Oklahoma Natural Gas Co., a Div. of ONEOK, Inc. v. F.E.R.C., No. 90-1603

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtBefore RUTH BADER GINSBURG, SILBERMAN, and D.H. GINSBURG; SILBERMAN
Citation940 F.2d 699
Decision Date02 August 1991
Docket NumberNo. 90-1603
PartiesOKLAHOMA NATURAL GAS COMPANY, A DIVISION OF ONEOK, INC., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Williams Natural Gas Company, Ladd Gas Marketing, Inc., PowerSmith Cogeneration Project, Limited Partnership, Intervenors.

Page 699

940 F.2d 699
291 U.S.App.D.C. 268
OKLAHOMA NATURAL GAS COMPANY, A DIVISION OF ONEOK, INC., Petitioner,
v.
FEDERAL ENERGY REGULATORY COMMISSION, Respondent,
Williams Natural Gas Company, Ladd Gas Marketing, Inc.,
PowerSmith Cogeneration Project, Limited
Partnership, Intervenors.
No. 90-1603.
United States Court of Appeals,
District of Columbia Circuit.
Argued May 6, 1991.
Decided Aug. 2, 1991.
As Amended Aug. 2, 1991.

Page 700

Petition for Review of an Order of the Federal Energy Regulatory Commission.

William I. Harkaway, with whom Kathleen Mazure, Washington, D.C., C. Burnett Dunn, and Brad D. Fuller, were on the brief, Tulsa, Okl., for petitioner.

Jerome M. Feit, Sol., F.E.R.C., with whom William S. Scherman, Gen. Counsel, and Joel M. Cockrell, Atty., F.E.R.C., were on the brief, Washington, D.C., for respondent. Catherine C. Cook, Atty., F.E.R.C., also entered an appearance, Washington, D.C., for respondent.

Ronald N. Carroll, with whom Harold L. Talisman and John H. Cary, Washington, D.C., for Williams Natural Gas Co., John N. Estes and Douglas E. Nordlinger, Washington, D.C., for PowerSmith Cogeneration Project, Ltd. Partnership, and Mark L. Van Scoyk, Denver, Colo., for Ladd Gas Marketing, Inc., were on the joint brief, for intervenors. Megan A. Sperling also entered an appearance, Washington, D.C., for intervenor, Williams Natural Gas Co.

Before RUTH BADER GINSBURG, SILBERMAN, and D.H. GINSBURG, Circuit Judges.

Opinion for the Court filed by Circuit Judge SILBERMAN.

SILBERMAN, Circuit Judge:

We remanded this case to the Federal Energy Regulatory Commission (FERC) last year because we did not understand the Commission's reasons for asserting jurisdiction over the proposed transaction--the construction of a 12.4 mile pipeline connecting an interstate pipeline to a cogeneration power project. Oklahoma Natural Gas Co. v. FERC, 906 F.2d 708 (D.C.Cir.1990) (ONG I ). The Commission had explained its position only in a cryptic footnote. The Commission has expanded its footnote into a four page opinion, Williams Natural Gas Co., 52 F.E.R.C. p 61,294 (1990), but the increased wording does not help us very much to understand the Commission's position; it is as if on learning that a listener does not understand English, the speaker tries shouting. We therefore remand again for an adequate explanation.

I.

We repeat the facts as set forth in our prior opinion:

Williams [Natural Gas Company] operates a 16-inch certificated interstate pipeline called the "cement pipeline" which takes gas from producers in western Oklahoma and transports it in interstate commerce. PowerSmith is a cogeneration plant under construction in Oklahoma City, some 12 miles away from the cement pipeline.

Page 701

Ladd Gas Marketing, Inc. ("Ladd") has agreed to sell PowerSmith all its gas requirements for fifteen years, and Ladd, PowerSmith and Williams have entered into a "transportation" agreement whereby Williams will deliver gas from its cement pipeline to PowerSmith--which requires the 12.4 mile lateral pipeline extension, the certification of which is the subject of this appeal. Ladd will compensate Williams by delivering gas to its pipeline at a number of designated receipt points downstream of the new extension, including locations in Kansas and Wyoming. The Commission describes this arrangement as a form of transportation called a "backhaul," as if Williams were taking the gas that Ladd puts in the cement pipeline downstream of the extension and transporting it upstream to PowerSmith, which, of course, is not what actually happens.

The Commission's jurisdiction over this transaction depends on the three-party arrangement being regarded as transportation, since the sale from Ladd to PowerSmith, even if viewed as interstate in character, would not itself confer jurisdiction on the Commission under section 1(b) of the Natural Gas Act ("NGA"), which provides only for FERC regulation of "the sale in interstate commerce of natural gas for resale...." See 15 U.S.C. Sec. 717(b) (emphasis added). Under section 1(b), FERC may also exercise jurisdiction over the transportation of natural gas in interstate commerce. Id.... [Transportation is defined under the NGA] to mean "commerce between any point in a State and any point outside thereof, or between points within the same State but through any place outside thereof...." 15 U.S.C. Sec. 717a(7). ONG argued that, since no molecule of gas that would be transported to PowerSmith could possibly cross state lines--gas would be gathered from producers in

Oklahoma, transported on the cement pipeline only in Oklahoma, and then carried from the cement pipeline through the lateral to PowerSmith in Oklahoma City--the lateral pipeline could not fall within the Commission's jurisdiction.

