Task: songer_adminrev

What follows is an opinion from a United States Court of Appeals. Your task is to identify the federal agency (if any) whose decision was reviewed by the court of appeals. If there was no prior agency action, choose "not applicable".

Opinion for the Court filed by Circuit Judge STEPHEN F. WILLIAMS.
STEPHEN F. WILLIAMS, Circuit Judge:
Table of Contents
I. Introduction.1503
II. Inaction under Section 5.1504
A. Scope of Review.1504
B. The Merits.1505
1. Absence of power over nonjurisdictional contracts.1505
2. Mismatch.1507
3. Comparative advantages of individual settlement negotiations_1508
III. Crediting Mechanism.1509
A. Producer Claims that Crediting is No Longer Needed and Pipeline
Claims to a Broader Weapon Against Producers.1509
B. Panhandle/Northern Natural.1510
C. Outer Continental Shelf Lands Act.1511
D. Casinghead Gas.1512
E. “Double Crediting”.1513
IV. Pregranted Abandonment.1513
A. Jurisdiction.1514
B. The Merits.1515
1. Decision illegally delegated to pipeline.1515
2. Reasoned decisionmaking.1516
C. Conclusion.1518
V. Miscellaneous Claims.1518
A. Contract Demand Reduction.1518
B. Take-or-pay Cost Passthrough.1519
1. Sunset date.1519
2. Opportunity to recover prudently incurred costs.1519
3. Continued use of passthrough mechanism.1519
C. Passthrough at the State Level.1520
VI. Conclusion.1520
I. Introduction
In the Spring of 1985, as Mikhail Gorbachev was assuming the duties of General Secretary and inaugurating perestroika, the Federal Energy Regulatory Commission launched its own restructuring of the natural gas industry. See Notice of Proposed Rulemaking, Regulation of Natural Gas Pipelines After Partial Wellhead Decontrol, 50 Fed.Reg. 24,130 (June 7, 1985) (issued May 30, 1985). The cornerstone was “open access” — a process by which a pipeline would be able to avoid many of the regulatory hurdles otherwise impeding the provision of gas transportation, in exchange for committing itself to carry gas for any party, including gas that would be sold in competition with its own. Open access would thus provide a market-based incentive to pipelines to keep the costs of their own gas competitive.
As with Gorbachev, the road has not been smooth. The Commission issued its final rule, Order No. 436, in October 1985. In Associated Gas Distributors v. FERC (“AGD I”), 824 F.2d 981 (D.C.Cir.1987), we generally approved the rule but vacated it on the ground that the Commission had failed to adequately address some fundamental problems, especially the rule’s effect on pipelines’ take-or-pay liabilities. The Commission moved swiftly to promulgate a substitute rule (Order No. 500, 52 Fed.Reg. 35,334 (Aug. 14, 1987)) before our mandate issued, so that open access transportation could continue without interruption.
Innumerable parties attacked not only Order No. 500 (and later orders of the 500 series), but also many individual FERC adjudications of issues based on Order No. 500. Many of these were consolidated and argued before us in the Fall of 1989. In American Gas Ass’n v. FERC (“AGA I”), 888 F.2d 136 (D.C.Cir.1989), the court resolved several of the claims but remanded the record to the Commission to address some issues that AGD I had said it must consider, as well as some new problems posed by Order No. 500 itself. (We disposed of still other components of the case in Associated Gas Distributors v. FERC (“AGD II”), 893 F.2d 349 (D.C.Cir.1989), petitions for certiorari filed, 59 U.S.L.W. 3017 (Nos. 89-1988, -1989, -1990, -2000, -2016), and Transwestern Pipeline Co. v. FERC, 897 F.2d 570 (D.C.Cir.1990)). As a result of the remand, the Commission issued Order No. 500-H, III FERC Stats. & Regs. ¶ 30,867 (1989), and, on applications for rehearing, Order No. 500-1, III FERC Stats. & Regs. ¶ 30,880 (1990). The contending parties were of course not satisfied, and here we review their contentions.
