Panhandle Eastern Pipe Line Co v. Fed. Energy Comm'n

• Citation: 196 F.3d 1273
• Decision Date: 26 November 1999
• Docket Number: No. 98-1048,98-1048
• Parties: (D.C. Cir. 1999) Panhandle Eastern Pipe Line Company, Petitioner v. Federal Energy Regulatory Commission, Respondent Kansas Gas Service Company, et al., Intervenors
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

Page 1273

196 F.3d 1273 (D.C. Cir. 1999)

Panhandle Eastern Pipe Line Company, Petitioner v. Federal Energy Regulatory Commission, Respondent

Kansas Gas Service Company, et al., Intervenors

No. 98-1048

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 11, 1999

Decided November 26, 1999

On Petition for Review of Orders of the Federal Energy Regulatory Commission

Brian D. O'Neill argued the cause for petitioner. With him on the briefs were Merlin E. Remmenga and F. Nan Wagoner.

David H. Coffman, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With him on the brief were Jay L. Witkin, Solicitor, John H. Conway, Deputy Solicitor, and Susan J. Court, Special Counsel.

Douglas E. Winter was on the brief for intervenors Riverside Pipeline Company, L.P., et al. James J. Murphy entered an appearance.

David A. Glenn, Gregory Grady and Michael J. Thompson were on the brief for amicus curiae Transcontinental Gas Pipe Line Corporation.

Before: Silberman, Sentelle, and Garland, Circuit Judges.

Opinion for the Court filed by Circuit Judge Garland.

Garland, Circuit Judge:

Petitioner Panhandle Eastern Pipe Line Company ("Panhandle") transports natural gas through its interstate pipeline system. Motivated by an earlier dispute over its responsibility to build pipeline interconnections ("interconnects") to permit access to its system, Panhandle filed a proposed tariff with the Federal Energy Regulatory Commission (FERC) intended to memorialize the criteria under which it would be willing to construct such interconnects in the future. FERC struck certain provisions of the proposed tariff and mandated that Panhandle adopt modified criteria for pipeline interconnects. See 81 F.E.R.C. p 61,295, at 62,393-94 (1997) (denial of rehearing); 79 F.E.R.C. p 61,016, at 61,077-78 (1997). Panhandle petitions for review of FERC's orders.

FERC objected to three provisions in Panhandle's proposed tariff. Those provisions required that a party requesting an interconnect: 1) be a "shipper"; 2) demonstrate the existence of "market demand commensurate with the facility requested"; and 3) establish that construction of the new interconnect would not result in "adverse economic impact to Panhandle." 79 F.E.R.C. at 61,077. FERC directed Panhandle to delete those requirements and to insert language stating that Panhandle would construct an interconnect for "any party willing to pay the reasonable costs and expenses of the construction and who meets the other conditions of Panhandle's interconnect construction policy as modified by the Commission...." Id.

On request for rehearing, Panhandle raised a number of objections to FERC's orders. In particular, it contended that the tariff modifications imposed by the Commission conflicted with or changed established FERC policy. As Panhandle recounted, FERC's policy had been to require a pipeline to build interconnects on a case-by-case basis if, but only if, the Commission found that the pipeline had previously built them for similarly situated parties. See, e.g., Southwestern Pub. Serv. Co. v. Red River Pipeline, 63 F.E.R.C. p 61,125, at 61,824, 61,825 (1993) (refusing to require pipeline to construct mid-point tap because requester was "not similarly situated to any other shipper on the system"), reh'g granted, 74 F.E.R.C. p 61,133, at 61,475 (1996) (requiring construction after requester met similarly situated standard); Southwestern Glass Co. v. Arkla Energy Resources, 62 F.E.R.C. p 61,089, at 61,648 (1993) (refusing to find unduly discriminatory a pipeline's refusal to construct bypass delivery tap because it had treated requester "the same as other similarly situated shippers");Arcadian Corp. v. Southern Natural Gas Co., 61 F.E.R.C. p 61,183, at 61,679 (1992) ("[T]he Commission's regulations do not directly require an open-access pipeline to construct facilities to provide service ... [except] ... where the pipeline has voluntarily decided to construct facilities for similarly situated customers."), vacated on other grounds sub nom. Atlanta Gas Light Co. v. FERC, 140 F.3d 1392, 1404 (11th Cir. 1998); see also Missouri Gas Energy v. Panhandle Eastern Pipe Line Co., 75 F.E.R.C. p 61,166, at 61,550 (1996);Texas Eastern Transmission Corp., 37 F.E.R.C. p 61,260, at 61,683 & n.114 (1986).

FERC did not dispute Panhandle's description of its established policy. Nor did it attempt to justify its demand that Panhandle delete the proposed interconnect criteria on the ground that they inaccurately reflected the criteria the pipeline utilized in the past. Instead, FERC rejected Panhandle's proposed "market demand" criterion on the ground that it was "unnecessary" to protect the pipeline's interests. 79 F.E.R.C. at 61,077. It directed deletion of the tariff's limitation to shippers in order to ensure that entities such as storage companies and market centers could seek an interconnect. See id. And it ordered removal of Panhandle's "adverse economic impact" criterion on the ground that it was "vague," and thus "might" allow Panhandle to deny an interconnect to a future requester that would have received one under the similarly situated standard. Id.

Notwithstanding the rationales it gave for its orders, FERC insisted that its directions to Panhandle did not "conflict with or change" its policy of requiring the construction of interconnects only when requesters were similarly situated to parties whose requests had previously been granted. 81 F.E.R.C. at 62,395. There was no conflict or change, the Commission said, because "the subject order does...