fahey schultz burzych rhodes plc
TRANSCRIPT
FAHEY SCHULTZ BURZYCH RHODES PLC
Attorneys at Law 4151 Okemos Road Okemos, MI 48864 Ph (517) 381-0100 Fx (517) 381-5051
R i c h a r d J . A a r o n [email protected] 517.381.3209 direct 517.381.3180 fax 517.974.2309 cell
February 16, 2010 Ms. Mary Jo Kunkle Executive Secretary Michigan Public Service Commission 6545 Mercantile Way Lansing, MI 48909 RE: In the matter of the application of MICHCON GATHERING COMPANY for
determinations against HIGHMOUNT MIDWEST ENERGY, LLC and HIGHMOUNT EXPLORATION & PRODUCTION MICHIGAN, LLC
MPSC Case No.: U-15766 Dear Ms. Kunkle: Attached for filing in the above captioned matter is the MichCon Gathering Company’s Exceptions to the December 22, 2009 Proposal for Decision and the Proof of Service. Thank you for your assistance. If you have any questions, please feel free to call. Very truly yours, FAHEY SCHULTZ BURZYCH RHODES PLC Richard J. Aaron Enclosure
1
STATE OF MICHIGAN
BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the application of MICHCON ) GATHERING COMPANY for determinations ) Case No. U-15766 arising from Case No. U-14754 and Complaint ) (E-file Paperless) against HIGHMOUNT MIDWEST ENERGY, ) LLC and HIGHMOUNT EXPLORATION & ) PRODUCTION MICHIGAN, LLC ) __________________________________________)
EXCEPTIONS OF MICHCON GATHERING COMPANY
INTRODUCTION
Pursuant to Rule 460.17341 and the schedule established by the Administrative Law
Judge (“ALJ”), MichCon Gathering Company (MGAT) submits these Exceptions to the
December 22, 2009 Proposal for Decision. In its Application and Complaint, MGAT asks the
Michigan Public Service Commission (Commission) to: (i) approve MGAT’s proposal to refuse
to transport gas dedicated to MGAT for treating and transportation but being withheld by
HighMount1
Among other things, the PFD rejected MGAT’s proposal to refuse to transport gas not
treated and specifically declined to rule on the volumes dedicated. In these respects, the PFD is
erroneous.
from MGAT’s treatment and (ii) determine the volumes of gas so dedicated to
MGAT for treatment.
Fundamentally, this case is about enforcing a dedication of gas reserves and the
Commission’s orders in Case No. U-14754. The principal questions in this case stem from a
1 HighMount collectively refers to HighMount Midwest Energy, LLC and HighMount Exploration & Production Michigan, LLC.
2
dedication of gas to MGAT2 for treating and transportation on the Antrim Expansion Pipeline
(AEP). On September 12, 1994, Wolverine Gas and Oil Company, Inc. (Wolverine) executed a
“Dedication of Antrim Reserves” (Dedication). Exhibit MG-1. Dominion Midwest Energy, Inc.
and Dominion Reserves, Inc. (collectively Dominion) succeeded to the interest in this contract.
In turn, HighMount Midwest Energy, LLC and HighMount Exploration & Production Michigan,
LLC (collectively HighMount) succeeded to the Dominion interests3
With respect to the Dedication, the Commission found that the Dedication was ‘a transfer
of an interest in real property” and:
. The Dedication provides
that Wolverine [and hence HighMount] “hereby dedicates to the transportation and treating
services provided by MichCon on the [AEP] all of the natural gas produced from the Antrim
shale formation which it owns or controls.” Id.
b. The “Dedication of Antrim Reserves” executed on September 12, 1994, by Wolverine and MichCon runs to MGAT as the successor of MichCon, and is for the life of the reserves so dedicated. Any gas produced from acreage that remains covered by that agreement must be transported and treated by MGAT. In re Complaint of Dominion Midwest Energy, Inc et al against MichCon Gathering Co, et al, Order, MPSC Case No. U-14754, p 17 (August 7, 2007)4
.
More important, in Case No. U-14754, the Commission specifically ordered:
A. The “Dedication of Antrim Reserves” executed on September 12, 1994, by Wolverine Gas and Oil Co., Inc., and Michigan Consolidated Gas Company runs to MichCon Gathering
2 Michigan Consolidated Gas Company (MichCon) assigned its rights and duties respecting the AEP to its subsidiary, MGAT, on or about January 1, 1997. See, In re Complaint of Dominion Midwest Energy, Inc et al against MichCon Gathering Co, et al, Order, MPSC Case No. U-14754, p 1 (August 7, 2007). 3Footnote number 1 Complainant’s Brief, dated May 20, 2008, Case No. U-14754, states, “HighMount Exploration and Production Michigan, LLC and HighMount Midwest Energy, LLC, are current successors in interest to the original complainants.” The original complainants in Case No. U-14754 were Dominion Midwest Energy, Inc and Dominion Reserves, Inc. 4 Although HighMount appealed the Commission’s August 7, 2007 Order, the order has never been stayed. Consequently, the Commission order and its findings and determinations are lawful and binding. See, e.g., MCL 462.25. On October 27, 2009, the Court of Appeals affirmed the Commission order in all respects. Dominion Midwest Energy, et al. v Public Service Comm, Slip Op Case No. 280391 (Unpublished, October 27, 2009).
3
Company as the successor of Michigan Consolidated Gas Company, and is for the life of the reserves so dedicated. Any gas produced from acreage that remains covered by that agreement must be transported and treated by MichCon Gathering Company. Id. (Emphasis added.)
On October 27, 2009, the Court of Appeals affirmed the Commission’s decision. The
Commission’s orders have never been stayed or suspended5
Instead, HighMount disputed that any
. Yet, for well over two years,
HighMount has done nothing to comply with either the Dedication or the Commission’s order.
(Tr. 75).
6
The record in this case shows that Wolverine owned or controlled the reserves dedicated
to MGAT for treating and transportation. The interests Wolverine owned or controlled cover the
volumes of gas now delivered by HighMount
of the gas it delivers to the AEP for transportation
is subject to the Dedication and disputed that it is bound to have MGAT treat any of the gas it
delivers to the AEP for transportation. In the alternative, HighMount concedes that at least
approximately 11% of the volumes it causes to be transported on the AEP are covered by the
Dedication. Yet, even with respect to those volumes, HighMount has done nothing to conform
its conduct to meet the Commission’s orders in Case No. U-14754.
7. The Commission has already found: (i) that a
Dominion Commitment Letter “did not modify the Dedication”8; (ii) that Dominion’s treating
interests extended only to “gas not subject to the Dedication”9
5 In disregard of its obligations embodied in the Dedication, HighMount refused to sign a new ASATT for the volumes at issue and thus, improperly shipped natural gas on the AEP under the terms of a transportation only agreement. Although MGAT offered to treat the Dedicated Reserves for CO2 removal at nondiscriminatory prices, HighMount refused to enter into any treating arrangement with MGAT as required for the Dedicated Reserves.