First, we affirm the Commission’s rejection of demands that it should have intervened under § 5 of the Natural Gas Act, 15 U.S.C. § 717d (1988), to modify uneconomic take-or-pay contracts between producers and pipelines. Second, we affirm in virtually all respects its decisions creating a “crediting” mechanism. This allows pipelines that carry gas under open access (which is likely to displace their own and thus aggravate their take-or-pay liabilities) to obtain credit in an equal amount against their take-or-pay obligations under contracts with the gas’s producer. As to one feature, however, we remand the case to the Commission for further consideration. Third, although we cannot find any insuperable legal obstacle to the Commission’s provision for “pregranted abandonment” of transportation services provided under “blanket certificates,” we remand the case on that issue because the Commission’s explanations do not adequately justify its decision or respond to opponents’ claims. Finally, we reject a series of miscellaneous contentions as either unripe or lacking in merit.
II. Inaction under Section 5
In AGD I, this court vacated Order No. 436 and remanded for the Commission to reassess both its reasoning and its factual premises for refusing to modify “uneconomical pipeline-producer contracts” under § 5 of the Natural Gas Act. 824 F.2d at 1030. The Commission then collected extensive data from the pipelines, including figures on the relation between high prices and take-or-pay provisions, and on the proportion of contracts that were within or without its jurisdiction. On issuing its requests to the pipelines for data, it promised to aggregate and analyze the results promptly. Order No. 500, 52 Fed.Reg. at 30,341.
Despite that promise, the Commission did virtually nothing after collecting the data, and its “half-explained cunctation [convinced the AG A I court] that it delay[ed] in order to avoid having to do the analysis that we required in AGD until after the take-or-pay problem... disappeared.” AGA I, 888 F.2d at 148. Accordingly we remanded for FERC to explain in a final rule whether it planned to take § 5 action, and if not, why not. Id. The Commission has now done so in Order Nos. 500-H and 500-1, and we find its explanation sufficient.
A. Scope of Review.
Certain petitioners attempt to cast the Commission’s duty to act under § 5 in mandatory terms. Drawing on the language of § 5 saying that the Commission “shall determine the just and reasonable rate... to be thereafter observed and in force,” 15 U.S.C. § 717d (1988) (emphasis added), they argue that the Commission must undertake a § 5 investigation whenever requested to do so. But the directive to impose a just and reasonable rate or provision is triggered only by the Commission’s finding that the existing one is “unjust, unreasonable, unduly discriminatory, or preferential.” Nothing in § 5 requires the Commission to embark on the inquiry in the first place.
Nor did our decision in AGD I impose any such burden. We simply concluded that the Commission had not considered all the factors relevant to pursuit of such an inquiry. Most particularly, the Commission appeared virtually to deny the tendency of its restructuring program — open access transportation and a grant to customers of authority to convert purchase arrangements into transportation — to aggravate the pipelines’ take-or-pay liabilities and thus, arguably, to generate a need for action under § 5. AGD I, 824 F.2d at 1021-28, 1044; see also San Diego Gas & Elec. Co. v. FERC, 904 F.2d 727, 730-31 (D.C.Cir.1990) (summarizing material passages of AGD I). Thus our remand insisted that the Commission reassess whether § 5 should play a role in the solution.
Our review of the Commission’s decision not to take action is therefore quite limited in scope. The Commission correctly invokes General Motors Corp. v. FERC, 613 F.2d 939 (D.C.Cir.1979), stating that we review a no-investigation decision under § 5 only to ensure that the Commission has “consider[ed] all the relevant factors.” Id. at 944; see also Southern Union Gas Co. v. FERC, 840 F.2d 964, 968-70 (D.C.Cir.1988). As neither the Commission nor any petitioners have invoked Heckler v. Chaney, 470 U.S. 821, 831-35, 105 S.Ct. 1649, 1655-57, 84 L.Ed.2d 714 (1985), holding that nonenforeement decisions are ordinarily unreviewable by virtue of § 10(a)(2) of the Administrative Procedure Act, we need not consider whether it argues for nonre-viewability or for greater deference.
