Document: 498 U.S. 211 111 S.Ct. 615 112 L.Ed.2d 636 MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST INC., et al., Petitioners,v.UNITED DISTRIBUTION COMPANIES al. FEDERAL ENERGY REGULATORY COMMISSION, Petitioner, v. UNITED Nos. 89-1452, 89-1453. Argued Nov. 5, 1990. Decided Jan. 8, 1991. Syllabus In response to ongoing natural gas shortages, Congress enacted the Natural Gas Policy Act of 1978 (NGPA), which, inter alia, established higher price ceilings for "new" in order encourage production and carried over pre-existing system "vintage" "old" protect consumers. However, recognizing that some vintage might be too low, Congress, § 104(b)(2) NGPA, authorized Federal Energy Regulatory Commission raise them whenever traditional pricing principles under 1938 (NGA) would dictate a price. After new incentives resulted serious market distortions, issued its Order No. 451, among other things, collapsed existing categories into single classification set forth ceiling exceeded then-current old gas; "Good Faith Negotiation" (GFN) procedure producers must follow before they can collect from current pipeline customers, whereby may certain circumstances abandon their obligations if parties cannot come terms; rejected suggestions undertake resolve 451 proceeding issue take-or-pay provisions contracts. Such obligate purchase specified volume at price, and, it is unable do so, pay volume. They have caused significant hardships purchasers conditions. On review, Court Appeals vacated ruling lacked authority NGPA; actually was unreasonable; provide across-the-board, preauthorized abandonment 7(b) NGA; should addressed this proceeding, even though considering matter separate proceeding. Held: does not exceed Commission's NGPA. Pp. 221-231. (a) Section NGPA—which authorizes prescribe "a . applicable any (or category thereof, as determined by ) ., such price" (1) "higher than" ceilings, (2) "just reasonable" NGA (emphasis added)—clearly unambiguously gives gas. The NGPA's structure—which created detailed gas, but carefully preserved vintaging scheme—does require contrary conclusion, since statute's bifurcated approach implies no more than found need sufficiently pressing deal with directly, content leave within discretion alter conditions warranted. Further, decision fully accords two restrictions establish, requirement nothing prevent consolidating setting one preserves flexibility historically exercised broad ratemaking exceed. Respondents' contention institution GFN process amounts an acknowledgment unreasonableness rejected, there incompatible belief reasonable ought imposed without prior negotiations. An otherwise lawful rate disallowed because additional safeguards accompany it. objection "deregulating" deemed just also deregulate legally relevant sense, concluded deregulation results simply given above 221-226. (b) 451's procedures comport requirements NGA, prohibits producer abandoning contractual service purchaser unless has granted "permission approval" abandonment; made "finding" "present or future public convenience necessity permit abandonment"; (3) held "hearing" "due." First, although approval specific instead general, prospective, conditional, prevents giving advance mandates individualized proceedings involving interested take place. Second, reviewing "all factors involved determining overall interest," finding regime generally purchasers, safeguard producers, serve releasing previously unused reserves necessary required 7(b), which compel agency make "specific findings" regard every when issues are general. Finally, discharged duty hold "due hearing," since, promulgating notice comment hearing oral hearing. See, e.g., Heckler Campbell, 461 458, 467, 103 1952, 1957, 76 66. United Pipe Line Co. McCombs, 442 529, 99 2461, 61 54, distinguished. Respondents claim provision individual determinations where appropriate, objecting on grounds been met file complaint Commission. 