Opinion ID: 588799
Heading Depth: 2
Heading Rank: 2

Heading: The Voluntary Pro Rata Scheme

Text: 54 Under the voluntary pro rata scheme that the Commission endorsed in principle in Order No. 509, an OCS pipeline could file a tariff enabling it to curtail its service to an existing firm transportation customer in order to serve a new customer. The petitioner argues that such a tariff would unlawfully deprive the existing customer of the protection afforded by § 7(b) of the NGA. That provision protects a shipper from a pipeline's unilateral abandonment of service by requiring the prior approval of the Commission, which must be based upon a finding that the continuance of service is unwarranted, or that the present or future public convenience or necessity permit such abandonment. 15 U.S.C. § 717f(b). 55 The petitioner complains that the Commission did not address any of [its] arguments against 'permissible' pro rata transportation. Instead the Commission has stated that these issues belong in any future proceeding when the Commission seeks to require or allow pro rata transportation. Urging immediate judicial redress, the petitioner claims that existing shippers were immediately aggrieved by Order No. 509 because they instantly lost their ability to rely upon the firm transportation entitlement for which they have paid reservation charges as well as their right to a hearing before their service is cut off. Absent a more particularized claim of harm, the shippers' lost ability to rely is at best an uncertain basis upon which to predicate the jurisdiction of a federal court, which is limited to the resolution of an actual case or controversy. 56 The petitioner also instances a host of problems that could or would arise if service to an existing customer were to be diverted to a new customer. It would be premature, however, in reviewing the FERC's mere announcement of the voluntary pro rata scheme, to consider all the potential adverse and irrational effects that the petitioner can conjure up, unrestrained by any reality check. Whether any OCS pipeline serving the petitioner will actually file the tariffs necessary to participate in this program or, assuming one does, the nature of any injury that the petitioner may in fact suffer, remains to be seen. As a result, both the fitness of the [further] issues for judicial decision and the hardship to the parties of withholding court consideration is at this point only speculative. Abbott Lab. v. Gardner, 387 U.S. 136, 149, 87 S.Ct. 1507, 1515, 18 L.Ed.2d 681 (1967). Consequently, the petitioner's challenge to this scheme is not ripe at this point, on this record. 57 Even if the petitioner's claim were ripe, we would be hard pressed to hold that the Commission abused its discretion in deferring resolution of the petitioner's objection until such time as a pipeline avails itself of the Commission's invitation to propose a prorating tariff. See, e.g., American Gas Ass'n v. FERC, 888 F.2d 136, 151-52 (D.C.Cir.1989); see also Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U.S. 519, 545, 98 S.Ct. 1197, 1212, 55 L.Ed.2d 460 (1978) (agency has discretion in establishing the time dimensions of the needed inquiry) (citation omitted). The Commission expressly declared that the question of its statutory authority to approve such a tariff provision was beyond the scope of this proceeding, 54 Fed.Reg. at 8303; as a result, neither the petitioner nor any other protestant opposing such a tariff, should one be filed, will be in any way disadvantaged by Order No. 509. It would be particularly imprudent for us to resolve now an issue that the agency itself has reasonably deferred until such time as a concrete case may arise.[297 U.S.App.D.C. 330] C. Onshore Regulation 58 Because the Commission's Orders apply to the transportation of gas from the OCS pipeline to the ultimate delivery point onshore, the petitioner challenges the agency's authority, by regulation under the OCSLA, to displace the regime established by the NGA. In its March 1989 Order, the Commission required that when a shipper relinquishes transportation service through an onshore segment of an OCS pipeline, the petitioner must file an abandonment application and then apply for a new § 7(c) certificate to serve a new shipper. The Commission later provided that the petitioner is not to charge the new shipper at the old shipper's rate, but is to charge only the generally applicable rate. See July 1989 Order, 48 FERC p 61,080, at 61,365, quoted above. The petitioner objects both to the abandonment-and-certification requirement and to the change in its rates without the formality of finding the old rate unreasonable and the new rate reasonable pursuant to NGA § 5. 