Opinion ID: 492011
Heading Depth: 2
Heading Rank: 1

Heading: Claimed Deficiencies in Statutory Authority to Require Open Access.

Text: 70 Order No. 436 imposes an open-access commitment on any pipeline that (1) secures a blanket certificate to provide gas transportation, pursuant to Sec. 7 of the NGA, 15 U.S.C. Sec. 717f (1982), or (2) actually provides transportation under Sec. 311 of the NGPA, 15 U.S.C. Sec. 3371 (1982). See 18 C.F.R. Secs. 284.8(b), 284.9(b). 3 Several pipelines and others attack these conditions as beyond the scope of the Commission's authority under the two statutes. The arguments under both statutes rely on the proposition that the open-access condition is equivalent to a common carriage requirement, as both the condition and common carriage have at their core a duty to accept shipments from all would-be shippers. The two statutes differ radically in their language, however, so we treat the claims separately, rejecting both. 71
72 The pipelines can point to no language in the NGA barring the Commission from imposing common carrier status on natural gas pipelines, and certainly none barring it from imposing upon the pipelines a specific duty that happens to be a typical or even core component of such status. They seek to overcome the statutory silence by means of legislative history. The task is uphill; courts have no authority to enforce principles gleaned solely from legislative history that has no statutory reference point. IBEW, Local No. 474 v. NLRB, 814 F.2d 697, 712 (D.C. Cir.1987) (emphasis deleted) (citing United States v. American College of Physicians, 475 U.S. 834, 106 S.Ct. 1591, 1598, 89 L.Ed.2d 841 (1986)). 73 The legislative history here consists entirely of congressional inaction. In 1906, when Congress brought oil pipelines under the wing of the Interstate Commerce Commission, it amended the Interstate Commerce Act to exclude natural gas pipelines from the category of common carrier, thus making clear that they were not covered by the extension of jurisdiction. Pub.L. No. 59-397, Sec. 1, 34 Stat. 584, 584 (codified as amended at 49 U.S.C. Secs. 10,102, 10,501 (1982)). In 1913 a bill was introduced in the Senate that would have reversed the 1906 decision, see S. 3345, 63d Cong., 2d Sess., 50 Cong. Rec. 5847-49 (1913), but it was never enacted. Finally, in 1935 a bill presaging the NGA--similar to the ultimate statute but explicitly imposing common carrier duties--died in committee. See H.R. 5423, 74th Cong., 1st Sess., 70 Cong. Rec. 1624 (1935). 74 This history provides strong support only for the point that Congress declined itself to impose common carrier status on the pipelines--a proposition that is unquestioned and is evident from the language of the statute itself. The chain of inference gets steadily weaker as we move toward more relevant issues. The history supplies modest support for the view that Congress did not intend the Commission to impose common carriage conditions at will. It affords weak--almost invisible--support for the idea that the Commission could under no circumstances whatsoever impose obligations encompassing the core of a common carriage duty. 75 The weakness of the legislative history is underscored when we examine the very component of common carriage on which the challenging pipelines rest their case: the duty to carry without discrimination. Insofar as they argue that a concern about discrimination has been a driving force behind legislative imposition of common carriage regulation, history is on their side. See, e.g., Louisville & Nashville R.R. v. United States, 282 U.S. 740, 749-50, 51 S.Ct. 297, 300-01, 75 L.Ed. 672 (1931); L. Gorton, The Concept of the Common Carrier in Anglo-American Law 42-43 (1971). But in the NGA Congress affirmatively addressed itself to that issue, giving the Commission power to stamp out undue discrimination; it is precisely that power that the Commission has here sought to exercise. 76 The Act fairly bristles with concern for undue discrimination. Section 4 prohibits any undue preference and any unreasonable difference in rates, charges, service, facilities, or in any other respect, and empowers the Commission to review tariffs filed by pipelines in order to reject ones violating the prohibition. 