Borden, Inc. v. F.E.R.C.
| Decision Date | 23 September 1988 |
| Docket Number | No. 87-4710,87-4710 |
| Citation | 855 F.2d 254 |
| Parties | BORDEN, INC., et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Robert A. Jablon and Scott H. Strauss c/o Spiegel & McDiarmid, Washington, D.C., for Certain Florida Cities.
John T. Ketcham, Phil W. Jordan, Washington, D.C., for Gardinier, Inc. and Coopers & Lybrand, Trustee.
Samuel Soopper, Jerome Feit, Sol., FERC, Washington, D.C., for FERC.
Lee A. Monroe, Sidley & Austin, Washington, D.C., for Borden, Inc.
Linda Gillespie Stuntz, Mary Ellen Powers, Washington, D.C., for Basic Inc.
Platt W. Davis, III, Washington, D.C., for Florida Gas Transmission Co.
John T. Ketcham, Phil W. Jordan, Wright & Talisman, Washington, D.C., for Gardinier, Inc., et al.
Petitions for Review of Orders of the Federal Energy Regulatory Commission.
Before GARZA, JOHNSON, and HIGGINBOTHAM, Circuit Judges.
Petitioners Borden, Inc.; Basic Incorporated; Gardinier, Inc.; and Florida Gas Transmission Company seek judicial review of an order 1 of the Federal Energy Regulatory Commission directing Borden, Basic, and Gardinier to make so-called monetary payback with interest. We affirm.
As explained in a previous opinion in this case:
Florida Gas Transmission Company operates a gas transmission line from Texas to Central and Northern Florida. In 1959, the gas company filed a curtailment plan with the Commission due to expected shortages in the supply of gas. Under this plan, Florida Gas's customers were classified as firm or interruptible customers. Firm customers were those to whom Florida Gas was bound by contract to deliver a stated amount of gas. Interruptible customers were those whose contracts allowed Florida Gas to temporarily cease delivery of gas under certain conditions. All firm customers were to be supplied with gas before interruptible customers during a shortage. Interruptible customers were further divided into two groups: resale customers--those who resell gas rather than use it for their own purposes--and direct sale customers--those who purchase gas primarily for their own needs. Resale customers were given preference over direct sale customers during shortages. 2
The instant case involves a wrangling over a 1970s gas shortage, a wrangling between two groups of Florida Gas customers all within the same curtailment plan priority category of interruptible direct sale customers: three petitioning industrial customers Borden, Inc.; Basic Incorporated; and Gardinier, Inc., 3 on the one hand, and a group of intervening municipal customers called the Florida Cities, 4 on the other hand.
In 1973, Florida Gas apparently notified some or all of its interruptible direct sale customers that an anticipated gas shortage would require that the curtailment plan filed in 1959 be put into effect. Basic, Borden, and Gardinier applied to the Commission 5 for temporary and permanent extraordinary relief from their gas allotments under the curtailment plan. Temporary relief was granted. 6 The Cities opposed the application for extraordinary relief altogether, but also urged:
[E]ven assuming that it were in the public interest and legally permissible to upset the [Florida Gas] contracts on the grounds that Applicants were to be "preferred", there is no reason why they should get the benefit of added gas supplies without compensation to other customers in their same class. If gas is curtailed from Cities to give Applicants special relief, Cities must purchase alternate fuels, most likely on the spot market. If any gas is to taken from Cities to the special benefit of Applicants, thereby increasing Applicants proportional allotment, then the Commission should order a condition that Applicants compensate the other customers in the preferred interruptible class the amount of additional revenues that they would have to pay for alternate fuels. 7
The Commission later granted permanent extraordinary relief and rejected the Cities' bid for compensation. 8
On petition for review, this Court remanded for further consideration of "the issue of financial compensation." 9 On remand, the Commission again rejected compensation. 10
On subsequent petition for review, this Court again remanded and directed the Commission "to consider, on the merits, whether compensation should be awarded the Cities to remedy any financial inequity resulting from the emergency relief." 11 On remand, the Commission this time accepted the Cities' compensation proposal, treating it as a proposal for monetary payback upon which the grant of extraordinary relief should have been conditioned. 12 Borden, Basic, Gardinier, and Florida Gas now petition for judicial review, raising what we treat below as eight issues.
