TransCanada Pipelines Ltd. v. F.E.R.C.
| Decision Date | 25 August 1994 |
| Docket Number | 91-1618,Nos. 91-1380,91-1381,93-1158,93-1155,93-1151,93-1245 and 93-1246,91-1619,93-1153,93-1107,s. 91-1380 |
| Citation | 24 F.3d 305 |
| Parties | TRANSCANADA PIPELINES LIMITED, et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. Western Gas Marketing Limited, et al., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Petitions for Review of Orders of the Federal Energy Regulatory Commission.
James D. McKinney, Jr. and William W. Brackett, argued the cause, for petitioners TransCanada PipeLines Ltd., Great Lakes Gas Transmission Ltd. Partnership, Midland Cogeneration Venture Ltd. Partnership, Northern Minnesota Utilities and ANR Pipeline Co. With them on the joint briefs were William R. Mapes, Jr., Ted Gerarden, Narinder J.S. Kathuria, Terry O. Brackett, James F. Bowe, Jr., Mary E. Baluss, Kristine L. Delkus, Daniel F. Collins, Mark G. Cook, and Richard W. Miller, Jr. Kenneth L. Glick, and Alex A. Goldberg entered appearances, for petitioner Great Lakes Gas Transmission Ltd. Partnership.
Jill Hall, Atty., F.E.R.C., argued the cause, for respondent. With her on the brief were Susan Tomasky, Gen. Counsel, and Jerome M. Feit, Sol., F.E.R.C.
Emmitt C. House argued the cause, for intervenor Natural Gas Pipeline Co. of America. With him on the joint brief of intervenors Natural Gas Pipeline Co. of America, Northern Natural Gas Co., Texas Eastern Transmission Corp., Michigan Consol. Gas Co., Consumers Power Co., and Northern States Power Co. (Minnesota) and Northern States Power Co. (Wisconsin) were Georgetta J. Baker, Paul W. Mallory, Sherrie N. Rutherford, F. Nan Wagoner, M. Frazier King, Jr., Kathleen C. Lake, David T. Field, G. James Van Heyde, Jeffrey M. Petrash, Mary A. Murphy, William M. Lange, Francis X. Berkemeier, Deborah A. Moss, and Frederick J. Killion.
On the joint briefs of intervenors Western Gas Marketing Ltd., Alberta Petroleum Marketing Com'n and Canadian Ass'n of Petroleum Producers and Union Gas Ltd. were Paul H. Keck, Robert I. White, Nancy A. White, James H. Holt, Nicholas W. Fels, and Douglas M. Gleason.
Terry O. Brackett, Daniel F. Collins, Mark G. Cook, Christine Rose-Murray Pembroke, and Richard I. Miller entered appearances for ANR Pipeline Co.
Nicholas W. Fels and Jonathan T. Foot entered appearances, for intervenor Central Gas Ontario, Inc., and intervenor Union Gas Ltd.
Paul W. Fox entered an appearance, for intervenor Progas Ltd.
Robert H. Benna, Robert Baker, David E. Williams, and Frances M. Kilborne entered appearances, for intervenor Tennessee Gas Pipeline Co.
Charles H. Shoneman entered an appearance, for intervenors Northeast Energy Associates and North Jersey Energy Associates.
Narinder J.S. Kathuria, William R. Mapes, Jr., James D. McKinney, Jr., Alex A. Goldberg, William G. Stafford, and Kenneth L. Glick entered appearances, for intervenor Great Lakes Gas Transmission Ltd. Partnership.
Marilyn Ann Specht, Mary E. Baluss, and Kristine L. Delkus entered appearances, for intervenor Northern Minnesota Utilities.
Georgetta J. Baker, Emmitt C. House, Paul E. Goldstein, Paul W. Mallory, and Carol A. Smoots entered appearances, for intervenor Natural Gas Pipeline Co. of America.
Robert W. Burke, Jr., James F. Bowe, Jr., Laurence E. Skinner, and Steven H. Lasher entered appearances, for intervenor Midland Cogeneration Venture Ltd. Partnership.
Frederick J. Killion, Gene R. Sommers, and Donald K. Dankner entered appearances, for intervenors Northern States Power Co. (Minn.) and Northern States Power Co. (Wis.).
Joseph R. Hartsoe, William H. Kockenmeister, Eric Jon Aafedt, and Martin J. Marz entered appearances, for intervenor Northern Natural Gas Co.
Peter G. Esposito entered an appearance, for intervenor Brymore Energy.
Thomas M. Patrick, James Hinchliff, Mark J. McGuire, and Mary Klyasheff entered appearances, for intervenors Peoples Gas Light and Coke Co. and North Shore Gas Co.
Mary Ann Walker entered an appearance, for intervenor Southeastern Michigan Gas Co. Roger A. Berliner and Jane E. Stelck entered appearances, for intervenors Alberta Petroleum Marketing Com'n, Canadian Ass'n of Petroleum Producers.
Ted P. Gerarden entered an appearance, for intervenor TransCanada PipeLines Ltd.
Joel Kaufman, Ronald D. Eastman, Thomas J. Casey, Henry J. Boynton, Frank J. Kelley and Don L. Keskey entered appearances, for intervenors State of Michigan and Michigan Public Service Com'n.
