Liquid Carbonic Industries Corp. v. F.E.R.C., Nos. 93-1095

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtKAREN LeCRAFT HENDERSON
PartiesLIQUID CARBONIC INDUSTRIES CORPORATION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Polk Power Partners, Limited Partnership, Lavair Cogeneration Limited Partnership, Intervenors. LIQUID CARBONIC INDUSTRIES CORPORATION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Lavair Cogeneration Limited Partnership, Intervenor. LIQUID CARBONIC INDUSTRIES CORPORATION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Lavair Cogeneration Limited Partnership, AES WR Limited Partnership, Intervenors. to 93-1097.
Docket NumberNos. 93-1095
Decision Date22 July 1994

Page 697

29 F.3d 697
308 U.S.App.D.C. 51
LIQUID CARBONIC INDUSTRIES CORPORATION, Petitioner,
v.
FEDERAL ENERGY REGULATORY COMMISSION, Respondent,
Polk Power Partners, Limited Partnership, Lavair
Cogeneration Limited Partnership, Intervenors.
LIQUID CARBONIC INDUSTRIES CORPORATION, Petitioner,
v.
FEDERAL ENERGY REGULATORY COMMISSION, Respondent,
Lavair Cogeneration Limited Partnership, Intervenor.
LIQUID CARBONIC INDUSTRIES CORPORATION, Petitioner,
v.
FEDERAL ENERGY REGULATORY COMMISSION, Respondent,
Lavair Cogeneration Limited Partnership, AES WR Limited
Partnership, Intervenors.
Nos. 93-1095 to 93-1097.
United States Court of Appeals,
District of Columbia Circuit.
Argued Nov. 16, 1993.
Decided July 22, 1994.

Page 698

Petitions for Review from an Order of the Federal Energy Regulatory Commission.

Kevin J. McIntyre, Washington, DC, argued the cause for petitioner Liquid Carbonic Industries Corporation. On brief were Floyd L. Norton, IV, and Bruce L. Richardson, Washington, DC.

Robert H. Solomon, Deputy Asst. Gen. Counsel, F.E.R.C., Washington, DC, argued the cause for respondent Federal Energy Regulatory Commission. On brief were Jerome M. Feit, Solicitor, and Thomas J. Lane, F.E.R.C., Washington, DC.

Robert F. Shapiro, Washington, DC, argued the cause for intervenors AES WR Ltd. Partnership and Polk Power Partners, Ltd. Partnership. On brief were Adam Wenner, Lynn N. Hargis and Richard C. Tufaro, Washington, DC.

Matthew W.S. Estes, Washington, DC, and Steven F. Greenwald, San Francisco, CA, entered appearances for intervenor Lavair Cogeneration Ltd. Partnership.

Before: SENTELLE and HENDERSON, Circuit Judges; LEVIN H. CAMPBELL, Senior Circuit Judge. *

Opinion for the court filed by Circuit Judge HENDERSON.

Page 699

KAREN LeCRAFT HENDERSON, Circuit Judge:

In this consolidated proceeding, Petitioner Liquid Carbonic Industries Corporation (Liquid Carbonic), a Delaware corporation in the business of producing and selling industrial gases, seeks review of three orders issued by the Federal Energy Regulatory Commission (FERC). In each order, FERC certified a proposed cogeneration facility 1 as a "qualifying cogeneration facility" within the meaning of section 201(8) of the Public Utility Regulatory Policies Act of 1978, Pub.L. No. 95-617, 92 Stat. 3117 (PURPA). 16 U.S.C. Sec. 796(18). FERC rejected Liquid Carbonic's arguments that the proposed facilities did not meet PURPA's "qualifying cogeneration facility" standards and denied Liquid Carbonic's request for rehearing. On three petitions for review, Liquid Carbonic asserts that FERC's orders violate PURPA standards and conflict with FERC precedent and that FERC's refusal to hold hearings on the orders was arbitrary and capricious. We do not reach the merits of Liquid Carbonic's petitions, however, because it lacks standing before this court.

I.

