Mid-Louisiana Gas Co. v. Federal Energy Regulatory Commission
| Decision Date | 23 December 1981 |
| Docket Number | MID-LOUISIANA,Nos. 80-3804,80-4010,s. 80-3804 |
| Citation | 664 F.2d 530 |
| Parties | GAS COMPANY, et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. CONSOLIDATED GAS SUPPLY CORPORATION, et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. . Unit A * |
| Court | U.S. Court of Appeals — Fifth Circuit |
Donald W. Seeley, Jr., Alan C. Wolf, New Orleans, La., for Mid Louisiana Gas Co.
Peter J. Wall, Denver, Colo., Larry D. Hall, Vice President, Hastings, Neb., William W. Brackett, Daniel F. Collins, Terry O. Vogel, Richard W. Miller, Jr., Brackett & Collins, P. C., Washington, D. C., for Kansas-Nebraska Nat. Gas Co.
Kim Martin Clark, William J. Grealis, Akin, Gump, Strauss, Hauer & Feld, Washington, D. C., for Northwest Pipeline Corp.; Donald C. Shepler, Northwest Pipeline Corp., Salt Lake City, Utah, of counsel.
Morris Kennedy, L. Eugene Dickinson, Ashland, Ky., James D. McKinney, Jr., William R. Mapes, Jr., Ross, Marsh & Foster, Washington, D. C., for Kentucky West Virginia Gas Co.
Charles J. McInerney, Senior Vice President and Gen. Counsel, Detroit, Mich., William W. Brackett, Daniel F. Collins, Terry O. Vogel, Brackett & Collins, P. C., Washington, D. C., for Michigan Wisconsin Pipe Line Co.
Kevin J. Lipson, Karol Lyn Newman, John E. Holtzinger, Jr., Morgan, Lewis & Bockius, Washington, D. C., for Consolidated Gas Supply Corp.
Jerome Nelson, Sol. and Acting Gen. Counsel, Auburn L. Mitchell, Susan Tomasky, Washington, D. C., for Federal Energy Regulatory Commission.
Arnold D. Berkeley, Richard I. Chaifetz, Bruce J. Wendel, Washington, D. C., for Arizona Electric Power Co-op. Inc.
George J. Meiburger, Frank X. Kelly, Washington, D. C., John B. Will, Deborah K. Vinson, Omaha, Neb., for Northern Natural Gas Co.
Philip J. Mause, Norman A. Pedersen, Kadison, Pfaelzer, Woodward, Quinn & Rossi, Washington, D. C., for Public Service Commission of Wisconsin; Steve Schur, Public Service Commission of Wisconsin, Madison, Wis., of counsel.
Frank J. Kelley, Atty. Gen., Robert Derengoski, Sol. Gen., Lansing, Mich., Ronald D. Eastman, Jeffrey D. Komarow, Cadwalader, Wickersham & Taft, Washington, D. C., for State of Michigan and the Michigan Public Service Commission.
Peter H. Schiff, Gen. Counsel, Albany, N. Y., Alexander M. Peters, Wilner & Scheiner, Richard A. Solomon, Washington, D. C., for Public Service Commission of State of N. Y.
Philip C. Wrangler, Houston, Tex., for Exploration and Production Division of Southern Nat. Gas Co.
William M. Lange, P. Michael Koenig, Colorado Springs, Colo., for Colorado Interstate Gas Co.
Richard C. Green, C. Frank Reifsnyder, Hogan & Hartson, Washington, D. C., Richard Owen Baish, Donald J. MacIver, Jr., Scott D. Fobes, Dennis J. Dwyer, El Paso, Tex., Raymond N. Shibley, Brian D. O'Neill, George M. Knapp, LeBoeuf, Lamb, Leiby & MacRae, Washington, D. C., for El Paso Nat. Gas Co., Miriam Vogel Gold, CIBA-GEIGY Corp., Ardsley, N. Y., of counsel.
Petitions for Review of Orders of the Federal Energy Regulatory Commission.
Before CHARLES CLARK, GARZA and SAM D. JOHNSON, Circuit Judges.
Petitioning pipeline producers of natural gas seek review of two issues concerning the scope and administration of the Natural Gas Policy Act of 1978 (NGPA), 15 U.S.C. § 3301 et seq. (Supp. III 1979). Their initial claim is that the Federal Energy Regulatory Commission (Commission) incorrectly determined in Order No. 58 that the pricing structure established by the NGPA was not applicable to most gas produced by pipeline companies. Because we find this claim correct, we do not reach the producers' alternate claim that, if the Commission retained jurisdiction to establish the price of such gas, it abused its discretion in Order No. 98 by denying higher prices to gas which had previously been priced on a cost-of-service basis.
