Michigan Consol. Gas Co. v. F.E.R.C.
| Decision Date | 18 August 1989 |
| Docket Number | 88-1199 and 88-1362,Nos. 88-1062,s. 88-1062 |
| Citation | 883 F.2d 117 |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
| Parties | , 105 P.U.R.4th 528 MICHIGAN CONSOLIDATED GAS COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, National Steel Corporation, Citizens Gas & Coke Utility, Panhandle Eastern Pipe Line Company, American Cyanamid Company, A.P. Green Refractories Company, Amoco Production Company, Michigan Gas Utilities Company, Central Illinois Light Company, Carnation Company, Association of Businesses Advocating Tariff Equity, Intervenors. STATE OF MICHIGAN and Michigan Public Service Commission, Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, National Steel Corporation, Citizens Gas & Coke Utility, Panhandle Eastern Pipe Line Company, Michigan Consolidated Gas Company, Amoco Production Company, Michigan Gas Utilities Company, Central Illinois Light Company, Intervenors. MICHIGAN CONSOLIDATED GAS COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Citizens Gas & Coke Utility, Panhandle Eastern Pipe Line Company, National Steel Corporation, Michigan Gas Utilities Company, A.P. Green Refractories Company, Intervenors. |
Jeffrey M. Petrash with whom James H. Holt, Washington, D.C., was on the brief, for petitioner, Michigan Consol. Gas Co. in No. 88-1062 and No. 88-1362 and intervenor in No. 88-1199.
Henry J. Boynton, Asst. Atty. Gen., with whom Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen., and Don L. Keskey, Asst. Atty. Gen., Lansing, Mich., State of Mich., were on the brief, for petitioners, State of Mich. and Michigan Public Service Com'n in No. 88-1199.
Dwight C. Alpern, Atty., F.E.R.C. with whom Catherine C. Cook, Gen. Counsel, and Jerome M. Feit, Sol., F.E.R.C., Washington, D.C., were on the brief, for respondent in Nos. 88-1062, 88-1199 and 88-1362. John Estes, Washington, D.C., also entered an appearance, for respondent F.E.R.C.
William H. Penniman with whom Raymond N. Shibley and Bruce W. Neely, Washington, D.C., were on the joint brief, for intervenors, Panhandle Eastern Pipe Line Co. and Nat. Steel Corp. in Nos. 88-1062, 88-1199 and 88-1362. Brian D. O'Neill, Washington, D.C., also entered an appearance, for intervenor, Panhandle Eastern Pipe Line Co. Douglas H. West, Detroit, Mich., also entered an appearance, for intervenor, Nat. Steel Corp.
Steven M. Sherman and William P. Diener, Indianapolis, Ind., entered appearances, for intervenor, Citizens Gas & Coke Utility in Nos. 88-1062, 88-1199 and 88-1362.
Nicholas W. Fels, Washington, D.C., entered an appearance, for intervenor American Cyanamid Co. in No. 88-1062.
Lyndon C. Taylor and Paula M. Young, Washington, D.C., entered appearances, for intervenor A.P. Green Refractories Co. in Nos. 88-1062 and 88-1362.
Kevin M. Sweeney, Washington, D.C., entered an appearance, for intervenor, Amoco Production Co. in Nos. 88-1062 and 88-1199.
John R. Schaefgen, Jr., Washington, D.C., entered an appearance, for intervenors, Michigan Gas Utilities Co. and Cent. Illinois Light Co. in Nos. 88-1062, 88-1199 and 88-1362.
Richard A. Oliver, Washington, D.C., entered an appearance, for intervenor, Carnation Co. in No. 88-1062.
Glen S. Howard, Washington, D.C., entered an appearance, for intervenor, Ass'n of Businesses Advocating Tariff Equity in No. 88-1062.
Frederick Moring and Herbert J. Martin, Washington, D.C., were on the brief, for amicus curiae Associated Gas Distributors in Nos. 88-1062, 88-1199 and 88-1362, urging review. M. Lisanne Crowley, Washington, D.C., also entered an appearance, for amicus curiae Associated Gas Distributors in No. 88-1062.
Before RUTH B. GINSBURG, D.H. GINSBURG, and SENTELLE, Circuit Judges.
Opinion for the Court filed by Circuit Judge SENTELLE.
In the orders we review, the Federal Energy Regulatory Commission ("FERC" or "the Commission") permitted Panhandle Eastern Pipe Line Company ("Panhandle") to transport natural gas from Oklahoma directly to National Steel Corporation's ("National") Great Lakes Steel Division plant in Michigan, bypassing the local distribution network of Michigan Consolidated Gas Company ("MichCon"). MichCon, together with the State of Michigan and the Michigan Public Service Commission (collectively "MPSC"), petition for review, arguing that FERC exceeded its jurisdiction and incorrectly construed section 7(c) of the Natural Gas Act, 15 U.S.C. Sec. 717f(c) (1982) ("NGA" or "the Act"). Finding no error, we deny the petition and uphold the orders.