Congress enacted PURPA in the wake of the energy crisis of the early 1970s to lessen dependence on foreign oil, reduce the risk of natural gas shortages and control consumer costs. See FERC v. Mississippi, 456 U.S. 742, 746, 102 S.Ct. 2126, 2130, 72 L.Ed.2d 532 (1982). Toward those ends, section 210 of PURPA encourages the development of cogeneration facilities. 16 U.S.C. Sec. 824a-3(a). Cogeneration is the sequential use of energy to produce electricity and either steam or some other useful thermal energy. American Elec. Power Serv. Corp. v. FERC, 675 F.2d 1226, 1229 (D.C.Cir.1982), rev'd on other grounds, 461 U.S. 402, 103 S.Ct. 1921, 76 L.Ed.2d 22 (1983). The rationale behind encouraging cogeneration is that the production of electricity frequently results in the production of thermal energy as a byproduct; by using small amounts of additional fuel, cogenerators can produce large amounts of thermal energy. As we earlier observed, "[b]ecause both heat and electricity are created in a single process, about half as much fuel is used to produce electricity and heat as would be needed to produce the two separately." American Elec., 675 F.2d at 1230. The additional thermal energy can be used instead of discarded as waste. PURPA encourages cogeneration by exempting cogeneration facilities certified by FERC as "qualifying cogeneration facilities" (QFs) from certain state and federal regulations, see 16 U.S.C. Sec. 824a-3(a), and by requiring electric utilities to purchase electricity from, and sell backup power to, QFs at statutorily specified prices. Id. Secs. 824a-3(a)-(c). Thus, QFs are ensured a market for their electricity production. 2

PURPA establishes guidelines for the certification of facilities as QFs. First, PURPA defines a cogeneration facility as one that produces "(i) electric energy, and (ii) steam or forms of useful energy (such as heat) which are used for industrial, commercial, heating, or cooling purposes." 16 U.S.C. Sec. 796(18)(A). It then provides that a "qualifying cogeneration facility" means a cogeneration facility that "the Commission determines, by rule, meets such requirements (including requirements respecting minimum size, fuel use, and fuel efficiency) as the Commission may, by rule, prescribe." Id. Sec. 796(18)(B)(i). In 1980, FERC adopted

Page 700

rules prescribing the standards for QFs. Such facilities must "produce electric energy and forms of useful thermal energy (such as heat or steam), used for industrial, commercial, heating or cooling purposes through the sequential use of energy." 18 C.F.R. Sec. 292.202(c) (emphasis added).

FERC deems "useful" those applications of thermal energy that are common in industrial or manufacturing processes. Electrodyne Research Corp., 32 F.E.R.C. p 61,102 (1985). Therefore, when a facility's proposed thermal energy use is common in industry, FERC certifies the facility as a QF. The facility may use the thermal energy itself or export the energy to a non-affiliated entity; so long as the thermal energy use is common, the facility qualifies as a QF. When the use of the facility's thermal energy output is a new one or not common, FERC analyzes the application differently. Id. p 61,278. First, FERC considers whether the thermal energy user--the "thermal host"--is, on the one hand, the cogenerator itself or its affiliate or, on the other hand, an independent entity. When an independent entity uses the energy, FERC considers the new application useful because it assumes that no entity would buy and use the thermal energy unless it served a legitimate purpose. If the thermal host at some point ceases purchasing the energy, the facility is no longer in compliance with FERC's rules and loses its QF certification. Id.

When the ultimate user of the thermal output is the cogenerator itself, or its affiliate, and the use is a new or uncommon one, FERC requires the cogenerator to demonstrate that the use involves "an independent business purpose with some economic justification." York Canyon Generation Assocs., 44 F.E.R.C. pp 61,101, 61,287 (1988). FERC requires an independent business purpose because otherwise a cogenerator could use its thermal energy for an impractical purpose and claim qualifying status simply because it is "using" the thermal energy. To allow such a result, FERC maintains, would contradict Congress's intent to promote energy efficiency.

Liquid Carbonic challenges FERC's certifications of three facilities as QFs. On June 12, 1992 FERC certified Lavair Cogeneration Limited Partnership (Lavair) as a QF. Lavair proposed to generate electricity by burning natural gas and to export the steam generated during the process to an adjacent, unaffiliated CO2 manufacturing plant to use as energy in producing liquid CO2. In addition to the steam, Lavair also proposed to export exhaust gas, called "flue gas," which is rich in CO2; the thermal host would use the flue gas as raw feed gas for purification and conversion into liquid CO2. FERC classified the production of liquid CO2 using steam and flue gas, the "flue method," as common because it has certified many cogenerating facilities whose thermal hosts are CO2 production facilities. Because the production of CO2 is common, FERC certified Lavair. Lavair Cogeneration Ltd. Partnership, 59 F.E.R.C. p 62,266 (1992). On July 13, 1992 Liquid Carbonic challenged the certification by requesting a rehearing, which FERC denied on December 3, 1992. See Joint Appendix (JA) 124-30.

AES WR Limited Partnership (AES WR) filed an application for QF status on April 13, 1992. AES WR proposed burning coal to produce electricity and using the thermal energy output to produce liquid CO2 in its own production facility. Because liquid CO2 production is common, FERC certified AES WR as a QF on July 10, 1992. JA 235-38. On August 11, 1992, Liquid Carbonic challenged the certification by petitioning for rehearing, which FERC denied on December 3, 1992. See JA 124-30.

