ARCTIC SLOPE REGIONAL CORPORATION, PETITIONER V. FEDERAL ENERGY
REGULATORY COMMISSION, ET AL.

   No. 87-1869

   In the Supreme Court of the United States

   October Term, 1988

   On Petition for a Writ of Certiorari to the United States Court of
Appeals for the District of Columbia Circuit

   Brief for the Federal Energy Regulatory Commission in Opposition

             TABLE OF CONTENTS
   Question presented
   Opinions below
   Jurisdiction
   Statement
   Argument
   Conclusion

                            OPINIONS BELOW

   The opinion of the court of appeals (Pet. App. 1a-19a) is reported
at 832 F.2d 158.  The order of the Federal Energy Regulatory
Commission approving the final settlement (Pet. App. 22a-44a), its
order approving the initial settlement (Pet. App. 54a-64a), and its
order denying rehearing (Pet. App. 50a-53a) are reported respectively
at 35 F.E.R.C. (CCH) Paragraph 61,425 (1986), 33 F.E.R.C. (CCH)
Paragraph 61,064 (1985), and 33 F.E.R.C. (CCH) Paragraph 61,392
(1985).

                             JURISDICTION

   The judgment of the court of appeals (Pet. App. 76a-78a) was
entered on October 27, 1987.  The petition for rehearing and
suggestion for rehearing en banc were denied on January 15, 1988 (Pet.
App. 79a-80a).  On April 4, 1988, the Chief Justice extended the time
for filing a petition for a writ of certiorari to and including May
14, 1988, and the petition was filed on that date.  The jurisdiction
of this Court is invoked under 28 U.S.C. 1254(1).

                          QUESTION PRESENTED

   Whether the court of appeals properly determined that the Federal
Energy Regulatory Commission had acted within its lawful authority in
approving as uncontested a settlement of a rate investigation endorsed
by all parties except petitioner, where petitioner retained the right
to challenge, at a future date, the rates charged under the settlement
agreement.

                               STATEMENT

   This case involves a challenge to orders issued by the Federal
Energy Regulatory Commission (Commission or FERC) approving settlement
agreements between the State of Alaska and the owners of the Trans
Alaska Pipeline System (TAPS) /1/ that resolve extended administrative
litigation challenging rates for the transportation of oil through the
pipeline.

   1. After the discovery of oil reserves on the North Slope of Alaska
in 1969, various oil companies constructed an 800-mile pipeline from
the North Slope to the all-weather port of Valdez on the Pacific coast
of Alaska.  As the pipeline was nearing completion in 1977, the TAPS
owners filed tariffs with the Interstate Commerce Commission (ICC).
/2/ The filed tariffs contained rates for transportation of oil over
the 800-mile system ranging from $6.04 to $6.44 per barrell.  The
State of Alaska, the United States Department of Justice, the ICC's
Bureau of Investigations and Enforcement, and petitioner Arctic Slope
Regional Corporation (Arctic) immediately filed protests against the
tariffs.  Pet. App. 2a-3a.  /3/

   Under Section 15(7) of the Interstate Commerce Act, 49 U.S.C.
15(7), /4/ the ICC suspended the tariffs for the maximum seven months
and launched an investigation.  /5/ The case was ultimately assigned
to administrative law judges (ALJs) for hearings of different phases
of the matter, a format that FERC retained when it assumed
jurisdiction in October 1977.  The so-called Phase I proceeding
involved the tariffs' ratemaking methodology, including rate base and
rate of return;  the Phase II proceeding concerned the reasonableness
of the TAPS construction costs.  Pet. App. 3a-4a.

