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Parties Involved:
B&J Oil and Gas
Petitioner
Dominion Transmission, Inc.
Intervenor
Federal Energy Regulatory Commission
Respondent

Document Text:

Notice: This opinion is subject to formal revision before publication in the

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 20, 2003 Decided January 13, 2004

No. 02-1306

B&J OIL AND GAS,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

DOMINION TRANSMISSION, INC.,

INTERVENOR

On Petition for Review of Orders of the

Federal Energy Regulatory Commission

Edward W. Hengerer argued the cause and filed the briefs

for petitioner.

Laura J. Vallance, Attorney, Federal Energy Regulatory

Commission, argued the cause for respondent. With her on

 Bills of costs must be filed within 14 days after entry of judgment.

The court looks with disfavor upon motions to file bills of costs out

of time.

USCA Case #02-1306 Document #796568 Filed: 01/13/2004 Page 1 of 11
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the brief were Cynthia A. Marlette, General Counsel, and

Dennis Lane, Solicitor.

H. Christopher Bartolomucci argued the cause for intervenor. On the brief were Kevin J. Lipson and Christopher A.

Schindler.

Before: GINSBURG, Chief Judge, and ROGERS and TATEL,

Circuit Judges.

Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge: In this case, we consider an energy

producer’s challenge to the Federal Energy Regulatory Commission’s decision to permit a neighboring natural gas pipeline operator to expand an underground gas storage facility

onto the producer’s property. Although we reject FERC’s

argument that the producer lacks standing to pursue this

challenge, because FERC’s orders are supported by substantial evidence and are neither arbitrary nor capricious, we

deny the petition for review.

I.

Under section 7(c) of the Natural Gas Act (NGA), natural

gas companies seeking to construct new gas transportation or

storage facilities, or to expand existing ones, must obtain a

certificate of ‘‘public convenience and necessity’’ from the

Federal Energy Regulatory Commission. See 15 U.S.C.

§ 717f(c)(1)(A) (2000) (‘‘No natural-gas company TTT shall

engage in the transportation or sale of natural gas TTT, or

undertake the construction or extension of any facilities

therefor TTT, unless there is in force TTT a certificate of public

convenience and necessity issued by the Commission authorizing such acts or operations TTTT’’); Schneidewind v. ANR

Pipeline Co., 485 U.S. 293, 295 n.1 (1988) (stating that ‘‘transportation’’ within the meaning of the NGA includes storage).

Such certificates enable gas companies unable to purchase the

property rights needed to construct or operate their certificated facilities to acquire the property from unwilling owners

through eminent domain. 15 U.S.C. § 717f(h).

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Dominion Transmission, Inc., intervenor in this case, owns

and operates an interstate gas transmission system that

transports and stores natural gas for customers in several

east coast states. As part of this system, Dominion runs an

underground storage facility in central West Virginia called

the Fink–Kennedy/Lost Creek Storage Reservoir. FERC’s

predecessor, the Federal Power Commission, certificated the

Fink Reservoir in 1956. See Dominion Transmission, Inc.,

97 F.E.R.C. ¶ 61,344, 62,598 (2001) (relying on Hope Natural

Gas Co., 16 F.P.C. ¶ 955 (1956)). The Fink Reservoir spans

nearly 50,000 acres within the Gantz Formation, a geologic

formation located approximately 1600 to 2600 feet underground. According to Dominion, the Fink Reservoir is one of

the country’s largest natural gas storage facilities.

Petitioner B&J Oil and Gas operates fourteen oil and gas

wells, ten of which are located within the Gantz Formation

adjacent to the current boundary of Dominion’s Fink storage

field. In these proceedings, B&J acts ‘‘on behalf of the

working interest owners and royalty interest owners that it

represents as the operator of [these] fourteen wells.’’ Pet’r’s

Br. at 2.