Frederic G. Berner, Jr. entered an appearance, for intervenor Altamont Gas Transmission Co.
Before WALD, EDWARDS, and SENTELLE, Circuit Judges.
Opinion for the Court filed by Circuit Judge SENTELLE.
Great Lakes, a pipeline company, TransCanada, its principal customer, and other interested firms petition for review of several orders of the Federal Energy Regulatory Commission (the "Commission"): Great Lakes Gas Transmission L.P., 57 FERC p 61,140, 61,512 (1991) ("Opinion 367"), reh'g denied, 62 FERC p 61,101, 61,713 (1993) ("Opinion 367-A"); Great Lakes Gas Transmission L.P., 57 FERC p 61,141, 61,534 (1991) ("Opinion 368"), reh'g denied, 62 FERC p 61,102, 61,731 (1993) ("Opinion 368-A"). The orders required Great Lakes to recover the costs of two recent expansions through "incremental" rates rather than "rolled-in" rates. 1 Petitioners claim that the Commission arbitrarily departed from its own precedent, violated the nondiscrimination provisions of the Natural Gas Act, imposed unfair retroactive penalties, and used hearing procedures that contravened the Administrative Procedure Act.
We hold that the Commission employed a standard to judge the permissibility of rolled-in rates that neither accords with the Commission's precedent nor is compelled by our decisions. As the Commission failed adequately to explain the adoption of the new test, we remand the orders for reconsideration. 2
Great Lakes operates an interstate pipeline that runs some 2,000 miles from the Canadian border in Wisconsin to the Canadian border in eastern Michigan. TransCanada is an affiliate of Great Lakes and uses about 80% of the pipeline's capacity. The present case arises from two rate filings under Section 4 of the Natural Gas Act, 15 U.S.C. Sec. 717c (1988), in which Great Lakes sought to recover the cost of several expansion projects designed to increase the pipeline's capacity.
Opinion 367The filing at issue in Opinion 367 covered expansion projects built to service petitioners TransCanada and Northern Minnesota Utilities. The projects cost some $557 million, which more than doubled Great Lakes' preexisting rate base from $393 million to $950 million. Great Lakes filed a rate increase request that proposed rates to be calculated by rolling in the expansion costs. The Commission set all the issues for an evidentiary hearing except the question of whether rolled-in rates should be allowed; on that question the Commission ordered "paper hearing" procedures. See Great Lakes Gas Transmission L.P., 55 FERC p 61,336, 61,990 (1991).
After considering the submissions the Commission held that Great Lakes must "specifically address and justify rolled-in rates by showing that systemwide benefits to existing customers are commensurate with the increase in rates." See Opinion 367, 57 FERC p 61,140 at 61,521. Finding that "the benefits [of the expansions] do not equal or exceed the costs," id. at 61,522, the Commission accordingly ordered that the costs of the expansions be recouped through incremental pricing. Id. at 61,525-26. The petitioners' requests for rehearing were subsequently denied. See Opinion 367-A, 62 FERC p 61,101 at 61,716.
Opinion 368In this proceeding the Commission considered Great Lakes' request to recover rolled-in rates for two expansion projects built to serve petitioners TransCanada and Midland Cogeneration Venture, with a total cost of $190 million. The rate filing was heard by an Administrative Law Judge ("ALJ") with the participation of Commission staff. The ALJ ruled that rolled-in rates were permissible under Commission precedent. See Great Lakes Gas Transmission L.P., 55 FERC p 63,037, 65,209 (1991) ("Initial Decision"). On appeal the Commission reversed, holding that the rates should be priced incrementally under the same "commensurate benefits" test employed in Opinion 367, and confirmed its order on rehearing. See Opinion 368, 57 FERC p 61,141 at 61,542; Opinion 368-A, 62 FERC p 61,102 at 61,745.
Petitioners contend that the standard by which the Commission judged Great Lakes' rate filing represents an unexplained departure from Commission precedent, and thus constitutes arbitrary decisionmaking under the Administrative Procedure Act. See 5 U.S.C. Sec. 706(2)(A) (1988); Michigan Consol. Gas Co. v. FERC, 883 F.2d 117, 122 (D.C.Cir.), cert. denied, 494 U.S. 1079, 110 S.Ct. 1807, 108 L.Ed.2d 937 (1989). They assert that the Commission's previous practice was to routinely grant roll-in requests when the pipeline could show that (1) the added facilities would be completely integrated into the mainline system and (2) the facilities would produce some systemwide benefits, qualitatively described. In these proceedings, however, the Commission suddenly adopted a "commensurate benefits" test without adequate explanation.
The Commission concedes that it weighed costs and benefits, but maintains that it has always done so. The only distinctive feature of the Great Lakes orders was that the Commission subjected the claimed benefits to a more rigorous scrutiny because the magnitude of the projects threatened a massive shift of costs onto existing customers. All concerned thus agree on the nature of the test the Commission applied in the present orders; the dispute stems rather from opposed descriptions of the Commission's precedent.
Petitioners have the better of the argument. At least since ...
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