; and (iii) that “[t]he gas-producing
6 This is particularly egregious when HighMount acknowledges that Wolverine could at least dedicate gas that Wolverine owned. 7 It is particularly ironic that HighMount claims Wolverine could dedicate only the gas Wolverine owned because HighMount has, under the terms of the Firm Gas Treating Agreement, Exhibit DOM-5, dedicated for treatment gas owned by others. 8 In Re Complaint of Dominion Midwest Energy, Inc, et al, Order, Case No. U-14754 (October 7, 2008) p 9. 9 Id.at p 6.
4
acreage covered by the Dedication and the Commitment Letter is substantially overlapping,
though not identical. 3 Tr. 156”10
As to the volumes at issue, HighMount based their claims largely upon the same evidence
they presented in Case No.U-14754 – which was unpersuasive to the ALJ and Commission then.
HighMount contends that, despite the express language in the Dedication, Wolverine could
dedicate only the gas which Wolverine owned and not gas that it controlled.
In the transcript referenced by the Commission, HighMount’s
witness conceded that although the Dedication and the (now expired) Commitment Letter
covered the same area and volumes, the Commitment Letter added land in Oscoda County which
has been sold and is not an issue in this case. See Exhibit MGAT-4. Hence, based on
HighMount’s witness’s concessions and consistent with the Commission’s finding in Case No.
U-14754 that Dominion was not entitled to any reimbursement for treating costs of gas not
subject to the Dedication, it is reasonable to conclude that all of the volumes of gas HighMount
delivers for transportation on the AEP are subject to the Dedication and should be treated by
MGAT. This conclusion is bolstered by the fact that the Commitment Letter dedicated gas only
for transportation while the Dedication dedicated gas for both treating and transportation.
[Compare Exhibit MG-1 to Attachment A to these Exceptions.] Hence, when MGAT was
treating the gas, it was doing so under the Dedication.
Staff presented a credible analysis of the volumes based in part on information self-
reported by shippers. The information self-reported by shippers is inherently reliable as the
shippers review and use the information for allocation of payments. The record shows this
information is of a type commonly relied upon by reasonably prudent persons in the conduct of
their affairs in this industry. Staff’s analysis of the volumes of gas subject to the Dedication
substantially supports MGAT’s claims. 10 Id. at p 3.
5
The record also shows that HighMount is failing to comply with the law, the
Commission’s U-14754 Orders and the Dedication which binds them. Common carriers have a
fundamental right to refuse transportation service for improperly tendered goods. As a common
carrier, MGAT may refuse to provide service for gas improperly tendered for transportation. See
e.g., Thomas v Chicago & Grand Trunk R Co,72 Mich 355 (1888) and Willet v King, 203 Mich
295 (1918). HighMount’s failure to properly tender gas for treating (which is a precondition to
subsequent transportation) affords MGAT a legal justification to consider the gas trespass gas
and to refuse to provide the common carrier service. Rather than act unilaterally, as it could,
MGAT has asked the Commission to approve this action.
HighMount urges rejection of MGAT’s proposal to terminate transportation service by
claiming a grant of MGAT’s request would be contrary to public policy and law – despite the
fact that HighMount’s refusal to respect the Dedication and Commission U-14754 Orders is
contrary to law and policy.
Staff recommended that HighMount pay MGAT for the treating services MGAT was
ready, willing and able to provide or face a shut-in of the gas volumes subject to the Dedication.
Such a proposal properly recognizes that the Commission may impose reasonable conditions
upon the exercise of its authority. Viewed in its proper context, such a recommendation is not an
award of damages as a remedy for a breach of contract or other tort.
The PFD did not specifically decide the amount of gas covered by the Dedication and
concluded that: 1) Staff’s recommendation for an award of damages should be dismissed for
lack of jurisdiction and 2) MGAT’s request for approval to terminate transportation service to
HighMount should be denied. The PFD’s findings go against the evidence and law and should
be rejected.
6
The PFD goes to great detail trying to analyze the positions of MGAT, HighMount and
the Staff in this case. In doing so, however, the PFD unduly complicates matters by addressing
issues not necessary for resolution of this case. Moreover, much of the PFD’s determinations
and conclusions are fundamentally flawed.11
This case is not isolated and it is critical that the Commission review and adopt the
following MGAT exceptions. Other shippers have similar dedications on the AEP. If
HighMount is free to disregard its own concessions, the Commission’s orders and a binding
dedication of gas reserves, nothing is left to stop other shippers from following suit. The result
could be devastating to MGAT, to shipping on the AEP and ultimately the State of Michigan.
EXCEPTIONS
The PFD misconstrues the Dedication and evidence related to the volumes at issue. At
pages 6-7 of the PFD, the ALJ wrote
Exception No. 1: The PFD misconstrues the Dedication as to its representations.
I cannot find, as fact, Mr. Lyle’s assertion, above, that “Wolverine represented that it had the authority to execute on behalf of other interest holders to bind this production for the life of the reserves, either through owning or controlling the rights to bind those parties.” First, the statement is rather vague, in that, it fails to identify and/or define the terms “controlling”, “production”, and the “interest holders” that he speaks of. Additionally, other than those found in the Dedication, Mr. Lyle has no direct knowledge of any representations made by Wolverine to MichCon and the Dedication, itself, makes no representations as to whether, and to what extent, Wolverine had the authority to act on behalf of others. Rather, the Wolverine Dedication is limited to the natural gas “which it own[ed] or control[ed]” and, even that, is not specifically identified. Furthermore, in Exhibit A to the Dedication, Wolverine made no representations about the gas owned or controlled by others, as Mr. Lyle admitted, himself. Thus, for these reasons and for others, discussed below, I cannot find that Wolverine represented it was acting on behalf of others when it signed the Dedication.
At pages 47 and 48 of the PFD, the ALJ wrote:
11 HighMount concedes that approximately 11% of the volumes at issue should be treated by MGAT. Hence, HighMount concedes that it has and continues to violate the terms of the Commission’s order and the Dedication. Yet, the PFD recommends that the Commission do nothing.
7
As stated in its Initial Brief, at p. 8, “MGAT claims that Wolverine expressly represented that it had the authority to execute the Dedication on behalf of other interest holders and dedicate, for the life of the reserves, the natural gas of these other interest holders.“ To support this claim, MGAT points to language in paragraph one of the Dedication, which reads, in part, “[p]roducer represents that it either owns valid leases covering the interests in or under or that it has the right to dedicate the real property described on Exhibit A.” MGAT adds that it “reasonably and rightfully“ relied upon this representation, when viewed in the light of “the conduct of Wolverine and its principals after the dedication”. MGAT Brief, p. 9. MGAT claims that Wolverine’s principals, in general, and HighMount, specifically, enjoyed the benefits of treating and transportation for 10 years and should, therefore, be estopped from denying Wolverine’s authority. I find this argument unconvincing. First, there is no evidence to support a finding that Wolverine expressly represented it was acting on behalf of others when it entered into the Dedication. There is no evidence of any such agency agreement outside the Dedication, whether oral or written. Nor does a fair reading of the Dedication support such a conclusion. Nowhere in either of these documents does it state that Wolverine was acting on behalf of any other party.
