Great Lakes Gas Transmission Ltd. Partnership v. F.E.R.C.
| Decision Date | 05 February 1993 |
| Docket Number | No. 91-1394,91-1394 |
| Citation | 984 F.2d 426 |
| Parties | , 139 P.U.R.4th 588, Util. L. Rep. P 13,911 GREAT LAKES GAS TRANSMISSION LIMITED PARTNERSHIP, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. ANR Pipeline Company, Bay State Gas Company, et al., Long Island Lighting Company, Michigan Consolidated Gas Company, Natural Gas Pipeline Company of America, Northeast Energy Associates and North Jersey Energy Associates, The Peoples Gas Light and Coke Company, ProGas Limited, and Texas Eastern Transmission Corporation, Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Petition for Review of an Order of the Federal Energy Regulatory Commission.
James D. McKinney, Jr., with whom Bernard A. Foster, III, G. William Stafford, Washington, DC, and Narinder J.S. Kathuria, Detroit, MI, were on the brief, for petitioner. Alex A. Goldberg, Washington, DC, also entered an appearance for the petitioner.
Edward S. Geldermann, Atty. Federal Energy Regulatory Commission ("FERC"), with whom William S. Scherman, General Counsel, Jerome M. Feit, Sol., Joseph S. Davies, Deputy Sol., Randolph Lee Elliott, Atty., FERC, Washington, DC, were on the brief, for respondent. Timm Abendroth, Atty., FERC, Washington, DC, also entered an appearance for the respondent.
J. Gordon Pennington and Daniel F. Collins, Washington, DC, entered an appearance for intervenor ANR Pipeline Co.
Cheryl L. Jones and Barbara K. Heffernan, Washington, DC, entered an appearance for intervenor Bay State Gas Co., et al.
Robert W. Burke, Jr. and James F. Bowe, Jr., Washington, DC, entered an appearance for intervenor Long Island Lighting Co.
Jeffrey M. Petrash, Washington, DC, entered an appearance for intervenor Michigan Consolidated Gas Co.
Carol A. Smoots, Paul E. Goldstein, Paul W. Mallory, Emmitt C. House and Georgetta J. Baker, Lombard, IL, entered an appearance for intervenor Natural Gas Pipeline Co. of America.
Charles H. Shoneman, Washington, DC, entered an appearance for intervenor Northeast Energy Associates and North Jersey Energy Associates.
Thomas M. Patrick, Chicago, IL, entered an appearance for intervenor The Peoples Gas Light and Coke Co.
Paul W. Fox, Washington, DC, entered an appearance for intervenor ProGas Ltd.
F. Nan Wagoner, Houston, TX, entered an appearance for intervenor Texas Eastern Transmission Corp. Before: MIKVA, Chief Judge, EDWARDS and HENDERSON, Circuit Judges.
Opinion for the Court filed by Circuit Judge HARRY T. EDWARDS.
The Great Lakes Gas Transmission Limited Partnership petitions this court for review of a certificate of public convenience and necessity issued by the Federal Energy Regulatory Commission ("FERC" or "Commission") pursuant to its authority under section 7 of the Natural Gas Act ("NGA"), 5 U.S.C. § 717f (1988). Tennessee Gas Pipeline Co., 52 F.E.R.C. p 61,257 (1990) (hereinafter "Order"). In 1990, FERC granted Great Lakes a certificate to expand its pipeline facility, but imposed a condition on the certificate providing that Great Lakes would be "at risk" for the construction costs of the facility if, at any time during the depreciable life of the facility, Great Lakes' suppliers did not have an export license from the Canadian National Energy Board ("NEB") for the full capacity of the facility. Great Lakes contends that this at-risk condition is not supported by reasoned, principled decisionmaking on the record. We agree, and grant Great Lakes' petition.
Great Lakes is a limited partnership engaged in the transport of natural gas through pipelines that it owns and operates in Wisconsin, Minnesota and Michigan. Since 1967, Great Lakes has transported gas for TransCanada Pipelines, Limited, a Canadian shipper of natural gas. 1 On February 8, 1989, Great Lakes entered into an agreement with TransCanada to increase (by 417,500 thousand cubic feet (Mcf) per day) the volumes of gas that it shipped under an existing contractual agreement between the parties. The contract for increased service was to commence on November 1, 1990, and run until October 31, 2005, when the underlying contract expired. Amendatory Agreement, reprinted in Brief of Petitioner, Addendum at A-41-45, Great Lakes Gas Transmission Limited Partnership v. FERC, No. 91-1394 (D.C.Cir.1992).