On April 28, 1992 Polk Power Partners, Limited Partnership (Polk) filed an application for QF certification. Polk proposed burning natural gas to produce electricity and exporting the steam recovered during the process to an affiliated thermal host to produce liquid CO2 by the flue method. Liquid Carbonic moved to intervene on August 3, 1992, protested Polk's application and requested a hearing. FERC issued an order on October 6, 1992, concluding that Polk's application met the criteria for QF status and denying Liquid Carbonic's request for a hearing. JA 104-10. Liquid Carbonic then requested a rehearing, which FERC denied on December 3, 1992. See JA 124-30.

Page 701

Liquid Carbonic asserts several grounds for reversing FERC's orders certifying Lavair, AES WR and Polk. Liquid Carbonic argues that the flue method of CO2 production is economically infeasible or that, if it is feasible, it is so only because a QF will make a large enough profit from selling electricity--which electric utilities are statutorily required to purchase at set rates--that it can subsidize CO2 production. Accordingly, Liquid Carbonic contends that the flue method of CO2...

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    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • April 15, 2014
    ...Nautilus, and that economic interest is not within the zone of interests protected by NEPA”); Liquid Carbonic Industries Corp. v. FERC, 29 F.3d 697, 705 (D.C.Cir.1994) (industrial gas corporation could not object to lax regulation of competitor's facilities: “There being no indication that ......
  • City of Orrville, Ohio v. F.E.R.C., No. 97-1352
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • June 30, 1998
    ...decide Orrville's claim, we must nonetheless be certain of it before proceeding to the merits. See Liquid Carbonic Indus. Corp. v. FERC, 29 F.3d 697, 701 (D.C.Cir.1994) (noting court's independent obligation to assure itself of petitioner's standing even if respondent does not challenge it)......
  • Shays v. Federal Election Com'n, No. 04-5352.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • July 15, 2005
    ...a cognizable Article III injury.'" MD Pharm., Inc. v. DEA, 133 F.3d 8, 11 (D.C.Cir.1998) (quoting Liquid Carbonic Indus. Corp. v. FERC, 29 F.3d 697, 701 To be sure, in this case, the challenged rules create neither more nor different rival candidates—the electoral analogue to participants i......
  • Am. Inst. of Certified Pub. Accountants v. Internal Revenue Serv., Civil Action No. 14-1190 (JEB)
    • United States
    • United States District Courts. United States District Court (Columbia)
    • August 3, 2016
    ...by avoiding competition with" unenrolled preparers in the market for tax services. See Liquid Carbonic Indus. Corp. v. F.E.R.C., 29 F.3d 697, 705 (D.C.Cir.1994).On the surface, it seems difficult to square AICPA's interest in dismantling the IRS's program with Congress's goal of safeguardin......
  • Request a trial to view additional results
32 cases
  • White Stallion Energy Ctr., LLC v. Envtl. Prot. Agency, Nos. 12–1100
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • April 15, 2014
    ...Nautilus, and that economic interest is not within the zone of interests protected by NEPA”); Liquid Carbonic Industries Corp. v. FERC, 29 F.3d 697, 705 (D.C.Cir.1994) (industrial gas corporation could not object to lax regulation of competitor's facilities: “There being no indication that ......
  • City of Orrville, Ohio v. F.E.R.C., No. 97-1352
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • June 30, 1998
    ...decide Orrville's claim, we must nonetheless be certain of it before proceeding to the merits. See Liquid Carbonic Indus. Corp. v. FERC, 29 F.3d 697, 701 (D.C.Cir.1994) (noting court's independent obligation to assure itself of petitioner's standing even if respondent does not challenge it)......
  • Shays v. Federal Election Com'n, No. 04-5352.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • July 15, 2005
    ...a cognizable Article III injury.'" MD Pharm., Inc. v. DEA, 133 F.3d 8, 11 (D.C.Cir.1998) (quoting Liquid Carbonic Indus. Corp. v. FERC, 29 F.3d 697, 701 To be sure, in this case, the challenged rules create neither more nor different rival candidates—the electoral analogue to participants i......
  • Am. Inst. of Certified Pub. Accountants v. Internal Revenue Serv., Civil Action No. 14-1190 (JEB)
    • United States
    • United States District Courts. United States District Court (Columbia)
    • August 3, 2016
    ...by avoiding competition with" unenrolled preparers in the market for tax services. See Liquid Carbonic Indus. Corp. v. F.E.R.C., 29 F.3d 697, 705 (D.C.Cir.1994).On the surface, it seems difficult to square AICPA's interest in dismantling the IRS's program with Congress's goal of safeguardin......
  • Request a trial to view additional results

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