At its Great Lakes Steel Division plant in Michigan, National has for many years been an end-user customer of MichCon, a local distribution company ("LDC"). Prior to March 24, 1985, National had purchased all its natural gas requirements from Michigan. On that date, MichCon commenced transportation on its system and National, while continuing to deal with the LDC, transported 100% of its gas, purchased from third parties, on the MichCon system. As a Michigan intrastate LDC, MichCon provided transportation at rates set by MPSC.
As it happens, an interstate pipeline owned by Panhandle transverses National's Michigan property. National and Panhandle negotiated an arrangement by which Panhandle would add fittings and pipes to tap its line at the National location, thereby making it possible for Panhandle to transport directly to National gas purchased by National in Oklahoma. The arrangement permitted National to bypass the MichCon local network and to transport its gas at interstate rates, lower than those set by MPSC for gas transported on MichCon's system. The new connection would cost Panhandle approximately $188,000, which National agreed to reimburse.
As an interstate transporter of natural gas, Panhandle applied for a certificate of public convenience and necessity from FERC under section 7(c) of the Natural Gas Act, 15 U.S.C. Sec. 717f(c), to tap the line and provide interruptible transportation service to National. See Abbreviated Application for Certificate of Public Convenience and Necessity, In the Matter of Panhandle Eastern Pipe Line Co., FERC Docket No. CP86-232 (Dec. 12, 1985), Joint Appendix ("J.A.") at 59a-60a. FERC consolidated this application with other related proceedings and, inter alia, directed an administrative law judge ("ALJ") to resolve several disputed issues of material fact. See Order Consolidating Applications and Complaint and Prescribing Hearing, FERC Docket Nos. CP86-232, -486, -504, -551, -573, -598, -584, -663 (Sept. 16, 1986) at 13, J.A. at 137a, 148a. FERC ordered the ALJ to "expedite[ ] [the] evidentiary hearing" and render a decision within ninety days due to "new economic pressures [for pipeline companies] to adapt, and to adapt quickly, to changing market conditions." 1 Id. at 12-13, 16, J.A. at 148a-49a, 152a.
The ALJ found that Panhandle's proposed transportation service would serve the public convenience and necessity. Panhandle Eastern Pipe Line Co., 38 F.E.R.C. p 63,009 at 65,046 (1987). While FERC policy favors service to industrial customers through LDCs such as MichCon rather than through pipelines, the ALJ noted that the preference "is conditional and does not apply if economic considerations preclude it." Id. at 65,040. In the present case, the ALJ concluded that economic conditions in fact precluded the preference. The ALJ then undertook an extensive analysis of the particular considerations relevant to the Panhandle application, including factors cited by Panhandle and National Steel in favor and those cited by MichCon and MPSC against. He then concluded that, on balance, the proposed service was in the public convenience and necessity. Id. at 65,042-44.
On appeal, the Commission (with one dissent) adopted the ALJ's findings and conclusions and granted Panhandle's request for a certificate of public convenience and necessity. Opinion No. 275-A; Opinion and Order Affirming in Part, Reversing in Part, and Modifying Initial Decision, Panhandle Eastern Pipe Line Co., 40 F.E.R.C. p 61,220 (1987) (). FERC reiterated the ALJ's analysis of the limited nature of the preference for LDC service to industrial end-users, stating that "we have made clear that we would not rigidly follow that rule, but rather [would] examine the individual circumstances of each [case] before applying the policy." Id. at 61,751.
On January 27, 1988, the Commission denied rehearing, rejecting MPSC's claim of exclusive jurisdiction to authorize the bypass. The Commission held that Panhandle's proposed service constituted transportation in interstate commerce, not local distribution. Opinion No. 275-B; Opinion and Order Partially Granting and Denying Rehearing, Panhandle Eastern Pipe Line Co., 42 F.E.R.C. p 61,076, at 61,348-49 (1988). On March 28, 1988, the Commission rejected MichCon's request for rehearing of Opinion No. 275-B. Order Dismissing Request for Rehearing, Panhandle Eastern Pipe Line Co., 42 F.E.R.C. p 61,381, at 62,129 (1988). MichCon and the Michigan state parties all petitioned this Court for review, 2 claiming that the Commission overstepped its jurisdiction by authorizing the bypass, departed from its longstanding policy without a reasoned explanation, reached conclusions supporting its grant of the certificate without substantial evidence, and denied petitioners due process of law. For the reasons set out below, we find that none of these assertions merits granting the petition for review.
Our review of the Commission's action is subject to section 706(2)(A) of the Administrative Procedure Act, 5 U.S.C. Sec. 706(2)(A) (1982). East Tennessee Natural Gas Co. v. FERC, 863 F.2d 932, 937 (D.C.Cir.1988); Maryland People's Counsel v. FERC, 761 F.2d 768, 774 (D.C.Cir.1985). We must uphold the Commission's decision unless it is "arbitrary,...
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