Sunoco rejects PUC judges, pushes ahead on pipeline

Despite an adverse advisory opinion that its Mariner East pipeline does not qualify as a public utility, Sunoco Logistics Partners is plowing ahead with plans to develop the Marcellus Shale project.

The Philadelphia company, in a filing this week, urged the Pennsylvania Public Utility Commission to reject a recommendation from two PUC administrative law judges that its Marcellus pipeline is not a public utility.

The company, which is repurposing a petroleum pipeline to transport Marcellus Shale ethane and propane to Marcus Hook, said the judges' recommendation in July was "clearly erroneous" and misinterprets previous court and PUC rulings.

The question about whether the pipeline is a public utility is crucial because it would allow Sunoco to bypass local zoning restrictions. It would also allow Sunoco to obtain rights of way by eminent domain.

Supported by the gas industry and business leaders, the Mariner East project has nevertheless attracted opposition from some neighboring landowners, particularly in Chester County's West Goshen Township, where Sunoco proposes to build a pumping station near Boot Road and Route 202.

Several regional environmental groups, who regard the project as part of a larger battle over shale-gas development and climate change, have also joined the fray.

Administrative law judges David A. Salapa and Elizabeth H. Barnes last month sided with opponents when they said the Mariner East project does not provide public utility service.

"The nature of Sunoco's proposed service is private since it is limited to a selected few number of shippers and not available to members of the public," the judges wrote.

But Sunoco says the pipeline does not have to provide direct service to end-user consumers to qualify as a public utility.

Sunoco initially proposed the project to deliver ethane and propane to Marcus Hook, mainly to serve an export market.

The company changed strategies in April to make intermediate deliveries of propane to local customers. Sunoco said its new plans were a response to market demands. But they also made the pipeline an intrastate project, strengthening its argument that it is a public utility.

Sunoco's lawyer, Christopher A. Lewis, of Blank Rome L.L.P., said in this week's filing that the public benefits derived from the intrastate service undergird the company's status as a public utility.

The filing this week is part of a larger legal foundation that Sunoco is building for its case.

The PUC last month approved changes to a 2013 order that allowed Sunoco to halt shipments of petroleum products on the pipeline, setting the stage for Mariner East. The PUC's amendments appeared to endorse Sunoco's plans to deliver propane to local customers.

"We find that approval of the petition is in the public interest, as Sunoco's proposed provision of intrastate propane service will result in numerous potential public benefits," the PUC said in its July 24 ruling.

On Thursday, the PUC, unanimously and without comment, approved two other actions that reinforce Sunoco's Mariner East plans. One action set intrastate tariffs for transporting propane to Sunoco's terminal in Aston. The second matter approved extending the pipeline's service territory to Washington County, where the processing plant that extracts ethane and propane from natural gas is located.

No date has been set for the PUC's hearing on Sunoco's petition for public utility status. Sunoco plans to begin propane shipments on the pipeline by the end of the year.

215-854-2947 @maykuth