Opinion ID: 322192
Heading Depth: 1
Heading Rank: 2

Heading: the allocation provisions

Text: Nature of the Provisions 14 The plan approved by the Commission provided that each Texas Eastern customer was to receive an annual 'entitlement' (hereinafter 'allocated entitlement') to supersede Texas Eastern's contract commitment to deliver a specified volume of gas. Each customer's allocated entitlement was based initially upon its historical annual purchases of gas from Texas Eastern; upward adjustments from the historical purchase 'baseline' were then made to reflect additional needs of some customers. 15 In the event Texas Eastern's gas supply did not allow it to fill each customer's allocated entitlement, the plan provided that further curtailment of deliveries would be accomplished by ratable reductions in allocated entitlements. Small-volume customers, defined as those with contractual entitlements of 10,000 Mcf per day or less, were exempt from daily curtailment below allocated entitlements (Article III). Under Article IV, other customers were eligible to seek an emergency exemption from daily curtailment to avoid jeopardy to residential and commercial loads. Challenges to the Allocation Provisions 16 Petitioners' principal challenges to the allocation provisions may be summarized as follows: 17 1. The Commission's use of historical purchases as the baseline for allocated entitlements was unreasonable in that there was no differentiation among consumptive use of gas, to the detriment of small-volume customers serving highpriority uses of gas; 18 2. The Commission unreasonably refused to guarantee that the exemption from curtailment below allocated entitlements available to small-volume Texas Eastern customers would be extended to Algonquin customers meeting the qualifying criteria; and 19 3. The Commission erred in refusing to require presentation of the settlement proposal by a sponsoring witness, available for cross-examination as to the methods used to calculate individual adjustments to the historical baseline in determining allocated entitlements, an error which led the Commission to approve the proposal on an inadequate record. 20 Decision to Disclaim Resolution of Challenges to Allocation Provisions 21 While some of the petitioners' objections are not without force, the court concludes that, in light of events occurring since the Commission's order, including the expiration of the allocation plan in September, 1973, judicial resolution of challenges to the allocation provisions is now inappropriate. The expiration of the plan, and the accompanying inability to change the allocation of gas to customers, does not alone deprive the court of a 'case or controversy' to adjudicate, for the court is empowered to decide the questions presented if they are likely to recur, and their immediate resolution will serve important public interests. 3 Such a course might be appropriate if petitioners challenged the Commission's power to act, or a basic approach it is likely to follow in future allocation proceedings. But petitioners' objections cannot be so characterized. The Commission's power to mandate allocations, upheld by the Supreme Court in FPC v. Louisiana Power & Light Co., 406 U.S. 621, 92 S.Ct. 1827, 32 L.Ed.2d 369 (1972), is beyond challenge. And subsequent to the approval in this case of what it stressed was an 'interim curtailment settlement,' thE commission has announced a new approach to permanent curtailment plans. For thr reasons stated below, we conclude that this later permanent approach makes it unlikely that resolution of petitioners' particular objections to Texas Eastern's interim plan would have any significant impact on future allocation proceedings. Accordingly, and in view of our inability to give petitioners meaningful relief even if they should prevail, 4 we decline to resolve petitioners' challenges to the allocation provisions. Such a disposition is analogous to a decision to withhold declaratory relief without reaching the merits, as in A. L. Mechling Barge Lines, Inc. v. United States, 368 U.S. 324, 331, 82 S.Ct. 337, 342, 7 L.Ed.2d 317 (1961), where the Supreme Court stated: 'sound discretion withholds the remedy where it appears that a challenged 'continuing practice' is, at the moment adjudication is sought, undergoing significant modification so that its ultimate form cannot be confidently predicted.' We now set forth in some detail the considerations underlying our decision to disclaim determination of petitioners' challenges to the allocation plan. 22 Commission Statement of Policy of January 8, 1973 23 Subsequent to its order of December 1, 1972, approving Texas Eastern's interim allocation plan, the Commission issued Order No. 467, 5 dated January 8, 1973, a Statement of Policy, which advised pipelines that the Commission would in the future favor allocation plans that discriminate among end-uses of natural gas with 'high-priority' users protected from curtailment until lower-priority users were without gas entirely. Order 467 contains eight categories of consumptive uses, ranked in the order in which they will be protected from disruption due to shortage. 