226-229. (c) erred had address problem court clearly overshot mark meant problem, enjoys how best handle related yet discrete terms procedures, likely addressing will generate data effectively. likewise insofar "exacerbated" it, solve same articulated rational concluding ameliorate worsen This neither inclined nor prepared second-guess reasoned determination complex area. 229-231. 885 F.2d 209 (CA 5 1989), reversed. WHITE, J., delivered opinion Court, all Members joined, except KENNEDY, who took part case. Edwin S. Kneedler, federal petitioner. Rex E. Lee, private petitioners. Roberta Lee Halladay, respondents. Justice WHITE Court. 1 These cases involve validity orders, 451-A, promulgated (Commission) substantial changes national petitions divided panel Fifth Circuit orders exceeding 92 Stat. 3352, 15 U.S.C. 3301 seq. (1989). light economic interests stake, we certiorari consolidated briefing argument. 496 904, 110 2585, 266 (1990). For reasons follow, reverse sustain entirety. 2 * (NGA), 52 821, 717 seq., Congress' first attempt establish nationwide regulation. 4(a) mandated present predecessor, Power Commission,1 ensure rates charges requested company sale transportation interstate commerce reasonable." 717c(a). 5(a) further provided rate, charge, classification, rule, regulation, practice, contract" connected these standards actions were "unjust" "unreasonable." 717d(a). 3 Over years adopted number different approaches applying NGA's standard. See Public Serv. Comm'n N.Y. Mid-Louisiana Co., 463 319, 327-331, 3024, 3029-3032, 77 668 (1983). Initially Commission, construing regulate sales only downstream end pipelines, proceeded company-by-company basis reference historical costs each operator incurred acquiring transporting customers. upheld FPC Hope 320 591, 64 281, 88 L.Ed. 333 (1944), explaining did bind "any formula combination formulae rates." Id., 602, S.Ct., 287. 4 shifted course our Phillips Petroleum Wisconsin, 347 672, 74 794, 98 1035 (1954). interpreted charged large concerns, upstream thousands independent producers. 682, 799. Faced regulatory burden resulted, eventually opted "area rate" while retaining method pipelines. First 1960, area schedule produced region based upon return. Statement General 61-1, 24 F.P.C. 818 (1960). Each included two-tiered ceiling: lower prices contracts 819. termed "vintage pricing" "vintaging." Vintaging rested premise superfluous already flowing "price could incentive, average costs, plus appropriate return, merely confer windfalls." Permian Basin Area Rate Cases, 390 747, 797, 1344, 1375, 20 312 (1968). balance hoped strike development through ensuring continued protection consumers limits. At time anticipated differences levels "reduced eliminated subsequent experience brings about revisions various areas." Policy, supra, We Basin, holding courts aside " 'zone reasonableness.' U.S., 1376 (citation omitted). By early 1970's, longer worked. Inadequate led shortages turn prompted rapid rise prices. Accordingly, abandoned favor designed production. Just Reasonable National Rates Sales Gas, 51 2212 (1974). Refining decision, prescribed drilled after 1972, thus rejecting earlier plan succeeding biennial vintages. 1604, 1615 But scheme last long either. 1976 reinstated promulgation 770. Jurisdictional 56 509. time, 749, vintages areas 1973. 54 3090 (1975), aff'd sub nom. Tennaco Oil FERC, 571 834 (CA5), cert. dism'd, 439 801, 43, 58 94 (1978). Despite consolidation, structure still contained own efforts, moreover, severe persisted low fell considerably below command intrastate markets, unregulated. 6 responded problems enacting statute controls controversy. 330-331, 3031-3032. NGPA continuing several ways. gave well market. Transcontinental Corp. State Bd. Miss., 474 409, 420-421, 106 709, 715-716, 732 (1986) (Transco ). reserves, hard-to-produce phased types §§ 102, 103, 105, 107 108; 3312, 3313, 3315, 3317, 3318. consumers, 104 happened effect mandating adjusted inflation. 3314 3316. however, recognized "may authorize[d] [them] price." 333, 3033. particular, 106(c) "may, rule order, maximum Commission) subject preceding section." 3314(b)(2) 3316(c). placed were, first, itself second, meaning NGA. 3314(b)(1), 3316(a). 