Opinion ID: 411637
Heading Depth: 1
Heading Rank: 1

Heading: the history of curtailment

Text: 255 Since the advent of natural gas scarcities in the early seventies, regulated interstate pipelines have been required to establish elaborate curtailment plans detailing which of their customers will get how much gas in what priority in times of short supply. In Congress' own words: 256 Curtailment plans establish priorities for the delivery of natural gas when supplies are insufficient to meet contract demand. In most cases, a local distribution company's entitlement to natural gas under a curtailment plan is determined by reference to the priorities of use, and volumes of gas used, by its customers during a particular base period. 257 H.R.Rep.No. 1750, 95th Cong., 2d Sess. 112-13 (1978), U.S.Code Cong. & Admin.News 1978, p. 7846, J.A. 39-40. 258 However, these plans often fall short of full effectiveness or equity because they cover only pipelines' direct customers. As we have decided today, the plans cannot assure that the ultimate users receive the benefit (or burden) of a statutory or FERC-ordered priority system unless they obtain their gas supply directly from an interstate pipeline. In general, local (non-interstate) distributors of natural gas allocate their supplies according to state law, 2 which may or may not correspond to the federal scheme. Moreover, many distributors have several sources of supply, enabling them to dispense nonfederally regulated gas during times of shortage. 3 259 Despite such problems, the FERC initially chose to develop curtailment plans allocating gas by end use rather than pro-rating contract entitlements. In pre-NGPA priority schedules, agricultural users were not accorded any special priority. As a result, two-thirds of the agricultural sector's 1977 interstate natural gas supply fell in the lowest, and most likely to be curtailed, priorities. 4 It was this situation which Congress sought to change by passage of the NGPA. 260 Once basic priorities were established, the FERC faced a further problem: how to decide how much gas is required by each priority class. In most cases, the FERC calculated the amount by reference to historical usage in a pre-curtailment year. Base period figures were adjusted for factors unique to particular pipelines, and particular years. 5 However, they did not normally take into account new or expanded uses of gas developed after the base year. 261 The base year approach has several advantages. It (1) permits predictability so that customers can plan ahead for shortage periods, (2) encourages conservation and (3) discourages irresponsible load growth by refusing to recognize new or expanded uses occurring after the base year during curtailment. Although this court has indicated that the base year concept must be intelligently applied in individual cases to ensure that it does not indiscriminately utilize stale data to bring about a result at odds with the overall priorities accorded current end users, it has never ruled use of a base year illegal per se. See North Carolina v. FERC, 584 F.2d 1003 (D.C.Cir.1978); 6 Southern California Edison Co. v. FPC, 524 F.2d 409 (D.C.Cir.1975); Rhode Island Consumers' Council v. FPC, 504 F.2d 203 (D.C.Cir.1974). And, although post-base year customers must be served during curtailment periods through use of supplementary self-help sources, see note 3 supra, this feature does not create insurmountable problems. As petitioners point out, agricultural production expanded 40% between 1974-1979 even when it had no statutory priority and had to be accommodated chiefly through such means. Even now, the government suggests self-help gas answers the needs of new load-growth among the highest priority residential users. 7 262 In the past, the Commission rejected the current requirements method of computing allocations because of its administrative complexity and unpredictability, as well as its unfortunate tendency to encourage distributors to recruit new priority users during shortages. 8 Nonetheless, the Secretary of Agriculture now claims that only the current requirements method is sufficiently flexible and responsive to provide for natural gas requirements necessary for full food and fiber production in all instances. 9 The problem in this case arises, however, not so much from the Secretary's position qua certification, as from the FERC's unquestioning acceptance of this certification for implementation purposes and its concomitant disclaimer of any power to make offsetting changes or accommodations necessary to insure that the overall curtailment plan works effectively and is in line with Congressional objectives. 10 The resultant disparity between treatment of load-growth in the top three priority classes will almost certainly have substantial, unpredictable and, I am convinced, largely unintended effects on the national consumption patterns for natural gas. 11 II. THE ISSUE 263 Section 401(a) of the NGPA requires the Secretary of Energy to prescribe, within 120 days of enactment, a rule that provides to the maximum extent practicable that interstate pipeline curtailment plans not curtail gas deliveries to essential agricultural users below the amount certified by the Secretary of Agriculture as necessary to meet the requirements of such users, unless a reduction is necessary in order to meet the requirements of high priority users. 12 Section 401(c) in turn requires the Secretary of Agriculture to certify to the Secretary of Energy and the FERC the natural gas requirements (expressed as volumes or percentages of use) for essential agricultural uses that are necessary to achieve full food and fiber production. 264 The FERC argues that these subsections of 401, when read together, leave it no option but to implement the whole of the Secretary of Agriculture's certification of need, regardless of whether that certification is based on current requirements estimates or, as are other priority categories, on base year calculations. It therefore has refused to pass on the wisdom or necessity of the Secretary of Agriculture's adoption of a current requirements entitlement scheme. 13 265 The petitioners, however, point to the language of section 403 of the NGPA, 15 U.S.C. Sec. 3393, which provides that the Commission shall implement the rules ... pursuant to its authority under the Department of Energy Organization Act to establish, review, and enforce curtailments under the Natural Gas Act. (Emphasis supplied.) They argue that this language preserves the Commission's traditional broad authority to implement curtailment priorities and policies, and that its failure to exercise that authority in this instance has resulted in an unfair and unworkable rule which violates rather than advances Congressional intent. 266 Indeed, the majority has accepted part of petitioner's argument; it finds the rule as it stands incomprehensible and unworkable. However, it would apparently remand only to allow the FERC to change its base year curtailment rule for high priority users to provide for load-growth in order to bring about some kind of parity with new agricultural users. In my view, this approach does not go far enough in recognizing the FERC's authority under section 403 of the NGPA to fashion curtailment rules for all priority (and non-priority) classes that will operate fairly and efficiently in accord with the NGPA's priority scheme. Though the language in sections 401 and 403 delegating authority to the various agencies is admittedly ambiguous and hard to follow, the accompanying legislative history makes clear that the FERC has been delegated the ultimate power and responsibility to accommodate the Secretary of Agriculture's certification to the overall statutory priority scheme, and to the Congressional directive that there be minimum disruption to pre-existing curtailment plans.