Transcontinental Gas Pipe Line Corp. v. Federal Energy Regulatory Commission, 78-1426

• Decision Date: 06 February 1979
• Docket Number: No. 78-1426,78-1426
• Parties: TRANSCONTINENTAL GAS PIPE LINE CORP., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 186

589 F.2d 186

47 A.L.R.Fed. 817

TRANSCONTINENTAL GAS PIPE LINE CORP., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.

No. 78-1426.

United States Court of Appeals Fifth Circuit.

Feb. 6, 1979.

Andrews, Kurth, Campbell & Jones, Thomas F. Ryan, Jr., Robert G. Hardy, Washington, D. C., Andrews, Kurth, Campbell & Jones, Michael McLaughlin, Marcus L. Thompson, Houston, Tex., for petitioner.

Robert R. Nordhaus, Gen. Counsel, FERC, Howard E. Shapiro, Sol., Barbara J. Weller, McNeill Watkins, Washington, D. C., for respondent.

Petition for Review of an Order of the Federal Energy Regulatory Commission.

Before BROWN, Chief Judge, COLEMAN and TJOFLAT, Circuit Judges.

COLEMAN, Circuit Judge.

In this case Transcontinental Gas Pipe Line Corporation (Transco) petitions for review of a Federal Energy Regulatory Commission (the Commission) ¹ order granting Transco a certificate of public convenience and necessity to construct and operate a major extension of its natural gas transmission network off the coast of Louisiana in the Gulf of Mexico. The certificate was subject to the condition that Transco comply with § 2.65(b) of the Commission's General Policy and Interpretations, 15 C.F.R. § 2.65(b), which attempts to insure pipeline utilization of at least 60% Of capacity by denying the company recovery of pipeline costs if the 60% Load factor required by that regulation is not achieved. The legality of the 60% Condition is the major issue presented in this petition, but the Commission also argues that review is premature at this time because Transco has not been "aggrieved" within the meaning of the statute which governs judicial review, 15 U.S.C. § 717r(b).

The Facts

On June 21, 1977, Transco applied for authorization to construct and operate a major extension of one of its natural gas pipelines in the Gulf of Mexico off the Louisiana coast. The estimated cost of the extension was $52,000,000, and the estimated maximum daily capacity of the extension was 240,475 million cubic feet of natural gas. Transco estimated that the load factor utilization for the second year of operation would be 65.45% Of maximum capacity; for the 1978-79 winter season, 80.26%; and for the fifth year of operation, 38%. ² Since there was no opposition to Transco's application, the Commission held an abbreviated hearing, as it was permitted to do in such cases, and issued the certificate that same day. The authorization, however, was "subject to compliance with . . . (15 C.F.R. § 2.65(b))", which provides It is the intention of the Commission to enforce the (60%) requirement (of § 2.65(a)(4)) by permitting offshore pipeline facilities, certificated after the date of this order, to be included in Applicant's cost-of-service in future rate proceedings at an average unit cost predicated upon load factors of not less than 60 percent of the annual capacity available.

Both parties agree that the import of this condition in the certificate is a requirement that Transco operate the pipeline at 60% Capacity or be unable to recover part of its costs. ³ Section 2.65(a)(4) of the Commission's General Policy and Interpretations requires an applicant to demonstrate

that its proposed facilities will be utilized, either by it individually or jointly with other pipeline companies, at a minimum annual load factor of 60 percent of the annual capacity available by the end of a 12-month period following the installation thereof, unless a waiver is issued.

Literally, this section allows a one-year start-up period and then seems to require 60% Utilization in the next year only. Neither party has adopted such an interpretation of the regulation, however, and Transco concedes that the Commission has consistently interpreted the regulation to require 60% Utilization in succeeding years. Although the Commission might well clarify the wording of this regulation, deference is due an administrative agency's interpretation of its own regulations, See, e. g., Pillsbury Co. v. FTC, 5 Cir. 1966, 354 F.2d 952, 963; and this reading of the regulation is not unreasonable.

The only other fact of apparent importance to the resolution of this case is the depreciation rate. Transco asserts in its brief, at 22, that its latest approved composite depreciation rate is 4.5%, a rate which would mean that, if straight-line depreciation were employed, the pipeline must remain in the rate base for 22 years for the company to recover its investment. The Commission responds that Transco used a depreciation rate of 10% In its application. Brief for Respondent at 38. In its reply brief, at 16-17, Transco asserts that

The 10 percent rate, however, was used to develop a price for transporting gas for others through the new pipeline. Such rate is not used as a basis for recovering the investment in the authorized facilities, since the revenues generated from the transportation services for others are credited to Transco's overall cost-of-service in its rate proceedings.