In February 2001, Dominion asked FERC to revise the

Fink Reservoir’s certificated boundary. In its application

filed pursuant to NGA section 7(c), Dominion asserted that

data acquired and analyses performed after the field’s initial

certification indicated that gas could easily migrate out of the

reservoir area and that third-party wells located outside the

current boundary likely were ‘‘producing,’’ i.e., extracting, gas

from Dominion’s storage field. To prevent this loss, Dominion asked FERC to amend the Fink Reservoir’s certificated

boundary to encompass an additional 3063 acres, which would

enlarge the storage area to the reservoir’s actual geologic

border. This proposed expansion would incorporate neighboring private property, including B&J’s.

To protect its property interests, B&J intervened and

objected to Dominion’s application. Claiming that Dominion

had failed to present sufficient engineering and geologic

information to justify boundary expansion, B&J submitted its

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own expert report challenging the accuracy of some of Dominion’s data. Staff from FERC’s Office of Energy Projects

subsequently sent ‘‘deficiency letters’’ to both Dominion and

B&J requesting more information about their filings. In

response, Dominion submitted additional materials, requesting confidential treatment for five documents on the ground

that they contained sensitive or proprietary information.

B&J promptly filed a Freedom of Information Act request to

obtain one of the five assertedly privileged documents, explaining that the other four appeared on a publicly accessible

FERC information management system. After determining

that it had mistakenly posted Dominion’s confidential documents, FERC removed the materials from its information

system, ordered parties who had downloaded them to destroy

the documents and not to use them in any way, and denied

B&J’s FOIA application. See Dominion Transmission, Inc.,

96 F.E.R.C. ¶ 61,238, 61,955 (2001) (document destruction

order); Dominion Transmission, Inc., 97 F.E.R.C. ¶ 61,120,

61,584 (2001) (denying rehearing of the document destruction

order and noting that the Commission’s Office of External

Affairs had denied B&J’s FOIA request). Concluding that

the public record contained sufficient information for it to

decide Dominion’s boundary revision application, FERC also

rejected B&J’s request to stay the Dominion certificate proceedings until after the agency resolved B&J’s FOIA appeal,

see Dominion, 97 F.E.R.C. at 61,584, and later affirmed the

denial of B&J’s FOIA application, see Dominion Transmission, Inc., 100 F.E.R.C. ¶ 61,168, 61,601 n.3 (2002).

In December 2001, FERC approved Dominion’s application

to expand the Fink Reservoir. Dominion, 97 F.E.R.C. at

62,598. Relying only on publicly available information,

FERC found that the Gantz Formation was larger than the

Fink Reservoir’s currently certificated boundary and that

Dominion storage gas was in fact migrating toward B&J’s

wells. Id. at 62,601. FERC thus found it ‘‘in the public

convenience and necessity to expand the storage boundary for

the Fink Reservoir as proposed, in order to maintain the

operational integrity of the storage field and to enable Dominion to continue to provide reliable natural gas storage serUSCA Case #02-1306 Document #796568 Filed: 01/13/2004 Page 4 of 11
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vice.’’ Id. Balancing the need to ensure the storage field’s

integrity against B&J’s interests, FERC concluded that preventing gas migration outweighed B&J’s property interests

because B&J would be compensated for the loss of its oil and

gas wells through eminent domain proceedings. Id. In

addition, the Commission rejected B&J’s proposal to allow

the company to continue producing oil and return any Dominion storage gas that it extracted. According to the Commission, permitting third-party drilling in the area could interfere with storage operations and encourage other producers

to poach Dominion gas. Id. at 62,601–02. In a second order,

FERC denied B&J’s petition for rehearing. Dominion, 100

F.E.R.C. at 61,603.

B&J now petitions for review, challenging both FERC

orders. It claims that FERC acted arbitrarily and capriciously in granting Dominion’s application and that the Commission’s decision is unsupported by substantial evidence.

II.