59 We first consider the FERC's claim that the petitioner is not entitled to present these issues to the court because it did not seek rehearing of Order No. 509-A. See NGA § 19(a), 15 U.S.C. § 717r(a). The petitioner, which did seek rehearing of the March and July 1989 Orders, emphasizes that its objections arise from the application of the rule to Tennessee and not from the rule itself. We agree. A different party, an OCS pipeline company that wanted the FERC to apply the abandonment procedure to onshore segments of OCS pipelines, petitioned the Commission to clarify Order No. 509 to that effect. Instead, the Commission, noting that not all OCS pipelines are in [the same] position, declared itself reluctant to have any part of Order No. 509 or the OCSLA govern the transportation of natural gas in interstate commerce onshore. Order No. 509-A, 54 Fed.Reg. at 8310. Thus, as of Order No. 509-A, it appeared that the FERC would not apply abandonment procedures to the onshore segment of an OCS pipeline. 60 Tennessee had no reason to seek rehearing on this point; its interest was served by the agency's position. It was only in a later Order applying the rule to the petitioner that the Commission announced that [a] separate abandonment application must be made, and approved by the Commission, for any portion of the transportation service that is beyond the first shoreward point of interconnection, that is, for onshore transportation. July 1989 Order, 48 FERC p 61,080, at 61,364-65. We therefore reject the agency's argument that the petitioner was required to complain earlier about its application of the abandonment procedure to onshore segments of OCS pipelines in order to preserve its right to judicial review. 61 We return to the March and July 1989 Orders, in which the FERC respectively required that a pipeline apply under § 7 to abandon an onshore transportation segment before reallocating service to a new shipper, and that it charge the new shipper the generally applicable rate. The petitioner argues that the Commission lacks the authority to regulate onshore transportation in this manner under either the NGA or the OCSLA, and that the Commission's scheme for forcing a change of rates solely by the operation of regulation is in derogation of § 5 of the NGA. That section requires that the Commission find an existing rate unreasonable, and a new rate reasonable, before it may effect such a change, and that it follow certain procedures to that end. 62 As the petitioner observes in support of the former point, the Commission did not cite any authority or provide any basis for ordering Tennessee to abandon existing service prior to expiration of the underlying contract. Nor does the Commission respond in its brief to the petitioner's argument that it lacks statutory authority for its order. Our own review of the NGA turns up no provision expressly giving the Commission authority to order an unwilling pipeline to abandon a certificated service. And no prior judicial decision of which we are aware countenances the Commission's ordering a pipeline to abandon a service or to file an application therefor. In these circumstances, we are constrained to remand [297 U.S.App.D.C. 331] this matter to the agency so that it may either identify the authority for or alter its rule. We do not now consider the petitioner's § 5 argument, therefore. 63 We note, however, the existence of a real question whether the mere reallocation of service from one customer to another, without a change in the quantum of service provided to the market, constitutes an abandonment within the meaning of § 7(b). A § 7(b) abandonment clearly occurs when there is a reduction or alteration in overall service to the interstate market, but the rationale of the cases closest in point might imply that such abandonment does not occur when there is no such loss of service to the market. See United Gas Pipe Line v. FPC, 385 U.S. 83, 88, 87 S.Ct. 265, 268, 17 L.Ed.2d 181 (1966) (upholding application of the abandonment procedure to a company that indefinitely terminated the operation of a facility because the Commission ha[s] a regulatory responsibility to assure that gas once dedicated to the interstate market will continue to be available to that market so long as the public interest demands) (quoting 31 F.P.C. 1079, 1082); Kansas Power & Light Co. v. FERC, 851 F.2d 1479, 1485 (D.C.Cir.1988) (approving FERC's authorization of limited term abandonments of gas sales in order to enable producers to sell gas that would otherwise be shut in, and noting that FERC had explicitly shifted the identification of the public interest away from the interest of only specific customers to the interest of the market as a whole) (quotation marks and emphasis omitted); Reynolds Metals Co. v. F.P.C., 534 F.2d 379, 384 (D.C.Cir.1976) (An 'abandonment' within the meaning of section 7(b) occurs whenever a natural gas company permanently reduces a significant portion of a particular service). But cf. Panhandle Eastern Pipe Line Co. v. FERC, 803 F.2d 726, 727 (D.C.Cir.1986) (§ 7(b) applicable to proposed termination of gas purchases where pipeline did not seek to abandon any of its certificated facilities but ... the character of the use of the facilities ... will change). We leave this matter to the Commission to consider in the first instance, bearing in mind that if there is no abandonment entailed in a pro rata reallocation, then it follows that the Commission cannot order the pipeline to file an application for abandonment in that circumstance.