B. The Merits.
The core of the Commission’s analysis was as follows: First, its authority to modify take-or-pay provisions under § 5 reaches only wellhead contracts subject to its jurisdiction. Second, even as to contracts accessible under § 5, permissible modifications would not suitably match the problems. Third, private negotiation within the industry, under Commission-created incentives, had good prospects of working and indeed seemed to be doing so. We address these in turn, concentrating on the want of authority over nonjurisdictional contracts, the only purely legal issue.
1. Absence of power over nonjurisdic-tional contracts. A major premise of the Commission’s decision was its conclusion that its § 5 power could not reach even the non-price terras of nonjurisdictional contracts. In Order Nos. 500-H and 500-1 it found that these accounted for 53% of the roughly $9 billion of unresolved take-or-pay liability at year-end 1986. Ill FERC Stats. & Regs, at 31,542, 31,715 n. 88. (The proportion of wellhead sales that is subject to FERC jurisdiction steadily declines, as Congress in the Natural Gas Policy Act eliminated such jurisdiction over what may loosely be characterized as “new” gas, which gradually increases as a share of the total as old gas is exhausted. See NGPA § 601(a)(1)(A) & (B), 15 U.S.C. § 3431(a)(1)(A) & (B); Pennzoil Co. v. FERC, 645 F.2d 360, 380 (5th Cir.1981).) Accordingly, the Commission reasoned that use of § 5 would provide a less finely tuned solution than other means — private negotiation under the incentives created by its crediting mechanism — to offset the effects of its restructuring program and to correct the industry’s disequilibrium.
In reviewing the Commission’s resolution of the jurisdictional issue, we need not decide whether Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), mandates deference to an agency interpretation of its own jurisdiction. See The Business Roundtable v. SEC, 905 F.2d 406, 408-09 (D.C.Cir.1990) (reviewing authorities). As we read the Natural Gas Act, the Commission was absolutely right: Congress clearly limited its § 5 powers to jurisdictional contracts.
Section 5(a) of the Natural Gas Act provides:
Whenever the Commission, after hearing had upon its own motion or upon complaint of any State [etc.], shall find that any rate, charge, or classification demanded, observed, charged, or collected by any natural-gas company in connection with any transportation or sale of natural gas, subject to the jurisdiction of the Commission, or that any rule, regulation, practice, or contract affecting such rate, charge, or classification is unjust, unreasonable, unduly discriminatory, or preferential, the Commission shall determine the just and reasonable rate, charge, classification, rule, regulation, practice, or contract to be thereafter observed and in force, and shall fix the same by order....
15 U.S.C. § 717d (1988).
The pipeline petitioners isolate the words “contract affecting such rate,” and argue that the Commission may assess the justness and reasonableness of the provisions of any contract that would likely influence a pipeline’s end-of-the-pipeline charges, and, if it finds any such provision unjust or unreasonable, replace it with one that meets that standard. Even they, of course, concede that any such power could not reach the prices set forth in nonjurisdic-tional contracts, as § 601(b)(1)(A) of the Natural Gas Policy Act, 15 U.S.C. § 3431(b)(1)(A), generally determines that the prices of even jurisdictional wellhead sales are automatically just and reasonable if they are either within their NGPA ceilings or are exempt from such ceilings.
The Commission reads “contract affecting such rate” as limited to contracts in which a “natural gas company” (within the meaning of the NGA) acts as seller and which directly governs the rate in a jurisdictional sale — providing for the rate in whole or in part, or specifying or embodying it, or setting forth rules by which it is to be calculated. Ill FERC Stats. & Regs, at 31,539. Contracts that “affect” a rate indirectly, merely by affecting the costs that determine what pipeline sales rates are permissible under the NGA’s “just and reasonable” standard, are beyond § 5’s reach.
