Opinion ID: 411637
Heading Depth: 2
Heading Rank: 3

Heading: Allocation Formula

Text: 98 In Order Nos. 29 6 and 29-C, 7 FERC promulgated a rule establishing a mechanism for determining what percentage of a high-priority customer's needs must be filled by a gas pipeline that had been one of several suppliers to the customer. The rule provides that each pipeline is responsible for supplying a proportion of the customer's high-priority gas needs equal to the pipeline's percentage contribution to the customer's total needs during the base period. 8 99 The state of Louisiana and several intervenors 9 (petitioners) challenge the rule's allocation formula, arguing that it violates the non-discrimination 10 and procedural requirements 11 of the Natural Gas Act (NGA), 15 U.S.C. Sec. 717 et seq., and fails to implement the curtailment priorities 12 of the NGPA. We find that the challenged orders fall within FERC's regulatory powers, and that petitioners' other arguments are premature given the acknowledged availability of an adjustment procedure. We thus affirm the facial validity of the regulation. 100 The interim rule 13 promulgated by FERC did not require a specific allocation mechanism. Rather, it directed pipelines to amend their tariffs to provide special relief from curtailment where such relief would be needed to assure delivery of gas to agricultural and high-priority users who would otherwise be curtailed. The gist of petitioners' argument is that only such an ad hoc approach is capable of fulfilling the non-discrimination requirement of the NGA as well as effectuating the curtailment priorities established in the NGPA, and thus that the final rule is unlawful on its face. Specifically, petitioners point out that utilization of FERC's allocation formula generates results consistent with the statutory demands only when all pipeline suppliers of a given customer are suffering from the same percentage curtailment in each priority category; in the absence of such identity in curtailment conditions, as was often the case during the gas shortage, 14 high-priority customers of a pipeline could be curtailed while lower-priority needs of customers of the same pipeline were still being serviced. 15 101 Petitioners rely on our decision in North Carolina v. FERC, supra, for support of their contention that the specification of an allocation mechanism is inherently violative of the statutory commands of the NGA. 16 In that case, the court held that FERC could not impose a curtailment plan with a similar allocation mechanism on a pipeline without considering the actual end-use impact of the plan. The court held that such plans were inherently discriminatory; 17 the only question was thus whether the discrimination was unreasonable within the meaning of section 4(b) of the NGA. 18 Acknowledging that discrimination necessary to assure parity of treatment for equivalent end uses could be reasonable, 19 the court remanded the case for consideration of whether the plan at issue would in fact assure parity in that particular case. 102 In short, petitioners rely on a case holding enforcement of a curtailment plan in a particular situation arbitrary and capricious on the record of that proceeding for the proposition that the regulation adopting portions of that plan as a model is per se unlawful, a logical leap specifically disclaimed by the panel in the earlier case. 20 As FERC has pointed out, see Supplemental Br. for Respondent FERC at 7, different standards guide our review of the Commission's promulgation of a rule, and its implementation in a given case. In promulgating general rules, the Commission is not required to determine, and take into account, the actual impact of the rule on each person subject to the rules. See United States v. Florida East Coast Ry., 410 U.S. 224, 246, 93 S.Ct. 810, 821, 35 L.Ed.2d 223 (1973); United States v. Allegheny-Ludlum Steel Corp., 406 U.S. 742, 749, 92 S.Ct. 1941, 1946, 32 L.Ed.2d 453 (1972); Permian Basin Area Rate Cases, 390 U.S. 747, 768-774, 88 S.Ct. 1344, 1360-1363, 20 L.Ed.2d 312 (1968). Rather, it is free to reason from the particular to the general, Assigned Car Cases, 274 U.S. 564, 583, 47 S.Ct. 727, 733, 71 L.Ed. 1204 (1927), and to correct any resultant inequities and hardships by providing exemption procedures. United States v. Allegheny-Ludlum Steel Corp., supra, 406 U.S. at 755, 92 S.Ct. at 1949 (citing Permian Area Rate Cases, supra, 390 U.S. at 784-786, 88 S.Ct. at 1368-1369). 103 In the instant case, the Commission recognized that the allocation formula promulgated in Order Nos. 29 and 29-C might not be the most appropriate rule in all circumstances. Indeed, in Order No. 29-C, the Commission noted: 104 In applying Order No. 29, the Commission has not been inflexible. Where the rule was obviously unsuited to the system of a particular pipeline, it has not been applied. The Commission has also evinced flexibility in molding curtailment plans in the settlement context. 105 If petitioners believe the rule unsuited to individual pipeline curtailment plans, the appropriate avenue for relief is a 502(c) adjustment or offer of settlement, not rehearing of the rule. 21 106 Some of the petitioners seem to have already successfully utilized this adjustment process. 22 107 Petitioners nonetheless claim the adjustment process is inadequate to solve the problems generated by the challenged rule. First, they contend that the adjustment procedure lacks necessary safeguards. However, we neither find nor were given any support for the proposition that the missing safeguards 23 are necessary. 24 Second, petitioners argue the adjustment procedures are likely to be useless, when viewed in the context of the Commission's stated views and actions on related subjects. 25 This fear has not been borne out by actual experience; 26 more importantly, we are not inclined to strike down a rule merely because of a petitioner's fear that the implementing agency may not conduct exemption proceedings in good faith. If the agency actually abuses its authority by refusing in an arbitrary, capricious or unreasonable manner to grant exemptions, petitioners will have every opportunity to attack those refusals at that time. 108 Finally, petitioners argue that the rule is defective because it implement[s] and chang[es] curtailment programs without utilizing the procedural mechanisms established in sections 4 and 5 of the NGA. Petitioners' argument that pipelines must be free to file tariffs without regulatory restraint, however, is contradicted by the words of the applicable statutes 27 and judicial precedent. 28 The Commission is free to announce constraints on tariff filings in the form of rules, though it must accept or reject rates on their individual merits. 29 109 FERC acted within its authority in promulgating the challenged portions of Order Nos. 29 and 29-C. As yet, petitioners have presented no evidence of any abuses in their implementation. The action of the Commission is therefore upheld.