   On February 1, 1980, after lengthy proceedings held over a 13-month
period in 1978 and 1979, the ALJ presiding over Phase I issued an
initial decision establishing a ratemaking methodology and
recommending interim rates substantially below the tariffs filed by
the TAPS owners.  See 10 F.E.R.C. (CCH) Paragraph 63,026 (1980).
While this decision was pending before it, the Commission decided
Williams Pipe Line Co., 21 F.E.R.C. (CCH) Paragraph 61,260 (1982),
which addressed the issue of oil pipeline ratemaking methodology.  The
Commission accordingly remanded the Phase I decision to the ALJ for
reconsideration in light of Williams Pipe Line.  Before the ALJ had an
opportunity to conduct remand proceedings, however, the court of
appeals reversed Williams Pipe Line.  Farmers Union Central Exchange,
Inc. v. FERC, 734 F.2d 1486 (D.C. Cir.), cert. denied, 469 U.S. 1034
(1984).  The ALJ then suspended the Phase I remand proceedings.

   In the meantime, the Phase II proceedings were going forward.  The
presiding ALJs held hearings between February 1982 and December 1984,
and set a briefing schedule that would end in January 1986.  The ALJs
suspended the Phase II proceedings, however, in October 1985, because
of a proposed settlement between the State of Alaska and six of the
TAPS owners.  See Pet. App. 4a.

   2. Given the likelihood that the TAPS litigation would continue for
a substantial period of time, Alaska and two of the TAPS owners, Arco
Pipe Line Company and BP Pipelines Inc., began settlement
negotiations.  "From this beginning, Alaska and six of the eight
(TAPS) owners managed to reach settlement by July 1985" (Pet. App.
4a).  By this time, the Antitrust Division of the United States
Department of Justice had announced its support of the settlement
agreements subject to certain conditions, as had the Commission's
staff.  See id. at 6a, 55a, 71a-72a.  /6/ Petitioner, and two TAPS
owners, Sohio Alaska Pipe Line Company and Amerada Hess Pipeline
Corporation, continued to oppose the settlement.  See id. at 66a, 71a.

   The settlement agreement submitted to the presiding ALJs on June
28, 1985, and two major components.  First, the settling TAPS owners
agreed to pay refunds for the rates charged during the period 1982 to
1985.  Second, the agreement established a "rate-setting methodology
(the TAPS Settlement Methodology or TSM) until the year 2011, the
estimated remaining useful life of the pipeline" (Pet. App. 4a).
Under the TSM (id. at 5a (footnote omitted)),

         rates are set on an annual basis, and are regarded under the
      regulatory scheme as any other rate filings by a common carrier.
       Thus, any such rates are subject to challenge by non-settling
      parties, such as Arctic * * *.  (T)he financial impact of (the
      TSM) is two-fold:  (1) to "front-end load" the tariffs charged
      by the owners in the early, pre-settlement years of the pipeline
      and (2) to provide for diminishing rates beginning with the
      initial rates filed under the settlement in December 1985.

   See also id. at 66a-67a.  /7/

   3. a. In an order issued October 23, 1985 (Pet. App. 54a-64a), the
Commission "approve(d) the settlement agreement with respect to the
settling parties because it is fair and reasonable and in the public
interest" (id. at 60a).  /8/ The Commission stated that such
settlements "are to be encouraged (because they) are in the interests
of this Commission, the regulated companies, their customers, other
parties such as (the State of) Alaska and (the Department of) Justice,
and the public * * *" (ibid.).  The Commission, however, acknowledged
the "concerns of the nonsettling parties" and thus remanded the
proceedings to the presiding ALJs "to allow the nonsettling parties a
hearing only on those issues which apply to them" (ibid. (footnote
omitted)).  The Commission did not address the non-settling parties'
objections because the Commission was not "imposing the terms of the
Settlement Agreement on any nonsettling party" (id. at 60a n.17).  /9/

   In an order issued December 19, 1985 (Pet. App. 50a-53a), the
Commission denied Arctic's request for rehearing.  The Commission
rejected petitioner's argument that the procedure adopted by the
October 23, 1985, order violated the Commission's own rules and due
process.  The Commission reiterated that its "rules permit the
severing and approval of uncontested portions of a settlement and the
setting of contested portions of the case for hearing" /10/ and
referred to the "case law uphold(ing) this position" (Pet. App. 52a
(footnote omitted);  see note 8, supra).  Petitioner also argued that
the remand denied non-settling parties an independent determination of
reasonable rates.  In rejecting this argument, the Commission made
clear that petitioner would be "afforded an opportunity to raise its
issues at a hearing" (Pet. App. 52a).  /11/

