United Gas Pipe Line Co. v. F.E.R.C., 82-1833
| Decision Date | 17 May 1983 |
| Docket Number | No. 82-1833,82-1833 |
| Citation | 707 F.2d 1507 |
| Parties | UNITED GAS PIPE LINE COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Scott E. Rozzell, Houston, Tex., with whom Irving Jacob Golub, Cecil W. Talley, Phillip D. Endom, and Thomas W. Pounds, Houston, Tex., were on the brief, for petitioner.
Arlene Pianko Groner, Atty., F.E.R.C., Washington, D.C., with whom Barbara J. Weller, Deputy Sol., Washington, D.C., was on the brief, for respondent.
Before WILKEY and GINSBURG, Circuit Judges, and FRIEDMAN, * Circuit Judge, United States Court of Appeals for the Federal Circuit.
Opinion for the court filed by Circuit Judge GINSBURG.
United Gas Pipe Line Company (United), in its March 31, 1982, rate change filing with the Federal Energy Regulatory Commission (FERC), 1 included a "tracker" designed to apply to all of United's transportation costs and revenues. The proposed tracker, which would yield automatic, semi-annual rate adjustments, concededly contravened a longstanding rate regulation policy currently stated in an explicit FERC regulation. 2 FERC refused to waive the regulation and consequently rejected the portion of the filing providing for the all-inclusive transportation tracker. The Commission recognized, however, that the time was ripe for fresh consideration of a tracker system for transportation costs and revenues. 3 It therefore stated that rejection of the filing was "without prejudice" to United's demonstration at the scheduled rate hearing that a transportation tracker should be adopted prospectively.
United's petition for review urges that FERC acted arbitrarily and abused its discretion when it denied the waiver and rejected the tracker. For the reasons stated below, we hold that the Commission exercised its discretion in a permissible, rational manner. We therefore have no warrant to disturb the course FERC is pursuing. Accordingly, we affirm the challenged Commission orders.
On March 31, 1982, United filed with FERC, pursuant to section 4 of the Natural Gas Act, 4 a rate increase request. The primary reason for the filing, United stated, was "to reflect the impact of deliveries through the Northern Border Pipeline Company (Northern Border) system on United's costs ... and revenues." Joint Appendix (J.A.) 2. Because United's transportation costs have increased significantly in recent years and resist accurate prediction, 5 United proposed automatic, semi-annual rate adjustments to reflect any increase or decrease in its transportation costs and revenues. This proposal ran directly counter to 18 C.F.R. Sec. 154.38(d)(3), a FERC regulation excluding from tariffs "price adjustments or periodic changes ... which in any way purport[ ] to effect the modification or change of any rate or charge specified in [a] rate schedule." 6 United therefore invited FERC's waiver of the regulation. Alternately, in the event FERC denied the requested waiver, United proposed a tracker limited to the transportation of gas by Northern Border, the eastern leg of the Alaska Natural Gas Transportation System. J.A. 4.
In support of its principal proposal, United presented figures showing that from 1977 to 1981, its transportation costs had quadrupled; in United's March 31, 1982, filing, "the transportation cost component ... account[ed] for approximately 71 percent of [all] operating and maintenance expenses exclusive of gas costs." J.A. 10; see Brief of Petitioner 5. The proposed tracking mechanism, United asserted, "will assure that [it] neither overrecovers nor underrecovers these significant system costs." J.A. 6.
On April 30, 1982, FERC accepted and suspended most of United's filing, and ordered a public hearing concerning the lawfulness of the proposed rate increase. 19 FERC p 61,081 (1982); J.A. 13-20. 7 The Commission permitted United to track Northern Border transportation charges based on an earlier opinion authorizing such limited tracking, Northwest Alaskan Pipeline Company, 11 FERC p 61,088 (1980), 8 but tersely declared that United "ha[d] not demonstrated good cause" for a broader, immediate waiver of the anti-tracking regulation. J.A. 16. The April 30, 1982, order noted, however, that FERC's denial of the waiver and consequent rejection of the all-inclusive transportation tracker at the filing stage 9 did not preclude any party from raising questions associated with this tracking mechanism in the scheduled hearing on the justness and reasonableness of United's proposed rates. J.A. 16 n. 4; see Brief for Respondent 3.