On February 24, 1989, Great Lakes filed an application with the Commission, under its standard certification procedures, 2 seeking a certificate of public convenience and necessity to expand its existing facilities to transport the increased volumes of gas for TransCanada. Under its proposal, Great Lakes, which already had certificate authority to transport up to 987,500 Mcf of gas per day for TransCanada, would receive the additional gas at an interconnection at the international border near Emerson, Manitoba, and would "transship" the gas to an interconnection at the international border near St. Clair, Michigan. Order, 52 F.E.R.C. at 61,917, 61,918. From there, TransCanada would deliver 285,000 Mcf of the gas to the "Niagara import point projects," a natural gas network serving the northeastern United States, and would deliver the remaining 132,500 Mcf of gas to customers in eastern Canada. Id. at 61,907-08. As an initial rate, Great Lakes proposed to charge TransCanada the same rate as that in their existing contractual agreement ("Rate Schedule T-4"). In order to provide the expanded service to TransCanada, Great Lakes also proposed to construct and operate 459.6 new miles of pipeline in Wisconsin, Minnesota and Michigan, and 25 new "aerodynamic assemblies" at its compressor stations. Great Lakes estimated the cost of constructing the proposed facilities at $438,498,000. Id. at 61,917.
On September 13, 1990, the Commission granted Great Lakes' certificate application, as well as applications from several other gas transporters proposing to construct facilities to transport Canadian gas to the northeastern United States, in a proceeding known as "Phase III" of the Niagara import point projects. Order, 52 F.E.R.C. at 61,905. However, citing concern over the supply of Canadian gas into the proposed facilities, the Commission imposed the following condition on the certificates issued:
Construction and operation of the authorized facilities shall not begin until applicants have filed with the Commission copies of final, long-term export licenses from the NEB of sufficient volume and duration to ensure the full cost recovery of the facilities utilized to transport Canadian gas; or in the alternative, the applicants shall be required to bear the responsibility for any shortfall in cost recovery if whatever export authority ultimately granted by the NEB for any of the volumes proves to be inadequate to allow for the recovery of the costs of the facilities approved herein. In that event, the pipeline applicants are explicitly prohibited from shifting any of the costs associated with the facilities and services authorized herein onto any of their other customers.
Id. at 61,927 (emphasis in original).
The effect of this condition is to place the transporters of gas at risk for the recovery of construction costs if, at any time during the "full cost recovery" period of their pipelines, their Canadian shippers are unable to obtain NEB export authority for the full volume of gas they propose to transport. Great Lakes' transmission facilities are assigned a 3% depreciation ratio, which means that the full cost recovery period of its expanded pipeline is 33.3 years. See Great Lakes Gas Transmission Co., 43 F.E.R.C. p 61,143, at 61,410 (1988). The condition thus places Great Lakes at risk for construction costs during the 33.3-year depreciable life of its expanded pipeline, unless it can show FERC that TransCanada has 33.3 years of NEB export authority for the full capacity (417,500 Mcf) of the pipeline expansion. 3
Great Lakes and the other transporters filed for a rehearing and/or clarification of the condition, questioning the requirement that NEB export authorization be equivalent to the depreciable life of the facility. In a clarifying order, the Commission justified the condition as a fair way of allocating the economic risk of building an expensive pipeline between the transporters and their customers:
[T]he central question is whether it is unfair to impose on the pipelines the risk of cost under-recovery, where changes in Canadian regulatory policy, alternative commercial opportunities for gas suppliers or shippers, or other unknown events could lead to circumstances in which the extension of the export authorizations would not be sought or received. The Commission believes it is far more appropriate and fair that the pipelines bear this risk than for their customers to bear it. This is the purpose of the condition. The Commission sees no reason to guarantee that the pipelines will be able to recover the cost of the facilities even if the facilities are unused. The Commission will not shift this risk to the customers.
Tennessee Gas Pipeline Co., 55 F.E.R.C. p 61,484, at 62,641 (1991) (hereinafter "Clarification"). The Commission ruled, however, that the transporters would be able to reallocate the costs of their pipelines in future rate filings, "if they are able to prove that other customers are using the facilities." Id. Great Lakes promptly filed this petition for review.
As a preliminary matter, we find that Great Lakes has standing to petition this court, and that the issue in the petition is ripe for review.
Section 19(b) of the NGA confers standing for judicial review of agency action on "[a]ny party ... aggrieved by an order issued by the Commission." 15 U.S.C. § 717r(b) (1988). To have standing under the NGA, a petitioner must allege facts "sufficient to prove the existence of a 'concrete, perceptible harm of a real, non-speculative nature[.]' " North...
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