Court Opinion

ID: 7849567
Source: CourtListenerOpinion
Date Created: 2022-09-08 17:19:09.613101+00
Date Added: 2024-06-11T16:28:53.731058
License: Public Domain

WALD, Circuit Judge,
dissenting in part.
I concur in the majority’s conclusion that the rule challenged here must be remanded to the Commission for revision because it “in practice reverse[s] the statutory scheme of section 401” by favoring new users in the second priority classification over new users in the highest priority classification. However, I disagree with the majority opinion insofar as it adverts that the FERC must resolve this inequitable situation by according both high priority and essential agricultural users entitlement to volumes of natural gas sufficient to meet their current requirements. In my view, no legislative mandate requires the FERC to implement unchanged the Secretary of Agriculture’s certification of agricultural users’ gas needs; rather, I conclude that the NGPA leaves the FERC the discretion to utilize its expertise to fashion a curtailment rule that accommodates agricultural priority users “to the maximum extent possible” consistent with legislative intent, overall curtailment policies, and administrative practicali*206ties.1 It should be given the opportunity to utilize the full extent of this discretion on remand.
I. THE HISTORY OF CURTAILMENT
Since the advent of natural gas scarcities in the early seventies, regulated interstate pipelines have been required to establish elaborate curtailment plans detailing which of their customers will get how much gas in what priority in times of short supply. In Congress’ own words:
Curtailment plans establish priorities for the delivery of natural gas when supplies are insufficient to meet contract demand. In most cases, a local distribution company’s entitlement to natural gas under a curtailment plan is determined by reference to the priorities of use, and volumes of gas used, by its customers during a particular base period.
H.R.Rep.No. 1750, 95th Cong., 2d Sess. 112-13 (1978), U.S.Code Cong. & Admin.News 1978, p. 7846, J.A. 39-40.
However, these plans often fall short of full effectiveness or equity because they cover only pipelines’ direct customers. As we have decided today, the plans cannot assure that the ultimate users receive the benefit (or burden) of a statutory or FERCordered priority system unless they obtain their gas supply directly from an interstate pipeline. In general, local (non-interstate) distributors of natural gas allocate their supplies according to state law,2 which may or may not correspond to the federal scheme. Moreover, many distributors have several sources of supply, enabling them to dispense nonfederally regulated gas during times of shortage.3
Despite such problems, the FERC initially chose to develop curtailment plans allocating gas by end use rather than prorating contract entitlements. In pre-NGPA priority schedules, agricultural users were not accorded any special priority. As a result, two-thirds of the agricultural sector’s 1977 interstate natural gas supply fell in the lowest, and most likely to be curtailed, priorities.4 It was this situation which Congress sought to change by passage of the NGPA.
Once basic priorities were established, the FERC faced a further problem: how to decide how much gas is required by each priority class. In most cases, the FERC calculated the amount by reference to historical usage in a pre-curtailment year. Base period figures were adjusted for factors unique to particular pipelines, and particular years.5 However, they did not nor*207mally take into account new or expanded uses of gas developed after the base year.
The base year approach has several advantages. It (1) permits predictability so that customers can plan ahead for shortage periods, (2) encourages conservation and (3) discourages irresponsible load growth by refusing to recognize new or expanded uses occurring after the base year during curtailment. Although this court has indicated that the base year concept must be intelligently applied in individual cases to ensure that it does not indiscriminately utilize stale data to bring about a result at odds with the overall priorities accorded current end users, it has never ruled use of a base year illegal per se. See North Carolina v. FERC, 584 F.2d 1003 (D.C.Cir.1978);6 Southern California Edison Co. v. FPC, 524 F.2d 409 (D.C.Cir.1975); Rhode Island Consumers’ Council v. FPC, 504 F.2d 203 (D.C.Cir.1974). And, although post-base year customers must be served during curtailment periods through use of supplementary “self-help” sources, see note 3 supra, this feature does not create insurmountable problems. As petitioners point out, agricultural production expanded 40% between 1974-1979 even when it had no statutory priority and had to be accommodated chiefly through such means. Even now, the government suggests “self-help” gas answers the needs of new load-growth among the highest priority residential users.7
In the past, the Commission rejected the “current requirements” method of computing allocations because of its administrative complexity and unpredictability, as well as its unfortunate tendency to encourage distributors to recruit new priority users during shortages.8 Nonetheless, the Secretary of Agriculture now claims that only the current requirements method is “sufficiently flexible and responsive to provide for natural gas requirements necessary for full food and fiber production in all instances.”9 The problem in this case arises, however, not so much from the Secretary’s position qua certification, as from the FERC’s unquestioning acceptance of this certification for implementation purposes and its concomitant disclaimer of any power to make offsetting changes or accommodations necessary to insure that the overall curtailment plan works effectively and is in line with Congressional objectives.10 The resultant disparity between treatment of load-growth in the top three priority classes will almost certainly have substantial, unpredictable and, I am convinced, largely unintended effects on the national consumption patterns for natural gas.11