15 U.S.C. Sec. 717c (1982). Section 5--the primary authority invoked by the Commission here--directs the Commission to adopt corrective measures whenever it finds a rate, charge or classification, or any rule, regulation, practice, or contract affecting the same, to be unjust, unreasonable, unduly discriminatory, or preferential. Id. Sec. 717d. 77 The issue seems to come down to this: Although Congress explicitly gave the Commission the power and the duty to achieve one of the prime goals of common carriage regulation (the eradication of undue discrimination), the Commission's attempted exercise of that power is invalid because Congress, in 1906 and 1914 and 1935 and 1938 itself, refrained from affixing common carrier status directly onto the pipelines and from authorizing the Commission to do so. And this proposition is said to control no matter how sound the Order may be as a response to the facts before the Commission. We think this turns statutory construction upside down, letting the failure to grant a general power prevail over the affirmative grant of a specific one. 78 Thus we find little relevance in cases relied on by the pipelines for the proposition that a duty to provide service to all comers is the essence of common carriage. In each of those cases the court was construing the term as used in a statute, in one instance stating that a particular class of persons shall not ... be deemed a common carrier, FCC v. Midwest Video Corp., 440 U.S. 689, 699-702, 99 S.Ct. 1435, 1440-1442, 59 L.Ed.2d 692 (1979), in the others prohibiting agency exercise of jurisdiction over activities of certain persons classified as common carriers, see National Ass'n of Regulatory Utility Commissioners v. FCC, 525 F.2d 630 (D.C. Cir.1976); National Ass'n of Regulatory Utility Commissioners v. FCC, 533 F.2d 601 (D.C. Cir.1976). Such cases are not helpful on the issue of whether Congress's omission of the term common carrier significantly undercuts its explicit provision of authority to prevent or correct undue discrimination. 79 Petitioners cite Florida Power & Light Co. v. FERC, 660 F.2d 668 (5th Cir.1981), and Richmond Power & Light v. FERC, 574 F.2d 610 (D.C. Cir.1978), for the following proposition: that any order by the Commission conditioning its approval of any wheeling (i.e., transmission of electricity owned by another) on the utility's agreement to wheel for all constitutes an attempt by the Commission to impose indirectly duties that the Federal Power Act prevents it from imposing directly, namely common carriage. As the Federal Power Act establishes a regulatory scheme for electricity paralleling that which the NGA creates for gas, see, e.g., FPC v. Sierra Pacific Power Co., 350 U.S. 348, 353, 76 S.Ct. 368, 371, 100 L.Ed. 388 (1956), petitioners contend that the Richmond and Florida cases compel invalidation of the Commission's open-access condition. 80 We think petitioners read Richmond and Florida far too broadly. First, we note that the legislative history of the two acts is, on this point, materially different. In its deliberations on the bill that ultimately emerged as the Federal Power Act, Congress considered and rejected a provision that would have empowered the Federal Power Commission to order wheeling if it found such action to be 'necessary or desirable in the public interest.'  Otter Tail Power Co. v. United States, 410 U.S. 366, 374, 93 S.Ct. 1022, 1028, 35 L.Ed.2d 359 (1973) (quoting S. 1725, 74th Cong., 1st Sess.). The evidence as to the NGA (surveyed above) is less direct: it consists exclusively of various occasions on which Congress did not adopt proposals actually making the natural gas pipelines into common carriers. 81 Second, neither Richmond nor Florida comes anywhere near stating that the Commission is barred from imposing an open-access condition in all circumstances. In Florida, the court expressly left open the question whether the Commission would be entitled to use open-access conditions as a remedy for anti-competitive conduct. 660 F.2d at 677-79. It stressed the failure of the Commission, in the orders under review, to make any findings of anti-competitive activities or violations. Id. at 678. Evidently because no party raised the issue, the court did not address the Commission's power to exact such conditions as a remedy for undue discrimination. Cf. FPC v. Conway Corp., 426 U.S. 271, 276-77, 96 S.Ct. 1999, 2003-04, 48 L.Ed.2d 626 (1976) (accepting assumption that the Commission could not remedy a utility's discrimination between wholesale (jurisdictional) rates and retail (nonjurisdictional) rates by ordering increases in the latter). 82 In Richmond the Commission had repulsed Richmond Power & Light's demand that it condition approval of any transmission by either of two large interstate systems on their agreeing to transmit for all. In upholding the Commission we said little more than that unwillingness to transmit for all comers could not be automatically deemed an undue discrimination: 83 Thus Richmond spurned the opportunity to demonstrate that particular activities were unreasonably anticompetitive or discriminatory and claimed instead that the mere failure to wheel energy to and from Richmond while wheeling for any other utility was unlawful discrimination. 