The fatal flaw in the PFD’s discussion is that it searches for evidence external to the
Dedication – and thereby inappropriately discounts Mr. Lyle’s testimony based on the
Dedication. The PFD also fails to recognize and properly interpret the plain meaning of the
language in the Dedication itself.
Wolverine dedicated all of the natural gas produced … which it “owns” or “controls” and
is produced from the “unitized acreage” set forth in the Dedication. The PFD does not recognize
the distinctions between the terms “own” and “control”, which terms lend proper context to the
representations made in the Dedication. As discussed below, once a simple and direct analysis
of these plain words is made, it becomes clear that the PFD’s conclusion that there is no evidence
that Wolverine was acting on behalf of others is completely unfounded.
Resorting to dictionary definitions is proper to ascertain the generally accepted meaning
of a term that is not separately defined. Consumers Power Co v PSC, 460 Mich 148 (1999).
Absent a definition within the document, Courts may consult dictionary definitions. Popma v
8
Auto Club Insurance Ass’n, 446 Mich 460 (1994). In this case, “own” or “owns” means – “to
have good legal title, to hold as property, to have a legal or rightful title to, to have, to possess.”
Black’s Law Dictionary, 5th Ed. In contrast, “control” means something different. “Control”
means - power or authority to manage, direct, superintend, restrict, regulate, govern, administer
or oversee. Black’s Law Dictionary, 5th Ed. Hence, while ownership implicates the ability to
control, control separately does not implicate ownership. These terms as used in the Dedication
clearly have two distinct meanings. The use of “owns” and “controls” in the alternative but in
the same sentence plainly means that Wolverine was not acting solely on its ownership interest
but that someone else has ownership interests affected by the Dedication12
Consistent with what was dedicated, Wolverine expressly represented in the next
sentence two separate matters: 1) that it owns valid leases covering the interests dedicated or in
the alternative 2) it has the legal right to dedicate the real property. If Wolverine were limited to
acting on its own behalf and not interests of others, the term “control” would be surplus as would
be the representation that “it has the legal right to dedicate.” Because Wolverine was dedicating
more than what it owned but also separately that which it controlled, the representation that it
had the legal authority makes it clear that Wolverine represented that it was acting on behalf of
others. The PFD’s conclusions should be rejected as against the weight of evidence – the
Dedication itself.
.
Exception No. 2: The PFD misconstrues the law and Dedication as to Wolverine binding others.
The PFD also presents a fatally flawed analysis concerning Wolverine’s authority to act
on behalf of others. At pages 48 and 49 the PFD states:
12 That Wolverine had authority to dedicate gas on behalf of others is discussed further in these exceptions.
9
In short, no evidence was presented to support a finding that, when Wolverine signed the Dedication, it was acting as agent for Dominion or that the parties subsequently relied upon such a representation. In fact, the evidence supports a finding that both assertions are utterly false.
As demonstrated below, these statements are incorrect and against the expressed terms of
the Dedication.
At pages 49 and 50 of the PFD, the ALJ also wrote:
MGAT makes a separate, but related argument, that when Wolverine signed the Dedication, it actually controlled Dominion’s gas. I find no support for this argument, also. First, I note that MGAT made no attempt to define the term “controls”, as found in the Dedication. Next, there is no affirmative representation, in the Dedication, that Wolverine, actually, controlled any gas. By the Dedication’s language, it’s a mere possibility, but, by no means, is it a certainty. Most problematic, however, is that MGAT presented insufficient, if any, credible evidence to support a finding that Wolverine had control, by any definition, of Dominion’s gas. Furthermore, as outlined, above, the relevant parties’ actions suggest that they never considered Wolverine to have control of Dominion’s gas. If they did, there would have been no reason for the separate Dominion Commitment and ASATT, under which business was conducted for 10 years. Finally, HighMount presented unrebutted evidence to establish that the operating agreements, for the wells and fields in which Wolverine held an interest when it executed the Dedication, expressly reserved to the non-operating working interest owners the right to receive in kind and to separately market their gas. In other words, they retained control of their natural gas
In sum, the evidence supports a finding that Wolverine had no authority to act as agent for Dominion. Additionally, there is no evidence to suggest that Wolverine represented that it had authority to do so or that the parties relied upon any such representation. Additionally, the evidence submitted by HighMount establishes that Wolverine did not control Dominion’s natural gas. Thus, the evidence supports a finding that, when Wolverine signed the Dedication, it dedicated the natural gas that it owned and that, when Dominion signed the Commitment, it did so for the natural gas it owned. Contrary to MGAT’s assertions, the Dedication and Commitment represent different interests in natural gas produced from, largely, the same acreage. Thus, the very premise upon which MGAT bases its claim proves false and MGAT has failed to establish the amounts of gas subject to the Dedication. 10 10. Both Staff and MGAT argue that MCL 324.61715 applies to this case and that, pursuant to it, the Wolverine Dedication covers Dominion’s gas. Both parties first raise this separate cause of action in their Initial Briefs. No mention of the statutory provision is made in any pleading. No mention of it was made by any witness or in any exhibit. In short, no evidence was presented to
10
determine the facts necessary to establish its applicability to this case. The claim is not properly before the Commission and will not be entertained in this PFD. I do note that, in its Reply Brief, at pages 8-11, HighMount presents arguments against application of this statute. However, I make no determination regarding HighMount’s argument, as the issue is not properly before the Commission.
The PFD’s above analysis misses much of the evidence concerning Wolverine’s authority
to act on behalf of others that is plainly in this case13
The record evidence supports MGAT and Staff’s position that the Dedication covered
reserves (gas in the ground) which Wolverine owned or controlled. In addition to the
representation by Wolverine that it controlled much more of the reserves than what it owned,
Wolverine also had statutory authority to act for others by virtue of being the operator for the
unitized field operations. The PFD made no ruling on the merits of this argument by erroneously
concluding that the issue was not properly raised. The PFD failed to see, however, that
Paragraph 1 of the Dedication recites the facts necessary to raise this issue, that is, the Dedication
encompassed natural gas produced …“from the unitized acreage” set forth on Exhibit A.
Unitized acreage has a specific meaning for oil and gas operations in Michigan.
. First, Wolverine expressly represented in
the Dedication that it was acting for others when dedicating gas to MGAT for treatment and
transportation. Second, as to the scope of Wolverine’s control, the PFD fails to take into
consideration the law on operations of the “unitized acreage” as well as the conduct of the parties
ratifying Wolverine’s actions.
