Arctic Slope Regional Corp. v. F.E.R.C.
| Decision Date | 27 October 1987 |
| Docket Number | 86-1427,Nos. 86-1115,s. 86-1115 |
| Citation | 832 F.2d 158 |
| Parties | ARCTIC SLOPE REGIONAL CORPORATION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, and United States of America, Respondents, State of Alaska, Amerada Hess Pipeline Corp., ARCO Pipe Line Company, Exxon Pipeline Co., Sohio Alaska Pipeline Co., Union Alaska Pipeline Co., BP Pipelines Inc., Mobil Alaska Pipeline Co., Phillips Alaska Pipeline Corp., Intervenors. ARCTIC SLOPE REGIONAL CORPORATION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, and United States of America, Respondents, Amerada Hess Pipeline Corp., Exxon Pipeline Co., ARCO Pipe Line Company, BP Pipelines Inc., Mobil Alaska Pipeline Co., Unocal Pipeline Co., Phillips Alaska Pipeline Corp., State of Alaska, Sohio Alaska Pipeline Co., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
O. Yale Lewis, Jr., Seattle, Wash., with whom Richard A. Curtin, John W. Phillips, Columbus, Ohio, and William W. Becker, Washington, D.C., were on the brief, for petitioner.
Hanford O'Hara, Atty., F.E.R.C., with whom Catherine C. Cook, General Counsel and Jerome M. Feit, Sol., F.E.R.C., Washington, D.C., were on the brief, for respondent, F.E.R.C. Joseph S. Davies, Atty., F.E.R.C., Washington, D.C., also entered an appearance for respondent, F.E.R.C.
John J. Powers, III, Robert J. Wiggers and Donald A. Kaplan, Attys., Dept. of Justice, Washington, D.C., entered appearances for respondent, U.S.
Richard J. Flynn, with whom Eugene R. Elrod, Kevin Hawley, Washington, D.C., for Exxon Pipeline Co.
Albert S. Tabor, Jr., John E. Kennedy, Houston, Tex., and David T. Andril, Washington, D.C., for Amerada Hess Pipeline Corp.
Robert E. Jordan, III, Steven H. Brose, Timothy M. Walsh and Steven Reed, Washington, D.C., for ARCO Pipe Line Co.
Eugene E. Threadgill, Washington, D.C., for BP Pipelines, Inc.
John P. Dean, Washington, D.C., for Mobil Alaska Pipeline Co.
Raymond N. Shibley, Brian D. O'Neill and Glenn E. Davis, Washington, D.C., for Phillips Alaska Pipeline Corp.
Robert A. Johnson, Frederick G. Wohlschlaeger, Philip R. Ehrenkranz, Keith R. McCrea, Paul F. Forshay, Washington, D.C., for Sohio Alaska Pipeline Co.
Patrick M. Raher and David J. Hayes, Washington, D.C., for Union Alaska Pipeline Co., were on the joint brief for intervenors, Exxon Pipeline Co., et al. Kenneth P. Fountain, Houston, Tex., also entered an appearance for Exxon Pipeline Co.
Gerald A. Costello also entered an appearance for ARCO Pipe Line Co.
R. Brian Corcoran, Washington, D.C., also entered an appearance for BP Pipelines, Inc.
Andrew J. Kilcarr, Washington, D.C., also entered an appearance for Mobil Alaska Pipeline Co.
John Lansdale, James L. Trump and William K. Black, Washington, D.C., also entered appearances for Sohio Alaska Pipeline Co.
Steven S. Rosenthal and Robert H. Loeffler, Washington, D.C., entered appearances for intervenor, State of Alaska.
Before RUTH BADER GINSBURG, STARR and NIES *, Circuit judges.
Opinion for the Court filed by Circuit Judge STARR.
These consolidated cases present a challenge to orders by the Federal Energy Regulatory Commission approving a multi-party settlement of extended administrative litigation attacking rates filed by the owners of the Trans Alaska Pipeline System (TAPS). After reviewing the various contentions pressed by the sole remaining party which contested the settlement, we conclude that the Commission's action is within lawful bounds and accordingly deny the petitions for review.
The story of the Trans Alaska Pipeline System has been oft repeated and scarcely requires recounting yet again. Suffice it to say that, after the discovery of vast oil reserves on the North Slope of Alaska in 1969, various oil companies constructed an 800-mile pipeline from the Prudhoe Bay field south to the warm water port of Valdez. From rather modest estimates at the outset, TAPS was ultimately completed at a cost of over $9 billion. Oil started to flow through TAPS in the summer of 1977 and has continued since. TAPS' owners, 1 common carriers under the Interstate Commerce Act, 49 U.S.C. Secs. 1 et seq. (ICA or Act), duly filed their tariff rates with the Interstate Commerce Commission in 1977, as required by law, see 49 U.S.C. Sec. 1(1)(b). The rates as filed in 1977 ranged from $6.04 to $6.44 per barrel. Promptly thereafter, in June 1977, several parties filed protests and petitions seeking to invoke the Commission's investigatory powers pursuant to sections 15(1) and 15(7) of the Act and challenging the rates as unjust and unreasonable. The parties included the Department of Justice, the State of Alaska, the ICC Bureau of Investigations and Enforcement, and the Arctic Slope Regional Corporation (Arctic), the petitioner in these two cases.
