3. Factual Dispute

Shell Oil ships the heavy crude it produces in the San Joaquin Valley to the Bay Area via the 20" Pipeline. Shell Oil's monthly shipments are always arranged before any remaining capacity is made available to other San Joaquin Valley producers. In order to ship their crude, the other producers, including Chevron, enter into so-called "buy/sell agreements" with Shell Trading. A buy/sell agreement is a contract in which a pipeline owner or crude oil trader buys crude oil from a supplier at one end of the pipeline and sells an equivalent amount of oil to the supplier at the other end of the pipeline.

In 2005, prior to filing its complaint with this Commission, Chevron disputed the prices of certain buy/sell agreements with Shell Trading. In accordance with the terms and conditions of the Proprietary Pipeline Contract, the dispute was submitted to arbitration. An arbitration decision was issued on June 20, 2005, establishing the price per barrel under the buy/sell agreements through December 31, 2005.

According to defendants, Chevron for a time refused to honor the arbitration award and refused to arbitrate pricing after calendar year 2005. Nevertheless, in December 2005, Chevron and Shell Trading entered into a new buy/sell agreement establishing pricing for transactions between January 1, 2006 and June 30, 2007. Chevron at that time also filed this complaint with the Commission. Chevron contends that if the Commission determines that the 20" Pipeline is operated as a public utility, then the Commission will assume exclusive jurisdiction to regulate rates and charges, and both the arbitrator's award and the new buy/sell agreement for 2006 and 2007 presumably would be moot.¹

Equilon and Shell Trading on February 16, 2006, asked ALJ Walker to issue a declaration confirming the 2005 arbitration award and requiring Chevron to arbitrate the pricing issues raised in its complaint. By ruling dated April 3, 2006, ALJ Walker denied the motion, observing that an order to compel arbitration among parties that are not public utilities is a matter for the civil courts rather than this Commission.

¹ Miller v. Railroad Commission (1937) 9 Cal.2d 190 (once Commission assumes jurisdiction over a public utility, Commission may set aside any prior order or determination of courts in matters coming under the exclusive jurisdiction of the Commission.)