, Presiding Judge
353rd Judicial District Court
Heman Marion Sweatt Courthouse
l 000 Guadalupe, 5th Floor
Austin, TX 78701
Re: Amicus Curiae Brief - Appeal in Westlake Ethylene Pipeline Corporation v. Railroad
Commission o/Texas; Cause No. D-1-GN-15-001009 in the 353rd Judicial District Court of
Travis County, Texas
To the Honorable Tim Sulak,
EnLink Midstream Operating, LP and Howard Energy Partners (collectively "Amici") file this amicus
curiae brief to address serious issues that have arisen for the Texas pipeline industry as a result of the
Railroad Commission of Texas' (RRC or Commission) December 9, 2014 order that is the subject of the
instant appeal. 1
Westlake Ethylene Pipeline Corporation's (Westlake Pipeline) brief, filed with the Court on August 14,
2015, explains these serious issues and the legal error in the RRC's order in detail. Here, Amici provide
our arguments in support of reversing the RRC's unprecedented interpretation of the longstanding
common carrier principle that a common carrier may choose to provide services that it offers so long as it
provides those services on a nondiscriminatory basis, and of reversing the RRC's unprecedented and
unsupported application of the well-established concept of discrimination regarding pipeline services.
Facts
Westlake Chemical Corporation (Westlake Chemical), the parent of Westlake Pipeline, acquired the
Westlake Pipeline and associated assets from Eastman Chemical Corporation (Eastman) in 2006. The
acquisition did not include any terminals or any of the compression necessary to operate the pipeline. The
sale included a 99 year contract between Eastman and Westlake Chemical that provided Eastman the
opportunity to exchange ethylene2 with Westlake Chemical that Westlake Chemical did not otherwise
purchase from Eastman. Westlake Pipeline is not a party to the purchase and exchange contract and the
contract does not entitle Eastman to transportation services, whether forward haul or backhaul, on
Westlake Pipeline.
1
The Commission's order was issued by a 2-1 vote, with Commissioners Craddick and Porter voting for
the decision and Commissioner Smitherman voting against. The Commission denied a motion for
rehearing also by a vote of2-l, with the same Commissioners voting against the motion and newly
elected Commissioner Sitton voting for the motion to rehear the initial decision.
2
An exchange is a commodity transaction that does not require pipeline transportation but instead
involves the transfer of title of equivalent volumes of a product between two owners of the product at
different locations. It is in effect a virtual transfer of title to equivalent volumes of product that does not
involve physical movement of the product. Pipeline companies typically do not own any of the product
that is shipped through the pipelines.
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•
For years, Westlake Pipeline has been operated almost exclusively to transport ethylene northward from
Mont Belvieu to Longview, Texas. Southward transportation (backhaul service) was available only at the
discretion of Westlake Pipeline, as provided in the pipeline's 2002 and 2013 tariffs, and was used only
sporadically by Eastman with Westlake Pipeline's consent. Westlake Pipeline filed a tariff revision in
2013 removing the backhaul service option and Eastman filed a discrimination complaint with the RRC.
Despite these facts, the RRC ordered Westlake Pipeline to provide backhaul service to Eastman. The
RRC also ordered Westlake Pipeline to provide exchange services despite the pipeline not having
ownership of any product.
Effect of the RRC Decision
The effect of the RRC's decision is to dictate business operations for private pipelines, interfere with
existing contracts between private parties, and interfere with the ability of common carrier pipelines to
choose which services to provide to shippers so long as such services are provided on a nondiscriminatory
basis, which is a longstanding fundamental principle of common carrier service.
The RRC's order opens the door for pipelines and shippers with pipeline affiliates to be forced to offer
services they would otherwise not choose to offer and, in fact, may not be able to offer. The RRC's order
denies a pipeline the discretion to control its direction of flow and operate its pipeline in the manner it
deems most beneficial and efficient. Furthermore, the RRC has ordered a pipeline to engage in
commodity transactions (exchanges) when it has no contractual obligation to do so. With this decision,
the RRC has cleared the way for other Texas shippers to seek RRC orders requiring pipelines or their
affiliates to offer new services. This overturns longstanding law and industry practice that a common
carrier is free to choose the services it wishes to provide so long as it acts in a nondiscriminatory manner.
Argument
1. There is no legal authority for the RRC to impose bidirectional or exchange services.
"A carrier may use its property in any way it chooses to promote its best interests, provided that such use
is not inconsistent with the duty the carrier owes to the public."3 Other than the erroneous order in this
case, we are unaware of any statute, Commission rule or common law that requires a common carrier
pipeline to offer bidirectional or exchange service.
On the contrary, the Federal Energy Regulatory Commission (FERC) has held that refusal to offer
exchange service does not violate a common carrier's duty. 4 Other pipeline tariffs on file at the
Commission, including the tariff of an Eastman affiliate, do not offer any bidirectional or exchange
service. Eastman failed to identify in the record a single liquids pipeline tariff that provided for exchange
service. By contrast, Westlake Pipeline provided many examples of liquids pipelines that do not offer
exchange service.
3 Tammy E. Hinshaw, et al., 11 TEX. JUR. 3D, Carriers § 8 at 39, citing Lewis v. Weatherford, 36 TEX.
CN. APP. 48, 81 S.W. 111, 113 (Fort Worth 1904, writ ref'd).
4 See Williams Refining Pipeline Co., 123 FERC ~ 61271, at 62658 (2008) ("Shipments on the Western
pipeline system ... were in a northerly direction from Midland, Texas to points in northwestern New
Mexico ... [T]he fact that Western is not offering an exchange transportation service does not constitute
discrimination under the [Interstate Commerce Act] or a failure of Western to fulfill its common carrier
duty of providing service upon reasonable request.")
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2. The RRC order gives a new interpretation to the concept of "discrimination."
The RRC order turns traditional discrimination analysis on its head by focusing not on whether the carrier
has treated all similarly situated shippers the same (the proper standard), but rather on whether the
carrier's actions affect shippers differently (which they almost always will). Absent reversal of the RRC,
any shipper adversely affected by a tariff change will suddenly be able to argue "discrimination." In fact,
in this instance, the result of the RRC order is that Eastman will be treated better than other shippers in
Longview, and receive an undue preference over other shippers.
Conclusion
The RRC erred in ruling in favor of Eastman. When agencies reach beyond their statutory authority, they
disrupt the market, cause confusion and undermine freedom of contract. Left to stand, the RRC order
creates the potential for pipeline carriers to be awash in shipper complaints and RRC orders compelling
the carriers to provide services they would otherwise not choose to provide or that they may not have the
capability to provide. The harm to RRC-regulated common carriers as a result of this decision cannot be
ignored.
For these reasons, Amici urge this Court to reverse the Railroad Commission's December 9, 2014 order.
Respectfully,
ENLINK MIDSTREAM OPERATING, LP HOWARD MIDSTREAM ENERGY PARTNERS, LLC
S. Mark Curwin
Director of Regulatory Affairs
T~
Assistant General Counsel
2501 Cedar Springs Road, Suite 100 17806 Ill-10 West, Suite 210
Dallas, TX 75230 San Antonio, TX 78257
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