Panhandle Producers and Royalty Owners Ass'n v. Economic Regulatory Admin.

Decision Date30 June 1987
Docket NumberNo. 86-1058,86-1058
Citation822 F.2d 1105
Parties, Energy Mgt. P 26,586 PANHANDLE PRODUCERS AND ROYALTY OWNERS ASSOCIATION, Petitioner, v. ECONOMIC REGULATORY ADMINISTRATION, Respondent.
CourtU.S. Court of Appeals — District of Columbia Circuit

Petition for Review of an Order of the Economic Regulatory administration.

Robert C. Platt, with whom Jeffrey G. Shrader and Marc C. Johnson, Amarillo, Tex., were on brief, for petitioner.

Thomas H. Kemp, Atty., Dept. of Energy, with whom Catherine C. Cook, Atty., Dept. of Energy, Washington, D.C., was on brief, for respondent.

Before SILBERMAN, WILLIAMS and D.H. GINSBURG, Circuit Judges.

Opinion for the Court filed by Circuit Judge WILLIAMS.

WILLIAMS, Circuit Judge:

Petitioner seeks review of an Economic Regulatory Administration ("ERA") order granting Northridge Petroleum Marketing U.S., Inc. blanket authorization under Sec. 3 of the Natural Gas Act ("NGA"), 15 U.S.C. Sec. 717b (1982), to import limited quantities of natural gas from Canada for a two-year period. Petitioner contends, among other things, that ERA improperly relied on a policy statement issued by the Secretary of Energy in February 1984, see 49 FED.REG. 6684 (1984) (the "Policy Statement"). We affirm.

I. BACKGROUND
A. The Statutory Scheme and Evolving Regulatory Strategy

Section 3 of the NGA prohibits the exportation or importation of natural gas without authorization, which is to be issued "unless ... [the Commission] finds that the proposed exportation or importation will not be consistent with the public interest." 15 U.S.C. Sec. 717b (1982).

With the creation of the Department of Energy ("DOE") in 1977, Congress reorganized administration of Sec. 3. Department of Energy Organization Act ("DOE Act"), Pub.L. No. 95-91, 91 Stat. 565 (1977) (codified, as amended, primarily at 42 U.S.C. Secs. 7101-7375 (1982)). It transformed the Federal Power Commission, which was originally charged with implementing Sec. 3, into the Federal Energy Regulatory Commission, and shifted Sec. 3 authority to the Secretary of Energy. See 42 U.S.C. Sec. 7151(b) (1982) (granting import/export authority to Secretary); id. Sec. 7172(f) (withdrawing import/export authority from FERC except to extent delegated by Secretary). The Secretary, in turn, issued delegation orders vesting most of his Sec. 3 authority in ERA. See id. Sec. 7252 (authorizing delegation by the Secretary); DOE Delegation Order No. 0204-54, 44 Fed.Reg. 56,735, 56,735 (1979); DOE Delegation Order No. 0204-25, 43 Fed.Reg. 47,769, 47,772 (1978).

Until 1984, these delegation orders (especially Delegation Order No. 0204-54) guided ERA's exercise of authority over imports. ERA evaluated applications for import authority case by case, comparing the proposed selling price with that of alternative fuels. It placed on the applicant the burden of proving that authorization would be in the public interest, see West Virginia Public Services Commission v. DOE, 681 F.2d 847, 851 (D.C.Cir.1982), demanding specifically that applicants make a "clear showing of regional need--i.e., a need on the applicants' particular pipeline systems that cannot be met by domestic gas supplies," id. at 860 (emphasis in original); see Tenneco Atlantic Pipeline Co., 1 E.R.A. p 70,103, at 70,557 (1978) ("ERA will look for a demonstration of end-user market need, as opposed to a mere showing of an interstate pipeline company's contractual obligations to deliver gas"). The declared policy also considered national "need," security of supply and effect on balance of payments. And ERA required the applicant to make a showing that the imports would not adversely affect the development of domestic supplies. Tenneco, 1 E.R.A. at 70,554-56. See generally West Virginia, 681 F.2d at 860-61.

By the Fall of 1982 it became apparent that Delegation Order No. 0204-54 was ill-matched to prevailing conditions. Long-term contracts were binding domestic producers to take Canadian gas at prices that had since become uncompetitive. See 49 FED.REG. at 6686. In late 1982, DOE, in conjunction with FERC and the Department of State, began to review natural gas import policy, soliciting oral and written public comments. 48 FED.REG. 34,501 (1983); 47 FED.REG. 57,756 (1982). The process culminated in the Secretary's issuance of the Policy Statement, "intended to provide a clear definition of public interest," 49 FED.REG. at 6687. The Secretary also issued Delegation Order No. 0204-111, id. at 6690, explicitly superseding Delegation Order No. 0204-54. The new delegation order generally instructed ERA to follow the policies prescribed by the Secretary, and to give special (though not necessarily exclusive) attention to three factors--competitiveness of the import, need for the natural gas and security of supply. The Policy Statement discussed each of the factors at some length.

