United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 5, 2006 Decided July 27, 2007

No. 05-1299

EXXON MOBIL CORPORATION

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION AND

UNITED STATES OF AMERICA,

RESPONDENTS

ANADARKO PETROLEUM CORPORATION, ET AL.,

INTERVENORS

Consolidated with

05-1300, 05-1301

On Petitions for Review of Orders of the

Federal Energy Regulatory Commission

Donald B. Craven argued the cause for petitioners. With

him on the briefs was C. Fairley Spillman. Frederick T. Kolb,

Douglas W. Rasch, and Bruce A. Connell entered appearances.

Judith A. Albert, Attorney, Federal Energy Regulatory

Commission, argued the cause for respondent. With her on the
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brief were John S. Moot, General Counsel, and Robert H.

Solomon, Solicitor.

Karol L. Newman argued the cause for intervenors

Anadarko Petroleum Corporation, et al. and amicus curiae

Legislative Budget and Audit Committee of the Alaska State

Legislature in support of respondent. With her on the brief were

Jason B. Tompkins, James C. Moffatt, Jonathan D. Simon, and

Donald C. Shepler, Jr.

Robert H. Loeffler, Edward J. Twomey, Seth M.

Galanter, and David W. Marquez, Attorney General, Attorney

General’s Office of the State of Alaska, were on the brief for

intervenor State of Alaska.

Before: GINSBURG, Chief Judge, and SENTELLE and

RANDOLPH, Circuit Judges.

Opinion for the court filed by Chief Judge GINSBURG.

GINSBURG, Chief Judge: The petitioners, which are

developing a proposal to build a natural gas pipeline from the

North Slope of Alaska to the contiguous United States, seek preenforcement review of two regulations promulgated by the

Federal Energy Regulatory Commission, 18 C.F.R. §§ 157.36,

157.37. According to the petitioners, the Commission has

“asserted authority to condition a certificate of public

convenience and necessity on the project sponsor’s willingness

to allow the Commission to increase the capacity or

expandability of the project,” and that assertion is invalid on its

face because it contravenes the Alaska Natural Gas Pipeline Act

(ANGPA), Pub. L. No. 108-324, § 105, 118 Stat. 1258, 1258-59,

15 U.S.C. § 720c, and the Natural Gas Act (NGA), Ch. 556,

§ 7(a), 52 Stat. 821, 824, 15 U.S.C. § 717f(a). According to the

Commission, it has broad authority to condition a certificate of
3

public convenience and necessity upon the sponsor of a

proposed pipeline making a “design change,” a term heretofore

applied not to a change in capacity but to such matters as

“routing, cost allocations, and the design of initial service rates.”

Preliminarily, we agree with the parties that this

controversy is ripe for review because the issues are purely legal

and delaying a decision would inhibit investment in a project the

construction of which the Congress has made a priority. As to

the merits, we note the Commission has not interpreted

§ 157.37, which provides that “[i]n reviewing any application

for an Alaska natural gas pipeline project, the Commission ...

may require changes in project design necess[ary] to promote

competition and offer a reasonable opportunity for access to the

project,” as authority to condition a Certificate upon increasing

the capacity of the proposed pipeline, and it may never do so.

Nor do we agree with the petitioners that 18 C.F.R. § 157.36,

which provides that “[i]n considering a proposed voluntary

expansion ... the Commission ... may require design changes to

ensure that some portion of the expansion capacity be allocated

to new shippers,” may reasonably be read to assert authority in

the Commission to condition a Certificate upon an increase in

the capacity above that proposed by the sponsor of the pipeline.

Therefore, we conclude neither § 157.36 nor § 157.37 is facially

invalid and accordingly deny the petitions for review.

I. Background

In 1976, the Congress enacted the Alaska Natural Gas

Transportation Act (ANGTA), in which it found there was a

“natural gas supply shortage” and encouraged the “expeditious

construction” of a pipeline to carry natural gas from Alaska to

the “contiguous States of the United States.” See Pub. L. No.

94-586, § 2, 90 Stat. 2903, 15 U.S.C. § 719. When, 28 years

later, the hoped for pipeline still had not been constructed, the
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Congress passed the ANGPA, which is meant to encourage

construction by offering certain government loan guarantees.

§ 116, 15 U.S.C. § 720n. The ANGPA also requires that we

expedite review of any final order of the Commission made

under the authority of that Act, § 107(a)(1), (c), 15 U.S.C.