   On February 5, 1986, while the case was on remand before the
presiding ALJs, Sohio Alaska Pipe Line Company and Amerada Hess
Pipeline Corporation agreed to join in the settlement agreement.
Accordingly, on March 12, 1986, the State of Alaska proposed that
these two TAPS owners be added to the settlement agreement;  the
Commission's staff and the Department of Justice supported this
proposal.  After all parties filed comments and replies, the ALJs, on
April 15, 1986, certified the settlement agreement to the Commission.
Pet. App. 7a, 24a.

   b. On June 27, 1986, the Commission issued its "Order Approving
Settlement, Granting Application, Affirming Initial Decision, and
Terminating Dockets" (Pet. App. 22a).  The Commission severed
petitioner from the proceeding under the Commission's Rule
602(h)(1)(iii), /12/ and approved the settlement as uncontested under
Rule 602(g).  /13/ The Commission rejected petitioner's argument that
the Commission may not lawfully dismiss its protest.  The Commission
stated (Pet. App. 37a (footnote omitted;  brackets and emphasis in
original)):

         At present, Arctic neither ships oil through TAPS nor does it
      have a royalty interest in any oil being shipped via TAPS.  It
      has no direct interest in TAPS' rates.  Arctic informs us that
      it has interests in probable and possible (oil) reserves on the
      Alaskan North Slope * * * and the oil in which it has a royalty
      interest will be shipped over TAPS soon.  At best, the record
      indicates this shipment may occur in the early to mid-1990's.
      This contingent, potential future interest is not so present and
      immediate to justify allowing Arctic to raise this proceeding to
      the level of a contested settlement.

   The Commission made clear that it was not "impos(ing) the
settlement on Arctic nor is Arctic bound by (the Commission's)
approval of the settlement" (Pet. App. 40a-41a).  Moreover, in
reiterating the substance of its earlier orders, the Commission
emphasized that "(i)f, and when Arctic is actually aggrieved, it may
contest TAPS' rates * * * by filing a complaint or protest to a rate
filing" (id. at 41a (footnote omitted);  see id. at 26a n.17).

   4. The court of appeals (Pet. App. 1a-19a) denied Arctic's
petitions for review of the Commission's action, concluding that the
Commission had acted within "lawful bounds" (id at 2a) and in
furtherance of "substantial public-interest considerations" (id. at
10a-11a), by 'approving a settlement as in the public interest, while
ensuring that Arctic can avail itself of its future remedies when its
interest is more fully developed" (id. at 19a (footnote omitted)).
/14/

   The court of appeals first rejected petitioner's claim that the
Commission approved the settlement in violation of its own rules
governing such settlements.  The court stated that "this dispute is
entirely about a FERC-approved settlement," and that the Commission's
actions were within the broad terms of the agency's "quite generous
and flexible" settlement rules (Pet. App. 11a).  The court thus
concluded that those rules, as confirmed by United Municipal
Distributors Group v. FERC, 732 F.2d 202 (D.C. Cir. 1984) (United),
permitted the Commission "to sever a contesting party from the
proceedings and to treat the matter as uncontested, so long as a forum
was provided to resolve the dissenter's challenge" (Pet. App. 11a).

   The court of appeals further rebuffed petitioner's contention that
the Interstate Commerce Act itself required the Commission "to assure
just and reasonable rates" in this proceeding (Pet. App. 11a (footnote
omitted)).  Noting that Sections 15(7) and 15(1) of the Act, 49 U.S.C.
15(7) and 15(1), "cofer broad discretion upon the Commission to
structure its proceedings as it sees fit" (Pet. App. 12a), the court
concluded that "decisions under the (Act) not to pursue an
investigation once begun lie squarely within the agency's discretion *
* *" (id. at 13a).  /15/ Moreover, the court held (id. at 14a) that

         (t)his congressionally granted, judicially confirmed
      discretion (under the Act), coupled with the general policy
      favoring settlement of administrative proceedings, * * * lead(s)
      us to the conclusion that neither the statute nor the agency's
      corpus of rules requires the Commission under any and all
      circumstances to prescribe just and reasonable rates whenever a
      party requests that it do so, even after administrative
      proceedings have been underway for some considerable time.