ONG I, 906 F.2d at 709-10. 1

As discussed in the prior opinion, the Commission bases its claim that the pipeline will be engaged in transportation in interstate commerce within the statute's meaning on two grounds: first, that the overall contractual arrangement between Williams, Ladd and PowerSmith is actually a form of transportation called a "backhaul" which makes the physical pattern in which the gas flows irrelevant; and, second, that since the cement pipeline is a certificated interstate pipeline and carries gas destined for interstate commerce, the extension attached to it also transports gas in interstate commerce. Id. at 711. 2

In response to our remand asking the Commission to elaborate and explain both assertions, the Commission first set forth its "backhaul" theory. We are told that we should think of this transaction as one in which Ladd is selling gas to PowerSmith that it purchased downstream of

PowerSmith in Kansas and Wyoming. When Williams delivers gas gathered in Oklahoma to PowerSmith at Ladd's direction and then Ladd delivers to Williams an equal amount of gas at the downstream locations in Kansas and Wyoming, the effect is the same as if Ladd has shipped the gas upstream to PowerSmith from Kansas and Wyoming. This transaction purportedly meets the statutory definition of transportation because "the economic effect of the transaction is that a specific amount of gas enters Williams' system in Kansas and Wyoming and that same amount of gas leaves Williams' system in Oklahoma." Williams Natural Gas Co., 52 F.E.R.C.

Page 702

p 61,294 at 62,157. The Commission relies on United Gas Improvement Co. v. Continental Oil Co., 381 U.S. 392, 399-402, 85 S.Ct. 1517, 1521-23, 14 L.Ed.2d 466 (1965), for support of its proposition that the underlying...

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5 practice notes
  • Checkosky v. S.E.C., Nos. 92-1396
    • United States
    • U.S. Court of Appeals — District of Columbia Circuit
    • May 20, 1994
    ...450 (D.C.Cir.1991). 22. Southwest Merchandising Corp. v. NLRB, 943 F.2d 1354, 1361 (D.C.Cir.1991). 23. Oklahoma Natural Gas Co. v. FERC, 940 F.2d 699, 704 24. Consumers Union of the U.S., Inc. v. Federal Reserve Bd., 938 F.2d 266, 274 (D.C.Cir.1991). 25. Tex Tin Corp. v. EPA, 935 F.2d 1321,......
  • Oklahoma Natural Gas Co., a Div. of ONEOK, Inc. v. F.E.R.C., No. 92-1576
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • July 22, 1994
    ...Natural Gas I "). On remand, FERC elaborated upon its justification, but we remained dissatisfied. Oklahoma Natural Gas Co. v. FERC, 940 F.2d 699 (D.C.Cir.1991) ("Oklahoma Natural Gas II "). This time FERC defended its jurisdiction in an exhaustive order, Williams Natural Gas......
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    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • April 12, 1994
    ...cert. denied sub nom. WHDH, Inc. v. FCC, 406 U.S. 950, 92 S.Ct. 2042, 32 L.Ed.2d 338 (1972)); see also Oklahoma Natural Gas Co. v. FERC, 940 F.2d 699, 704 (D.C.Cir.1991). Delta's cancellation of the direct service from Cleveland to London after eighteen months is not a change in circumstanc......
  • In re Algonquin Gas Transmission, LLC, CP16-9-011
    • United States
    • Federal Energy Regulatory Commission
    • January 20, 2022
    ...Request at 6. [48] Rehearing Request at 3, 7-8 (citing 18 C.F.R. § 385.716 (2021)). [49] Id. at 7 (citing Okla. Nat. Gas Co. v. FERC, 940 F.2d 699 (D.C. Cir. 1991)). [50] 15 U.S.C. § 717f(e). [51] Id. [52] See Algonquin Gas Transmission, LLC, 170 FERC ¶ 61, 144 at P 16 (considering and dete......
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5 cases
  • Checkosky v. S.E.C., Nos. 92-1396
    • United States
    • U.S. Court of Appeals — District of Columbia Circuit
    • May 20, 1994
    ...450 (D.C.Cir.1991). 22. Southwest Merchandising Corp. v. NLRB, 943 F.2d 1354, 1361 (D.C.Cir.1991). 23. Oklahoma Natural Gas Co. v. FERC, 940 F.2d 699, 704 24. Consumers Union of the U.S., Inc. v. Federal Reserve Bd., 938 F.2d 266, 274 (D.C.Cir.1991). 25. Tex Tin Corp. v. EPA, 935 F.2d 1321,......
  • Oklahoma Natural Gas Co., a Div. of ONEOK, Inc. v. F.E.R.C., No. 92-1576
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • July 22, 1994
    ...Natural Gas I "). On remand, FERC elaborated upon its justification, but we remained dissatisfied. Oklahoma Natural Gas Co. v. FERC, 940 F.2d 699 (D.C.Cir.1991) ("Oklahoma Natural Gas II "). This time FERC defended its jurisdiction in an exhaustive order, Williams Natural Gas......
  • Northwest Airlines, Inc. v. U.S. Dept. of Transp., Nos. 92-1251
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • April 12, 1994
    ...cert. denied sub nom. WHDH, Inc. v. FCC, 406 U.S. 950, 92 S.Ct. 2042, 32 L.Ed.2d 338 (1972)); see also Oklahoma Natural Gas Co. v. FERC, 940 F.2d 699, 704 (D.C.Cir.1991). Delta's cancellation of the direct service from Cleveland to London after eighteen months is not a change in circumstanc......
  • In re Algonquin Gas Transmission, LLC, CP16-9-011
    • United States
    • Federal Energy Regulatory Commission
    • January 20, 2022
    ...Request at 6. [48] Rehearing Request at 3, 7-8 (citing 18 C.F.R. § 385.716 (2021)). [49] Id. at 7 (citing Okla. Nat. Gas Co. v. FERC, 940 F.2d 699 (D.C. Cir. 1991)). [50] 15 U.S.C. § 717f(e). [51] Id. [52] See Algonquin Gas Transmission, LLC, 170 FERC ¶ 61, 144 at P 16 (considering and dete......
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