*208II. THE ISSUE
Section 401(a) of the NGPA requires the Secretary of Energy to prescribe, within 120 days of enactment, a rule that provides “to the maximum extent practicable” that interstate pipeline curtailment plans not curtail gas deliveries to “essential agricultural users” below the amount certified by the Secretary of Agriculture as necessary to meet the “requirements” of such users, unless a reduction is “necessary in order to meet the requirements of high priority users.”12 Section 401(c) in turn requires the Secretary of Agriculture to certify to the Secretary of Energy and the FERC the “natural gas requirements (expressed as volumes or percentages of use) for essential agricultural uses” that are necessary to achieve “full food and fiber production.”
The FERC argues that these subsections of 401, when read together, leave it no option but to implement the whole of the Secretary of Agriculture’s certification of need, regardless of whether that certification is based on current requirements estimates or, as are other priority categories, on base year calculations. It therefore has refused to pass on the wisdom or necessity of the Secretary of Agriculture’s adoption of a current requirements entitlement scheme.13
The petitioners, however, point to the language of section 403 of the NGPA, 15 U.S.C. § 3393, which provides that “the Commission shall implement the rules ... pursuant to its authority under the Department of Energy Organization Act to establish, review, and enforce curtailments under the Natural Gas Act.” (Emphasis supplied.) They argue that this language preserves the Commission’s traditional broad authority to implement curtailment priorities and policies, and that its failure to exercise that authority in this instance has resulted in an unfair and unworkable rule which violates rather than advances Congressional intent.
Indeed, the majority has accepted part of petitioner’s argument; it finds the rule as it stands incomprehensible and unworkable. However, it would apparently remand only to allow the FERC to change its base year curtailment rule for high priority users to *209provide for load-growth in order to bring about some kind of parity with new agricultural users. In my view, this approach does not go far enough in recognizing the FERC’s authority under section 403 of the NGPA to fashion curtailment rules for all priority (and non-priority) classes that will operate fairly and efficiently in accord with the NGPA’s priority scheme. Though the language in sections 401 and 403 delegating authority to the various agencies is admittedly ambiguous and hard to follow, the accompanying legislative history makes clear that the FERC has been delegated the ultimate power and responsibility to accommodate the Secretary of Agriculture’s certification to the overall statutory priority scheme, and. to the Congressional directive that there be minimum disruption to preexisting curtailment plans.
III. ANALYSIS
Section 401 of the NGPA was passed as part of a broader gauged energy package consisting of five separate acts.14 The entire legislative package was debated on and off for over a year, with most of the debate focusing on pricing policies for natural gas. The provision of a special curtailment priority for agriculture was given relatively little attention and considered essentially noneontroversial.15 It was motivated by the FPC’s past refusal to give agricultural users any special priority in curtailment plans, and the perceived results of that failure, i.e., lack of gas in times of shortage for irrigation, heating hen houses, fueling refrigeration plants, etc.16
Senators Ford and Jackson submitted the basic language of section 401 on September 19,1977 as an amendment to the Senate bill then under consideration on the floor; the amendment had already been adopted by a majority of the Committee in an earlier version of the bill. It provided that no pipeline or local distribution company could curtail agricultural use deliveries below those certified as essential by the Secretary of Agriculture. But it also expressly provided that the Secretary of Agriculture’s certification could include extended production capacities or new facilities only if determined by the Secretary to be necessary to meet national food and fiber production and to preserve health, safety or welfare.17 Moreover, this amendment provided that the Secretary of Agriculture was to determine the essential agricultural uses while the FERC would determine the volumes necessary to meet those uses. The phrase “full food and fiber production” was later substituted for “national food and fiber production” in an apparent effort to insure that the “full cyclical process of raising or preparing food for market” was included in designated essential agricultural uses.18
At this juncture, then, the amendment gave the Secretary of Agriculture no power at all to certify amounts or volumes but only the uses essential to food and fiber production. The amounts necessary to meet those uses were to be fixed by the FERC, presumably in accommodation with all other aspects of pipelines’ curtailment *210plans, including the needs of other statutorily mandated priorities.
