Opinion ID: 362296
Heading Depth: 2
Heading Rank: 1

Heading: General Arguments

Text: 27 New York challenges the Commission's allowance of a rate of 80 cents per Mcf in this proceeding on the general ground that the rate was entirely unnecessary to secure new gas for the interstate market. New York raises several specific points. It notes that Pennzoil was willing to make the final requisite investments to produce this gas in the early 1970's when the areawide rate was only 26 cents per Mcf. It also notes that the gas at issue here came from an offshore federal lease, involving two special considerations: that full compensation to producers for lease acquisition costs needlessly spurs the upward spiral in lease bidding; and that the FPC's jurisdiction over offshore gas as contrasted with the lack of jurisdiction over onshore gas sold in intrastate commerce lessens the need for extra financial incentives to secure that gas for the interstate market. Finally, New York contends that there are fundamental inconsistencies between the average cost method of national ratemaking, under which high-cost production serves to enhance the average costs and the national price available to low-cost producers, and the standards of the optional certificate program, which compensates producers of high-cost gas on the basis of their own high costs alone. 28 The FPC and Pennzoil, intervenor on appeal, make two general responses to New York's contentions. 41 First, they argue that New York is challenging the core concept of the optional certification procedure, and this challenge, it is argued, was rejected in Moss v. FPC. However, this court has not previously upheld a total project cost standard under the optional certification program. As discussed above, Moss v. FPC upheld the novel procedural aspects of optional certification, notably the combination of Section 7 and 4 proceedings. We specifically noted that we were not presented at that time with FPC standards for reasonableness and that we were assuming that the standards eventually adopted would conform to the statute. On the present record, we said, we must Assume that the Commission will abide by the standards of the statute and the promises it has made. We cannot condemn the Commission on the theory that it may not do what it has promised to do. Moss v. FPC, supra, 164 U.S.App.D.C. at 7, 502 F.2d at 467 (emphasis supplied). We cannot sensibly uphold the Commission's standards now on the ground that this ruling was established in Moss v. FPC, when the fact is that we upheld the FPC in Moss as to procedure, on the Assumption that the standards issued in due course would be consistent with the statute. To provide judicial affirmance without judicial review through circularity or bootstrapping is not consonant with the review function entrusted to the courts. The Commission has now taken the step that it had not at the time of Moss, of setting forth the substantive principle the total project cost standard for optional certification. Now we must determine whether that principle is reasonable and consistent with the statute and the purpose of the optional certification program. 29 Our view of Moss is confirmed by our holding in Consumers Union, the same year as Moss, that the FPC's first set of optional certification standards violated the statute. We specifically noted in Consumers Union that standards based on individual project costs would have to be reconciled with prior FPC statements and ratemaking approaches. 42 It is precisely that reconciliation which the FPC has failed to perform. 30 The other FPC response, that if rates under the optional program were limited to the national rate there would be no point to the optional procedure, also fails to meet New York's arguments. This is not a situation of only two alternatives, of either making the national rate an inflexible ceiling on optional rates, or accepting unconditionally the FPC's total project costs approach. Rather, the issue is whether all the elements of the total project costs approach have been justified by reasoned consideration, in light of the principles of review for FPC programs. Change in administrative standards in light of the increased experience under them is appropriate, and may be desirable if flaws are discerned in the previous standards. However, change must be accompanied by reasoned consideration supporting the new standards. (T)he process of change in agency policy must be one that serves and does not erode the principle of reasoned decision making. Public Service Comm'n v. FPC, supra, 167 U.S.App.D.C. at 115, 511 F.2d at 353. As we have stated, Greater Boston Television Corp. v. FCC, 143 U.S.App.D.C. 383, 394, 444 F.2d 841, 852 (1970), Cert. denied, 403 U.S. 923, 91 S.Ct. 2229, 29 L.Ed.2d 701 (1971): 31 Judicial vigilance to enforce the Rule of Law in the administrative process is particularly called upon where, as here, the area under consideration is one wherein the Commission's policies are in flux. An agency's view of what is in the public interest may change, either with or without a change in circumstances. But an agency changing its course must supply a reasoned analysis indicating that prior policies and standards are being deliberately changed, not casually ignored, and if an agency glosses over or swerves from prior precedents without discussion it may cross the line from the tolerably terse to the intolerably mute.