Pacific Gas and Elec. Co. v. F.E.R.C.

Decision Date19 February 1997
Docket Number96-60039,Nos. 96-60036,s. 96-60036
Citation106 F.3d 1190
Parties, Util. L. Rep. P 14,149 PACIFIC GAS AND ELECTRIC COMPANY; Southern California Gas Company; Southern Union Gas Company, Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. NEW MEXICO ENERGY, MINERALS AND NATURAL RESOURCES DEPARTMENT; Commissioner for Public Lands for the State of New Mexico, Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.
CourtU.S. Court of Appeals — Fifth Circuit

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

Frank Rich Lindh, Patrick G. Golden, Pacific Gas & Electric Company Law Department, San Francisco, CA, for Pacific Gas and Electric Company, petitioner.

David L. Huard, Southern California Gas Company, Los Angeles, CA, Thomas Robert Brill, Pacific Enterprises, Los Angeles, CA, for Southern California Gas Company, petitioner.

James F. Moriarty, Fleischman & Walsh, Washington, D.C., for Southern Union Gas Company and Citizens Utilities Co.

Larry Robert Cope, Rosemead, CA, for Southern California Edison Company, intervenor.

John Postler Gregg, Miller, Balis & O'Neil, Washington, D.C., for El Paso Municipal Customer Group.

Patricia L. Weiss, Federal Energy Regulatory Commission, Washington, D.C., Jerome M. Feit, Solicitor, Federal Energy Regulatory Commission, Office of the Solicitor, Washington, D.C., for Federal Energy Regulatory Commission.

James Howard, Washington, D.C., for Colorado Interstate Gas Company (CIG), intervenor.

Janice Ann Alperin, Washington, D.C., for ANR Pipeline Company, intervenor.

Joel L. Greene, Washington, D.C., for Salt River Project.

Richard C. Green, Judy A. Johnson, Kenneth M. Minesinger, Andrews & Kurth, Washington, D.C., for El Paso Natural Gas Co.

Kim Martin Clark, John, Hengerer & Esposito, Washington, D.C., for Meridian Oil Inc.'s.

Steven Robert Hunsicker, Samuel J. Waldon, Debra Raggio Bolton, Baker & Botts, Washington, D.C., for New Mexico Energy, Minerals and Natural Resources Dept. and Com'n for Public Lands for the State of New Mexico, petitioners.

J.E. Gallegos, Santa Fe, NM, for Pro New Mexico Inc. ("PRO"), intervenor.

Barbara S. Jost, Huber, Lawrence & Abell, Washington, D.C., for Phelps Dodge Corporation, intervenor.



This case requires us to decide whether the Natural Gas Act supplies the Federal Energy Regulatory Commission with jurisdiction over gathering facilities operated by a corporation that is wholly-owned by an interstate natural gas pipeline company. We affirm FERC's conclusion that these gathering facilities are beyond its regulatory reach, notwithstanding the fact that the gatherer is a subsidiary of a pipeline company that transports gas in interstate commerce.


El Paso Natural Gas Co., one of the nation's largest natural gas pipeline companies, owns and operates twenty-nine gathering facilities in New Mexico, Colorado, Oklahoma, and Texas. Because some of these facilities are subject to certificates of public convenience and necessity, El Paso sought FERC's permission in 1994 to abandon its gathering facilities and convey them, along with treating and processing facilities, to El Paso Field Services Co., which it would own in its entirety. El Paso established a Field Services Division in 1991, and it explained in its FERC application that conveying facilities to the liberated Field Services Co. was the culmination of years of corporate reorganization.

After notice of El Paso's application was published in the Federal Register, forty-six parties filed motions to intervene. Some of the intervenors sought to prevent El Paso from using Field Services as a means of escaping FERC regulation. FERC issued El Paso's abandonment order on September 13, 1995, effective January 1, 1996. According to FERC, it "does not have jurisdiction over companies such as Field Services that perform only a gathering function." El Paso Natural Gas Co., 72 FERC p 61,220, at 62,014 (Sept. 13, 1995). The order imposed two conditions on Field Services: (1) it had to amend its tariff to guarantee nondiscriminatory access to the facilities and arm's-length dealings between El Paso and Field Services, and (2) it had to offer existing customers a two-year default contract that would preserve the status quo. 1 FERC refused to hold a full evidentiary hearing on the matter and declined the intervenors' request to examine whether Field Services would face sufficient competition. FERC did, however, reserve the right to assert its jurisdiction over Field Services if El Paso and Field Services failed to maintain their separate corporate identities. FERC denied rehearing in a written opinion on November 29, 1995.