In a July 1, 1982, order denying United's rehearing application, 20 FERC p 61,005 (1982); J.A. 29-32, FERC devoted several paragraphs to United's charge, J.A. 23-27, that the Commission's peremptory rejection of the unlimited transportation tracker furthered no sound regulatory policy and was therefore unlawful. First, FERC explained:
We have disallowed these types of trackers because a just and reasonable rate under the Natural Gas Act is based upon a review of all costs incurred by a pipeline during the period used to determine those costs. Trackers, however, modify automatically a pipeline's rate to reflect a change in cost level of one item of cost. Thus, tracking an increase in cost level for one expense, e.g., transmission costs of pipeline suppliers, does not consider any changes in a pipeline's other costs and revenues.
J.A. 30. FERC acknowledged that it had "excepted from the general prohibition against trackers" certain items of cost, including "purchased gas costs, research and development costs, and costs associated with the Louisiana First Use Tax." But rulemaking procedures, the Commission pointed out, not individual tariff filings, had been the vehicle for implementing such permanent tracking provisions. J.A. 30. 10 FERC also acknowledged that it had approved transportation trackers in rate settlement agreements, applicable for the life of the agreement, but the Commission distinguished these limited duration arrangements from trackers permanently featured in a pipeline's tariffs. J.A. 30-31. Finally, FERC indicated again that United would have an opportunity in the scheduled rate hearing to demonstrate why an unlimited transportation tracker should be adopted on a prospective basis. J.A. 31.
We deal first with the threshold question in this appeal, whether FERC arbitrarily denied United's request for a broad and immediate waiver of the Commission's regulation prohibiting cost trackers in rate schedules. Next, we turn to the two subsidiary issues United's petition presents: (1) whether, absent a threshold waiver, FERC abused its discretion in rejecting the unlimited transportation tracker proposed in United's filing; and (2) whether FERC's rejection of the proposed tracker at the filing stage, without prejudice to full airing of the matter at the section 4 rate hearing, constituted an indefinite suspension of a rate, in violation of the Natural Gas Act's five-month suspension limit. 11
Judicial review of an agency's denial of a waiver application is tightly contained. See WAIT Radio v. FCC, 459 F.2d 1203, 1207 (D.C.Cir.), cert. denied, 409 U.S. 1027, 93 S.Ct. 461, 34 L.Ed.2d 321 (1972) (WAIT II ); Sudbrink Broadcasting, Inc. v. FCC, 509 F.2d 418, 422 (D.C.Cir.1974). Challengers must show that the agency acted arbitrarily by failing to give "meaningful consideration" to the application. See WAIT Radio v. FCC, 418 F.2d 1153, 1159 (D.C.Cir.1969) (WAIT I ). In WAIT I, this court elaborated:
The applicant for waiver must articulate a specific pleading, and adduce concrete support, preferably documentary. Even when an application complies with these rigorous requirements, the agency is not required to author an essay for the disposition of each application. It suffices, in the usual case, that we can discern the "why and wherefore."
FERC's initial denial of United's waiver request, stating, without explanation, that United "ha[d] not demonstrated good cause," J.A. 16, was inadequate to indicate the "why and wherefore." In denying United's rehearing application, however, FERC explained its position. FERC cited its long-held policy of permitting rate adjustments only on the basis of a pipeline's total package of costs and revenues: Trackers for one portion of a pipeline's costs do not take account of offsetting changes in other costs or overall revenues and therefore might yield rates incompatible with the Act's "just and reasonable" standard. The Commission recognized that its traditional policy is less firm today in view of significant departures carved out through rulemaking procedures. 12 FERC also acknowledged its approval of "settlement agreements that incorporate third-party transportation cost trackers similar to that proposed by United." J.A. 30. While the Commission left open the possibility that it might change its policy should United renew the matter at the rate hearing, 13 FERC was unwilling to depart from its regulation and allow the broad waiver United sought in advance of a full airing of the matter at which views, other than those of United, could be presented. This explanation, while it might have been more expansive, enables us to discern the "why and wherefore" of the Commission's reasoning. FERC's denial of the waiver, pre-hearing, in view of the Commission's long-held, recently reiterated policy, 14 we conclude, was not based on grounds "so insubstantial as to render [the] denial an abuse of discretion." WAIT II, supra, 459 F.2d at 1207.
A tariff filing is appropriately rejected if it is "patently ... either deficient in form or a substantive nullity." Municipal Light Boards v. Federal Power...
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