Enserch Exploration, Inc. v. F.E.R.C., 88-4066

• Decision Date: 30 October 1989
• Docket Number: No. 88-4066,88-4066
• Citation: 887 F.2d 81
• Parties: ENSERCH EXPLORATION, INC., as Managing General Partner of EP Operating Company, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 81

887 F.2d 81

ENSERCH EXPLORATION, INC., as Managing General Partner of EP

Operating Company, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.

No. 88-4066.

United States Court of Appeals, Fifth Circuit.

Oct. 30, 1989.

Kevin M. Sweeney, George C. Garikes, Washington, D.C., for Enserch Exploration.

Jerome Feit, Sol., F.E.R.C., Robert H. Solomon, Washington, D.C., for F.E.R.C.

E.R. Island, David L. Huard, Los Angeles, Cal., for Southern California Gas Co.

Steve Hunnicutt, Houston, Tex., for Texas Eastern Transmission Corp.

Michael J. Manning, Washington, D.C., for Delhi Gas Pipeline Corp.

Douglas F. John, Julie Simon, Washington, D.C., for Travis Peak Producers Group.

Petitions for Review of Orders of The Federal Energy Regulatory Commission.

Before CLARK, Chief Judge, BROWN and JOHNSON, Circuit Judges.

JOHNSON, Circuit Judge:

Enserch Exploration, Inc. petitions for review of the Commission's order remanding a tight formation designation to the Texas Railroad Commission and of the Commission's order reopening seventy-five individual tight formation well determinations. For the reasons cited herein, we affirm the remand order but dismiss the petition for review of the reopening order for lack of jurisdiction.

I. FACTS AND PROCEDURAL HISTORY

The Natural Gas Policy Act authorizes the Federal Energy Regulatory Commission (hereinafter Commission) to prescribe incentive prices for certain categories of natural gas that are produced under conditions which "present extraordinary risks or costs." 15 U.S.C. Sec. 3317. Among those categories is gas produced from a tight formation. ¹ A producer operating in a field that has been designated as a tight formation may be entitled to higher incentive prices for gas produced from that field.

Section 503 of the Natural Gas Policy Act (hereinafter NGPA) provides the contemporary statutory framework for the identification and designation of gas entitled to incentive pricing. A four step process is involved. First, the local regulatory authority ² recommends that a field be designated as a tight formation. Second, the Commission may affirm, reverse, remand, issue a preliminary finding or simply take no action on the local authority's recommendation. If the Commission takes no action, the local authority's recommendation becomes final forty-five days after receipt of the recommendation by the Commission. If the Commission issues preliminary findings but fails to take further action, the local authority's recommendation becomes final one hundred twenty days after the date the Commission's preliminary finding was issued. In step three, an interested producer may petition the local regulatory authority to recommend that a particular well within the designated tight formation be classified as a tight formation well. If the local regulatory authority agrees, it recommends to the Commission that the particular well be classified as a tight formation well. Fourth, the Commission may affirm, reverse, remand, issue a preliminary finding, or simply take no action on the local authority's recommendation. As in step two, the local authority's individual tight formation well recommendation becomes final in forty-five days from the date the Commission receives the recommendation unless the Commission has issued a preliminary finding. In the event that the Commission has issued a preliminary finding, the Commission has one hundred twenty days from the date the preliminary finding was issued in which to take further action before the local authority's recommendation becomes final. See Ecee, Inc. v. FERC, 645 F.2d 339, 345-53 (5th Cir.1981) (discussing the statutory divisions of responsibilities between the Commission and the local regulatory authority).

The Commission is obligated to reverse the local regulatory authority's determination if "[the Commission] makes a finding that such determination is not supported by substantial evidence in the record upon which such determination was made." 15 U.S.C. Sec. 3413(b)(1). Absent such a finding, the Commission may remand to the local regulatory authority if

(A) the Commission finds that a State or Federal agency determination is not consistent with information contained in the public records of the Commission, and which is not part of the record upon which such determination was made; and

(B) such preliminary finding and notice thereof ... is made within 45 days after the date on which the Commission received notice of such determination ... and the final such finding is made within 120 days after the date of the preliminary finding.

Id. Sec. 3413(b)(2). Once final, the determination is binding unless:

(A) if in making such determination the Commission or such Federal or State agency relied on any untrue statement of a material fact; or

(B) if there was omitted a statement of material fact necessary in order to make the statements made not misleading, in light of the circumstance under which they were made, to the Federal or State agency in making such final determination or to the Commission in reviewing such determination.