6 In its order of January 24, 1973, denying petitioners' application for rehearing, the Commission provided that Texas Eastern's filing for a curtailment plan to become effective September 1, 1973, should take into account the policies set forth in Order No. 467, and include detailed submissions so that end-use determinations can be made. 24 While providing that 'in specific cases, opportunity will be afforded interested parties to challenge or support this policy,' Order 467 plainly evinces the Commission's intention to adopt, at least as a point of departure, the approach based upon end-use priorities when reviewing future allocation plans submitted for approval. In its January 24, 1973, order denying rehearing on Texas Eastern's interim curtailment plan, the Commission (at p. 9) drew attention to the newly-promulgated Order 467 and directed Texas Eastern to consider end-use priorities in the preparation of a permanent curtailment plan. More recently, the principle of designating end-use priorities has been reflected in permanent plans approved since promulgation of Order 467. See United Gas Pipe Line Co., 49 FPC 179 (1973), modified, 49 FPC 1211 (1973); El Paso Natural Gas Co., Opinion No. 697, June 14, 1974. 25 Use of Historical Purchases As Baseline for All Customers 26 Petitioners contend that the Commission's use of historical purchases as the baseline for allocated entitlements to all customers constitutes an unreasonable discrimination against small-volume Texas Eastern customers, having a low ratio of historical purchases to contract entitlements but serving end-uses deserving the highest degree of protection from curtailment. The outcome is most egregious, petitioner MDG contends, because the allocated entitlements of industrial customers are boosted by past purchases of gas made on an interruptible basis-- deliveries ordinarily made by a pipeline only when the needs of higher-priority customers have been fully met. 27 We perceive some merit in the contention that an approach that is blind to the differing degrees of hardship disruption of service may impose on different customers may constitute an unreasonable abandonment of reasoned inquiry merely for the sake of a convenient 'rule of thumb.' At the same time, we discern in the provisions for exemption of small-volume customers from daily curtailment below allocated entitlements, and the emergency exemption for others, 7 a sensitivity to special hardships worked by curtailment. In addition, in its order denying rehearing, the Commission addressed MDG's contention that high-priority uses had been given short shrift, stating: 'While it may be true, as MDG contends, that Texas Eastern's larger customers will use part of their allotments for industrial purposes, the record indicates that this is the intent of the smaller customers also.' Finally, the Commission noted that extraordinary relief under 1.7(b) of its rules was available to customers having special hardship. 28 A more currently relevant consideration, however, is that the policy outlined in Order 467 meets the concern which petitioners raise. So long as the Commission continues to focus attention on establishing end-use priorities, there is little prospect of a recurring claim that it has been blinded by historical usage alone. 8 Accordingly, we see no warrant for a declaration as to the validity of the technique employed in Texas Eastern's interim, and now expired, curtailment plan. 29 Refusal to Mandate Exemption for Algonquin Customers 30 Similar considerations govern our treatment of the objection raised by small-volume Algonquin customers to the Commission's refusal to guarantee them the same exemption from curtailment below allocated entitlements that was granted their counterparts purchasing directly from Texas Eastern. The Commission's response to the small-volume Algonquin customers' demands for a guarantee of equal treatment was a statement that Algonquin's allocation should be examined separately, notwithstanding the fact that Algonquin obtains its entire supply from Texas Eastern, in view of the Commission's policy that each pipeline must be 'responsible for its own curtailment plan.' 31 We are concerned about the possibility that a rigid procedure of 'one pipeline at a time' may, as a practical matter, foreclose equal treatment of substantially equal customers, identical except for the fact that some customers purchase directly and others through a major 'customer' pipeline. Refusal to provide for the interests of the indirect purchasers in the initial proceeding raises serious problems, unless justified by overriding considerations of administrative necessity. 