§ 720e, and that the Commission expedite consideration of any

application for a Certificate, § 103(c), 15 U.S.C. § 720a. This

case concerns regulations the Commission promulgated to

govern its issuance of an initial Certificate to build and a

subsequent Certificate to expand an Alaska Pipeline.

Under the ANGPA, the Commission is required to

promulgate regulations for the conduct of an “open season”

designed to “promote competition in the exploration,

development, and production of Alaska natural gas.”

§ 103(e)(2)(B). A potential Alaska Pipeline project sponsor

must, during the “open season,” allow potential gas producers to

bid for the right to ship a specified quantity of gas through the

proposed pipeline. 18 C.F.R. § 157.33. The sponsor then may

seek a “certificate of public convenience and necessity” under

the NGA, which Certificate the Commission is to issue if it finds

the sponsor “able and willing” to perform a service “required by

the present or future public convenience or necessity[.]” NGA

§ 7(c), (e). The Commission may attach “such reasonable terms

and conditions [to the Certificate] as the public convenience and

necessity may require.” NGA § 7(e). Of particular relevance

here, the Commission may require a “natural-gas company” to

“extend or improve” or to “establish physical connection of its

transportation facilities” with another’s facilities but may not

“compel the enlargement of transportation facilities for such

purposes.” NGA § 7(a).
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The petitioners, which lease from the State of Alaska

land with about 90 to 95 percent of that State’s proven natural

gas reserves, intend jointly to apply for a Certificate to build and

operate an Alaska Pipeline. Before doing so, however, the

petitioners seek review of two regulations promulgated by the

Commission pursuant to ANGPA § 103(e)(2), namely, 18

C.F.R. §§ 157.36 and 157.37, that the petitioners read as

asserting an authority they say the Commission does not have,

to condition the issuance of a Certificate upon the project

sponsor increasing the capacity of its proposed pipeline or of a

later proposed expansion thereof.

II. Analysis

Before we reach the merits of this facial challenge to the

validity of §§ 157.36 and 157.37, we consider whether the issue

is ripe for judicial review. Though the Commission did not raise

the issue, “The question of ripeness goes to our subject matter

jurisdiction, and thus we can raise the issue sua sponte at any

time.” Duke City Lumber Co. v. Butz, 539 F.2d 220, 221 n.2

(D.C. Cir. 1976).

A. Ripeness

To determine whether a controversy is ripe, we must

consider both the “fitness of the issues for judicial decision and

the hardship to the parties of withholding court consideration.”

Abbott Labs. v. Gardner, 387 U.S. 136, 149 (1967). At oral

argument the Commission agreed with the petitioners that the

issue whether the regulations are within the Commission’s

statutory authority is fit for judicial review. We agree as well,

because “the issue tendered is a purely legal one: whether the

statute was properly construed.” See id.

With respect to the hardship to the parties, we agree with
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*

 Section 157.36 of Title 18 of the Code of Federal

Regulations provides:

Any open season for capacity exceeding the initial

capacity of an Alaska natural gas transportation

the petitioners that delaying resolution of the issue will tend to

inhibit or delay investment in the Alaska Pipeline, contrary to

the twice expressed intent of the Congress. The petitioners

would remain uncertain whether the Commission may condition

the Certificate for which they plan to apply upon their building

a pipeline with greater capacity than they will propose. If the

petitioners nevertheless seek a Certificate and the Commission

deems the capacity for their proposed pipeline too small,

resolution then of the issue now before the court will delay the

process of certification for at least an additional year. The delay

and its attendant cost will be a hardship to the petitioners and, in

the unusual circumstances of this case, will also be a cognizable

hardship to the Nation as a whole.

The Congress has made unmistakably clear its intention

to speed construction of an Alaska Pipeline, starting with its

determination in 1976 that “expeditious construction” of a

pipeline was in the national interest, ANGTA § 2, followed by

its determination in 2004 to provide loan guarantees in order to

get the project moving, ANGPA § 116, 15 U.S.C. § 720n, its

directive that the court expedite review of regulations issued

pursuant to the ANGPA, § 107(a)(1), (c), and its requirement

that the Commission expedite consideration of an application for

a Certificate to build the pipeline, ANGPA § 103(c).

Accordingly, we conclude this matter is ripe for decision.

B. Facial Validity of the Regulations

The petitioners contend the two regulations*

 exceed the
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project must provide the opportunity for the

transportation of gas other than Prudhoe Bay or Point

Thomson production. In considering a proposed

voluntary expansion of an Alaska natural gas pipeline

project, the Commission will consider the extent to

which the expansion will be utilized by shippers other

than those who are the initial shippers on the project

and, in order to promote competition and open access

to the project, may require design changes to ensure

that some portion of the expansion capacity be

allocated to new shippers willing to sign long-term

firm transportation contracts, including shippers

seeking to transport natural gas from areas other than

Prudhoe Bay and Point Thomson. [Emphases

added.]