Id. Sec. 3413(d)(1).

Prior to Williston Basin Interstate Pipeline Co. v. FERC, 816 F.2d 777 (D.C.Cir.1987), cert. denied, 484 U.S. 1025, 108 S.Ct. 748, 98 L.Ed.2d 761 (1988), the Commission conducted its review of local authority tight formation recommendations pursuant to Sec. 501 of the NGPA rather than Sec. 503. Under Sec. 501, the Commission's review of a tight formation recommendation was made under the Commission's rulemaking authority. ³ At the time the instant proceedings began, the Commission, operating under its Sec. 501 rulemaking authority, received such a recommendation from the Texas Railroad Commission regarding the Travis Peak Field. ⁴ Upon review of the data submitted by the Texas Railroad Commission in support of the Travis Peak recommendation, the Commission advised the Texas Railroad Commission that the data did not appear to satisfy the prescribed permeability and flow rate guidelines. ⁵ Thereafter, the Texas Railroad Commission tendered an amended recommendation. As with the first recommendation, the amended recommendation did not meet with the Commission's approval; informal meetings were therefore held in order to resolve the problem. Eventually, on May 23, 1986, the Commission issued Order No. 450 which designated most, but not all, of the Travis Peak Field as a tight formation. ⁶

Less than a month later, on June 19, 1986, Delhi Gas Pipeline Corporation (hereinafter Delhi) filed a petition for rehearing of Order No. 450. In support thereof, Delhi argued that the data submitted to the Commission regarding the tight field qualities of the Travis Peak Field were unrepresentative of the Field and were outdated at the time of submission. In further support of its contentions, Delhi submitted two documents. One represented an analysis of fifty-three Travis Peak wells completed after 1980 that reportedly failed to meet tight formation standards. The other was a 1986 report conducted by the Gas Research Institute demonstrating that average permeability in the Travis Peak Field exceeded permissible levels.

Approximately six months after Delhi's June 19, 1986 petition for rehearing of Order No. 450, the Commission, on January 9, 1987, granted the petition for rehearing, vacated Order No. 450, and reopened the record. The parties to the reopened rulemaking proceeding held several prehearing conferences which addressed such topics as whether the seventy-five individual Travis Peak tight well determinations would be affected by the outcome of the hearing. Before that and other issues were resolved, however, the Commission cancelled the hearing as a result of the D.C. Circuit's decision in Williston Basin Interstate Pipeline Co. v. FERC which effectively stripped the Commission of its Sec. 501 rulemaking authority. ⁷ After Williston was decided, the Commission, proceeding under Sec. 503, could pursue five avenues with respect to the Texas Railroad Commission's recommendation that the Travis Peak Field qualify as a tight formation: the Commission could affirm, reverse, remand, issue a preliminary finding, or simply take no action on that recommendation. ⁸ Accordingly, the Commission issued a "notice of preliminary finding" to remand the designation of the Travis Peak Field as a tight formation to the Texas Railroad Commission. Texas Railroad Commission, Travis Peak Formation, 40 FERC p 61,100 (July 29, 1987).

In support of its decision to remand, the Commission noted that the information provided to it by Delhi was inconsistent with the Texas Railroad Commission's designation of the Travis Peak Field as a tight formation. ⁹ Moreover, the Commission stressed that the new information provided by Delhi had not been a part of the record upon which the Texas Railroad Commission had made its original designation. See "Final Order Remanding Jurisdictional Agency Determination," Texas Railroad Commission, Travis Peak Formation, 41 FERC p 61,213, 61,580-81 (1987) ("the data submitted by Delhi raise legitimate doubts as to whether Travis Peak qualifies as a tight formation under the applicable standards of the Commission's regulations"). Thereafter, the Commission, on November 25, 1987, issued an "Order Reopening Final Well Category Determinations." The Commission, relying on its reopening authority under Sec. 503(d)(1)(A), concluded that the seventy-five individual tight field well determinations of the Texas Railroad Commission had rested on an "untrue statement of fact," namely, the Commission's own earlier designation of the Travis Peak Field as a tight formation.

On January 25, 1988, the Commission dismissed all requests for rehearing of the remand order. Texas Railroad Commission, Travis Peak Formation, 42 FERC p 61,074 (1988). Likewise, on January 25, 1988, the Commission dismissed requests for rehearing of the "Order Reopening Final Well Category Determinations." Id. at p...