Oklahoma Natural Gas Co., a Div. of ONEOK, Inc. v. F.E.R.C.

• Decision Date: 22 July 1994
• Docket Number: No. 92-1576,92-1576
• Citation: 28 F.3d 1281
• Parties: OKLAHOMA NATURAL GAS COMPANY, A DIVISION OF ONEOK, INC., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Amax Gas Marketing, Inc., Natural Gas Pipeline Company of America, PowerSmith Cogeneration Project, Limited Partnership, Williams Natural Gas Company, Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1281

28 F.3d 1281

307 U.S.App.D.C. 414

OKLAHOMA NATURAL GAS COMPANY, A DIVISION OF ONEOK, INC., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent,

Amax Gas Marketing, Inc., Natural Gas Pipeline Company of

America, PowerSmith Cogeneration Project, Limited

Partnership, Williams Natural Gas

Company, Intervenors.

No. 92-1576.

United States Court of Appeals, District of Columbia Circuit.

Argued Feb. 4, 1994.

Decided July 22, 1994.

Petition for Review of Orders of the Federal Energy Regulatory Commission.

William I. Harkaway, Washington, DC, argued the cause for petitioner. With him on the briefs were Kathleen Mazure, Washington, DC, Brad D. Fuller and C. Burnett Dunn, Tulsa, OK.

Jerome M. Feit, Solicitor, Federal Energy Regulatory Commission, Washington, DC, argued the cause for respondent. With him on the brief were Susan Tomasky, Gen. Counsel, and Joel M. Cockrell, Attorney, Federal Energy Regulatory Commission, Washington, DC.

On the joint brief for intervenors were John N. Estes, Philip R. Ehrenkranz, Michael T. Mishkin, Harold L. Talisman, Ronald N. Carroll, Washington, DC, and John H. Cary, Tulsa, OK. Priscilla A. Mims, Paul E. Goldstein and Philip R. Telleen, Lombard, IL, entered an appearance for intervenor Natural Gas Pipeline Company of America. Douglas E. Nordlinger, Washington, DC, entered an appearance for PowerSmith Cogeneration Project, Limited Partnership.

Before: BUCKLEY, WILLIAMS and GINSBURG, Circuit Judges.

STEPHEN F. WILLIAMS, Circuit Judge:

For the third time, we review an order of the Federal Energy Regulatory Commission granting a certificate of public convenience and necessity to Williams Natural Gas Company for a 12.4-mile lateral pipeline. Oklahoma Natural Gas Company, a local distribution company that is a rival seller to the customer that the lateral will supply, contests FERC's jurisdiction over the pipeline, claiming that it does not transport gas in interstate commerce. Our earlier doubts answered, we affirm the Commission's exercise of jurisdiction.

* * *

Williams in 1989 sought a certificate under Sec. 7 of the Natural Gas Act, 15 U.S.C. Sec. 717f, to construct, own and operate a lateral pipeline to connect its 16-inch diameter interstate "Cement Pipeline" with the PowerSmith Cogeneration Project Limited Partnership plant. The lateral serves only PowerSmith, pursuant to a transportation agreement among PowerSmith, Amax Gas Marketing, Inc. ¹ and Williams. The agreement provides that Williams will transport, on an interruptible basis, gas sold by Amax to PowerSmith under a longterm supply contract. The arrangement is for a "back-haul". Amax injects gas into the Williams pipeline at numerous points in Oklahoma, Kansas and Wyoming, all downstream of the point where the lateral cuts off from the Cement Pipeline. Williams delivers equal amounts of gas to PowerSmith in Oklahoma via the lateral. We assume, as the Commission did, that because the Cement Pipeline originates in Oklahoma, every molecule received by PowerSmith will have originated in Oklahoma.

Oklahoma Natural Gas has consistently contended that the lateral would not transport gas in interstate commerce, defeating Commission jurisdiction. In its first pass at the matter, the Commission rejected the claim in a mere footnote, only to have its decision remanded by this Court for a more adequate explanation. Oklahoma Natural Gas Co. v. FERC, 906 F.2d 708 (D.C.Cir.1990) ("Oklahoma 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 Co., 59 FERC p 61,306 (1992) ("Second Remand Order"), and we uphold its decision.

