7. Commission Practice
Associated Pipe Line Co. v. Railroad Commission (1917) 176 Cal. 518 represented the Commission's first and last attempt to require all crude oil pipeline owners in the state to operate their pipelines as public utilities. Acting pursuant to state statute, the Railroad Commission ordered pipeline owners to file for Commission review their schedules of rates for the transportation of oil products. The pipeline owners appealed. The California Supreme Court ruled that pipeline owners that transport their own crude oil or purchase crude oil from third parties and transport only that oil to which the pipeline owner had acquired title do not thereby transport crude oil for others. The Court went on to state that neither the Legislature nor the Commission could, by fiat, require that private crude oil pipelines be made public utilities available for public use without condemning the property and providing just compensation to the owners. It held that any such action would constitute a violation of state and federal constitutional prohibitions on the taking of private property without compensation.16 The United States Supreme Court affirmed the state court decision on June 5, 1920.17
Since Associated Pipeline, the Commission has never required public utility status for a crude oil pipeline that was used by its owner to transport crude oil purchased from third parties. The only crude oil pipelines that the Commission currently regulates are those that either voluntarily submitted to Commission regulation or expressly held themselves out as being willing to serve any customer requesting service.18
In City of Long Beach v. Unocal California Pipeline Company, D.96-04-061, the Commission commented:
Actually, this Commission has had little to do in the past with crude oil pipelines, both because FERC [the Federal Energy Regulatory Commission] regulation controls where interstate operation is involved and because state pipelines were operated privately by major oil companies. In the Four Corners cases cited by Long Beach, it can be seen that intrastate rates essentially have followed FERC rates, which in turn are calculated on a form of cost-of-service ratemaking. (1994 Cal. PUC LEXIS 380, at 21-22; footnotes omitted.)
Indeed, in Re Investigation Into Possible Over-Assessment by State Board of Equalization, D.93-07-047, the Commission dismissed oil pipelines and other utilities (cellular, nondominant interexchange carriers, radiotelephone utilities) from the proceeding on the basis that they "are not subject to cost-of-service [or] rate base rate-of-return regulation." (D.93-07-047, at 6.)
Finally, the Commission after a lengthy investigation declined to take action with respect to oil pipelines like the 20" Pipeline at issue here. Between 1975 and 1979, the Commission investigated the business practices of crude oil pipeline companies to determine the extent to which they should be regulated.19 The investigation resulted in the production by pipeline owners of thousands of documents and the execution of a settlement agreement regarding Atlantic Richfield Company, one of the pipeline owners. After four years, the investigation was concluded without a finding that the public interest requires the Commission to regulate pipeline owners as a result of their use of buy/sell agreements.20
16 Associated Pipeline, 176 Cal. at 529.
17 251 U.S. 228.
18 See, e.g., In re Southern California Edison Company, Decision (D.) 94-10-044 (utility proposal contemplated entering into contracts with all customers that could potentially use its pipeline system and did not seek to deny service to others); City of Long Beach v. Unocal California Pipeline Company, D.94-05-022 (referencing settlement agreement in which Union Oil, Shell Oil, Chevron, Texaco and Mobil agreed to dedicate proprietary pipelines to public utility service); Application of San Pablo Bay Pipeline Company, D.05-07-016 (approving voluntary request of pipeline owner to be regulated as a common carrier.
19 See D.88640 (1978) Investigation on the Commission's Own Motion into the rates, rules, charges, operations, business practices, corporation, individual, partnership, joint venture or other entity which operates any pipeline for the transportation of crude or refined petroleum products within the State of California, Case No. 9893.
20 D.91074 (1979) Order Discontinuing Proceedings.