84 574 F.2d at 623. We went on to say that the Commission's rejection of a per se rule (i.e., a rule that selective transmission was necessarily undue discrimination) followed logically from Congress's refusal to impose common carrier duties on electric utilities. Id. 85 Petitioners' reading of Richmond, moreover, is belied by this court's later decision in Central Iowa Power Coop. v. FERC, 606 F.2d 1156 (D.C.Cir.1979). Pursuant to Sec. 205 of the Federal Power Act, 16 U.S.C. Sec. 824d (1982) (paralleling Sec. 4 of the NGA), the Commission had reviewed the terms of a power-pooling agreement that established two classes of membership, one of them entitled to fewer privileges than the other. Finding the distinction discriminatory on its face, the Commission conditioned its approval on removal of the membership criteria that prevented the inferior class of participants from enjoying the privileges of the favored ones. We upheld the decision as a proper exercise of its power to prevent undue discrimination. 606 F.2d at 1170-72. See Reiter, Competition and Access to the Bottleneck: The Scope of Contract Carrier Regulation Under the Federal Power and Natural Gas Acts, 18 Land & Water L.Rev. 1, 47-50 (1983). The Commission's open-access condition relies on precisely that principle. 86 It is true that in Central Iowa the court rejected South Dakota's claim that the Commission should have conditioned approval of the power-pooling agreement on the parties agreeing to wheel for nongenerating electrical systems. See 606 F.2d at 1169. Such a condition would in effect have forced on the participants a broad extension of their agreement to wheel for each other. See id. at 1160 n. 7. Though the court brushed the request aside in fairly sweeping language, its approval of the Commission's elevation of the inferior class of members clearly limits the negative impact of the discussion. The case upholds the power of the Commission to subject approval of a set of voluntary transactions to a condition that providers open up the class of permissible users. 87 Neither Florida nor Richmond presented the extreme factual circumstances that are now present in the gas industry. Here the Commission has found (a) that pipelines continue to possess substantial market power, J.A. 306; (b) that they have exercised that power to deny their own sales customers, and others without fuel-switching capability, access to competitively priced gas, J.A. 318; and (c) that this practice has denied consumers access to gas at the lowest reasonable rates, J.A. 318-21, 352. Thus, despite the removal of regulation over the price and non-price aspects of wellhead transactions, and the evolution of an interconnected nationwide pipeline grid, discrimination in transportation has denied gas users, and the economy generally, the benefits of a competitive wellhead market. 88 Despite a sweeping suggestion that the Order is unsupported, Brief of Interstate Pipeline Group at 35, the pipelines do not in fact challenge these factual findings. Their objection is rather on matters of policy, grounded on beliefs that the kind of discrimination here prohibited is not undue within the meaning of the NGA. 4 Indeed, the burden of their attack on the Order is precisely that it may disable them from passing on to customers gas purchase costs that they incur under contracts entered into years ago under premises now obsolete. Id. at 37-38. In other words, enforcement of Order No. 436 will expose them to competition that their discriminatory practices enable them to avoid. Their claim thus tends to substantiate the Commission's views (1) that in the absence of Order No. 436 competition will be thwarted and (2) that the practices controlled by Order No. 436 are indeed anti-competitive and discriminatory. 