* * *

In neither of the previous proceedings before this court did FERC invoke Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), or otherwise claim the deference that Chevron commands for an agency's interpretation of a statute that it is charged with administering. Oklahoma Natural Gas II, 940 F.2d at 704. The Commission now argues explicitly in favor of Chevron deference; Oklahoma Natural Gas resists, on the ground that deference is inappropriate for jurisdictional issues. Although not directly ruling upon the matter of deference on such issues, the Supreme Court has in practice deferred even on jurisdictional issues. See Reiter v. Cooper, --- U.S. ----, ----, 113 S.Ct. 1213, 1221, 122 L.Ed.2d 604 (1993) (applying Chevron to ICC's determination that statute did not grant it "initial jurisdiction ... with respect to the award of reparations"); Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833, 844-45, 106 S.Ct. 3245, 3253, 92 L.Ed.2d 675 (1986) (applying Chevron to scope of the Commission's jurisdiction over counterclaims); NLRB v. City Disposal Systems, Inc., 465 U.S. 822, 830 n. 7, 104 S.Ct. 1505, 1510 n. 7, 79 L.Ed.2d 839 (1984) (pre-Chevron decision expressly rejecting proposition that a different level of deference guides review of "a jurisdictional or legal question concerning the coverage of" the National Labor Relations Act). See generally, Comment, Chevron Deference to Agency Interpretations that Delimit the Scope of the Agency's Jurisdiction, 61 U.Chi.L.Rev 957 (1994). So have we. See Railway Labor Executives' Ass'n v. United States, 987 F.2d 806, 813 (D.C.Cir.1993) (applying Chevron to issue whether provision of Interstate Commerce Act "is an independent source of authority" to modify collective bargaining agreements in a specific class of cases); Texas Utilities Electric Co. v. Federal Communications Commission, 997 F.2d 925 (D.C.Cir.1993). In Texas Utilities we upheld the FCC's authority, under a statute granting it power over "attachment by a cable television system" to utility poles, to regulate attachments for cables carrying nonvideo services, expressly formulating the issue as whether such cables fell "within the FCC's regulatory jurisdiction." Id. at 936.

The exchange between the majority and the dissent in Railway Labor Executives' Ass'n v. National Mediation Board, 29 F.3d 655 (D.C.Cir.1994), does not direct a contrary result. There, the majority expressed doubt as to whether the highly deferential model of review under Switchmen's Union v. National Mediation Board, 320 U.S. 297, 64 S.Ct. 95, 88 L.Ed. 61 (1943), applied to issues framed as "jurisdictional". 29 F.3d at 663-64. The court ultimately, however, rested the decision on a finding that the Board was reversible on a straightforward application of Leedom v. Kyne, 358 U.S. 184, 79 S.Ct. 180, 3 L.Ed.2d 210 (1958), declining--in significant part because of the difficulties of drawing a manageable and principled line between jurisdictional and other issues, see id. at 664, which the dissent had also stressed, see Dissent, 29 F.3d at 675-77, to rely on the possible classification of the issue there as jurisdictional. See Railway Labor Executives' Ass'n, slip op. at 664. Moreover, the majority explicitly stated that what it had said on the problem of arguably jurisdictional issues in the Switchmen's context would have no bearing on conventional review under Chevron. Id. at 664 n. 5.

Petitioner argues more narrowly that wherever a federal agency's exercise of authority will preempt state power, Chevron deference is inappropriate. But with the exception of negative exercises of federal authority, all agency legal interpretations have some preemptive effect; no state law in direct contradiction will survive. Petitioner's special non-deference principle would therefore have to be applied almost universally, overturning Chevron. Alternatively, the issue of deference would turn on a survey of state rules to see if any extant ones happened to succumb under preemption principles. This approach, though less of an onslaught on Chevron, would be completely unprincipled, for deference would depend on what rules states happened to have adopted at the moment of review.

Hence, we review FERC's interpretation of its authority to exercise jurisdiction over transportation with the familiar Chevron framework in mind.

* * *

Section 1(b) of the Natural Gas Act states that the Act shall apply

to the transportation of natural gas in interstate commerce, to the sale in interstate commerce of natural gas for resale ..., and to natural-gas companies engaged in such transportation or sale, but shall not apply to any other transportation or sale of natural gas....

15 U.S.C. Sec. 717(b) (brackets added). The Act defines "interstate commerce" as

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, but only insofar as such commerce takes place within the United States.

15 U.S.C. Sec. 717a(7). We must determine whether FERC reasonably determined that the gas delivered by Williams from Oklahoma wells to PowerSmith, also located in Oklahoma, is transported in interstate commerce.

FERC rests in part on a rather complex argument attributing interstate character to the lateral because of the out-of-state character of the gas supplied by Amax to Williams under the three-way agreement. We pass that, however, because we are persuaded that the Commission's determination is permissible under longstanding precedent embodying a narrower principle--namely that gas commingled with other gas indisputably flowing in interstate commerce becomes itself interstate gas, even though the gas in question leaves the interstate stream before it crosses any state border.

In the first two proceedings, FERC defended its jurisdiction largely on the basis of California v. Lo-Vaca Gathering Co., 379 U.S. 366, 85 S.Ct. 486, 13 L.Ed.2d 357 (1965). There the Court upheld FERC jurisdiction over wellhead sales of gas to a pipeline that, by contract with a producer (or gatherer), was earmarked for use by the pipeline for...