Five intervenors have filed this appeal and asked us to invalidate the abandonment order. Three are local distributors of natural gas who use the El Paso system: Pacific Gas & Electric Co., Southern California Gas Co., and Southern Union Gas Co. The other two are units of the State of New Mexico: the New Mexico Department of Energy, Minerals, and Natural Resources; and the Commissioner of Public Lands for the State of New Mexico. Many of the remaining intervenors have aligned themselves with these parties. The appellants argue that allowing El Paso's wholly-owned subsidiary to operate El Paso's gathering facilities without any regulatory oversight and without any significant competition will lead to unreasonably high natural gas prices.


As a threshold matter, we must ensure that the local distribution companies and the New Mexico appellants have standing to challenge FERC's order. According to El Paso, the abandonment order does not threaten these appellants with any concrete, imminent injury. The local distribution companies, on the other hand, insist that they will inevitably be forced to pay higher gas prices if FERC ends its regulation of the rates charged by the gathering facilities through which the gas must pass. The New Mexico appellants assert that they have an interest not only in protecting their citizens from monopolistic gathering facilities, but also in avoiding the expense of imposing their own regulation of natural gas to compensate for FERC's decision to bow out of the regulation of gatherers affiliated with interstate pipelines. See Florida v. Weinberger, 492 F.2d 488, 494 (5th Cir.1974) ("[T]he State of Florida has standing, arising from its clear interest ... in being spared the reconstitution of its statutory [system for licensing nursing homes].").

In addition to the constitutional and prudential standing limitations, the Natural Gas Act itself specifies who may challenge FERC's orders issued under the Act. See 15 U.S.C. § 717r(a) (granting the rights to seek rehearing before FERC and review in a circuit court to "aggrieved" states, municipalities, and state commissions); 15 U.S.C. § 717r(b) (granting the same rights to "aggrieved" parties to FERC proceedings). A party has not been "aggrieved" by a FERC decision unless its injury is "present and immediate." Tenneco, Inc. v. FERC, 688 F.2d 1018, 1022 (5th Cir.1982). Case law has not established how this test for standing might differ from the test developed under Article III. See, e.g., American Agriculture Movement v. Board of Trade, 848 F.Supp. 814, 819 n. 6 (N.D.Ill.1994) (suggesting that standing cases decided under § 717r do not always provide solid authority for standing cases decided under Article III), aff'd in part and rev'd in part, 62 F.3d 918 (7th Cir.1995).

El Paso directs our attention to Williams Gas Processing Co. v. FERC, 17 F.3d 1320 (10th Cir.1994), another case in which an interstate pipeline company created a wholly-owned subsidiary to take over its gathering facilities and thus escape regulation. FERC responded to the pipeline's application to abandon the facilities in much the same way that FERC responded to El Paso's application: it granted the request, placed no rate restrictions or reporting obligations on the affiliate, and explained that its jurisdiction over the affiliate would arise if the parent and the affiliated subsidiary failed to subscribe to an open-access policy. Natural gas producers and shippers intervened in the FERC proceedings and ultimately petitioned for review in the Tenth Circuit because they did not want to pay an unregulated entity for gathering and transportation costs. The court held that these intervenors did not have standing under § 717r(b) because they could not show a looming, unavoidable threat of injury from the FERC action:

There is no evidence in this record that Chevron and Conoco have suffered, or will unavoidably suffer, an economic injury as a result of the Commission's orders. Their fear that Williams will charge unreasonable rates is only speculation for now, and even if it materializes, they can challenge the reasonableness of Williams's rates under section 5 [of the Natural Gas Act], 15 U.S.C. § 717d.

Williams, 17 F.3d at 1322.

We question whether the appellants could make use of § 717d at some later time to challenge unreasonably high rates. That section applies only to rates charged by natural gas companies that make sales within FERC's jurisdiction. In both Williams and in this case, FERC decided that affiliated gathering companies are not natural gas companies unless they act "in connection with" their parent pipelines. Section 717d would be available to these appellants if Field Services were to charge rates that discriminated against entities other than El Paso. But under FERC's order, there would be no jurisdiction over Field Services on the basis of unreasonably high rates as such. Furthermore, Williams fails to take account of any injury that might come from terminating the affiliated gatherer's duty to report rates. Unless the gatherer has such a duty, the distributors must rely on FERC's oversight to ensure that the gatherer does not...

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