89 The electricity cases cited thus provide only very weak support for the challenge. In contrast, our decision in Maryland People's Counsel v. FERC, 761 F.2d 780 (D.C.Cir.1985) (MPC II ), came about as close to endorsing the Commission's approach as Article III permits. There we vacated orders of the Commission that had established blanket certificate transportation without any specific effort to prevent pipelines from offering such transportation on a discriminatory basis. We did not, of course, explicitly find undue discrimination such as would obligate the Commission to act under Sec. 5. But we did find that the petitioners there had made a strong enough showing to require the Commission to address the issue. Specifically, we made it clear that blanket-certificate transportation, unconstrained by any nondiscriminatory access provision, might well require remedial action under Sec. 5. We ended by saying: 90 We vacate the challenged orders to the extent that they allow transportation of direct-sale gas to fuel-switchable, non-high-priority end users without requiring pipelines to furnish the same service to LDCs and captive consumers on nondiscriminatory terms. 91 761 F.2d at 789 (footnote omitted). 92 Our holding in MPC II obviously did not require the Commission to make the findings that it has. It surely carried the implication, however, that if it did make supportable findings of undue discrimination in pipeline use of the old blanket certificates, it would have the authority to employ suitable remedies. And it carried the further implication that among them might be a requirement that any pipeline offering blanket-certificate transportation agree to serve LDCs and captive consumers on non-discriminatory terms. Id. 93 The interstate pipelines appear to suggest that Order No. 436's impact on their financial integrity is so grave as to be equivalent to a rule denying them the legal right to pass on costs, and invalid as such a rule would be. It is true that the Commission has only very limited power to deny the pipelines the legal right to pass gas purchase costs through to customers. See Sec. 601(c)(2) of the NGPA, 15 U.S.C. Sec. 3431(c)(2) (1982) (providing that the Commission must allow interstate pipelines to pass through gas costs not violating NGPA wellhead ceilings except to the extent the Commission determines that the amount paid was excessive due to fraud, abuse, or similar grounds); Office of Consumers' Counsel v. FERC, 783 F.2d 206 (D.C.Cir.1986). But petitioners have called our attention to nothing that bars the Commission from devising rules that remedy a lack of competition by exposing pipelines to competition and its normal consequences. The Supreme Court has made clear, for example, that the due process clause affords no protection from losses inflicted by market conditions. In Market Street Ry. v. Railroad Comm'n, 324 U.S. 548, 65 S.Ct. 770, 89 L.Ed. 1171 (1945), it said of its decision in FPC v. Hope Natural Gas Co., 320 U.S. 591, 64 S.Ct. 281, 88 L.Ed. 333 (1944): 94 All that was held was that a company could not complain if the return which was allowed made it possible for the company to operate successfully. There was no suggestion that less might not be allowed when the amount allowed was all the company could earn.... The due process clause ... has not and cannot be applied to insure values or to restore values that have been lost by the operation of economic forces. 95 324 U.S. at 566-67, 65 S.Ct. at 779-80. Similarly, nothing in the NGA protects the pipelines from the market forces to which Order No. 436 subjects their gas marketing business, even though those forces are derived in part from a restriction on their discrimination in transportation. 96 It is finally argued that the Commission's not having imposed any requirements like those of Order No. 436 in the period from enactment in 1938 until the present demonstrates the lack of any power to do so. Cf. FPC v. Panhandle Eastern Pipe Line Co., 337 U.S. 498, 513-14, 69 S.Ct. 1251, 1260-61, 93 L.Ed. 1499 (1949). But as our introductory review of the economic background sought to illustrate, the Commission here deals with conditions that are altogether new. Thus no inference may be drawn from prior non-use. 97 While the Supreme Court's decision in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), is not a wand by which courts can turn an unlawful frog into a legitimate prince, the case bolsters our conclusion. Congress has given the Commission in Sec. 5 of the NGA a broad power to stamp out undue discrimination; in Sec. 7 the power to approve certificates of service subject to such reasonable terms and conditions as the public convenience and necessity may require; and in Sec. 16 the power to perform any and all acts, and to prescribe ... such orders, rules, and regulations as it may find necessary or appropriate to carry out the [NGA's] provisions. The alleged negative restriction on this power is at best ambiguous, if indeed it exists at all. Under these circumstances, Chevron binds us to defer to Congress's decision to grant the agency, not the courts, the primary authority and responsibility to administer the statute. The Commission's view represents a reasonable interpretation of the Act, for which we may not substitute our view. 467 U.S. at 844, 104 S.Ct. at 2782. 98
