Atlanta Gas Light Co. v. F.E.R.C.
| Decision Date | 14 May 1998 |
| Docket Number | No. 93-8056.,No. 94-8760.,No. 96-9503.,No. 92-9121.,No. 97-8032.,92-9121.,94-8760.,96-9503.,93-8056.,97-8032. |
| Citation | 140 F.3d 1392 |
| Parties | ATLANTA GAS LIGHT COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. AMERICAN GAS ASSOCIATION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. BOARD OF WATER, LIGHT AND SINKING FUND COMMISSIONERS OF THE CITY OF DALTON, GEORGIA, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Joel F. Zipp, Morely Caskin, Washington, DC, for South Carolina Pipeline Corp.
Edward J. Grenier, Jr., Sutherland, Asbill & Brennan, LLP, Washington, DC, for Process Gas Consumers Group/ Georgia Industrial Group.
Paul B. Turner, Sutherland, Asbill & Brennan, LLP, Washington, DC, for Association of Businesses Advocating Tariff Equity.
John T. Miller, Jr., Washington, DC, for Board of Water, Light and Sinking Fund.
Jerry W. Amos, Amos & Jeffries, Greensboro, NC, for United Cities Gas Co.
Kent K. Carter, James R. Choukas-Bradley, Miller, Balis & O'Neal, Washington, DC, for International Mun. Gas Auth. of Georgia and Alabama, City of Austell, GA, Municipal Distributors Group, SE AL Gas District.
Petitions for Review of Orders of the Federal Regulatory Commission.
Before BARKETT, Circuit Judge, and GODBOLD and GOODWIN*, Senior Circuit Judges.
In this consolidated appeal, appellants Atlanta Gas Light Company ("Atlanta Gas"), the American Gas Association ("AGA"), and the Board of Water, Light and Sinking Fund Commissioners of the City of Dalton, Georgia ("Dalton"), seek judicial review of four related orders issued by the Federal Energy Regulatory Commission ("FERC" or "the Commission") between 1991 and 1996. These orders involved the attempt, ultimately successful, of Arcadian Corporation ("Arcadian") to obtain natural gas directly from Southern Natural Gas Company ("Southern"), thereby obviating the need to purchase it from Atlanta Gas.
Arcadian uses natural gas to produce anhydrous ammonia for fertilizer at a plant in Augusta, Georgia. The plant was built by its corporate predecessor near Southern's mainline system in order to obtain the most direct natural gas service available. See Arcadian Corp. v. Southern Natural Gas Co., [April-June 1991 Transfer Binder] Fed. Energy Reg. Comm'n Rep. (CCH) ¶ 61,207, at 61,683. Southern provides service directly to end-use customers as well as to wholesale local distribution companies ("LDCs") like Atlanta Gas which, in turn, sells gas at retail. Beginning in 1963, Arcadian's predecessor, and later Arcadian, purchased gas for the plant from Southern's largest LDC customer, Atlanta Gas. In 1990, however, Arcadian sought direct service from Southern which would have necessitated the construction of approximately 140 feet of connecting pipeline to physically link Arcadian's plant with Southern's pipeline. Southern refused, and Arcadian filed a complaint with FERC alleging that by refusing its request for direct service while providing such service to other end-users (including Arcadian's competitors), Southern had violated the anti-discrimination provisions of the Natural Gas Act, 15 U.S.C. § 717, et seq. (1994) ("NGA" or "the Act").
Arcadian requested that the Commission order Southern to construct the interconnection facilities for the direct link to the pipeline. Southern opposed this request, contending that its decision not to provide direct service to Arcadian was a business decision that did not violate the NGA or its tariff.1 Atlanta Gas, among others,2 intervened in the law suit and argued that § 5 of the NGA did not authorize the Commission to compel Southern to construct facilities or to provide transportation service to an individual end-user. The Commission ruled that although it had the authority to grant the relief sought under § 5 of the NGA, Southern had not discriminated against Arcadian. Arcadian Corp. v. Southern Natural Gas Co., [April-June 1991 Transfer Binder] Fed. Energy Reg. Comm'n Rep. (CCH) ¶ 61, 207 ("1991 Order"). On rehearing, FERC reaffirmed its authority to grant the relief sought under § 5 of the NGA, but reversed its earlier decision that Southern had not discriminated and ordered Southern to provide direct service to Arcadian and to submit tariff sheets which would govern future requests for direct connection by other end-users like Arcadian. Arcadian Corp. v. Southern Natural Gas Co., [October-December 1992 Transfer Binder] Fed. Energy Reg. Comm'n Rep. (CCH) ¶ 61, 183 ("1992 Order").