We think petitioners’ view would make a nonsense of the Supreme Court’s decision in Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035 (1954), and (more significantly) of Congress’s effort 24 years later to undo Phillips with the Natural Gas Policy Act. The Natural Gas Act’s basic grant of jurisdiction appears in § 1(b), and extends to interstate transportation of gas, to interstate sales for resale, and to natural gas companies engaging in either. 15 U.S.C. § 717(b). In Phillips, the Supreme Court construed the authority over interstate sales for resale to encompass producers’ wellhead sales for resale, against a contention that § l(b)’s exclusion of “production or gathering” foreclosed such a view. The Court explicitly saw as the consequence of its decision the fulfillment of a congressional intent “to give the Commission jurisdiction over the rates of all wholesales of natural gas in interstate commerce.” Id. at 682, 74 S.Ct. at 799. On petitioners’ view, Phillips’s narrow construction of the “production or gathering” exemption was completely unnecessary for fulfillment of that intent; under § 5 the Commission would have had the authority to control wellhead rates merely because those rates are elements in the computation of pipelines’ sales rates. Indeed, petitioners’ theory is, more generally, an oxymoron — Commission jurisdiction over nonjurisdictional contracts.
Twenty-four years after Phillips, Congress in the NGPA took away FERC’s jurisdiction over wellhead sales of what may loosely be called “new” gas, see NGPA § 601(a)(1)(A) & (B), 15 U.S.C. § 3431(a)(1)(A) & (B). In more sweeping terms, it reduced FERC’s jurisdiction over wellhead prices. The prices of wellhead sales that remained jurisdictional were deemed to satisfy the NGA’s requirement that jurisdictional prices be “just and reasonable” so long as they complied with the NGPA’s ceilings. See NGPA § 601(b)(1)(A), 15 U.S.C. § 3431(b)(1)(A). Finally, as to downstream prices, the NGPA guaranteed interstate pipelines’ recovery of amounts paid for gas if the price was deemed “just and reasonable” under § 601(b), i.e., was in compliance with the NGPA. See § 601(c), 15 U.S.C. § 3431(c). The interaction of the Commission’s residual “non-price” jurisdiction over transactions whose prices are beyond its jurisdiction itself raises a delicate issue: what kinds of § 5 control over non-price terms might the Commission exert without commandeering the price authority that Congress expressly denied? We need not answer that question, as the Commission has declined to exercise its § 5 power at all. But it would greatly extend the scope of the dilemma if the Commission were empowered to reach the non-price terms of nonjurisdictional contracts.
The Supreme Court has not defined the class of contracts reached by § 5, but has spoken to the scope of the parallel section of the Federal Power Act, § 206, 16 U.S.C. § 824e (1988). In FPC v. Conway Corp., 426 U.S. 271, 96 S.Ct. 1999, 48 L.Ed.2d 626 (1976), it found that the Commission (actually, FERC’s predecessor, the Federal Power Commission) had a duty to consider whether the structure of a utility’s jurisdictional (wholesale) and nonjurisdictional (retail) rates might impose a “price squeeze” on the firms that bought from it at wholesale and sold in competition with it at retail. In identifying a price squeeze, of course the Commission would have to compare nonjurisdictional with jurisdictional rates, but the Court was quite clear that “[t]he remedy, if any, would operate only against the rate for jurisdictional sales.” Id. at 279, 96 S.Ct. at 2005 (emphasis added); see also id. at 276, 96 S.Ct. at 2003 (“the Commission’s power to set just and reasonable rates under § 206(a) [is] accordingly limited to sales ‘subject to the jurisdiction of the Commission’ ”). Of course Conway denies the Commission power only over a utility’s nonjurisdictional sales contracts, and so is not direct authority for want of such power over nonjurisdictional purchase contracts. But it surely suggests that the potential impact of nonjuris-dictional contracts’ prices on the justness and reasonableness of jurisdictional rates provides no license for the Commission to monkey with the former.