Michigan law affords unit operators, such as Wolverine, the express authority, to bind
other unit interests when conducting unit operations. MCL 324.61715 provides:
13 Although the PFD cites its perceived failings of MGAT’s evidence on the volumes of gas affected as a basis for concluding that Wolverine lacked authority to act on behalf of others, these Exceptions will demonstrate the PFD’s errors concerning the volumes affected by Wolverine’s Dedication below. It is sufficient to say that the PFD’s analysis faulting a purported lack of evidence on the amount of Dominion’s gas is irrelevant and immaterial to the issue of Wolverine’s authority.
11
“Each unit created under this part, if the plan provides, shall, through its operator, be capable of suing, being sued, and contracting as such in its own right. The operator of the unit, on behalf and for the account of all owners of interest within the unit area, without profit to the unit, may supervise, manage, and conduct further development and operations for the production of oil and gas from the unit area under the authority and limitations of the order creating it.”
Clearly, Wolverine can and did dedicate more than the gas it owned. It dedicated gas it
controlled as represented in the Dedication itself. HighMount is bound by that Dedication.
The PFD also erroneously rejected MGAT’s straightforward argument that HighMount is
additionally bound by the apparent agent authority under which Wolverine acted. The PFD fails
to recognize that an agent may convey property for a principal. An agent has the power to act
and bind the principal to the same extent as if the principal acted. Capuzzi v Fisher, 470 Mich
399 (2004).
In Paragraph 1 of Exhibit MG-1, Wolverine expressly represented that it had the
authority to execute on behalf of other interest holders to bind this production for the life of the
reserves, either through owning or controlling the rights to bind those parties. Paragraph 1 of the
Dedication states:
“Producer represents that it either owns valid leases covering the interests in or under or that it has the right to dedicate the real property described on Exhibit A.” MGAT has appropriately relied on that representation consistent with the practice of the
industry in Michigan. (Tr.72). The “Exhibit A” attached to the Dedication defines the extent of
the area covered by the agreement. An affidavit was then recorded with the appropriate county
authority establishing the Dedication as an interest in the real property described therein and
more fully describing the projects within the area of the Dedication. (Tr. 72-73).
Furthermore, MGAT’s position is consistent with testimony in Case No U-14754, in
which a witness for HighMount’s predecessor testified that the Dedication covered all of the gas
12
which was also covered by an expired commitment letter – not different interests. (Tr. 73). The
only operative difference between the documents was that the expired Commitment Letter added
acreage that was not owned or controlled by Wolverine but is no longer owned or controlled by
HighMount.
At page 48 of the PFD, the ALJ wrote:
Furthermore, the notion that MGAT relied upon the Wolverine Dedication and that Dominion and HighMount enjoyed the benefits of the agreement is belied by the actions of the parties. After signing the Wolverine Dedication and the accompanying ASATT on September 12, 1994, MGAT signed a Commitment Letter and accompanying ASATT #16 with Dominion, on February 6, 1995. It seems clear that, had the parties been relying upon the Wolverine Dedication, there would have been no reason the sign the 1995 Dominion Commitment and ASATT.
The PFD’s discussion of the expired Commitment Letter as evidence that Wolverine did
not beneficially dedicate gas of others, fails to recognize that the Commission has already
determined that the Commitment Letter “did not modify the Dedication” which remains in force
and effect. In re Complaint of Dominion Midwest Energy, Inc Order, Case No. U-14754
(October 7, 2008) p. 9. Because the Commitment Letter and related transportation service
agreements did not and cannot alter the Dedication’s recorded interest in real estate,
HighMount’s assertion that it nominated gas for transportation under the Commitment Letter and
expired related ASATT are meaningless distinctions. The PFD also fails to recognize that the
Commission has already determined that the Dedication and Commitment Letter covered
overlapping gas producing acreage -not separate interests. See also MGAT-4. Hence, the
Commitment Letter operated no differently than a quit claim deed, and dedicated only that which
was not otherwise dedicated.
13
The fact that some parties entered separate modes of dedications after the Wolverine
Dedication does not change the result. As discussed below, the Dedication did more than the
Commitment Letter – the Dedication dedicated gas for treating, the Commitment Letter did not.
Furthermore, the Commitment Letter did not purport to convey a recordable interest in real estate
as the Dedication does. Any additional dedications eliminated ambiguous claims others may
have asserted for gas Wolverine controlled and dedicated but those dedications did not expressly
undermine the effect of the Dedication in the first case as to HighMount. The fact that MGAT
obtained dedications of gas is consistent with the need for gas reserves to be dedicated.
Therefore, it did not matter that the Commitment Letter expired as the area was covered under
the Dedication. (Tr. 264). The reserves were and remain covered by the Dedication. (Tr. 265).
MGAT’s evidence shows that all of the gas Wolverine owned or controlled remains
dedicated. See Exhibit MG -1 which is a complete copy of the Dedication. As described above,
MGAT’s evidence shows that Wolverine represented it owned or controlled the gas in the areas
described. See Paragraph 1 of Exhibit MG-1. Wolverine, as the operator of the unitized acreage
and agent for the reserves owned by others, represented it could dedicate those reserves. Such
authority was necessary because Wolverine committed to execute necessary recordable
instruments as may be required which reflected the transfer of an interest in the real property
(e.g., the reserves) described in Exhibit A. In light of the conduct of Wolverine and its principals
after the dedication, MGAT reasonably and rightfully relied upon that representation. Wolverine
and its principals enjoyed the benefits14
14 One of those benefits included avoiding payment of demand charges typically agreed between shippers and pipeline owners for supporting the construction of the new pipeline and other facilities. (Tr. 73).
of the treating and transportation services MGAT
provided for 10 years. As one of those beneficiaries, HighMount is estopped from denying
Wolverine’s authority.
14
Those principals [including HighMount], who by their conduct of enjoying the benefits
of the Dedication for 10 years, placed Wolverine in a position where it appeared with reasonable
certainty to be acting for principals and within the scope of its represented authority. The
measure of authority an agent seems to possess, whether the agent had actual authority being
immaterial, is binding on the principals if his conduct was within the apparent scope of powers
and the principals accepted the benefits. Central Wholesale Co v SEFA, 351 Mich 17 (1958).
Contrary to the PFD’s conclusion, the record shows that HighMount and its predecessors
benefited from the Dedication notwithstanding their contrary conduct. The Commitment Letter
committed only “certain quantities of natural gas for Gas Transportation Service.” (Emphasis
added.) See, Attachment A to these Exceptions. The Commitment Letter, however, does not
commit gas for treatment by MGAT. In contrast, the Dedication dedicated gas for both treating
and transportation by MGAT. It is not disputed that HighMount and its predecessors benefited
by enjoying the treating services of MGAT. They were able to do so because the Dedication
satisfied the requirement of dedicating the gas, not the Commitment Letter.
