Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-94-01059/USCOURTS-caDC-94-01059-0/pdf.json

Parties Involved:
Arizona Public Service Company
Intervenor
El Paso Natural Gas Company
Petitioner
Federal Energy Regulatory Commission
Respondent
Meridian Oil Inc
Intervenor
Public Utilities Commission of the State of California
Intervenor
Salt River Project Agricultural Improvement and Power District
Intervenor
San Diego Gas & Electric Company
Intervenor
Southern California Gas Company
Intervenor
Southwest Gas Corporation
Intervenor
Transwestern Pipeline Company
Intervenor

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 28, 1995 Decided March 21, 1995

No. 94-1059

EL PASO NATURAL GAS COMPANY,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

PUBLIC UTILITIES COMMISSION OF THE

STATE OF CALIFORNIA;

ARIZONA PUBLIC SERVICE COMPANY;

SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT

AND POWER DISTRICT;

MERIDIAN OIL INC.;

SAN DIEGO GAS & ELECTRIC COMPANY;

SOUTHERN CALIFORNIA GAS COMPANY;

SOUTHWEST GAS CORPORATION;

TRANSWESTERN PIPELINE COMPANY,

INTERVENORS

Petition for Review of an Order of the

Federal Energy Regulatory Commission

Richard C. Green argued the cause for petitioner. With him on the briefs were James R. McCotter,

Mark F. Sundback, Peter J. Thompson and Phillip D. Endom. Britton White, Jr. entered an

appearance.

Eric L. Christensen, Attorney, Federal Energy Regulatory Commission, argued the cause for

respondent. With him on the brief were Jerome M. Feit, Solicitor, and Joseph S. Davies, Jr., Deputy

Solicitor, Federal Energy Regulatory Commission.

Mark Fogelman argued the cause for intervenors. With him on the joint brief were Edward W.

O'Neill for Public Utilities Commission of the State of California, Douglas M. Gleason, James P.

Walsh and Nicholas W. Fels for San Diego Gas & Electric Company and David J. Gilmore for

Southern California Gas Company. Barbara S. Jost and Joel L. Greene entered appearances for

Arizona Public Service Company and Salt River Project Agricultural Improvement and Power

District. Kim M. Clark entered an appearance for Meridian Oil Inc. John C. Walley entered an

appearance for Southwest Gas Corporation. Sherrie N. Rutherford and Steve Stojic entered

appearances for Transwestern Pipeline Company.

Before EDWARDS, Chief Judge, WALD and RANDOLPH, Circuit Judges.

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1The NGA defines "natural-gas company" as any individual or corporation "engaged in the

transportation of natural gas in interstate commerce, or the sale in interstate commerce of such

gas for resale." 15 U.S.C. § 717a(6). 

Opinion for the Court filed by Circuit Judge WALD.

WALD, Circuit Judge: Petitioner El Paso Natural Gas Company ("El Paso") seeks review of

two orders of the Federal Energy Regulatory Commission holding that a proposal by two local

distribution companies ("LDCs") located in California to extend their pipeline network into Mexico

would not bring the network within the Federal Energy Regulatory Commission's ("FERC" or

"Commission") jurisdiction under §§ 4 and 7 of the Natural Gas Act ("NGA" or "Act"). 15 U.S.C.

§§ 717c, 717f (1988). El Paso argues that FERC's determination contravened both the terms of the

NGA and Commission precedent. We hold that El Paso lacks standing because it has failed to

demonstrate aggrievement or a likelihood of imminent injury under the challenged rulings, and we

therefore dismiss the petition without reaching the merits.

I. BACKGROUND

A. Regulatory Background

The NGA regulates the transportation and sale of natural gas in interstate commerce. Three

sections of the Act are particularly relevant to this case. Section 7 provides that "[n]o natural-gas

company1or person which will be a natural-gas company upon completion of any proposed

construction or extension shall engage in the transportation or sale of natural gas" without first

obtaining a certificate of public convenience and necessity from the Commission. Id. at §

717f(c)(1)(A). Section 4 requires that "natural-gas companies" must maintain their rates for

transportation or sale of gas on file with the Commission. Id. at § 717c(c).