   Finally, the court of appeals, in upholding the Commission's
severing of petitioner from the proceeding, found that petitioner was
"for starters, not even a current rate payer (and thus) (i)ts interest
is * * * considerably less immediate than that of the ratepayer in
United" (Pet. App. 16a).  And, although concluding that petitioner's
allegations of present injury meet "jurisdictional" standing
requirements (id. at 10a n.10), the court also recognized "Artic's
currently less direct interest in rates than it may well have at some
later time" (id. at 18a n.21).  The court thus held that "it (was)
appropriate for the Commission, under the specific circumstances at
hand, to serve (Arctic's) interests by not forcing the settlement upon
Arctic and by preserving possible future challenges for a riper
moment" (id. at 17a (footnote omitted)).

                               ARGUMENT

   In upholding the Commission's order in this case, the court of
appeals left standing as "fair and reasonable (a) settlement as to all
those who have the most direct and immediate interest in these
long-lived proceedings" (Pet. App. 17A).  This settlement, as the
court of appeals acknowledged (id. at 18a-19a), established a
predictable and declining ceiling for TAPS oil rates for a substantial
period of time and also resolved long years of dispute over refunds
for the period before the rates went into effect.  Moreover, the court
approved, "under the specific circumstances at hand," the Commission's
conclusion that Arctic, as the only party opposing settlement, has the
right to challenge the settlement but that such challenge should be
brought at "a riper moment," namely, when Arctic's interests became
more direct and definite (id. at 17a).

   The court of appeals' decision, which reflects a careful balance of
competing interests, is correct and does not conflict with any
decision of this Court of any other court of appeals.  Moreover,
although the settlement agreement is economically significant and
beneficial to the public interest, the agreement itself is unique and
its approval is therefore not likely to be of any continuing legal
importance.  Indeed, as the court of appeals pointed out, "(t)he very
uniqueness of the proceeding and the subsequent settlement render(ed)
the Commission's action more readily understandable and defensible"
(Pet. App. 16a).  For all these reasons, further review by this Court
is not warranted.

   1. Petitioner contends (Pet. 15-17) that the court of appeals
violated the rule of SEC v. Chenery Corp., 332 U.S. 194, 196 (1947),
in approving the Commission's action on a basis that the Commission
itself had rejected.  In petitioner's view, the Commission "had
dismissed Arctic from the proceeding for lack of standing" (Pet. 16);
the court of appeals rejected that "ruling" and "upheld the agency's
order as a proper exercise of administrative 'discretion'" (ibid.).
This contention, however, misperceives the rulings of both the court
of appeals and the Commission and provides no basis for disturbing the
decision below.

   The Commission, adhering to a ruling in another proceeding, /16/
concluded that a party may not "automatically create a genuine,
material issue (of fact) in a settlement merely by its opposition to
the settlement" (Pet. App. 36a).  Instead, when all other parties
accept a settlement, the non-settling party's interests must be
"'immediately and irreparably affected by approval of a settlement'"
(ibid. (emphasis in original;  citation omitted)) in order "to raise
(the) proceeding to the level of a contested settlement" (id. at 37a).
 The Commission analogized this standard to that which "courts have
fashioned * * * to determine judicial standing" (id. at 36a).  /17/
The Commission, analyzing the "specific facts" of the case, determined
that Arctic was not "particularly 'aggrieved' by the settlement" but
could assert only contingent and potential harm (ibid.).  Accordingly,
the Commission postponed an evaluation of petitioner's challenge to
the settlement to such time as petitioner could show a more immediate
and direct impact.  See id. at 37a-40a.