The PFD erred in relying on HighMount’s argument that a reservation to take gas in-kind
defeats the Dedication. An interest-holder’s reservation of a right to receive gas in-kind does not
change the outcome. Arranging for gas produced to be treated for CO2 is a necessary
precondition to marketing the gas. Exhibit DOM-3, Model Form Operating Agreement,
ARTICLE VI, C. TAKING PRODUCTION IN KIND states:
Each party shall take in kind or separately dispose of its proportionate share of all oil and gas produced from the Contract Area, exclusive of production which may be used in development and production operations and in preparing and treating oil and gas for marketing purposes and production unavoidably lost. (Emphasis added.)
15
This provision of taking gas “exclusive” of gas used for treating clearly envisions that gas
taken in kind is done so after treatment for marketing purposes. Presumably, when the unit
operator arranges for treatment, the party taking the gas in-kind, does so after treatment and
subject to the treating costs. Fundamentally, Wolverine’s dedication of gas for treatment is not
in conflict with and does not preclude the reservation of a right to take gas in kind. The taking
in-kind permits that interest holder then to market gas separately from those electing someone
else to market the gas. They do so, after treatment.
The PFD’s conclusions are at odds with what HighMount currently does as well. Mr.
Barnhart testified that an interest-holder with a reservation of the right to receive gas in-kind
merely need only default by not taking the gas in-kind and the operator then markets the gas.
(Tr. 215). Mr. Barnhart admitted that HighMount delivers gas owned by others for treatment and
transportation under the terms of the Firm Gas Treating Agreement, Exhibit DOM-5. The Firm
Gas Treating Agreement requires as a condition to its effectiveness that such gas be dedicated.
HighMount, not the other interest holder, purportedly dedicated this gas for treating. (Tr. 215-
216). Hence, HighMount’s witness admits that HighMount has attempted to dedicate for
treatment gas owned by others - something HighMount claims Wolverine could not do. In this
case, Wolverine acted as an agent for other unit interest-holders and was lawfully able to enter
binding commitments under the Dedication - just as HighMount purports to do now under the
Firm Gas Treating Agreement.
This conduct conflicts HighMount’s witnesses’ claims that the Standard Form Operating
Agreement and the actual operating agreements permit the dedication of only the gas one owns.
If the claims were true, then HighMount would not be able to presently dedicate gas owned by
16
others for treatment under the terms of Exhibit DOM-5. If the claims were true, then HighMount
would not have been able to lawfully commit for transportation gas “produced from properties
owned by Producer or which the Producer has the right to commit” under the Commitment letter.
See, Attachment A to these Exceptions.
The PFD’s analysis disregards the binding nature of the Dedication and simply and
completely misses these facts and the law.
Exception No. 3: The PFD commits errors as a matter of fact and law as to the Volumes covered by the Dedication
The PFD discounts completely the MGAT and Staff evidence concerning the volumes of
gas subject to the Dedication which must be treated by MGAT. Then, notwithstanding
HighMount’s concession as to volumes subject to the Dedication, the PFD leaves that for the
Commission to decide.
Staff’s case and that of MGAT show that Wolverine dedicated the gas reserves being
delivered for shipment on the AEP by HighMount. MGAT’s case is based on (i) the testimony
of HighMount’s witness in Case No. U-14754, (ii) the Dedication and (iii) the conduct of the
HighMount’s predecessors who by their actions ratified Wolverine’s actions. MGAT’s evidence
shows that all of the HighMount volumes currently being transported are subject to the
Dedication and should be treated by MGAT.
Staff’s case was presented based on the TIPS reports which contain volume information
provided by shippers and is used for billing, allocation and reporting purposes among the
shippers. (Tr. 264). As such, there is an inherent need and assurance for the accuracy of the
information reported. Staff used the TIPS “Ownership” reports, which reflects the ownership
17
and producer interests. (Tr. 267). Contrary to the claims made by HighMount and the
conclusions of the PFD, there is a TIPS Ownership report. See, (Tr. 286) and Exhibit DOM-29.
Staff’s evidence shows that the Antrim projects covered by the Dedication currently
flowing under HighMount’s ASAT include Chester 1, Mid Charlton East, Mid Charlton West,
State Maple Forest, Marstrand 34, Hardwood, Highway 612, Paffi, Sheridan Creek, Sage Creek,
Highway 33, Joy, Gilchrist, South Briley and Webber Creek. (Tr. 73). Exhibit MG-3
summarizes the volumes that HighMount has transported on the AEP, but has not been subject to
a contractual arrangement for treating services with MGAT as required by the Dedication. (Tr.
74). This exhibit illustrates the total extent of the impact to MGAT of HighMount’s failure to
have MGAT treat gas consistent with the Dedication and the Commission order for the period
from December 2005 through February 2009. (Tr. 74). This financial impact grows each day.
The PFD rejected Staff and MGAT’s evidence concerning the volumes of gas which
should be treated by MGAT. In so doing, the PFD demonstrates the reality of a conclusion being
reached before the facts are considered.
At page 17, the PFD presents the following discussion concerning MGAT’s case:
Mr. Karim challenges the figures contained in Exhibit MGAT-3 from which MGAT’s witness, Mr. Lyle identified 26,771,584 Mcf of gas that he claims “historically should have been treated” by MGAT, by stating, at Tr 3, p. 169: Mr. Lyle has included all of the gas being transported by HighMount. . . . [O]nly approximately 11% of that gas is subject to the ASATT #1 Dedication, . . . because that is all the interest which Wolverine had in those wells and fields at the time ASATT #1 was executed. The rest of Highmount’s gas was never subject to ASATT #1. At Page 18 the PFD states: Particularly, in light of no credible evidence to the contrary, I accept HighMount’s assertion that “slightly less that 11%” is the maximum amount of gas production that is subject to the Dedication.
18
The PFD also erroneously rejects Staff’s evidence. At page 14 the PFD states:
I feel Staff has failed to establish that HighMount owes MGAT $3,103,293.06, for outstanding invoices. First, I do not hold, as Staff does, that “[i]t doesn’t matter that the Commitment terminated” because “[t]he production area was inherently covered under the Dedication.” Rather, as explained, below, the Dedication and the Commitment represent different ownership interests in the natural gas. *** Second, Ms. Janssen acknowledged her unfamiliarity with the information that is actually reported to MGAT for inclusion in the TIPS reports, that she had “no idea” whether any shipper actually provided MGAT any information regarding ownership of the natural gas being shipped, and that she did not know how producers and shippers made use of these TIPS reports. In short, Ms Janssen was unable to attest that the reports she relied upon to determine natural gas ownership are, actually, valid and accurate indicators of ownership. In fact, based on the evidence presented, it appears they are not.