Section 3 of the NGA is broader in scope than §§ 4 and 7. It requires that the Commission

must approve the exportation or importation of natural gas by any "person" unless it finds that the

project "will not be consistent with the public interest." Id. at § 717b. Because this section addresses

"person[s]," rather than "natural-gas companies," the need for compliance with § 3 extends to all

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2Under Executive Order No. 10,485, 18 Fed. Reg. 5397 (1953), as amended by Executive

Order No. 12,038, 43 Fed. Reg. 4957 (1978), constructing transmission facilities at the border

between the United States and a foreign country also requires a "Presidential Permit," signifying

the approval of the Secretaries of State and Defense. As a practical matter, applicants request this

authorization from the Commission, who submit a draft Permit to the Secretaries for their

recommendation. If the Secretaries approve, the Commission issues the Permit. See San Diego

Gas & Electric Co., 64 F.E.R.C. ¶ 61,221 at 62,652 (1993). 

importers or exporters of natural gas, regardless of whether they operate in interstate commerce.2

The "Hinshaw Amendment," contained in § 1(c) of the NGA, exempts certain facilities that

transport or sell "interstate" gas but that are located within a single state from many provisions of the

NGA, including §§ 4 and 7:

The provisions of this chapter shall not apply to any person engaged in ... the

transportation in interstate commerce or the sale in interstate commerce for resale, of

natural gas received by such person from another person within ... a State if all the

natural gas so received is ultimately consumed within such State, or to any facilities

used by such person for such transportation or sale, provided that the rates and

service of such person and facilities be subject to regulation by a State commission.

The matters exempted from the provisions of this chapter by this subsection are

declared to be matters primarily of local concern and subject to regulation by the

several states.

15 U.S.C. § 717(c) (1988). Because the Hinshaw Amendment exempts "Hinshaw pipelines" only

from aspects ofthe NGA "subject to regulation by a State Commission," and state commissions have

no authority to approve exportation or importation of natural gas, the requirements of § 3 apply even

to Hinshaw pipelines. See, e.g, Empire State Pipeline, 64 F.E.R.C. ¶ 61,035 at 61,335-36 (1993).

B. Factual Background

Petitioner El Paso transports natural gas in interstate commerce from various gas sources to

distributors. It is a "natural-gas company," as defined by the NGA, 15 U.S.C. § 717(a)(6), and is

therefore subject to FERC's §§ 4 and 7 jurisdiction.

Among El Paso's customers are two LDCs, San Diego Gas & Electric Company ("SDGE")

and SouthernCaliforniaGasCompany("SoCal"), whose pipeline network servessouthernCalifornia.

The LDCs are Hinshaw pipelines, and so exempt from FERC regulation under §§ 4 and 7 of the

NGA. Their rates, services, and facilities are regulated by the Public Utilities Commission of the

State of California ("CPUC").

This case involves a proposal ("Project Vecinos") by the LDCs to extend their service into

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Baja California, in Mexico. The Project contemplates construction of 110 miles of new pipeline in

California, primarily to transport gas to Mexico, but which would also convey gas for consumption

inCalifornia. In addition, Project Vecinos would require the LDCs to construct and operate a border

crossing facility at the Mexican frontier, including a 2.1 mile pipeline (the "Otay Mesa Extension")

that would connect the LDCs network to a Petroleos Mexicanos facility.

C. Procedural Background

In December 1992, SDGE applied to the Commission for § 3 authorization and a Presidential

Permit to construct the Otay Mesa Extension. At the same time, the LDCs filed a joint petition for

a declaratoryorderstating that execution ofProject Vecinoswould not jeopardize the Hinshaw status

oftheir distribution network upstream of the OtayMesa Extension. El Paso intervened in opposition

to the LDCs' declaratory order request.

InAugust 1993, the Commission issued an order granting the necessary § 3 authorization and

Presidential Permit. See San Diego Gas & Electric Co., 64 F.E.R.C. ¶ 61,221 at 62,651-52 (1993).

