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

Heading: Supply curtailment of third-party gas

Text: 109 Finally, the small distributor petitioners contend that the consumer-protection mandate of the NGA requires the Commission to adopt end-use curtailment for shortages in the supply of third-party gas. The petitioners concede that title IV of the NGPA applies only to pipelines' sale of gas, but urge that §§ 4 and 7(e) of the NGA require some form of end-use curtailment for the sale of gas by producers and other third parties. The Commission declined to impos[e] ... the industry-wide, end-use supply curtailment scheme envisioned by the petitioners because the best protection against, and remedy for, supply shortages [i]s to allow the [319 U.S.App.D.C. 85] market to establish the price for gas. Order No. 636-A, p 30,950, at 30,591. 110 As an initial matter, a group of intervenors in support of the Commission maintains that the Commission lacks jurisdiction under § 1(b) to enact a curtailment plan for third-party gas. But the Supreme Court has held expressly that curtailment plans are aspects of [the Commission's] 'transportation' and not its 'sales' jurisdiction. Louisiana Power & Light, 406 U.S. at 641, 92 S.Ct. at 1839 (citing Panhandle Eastern Pipe Line Co. v. Public Serv. Comm'n, 332 U.S. 507, 523, 68 S.Ct. 190, 198, 92 L.Ed. 128 (1947)). The intervenors rely on a Fifth Circuit case, Sebring Utilities Commission v. FERC, 591 F.2d 1003 (5th Cir.), cert. denied, 444 U.S. 879, 100 S.Ct. 167, 62 L.Ed.2d 109 (1979), in which the court indicated that the Commission would not have jurisdiction to order curtailment of gas not owned by a statutory natural-gas company. Id. at 1016-19. However, the ownership of the gas is not relevant to the Commission's transportation jurisdiction because in adopting a curtailment scheme the Commission exercises its jurisdiction over the pipeline, which incorporates any curtailment plan into its tariff. 51 If we were to follow Sebring, then the Commission would also lack jurisdiction to regulate capacity curtailment of third-party gas--a proposition implicitly rejected by the City of Mesa court, which in remanding on the capacity-curtailment issue assumed that the Commission had jurisdiction over curtailment plans for third-party gas. 993 F.2d at 895-98. Moreover, Sebring was decided before the unbundling of sales from transportation, at a time when virtually all gas was pipeline-owned. 52 Under the principles of Louisiana Power & Light, the Commission's transportation jurisdiction extends to supply curtailment of third-party gas. 111 The Commission decided that an end-use supply curtailment plan for third-party gas was not required to ensure high-priority customers continuous access to needed supplies of natural gas. City of Mesa, 993 F.2d at 895. As discussed with respect to capacity curtailment, see supra at 83-84, the Commission provided a list of market-based alternatives to secure the continuous supply of gas that is convincing in the context of supply curtailment. Although the petitioners posit a force majeure supply shortage that the market-based protections would not cover, namely a freeze-off  of wells that would prevent all producers from producing sufficient quantities of gas during cold weather, the petitioners have provided no evidence that such an event has ever occurred or is likely to occur in the future. The Commission's decision that such an occurrence is unlikely given foreseeable supply conditions is reasonable. Order No. 636-A, p 30,950, at 30,591. In addition, the Commission noted that title III of the NGPA, 15 U.S.C. §§ 3361-3364, authorizes the President to declare a natural gas supply emergency in the event of a severe natural gas shortage, endangering the supply of natural gas for high-priority uses. Id. § 3361(a); see Order No. 636-A, p 30,950, at 30,591. 112 Thus, the Commission has complied with the continuity-of-service guarantee of the NGA, as articulated in City of Mesa, with respect to supply shortages of third-party gas.