At Pages 23 and 24 the PFD concludes:
For the reasons stated above, I cannot find that the Wolverine Dedication covers all the gas production from the acreage listed in the Dominion Commitment. MGAT’s agency argument is without merit. Staff’s proofs in support of its belief that the Dedication inherently covers all the natural gas production are unconvincing. Rather, it seems quite obvious and beyond doubt that, as the Commission stated, at page 6 of its November 8, 2007, Order in Case No. U-14754, “the two contracts represent different interests in the gas covered by those contracts, despite the overlapping acreage.” Because the Dedication and the Commitment represent different interests in gas, MGAT’s and Staff’s calculations regarding the quantities of gas covered by the Dedication cannot be accepted. While for different reasons, both parties have based their calculations under the erroneous assumption that all the gas produced from the overlapping acreage is subject to the Dedication. While not required to do so in this complaint, HighMount has presented a rational argument regarding how to calculate the quantities of natural gas subject to the Dedication. HighMount’s witnesses have presented credible testimonial and documentary evidence to support its calculation and has determined that slightly less than 11% of the natural gas now produced by the HighMount companies is subject to the Dedication. The PFD concludes at page 53: In this regard, I have found MGAT’s and Staff’s proofs and arguments unconvincing. None-the-less, because the parties have had the opportunity to fully litigate this matter, the Commission may wish to rule on it. I believe HighMount
19
has presented sufficient evidence for a finding that slightly less than 11% of the natural gas shipped by HighMount is subject to the Dedication. The PFD commits a number of fatal errors. First, what is at is issue is not the gas subject
to a particular treating and transportation agreement (as suggested by Mr. Karim’s testimony) but
what gas is subject to the Dedication. As noted above, the Commitment Letter dedicated gas
only for transportation. Hence, whether HighMount or its predecessors were operating under a
particular ASATT, the Dedication was the only document which dedicated gas for treatment by
MGAT. That Dedication continues today.
HighMount’s evidence on volumes is virtually the same evidence that failed to persuade
the ALJ and the Commission in Case No. U-14754 in that portion of the case on remand.
Nothing new was presented here making the evidence more persuasive now. Nothing has
changed to make the HighMount evidence persuasive in this case. Moreover, MGAT’s case is
based on credible evidence, including HighMount’s admissions. The PFD is wrong in
concluding that there was no credible evidence to the contrary.
Second, requiring Staff witnesses to have direct personal knowledge in order to find the
data presented to be reliable fails to acknowledge the type of information presented and
disregards the rules of the Commission. Rule 325 of the Commission’s Rules of Practice and
Procedure, R 460.17325, recognizes that cases before the Commission often involve complex
numerical data and that it is appropriate to admit and give probative effect to evidence of a type
commonly relied upon by reasonably prudent persons in the conduct of their affairs. Since
Shippers rely upon the self-reported information contained in the TIPS reports, it is appropriate
for Staff to present such evidence as well. The standard applied by the PFD used to justify its
rejection of MGAT’s and Staff’s case disregards the above rule. Third, the PFD misconstrues
20
the Commission’s November 8, 2007 Order. The Commission order did not hold that the
Dedication and the Commitment Letter represented different interests in the same acreage but
instead the Commission stated the Commitment Letter “did not modify the Dedication”15; that
Dominion’s treating interests extended only to “gas not subject to the Dedication”16; and that
“[t]he gas-producing acreage covered by the Dedication and the Commitment Letter is
substantially overlapping, though not identical. 3 Tr. 156”17
The Commission should reject the PFD’s erroneous conclusions and find that all of the
volumes of gas tendered by HighMount for transportation are subject to the Dedication and
should be treated by MGAT. In the alternative, the Commission should find that Staff’s
evidence is persuasive as to the volumes subject to the Dedication and need to be treated by
MGAT.
Because the interests were
overlapping, the Dedication continues to cover all interests not exclusively covered by the
Commitment Letter.
Exception No. 4: The PFD erroneously rules on damages and non-jurisdictional claims.
The PFD makes unnecessary and erroneous determinations concerning claims for
damages. The PFD also errs by labeling as damages the Staff’s recommendation, which
conditions continued transportation service for HighMount upon payment of money based on gas
volumes which MGAT was ready, willing and able to treat, but which HighMount withheld.
At page 45 of the PFD, the ALJ correctly ruled that MGAT did not ask for an award of
damages but then made the following conclusion:
As MGAT has stated, this is not a case involving a request for damages or a declaratory ruling. If those claims were ever made, they have been abandoned.
15 In Re Complaint of Dominion Midwest Energy, Inc, et al, Order, Case No. U-14754 (October 7, 2008) p 9. 16Id.at p6. 17 Id. at p 3.
21
Again, the PFD is flawed. First, the PFD fails to acknowledge that damages are a remedy
arising from a cause of action or claim, not as an independent cause of action or claim itself.
Second, whether MGAT has abandoned a claim (for damages) is not ripe for decision in this
case. Determinations of whether a claim (as opposed to a remedy) has been abandoned are made
based on a defense when the claim is raised. Here, MGAT made no claim.
Further, the PFD never determined that MGAT must under compulsory joinder rules,
include a claim for damages. In order for a claim to have been abandoned because it is not pled,
a subsequent court or the Commission must first find that the claim must have been joined with
others. In the regard to damages, the PFD errs because damages are not a claim or cause of
action, damages are a remedy arising from a claim.
Furthermore, MGAT has a number of possible causes of action against HighMount and
others in which a court could order a damages remedy such as, but not limited to, breach of
contract, trespass and statutory conversion. Some of these claims can result in an award of treble
damages. See, e.g. MCL 600.2919a. These claims, however, are not ones over which this
Commission has primary jurisdiction because they do not fall within this Commission’s express
statutory authority.
As noted in the PFD, MGAT has consistently taken the position that damages were not at
issue in this proceeding. “[T]his case does not involve MGAT’s claim for damages as a result of
HighMount’s failure to respect the Dedication. MGAT is not asking the Commission to award
damages in this case.” PFD at 45 (citing Br Opposing Respondents’ Mot to Dis, p 7). Moreover,
MGAT noted that “this is not a case of MGAT pursuing damages for breach of contract by
HighMount. At an appropriate time and in an appropriate forum, MGAT may pursue its legal
22
remedies.” PFD at 46 (citing MGAT’s Supplemental filing, fn 1). Further, “[i]t seems clear,
from the record, that Counsel for MGAT affirmatively disavowed any request for damages
almost immediately after filing its Complaint/Application. In its brief opposing the Motion to
Dismiss, during oral arguments at the motion hearing, and in its Supplement to the Complaint,
MGAT requested only Commission approval to discontinue transportation services and
affirmatively stated that it was not making a request for damages.” PFD at 46-47. Lastly, the
Proposal for Decision notes that “HighMount argues that the Commission lacks jurisdiction to
award damages, in this case. MGAT agrees. Staff is silent on the issue. I accept HighMount’s
and MGAT’s position that the Commission lacks authority to award damages in this matter.”