It also declared that upon completion ofProject Vecinos, the LDCs would retain their Hinshaw status

and thus did not require § 7 authorization to execute the Project. Id. at 62,653. The Commission

reasoned that gas exported to Mexico would be in "foreign," not interstate commerce, and so could

not render the LDCs "natural-gas companies" subject to the requirements of § 7 of the NGA.

Because the remainder of the gas would be "consumed in California," the Commission believed that

the LDCs would continue to satisfy the requirements of the Hinshaw Amendment. Id.

El Paso timely petitioned the Commission for rehearing. It argued that FERC precedent

establishes that "interstate gas" sold in foreign commerce remains in interstate commerce until it

reaches the border. Therefore, upon completion of the Project, the LDCs would be engaged in

interstate commerce, rendering them "natural-gas companies" subject to §§ 4 and 7 of the NGA.

Moreover, El Paso argued, the LDCs would no longer fall within the Hinshaw Amendment, because

the gas exported to Mexico would not be "consumed" withinCalifornia asthe Amendment mandates.

ElPaso concluded that the LDCs were therefore required to obtain § 7 authorization before executing

Project Vecinos, and should be subject to rate regulation by FERC under § 4 upon completion of the

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Project.

In December 1993, the Commission issued an order denying rehearing for essentially the

reasons advanced in its earlier decision. San Diego Gas&Electric Co., 65 F.E.R.C. ¶ 61,299 (1993).

El Paso petitioned this court for review on the same grounds advanced in its petition for rehearing

to the Commission.

II. DISCUSSION

A. The "Injury-in-Fact" Requirement

FERC challenges El Paso's standing to pursue this petition. We agree with the Commission

that El Paso has failed to demonstrate aggrievement or the likelihood of imminent injury under

FERC's rulings, and we therefore dismiss the petition without reaching the merits.

Pursuant to § 19(b) of the NGA, 15 U.S.C. § 717r(b), only a party that is "aggrieved" by an

order issued under the Act may obtain judicialreview thereof. See, e.g., Moreau v. FERC, 982 F.2d

556, 564 (D.C. Cir. 1993). In addition, like all parties seeking access to the federal courts, petitioners

must satisfy the requirements of constitutional standing. "Common to both these thresholds is the

requirement that petitioners establish, at a minimum, "injury in fact' to a protected interest." Shell

Oil Co. v. FERC, No. 92-1634, slip op. at 25 (D.C. Cir. Feb. 21, 1995).

The SupremeCourt recentlyheld that to demonstrate "injury in fact" under Article III, a party

must allege an invasion of legally protected interests that is both (a) concrete and particularized and

(b) actual or imminent, not conjectural or hypothetical. See Lujan v. Defenders of Wildlife, 112 S.

Ct. 2130, 2136 (1992). El Paso advances two separate arguments in an attempt to meet this minimal

requirement; it claims to have suffered "injury in fact" as an "upstream transporter" of gas for the

LDCs, and as a "potential competitor" of the LDCs for customers in Baja California.

B. The "Upstream Transporter" Argument

El Paso claims that FERC's ruling that the LDCs will retain their Hinshaw status affects

petitioner in its role as an "upstream transporter" because gas sold by El Paso to the LDCs will not

be transported and resold subject to regulation under §§ 4 and 7 of the NGA, but rather on terms

controlled by CPUC. Petitioner argues that this absence of "protections mandated by federal

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law"after El Paso's gas is delivered to the LDCsconstitutes "injury in fact."

Petitioners do not, however, suggest that the downstream "protections" of California state

regulation are currently any less advantageous to El Paso than those of the NGA. Indeed, counsel

for petitioner conceded at oral argument that CPUC regulation of the LDCs could prove more

favorable to El Paso than FERC regulation would be. Certainly petitioner has not, either in its briefs

or at oral argument, pointed to any concrete element of CPUC regulation that presently fails to

measure up to the NGA's protections.