   To be sure, the court of appeals rejected, in response to the TAPS
owners' argument that petitioner lacked standing to challenge the
settlement, /18/ any suggestion in the Commission's order that Arctic
did not allege "a sufficient present injury to satisfy jurisdictional
(standing) prerequisites" (Pet. App. 10a n.10).  At the same time,
however, the court of appeals made clear that it accepted the
Commission's view of its own discretion to conclude the proceedings
for the reasons articulated by the Commission.  See id. at 19a.

   A fair and careful reading of the court of appeals' opinion, in
light of the Commission's order, belies any claim that the court
decided the case on a ground that the Commission itself had not
adopted.  On the contrary, the court of appeals fully agreed with the
Commission's critical finding that approval of the settlement would
not so immediately and irreparably affect Arctic's interests to
warrant that its challenge should go forward.  The court of appeals
also accepted the Commission's ultimate conclusion that terminating
the proceedings was appropriate and within the bounds of its
discretion under the pertinent statutes and regulations.  See Pet.
App. 17a-19a;  cf. Penn-Central Merger and N & W Inclusion Cases, 389
U.S. 486, 526 n.14 (1968).

   Petitioner seeks to treat the Commission's ruling as an inflexible
jurisdictional holding that cannot be characterized as an exercise of
discretion.  That treatment, however, is unjustified.  Whether phrased
in terms of "aggrievement," "ripeness," or "prematurity," the focus of
the Commission's decision, far from being a rigid jurisdictional
ruling, reflects a balancing or competing interests in order to
determine the proper course under the circumstances.  In affirming
this determination, the court of appeals concluded that the Commission
had acted "appropriate(ly) * * * under the specific circumstances at
hand" (Pet. App. 17a).  Contrary to petitioner's claim, the court of
appeals did not "invent() a theory that (the Commission) has never
suggested or adopted" (Pet. 14).

   2. Petitioner also contends (Pet. 20-23) that the court of appeals
failed to treat the case as a complaint under Section 13(1) of the
Interstate Commerce Act, 49 U.S.C. 13(1), and thus erred in not
requiring the Commission to resolve Arctic's challenge to the TAPS
rates.  As the court of appeals made clear (Pet. App. 12a n.13),
however, the filing of a complaint under Section 13(1) had not
prompted the Commission's proceeding.  /19/ Rather, the Commission
initiated the proceedings on its own motion under Section 15(7) in
response to the TAPS owners' filing of new rates.  The court of
appeals adhered (Pet. App. 12a-13a) to this Court's decisions holding
that an agency's discretion under Section 15 proceedings is broad and,
in some instances, unreviewable.  See, e.g., Southern Ry. v. Seaboard
Allied Milling Corp., 442 U.S. 444 (1979);  Arrow Transp. Co. v.
Southern Ry., 372 U.S. 658 (1963).  The court thus correctly concluded
that "decisions under the (Interstate Commerce Act) not to pursue an
investigation once begun lie squarely within the agency's discretion,
even if the initial investigation reveals that some rates, though not
all, are illegal" (Pet. App. 13a, citing United States v. Louisiana,
290 U.S. 70 (1933)).

   Petitioner attempts to blunt the force of this straightforward
reasoning by erroneously assuming that the case, however initiated,
must be treated as having arisen under Section 13(1).  The fact
remains that the case began as an investigation under Section 15(7),
not as a formal complaint under Section 13(1), and that the court of
appeals' analysis of the applicable scope of the Commission's
discretion in this matter followed settled law.  Moreover,
petitioner's unfounded assumption would lead to the unprecedented
conclusion that the remedies of Section 13(1) automatically apply
whenever a private party files a protest against a rate subject to the
Commission's jurisdiction under Section 15(7).  In Southern Ry. v.
Seaboard Allied Milling Corp., 442 U.S. at 463 (emphases in original),
/20/ however, this Court has already made clear that remedies under
Sections 15(7) and 13(1) are independent of each other:

         (I)t is * * * clear that (Section 13(1)) remedy is
      independent of Section 15(8)(a) proceedings.  First, the
      language of Section 15(8)(a) suggests no linkage to Section
      13(1) * * *.  Second, Section 13(1) has been an independent and
      self-contained procedure since the Act was first passed in 1887.
       When Section 15(8)(a) was added some 23 years later, there was
      no indication that it was intended as an amendment to Section
      13(1), rather than as a limited pre-effective and
      Commission-initiated alternative to the posteffective and
      shipper-initiated Section 13(1).

