Opinion ID: 658297
Heading Depth: 2
Heading Rank: 3

Heading: Pro rata curtailment provision

Text: 64 Elizabethtown Gas contends that by insisting upon priority curtailment, rather than pro rata curtailment as provided in the original Restructuring Settlement, and by refusing to require compensation for low priority users, the Commission misinterpreted Sec. 401(a) of the NGPA, 15 U.S.C. Sec. 3391(a), and acted in an arbitrary and capricious manner. First, Elizabethtown claims that the original pro rata plan was proper under the terms of Sec. 401(a) because it provided the greatest practicable protection for high priority users, such as agriculturalists. Greater protection for those users is not practicable because, we are told, Transco's firm sales are greatly reduced under the Restructuring Settlement and Transco will cease to be the dominant firm supplier to its LDC customers. This argument makes no sense to us. Even if Transco 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 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. 65 Second, Elizabethtown argues that the FERC's decision is arbitrary because the Commission has approved prior Transco settlements that did not protect high priority users. In 1978 the FERC approved a settlement agreement that made no provision for the protection of high priority users; indeed it did so notwithstanding an admitted lack of information about whether the then existing curtailment plans of interstate pipelines can adequately protect essential agricultural users from curtailment. Transcontinental Gas Pipe Line Corp., 6 FERC p 61,050, at 61,112, reh'g denied, 8 FERC p 61,117 (1979). Further, in 1989 the FERC approved an Interim Restructuring Settlement that made specific provision for priority curtailment. 66 Those prior decisions are not controlling in this case, however, because the lawfulness of the treatment afforded high priority users was not contested in either of them. In the first case, the FERC found that in the particular circumstances there present the interests of high priority users were not put at risk by virtue of the settlement. See 8 FERC at 61,412-13. Moreover, the Commission specifically noted that only parties to the settlement were bound by it, and the Commission forewarned them that it would not be bound if ... [it is] in the future presented with the situation where performance of [its] statutory duties (under either the Natural Gas Act or the National Energy Act) is found to conflict with this [curtailment] provision. 6 FERC at 61,111. As for the second settlement, [304 U.S.App.D.C. 100] no party challenged the curtailment plan and the Commission did not even discuss the treatment of high priority users. See Transcontinental Gas Pipe Line Corp., 48 FERC p 61,399 (1989). 67 Elizabethtown's third argument is that the FERC should have required high priority customers to compensate low priority customers if the former group benefits at the expense of the latter during a period of curtailment. Responding in its order on rehearing, the Commission stated only that [t]he petitioners' policy arguments do not overcome the legal requirement under NGPA Sec. 401(a) to give curtailment priority to certain high priority users. Until Congress changes the statute, the statutory priority must be observed. 57 FERC at 62,117. 68 As Elizabethtown points out, however, this court has clearly held that a compensation provision is not necessarily inconsistent with Sec. 401(a). In Consolidated Edison Co. v. FERC, 676 F.2d 763, 767 n. 9 (D.C.Cir.1982), we said that there is nothing inherently inconsistent about allocating natural gas to those who are most in need of it while requiring the beneficiaries of such a plan to compensate those who must purchase more expensive alternative supplies. See also Elizabethtown Gas Co. v. FERC, 575 F.2d 885, 888-89 (D.C.Cir.1978). Therefore, the FERC's conclusion that Sec. 401 disables it from requiring curtailment compensation seems plainly incorrect. 69 The Commission's only response is that Elizabethtown did not raise the compensation issue with sufficient clarity in its petition for rehearing to preserve the point for review. Elizabethtown's petition, as restated by the Commission itself in the course of denying rehearing, see 57 FERC at 62,117 n. 57, asked that a high priority user be required to pay compensation to the LDCs who must suffer a greater than pro rata curtailment on Transco's system in order to supply the customer. Because it is clear that the petitioner preserved its argument on rehearing, we remand this aspect of the case to the agency for it to do what it should have done in the first instance--consider on the merits the petitioner's request for a curtailment compensation scheme.