As finally passed by the Senate, however, the “agricultural use” curtailment amendment applied only to interstate pipelines19 and although it delegated to the Secretary of Agriculture the power to certify amounts as well as uses, it made provision for “present and expanded capacity” in existing and future plants for only two uses, raw material feedstock or process fuel and production of fertilizer and essential agricultural chemicals. Other essential agricultural uses apparently were not to be permitted such “load growth.” As in the final version of section 401, there was no reference to the method to be used to certify “requirements” for agricultural uses, or any indication that it should be different from that currently used to determine the “requirements” of other priority classifications protected by the statute.
The House-passed counterpart was a different animal altogether because it attempted to regulate the curtailment priorities of interstate and intrastate pipelines and local distribution companies. The Secretary of Agriculture was to identify essential uses and determine the “supply requirements including requirements from capacity extensions” needed “to satisfy the requirements of full food and fiber production and processing.” In the context of the House bill, a certification of current requirements made administrative sense since the curtailment plan could be imposed to effect priorities at the burner tip level by application to local distribution companies as well as intrastate and interstate pipelines.
The Conference Committee, however, adopted the more limited Senate provision “with certain modifications.” Curtailment priorities applied only to interstate pipelines, not to local distribution companies. There was no express authorization for new or expanded agricultural uses or any reference to “load growth” in the statute itself. As to the Secretary’s certifying power the Report said only:
The conference agreement gives authority to the Secretary of Agriculture to certify to the Secretary of Energy and to the Commission the natural gas requirements for agricultural uses in order to meet the requirements of full food and fiber production, based upon the definition of “agricultural use” contained in this section.
(Emphasis supplied.)20 The Report was silent on the subject of what FERC must do with the certification, referring in general terms to the Secretary of Energy’s responsibility for adjusting, according to the statutory plan, the “schedule of curtailment priorities.” 21
Moreover, the Report stressed, repeatedly and emphatically, that Congress did not *211wish to open up existing curtailment plans, particularly base year calculations, any more than was absolutely necessary.
Once the schedule of curtailment priorities is brought into conformity with the requirements of this Act, the Commission will be required to implement the revised curtailment priority schedule applicable to interstate pipelines. For purposes of implementing this section, the Commission is instructed to reopen curtailment plans that are already in effect under the Natural Gas Act only to the extent necessary to adjust those plans to bring them into conformity with the new curtailment priority schedule. The conferees were concerned that these changes not burden the Commission with lengthy proceedings which might throw existing curtailment plans into disarray. Therefore, the conference agreement includes the term “to the maximum extent practicable” to assure that the Commission has the necessary flexibility in implementing any changes. For example, the conferees do not intend the reopening of curtailment plans for this limited purpose to result in adoption of a new base year for curtailment purposes.
(Emphasis supplied.)22 Contrary to the majority opinion’s finding of an “absence of any ... precise indication from Congress,” maj. op. at 747, it is hard to think of a clearer Congressional signal that the FERC had discretion to allocate scarce gas to the newly established priority classes under the base year system it had traditionally used.
So far as I can see, then, there is nothing in the text or legislative history of the Act to suggest that section 401 was meant to strip the FERC of its traditional powers to balance needs and make the myriad of accommodations necessary for a coherent curtailment implementation scheme. The most logical interpretation of the relationship between the FERC and the Secretaries of Agriculture and Energy is that the Secretary of Agriculture would designate the essential uses and the percentages or volumetric quantities necessary for “full food and fiber production,” the Secretary of Energy would incorporate those uses into his “priority schedule” rule, and then the FERC would proceed to “implement” that rule, i.e., accommodate the volume or percentage certifications with other priorities and general curtailment policies required under the Natural Gas Act. Given the fact that Congress knew — and had indeed decided for itself — that only deliveries to pipelines, not burner tip users, were to be regulated by the federal curtailment scheme, there is no reason to believe — and nothing in the legislative history to indicate — that the Commission could not treat the Secretary’s essential agricultural uses certification as it does estimates of needs of other priorities.23
In short, I believe that Congress, well aware of the varied and complex issues associated with the curtailment process,24 *212meant to keep the FERC’s power “to implement” curtailment priority rules intact, although assigning to another agency the power to define a user class with a specified placement in the priority hierarchy and quantify its needs. If, as a result of the rule before us, Title IV of the NGPA is interpreted otherwise, i.e., to lay down an aberrational and inflexible method of allocation for one priority class, regardless of other considerations, the flexibility of the FERC “to administer curtailments” will have been gravely and unwisely, and I believe unnecessarily, limited. I therefore dissent from approval of the FERC’s refusal to utilize its much needed “expertise” to resolve this complex curtailment problem.