The Policy Statement declared that "[t]he policy cornerstone of the public interest standard is competition." Id. at 6687. Further, it "presume[d]" that if buyers and sellers could negotiate "free of constraining governmental limits, [they would] ... be responsive to market forces over time." Id. Accordingly, for assurance that the arrangements would be competitive, the Policy Statement looked to flexibility in a proposed transaction's contractual arrangements. So long as flexibility as to price or volume allowed the buyer to respond to changing market forces, the gas would be presumed competitive in price. An opponent of the proposed import could, however, rebut the presumption. Id.

Similarly, the Policy Statement still treated "need" as relevant, but viewed it as "a function of competitiveness," id. at 6687, and announced a second presumption:

[I]f the imported gas is competitive in the proposed market area and, through its contract terms, will remain competitive throughout the contract period, then the rebuttable presumption exists that the gas is needed in that market.

Id. at 6688. Again, opponents of a particular authorization could rebut the presumption, evidently in terms of either the regional or the national market, id., though the Policy Statement did not specify what evidence might be persuasive of lack of need.

Finally, the Policy Statement indicated that security of supply remained relevant, especially for long-term arrangements, and that ERA would "consider international trade policy, foreign policy, ... national security interests," and "other factors as may be appropriate...." Id.

B. The Northridge Import Authorization

In July 1985, Northridge, a wholly owned subsidiary of a Canadian corporation, applied to ERA for blanket authorization to import up to 100 billion cubic feet ("Bcf") of Canadian natural gas over a two-year period. Northridge intended to engage in individually negotiated, short-term transactions directly with purchasers located primarily in the midatlantic and midwestern United States. It anticipated that its sales would generally displace higher-priced energy supplies. Petitioner intervened to oppose Northridge's application, requesting a trial-type hearing.

In Order No. 88, ERA gave its approval, conditioned on Northridge's quarterly reporting of the details of each transaction entered into under the authorization. Joint Appendix ("J.A.") at 100a. In accordance with the Policy Statement, ERA concluded that since each transaction during that two-year term would be freely negotiated, the transactions would only take place if the gas was competitively priced and needed. J.A. at 96a. It considered advance knowledge of the precise terms of each spot transaction unnecessary; the public interest would be fully protected by the reporting condition. Id. ERA also cited the Secretary's belief that short-term spot sales of the type proposed would increase competition in the natural gas market. Id. at 99a. ERA declined to hold an evidentiary hearing; petitioner had pressed no material issues of fact, only "issues of policy or law." Id. at 98a-99a; see 10 C.F.R. Sec. 590.313(a) (1986). Petitioner sought rehearing, which ERA denied in Order No. 88-A, see J.A. at 118a-28a.

Petitioner seeks review on three grounds. First, it complains that ERA improperly relied on the Policy Statement as if it were a substantive rule. Second, petitioner argues that the Policy Statement and ERA's decision here improperly placed on petitioner the burden of proof and failed to consider necessary factors. Third, petitioner objects to the denial of a trial-type hearing. 1 We reject all three attacks. Before doing so, we briefly consider petitioner's standing.

II. STANDING

Section 19(b) of the NGA, 15 U.S.C. Sec. 717r(b) (1982), authorizes judicial review at the behest of any party "aggrieved" by an order thereunder. Petitioner is an association representing the interests of gas producers, royalty owners and service companies, and its members allegedly sell natural gas to interstate pipelines that import gas from Canada. J.A. at 63a. ERA contends that petitioner lacks standing to challenge Order No. 88, for want of injury in fact. We find standing.

Petitioner clearly asserts an injury in fact, fairly traceable to ERA's conduct and redressable by the relief sought. See Allen v. Wright, 468 U.S. 737, 750-52, 104 S.Ct. 3315, 3324-25, 82 L.Ed.2d 556 (1984). Order No. 88 permits entry of up to 100 Bcf of gas into the United States gas market. Under undisputed economic principles, such an increase in supply is likely to depress the prices that petitioner's members can secure. Vacation of Order No. 88 would redress the injury, sheltering petitioner's members from this adverse effect. Similarly, those allegations suffice to establish the "concrete, perceptible harm of a real, non-speculative nature" that Sec. 19(b)'s aggrievement language demands. Office of the Consumers' Counsel v. FERC, 808 F.2d 125, 128-29 (D.C.Cir.1987).

Petitioner is also at least "arguably" within the zone of...

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