In Federal Power Commission v. Louisiana Power & Light Co., 13 the Supreme Court stated that the substantive standard governing [Commission] evaluation of curtailment plans is found in Sec. 4(b) of the [Natural Gas] Act:
"No natural-gas company shall, with respect to any transportation or sale of natural gas subject to the jurisdiction of the Commission, (1) make or grant any undue preference or advantage to any person or subject any person to any undue prejudice or disadvantage, or (2) maintain any unreasonable difference in rates, charges, service, facilities, or in any other respect, either as between localities or as between classes of service."
The same substantive standard governs Commission evaluation of applications for extraordinary relief from curtailment plans. 14 In the present case, the Commission has now determined "that the paybacks are necessary and appropriate to prevent undue discrimination prohibited by the Natural Gas Act." 15
Petitioners seek judicial review pursuant to 15 U.S.C. Sec. 717r. This statute provides that the "finding of the Commission as to the facts, if supported by substantial evidence, shall be conclusive." 16 Beyond reviewing the findings of fact for substantial evidence, courts review Commission orders to prevent an " 'arbitrary result.' " 17 In the margin, we set out the "more discriminating" criteria developed by the Supreme Court in elaboration upon the standard of review. 18 The " 'ultimate issue in judicial review of [the Commission's] determinations' " is the " 'requirement of "reasoned consideration." ' " 19
Petitioners allege that the Commission, by speaking now in terms of monetary payback instead of compensation, has shifted the legal theory of the case and contend that this alleged shift in legal theory violates due process. We pretermit discussion of the law governing this claim because we conclude that petitioners' factual premise is faulty. In other words, we conclude that there has been no shift in legal theory.
As noted, the Cities at the outset requested that the Commission grant extraordinary relief from the curtailment plan, if at all, on the condition that those receiving more gas compensate in money those from whom the gas would be taken. The Cities used the term compensation to describe their request. The request placed before the Commission the issue whether the extraordinary relief sought by petitioners was unduly discriminatory toward the Cities under subsection 4(b) of the Act.
Throughout these proceedings, numerous terms have been used to describe the Cities' request: "financial[ ] compensat[ion]," 20 "[r]eimbursement," 21 "past damages," 22 "recompense," 23 and arguably "payback" 24 as well. The Commission now distinguishes between two situations: (1) recompense as a condition of a grant of extraordinary relief from a curtailment plan and (2) recompense under the curtailment plan itself. The Commission refers to extraordinary relief recompense as payback while referring to curtailment plan recompense as compensation. 25 The Cities requested extraordinary relief recompense. The Cities described their request as compensation. The Commission now calls this a request for payback. Whether called payback or compensation, the Cities' request posed from the outset the legal issue whether the extraordinary relief sought by petitioners was unduly discriminatory toward the Cities. The Commission has not shifted away from this issue, but has squarely addressed it.
Petitioners contend that the Commission's order of monetary payback is not supported by reasoned consideration. We reject this contention: The Commission reasoned chiefly that the public interest required reallocation to petitioners of some of the Cities' allotment of gas under the curtailment plan, not reallocation of the gas' inexpensiveness vis-a-vis other fuels.
While alternative fuels could be employed for the ends to which the Cities put their gas, there were no such alternative fuels for petitioners' ends. With reallocation, the operations of both the Cities and petitioners could continue. Without reallocation, petitioners' operations would be shut down, and the economy would suffer. The public interest in a sound economy required that this injury to the economy be avoided through reallocation.
Reallocation had the collateral consequence, however, of keeping petitioners' fuel costs down because gas was then cheaper than other fuels and petitioners were permitted to pay gas prices to Florida Gas for the extraordinary relief gas received. On the other hand, the fuel costs of the Cities went up as they purchased the more expensive alternative fuels. In the words of the Commission, the public interest required reallocation of the gas because of "its physical properties, not because it was cheaper than fuel oil." 26 The public interest did not require reallocation to petitioners of the gas' "economic value," 27 that is, its relative inexpensiveness.
In other words, because of their placement in the same curtailment plan priority...
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