Section 157.37 of the same title provides:

In reviewing any application for an Alaska natural

gas pipeline project, the Commission will consider

the extent to which a proposed project has been

designed to accommodate the needs of shippers who

have made conforming bids during an open season,

as well as the extent to which the project can

accommodate low-cost expansion, and may require

changes in project design necessity [sic] to promote

competition and offer a reasonable opportunity for

access to the project. [Emphasis added.]

Commission’s authority under the NGA and the ANGPA and

are arbitrary and capricious in that, if the Commission

conditions a Certificate upon the building of a pipeline with

capacity greater than that proposed by the sponsor of the project,

then the sponsor will bear the additional cost of building a larger

pipeline in order to transport gas that has not been and may

never be discovered. The petitioners, which as of April 2002
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*

 Intervenor Anadarko Petroleum Corporation has leased

millions of acres of land for gas exploration in the North Slope of

Alaska. Intervenor TransCanada Pipelines Limited is the parent of

Alaskan Northwest Gas Transportation Company, which will

construct and operate the Alaska segment of the Pipeline if a sponsor

ever receives a Certificate to build it. Amicus Legislative Budget and

Audit Committee of the Alaska State Legislature is responsible for

commenting upon contracts proposed by the Governor of Alaska

pursuant to the Alaska Stranded Gas Development Act, Alaska Stat.

§§ 43.82.010-43.82.990 (2006).

had already spent $ 125 million on preliminary feasibility

studies, anticipate it will cost hundreds of millions of dollars to

prepare an application for a Certificate. They argue that

uncertainty over the possibility of footing the bill now to provide

capacity for those who might later wish to ship gas on the

pipeline could make the project too risky for them or any

potential sponsor to undertake, thus thwarting the purpose of the

Congress to encourage the construction of an Alaska Pipeline.

The Commission, joined by the Intervenors and the

Amicus,* argue the Commission has “broad conditioning

authority to support findings of public convenience and

necessity” per NGA § 7(e), including authority to condition a

Certificate upon the sponsor making a “design change.” The

Commission further contends any such condition would not be

“mandatory” because an applicant for a Certificate could simply

decline to accept a Certificate so conditioned. Regulations

Governing the Conduct of Open Seasons for Alaska Natural Gas

Transp. Projects (Order 2005-A), 70 Fed. Reg. 35,011, 35,015

¶ 31. More to the point, the Commission represents that in

promulgating §§ 157.36 and 157.37, it “merely codif[ied] ...

existing authority and practice,” id. at 35,015 ¶ 33, which is,

where necessary in the public interest, to require “design

changes” involving “routing, cost allocations, and the design of
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initial service rates.”

The Commission believes “there will be only one ...

Alaska pipeline for the foreseeable future,” which intensifies the

“unique and complex competitive conditions” facing an Alaska

Pipeline project. Order 2005-A, 70 Fed. Reg. at 35,016 ¶ 36. In

§ 157.37, therefore, the Commission clearly asserts authority to

“require changes in project design necess[ary] to promote

competition and offer a reasonable opportunity for access to the

project.” At oral argument, however, Commission counsel

claimed the regulation also authorizes the Commission to

require design changes in order to “accommodate low-cost

expansion” and thereby promote future competition, but that is

not at all clear on the face of the regulation. 

In the view of the State of Alaska, authority to ensure the

pipeline can “be expanded easily” to accommodate future

shippers follows necessarily from the directive of the Congress

to the Commission, in ANGPA § 103(e)(2)(B), to promulgate

regulations for the conduct of an open season in such a way as

to “promote competition in the exploration, development, and

production of Alaska natural gas.” These objectives are all the

more important, we are told by the State, because the Alaska

Pipeline will likely pass near areas with large unexplored

reserves of natural gas, which may not be brought into

production in the future if the pipeline cannot readily be

expanded.

At oral argument, Commission counsel conceded, as she

could hardly deny, that § 157.36 “does not state the expansion

will be increased,” and allowed as how the regulation could be

read to allow only the “allocation” of such “expansion capacity”

as is voluntarily proposed by the sponsor of an extant pipeline.