PFD at 48.
MGAT has not and does not seek a Commission order awarding compensatory damages
in this case. Such a request would be nonsensical, as the Commission would not have
jurisdiction to entertain it. See Muskegon Agency v General Tel Co, 340 Mich 472, 482 (1954)
(noting that the “jurisdiction of the public service commission under the statutory provisions is
broad and comprehensive. Yet that jurisdiction has generally been prospective in operation.
However, it is not a proper tribunal to decide a controversy after damage has been inflicted. [In
a] civil action to recover damages for breach of contract or for negligence[,] [t]he commission
has no jurisdiction to award plaintiff damages or to reimburse plaintiff for its losses. Only a
court, in accordance with due process, can constitutionally award damages in a civil action.”);
see also Muskegon Agency, Inc v General Tel Co, 35 Mich 41, 53-54 (1957). MGAT surely
would not plead a frivolous claim and then subject itself to counter claims for costs and/or
sanctions under MCR 2.114(F) or MCR 2.625(A)(2).
23
Additionally, as pled throughout this case, MGAT, by not raising or seeking a remedy of
damages in this proceeding, has not waived its right to seek damages in an appropriate forum in
the future. MGAT may pursue a claim seeking damages for breach of contract, trespass or
statutory conversion at an appropriate time, in the appropriate court. Since, as explained above,
MGAT has not sought such a remedy in this matter, such a claim would not be barred by the
doctrine of res judicata in a future case, brought in an appropriate forum. Further, MGAT was
not compelled, by the doctrine of compulsory joinder, MCR 2.203(A), to make a claim for
damages in this case.
One of the four elements of res judicata requires proof that “the matter contested in the
second case was or could have been resolved in the first case.” Richard v Tibaldi, 272 Mich App
522, 531 (2006). MGAT is not barred from raising a claim for damages in a future case because
the matter was not contested, and could not have been contested, in this case. See Martino v
Cottman Trans Systems, Inc, 218 Mich App 54, 59 (1996) (holding that a breach of contract
action in Pennsylvania did not operate as res judicata and bar a subsequent case in Michigan
based on statutory rescission because “Pennsylvania’s laws contain no analogous right,” thus the
rescission claim could not have been brought in the previous case, and the plaintiff would
otherwise “have to forfeit the claim.”). Likewise, MGAT was not compelled to bring its claim
for damages in this case by Michigan’s joinder rules, MCR 2.203(A). See Houdini Props, LLC v
City of Romulus, 480 Mich 1022 (2008) (holding in summary fashion that, where a developer
appealed a zoning board of appeals’ decision and later raised constitutional claims in a separate
action, the joinder rules of MCR 2.203 did not apply. “The zoning board of appeals did not have
jurisdiction to decide the plaintiff’s substantive due process and takings claims.” Since, in the
first action, the court’s review was limited by statute to the record before the zoning board of
24
appeals, it could not rule on the due process and takings claims until they were brought in a
subsequent, separate, action.).
To be sure, MGAT is not seeking an award of compensatory damages from the
Commission in this case. Such a request cannot be abandoned or waived because it was not
made in the first instance because it is not within the Commission’s statutory jurisdiction, it is
not barred by the doctrine of res judicata, and MGAT was not compelled to raise it in this case
under Michigan’s compulsory joinder rule. The PFD simply should have never made its
determinations on damages.
Exception No. 5: The PFD rejects MGAT’s request to approve a refusal to transport Dedicated gas not treated by MGAT.
The PFD rejected MGAT’s request that if HighMount refuses to tender gas for treatment
by MGAT, the Commission should expressly approve MGAT’s exercise of its right as a
common carrier to refuse to transport the gas tendered for transportation. The PFD also rejected
Staff’s recommendation that continued transportation service be conditioned on HighMount
paying to MGAT approximately $3.1 million, which represents treating revenues MGAT lost
because HighMount has refused to conform to the Dedication and Commission orders.
The PFD reaches this conclusion with an implausible analysis which suggests that
MGAT has arranged for HighMount to do the treatment and thus it is permissible to disregard
the obligation of the Dedication and the Commission orders which require HighMount to permit
MGAT to treat the gas. This analysis is flawed. Page 54 of the PFD starts the analysis
concerning termination of service:
These requests should be denied for a variety of reasons. All the parties seem to agree that, for the most part, the Commission has chosen to not regulate treatment services. While MGAT must deliver natural gas with a CO2 of no more than 2%,
25
it is generally, free to do so in any reasonable manner, so long as it does so in a non-discriminatory manner. For instance, there is nothing to prevent MGAT from contracting with third parties for the physical treatment of natural gas, as it does for much of the gas it accepts for transportation. Likewise, there appears nothing to prevent MGAT from permitting shippers to contract for their own treatment and, for those choosing to do so, providing them transportation only services, as is MGAT’s current arrangement with HighMount. In short, no particular treatment arrangement is mandated by the Commission. Page 55 of the PFD continues: Likewise the Dedication does not mandate the manner in which MichCon (now MGAT) disposes of the natural gas dedicated to it for treatment. Because, MGAT has no treatment facilities, the treatment services it provides are, by necessity, contracted through third parties. No party has suggested that such an arrangement is not permitted under the Dedication. Additionally, no party has presented a convincing argument to establish that the Dedication does not permit MGAT to allow a shipper to perform its own treatment, as it has done with HighMount. Finally the PFD states at Page 56 Furthermore, ASAT #62501 has been in effect, on a month to month basis, since February 1, 2006. No party has provided notice to the other to terminate the contract. In particular, except by filing this complaint/application, MGAT has not even approached HighMount to discuss entering into new contracts for transportation and/or treatment. For reasons I do not understand, that, seemingly, normal business process was never pursued. Had MGAT done so, it is possible that the parties might have worked through their differences and negotiated a new agreement that was acceptable to the parties. Instead, MGAT filed this case, litigated it much as a complaint case, and requested rulemaking as a remedy. (Footnote omitted.) Here the fatal flaws are threefold. One – a particular treatment arrangement is mandated
by the Dedication – that MGAT should be treating HighMount’s gas. Two – MGAT has
consistently taken this position, and the “current arrangement” with HighMount treating gas
using a 3rd party has always been contested vigorously by MGAT. The record shows that there is
material value to MGAT in it providing treating service. There is a financial benefit in service
fees but there is greater value in MGAT being able to contract for treatment at levels of CO2
lower than 2% which permits MGAT to blend gas and manage the AEP to the 2% standard.