Prior to the NGPA, the price for both the production and transportation of gas was regulated by the Commission under the Natural Gas Act of 1938 (NGA), 15 U.S.C. § 717 (1976). Under the NGA, the cost of gas which was bought by the pipelines for resale in interstate commerce was set according to area or national rates. Although the majority of gas transported by pipelines was bought from independent producers, some pipelines also produced their own gas, which was combined with gas bought from independent producers, and transported to their customers downline. The Commission treated the pipelines' intracorporate transfer of its own production as if it had been bought from another entity and determined its "cost" to the pipeline by applying the same area or national rates the Commission applied to independently produced gas. The Commission determined the pipelines' sales price to its customers on a cost-of-service basis. 1
The fuel shortages of the 1970s revealed two flaws in the regulation of gas production. The first appeared when the area and national rates established by the Commission for gas sold on the interstate market fell markedly below the price available for gas sold on the intrastate market, which was not regulated by the Commission. The price disparity between the two markets skewed the distribution of gas and resulted in shortages of gas available for interstate sale. See Air Products & Chemicals, Inc. v. FERC, 650 F.2d 687, 705 (5th Cir. 1981). The second became apparent when the area and national rates established by the Commission did not provide a sufficient incentive to encourage exploration for new sources of gas. See Pennzoil Co. v. FERC, 645 F.2d 360, 367 n.13 (5th Cir. 1981). These two problems resulted in enactment of the NGPA. While the NGPA did not disturb the Commission's jurisdiction over the prices a pipeline could charge its customers, it did take away from the Commission the right to fix most prices paid for the production of natural gas.
In the NGPA, Congress defined several categories of natural gas and set maximum lawful prices for the "first sale" in each. The pipelines claim that because Congress intended for the NGPA to apply to both pipeline and independent production, the Commission's order defining "first sale" conflicts with the NGPA.
The NGPA generally defines "first sale" as "any sale of any volume of natural gas," to a specified purchaser. 15 U.S.C. § 3301(21)(A). However, this general definition is subject to a qualified exception which is crucial to the issue presented here. The subsection following the general definition provides that "first sale" shall not include "the sale of any volume of natural gas by any interstate pipeline, intrastate pipeline, or local distribution company, or any affiliate thereof, unless such sale is attributable to volumes of natural gas produced by such interstate pipeline, intrastate pipeline, or local distribution company, or any affiliate thereof." 15 U.S.C. § 3301(21)(B).
In Order No. 58, the Commission assumed that the sale referred to by section 3301(21)(B) was a transfer by the pipeline to its customers. The Commission found that such a transfer was not a "first sale" unless the gas transferred was exclusively attributable to the pipeline's own production. Thus, it provided that if a pipeline commingled gas produced by it with gas produced by other entities, the pipeline was not entitled to NGPA prices for the gas it produced.
Because sales by pipelines are normally comprised of commingled gas, the Commission acknowledged that its regulation denied NGPA prices to virtually all pipeline produced gas and that FERC would retain jurisdiction under the NGA to set the price of such gas. The Commission justified its regulation because it intruded the least into state regulation and because it was less difficult to administer.
Under the NGA, regulation of retail sales by interstate pipelines, intrastate pipelines and local distribution companies had been committed to the states. The Commission found that applying NGPA prices to such sales, particularly those by intrastate pipelines and local distribution companies, would supplant an area of regulation traditionally controlled by the states. The Commission also found that applying NGPA prices to pipeline customer sales of natural gas would disrupt the method it had traditionally used to factor transportation and other costs into the price charged for natural gas. Although treating the transfer from the production to the transportation division of the pipeline as a first sale would have eliminated the problems noted by the Commission, the Commission declined to do so because it had not previously treated an intracorporate transfer as a sale. 2
We have previously recognized that "an agency's interpretation of its own statute is generally given deference ...." Columbia Gas Development Corp. v. FERC, 651 F.2d 1146, 1155 (5th Cir. 1981). We have also recognized that a greater degree of deference results from such factors as (i) a long standing interpretation which has not been disturbed by congressional action, see International Brotherhood of Teamsters v. Daniel, 439 U.S. 551, 566 n.20, 99 S.Ct. 790, 800, 58 L.Ed.2d 808 (1979); Sanchez v. Schweiker, 656 F.2d 966, 970 (5th Cir. 1981) (per curiam), (ii) the fact that "the interpretation concerns matters within the agency's expertise," Adkins v. Hampton, 586 F.2d 1070, 1073 (5th Cir. 1978); accord Office of Consumers' Council v. FERC, 655 F.2d 1132, 1141 (D.C.Cir.1980), and (iii) the fact that a contemporaneous interpretation of the statute suggests that the agency personnel interpreting the act had a hand in its development. See Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 100 S.Ct. 790, 797, 63 L.Ed.2d 22 (1980); Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 689, 74 S.Ct. 794, 803, 98 L.Ed.1035 (Douglas, J. dissenting). While the presence of these factors argues for greater deference, their absence suggests that a court need not accord as much deference as it otherwise would and indeed may rely on its own...
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