With respect to § 157.37, however, counsel muddied the waters,

arguing the Commission could “under certain circumstances”
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condition an initial Certificate upon an increase in the capacity

of the proposed pipeline in order to ensure the project serves the

public convenience and necessity and “promote[s] competition”

— though we do not understand the Commission itself to claim

authority to order an increase in the initial capacity of the Alaska

Pipeline. Commission counsel, like the state of Alaska,

nonetheless contends such a reading would be authorized by

§ 103(e)(2) of the ANGPA.

The petitioners’ facial challenge to §§ 157.36 and 157.37

is based upon a misreading of these regulations. They misread

§ 157.37 as asserting the Commission has authority to condition

the issuance of an initial Certificate upon the project sponsor’s

agreement to build a pipeline capable of carrying more gas than

the project sponsor proposes. Even Commission counsel,

drawing upon the last clause of the regulation, maintained at oral

argument that the regulation could be interpreted to authorize

such a condition only in the interest of “promot[ing]

competition.” The Commission itself has not adopted the

reading of § 157.37 the petitioners oppose — which is highly

strained — and it may never do so, particularly in view of the

prohibition in NGA § 7(a) upon the Commission’s authority to

“compel the enlargement of transportation facilities.” Nor has

the Commission adopted their lawyer’s less expansive view.

Indeed, Commission counsel herself tells us the Commission has

never conditioned a Certificate for a non-Alaskan pipeline upon

an increase over the capacity proposed, and in promulgating the

challenged regulations, the Commission clearly represented that

it was “merely codify[ing] [its] existing authority and practice,”

Order 2005-A, 70 Fed. Reg. at 35,015 ¶ 33, and making them

applicable to the Alaska Pipeline. Thus, the Commission

appears to have interpreted § 157.37 as authority to condition

the issuance of a Certificate only upon the types of design

change the Commission has imposed in the past — to wit,

changes in routing, cost allocation, and initial rates, 70 Fed. Reg
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at 35,015 ¶¶ 31, 33 — which the petitioners do not challenge.

Because § 157.37 is capable of several valid applications, i.e.,

may be invoked to require a design change of the

aforementioned sorts, it obviously is not invalid on its face. See

Amfac Resorts, L.L.C. v. U.S. Dep’t of the Interior, 282 F.3d

818, 826-28 (D.C. Cir. 2002) (“That there might be one invalid

application is ... far from enough to make the regulation

unlawful”).

The petitioners misread § 157.36 as asserting the

Commission may order an increase in the capacity of a proposed

voluntary expansion to an extant Alaska Pipeline. The text of

the regulation simply does not support the petitioners’ reading.

As Commission counsel acknowledged at oral argument,

§ 157.36 purports only to allow the Commission, in order to

introduce new competitors into the market, to allocate such

capacity as the sponsor itself proposes to add. So understood,

the regulation ensures that a new shipper willing to sign a longterm contract may gain access to a portion of any proposed

expansion capacity. Indeed, it would not make sense for the

Commission to rely upon § 157.36 to order an increase in

expansion capacity above that proposed by the sponsor:

ANGPA § 105, 15 U.S.C. § 720c, specifically allows the

Commission to order an “expansion of the Alaska natural gas

project” when one or more parties so requesting has “execute[d]

a firm transportation agreement” with the operator of the

pipeline, and the Commission, after notice and the opportunity

for a hearing, finds the expansion satisfies eight specific criteria

and is, in addition, “required by the present and future public

convenience and necessity.” This section of the statute would

be set to naught if the Commission could order an increase in a

proposed expansion upon the strength solely of the regulation.

In sum, the petitioners have not offered any textually

supported interpretation of § 157.36 that would exceed the
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Commission’s authority under the NGA or the ANGPA.

Accordingly, we do not find § 157.36 invalid on its face. Cf.

Amfac Resorts, 282 F.3d at 826-28.

III. Conclusion

The issues presented in this case are purely legal and ripe

for decision. Delaying their resolution would only increase the

petitioners’ costs and hence diminish the likelihood they will

pursue a certificate of public convenience and necessity for an

Alaska Pipeline, the construction of which is a priority of the

Congress.

On the merits, we hold §§ 157.37 and 157.36 are not

facially invalid. The former, by its terms, does not — except in

the petitioners’ highly strained reading, and in Commission

counsel’s apparently extempore assertion at oral argument —

assert authority to condition approval of a proposal to build an

Alaska Pipeline upon an increase in capacity above that

proposed by the sponsor. The latter authorizes the Commission

to condition approval of a voluntarily proposed expansion upon

a different allocation of the added capacity, not upon an increase

in that capacity. Accordingly, the petitions for review are

Denied.