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

Heading: Supply curtailment of pipeline gas

Text: 93 Elizabethtown contends that because § 402(a) of the NGPA requires end-use curtailment only to the maximum extent practicable, 15 U.S.C. § 3392(a), the declining role of pipelines as gas merchants renders end-use curtailment for shortages of pipeline gas no longer practicable. The court recently rejected this argument, made by the same petitioner, in Elizabethtown Gas Co. v. FERC, 10 F.3d 866 (D.C.Cir.1993) (Elizabethtown III): 94 This argument makes no sense to us. Even if [the pipeline] supplies a smaller share of the gas bought by each of the LDCs, the gas it does deliver to them could still in times of shortage go first to [319 U.S.App.D.C. 82] high-priority users. Accordingly, it seems entirely practicable to increase the level of protection for high priority users above that provided by the pro rata plan. 95 Id. at 874; see also Process Gas Consumers Group v. United States, 694 F.2d 778, 787-92 (D.C.Cir.1982) (en banc) (Process Gas II) (holding that the phrase to the maximum extent practicable gives the Commission broad powers). Although Elizabethtown contends that the near-elimination of pipelines as gas merchants following Order No. 636 requires us to reconsider our holding in Elizabethtown III, this change in the industry does not affect our reasoning that end-use curtailment remains practicable no matter how small the pipelines' share of the gas-sales market. The Commission recognized that the limitation of title IV of the NGPA to pipelines' sale of gas means that pipelines are disadvantaged vis-a-vis other gas merchants, but explained that it remained bound by the statute. Order No. 636, p 30,929, at 30,430. Because we have already decided this question in Elizabethtown III, we affirm the Commission's decision that title IV of the NGPA mandates end-use curtailment for shortages in the supply of pipeline gas. 96 Elizabethtown also maintains that the Commission acted arbitrarily in not requiring high-priority users to compensate pipeline customers who lose gas supply under end-use curtailment. In Elizabethtown III, the court held that a compensation provision is not necessarily inconsistent with § 401(a). 10 F.3d at 875. Indeed, this court has long held that the Commission retains the authority under title IV of the NGPA to adopt a compensation scheme. See Consolidated Edison Co. v. FERC, 676 F.2d 763, 767 (D.C.Cir.1982); cf. Elizabethtown Gas Co. v. FERC, 575 F.2d 885, 887-89 (D.C.Cir.1978) (Elizabethtown I) (holding that the Commission has authority under the NGA to adopt a curtailment compensation plan). In Elizabethtown III, the court remanded with instructions for the Commission to consider Elizabethtown's request for a curtailment compensation scheme. Id. In the Order No. 636 series, decided before the court's decision in Elizabethtown III, the Commission stated that its 97 position on curtailment compensation plans is that the parties in the individual restructuring proceedings must explore the development of such schemes ... in the context of developing their individual curtailment plans and in the development of voluntary emergency contractual arrangements between shippers. However, the Commission believes that it would be contrary to the concept of the restructuring proceeding process and the negotiation and development of individually tailored curtailment allocation procedures and emergency mechanisms for it to mandate a generic compensation scheme. 98 Order No. 636-A, p 30,950, at 30,592; see also Order No. 636, p 30,929, at 30,430. The comments by the Commission in the Order No. 636 series continue the Commission's pattern of avoiding the question of curtailment compensation and do not exhibit the reasoned consideration of curtailment compensation that the court subsequently requested in Elizabethtown III. 99 The Commission has reconsidered the issue of curtailment compensation, however, on remand from Elizabethtown III. See Transcontinental Pipe Line Corp., 72 F.E.R.C. p 61,037, reh'g denied, 73 F.E.R.C. p 61,357 (1995). In those proceedings, the Commission 100 conclude[d] that compensation is needed to render Transco's gas supply curtailment plan just and reasonable. The priority curtailment plan affects the contractual rights of Transco's customers by altering the pro rata allocation of curtailed supplies so that higher priority customers can obtain gas that would otherwise go to lower priority customers. 101 72 F.E.R.C. p The Commission rejected Elizabethtown's proposed compensation scheme, however, in favor of requiring the higher-priority customer to pay: (1) 150% of the spot market price for gas if the lower-priority customer was unable to cover (locate replacement gas on the spot market), or (2) the difference between the cover price and the original contract price if [319 U.S.App.D.C. 83] the lower-priority customer was able to cover. Id. at 61,237-38. 102 In light of the Commission's Transcontinental decision, the issue of curtailment compensation is not ripe for review. The Commission enjoys broad discretion whether to adopt a compensation scheme on a generic basis or in pipeline-specific proceedings. See Mobil Oil, 498 U.S. at 230, 111 S.Ct. at 627. If Elizabethtown remains aggrieved by the Commission's decision to accept its general argument but fashion a different compensation mechanism, then it may seek relief in review of the Transcontinental decision. We therefore express no opinion on the appropriateness of any particular curtailment compensation plan.