9 In Order 467, however, the Commission has acknowledged that discrimination among end-uses requires equal treatment of direct and indirect purchasers having consumptive uses of the same priority, and we read its provisions as eschewing an inflexible rule that truncates the inquiry regardless of the circumstances. Hearing Procedures and Record 32 At this juncture we think it appropriate to say that the record in this case is not free from difficulty. The allocated entitlements arrived at in the course of settlement negotiations consisted of historical purchase baselines and individual adjustments to take care of special needs. Municipal Defense Group asserted a need to cross-examine a sponsoring witness to determine the extent of individual adjustments to the baselines and the reasons for making them; the Administrative Law Judge ruled that submission of interrogatories were adequate. We have some doubt that the interrogatory responses filed by Texas Eastern and affidavits in the record sufficiently disclose the basis for individual adjustments to permit a conclusion that the Commission, by its adoption of the settlement proposal, has 'genuinely engaged in reasoned decision-making.' Greater Boston Television Corp. v. FCC, 143 U.S.A.pp.D.C. 383, 393, 444 F.2d 841, 851 (1970), cert. denied, 403 U.S. 923, 91 S.Ct. 2229, 2233, 29 L.Ed.2d 701 (1971). 33 It appears, at least upon an initial examination of the record, that the reasons for some adjustments are rather vaguely described as 'to reflect historical purchase patterns,' that there is frequently no identification of controlling factors-- such as nature of end use, the importance of end use to ultimate consumers or to the community at large, or the date of a commitment-- that impelled adjustment, and that adjustments were in some instances made upon data submitted to Texas Eastern and not contained in the record. 10 34 The difficulties for the reviewing court presented when the record fails to disclose with unmistakable clarity the reasons for the governing provisions of the agency's action are exacerbated where, as here, the terms of its order have originated in proceedings from which some affected parties have been excluded. Compare Mobil Oil Corp. v. FPC, 157 U.S.A.pp.D.C. 235, 483 F.2d 1238 (1973). The Commission's desire for the expedition afforded by settlement proposals, even non-unanimous ones, is understandable, particularly where it is concerned with provisions having a quite temporary life. Nevertheless, the encouragement of settlement agreements gives rise to a complementary obligation to avoid the appearance as well as the reality of special favoritism, by insuring that the basis for action taken is placed on the record for all parties to see. 35 The need for an adequate record is not rigidly tied to particular procedures. Our cases have consistently held that the procedures required are those appropriate to the issues raised. See e.g., American Airlines, Inc. v. CAB, 123 U.S.App.D.C. 310, 359 F.2d 624, cert. denied, 385 U.S. 843, 87 S.Ct. 73, 17 L.Ed.2d 75 (1966); International Harvester Co. v. Ruckelshaus, 155 U.S.App.D.C. 411, 478 F.2d 615 (1973). Sua sponte inquiry by the agency may, under certain circumstances, provide the requisite clarity quite as well as the full-dress evidentiary hearing demanded by Municipal Distributors Group here. We do caution, however, that the decision in Pennsylvania Gas & Water Co. v. FPC, 150 U.S.App.D.C. 151, 463 F.2d 1242 (1972), which upheld the Commission's approval of a non-unanimous settlement proposal on a record consisting only of written submissions, is not to be taken as an invitation to dispense with further inquiry whenever the Commission can find some level of descriptive fact at which all parties agree. 11 When important decisions turn on the particular weight to be attributed to certain facts, the Commission may have a duty to probe beyond 'canned' writings or to allow the parties to illuminate the issues through exposure to questioning designed to separate inferences from hard data and ventilate interpretative assumptions. 36 Having identified some difficulties, we decline to determine whether, as petitioners argue, the record and the procedures used to compile it are fatally deficient. Claims such as these will undoubtedly arise again as the Commission approves permanent allocation plans, but they are invariably tied closely to the record and circumstances of the particular case in which they arise. Even if petitioners should prevail, our decision would contribute little in the way of general guidance relevant to future proceedings. Accordingly, it would not be a productive judicial exercise to unravel the record in order to reach the merits. 12