   Indeed, acceptance to petitioner's ill-founded premise would
require this Court to repudiate the line of decisions holding that an
agency exercises considerable discretion under Section 15(7).  See,
e.g., Southern Ry. v. Seaboard Allied Milling Corp., supra;  Arrow
Transp. Co. v. Southern Ry., 372 U.S. 658 (1963).  /21/ Petitioner
offers no sound basis for the Court to take this step.

   3. Petitioner further argues (Pet. 17-20) that the Due Process
Clause prohibits "dismiss(ing) (petitioner,) an aggrieved party(,)
from a proceeding that directly affects its interests, without ruling
on the merits of its claim" (Pet. 18).  This claim is both overstated
and erroneous.  To be sure, the court of appeals did hold that
petitioner had standing to maintain this action.  See Pet. App. 10a
n.10.  Petitioner, however, conveniently elevates this ruling into a
constitutional prohibition against the Commission's chosen method of
resolving the case.  This sleight of hand cannot succeed because, as
this Court has consistently recognized, "(t)he constitutional
sufficiency of procedures provided in any situation, of course, varies
with the circumstances." Landon v. Plasencia, 459 U.S. 21, 34 (1982).

   The court of appeals noted that "Artic's interest in TAPS tariffs
stems from its ongoing negotiation of exploration leases and the level
of bonus and royalty payments it may achieve, sources of compensation
that are potentially affected by transportation costs in bringing oil
via TAPS to market" (Pet. App. 3a;  see id. at 10a n.10).  The court,
however, weighed this interest against other crucial facts in
approving the Commission's decision to require Arctic to initiate a
further complaint or protest if it wishes to challenge the TAPS rates
filed under the settlement.  First, the court found that the
settlement's impact on Arctic, "though assuredly real," is also
"indirect" (id. at 18a n.20).  This distinction is not semantic.
Arctic's current interest in the TAPS rates has not led it to file a
complaint or protest against the rates promulgated under the
settlement.  And, as all parties agree, Arctic cannot expect to ship
oil, if at all, before the mid-1990s.

   Second, the court of appeals recognized that, given Arctic's
current attenuated as compared to more direct future interest in TAPS
rates, the Commission quite properly could provide Arctic "with a
meaningful remedy contemplated by the statute" (Pet. App. 18a n.21),
while choosing to approve the settlement in the public interest and
deferring petitioner's challenge to a future proceeding.  This
procedural solution to a complicated administrative problem, namely,
balancing the immediately pressing interests of other diverse parties
involved in complex and protracted litigation while preserving
Arctic's right to challenge future TAPS rates when its interest
becomes more concrete, comports with the Due Process Clause by
ensuring petitioner "the opportunity to be heard 'at a meaningful time
and in a meaningful manner.'" Mathews v. Eldridge, 424 U.S. 319, 333
(1976) (quoting Armstrong v. Manzo, 380 U.S. 545, 552 (1965)).

   4. Finally, petitioner contended (Pet. 24-28) that the Commission's
action in severing petitioner and approving as uncontested the
settlement agreement violated the Commission's own rules.  The court
of appeals, following its earlier decision in United, 732 F.2d at 209,
construed the Commission's rules as permitting the severence of a
nonsettling party in order to enable the settlement to proceed on an
uncontested basis (Pet. App. 11a).  And, as in United, petitioner, as
the non-settling party, "was afforded a further procedural remedy
(consistent with the statute and the Commission's rules) to challenge
the rates it was being charged" (id. at 8a).