26
Third – the PFD suggests that HighMount has no burden to conform its conduct to satisfy the
Commission order and the Dedication but instead MGAT has some burden beyond tendering a
nondiscriminatory agreement to provide treating service. Nevertheless, it is clear that
HighMount has the obligation to conform its conduct to the law, not MGAT. While there is
discussion of HighMount’s objections to the proposed transportation and treating agreement,
there is no record evidence that HighMount raised those objections with MGAT or made an
effort to negotiate non-objectionable terms to the agreement for the volumes at issue in this case.
Instead and more important, there is evidence that HighMount has defied the Commission Case
No. U-14754 orders and the Dedication. The above discussion in the PFD should be rejected by
the Commission.
While the ALJ was presented with evidence that HighMount is acting contrary to the
Commission’s August 7, 2007 Order in Case No. U-14754 and the Dedication by continuing to
transport gas on the AEP without tendering the gas to MGAT for treatment, the PFD would have
the Commission do nothing.
CONCLUSION
HighMount’s refusal to comply with the Commission’s orders in Case No. U-14754 and
treat the dedicated gas with MGAT is not a trifling matter. MGAT calculates that from
December 2005 through February 2009, HighMount has, contrary to the terms of the Dedication,
withheld from MGAT treating services, approximately 26,771,584 Mcf of Dedicated Reserves
produced. (Tr. 76). As a result, MGAT has suffered, and continues to suffer, economic losses in
regards to lost treating fees of eleven (11) cents per Mcf. As a result of HighMount’s’ refusal to
have the Dedicated Reserves treated for CO2, MGAT’s ability to effectively manage the CO2
27
content of all natural gas on the AEP is constrained and will become increasingly difficult as
Antrim gas CO2 levels increase over time.
The volumes represent a shift in outlet CO2 at the South Chester plant of approximately
0.13%, with a target of 1.10% going to 0.97%. This change greatly reduces the flexibility
MGAT has when upsets occur on the overall system and limits the assistance that could be given
downstream as well. (Tr. 76). Additionally, HighMount’s refusal to tender gas to MGAT for
treating undermines the basis for MGAT’s long-term agreement for treating services at the South
Chester plant. (Tr. 76). There have been incidents when the downstream CO2 levels have risen
above 2% for various periods of time due to the outlet CO2 level received from the South Chester
plant, which blends with the raw downstream production, especially in periods where Oxygen
levels rise at the inlet to the plant and restrictions are made on the upstream pipelines. (Tr. 76-
77). This reduces the volume into the plant and raises downstream CO2 levels. (Tr. 77). A
lower outlet CO2 target at the plant (if MGAT’s treating services were used) would add
additional buffer to these situations. (Tr. 77). Additionally there have been times when other
integrated systems are down or need assistance to maintain levels of CO2 at or below the 2%
specification. HighMount’s gas not being treated under an MGAT agreement results in less
capability to respond to or eliminate CO2 issues in these situations. (Tr. 77).
The lack of these volumes under contract also impacts MGAT’s basis for executing the
agreement in place for CO2 treating services with the South Chester plant. MGAT reasonably
relied upon the expectation that Dedicated gas would be available for MGAT to treat under this
agreement. The agreed-to terms and conditions of the CO2 treating agreement could have
reduced the volumes included in the demand charge or been limited to a shorter overall term if
the Dedicated volumes were to be excluded. (Tr. 77).
28
Lastly, HighMount’s behavior towards MGAT and the Commission Order is being
observed by many other producers that have dedications for their production. Other producers
may use HighMount’s actions as a basis for contracting with another party for treating services
covered under a dedication for treating, instead of relying on the MPSC’s confirmation of the
validity of the Dedication. (Tr. 77). This type of action would lead to further complaints filed
with the Commission left to resolve such issues. (Tr. 77).
RELIEF REQUESTED
Based on the foregoing argument and the record in this case, MGAT respectfully requests
that the Commission reject the PFD’s determinations for the reasons stated in the Exceptions
stated above and :
A. Determine that, from December 2005 to the present day, HighMount has
improperly, and contrary to the Commission’s order in Case No. U-14754, refused to
tender Dedicated Reserves to MGAT for CO2 treatment and that through April 2009,
which reflects the most recent data available in the record, approximately 28.5 Bcf of
natural gas volumes are the Dedicated Reserves subject to treatment by MGAT. Further,
as supported by Staff in its testimony and exhibits, HighMount’s failure to tender
Dedicated Reserves and pay for treating services by MGAT results in treating fees of
approximately $3.1 million properly owed to MGAT as of April 2009. In the alternative,
the Commission should determine that HighMount owes MGAT for the amounts not in
dispute, which are represented by 11% of the total volumes.
29
B. Approve MGAT’s request to refuse to transport any additional Dedicated
Reserves tendered by HighMount for transportation on the AEP which are not treated by
MGAT consistent with the Dedication of Reserves still in effect and until HighMount
pays to MGAT the amount the Commission determines HighMount owes.
Respectfully submitted, FAHEY SCHULTZ BURZYCH RHODES PLC Attorneys for MichCon Gathering Company Dated: February 16, 2010 By: ______________________________________ Richard J. Aaron (P35605) 4151 Okemos Road Okemos, MI 48864 (517) 381-0100 Richard P. Middleton (P41278) One Energy Plaza, 688 WCB Detroit, MI 48226-1221 (313) 235-3647
STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the application of MICHCON ) GATHERING COMPANY for determinations ) Case No. U-15766 arising from Case No. U-14754 and Complaint ) (Efile Paperless) against HIGHMOUNT MIDWEST ENERGY, ) LLC and HIGHMOUNT EXPLORATION & ) PRODUCTION MICHIGAN, LLC
)
PROOF OF SERVICE
STATE OF MICHIGAN ) ) ss. COUNTY OF WAYNE ) Jennifer Evans, being duly sworn, deposes and says that on the 16th day of February, 2010, a copy of MichCon Gathering Company’s Exceptions to the December 22, 2009 Proposal for Decision in the above captioned matter was served upon the persons on the attached service list via e-mail.
Jennifer Evans Subscribed and sworn to before me this 16th day of February, 2010 ___________________________ Notary Public
SERVICE LIST MPSC CASE NO: U-15766
March 30, 2009
MPSC STAFF Kristen M. Smith 6545 Mercantile Way, Suite 15 Lansing, Michigan 48911 [email protected] HIGHMOUNT MIDWEST ENERGY, LLC and HIGHMOUNT EXPLORATION & PRODUCTION MICHIGAN, LLC, LOOMIS, EWERT, PARSLEY, DAVIS & GOTTING Michael G. Oliva A Professional Corporation 124 West Allegan Suite 700 Lansing, MI 48933 [email protected] MICHCON GATHERING COMPANY FAHEY SCHULTZ BURZYCH RHODES PLC Richard J. Aaron 4151 Okemos Road Okemos, MI 48864 [email protected] Richard P. Middleton One Energy Plaza. 688 WCB Detroit, Michigan 48226 (313) 235-3647 (313) 235-8500 (fax) [email protected] [email protected]