Opinion ID: 362296
Heading Depth: 3
Heading Rank: 3

Heading: FPC Authority

Text: 54 The FPC has sometimes attempted to justify a failure to give consideration to problems of lease acquisition costs by asserting a lack of information or authority to deal with them. As the Commission declared in its most recent national ratemaking proceeding, Opinion 770-A, 41 Fed.Reg. 50199, 50208-09 (1976): 55 At the same time, we determined that lease acquisition costs are legitimate actual costs which must be recouped by producers as part of their cost-of service. Mobil Oil Corp. v. F.P.C., supra. The suggestion of APGA to disallow pass-through of certain costs, therefore, would be unlawful. 56 NYPSC does not object to our current treatment of lease acquisition costs, but suggests: 57 The Commission should expressly announce in its Opinion on Rehearing that its future nationwide rate determination will not utilize any ratio which exceeds the 1.1 figure utilized in Opinion No. 770, with any higher figure which might be applicable in specific cases as a result of lease sale bonus payments in 1975 or 1976 being the subject of special relief applications. 58 While we appreciate the motivation behind NYPSC's suggestion, we cannot so limit our future rate determinations. Just as this Commission could not deter mine the allowable amount of state production or severance taxes for inclusion in the allowed rate, similarly this Commission has no authority to determine the method or amount of lease payments to the Department of the Interior. While we are mindful of our responsibility not to allow unreasonable costs in our cost-based rate determination, we cannot arbitrarily conclude that lease acquisition costs beyond some set ratio are unreasonable without substantial and timely information. 59 The foregoing FPC analysis made in its ratemaking opinion does not relieve it of the responsibility to consider whether to provide an incentive for lease acquisition in optional certification. Optional certification is an exception to national ratemaking allowing higher rates to encourage exploration and development. It is not the prescribed channel for passthrough of producers' costs; 61 that is the function of national ratemaking. The elements of an optional certification incentive must be connected to incentive objectives. The fact that a lease has been arranged by another federal department is a matter for that department, and is not in and of itself reason for a special-exception program by the Commission. There is no indication that the Interior Department has put it forward that its leasing efforts require or depend on special provision for its lessees. 60 Moreover, in carrying out its functions, the FPC has been required when appropriate to give independent policy consideration to matters which are also the responsibility of other federal agencies. National antitrust policy is principally the responsibility of the Department of Justice and the Federal Trade Commission, yet the FPC is required to give its own independent consideration to competitive factors in its decisions. See, e. g., Conway Corp. v. FPC, 167 U.S.App.D.C. 43, 49, 510 F.2d 1264, 1270 (1975), Aff'd, 426 U.S. 271, 96 S.Ct. 1999, 48 L.Ed.2d 626 (1976); City of Pittsburgh v. FPC, 99 U.S.App.D.C. 113, 126, 237 F.2d 741, 754 (1956), Cited with approval, California v. FPC, 369 U.S. 482, 485, 82 S.Ct. 901, 8 L.Ed.2d 54 (1962). National environmental policy is the responsibility of many federal agencies yet the FPC is required to give its own independent consideration to environmental factors in its decisions. See, e. g., Udall v. FPC, 387 U.S. 428, 87 S.Ct. 1712, 18 L.Ed.2d 869 (1967). See generally NAACP v. FPC, 172 U.S.App.D.C. 32, 44, 520 F.2d 432, 444 (1975), Aff'd, 425 U.S. 662, 668, 96 S.Ct. 1806, 48 L.Ed.2d 284 (1976). Conversely, because offshore leasing implicates the energy policy alternatives of many agencies, we have required the Department of the Interior to assess energy factors including FPC activity in its environmental statements on offshore leasing. Natural Resources Defense Council v. Morton, 148 U.S.App.D.C. 5, 15, 458 F.2d 827, 837 (1972); Cf. Continental Oil Co. v. FPC, 370 F.2d 57, 67 (5th Cir. 1966) (leasing act does not block FPC offshore gas regulation). We need not consider how much weight the FPC may give to national leasing policy in ratemaking because it has not yet discussed the matter at all. We hold only that the FPC cannot abdicate its responsibility to give reasoned consideration simply because leasing involves another department. 62 61 The initial statute providing for offshore leasing, the Outer Continental Shelf Lands Act of 1953, expressly staked out an FPC role in regulation of gas pipelines from the leased lands to take account of conservation. 63 Beyond that is the overriding requirement of regulation in the public interest, which can take account of national policy. As for any administrative difficulties of coordination, this did not justify a total lack of effort by the FPC in the past, and may be more tractable in the future, since the Department of Energy Organization Act makes the FERC part of the new Department of Energy which has inherited offshore leasing responsibilities. 64 That Department and the FERC will be in a position on remand to take an enhanced overview of the policy concerns to be coordinated here. 65 62 Since the Commission has failed to give any consideration at all to pertinent factors, we must remand for further consideration. In view of the absence of Commission analysis, we observe that our comments do not constitute implacable prohibition against incentives for leasing; (W)e have, however, identified substantial problems that the FPC will have to consider on remand. Public Service Comm'n v. FPC, supra note 59, 159 U.S.App.D.C. at 203, 487 F.2d 1043 at 1074. 66 63