Natural Gas Clearinghouse v. F.E.R.C., 96-1140
| Decision Date | 18 March 1997 |
| Docket Number | No. 96-1140,96-1140 |
| Citation | 108 F.3d 397 |
| Parties | , Util. L. Rep. P 14,152 NATURAL GAS CLEARINGHOUSE, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, United Municipal Distributors Group, et al., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
On Petition for Review of Orders of the Federal Energy Regulatory Commission.
Peter G. Esposito, Washington, DC, argued the cause for petitioner. With him on the brief was Kenneth E. Randolph.
Katherine Waldbauer, Attorney, Federal Energy Regulatory Commission, Washington, DC, argued the cause for respondent. With her on the brief were Jerome M. Feit, Solicitor, and Joseph S. Davies, Deputy Solicitor.
Michael E. McMahon argued the cause and filed the brief for intervenor Koch Gateway Pipeline Company. James H. Byrd and Pamela M. Silberstein entered appearances.
Before: WILLIAMS, HENDERSON and RANDOLPH, Circuit Judges.
Opinion for the Court filed by Circuit Judge WILLIAMS.
Moving natural gas through a pipeline requires energy, which is commonly, perhaps invariably, supplied by natural gas itself. Koch Gateway Pipeline Company has customarily used its shippers' own gas for these purposes, simply providing a little less gas (about two percent less) at the point of delivery than the shipper supplied at the point of receipt. In 1995 Koch filed tariff sheets under which it would give shippers an additional option--that of paying Koch in cash for the requisite fuel, at a price that Koch would post on its electronic bulletin board. The Commission approved the tariff change, see Koch Gateway Pipeline Co., 73 FERC p 61,375 (1995) ("Koch I"), made some adjustments in response to a petition for rehearing, Koch Gateway Pipeline Co., 74 p FERC 61,212 (1996) ("Koch II"), and denied a final petition for rehearing, Koch Gateway Pipeline Co., 75 FERC p 61,096 (1996).
Petitioner Natural Gas Clearinghouse is an independent marketer buying and selling natural gas, unaffiliated with any pipeline. It views the orders as representing a Thermidor in the natural gas revolution that began in 1985, turning "the competitive clock back in the direction of a far darker age ... [when] vigorous competition among many different [natural gas] suppliers was a mere academic concept." Petitioner's Brief at 9. Even assuming we had authority to check such counter-revolutionary impulses in the Commission, which of course we don't, this case presents no such issue. Finding no violation of statutes, of the Commission's regulations, or of any precept of administrative law, we deny the petition for review.
* * *
In its reshaping of the regulatory environment the Commission has sought to assure that competition at the wellhead is carried downstream to customers, undistorted by regulation of the pipelines' natural monopolies in gas transportation. A series of rules and policies requires, among other things, that pipelines carry the gas of competing natural gas vendors on a non-discriminatory basis, separate their own gas marketing from their transportation functions, and, indeed, quit the business of making "bundled" sales of gas (i.e., sales by the entity that provides the transportation). See Order No. 636, Pipeline Service Obligations and Revisions to Regulations Governing Self-Implementing Transportation; and Regulation of Natural Gas Pipelines After Partial Wellhead Decontrol, 57 Fed.Reg. 13267, 13268-77 (1992), III FERC Stats. & Regs. p 30,939, aff'd but remanded for consideration of certain issues, United Distribution Cos. v. FERC, 88 F.3d 1105 (D.C.Cir.1996); see id. at 1122-25 for an overall background review and summary.
A major concern behind this unbundling was that otherwise the pipelines could use their transportation monopolies to secure illegitimate advantages in gas sales. For example, they might undercharge for carrying their own gas, or provide better service for that gas, and, by burying the costs of such favoritism in higher charges to competing sellers of gas (or their vendees), could gain an artificial advantage in the gas market. 1 The Commission's actions have thus been based on the familiar proposition that a price-regulated monopoly's business activity upstream or downstream from the area it monopolizes carries a risk both of defeating the regulatory scheme (by enabling the monopolist to inflate the costs that under cost-of-service principles are recoverable from captive customers), and of impairing competition in the adjacent activity (by enabling the monopolist to use inflated cost recoveries in the regulated market to subsidize its competition in the adjacent competitive one). See, e.g., 3 Phillip Areeda & Donald F. Turner, Antitrust Law § 726e (1978).
Natural Gas Clearinghouse's essential argument is that Koch's offer of a fuel-gas option is an attempted sale of natural gas and therefore, under Order No. 636, an offer that Koch could make only through its separate, merchant affiliate. Natural Gas Clearinghouse cites no specific language in Order No. 636 that the Commission's approval of the fuel-gas option might violate; its claim is that the approval contradicts the fundamental purposes of that Order. We must sustain the Commission's interpretation of the Order if it is reasonable. See Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965). But see John F. Manning, "Constitutional Structure and Judicial Deference to Agency Interpretations of Agency Rules," 96 Colum. L.Rev. 612, 682 (1996) (). The Commission concluded that Koch's proposed option was "not a marketing service, but is an extension of its transportation service." Koch I, 73 FERC at 62,166.
As a matter of ordinary language FERC's approach seems unassailable. FERC defines "transportation" to include "storage, exchange, backhaul, displacement, or other methods of transportation." 18 C.F.R. § 284.1(a) (1996). Here the gas is used, by Koch itself, to provide transportation service to Koch's...
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