   Nevertheless, petitioner cites its "aggrieved" status as requiring
the Commission to treat the settlement as contested and thus afford
Arctic an immediate hearing.  Petitioner's attempt to twist the
meaning of the Commission's rules must fail because, at bottom,
petitioner seeks to make mandatory what the rules leave discretionary.
 Rule 602(h)(1)(i), 18 C.F.R. 385.602(h)(1)(i), for example, states
that "the Commission may decide the merits of the contested settlement
issues";  Rule 602(h)(1)(ii)(B), 18 C.F.R. 385.602)h)(1)(ii)(B),
similarly provides that when confronted with a contesting party to a
settlement, the Commission may take such "action which the Commission
determines to be appropriate." As the court of appeals correctly
observed, "(t)he breadth of discretion trumprted by that provision is
manifest" (Pet. App. 11a).  /22/ In the circumstances presented, the
Commission's action fell well within its settled discretionary
practice under its rules.

                              CONCLUSION

   The petition for a writ of certiorari should be denied.

   Respectfully submitted.

   CHARLES FRIED

      Solicitor General

   CATHERINE C. COOK

      General Counsel

   JEROME M. FEIT

      Solicitor

   HANFORD O'HARA

      Attorney Federal Energy Regulatory Commission

   JULY 1988

   /1/ At the time of the settlements, the TAPS owners were Arco Pipe
Line Company, BP Pipelines Inc., Exxon Pipeline Company, Mobil Alaska
Pipeline Company, Phillips Alaska Pipeline Corporation, Union Alaska
Pipeline Company, Sohio Alaska Pipe Line Company, and Amerada Hess
Pipeline Corporation.  See Pet. App. 21 n.1.

   /2/ Before October 1, 1977, oil pipelines were subject to the
jurisdiction of the ICC.  On that date, jurisdiction was transferred
from the ICC to FERC.  See Trans Alaska Pipeline Rate Cases, 436 U.S.
631, 634 n.4 (1978) (TAPS I).

   /3/ The Court is familiar with this early history of the TAPS
litigation.  See TAPS I, supra.

   /4/ In October 1978 the Interstate Commerce Act was recodified at
49 U.S.C. 10101 et seq.  Oil pipelines, however, continue to be
regulated under the original Act (49 U.S.C. (1976 ed.) 1 et seq.).
Unless otherwise specified, citations to the Act refer to the 1976
version.  See Pet. App. 4a n.3;  Act of Oct. 17, 1978, Pub. L. No.
95-473, 92 Stat. 1337.

/5/ The ICC permitted the TAPS owners to file lower interim rates that
would remain in effect during the suspension period.  This Court
upheld the ICC's authority to suspend a pipeline's initial tariff and
to set maximum interim rates during the suspension period.  TAPS I,
436 U.S. at 651-654.

   /6/ The Department of Justice signed the "Stipulation and Offer of
Settlement" that led to the settlement subject to the Commission's
approval (J.A. 1108;  "J.A." refers to the joint appendix filed in the
court of appeals).  The Department of Justice did not sign the
separate settlement agreements (J.A. 502;  see also Pet. App.
65a-66a).

   /7/ The presiding ALJs acknowledged (Pet. App. 66a) that the TSM

         has two principal consequences.  First, it diminishes
      considerably the signatory carriers' potential obligation to pay
      refunds to shippers whose oil has been transported through the
      System during the early years of its operation.  Second, it
      provides for relatively low transportation rates in future
      years, when decisions about the development vel non of marginal
      oil reserves in northern Alaska will be made.

   /8/ The Commission cited United Municipal Distributors Group v.
FERC, 732 F.2d 202 (D.C. Cir. 1984), as authority for its procedure of
severing the contesting parties and approving the settlement with
respect to the consenting parties.  See Pet. App. 55a n.3.

   /9/ The Commission also approved provisions of the settlement
agreement concerning the allocation of certain costs among the TAPS
owners as a pooling agreement under Section 5(1) of the Interstate
Commerce Act, 49 U.S.C. 5(1).  See Pet. App. 60a-61a.

   /10/ The Commission relied on Rule 602(h)(1)(iii), 18 C.F.R.
385.602(h)(1)(iii), which provides:

         If contested issues are severable, the uncontested portions
      may be severed and decided in accordance with paragraph (g) of
      this section.

