Opinion ID: 492011
Heading Depth: 2
Heading Rank: 3

Heading: Claims of Arbitrariness and Caprice.

Text: 123
124 Maryland People's Counsel finds Order No. 436 defective in that it (potentially) allows a pipeline to provide transportation under an individual certificate issued under Sec. 7(c) without agreeing to provide the same on a nondiscriminatory basis. 125 We lack jurisdiction over the claim. Section 19(a) of the NGA, 15 U.S.C. Sec. 717r(a) (1982), prohibits any proceeding to review an order of the Commission in the absence of an application for rehearing filed within 30 days after issuance of the order, setting forth specifically the ground on which the application is based. The Commission addressed the problem of individual Sec. 7 certificates in Order No. 436, stating in its analysis of comments that it did not intend to apply the nondiscriminatory access provision on a generic basis to all section 7 certificates at this time. J.A. 388. MPC did not file an application raising the point until March 1986, long after expiration of the 30 days from issuance of Order No. 436 on October 9, 1985. 126 MPC acknowledges the jurisdictional difficulty, but states that it could not have realized, until February 1986, that the Commission's refusal encompassed certificates for transportation to fuel-switchable customers. At that time, in Texas Gas Transmission Corp., 34 F.E.R.C. p 61,203 (1986), the Commission actually did issue such a certificate without open-access conditions. MPC argues that, in view of the obligations imposed by MPC II, and language of the Commission elsewhere in Order No. 436, it was entitled to believe that the Commission's statement referred only to transport in support of [the pipelines'] merchant function (e.g., where one pipeline transports gas owned by another pipeline) or in ways that would not create the discrimination that the Commission found unlawful in Order No. 436 (e.g., transportation for high priority customers ...). Reply Brief of MPC at 4. 127 We must reject MPC's reading of Order No. 436's disclaimer. The statement is broadly phrased to encompass section 7 transportation certificates, and is justified in terms of the Commission's opportunity to scrutinize individual section 7 transportation arrangements ... on a case-by-case basis when [the certificates] are applied for. J.A. 388. Both the language and the explanation are fully as applicable to transportation to fuel-switchable users as to any other transportation. MPC of course remains free to challenge the policy by seeking review of individual Sec. 7 orders in which the Commission applies it. 128 The Commission briefly sought to refute MPC's contention in Order No. 436-D, issued on March 28, 1986. Such discussion was merely dictum, as MPC's March 1986 application was time-barred under Sec. 19 and the Commission so recognized. In any event, the Commission cannot waive the jurisdictional bar of Sec. 19 by selective discussion of belated rehearing applications. See Boston Gas Co. v. FERC, 575 F.2d 975, 979-80 (1st Cir.1978). 129
130 Several parties attack as arbitrary and capricious the Commission's first-come, first-served formula for determining priorities among those who seek transportation service under the Order. 131 The Commission did not announce this formula in any regulation but merely in material supporting the regulations. See J.A. 342, 401-04. It also said that certain claims on pipeline capacity might enjoy favored treatment, outside the general first-come, first-served rule. J.A. 400. These preferred claims include those of a firm sales customer, on the grounds that such a customer has already booked the transportation capacity currently 'bundled' with ... the sale. Id. (emphasis in original). A similar special priority applies to LDCs that exercise the CD conversion option discussed in part IV of this opinion. Id. at 401. Further, the first-come, first-served concept is evidently not to apply in cases of sudden capacity interruption, but only to the process of contracting for available capacity. Id. at 1095-96 (emphasis in original). But see El Paso Natural Gas Co., 35 F.E.R.C. p 61,440, at 62,061 (June 27, 1986). 132 Apart from introducing the complexity of these exceptions and superior claims, Order No. 436 and its supporting statements contain no guidance about how pipelines are to implement this formula. First come, first served is an easy principle to apply in a bakery where each customer pulls a numbered ticket on entering and is served in that order. But in an industry such as natural gas transportation it may often be difficult to say who comes first. 133 Here are a few sample questions that the rule fails to resolve: (1) Suppose that A, an end user, contracts with a pipeline for the right to transmit up to five billion Btu per day for five years. At the end of four years A seeks to renew the contract on the same terms. But others have earlier filed requests that in the aggregate exceed the pipeline's capacity. Does A go to the end of the line? Such a result would probably disrupt most notions of ordinary business arrangements in this market. But if A and persons similarly situated enjoy a sort of super-priority, open access will be an empty promise for new would-be users. (The Commission appears to lay great stress on the date on which a request is filed, J.A. 1191, but the full implications are nowhere spelled out.) (2) What of efforts by A to secure not merely continued but additional transportation at the end of a fixed-term contract? Would A go to the end of the line for the increment? (See El Paso Natural Gas Co., supra, at 62,060.) (3) What is the impact of a minor