Before considering the merits of B&J’s petition, we must

address FERC’s argument—supported by Dominion—that

B&J lacks standing. See Steel Co. v. Citizens for a Better

Env’t, 523 U.S. 83, 94–102 (1998) (holding that federal courts

must ensure that they have jurisdiction before considering

the merits of a case). To establish Article III standing, B&J

must demonstrate that it has suffered an injury-in-fact, that

FERC’s action caused its injury, and that a favorable order

would likely redress its harm. See Lujan v. Defenders of

Wildlife, 504 U.S. 555, 560–61 (1992); Idaho Power Co. v.

FERC, 312 F.3d 454, 459–60 (D.C. Cir. 2002).

FERC and Dominion insist that B&J is not ‘‘aggrieved’’

within the meaning of the Natural Gas Act because subsequent eminent domain proceedings will fully remedy any

harm that FERC’s orders may cause B&J. See 15 U.S.C.

§ 717r(b) (2000) (providing that only ‘‘aggrieved’’ parties may

seek judicial review of FERC decisions). Absent such ‘‘aggrievement,’’ they claim, B&J has suffered no injury and

therefore cannot establish constitutional standing to petition

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this court for review. Acknowledging that it found no legal

authority supporting its theory, Dominion contends that its

standing claim presents a ‘‘novel’’ issue of ‘‘first impression.’’

See Mot. of Intervenor Dominion Transmission, Inc. for

Leave To Share Oral Argument Time with Resp’t at 3.

We think the standing argument is not so much ‘‘novel’’ as

it is wholly without merit. Because FERC’s approval of

Dominion’s application will eliminate B&J’s ownership interest in its property, B&J unquestionably suffers from an

injury-in-fact. As a result of the Commission’s orders, B&J,

whether or not it wishes to continue operating its oil and gas

wells, must either sell its land to Dominion or allow Dominion

to take its property through eminent domain. See Idaho

Power, 312 F.3d at 460 (finding an injury-in-fact where a

FERC order would compel a company to enter into a shortterm, instead of a long-term, contract even though the two

contracts had equivalent monetary value). That Dominion

ultimately will compensate B&J for its property does nothing

to erase B&J’s legally cognizable injury. See Consumer

Fed’n of Am. v. FCC, 348 F.3d 1009, 1012 (D.C. Cir. 2003)

(‘‘[T]he inability of consumers to buy a desired product may

constitute injury-in-fact even if they could ameliorate the

injury by purchasing some alternative product.’’ (internal

quotation marks omitted)). Indeed, if FERC’s and Dominion’s theory were correct, homeowners would be unable to

challenge construction of a road through their homes, no

matter how arbitrary or unjust the decision. The public

entity building the road would simply argue, as here, that the

homeowners lack Article III standing because eminent domain proceedings will fully compensate them for the value of

their homes. No wonder neither FERC nor Dominion cites

any supporting authority.

B&J easily satisfies the other requirements for Article III

standing: FERC’s orders cause B&J’s injury because they

effectively extinguish B&J’s ownership interests, and a favorable decision here would redress B&J’s harm, for absent

FERC’s approval, Dominion would have no right to take over

B&J’s property. We thus turn to the merits.

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III.

We evaluate FERC’s orders under familiar and highly

deferential standards of review. We will sustain the Commission’s decision unless it is ‘‘arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with law.’’ 5

U.S.C. § 706(2)(A) (2000); see also Midcoast Interstate

Transmission, Inc. v. FERC, 198 F.3d 960, 967 (D.C. Cir.

2000) (applying the arbitrary and capricious standard of

review to a challenge to a FERC order). If supported by

substantial evidence, the Commission’s findings of fact are

conclusive. 15 U.S.C. § 717r(b). Moreover, when agency

orders involve complex scientific or technical questions, as

here, we are particularly reluctant to interfere with the

agency’s reasoned judgments. See City of Waukesha v. EPA,

320 F.3d 228, 247 (D.C. Cir. 2003) (per curiam) (‘‘[W]e will

give an extreme degree of deference to the agency when it is

evaluating scientific data within its technical expertise.’’ (internal quotation marks omitted)).