   /11/ Arctic petitioned the court of appeals for review of the
Commission's December 19, 1985, order denying rehearing.  The TAPS
owners, as intervenors, moved to dismiss on the ground that petitioner
lacked standing to contest the settlement.  A motions panel of the
court of appeals denied the motion to dismiss on July 14, 1986,
concluding that petitioner's contentions "present the requisite injury
to make petitioner an aggrieved party" (Pet. Ap. 21a).

   /12/ See note 10, supra.

   /13/ Rule 602(g)(3), 18 C.F.R. 385.602(g)(3), provides:

         An uncontested offer of settlement may be approved by the
      Commission upon a finding that the settlement appears to be fair
      and reasonable and in the public interest.

   The Commission also approved the addition of Sohio and Amerada Hess
to the settlement agreement and to the pooling arrangement under 49
U.S.C. 5(1).  See Pet. App. 43a.

   /14/ In the court of appeals, the United States, as a statutory
respondent to the petition for review under 28 U.S.C. 2344 and 2348,
neither supported nor opposed the Commission's order under review.
See Position of the United States, No. 86-1115.

   /15/ The court referred to decisions such as Southern Ry. v.
Seaboard Allied Milling Corp., 442 U.S. 444 (1979) (initiation of
Section 15 investigations), and Aberdeen & Rockfish R.R. v. SCRAP, 422
U.S. 289 (1975) (suspension of challenged rates).

   /16/ See El Paso Natural Gas Co., 25 F.E.R.C. (CCH) Paragraph
61,292 (1983);  Pet. App. 36a n.39.

   /17/ The Commission described that judicial "test" as "whether a
party 'has sustained an injury in fact to an interest arguably within
the zone of interests protected or regulated by the (Interstate
Commerce Act)'" (Pet. App. 36a (brackets and emphasis in original;
footnote ommitted)).

   /18/ In the court of appeals, the Commission did not assert that
Arctic lacked standing to file its challenge.  The Commission
contended only that Arctic's attenuated interest offered no basis for
"upset(ting) a settlement otherwise clearly in the public interest"
(FERC Br. 25).

   /19/ The court of appeals stated that petitioner "has advanced no
reason to persuade us that section 13 was ever involved in this case"
(Pet. App. 12a n.13).

   /20/ Section 15(8)(a), currently codified at 49 U.S.C. 10707, was
enacted by Congress as part of the Railroad Revitalization and
Regulatory Reform Act of 1976, Pub. L. No. 94-210 Section 203(e), 90
Stat. 36, to replace Section 15(7) as it applied to railroads.
Section 15(8)(a) is the same as Section 15(7) in all respects material
to the parent discussion.

   /21/ Petitioner errs in relying (Pet. 24) on City of Chicago v.
United States, 396 U.S. 162 (1969), and Minneapolis Gas Co. v. FPC,
294 F.2d 212 (D.C. Cir. 1961).  Petitioner claims that those decisions
show that the duration and course of the proceedings themselves
obligated the Commission to adjudicate the lawfulness of the TAPS
rates.  In City of Chicago, however, the ICC's decision resulted in
the immediate grant of the relief requested.  Here, the initial rates
that caused the Commission's investigation under Section 15 have been
replaced by the TAPS settlement.  Similarly, in Minneapolis Gas Co.,
the Commission's refusal to act effectively left in place rates deemed
to have been just and reasonable.  In the instant case, however, the
Commission made clear that its settlement approval does not establish
that the rates are just and reasonable.  See Pet. App. 14a n.16.

   /22/ Hence, petitioner errs in relying (Pet. 28-30) on decisions
such as New Orleans Public Service v. FERC, 659 F.2d 509 (5th Cir.
1981), as creating a conflict with the court of appeals' decision.
Because the Commission exercises considerable discretion in its
approval of settlement agreements, decisions such as New Orleans
Public Service, which hold that the Commission can treat its approval
of a contested settlement as a resolution of the merits, are entirely
consistent with the decision here.