7 difficult-to-produce transformed 1970's surpluses during 1980s. One result distortions. prevented unexpected oversupply translating consumer lower, premature reserves. App. 32-36. Secretary 1985 formally recommended proposed rulemaking revise system. 50 Fed.Reg. 48540 (1985). conducting days hearings analyzing approximately 113 sets comments, dispute case: June 1986, 22168 (1986); December reaffirmed predecessor making modifications.2 46762 (1986). 8 three principal components. alternative willing buyer. $2.57 per million BTU's, equal highest then (that having most recent, post-1974, vintage) 22183-22185 see 18 CFR 271.402(c)(3)(iii) When nonetheless because, reasons, approximated replacement cost fields, drilling wells, producing Shell FPC, 520 1061 (CA5 1975) denied, 426 941, 96 2661, 49 394 (1976) (holding establishing NGA). taking steps, noted express unambiguous authorization so resulting requirement. Fed.Reg., 22179. 9 second feature establishes 270.201 consists steps. Initially, request nominate continue purchasing contract. 270.201(b)(1). offer release contract between covers 270.201(b)(4). response, both selling new, covered cover least If terms, either executed another customer 30-days' notice. 157.301, 270.201(c)(1), (e)(4). chief rationale fear automatic collection lead disruption existence numerous containing indefinite price-escalation clauses tied whatever established. 22204. hearing" abandonments place, across-the-board rather engage case-by-case adjudication. 717f(b). 10 completely pricing.3 explained 436 proceedings. It pointed out procedure, allowing propose return renegotiation obligations, help many take-orpay disputes. expansion reduce pipelines' exposure. 22174-22175, 22183, 22196-22197, 46783-46784. 11 A ground statutory authority. intend give 106(c). dismissed unreasonable spot amounted "de facto deregulation." F.2d, 218-222. across board, 7(b). 221-222. Third, chided failing seize opportunity issue, acknowledge remand District Columbia Circuit's Associated Distributors 263 U.S.App.D.C. 1, 824 981 (1987), 485 1006, 108 1468, 698 (1988). dissent disagreed conclusions, observing majority deferred delegated 226-235 (Brown, dissenting). certiorari, (1990), now orders. II 12 104(a) provides computed 104(b).4 general ruleunder 104(b)(1) priced enactment increased accordance inflation formula. obtained until issuance here. 104(b)(2), plainly change gas: 13 "The may, section, is— 14 "(A) provisions; "(B) [15 seq.]." 16 Nothing increasing multiple level. To contrary, states increase )." (Emphasis added.) Likewise, allows "prescribe category. Insofar "any" encompasses "all," language enables As stated similar contexts, "[i]f clear unambiguous, 'that matter, court, agency, expressed intent Congress.' Sullivan Stroop, 478, 482, 2499, ----, 438 (1990) (quoting K mart Cartier, Inc., 486 291, 1811, 1817, 100 313 (1988)). 17 counter points opposite conclusion. Specifically, contend intended allow collapse hand, other. Brief 33-37. disagree. plain confirms view. establish. With respect equivalent previous ceiling. 3314(b)(2)(A) 3316(c)(1). collapsing comports mandate Act." 3314(b)(2)(B) 3316(c)(2). 19 Far binding repeatedly standard use particular. 287-88, (1944); Pipeline 315 575, 586, 62 736, 743, 86 1037 (1942); 776-777, 1364-1365; Texaco 417 380, 386-389, 2315, 2320-22, 41 141 (1974); Mobil 283, 308, 2328, 2345-46, 72 Courts consistently affirmed replacement-cost-based E.g., 1061, 1082-1083 1975), (1976); American Assn. 567 1016, 1059 (CADC 1977), 435 907, 1456, 55 499 incorporating preserve Merrill Lynch, Pierce, Fenner Smith, Inc. Curran, 456 353, 378-382, 102 1825, 1839-1841, 182 (1982). employing formula, what done NGA: together regardless (1975).5 ceiling, particular unjustly impermissibly high. argue conceded actual therefore requisite safeguard. correctly denies concession. briefs, argument, pains point falls squarely "zone reasonableness" 767, 1360. What acknowledged up escalator common industry produce "inappropriate" distortion, especially remains Reply Petitioner 89-1453, p. 12. consequence instituted mitigate abrupt transition next. sought challenge (and today consider) process, assert requiring fact unreasonable. There decline disallow 21 reject respondents' fundamental reasonable. agency's sense. approved expressly proposals truly eliminating whatsoever. 