While Southern, Atlanta Gas, and AGA sought reconsideration of the 1991 and 1992 Orders, Southern built the interconnection facility mandated by the 1992 Order, and then, in 1993, entered into a settlement in which it agreed to service Arcadian under a requirements contract and Arcadian agreed to drop its complaint. Atlanta Gas, AGA, and Dalton opposed the settlement, as well as the proposed tariffs Southern submitted to the Commission. Nonetheless, the Commission approved the settlement and Southern's proposed tariffs for end-users and terminated Arcadian's complaint proceeding. Arcadian Corp. v. Southern Natural Gas Co., [April-June 1994 Transfer Binder] Fed. Energy Reg. Comm'n Rep. (CCH) ¶ 61, 176 ("1994 Order"). Atlanta Gas sought rehearing of the 1994 Order on the grounds that FERC had not held an adequate hearing on the effects of the settlement, that its decision was not rational, and that even if the settlement was approved, the 1992 Order should be vacated. Dalton challenged FERC's approval of the tariffs.
While these petitions were pending, Southern submitted to the Commission, on March 15, 1995, a proposed settlement ("Global Settlement") it had entered with Atlanta Gas, among others, to resolve numerous outstanding rate and certificate cases. Certain terms of the Global Settlement dealt with the Southern-Arcadian bypass, including the agreement of Atlanta Gas to withdraw its claims that the Southern-Arcadian bypass was discriminatory.3 The Commission thus stayed the rehearing requests filed in response to its 1994 Order pending final action on the Global Settlement. After subsequently approving the Global Settlement in Southern Natural Gas Co., [July-September 1995 Transfer Binder] Fed. Energy Reg. Comm'n Rep. (CCH) ¶ 61,322, the Commission issued the fourth and final order under review here denying the petitions for rehearing of its 1994 Order on November 26, 1996. Arcadian Corp. v. Southern Natural Gas Co., [October-December 1996 Transfer Binder] Fed. Energy Reg. Comm'n Rep. (CCH) ¶ 61, 210 ("1996 Order"). This Court consolidated for appeal the multiple petitions seeking review of these four FERC orders.
A brief discussion of the organization of the industry and the regulatory framework governing its participants helps set the scene for the case at bar. The Supreme Court recently undertook such a summary of the "evolution of the structure of the natural gas industry" in General Motors Corp. v. Tracy, 519 U.S. 278, ___, 117 S.Ct. 811, 816, 136 L.Ed.2d 761 (1997). As the Court explained:
Traditionally, the industry was divisible into three relatively distinct segments: producers, interstate pipelines, and LDCs. This market structure was possible largely because the Natural Gas Act of 1938 failed to require interstate pipelines to offer transportation services to third parties wishing to ship gas. As a result, interstate pipelines were able to use their monopoly power over gas transportation to create and maintain monopsony power in the market for the purchase of gas at the wellhead and monopoly power in the market for the sale of gas to LDCs. For the most part, then, producers sold their gas to the pipelines, which resold it to utilities, which in turn provided local distribution to consumers.
Congress took a first step toward increasing competition in the natural gas market by enacting the Natural Gas Policy Act of 1978, which was designed to phase out regulation of wellhead prices charged by producers of natural gas, and to "promote gas transportation by interstate and intrastate pipelines" for third parties. Pipelines were reluctant to provide common carriage, however, when doing so would displace their own sales, and in 1985, [FERC] took the further step of promulgating Order No. 436, which contained an "open access" rule providing incentives for pipelines to offer gas transportation services. In 1992, this evolution culminated in FERC's Order No. 636, which required all interstate pipelines to "unbundle" their transportation services from their own natural gas sales and to provide common carriage to buyers from other sources that wished to ship gas.
Although FERC did not take the further step of requiring interstate pipelines to provide local transportation services to insure that gas sold by producers and independent marketers could get all the way to the point of consumption, under the system of open access to interstate pipelines that had emerged in the mid-1980s "larger industrial end-users" began increasingly to bypass utilities' local distribution networks by "construct[ing] their own...
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