B&J first argues that FERC acted arbitrarily and capriciously by failing to recognize the ‘‘sui generis nature’’ of the

Fink Reservoir, Pet’r’s Br. at 13—namely, that Dominion’s

facility stores natural gas in a non-depleted oil field (a field

that still contains producible oil) rather than in the more

typical, depleted natural gas field (a field emptied of producible natural gas). In missing this distinction and in mechanically applying FERC precedent relating to storage reservoirs

in depleted gas fields, B&J argues, FERC improperly disregarded two key issues: (1) the adverse impact that boundary

revision would have on domestic oil production, and (2) the

unique difficulties associated with storing gas in an active oil

field. As B&J sees it, FERC erred in ignoring these factors

because the public convenience and necessity standard ‘‘that

forms the basis of FERC’s responsibility under the NGA is

not completely static TTT and is meant by Congress to be

broad and flexible enough to address current conditions that

differ significantly from the original certificate context.’’

Pet’r’s Br. at 17 (citation omitted). We are unconvinced.

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To begin with, we do not agree that FERC applied an

erroneous public convenience and necessity standard. In

deciding to grant Dominion’s application, FERC followed

established precedent. Specifically, when the Commission

evaluates an application to enlarge a storage field boundary,

it considers whether expansion is necessary to preserve the

integrity of the storage field, and its ‘‘material consideration

is whether the storage reservoir has expanded and whether

the company’s estimations of the reservoir and protective

boundaries are reasonable.’’ Dominion, 97 F.E.R.C. at 62,-

600; see also Nat’l Fuel Gas Supply Corp., 88 F.E.R.C.

¶ 61,129, 61,134–44 (1999); ANR Pipeline Co., 76 F.E.R.C.

¶ 61,263, 62,346 (1996), reh’g denied, 78 F.E.R.C. ¶ 61,122

(1997). B&J cites no authority to support its claim that

FERC could not apply this precedent here simply because

Dominion’s storage reservoir is housed in an active oil field

and not a depleted gas field. Moreover, B&J’s argument that

FERC’s public convenience and necessity analysis should

have incorporated a broader range of factors based on this

court’s precedent fundamentally misapprehends the two cases

on which the company relies, Koch Industries, Inc. v. Federal

Power Commission, 554 F.2d 1158 (D.C. Cir. 1977), and

Consolidated Gas Supply Corp. v. Federal Power Commission, 520 F.2d 1176 (D.C. Cir. 1975). In those cases, we

observed—unremarkably—that agencies may change their

policies as long as they engage in reasoned decisionmaking

and explain their breaks with precedent. The Commission is

not ‘‘impotent,’’ we explained in Koch Industries, ‘‘to appropriately reshape policies in its continuing endeavor to solve

the Nation’s critical gas shortage.’’ 554 F.2d at 1162. Nor

does ‘‘[t]he legal system TTT compel rigidity, or bureaucratic

inflexibility, least of all in an area like energy policy where

flexibility may be essential in the public interest.’’ Consol.

Gas, 520 F.2d at 1185. Thus, although these cases certainly

authorize FERC to shift course in response to evolving

circumstances, they do not permit us to compel FERC to

consider the factors that we believe are in the public interest

as B&J would have us do. Indeed, such a result would be

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flatly inconsistent with fundamental principles of judicial deference to agency expertise.

Furthermore, despite B&J’s claims to the contrary, FERC

did consider the effect of Dominion’s application on domestic

oil production—it simply rejected B&J’s position that oil

supply in the area justified rejecting Dominion’s application.

In its rehearing order, the Commission concluded that B&J’s

projections of crude oil recovery were ‘‘overstated’’ and that

B&J currently produces only fifty barrels of oil per day from

its Gantz Formation wells. Dominion, 100 F.E.R.C. at 61,-

602. In light of the limited oil deposits at issue, we find

nothing unreasonable about FERC’s conclusion that ‘‘the

benefits of maintaining the operational integrity of the storage field so that Dominion could continue to provide reliable

natural gas storage service outweighed any adverse [e]ffect to

B&J’s interests.’’ Id. B&J’s argument that FERC should

not only have reevaluated the technical premises underlying

the original decision to certificate the Fink Reservoir for gas

storage but also considered requiring Dominion to resume its

own oil production in the Fink Reservoir makes little sense in

the context of this proceeding. Dominion’s application only

sought permission to expand an existing gas storage pool—

not permission to convert the field from oil production into

gas storage as an original matter.