Pennzoil Co. v. FERC, 645 F.2d 360, 381 (5th Cir.1981), also argues against petitioners’ position (but also inconclusively). The court held that the Commission’s authority to interpret (and nullify) price escalation clauses in contracts as to which the price increase could take effect only by a filing under § 4 of the NGA (i.e., jurisdictional contracts), did not give it any such interpretive or nullification authority over price escalation clauses in nonjurisdictional contracts. As the petitioners justly observe, Pennzoil involves § 4, not § 5. But they fail to advance any logic supporting a far greater reach for the Commission under § 5.
Petitioners claim that somewhere in the chain of decisions captioned Office of Consumers’ Counsel, Ohio v. FERC, 783 F.2d 206 (D.C.Cir.1986), 826 F.2d 1136 (D.C.Cir.1987), 842 F.2d 1308 (D.C.Cir.1988), we held that § 5 affords authority to modify non-price terms of nonjurisdictional contracts. The third decision reviews the entire series and makes clear that the facts did not pose the issue and that the court never purported to address it. See OCC III, 842 F.2d at 1309-10.
Weighing against petitioners’ theory is that logically it reaches pipelines’ contracts for every other possible factor of production — even legal services. Petitioners themselves offer no distinction between these and gas contracts except as to the degree of impact on the pipelines’ selling prices. That line, in contrast to the Commission’s, has no conceptual core and thus seems awkward and implausible as a jurisdictional boundary.
Accordingly, we find the Commission entirely correct in its premise that it lacks authority to modify even the non-price terms of nonjurisdictional contracts.
2. Mismatch. As the Commission explained, the so-called take-or-pay problem arises in reality from “the combination of high take and high price provisions.” Ill FERC Stats. & Regs, at 31,543; see also id. at 31,545 (contracts “a problem only because [the] expectation [of continued high demand for gas at relatively high prices], reasonable at the time, proved incorrect”). Indeed, take-or-pay provisions are primarily contract authorizations of a kind of specific performance for the seller. The centrality of price is underscored by the fact that most specific § 5 proposals called for the Commission to modify the contracts by inserting “market-out” clauses, allowing the pipeline to escape if the producer refused to lower the price. Ill FERC Stats. & Regs, at 31,543-45; see, e.g., Responses of AGD to Questions Posed by Commissioners Concerning Order No. 500 at 18, R. 10803 (reproduced in Appendix of Local Distribution Companies, State Commissions and Related Agencies (“LDC App.”) at 107) (insert market-out clause for any contract containing a take-or-pay clause above 50% and a price above pipeline’s weighted average cost of gas); Supplemental Comments of Allied Commenters at 24 (LDC App. at 137) (same); Comments of the Illinois Commerce Commission in Response to Order 500 Interim Rule and Statement of Policy at 15, R. 3226 (LDC App. at 20) (delete the take-or-pay requirements). Adoption of any such proposals would appear to undercut Congress’s decision that NGPA-complying prices are to be deemed just and reasonable.
Any across-the-board reduction of take percentages (the percentage of deliverable gas that a pipeline must take or pay for) would be both under- and overinclusive. About 25% percent of remaining high take- or-pay contracts are for low-priced gas. See III FERC Stats. & Regs, at 31,545. An across-the-board reduction in take percentages would reach these, impairing producers’ contract rights with little benefit for pipelines. At the same time, such a reduction would leave the pipelines subject to contract duties to buy large amounts of high-priced gas and thus partially disabled from successfully competing with lower-priced spot-market gas. Id. at 31,543-44.
The Commission affirmed, moreover, that take-or-pay provisions have a legitimate role in producer-pipeline contracts. (Not to do so would seem to condemn long-term gas purchase contracts to extinction. They would be virtually meaningless with no remedy, and it is not clear that take-or-pay is much more draconian than ordinary contract damages, as the forced purchaser can take and resell at a loss.) The Commission saw the clauses as assuring the producer some minimum level of revenue to cover operating expenses and debt. Id. at 31.544. Further, it noted that the suitable level varies with the circumstances. Individual operators’ financial circumstances vary, as does the minimum rate of extraction from a reservoir necessary to secure the optimal level of total recovery. Id. at 31.545. (Indeed, one can readily imagine other potentially relevant variations, such as the contracting parties’ risk aversion and their means of influencing each other’s behavior.) Thus the Commission could make no generic finding of a reasonable take-or-pay percentage, and case-by-case analysis of thousands of contracts would be, it observed conservatively, “administratively difficult.” Id. The Commission is entitled, of course, to give great weight to issues of internal resource allocation in making a no-go decision under § 5. See National Fuel Gas Supply Corp. v. FERC, 900 F.2d 340, 345 (D.C.Cir.1990), and cases cited therein.