170-171. Nor conclude Mobile Corp., 350 332, 343, 373, 373 (1956); Sierra Pacific 348, 368, 371-72, 388 397, 2326, III 22 suggestion 23 retained states: "No natural-gas shall portion facilities jurisdiction rendered means facilities, permission obtained, due hearing, available supply depleted extent continuance unwarranted, abandonment." 25 applied case has, third, taken 26 permits approves issue. That conditional. include: failure agree revised procedures; execution purchaser; termination. 270.201(c)(1) Neither respondents directly questions satisfy initial held, abandonment. Moss, 424 494, 499-502, 1003, 1007-1008, 47 186 (1976). 776, 1364-65. 27 findings interest necessity" allowed conditional prescribed. 46785-46787. Reviewing buy elsewhere contracting insisted price; fails releasingpre viously Felmont Essex Offshore, 33 FERC ¶ 61,333, 61,657 (1985), rev'd Consolidated Edison 262 222, 823 630 (1987). bottom demonstrate matters abandonments. Contrary theory, context disability Social Security Act, "general factual issue[s] resolved fairly rulemaking" evidence consideration "not unique" 468, 1957-58, 66 28 follows foregoing hearing." Before concluded, more. Time again, "[t]he enabling requires rely determine consideration." 1957; 774-777, 1363-1365; 377 33, 41-44, 84 1105, 1110-1112, (1964); States Storer Broadcasting 351 192, 205, 763, 771-72, 1081 (1956). confirm, here precisely type "[a] continually relitigate efficiently proceeding." 1957. Panhandle Eastern 285 115, 907 185, 188 (1990); Kansas Light 271 252, 256-259, 851 1479, 1483-1486 (1988); 35, n. 17, 981, 1015, 29 uncovered convincing otherwise. Relying (1979), prospective impermissible "practical" control afforded 221-223. inapposite dealt attempted approval, finding, object appropriate. Under objects 385.206 IV 30 turn, finally, "take-or-pay" obligates plausible device dislocations occurred since. Today face disastrous liability sufficient outlets recoup losses. cited reason invalidating 451. chastised "regrettable unwarranted" consideration. 224. 31 Exactly matter. viewed majority's discussion affirmatively ordering "once entire 234 narrowly characterize exacerbated 67-70. choose interpretations 32 ordered related, discrete, Vermont Yankee Nuclear Resources Defence Council, 519, 1197, 460 (1978), priorities, Chaney, 470 831-832, 105 1649, 1655-1656, 714 treat separately information question. Sunray DX 391 9, 49-51, 1526, 1547-1548, record shows two-thirds satisfied compile effectively "the steps alleviate problems." 50, 1547. chosen primarily D.C. Circuit. supra.6 noted, applies solution adverse consequences addressing. Yankee, 543-544, 1211-1212 (agencies free "[a]bsent constitutional constraints extremely compelling circumstances"). Moreover, 22196, together. 22196-22197. aggregate liability. Motor Vehicle Mfrs. States, Farm Mutual Automobile Ins. 29, 2856, 2866-67, 443 V 34 disagree possessed power authorize producers' judgment Orders 451-A 35 So ordered. 36 KENNEDY term "Commission" refer distinction relevant. clause or, Transco, 412, 711, entirety reads: "Ceiling dedicated commerce. "(a) Application.—In committed [November 1978,] seq.] date subsection apply month. "(b) Maximum price.— "(1) rule.—The section month of— "(A)(i) Btu's, been) April 20, 1977, 1977; "(ii) thereafter, subparagraph multiplied monthly annual adjustment factor month, 27, "(2) Ceiling 717]." 106(c), deals almost identical "rollover" contracts, defines entered November 1978, expired fixed itself. 3301(12). used provisions. Even failed speak question, compelled defer interpretation. view arbitrary, capricious, manifestly Chevron U.S.A. Defense 467 837, 843-844, 2778, 2781-2783, 81 694 (1984); 292, 1817-18, invalidated solving problem. 283 265, 899 1250 286 142, 912 1496 (approving aspects proceedings), pending Willcox 90-806. precludes petitioning become apparent 281 318, 890

Category: 8