A 10% Depreciation rate implies full recovery, under straight-line depreciation, in 10 years. Because Transco asserts that utilization will drop below 10% By the fifth year of operation, any injury that it may suffer will not depend upon a depreciation rate of 4.5% Or 10%.

Reviewability

Analysis of the reviewability issue must begin with the language of the statute. 15 U.S.C. § 717r(b) provides that "(a)ny party to a proceeding under this chapter aggrieved by an order issued by the Commission in such proceeding may obtain a review of such order in the court of appeals . . . ." Transco is clearly a party to the proceeding, and it is not necessary under the statute that the order be "final". In our view, the reviewability question boils down to whether or not Transco has sustained an "injury in fact".

The Commission's position is that Transco has not been injured by the inclusion of this condition in the certificate and that it will not be injured, if at all, until the issuance of an order which sets just and reasonable rates. It notes that waivers are available, but there is no indication of the criteria used to evaluate waiver requests nor of the frequency with which they are granted. ⁴ Furthermore, if the condition had not been included in the certificate, the Commission would still be free to apply the policy at the § 4 or § 5 rate proceeding.

Transco's argument that it has been "aggrieved" proceeds along these lines: (1) its data predict a utilization of less than 60% Within five years, (2) if the Commission accepts that data (and there is no indication to the contrary), then its refusal to issue a certificate without the 60% Condition must mean that it does not intend to waive the condition later, (3) although there is always the possibility of a change in attitude or personnel at the Commission, this chance is somewhat remote and Transco must assume that it will not be granted a waiver, and (4) the increased risk of non-recovery of part of Transco's $52,000,000 investment because of the uncertainty in administrative action in the future is substantial and generates an immediate injury.

The case law does not provide an easy solution to this question of reviewability. The Commission quotes language from Rochester Telephone Corp. v. United States, 307 U.S. 125, 130, 59 S.Ct. 754, 757, 83 L.Ed. 1147 (1939), where Mr. Justice Frankfurter, in summarizing the "negative order" cases, stated that resort to the courts is premature where "the order sought to be reviewed does not of itself adversely affect complainant but only affects his rights adversely on the contingency of future administrative action." See also FPC v. Hope Natural Gas Co., 320 U.S. 591, 619, 64 S.Ct. 281, 88 L.Ed. 333 (1944); Columbia Broadcasting System v. United States, 316 U.S. 407, 425, 62 S.Ct. 1194, 86 L.Ed. 1563 (1942).

In this Circuit, the two leading cases on reviewability are Magnolia Petroleum Co. v. FPC, 5 Cir. 1956, 236 F.2d 785, 791, Cert. denied, 352 U.S. 968, 77 S.Ct. 356, 1 L.Ed.2d 322 (1957) (denying reviewability); and Atlanta Gas Light Co. v. FPC, 5 Cir. 1973, 476 F.2d 142, 147 (finding reviewability). As stated in the latter case,

In general, the courts have declined to review non-final orders that are not "definitive" in their impact upon the rights of the parties and do not threaten the petitioner with "irreparable harm".

The requirement that the reviewable order be "definitive" in its impact upon the rights of the parties is something more than a requirement that the order be unambiguous in legal effect. It is a requirement that the order have some substantial effect on the parties which cannot be altered by subsequent administrative action.

476 F.2d at 147 (citations omitted). This test has since been followed in Shell Oil Co. v. FPC, 5 Cir. 1976, 531 F.2d 1324, 1326-27.

In response, Transco cites two cases to support its contention that the order is reviewable. In Texaco, Inc. v. FPC, 5 Cir. 1961, 290 F.2d 149, some gas producers had accepted temporary certificates with a vague refund condition and did not appeal until they received permanent certificates with the same condition attached. This Court held that they should have appealed the grant of the temporary certificate, saying

Clearly, the order granting the temporary certificates, when it embodied the conditions now complained of was an order which then aggrieved the petitioners. . . . This is not such a case as affected only eventualities that would affect petitioners' rights adversely on the contingency of future administrative action. Their right to a certificate without a condition in the terms proposed was then at issue and was then decided. The refusal of the Commission to grant the temporary certificate without the condition was an appealable order.

290 F.2d at 157. The force of this holding is greatly undercut by a case which Transco did not cite, FPC v. Sunray DX Oil Co., 391 U.S. 9, 88 S.Ct. 1526, 20 L.Ed.2d 388 (1968), where the...