3. Comparative advantages of individual settlement negotiations. The Commission found that individual settlement negotiations, under incentives structured by its crediting mechanism, provided an avenue for resolution of the take-or-pay difficulties that was free of the incongruities of action under § 5. Such settlements would take into account specific factors relevant to the contracting parties, see III FERC Stats. & Regs, at 31,546, and would accord with Congress’s strong preference for reliance on private agreements for structuring the wellhead market, see id. at 31,546-47. See also Natural Gas Wellhead Decontrol Act of 1989, Pub.L. No. 101-60, 103 Stat. 157 (1989) (generally removing all wellhead price limits and all Commission jurisdiction over wellhead sales by 1993).
Although the Commission was actually making this decision in 1989-90, petitioners argue (and we will assume) that its duty was to consider matters as they stood at the time it adopted open access in 1985. See OCC II, 826 F.2d 1136 (D.C.Cir.1987) (where legal error has caused a delay in Commission action under § 5, it should afford a remedy that corrects for the delay). On this view, the policy question was whether adding § 5 action to the picture at that time would have been wise. We read the Commission analysis as fundamentally addressing that question. Nevertheless, it reported figures as to the actual resolution of conflicts in the meantime, presumably to show that ex post data confirmed its ex ante analysis. For example, it found that by March 1989 negotiations had resolved all but about $2.4 billion of $9 billion in liabilities outstanding at year-end 1986, III FERC Stats. & Regs, at 31,542-43, and that on average pipelines paid only 18.6 cents on the dollar for these settlements, id. at 31,522. The local distribution company (“LDC”) petitioners attack this figure as inaccurate, or at least unverifiable. They argue that the true cost of the take-or-pay buyouts and buydowns for pipelines has been much higher.
It is true that the precision suggested by the figure 18.6 cents is illusory. As the LDCs point out, most of the ingredients of the conclusion are squishy soft. For example, in comparing the amounts paid out with relief obtained, the Commission included in the latter not only take-or-pay liabilities extinguished but also $27 billion in “future-oriented relief.” Id. at 31,522. How the latter was calculated is not revealed, and in the nature of things could not be firm: how could the Commission accurately estimate how a pipeline’s sales would match its contract obligations over years into the future? Moreover, it is not altogether clear to what extent the liabilities extinguished were gross or net — i.e., offset by the value of the gas paid for (to the extent that pipelines by contract still could take the gas). But the Commission has not used the 18.6 cent figure as a precise measure of the allocation of the burden between producers and pipelines — a measure that, besides being unverifiable, would be largely meaningless as there is no “right” allocation. Rather, we read the Commission as gleaning from the data a general confirmation of the proposition that the crediting mechanism and other factors would force the producers to assume a significant share of the sunk costs arising from actions taken long ago in the expectation of continued high prices. The LDCs’ and pipelines’ arguments do not seriously draw that proposition in question.
All in all, we find that the Commission's approach handily meets the standard of General Motors, Southern Union and AGD I. We have no basis whatever for forcing the Commission into interference with thousands of contracts, in the form either of generic rules or interminable case-by-case decisions, which in either event would be only dimly related to the price difficulty that is the core of the pipelines’ problem and is plainly off the Commission’s reservation.
