Opinion ID: 721438
Heading Depth: 3
Heading Rank: 1

Heading: FERC's jurisdiction to regulate capacity release

Text: 134 Petitioners' first jurisdictional challenge is the claim of the LDCs that FERC lacks any authority whatsoever to regulate shippers' resale of firm capacity rights. LDCs' capacity assignments, they maintain, involve sales of LDCs' rights to transportation service but do not involve interstate transportation or sale for resale of gas itself. As we understand their position, the LDCs would limit FERC's regulatory authority over transportation to the rendition of interstate gas transportation services, as opposed to authority over the rights to receive those services. As their theory goes, the Commission has jurisdiction over the pipelines' initial sales of transportation capacity--given that it is the pipelines that render transportation services--but is without jurisdiction over resales of those same capacity rights by third parties--given that those third parties do not render transportation services. 135 Initially, we believe that the distinction drawn by the LDCs between the rights to and rendition of  interstate transportation services is not a meaningful one. While the pipeline provides transportation only when a party utilizes capacity rights to transport gas, the pipeline provides transportation services throughout the capacity release process. Specifically, the pipeline operates the electronic bulletin board on which all prospective transactions are posted and consummated. The pipeline also selects the winning bidder in the transaction. Moreover, unlike capacity brokering arrangements, which occur directly between releasing and replacement shippers, capacity release requires the pipeline to contract with the replacement shipper. In effect, the pipeline is temporarily abandoning service to the releasing shipper and instituting service to the replacement shipper. Both of these activities are subject to the Commission's jurisdiction under NGA section[ ] 1(b).... Order No. 636-A, p 30,939, at 30,551. In sum, the capacity release regulations operate as a term or condition of pipeline service, with which its customers must comply. 136 As an entirely separate matter, the Commission's jurisdiction attaches to the subject of the capacity resale transaction: interstate transportation rights. By controlling such capacity, the assignors are effectively determining by whom, and under what circumstances, gas will be transported and are using the pipeline's facilities as if they were the assignors' facilities. Id. (quotation marks, alteration, and citation omitted). In contrast, under the regulatory system envisioned by the LDCs, holders of capacity rights could engage in resales without regard to the principles of open access and nondiscrimination that are at the heart of the uniform capacity release system. Such a result is directly contrary to Congress' intent in enacting the Natural Gas Act. Responding to the Supreme Court's conclusion that the Constitution's dormant Commerce Clause prohibited state regulation of the interstate transportation of natural gas, see supra at 88, the federal government interceded to ensure stability and protect the interests of the consuming public. It thereby occupied the field, which necessarily includes both the sale and resale of interstate transportation rights. 137