change in point of receipt? If such a change forces the user to go to the end of the line, then an LDC or end user may find it hard to shift from one supplier to another. See Brief of Baltimore Gas & Elec. Co. at 17. (4) May a pipeline charge a fee for accepting requests for service? If not, how can it prevent all potential users from filing immediately for virtually unlimited claims on capacity for an indefinite period of time? 134 The most potent objection to the Commission's treatment of the problem--and one that is unquestionably ripe--is the contention that it leaves an intolerable gap in the regulatory structure. That gap creates some risk that pipelines may use the resulting leeway to persist in the discrimination that Order No. 436 nominally forbids. It leaves even the most willing pipeline uncertain as to what full compliance requires. On the other side, shippers cannot know what steps they must take to secure adequate priority status or what should guide them in choosing between bundled and unbundled service. 135 The Commission's brief treats the problem dismissively, noting that aggregate annual gas consumption has fallen from a peak of 22.6 trillion cubic feet in 1973 to only about 17-18 Tcf currently. FERC Brief at 101. This comment seems utterly irrelevant: the problem is surely capacity at peak periods. The Commission expressly concedes that generally pipelines have operated at capacity during the winter peak. See FERC Brief at 103 n. 3; J.A. 280. 136 Nonetheless, as each pipeline elects to become an open-access transporter, it must file tariffs with the Commission to govern the service, which tariffs must include any operational conditions the pipeline proposes to apply. 18 C.F.R. Secs. 284.7(a), 284.8(c), 284.9(c). See, e.g., El Paso Natural Gas Co., 35 F.E.R.C. p 61,440 (June 27, 1986). These filings afford the Commission an opportunity to develop standards of permissible capacity allocation. Accordingly, the essential legal issue is the validity of the Commission's choice to address the problem in that format rather than in the format of generic rulemaking. 137 It is clear that this choice lies primarily in the informed discretion of the administrative agency. SEC v. Chenery Corp., 332 U.S. 194, 203, 67 S.Ct. 1575, 1580, 91 L.Ed. 1995 (1947). The Supreme Court has noted that such resolution is appropriate where problems arise that the agency could not reasonably foresee, or where its experience makes adoption of a hard-and-fast rule unsuitable, or where the problem is so specialized and variable as to be impossible of capture within the boundaries of a general rule. Id. at 202-03, 67 S.Ct. at 1580-81. See also NLRB v. Bell Aerospace, 416 U.S. 267, 294, 94 S.Ct. 1757, 1771, 40 L.Ed.2d 134 (1974). While the Commission has said little or nothing to explain why it is sensible to postpone these decisions to the stage of review of individual proposals, the necessity of its conducting that review seems to us, at this point, an adequate ground for deferring to its judgment. 138 This is not to say, however, that the Commission may endlessly postpone the necessary decisions. Failure to make the rule reasonably determinate by the time a pipeline starts Order No. 436 operations would severely constrain the Commission's authority to enforce the Order against the pipeline. Such failure would at least complicate actions seeking injunctive relief against pipelines under Sec. 20 of the NGA, 15 U.S.C. Sec. 717s (1982), and would probably make impossible any effort to secure penalties under Sec. 21, 15 U.S.C. Sec. 717t (1982). See NLRB v. Majestic Weaving Co., 355 F.2d 854, 860 (2d Cir.1966) (Friendly, J.) (the [judicial] hackles bristle still more when a financial penalty is assessed for action that might well have been avoided if the agency's changed disposition had been earlier made known, or might even have been taken in express reliance on the standard previously established). Cf. Boyce Motor Lines, Inc. v. United States, 342 U.S. 337, 340, 72 S.Ct. 329, 330, 96 L.Ed. 367 (1952) (requirement of adequate notice for criminal enforcement of administrative regulations). Moreover, if the Commission approves plans of compliance so vague that enforcement is impaired, its posture will be essentially that found fatally defective in MPC II: it will have authorized blanket certificate transportation under rules not adequately grappling with the potentially discriminatory effects. 139 The Commission's oracular procrastination (a blend of Delphi and Fabius) makes challenges to the specifics of first come, first served unripe. These challenges include assertions that the policy (1) gives inadequate attention to contractual commitments or to dependency as bases of distinction; (2) unduly threatens the security of supply of LDCs; and (3) disregards equities based on prior payments for pipeline capacity. See, e.g., Brief of Interstate Pipeline Group at 35-36; Brief of Associated Gas Distributors at 39-41. One intervenor also poses a carefully reasoned attack on the Commission for its failure to consider alternatives such as an auction system. See Brief of Baltimore Gas & Elec. Co. at 19-20. Though the point is much closer, the Commission's vagueness and lack of commitment are such that even this attack appears unripe. The ripeness doctrine seeks to 140 prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties. 141 Abbott Laboratories v. Gardner, 387 U.S. 136, 148-49, 87 S.Ct. 1507, 1515-16, 18 L.Ed.2d 681 (1967). As the Commission confined its disposition of the issue to some general remarks in its supporting statement, our involvement in the merits at this stage would defy these principles.