III. Crediting Mechanism
Under the crediting mechanism, a pipeline accepting a blanket certificate may deny a producer the benefits of open access unless the producer allows the pipeline to credit each unit of transported gas (subject to some exceptions) against outstanding take-or-pay contracts. The pipeline may apply the credit to any contract between the producer and the pipeline which was entered into before June 23, 1987 (the date of our decision in AGD I); because of this power to select among contracts, the producers dub the process “cross-crediting.” The mechanism continues in effect until the earlier of December 31, 1990 (or, if our mandate in this case has not issued by then, 60 days after our mandate issues), or the date on which a pipeline accepts a “gas inventory charge” certificate, III FERC Stats. & Regs, at 31,528-29, under which a pipeline can charge its customers for the cost of standing ready to supply gas. See Transwestern Pipeline Co. v. FERC, 897 F.2d 570, 573 (D.C.Cir.1990).
A. Producer Claims that Crediting Is No Longer Needed and Pipeline Claims to a Broader Weapon Against Producers.
The producers argue that the take- or-pay problem has largely gone away, rendering the crediting mechanism obsolete. The pipelines make an argument in the opposite direction — that they should be allowed to deny any access to a producer who has refused “to modernize its contracts.” Joint Brief for Pipeline Petitioners on Mandate Compliance at 26. (We take “modernize” to be a euphemism for accommodating pipeline wishes.) Neither argument has legal merit.
The producers concede that the crediting mechanism (or the threat of its use) helped pressure them into settling much of their take-or-pay rights against the pipelines. The Commission, reasonably enough, concluded that in future negotiations over the remaining take-or-pay liability, the mechanism would serve the same purpose. Ill FERC Stats. & Regs, at 31,527-28, 31,700. To the extent that the producers argue that the mechanics of crediting (which we will spare the reader) have become more of a hassle than they are worth, we must defer to the Commission’s judgment call the other way. Finally, the producers suggest that most of the remaining take-or-pay liability is in litigation, dispensing (they say) with any further need for a pipeline bargaining chip. As lawsuits can settle (and most do), the utility of bargaining chips survives their filing.
The pipelines rest their claim on language in AGO I expressing skepticism about the Commission’s apparent assumption that “pipeline denial of access to producers that stand on the letter of their contract rights [would be] unduly discriminatory.” 824 F.2d at 1028. The pipelines would transform this observation into a mandate that the Commission give the pipelines an absolute veto over recalcitrant producers. Obviously it was not — the passage went on to suggest types of conditions that the Commission might place on any such pipeline veto power. Id. at 1028-29. In adopting the crediting mechanism the Commission in effect gave the pipelines a conditional veto. The Commission has in this respect fulfilled the mandate of AGD I.
B. Panhandle/Northern Natural.
The producer petitioners attack the Commission’s approval of the crediting mechanism as a violation of the principles of Panhandle Eastern Pipe Line Co. v. FERC, 613 F.2d 1120 (D.C.Cir.1979), and Northern Natural Gas Co. v. FERC, 827 F.2d 779 (D.C.Cir.1987), which forbid it from using its power to impose conditions on certificates of service, under § 7(e) of the Natural Gas Act, 15 U.S.C. § 717f(e), to “adjust[ ] previously approved rates for services not before the Commission in the relevant certificate proceeding.” 827 F.2d at 786. In both those cases, the Commission had conditioned new service on the pipelines’ “crediting” part of the resulting revenues to users of other service, i.e., reducing the rates charged for the other service. See 613 F.2d at 1130-31 n. 52; 827 F.2d at 786.
The producers can at most be appealing to the spirit of Panhandle and Northern Natural, for the Commission’s action by no means fits the letter. Whereas in those cases the Commission conditioned its grant of the applying pipelines’ certificates on their reducing rates for other service, here it has provided that pipelines applying for and receiving blanket certificates shall have the authority to deny open access to a specific class of would-be customers; in other words, it has refined the concept of nondiscrimination that is the essence of the service itself being certificated.