B&J’s contention that the Commission failed to consider

the difficulties associated with storing natural gas in an active

oil field likewise provides no basis for setting aside FERC’s

approval of Dominion’s application. According to B&J, housing natural gas in an oil field is problematic because the oil

mixes with and thus taints the storage gas. Even if this is so,

B&J offers no evidence to show that extending the Fink

Reservoir’s certificated boundary, the only question at issue

here, will result in greater gas loss or cost to Dominion’s

customers than if the boundary were left unchanged.

Finally, we reject B&J’s claim that FERC’s orders are

unsupported by substantial evidence. Although the substantial evidence standard ‘‘requires more than a scintilla,’’ it ‘‘can

be satisfied by something less than a preponderance of the

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evidence.’’ FPL Energy Me. Hydro LLC v. FERC, 287 F.3d

1151, 1160 (D.C. Cir. 2002). Here, FERC based its findings

on: (1) isopach maps demonstrating that the Gantz Formation extends beyond the currently certificated area, (2) a

structural map of the Gantz Formation, (3) isobaric maps

demonstrating that pressure variations would tend to cause

Dominion’s storage gas to migrate, and (4) the production

history of B&J’s wells showing Dominion storage gas likely

entering B&J’s energy production area. Dominion, 97

F.E.R.C. at 62,601. This data-rich evidentiary record easily

satisfies our ‘‘more than a scintilla, less than a preponderance’’ standard. Moreover, FERC’s decision rests on just the

type of highly technical evidence that this court is least

equipped to second-guess. See City of Waukesha, 320 F.3d

at 247.

B&J nevertheless contends that FERC’s orders lack substantial evidence because the Commission failed to consider

the confidential documents that Dominion submitted in response to agency ‘‘deficiency letters,’’ which, according to

B&J, prove that FERC itself viewed the public record as

insufficient. As B&J sees it, because the ignored documents

might contain information supporting its position, FERC

should have granted B&J access to them and considered

them before approving Dominion’s application.

B&J’s arguments do not justify remand to the agency.

For one thing, just because agency staff sought additional

information in no way undermines FERC’s ultimate determination that the public record was adequate to decide the case.

Indeed, the public record, which comprises not only Dominion’s and B&J’s pleadings but also Dominion’s nonconfidential responses to staff data requests, contains ample

evidence on the key issues relevant to FERC’s inquiry—

whether the Gantz Formation is larger than the currently

certificated area, whether gas is migrating, and whether

Dominion’s estimates of the actual border are reasonable.

FERC, moreover, gave B&J an opportunity to refute Dominion’s data and to challenge FERC’s findings with B&J’s own

geologic or engineering reports. See Dominion, 97 F.E.R.C.

at 62,599 (stating that the Commission had permitted B&J to

reply to Dominion’s answer to B&J’s protest). Having failed

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to do so, B&J leaves us with no basis for concluding that

FERC’s decision is unsupported by substantial evidence.

Finally, in light of this extensive public record, not only is

B&J’s argument that it needed access to Dominion’s confidential documents that ‘‘might’’ support its position far too

speculative to provide a basis for setting aside FERC’s

judgment, but also, in substantial evidence cases, ‘‘[t]he question we must answer TTT is not whether record evidence

supports [the petitioner’s] version of events, but whether it

supports FERC’s.’’ Fla. Mun. Power Agency v. FERC, 315

F.3d 362, 368 (D.C. Cir.), cert. denied, 124 S. Ct. 386 (2003).

Having found FERC’s decision supported by substantial

evidence and neither arbitrary nor capricious, we deny the

petition for review.

So ordered.

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