Arctic is a private corporation. It represents the interests of Alaskan natives whose aboriginal claims were extinguished by an act of Congress granting them title to 4.5 million acres of land on the North Slope. 2 Arctic thus enjoys ownership interests in substantial possible and proven oil reserves, the only possible method of transport for which is TAPS. However, Arctic's interest in TAPS tariffs stems from its ongoing negotiation of exploration leases and the level of bonus and royalty payments it may achieve, sources of compensation that are potentially affected by transportation costs in bringing oil via TAPS to market. Arctic has never shipped any oil through the pipeline; indeed, all agree that Arctic has no realistic possibility of doing so until sometime in the 1990's.
Following the filing of initial rates and the ensuing protests, protracted administrative litigation unfolded before FERC, which on October 1, 1977 stepped into the shoes of the ICC as regulator of oil pipeline rates. 3 The rate challenges fell into two categories. First, the challengers objected to the rate setting methodology and proposed rate of return established in the initial filing. Second, the objectors claimed that imprudent costs had been incurred during construction of the pipeline. 4 Accordingly, the Administrative Law Judge assigned to the case divided the litigation into so-called Phase I and Phase II proceedings to coincide with these two distinct areas of challenge. See Brief for Petitioner at 10. The complexity of the issues and the magnitude of the proceedings which followed are dramatically evidenced by the expenditure of hundreds of days of hearings before several ALJs, with over 15,000 exhibits and upwards of 65,000 pages of transcript. See Brief for Intervenors at 7.
With the agency proceeding grinding on at a glacial pace, Alaska and two of the TAPS owners, ARCO and BP, entered into settlement negotiations in 1984. From this beginning, Alaska and six of the eight owners managed to reach settlement by July 1985. See Settlement Agreement (June 28, 1985), Joint Appendix (J.A.) at 502. (Phillips Alaska, not an original party to the settlement, agreed to join on July 3, 1985, see Stipulation Adopting Offer of Settlement (July 3, 1985) (J.A. at 681).) Among other things, the settlement established a complex and comprehensive rate-setting methodology (the TAPS Settlement Methodology or TSM) until the year 2011, the estimated remaining useful life of the pipeline. The settlement further established rate ceilings for the life of the pipeline and provided for a substantial refund to the State of Alaska for tariff costs previously incurred. Under the TSM, which is the centerpiece of the settlement agreement, rates are set on an annual basis, and are regarded under the regulatory scheme as any other rate filings by a common carrier. Thus, any such rates are subject to challenge by non-settling parties, such as Arctic, as well as any other non-signatory. Over the long haul, the financial impact of the settlement is two-fold: (1) to "front-end load" the tariffs charged by the owners in the early, pre-settlement years of the pipeline and (2) to provide for diminishing rates beginning with the initial rates filed under the settlement in December 1985. 5
Blessed with Justice Department approval, this Six-Carrier Settlement Agreement was presented to the various ALJs responsible for the multi-faceted litigation and subsequently was certified by them to the Commission. However, the proposed arrangement was attacked by several parties namely Arctic, the Alaska Public Interest Research Group (AkPIRG), 6 and the two remaining non-settling owners, SOHIO and Amerada Hess. The bases for these attacks included assertions that numerous genuine material issues of fact remained and that the settlement established unjust and unreasonable, non-cost based tariffs.
The Commission severed the contesting parties and approved the Six-Carrier Settlement as uncontested on October 23, 1985. See October 23 Order, 33 F.E.R.C. (CCH) p 61,064 (S.A. at 220). Buoyed by the Justice Department's support and that of its own staff, the Commission concluded that the settlement was fair and reasonable and in the public interest, as required by its rules. See 18 C.F.R. Sec. 385.602(g) (1987). To accommodate the interests of the non-settling parties, the Commission remanded the case to the ALJs to consider the non-settling parties' objections and to determine whether the settlement should be imposed upon them. On December 19, 1985, the Commission denied Arctic's motion for rehearing of the October 23 Order. See Order Denying Rehearing, 33 F.E.R.C. (CCH) p 61,392 (December 19, 1985) (S.A. at 226) (the "December 19 Order").
Arctic then petitioned this court for review of the December 19 Order. That petition comprises No. 86-1115. The TAPS owners, as intervenors, moved to dismiss the petition on the grounds that Arctic was not aggrieved by the settlement, and that Arctic therefore lacked standing under the Hobbs Act, 28 U.S.C. Sec. 2344 (1982), to seek review of the Commission's action....
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