99 In enacting the NGPA Congress endeavored to break down the regulatory barriers between the interstate and intrastate markets. Sections 311 and 602(b)(2) were added to facilitate[ ] development of a national natural gas transportation network without subjecting intrastate pipelines, already regulated by State agencies, to FPC regulation over the entirety of their operations. H.R.Rep. No. 543, 95th Cong., 1st Sess. 45 (1977). See also Public Service Comm'n v. Mid-Louisiana Gas Co., 463 U.S. 319, 342-43, 103 S.Ct. 3024, 3037-38, 77 L.Ed.2d 668 (1983). Thus, Sec. 311(a) permits the Commission to authorize transportation by an interstate pipeline on behalf of an intrastate or LDC and by an intrastate on behalf of an interstate or LDC. 15 U.S.C. Sec. 3371(a) (1982). The Commission has exercised this authority, permitting such transportation as a general matter. See 18 C.F.R., part 284, subparts B and C. It has also exercised the authority provided by Sec. 311(c), 15 U.S.C. Sec. 3371(c) (1982), to prescribe terms and conditions. 5 Order No. 436 would add to these the requirement that any interstate or intrastate pipeline offering such transportation shall do so on a nondiscriminatory basis. 18 C.F.R. Secs. 284.8(b) and 284.9(b). Petitioners challenge these open-access conditions, relying here on express statutory language. Section 602 of the NGPA, captioned Effect on State Laws, provides in subsection (b): 100 (b) Common carriers. 101 No person shall be subject to regulation as a common carrier under any provision of Federal or State law by reason of any transportation-- 102 (1) pursuant to any order under section 3362(c) or section 3363(b), (c), (d), or (i) of this title; or 103 (2) authorized by the Commission under section 3371(a) of this title [section 311(a) of the NGPA]. 104 15 U.S.C. Sec. 3432(b) (1982). 105 Petitioners read this language as stultifying any effort by the Commission to control discrimination where that effort imposes on pipelines a duty--even though it be a conditional one--equivalent to the common carrier's duty to provide nondiscriminatory service. We believe this interpretation is incorrect. 106 It seems to us that Sec. 602(b)(2) was a congressional effort to protect Sec. 311(a) from the consequences of pipeline concern that service thereunder would expose them generally to classification as common carriers, most likely by states, and thus to an unprecedented range of legal burdens. If pipelines shied away from use of Sec. 311(a), its purpose would be defeated. Section 602(b)(2) could protect against that threat by assuaging the pipelines' concern. A duty not to discriminate, imposed by the Commission on the basis of findings that the duty is necessary to assure consumers access to competitively priced gas, is utterly different. The imposition of the duty here facilitates the accomplishment of Congress's purposes. At least it will do so if the gains in enhanced access offset whatever losses may result from the disincentive effect on pipelines. The judgment balancing those consequences is for the Commission to make, and it has made it in favor of imposing the duty. 6 107 Congress had ample reason to fear that the risk of extraneous legal burdens would chill pipeline interest. Take the laws of Texas. Two years before enactment of the NGPA a Texas court ruled that [w]hether the business conducted by a pipe line company is actually that of a common carrier is a question of fact, which would depend on the court's perception of whether the line is available to all producers seeking its services. China-Nome Gas Co. v. Riddle, 541 S.W.2d 905, 908 (Tex.Civ.App.1976). A pipeline's transportation under Sec. 311(a) would expose it to the risk of such fact findings, and thus enmesh it in state regulations. In Texas, for example, such classification would subject it to the jurisdiction of the Railroad Commission, see Op.Atty.Gen. No. M-175 (1967), to certain health requirements, see Tex.Civ.Stat.Ann. art. 4477-1 Secs. 1 & 22 (Vernon 1976 & Supp.1987), and to such duties and liabilities as a court might find the common law to prescribe, see id. arts. 882-884 (Vernon 1964 & Supp.1987). Most notably, a firm declared a common carrier is required under Texas law to carry, for anyone, any goods of the type for which it is suited. Id. Sec. 884. 