But in any event we do not propose to kill the spirit of Panhandle and Northern Natural. One might express that spirit as a proposition that the Commission may not use its § 7 conditioning power to do indirectly (1) things that it can do only by satisfying specific safeguards not contained in § 7(e) (in the case of reducing previously-approved jurisdictional rates, by meeting its burden under § 5, see Panhandle, 613 F.2d at 1130; Northern Natural, 827 F.2d at 782), or (2), a fortiori, things that it cannot do at all. If the crediting mechanism reduced the rates charged in pipeline/producer contracts, the second variant would be applicable, for under § 601(b)(1)(A) of the Natural Gas Policy Act, 15 U.S.C. § 3431(b)(1)(A) (1988), wellhead prices are (generally) lawful under the Natural Gas Act if they are within the NGPA ceilings or subject to no such ceilings. If the mechanism modified non-price terms of the contracts, then as to jurisdictional contracts it would be an act that the Commission can perform only by meeting § 5’s requirements; as to nonjurisdictional ones, it would be, as we have just seen, an act the Commission cannot perform at all.
But the crediting mechanism neither reduces rates nor modifies non-price terms; it creates incentives for producers to agree to reductions and modifications. There is a difference, and the producers recognize it. They concede that the Commission’s authorization of pipeline insistence on credits is within its jurisdiction as to credits against take-or-pay obligations in a contract to which the gas being transported is (or was) subject. See Joint Initial Brief of Indicated Producers at 19-20; see also III FERC Stats. & Regs, at 31,709. But provision for pipeline insistence on that more limited credit also alters the bargaining relationship of the parties; it establishes that any producer shipment of contract gas over the (formerly purchasing) pipeline ipso facto reduces the pipeline’s take-or-pay obligation. Thus the producers recognize that the Panhandle/Northern Natural principle does not bar the Commission from establishing certificate conditions with an eye to inducing changes in transactions that are beyond its direct grasp.
The producers accordingly are reduced to arguing that transportation service has “no relation whatsoever” to gas sold by a producer to a pipeline under other contracts. Joint Initial Brief of Indicated Producers at 20. But the core purpose of open access was to extend the competitive character of the wellhead market all the way to the burner tip by unbundling the gas commodity from its transportation and assuring consumers access to the wellhead market. A major stumbling block to its implementation was the pipelines’ reasonable fear that producers’ and others’ use of it would displace their own gas sales and balloon their take-or-pay liabilities. The Commission therefore adopted the crediting mechanism in order to give pipelines “the bargaining power necessary to negotiate reasonable settlements of their take-or-pay problems.” See III FERC Stats. & Regs, at 31,549. The relation could hardly be tighter.
In essence, the producers want to have their cake and eat it. They want both the full benefit of very favorable contracts under the old regime, and the full right to force pipelines to carry their gas under the new. Instead the Commission put them to the choice. By defining limits to the producers’ entitlement to open access, it enhanced the prospect of achieving its goals. We do not read this structuring of incentives as an invasion of territory beyond the Commission’s jurisdiction.
C. Outer Continental Shelf Lands Act.
In Order No. 500, the Commission allowed pipelines to refuse to transport gas on the Outer Continental Shelf for producers who would not give credits for such gas. The producers argued in AGA I that the Commission lacked the power to so restrict open access on the OCS because §§ 5(e) and 5(f) of the OCSLA, 43 U.S.C. §§ 1334(e)-(f) (1982), already gave them an unqualified right of access to OCS pipelines. Specifically, § 5(e) allows pipelines rights-of-way across the OCS
upon the express condition that [they] shall transport or purchase without discrimination, oil or natural gas produced from submerged lands or outer Continental Shelf lands.
43 U.S.C. § 1334(e). And § 5(f), added in 1978, provides that
every permit, license, easement, right-of-way, or other grant of authority for the transportation

Question: What federal agency's decision was reviewed by the court of appeals?
A. Benefits Review Board
B. Civil Aeronautics Board
C. Civil Service Commission
D. Federal Communications Commission
E. Federal Energy Regulatory Commission
F. Federal Power Commission
G. Federal Maritime Commission
H. Federal Trade Commission
I. Interstate Commerce Commission
J. National Labor Relations Board
K. Atomic Energy Commission
L. Nuclear Regulatory Commission
M. Securities & Exchange Commission
N. Other federal agency
O. Not ascertained or not applicable
Answer:

Answer: E