Instead, El Paso advances a number of ways in which CPUC regulation might harm El Paso

in the future. All appear to be variations on the theme that CPUC may accord "preferential treatment

to shippers who make use of locally-regulated facilities over shippers who might otherwise rely

primarily on federally regulated pipelines, such as El Paso." Again, however, petitioner fails even to

argue that injury from such potential prejudicial treatment has occurred or is in any way imminent.

In Shell Oil Co. v. FERC, No. 92-1634,slip op. (D.C. Cir. Feb. 21, 1995), this court recently

confronted a similar argument that FERC'sfinding ofjurisdiction under one regulatory scheme rather

than another constituted "injury in fact." In Shell, petitioners sought access to the Bonito Pipe Line

Company's ("Bonito") network on the Outer Continental Shelf under the access provisions of both

the Outer Continental Shelf Lands Act ("OCSLA") and the Interstate Commerce Act ("ICA"). The

Commission ruled for Shell under the OCLSA, but found that it lacked jurisdiction under the ICA.

Shell petitioned this court for review of FERC's jurisdictional ruling on the ground that the ICA

provides certain rate protections and filed tariffrequirementsthat have no counterpart in the OCSLA.

Shell argued that the Commission's order both opened the door to Bonito to impose tariffsthat would

be unreasonable under the ICA, and denied petitioners their statutory right to know the rates and

terms of other shippers.

The court found that Shelllacked standing to challenge theCommission'sjurisdictionalruling.

It noted that Shell had "failed to point to any existing practicesthat would have been prohibited under

the ICA" but were allowed under the OCLSA. Id. at 26. Instead, "Shell's allegations of injury

rest[ed] on a hypotheticalscenario" in which "the Bonito owners... at some point in the future exact

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excessive ... rates and [ ] the Commission denies the protection of the ICA." Id. at 28. The court

concluded: "[While] such injury is not inconceivable, we are unpersuaded that it is imminent, as it

must be under traditional standing analysis." Id.

The same is true in this case. El Paso's alleged "injury" flows from the hypothetical premise

that CPUC may some day promulgate regulations that favor CPUC-regulated entities over

FERC-regulated entities, and that FERC will deny the protections of the NGA. This scenario is

certainlywithin the realmof possibility, but we are unconvinced that it portendssufficiently imminent

injury to confer standing on El Paso. Of course, as in Shell, "[o]ur decision does not [ ] bar future

efforts by [El Paso] to challenge the Commission's conclusion that it lacks jurisdiction under the

[NGA], if the Commission's adherence to its interpretation produces [injury in fact] to [El Paso]."

Id. at 30.

C. The "Potential Competitor" Argument

El Paso also argues that it has sustained injury in fact because it may one day compete with

the LDCs in Baja California, and will be obliged to operate under FERC regulation while the LDCs

are subject to the authority of CPUC. We reject this argument as well.

We think it insufficiently clear that El Paso will, in fact, ever compete with the LDCs for

customers in Mexico. In November 1993, FERC granted El Paso § 3 authorization to construct

facilities to serve the area of Baja California targeted by Project Vecinos, but denied petitioner's

request for § 7 authorization on the ground that they had failed to produce agreements demonstrating

a demand for El Paso gas in the region. El Paso Natural Gas, 65 F.E.R.C. ¶ 61,276 at 62,270

(1993). Although FERC then afforded El Paso ample opportunity to furnish such evidence, El Paso

instead elected to withdraw its request in June 1994. At present, then, it is wholly speculative that

El Paso will ever "compete" with the LDCs in Baja California.

We note, moreover, that it is uncertain whether petitioner would have standing to challenge

FERC's jurisdictional determination even if they were currently competing with the LDCs for

Mexican customers. This court's "competitor standing" cases, upon which petitioner relies, appear

inapposite to such circumstances. The nub of the "competitive standing" doctrine is that when a

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challenged agency action authorizes allegedly illegal transactions that will almost surely cause

petitioner to lose business, there is no need to wait for injury from specific transactions to claim

standing. In Investment Company Institute v. Federal Deposit Insurance Corporation, 815 F.2d

1540 (D.C. Cir. 1987), for example, mutual fund companies challenged, as violative of the GlassSteagall Act, Federal Deposit Insurance Corporation regulationsthat permitted nonmember insured

banks to establish subsidiary and affiliate relationships with firms engaged in securities work. In

holding that the petitioners had constitutional standing on the basis of competitive injury, the court

cited no specific instances of injury, but noted that "allowing insured non-member banks to enter the

securitiesfield indirectly through subsidiaries and affiliates" would "plainlythreaten" economic injury

to the petitioners in the form of lost customers. Id. at 1543.