108 Pipeline fear of such extraneous burdens might well have rendered Sec. 311 a dead letter. Though we have not identified similar federal hazards, we believe that Congress might well have included the reference to federal law out of anxiety that some overlooked federal provision would operate to thwart Sec. 311's purposes. Viewed in this light, Sec. 602 has nothing to do with a Commission decision to impose a duty of nondiscrimination. 109 The structure of Sec. 602 favors this reading over the broader one urged by the petitioners. Section 602 also provides that no one shall be subject to regulation as a common carrier by reason of providing transportation under 15 U.S.C. Secs. 3362(c) or 3363(b), (c), (d), or (i), which involve presidential orders to transport in a natural gas supply emergency. The President's emergency powers are extremely broad, and their exercise could well impose duties quite like those of common carriage, with the President dictating detailed priorities about whom the pipelines should serve. See id. Sec. 3363. If the President determined that imposition of something like common carriage were necessary to meet such an emergency, it is hardly credible that Sec. 602 would stand in the way. By the same token, that section must not flatly bar the Commission from imposing similar conditions on gas transportation under Sec. 311. 110 Congress may conceivably have intended Sec. 602 to bar FERC from conditioning Sec. 311 transportation upon assurances of nondiscrimination. We doubt it. But apart from our independent conclusion that it has no such purpose, we regard FERC's interpretation as reasonable. The reasonableness is underscored by FERC's broad duties to assure consumers access to natural gas at prices such as would prevail in the absence of pipeline market power and its conclusion that under the present circumstances fulfillment of that duty requires such conditioning. Cf. American Trucking Ass'ns, Inc. v. Atchison, T. & S.F. Ry., 387 U.S. 397, 87 S.Ct. 1608, 18 L.Ed.2d 847 (1967). We are therefore under Chevron bound to uphold the Commission. 111 A parallel attack on Order No. 436 stresses Sec. 601(a)(2)(A) of the NGPA, 15 U.S.C. Sec. 3431(a)(2)(A) (1982), providing that transportation under Sec. 311 (or under the Presidential emergency powers discussed above) shall not constitute transportation in interstate commerce within the meaning of Sec. 1(b) of the NGA. But for this provision, a transporting intrastate pipeline would fall prey to the Commission's NGA jurisdiction. Several petitioners argue that Order No. 436 imposes burdens substantially identical to those encompassed by NGA jurisdiction. Thus, they argue, application of the open-access condition to intrastate pipelines is an impermissible interference with state regulatory authority. See Brief of the American Gas Ass'n at 42-43; Brief of Intrastate Petitioners & Intervenors at 22-29. 112 Again consideration of the purpose of the provision refutes the attack. Section 601(a)(2)(A) is clearly intended to assure that pipelines' fear of the automatic imposition of the burdens of NGA jurisdiction does not make them so chary of Sec. 311 that it languishes unused. This is altogether different from regulatory burdens imposed by the Commission in the exercise of its discretion under Sec. 311(c) in order to make sure that Sec. 311 transportation operates in harmony with the congressional purpose. Thus, even if it were true that the regulatory impact of Order No. 436 were identical to that of NGA jurisdiction, the decision to condition Sec. 311 on acceptance of those burdens would not violate Sec. 601(a)(2)(A). 113 In fact, of course, the nondiscrimination duties imposed by Order No. 436 by no means encompass all the burdens of NGA jurisdiction. (1) New service under Sec. 311 does not require Sec. 7 certification, and Order No. 436 carries that distinction forward where a pipeline brings itself under the Order: operations under a Sec. 7 blanket transportation certificate entail notice-and-protest procedures more burdensome than the reporting requirements for Sec. 311 transportation. See infra part VII.B. (2) Construction of facilities to be used exclusively for Sec. 311 transportation requires no certification or FERC review at all. See infra part VII.D. (3) Sec. 311 transportation does not subject an intrastate pipeline to the detailed accounting provisions applicable to a natural gas company under the NGA. Compare 18 C.F.R. part 201. (4) Intrastate pipelines may provide firm or interruptible service without providing both, while interstate pipelines providing one type must also provide the other. Compare 18 C.F.R. Secs. 284.8(a)(1) & 284.9(a)(1) with id. Secs. 284.8(a)(2) & 284.9(a)(2). 114