Opinion ID: 457816
Heading Depth: 2
Heading Rank: 1

Heading: Ambiguity of the Minimum Bill

Text: 23 Whether the minimum bill provision is ambiguous is a matter of law for this court to decide. Clayman v. Goodman Properties, Inc., 518 F.2d 1026, 1034 (D.C.Cir.1973). A tariff or contract is ambiguous when it is 'reasonably susceptible of different constructions or interpretations.'  Lee v. Flintkote Co., 593 F.2d 1275, 1282 (D.C.Cir.1979) (footnote omitted). If a contract is not ambiguous, extrinsic evidence cannot be used as an aid to interpretation. Id. at 1281 (quoting Clayman v. Goodman Properties, Inc., 518 F.2d 1026, 1034 (D.C.Cir.1973)). 24 The LNG companies argue that the tariff is not ambiguous and so its plain meaning controls. The plain meaning put forth by the LNG companies and adopted by the ALJ is that the minimum bill is triggered by the inability to deliver gas. Under this interpretation, the minimum bill need never have been triggered because the Cove Point terminal was full of LNG which the companies were able to deliver even though they chose not to make deliveries in more than boil-off quantities. ALJ Op. at 65,190-91. FERC rejected this interpretation as placing total control over the triggering of the minimum bill into the hands of the LNG companies, frustrating the provision's purpose as a mechanism of risk allocation between the customers and the companies. Op. 202-A at 61,168. Instead, FERC found the unable to deliver gas language to be ambiguous. 25 FERC's analysis is properly the starting point for our assessment of the minimum bill language. In determining whether the minimum bill provision is ambiguous, we accord FERC's finding of ambiguity the same degree of deference ... as we accord it with regard to the ultimate question of the meaning of the contract. Papago, 723 F.2d at 955. In Opinion 202-A the Commission concluded that the phrase unable to deliver gas was ambiguous, citing three reasons. First, after looking to other portions of the tariff establishing contract demand levels, FERC found that the word gas was susceptible of differing interpretations as to what was intended with respect to quantity. Op. 202-A at 61,166. Second, FERC considered the purpose of the tariff when proposed--certificating a base load facility in response to a gas shortage--in light of changed circumstances which might make the tariff ambiguous as applied. Finally, FERC considered Columbia LNG's prior conduct in invoking the minimum bill after an explosion at the terminal in 1979. Id. at 61,167. 26 FERC properly looked at portions of the tariff other than the minimum bill, including the service agreements, in assessing the ambiguity of the word gas in the phrase unable to deliver gas. In construing tariffs, courts and agencies must look to the four corners of the tariff and consider the entire instrument as a whole. United States v. Missouri-Kansas-Texas Railroad, 194 F.2d 777, 778 (5th Cir.1952). In light of anticipated daily delivery levels in the tariff of at least 300,000 Mcf/day, 10 FERC properly found that the word gas implicitly intended some quanitity of gas, but was susceptible of different interpretations a to how much. 27 FERC also discerned ambiguity in the minimum bill provision when it examined the original purposes underlying the tariff in light of changed circumstances. The purposes for which a tariff was imposed should be considered when interpreting the tariff, for to decide the question of the scope of [a] tariff without consideration of the factors and purposes underlying the terminology employed would make the process of adjudication little more than an exercise in semantics. United States v. Western Pacific Railroad, 352 U.S. 59, 67, 77 S.Ct. 161, 167, 1 L.Ed.2d 126 (1956). In addition, in interpreting contracts and tariffs, extrinsic evidence is admissible to remove and explain any ambiguity in the contract as applied. Ambiguity easily arises when the contract is applied to its subject matter in changed circumstances. Pennzoil Co. v. FERC, 645 F.2d 360, 388 (5th Cir.1981) (citation omitted). The Cove Point terminal had been certificated as a base load facility in response to a severe shortage of natural gas, Op. 622 at 1636-37, and FERC properly concluded that ambiguity arose in applying tariffs drafted for such a facility when circumstances had changed and the terminal was no longer supplying base load quantities of gas. 11 28 FERC also based its finding of ambiguity on the prior conduct of a party ... arguably inconsistent with that party's present interpretation of the same language. Op. 202-A at 61,167. Following an explosion at Cove Point in 1979, Columbia LNG invoked its minimum bill provision although small amounts of gas were delivered to Columbia Transmission. (Consolidated LNG invoked the provision only when no deliveries were made.) A Columbia vice president stated in testimony before the Economic Regulatory Administration that the provision had been invoked  'when the plant was not capable of sending out significant quantities of gas.'  Id.; see J.A. at 261. FERC's use of this prior conduct is questionable, however, for two reasons. First, prior inconsistent actions by Columbia LNG should not necessarily affect the interpretation of Consolidated LNG's tariff if Consolidated has always acted consistently with its current interpretation. Second, the parties' interpretations may be irrelevant if the language was drafted by the Commission rather than by the parties. 12 29 We need not decide whether Columbia LNG's prior conduct can be used as a basis for finding the contract to be ambiguous, however. Other language within the four corners of the tariff, the purposes of the tariff and minimum bill provisions, and changed circumstances suffice to support the Commission's conclusion that the language of the minimum bill provision is ambiguous. 30