In Associated Gas Distributors v. FERC, 899 F.2d 1250 (D.C. Cir. 1990), we found standing

on similar grounds. Petitioner Associated Gas Distributors ("AGD") there questioned whether § 311

of the National Gas Policy Act ("NGPA"), 15 U.S.C. § 3371 (1988), authorized FERC to issue

blanket exemptions from the requirements of the NGA's § 7, so long as some intrastate pipeline or

LDC benefitted from the proposed transportation. FERC challenged the AGD's standing on the

ground that it was "purely speculative" whether the allegedlyillegal§ 311 transactions would actually

harm petitioner. See id. at 1258. The court noted, however, that "[a]t least one LDC ha[d] already

been bypassed by allegedly illegal § 311 transportation," and held that the "clear and immediate

potential" that more allegedly illegal transportation would interfere with petitioner's sales conferred

standing.

The present case divergesin a criticalrespect fromInvestmentCompany,AssociatedGas, and

our other "competitor standing" cases. El Paso does not appear to argue that the LDCs are not

legally entitled to serve the Mexican customers for which El Paso hopes to compete. Rather, they

emphasize that FERC's decision means that CPUC, rather than FERC, will regulate the LDCs'

proposed facilitiesinCalifornia. They object that if CPUC regulates the LDCs' facilities, and El Paso

one day constructs competing facilities subject to FERC regulation, the LDCs could enjoy a

competitive advantage ifCPUC regulation proves more favorable to pipelinesthan FERC regulation.

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This argument, however, runs smack into the same impediment as petitioners' "upstream

transporter" claim. If El Paso actually were a "competitor," its purported "injury" would apparently

rest on the hypothesis that CPUC oversight is less onerous than FERC regulation. As we explain

supra at 7-9, however, petitioner has failed even to make a case that such a difference in regulatory

burdens in fact exists. We therefore caution that even if El Paso were "competing" with the LDCs

in Mexico, that would not necessarily bring petitioners within the ambit of our "competitor standing"

cases. El Paso would still be required to allege facts demonstrating "injury in fact." Cf. King Bridge

Co. v. Otoe County, 120 U.S. 225, 226 (1887) (facts supporting Article III jurisdiction must

"appea[r] affirmatively from the record").

Finally, we note a different formulation of El Paso's "competitor standing" argument that

appears at first blush more substantial. Although the claim does not emerge clearly, El Paso may have

intended to argue that FERC's determination that petitioner must obtain a § 7 construction

authorization before building facilities to serve the Mexican market, while the LDCs could proceed

without satisfying § 7, placed El Paso at a competitive disadvantage.

The response already made to petitioner's "upstream transporter" argument, however,

disposes of this potential ground for standing as well. By declining to apply § 7 to the LDCs, FERC

did not effectively authorize the LDCs to serve the Mexican market. Rather, the Commission held

only that the LDCs had approached the wrong regulatory body for authorization; any approval

necessary for the LDCs to proceed with the Project Vecinos construction should have been sought

from CPUC, not FERC. Again, on the record in this case, we are unable to say whether requiring

the LDCs to seek CPUC, rather than FERC, authorization was a competitive advantage or

disadvantagethe answer would turn on concrete differences between the regulatory schemes that

El Paso has failed to elaborate.

III. CONCLUSION

Petitioner has not carried its burden to demonstrate that the challenged jurisdictional

determination has caused or imminently will cause it injury in fact. We therefore dismiss the petition

for lack of standing.

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So ordered.

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