. The resulting rule could utilize base year or current requirements entitlement schemes, a combination of both, if justified, or neither. The one set of proposed regulations noticed subsequent to the rule involved here suggests market mechanisms rather than curtailment plans may be the preferred method of reconciling the statutory goals. See Notice of Hearing & Public Comment on Proposed Rulemaking Concerning Review and Establishment of Natural Gas Curtailment Priorities for Interstate Pipelines, 45 Fed.Reg. 49087, 49091 (1980) (hereinafter July 1980 Proposed Rulemaking) (“Our studies indicate that a pricing system has the greatest potential of any alternative examined for achieving these benefits [of minimizing the costs of curtailment] since it provides a means to move gas to the industrial end users who value it most, while avoiding the costs associated with mandated shifts of supply.”).

.Many states have utility commissions or statutes which mandate curtailment priorities for intrastate distributors.

. Local distributors very often rely on multiple supply sources to meet their retail demands; some also invest in gas storage facilities for peak periods; still others maintain synthetic natural gas facilities or propane-air plants or make arrangements to buy directly intrastate supplemental gas supplies. Additionally, many companies take gas from several interstate pipelines, which may be suffering varying degrees of curtailment. Thus, in times of shortage, local distribution companies may have gas which they are permitted or required to dispense according to different priorities than the federally prescribed ones. In this way they may be able to accommodate new as well as existing customers even though their curtailment share of the regulated pipeline’s supply is based on a long gone base year.

. Final Economic and Environmental Impact Statement, U.S. Dept, of Agrie., May 14, 1979 at 17 (Table 5), J.A. 946.

. Thus as PGC suggested in its comments on the USDA draft environmental impact state*207ment, J.A. 865-67, “base periods can be adapted to meet fluctuating demands” through normalization of the base period figures if “the base year was abnormal,” and the introduction of weather variables (i.e., a “temperature sensitive factor” and a “wetness sensitive factor”). The volumes in the base periods of existing pipeline curtailment plans may reflect many factors unique to each pipeline (e.g., gas supply and demand projections, certificate and contract obligations, technical and engineering capabilities, storage and peak shaving capabilities of distributor-customers, end use and weather). For example, on Panhandle Eastern Pipe Line Company’s system, a 12-month pro forma year is used as the base period. The data for this base period reflect the highest monthly use over a 30-month period during which there was no curtailment.

.“[Djiscrimination resulting from an end-use plan can be justified only to the extent that the plan actually does protect the high priority uses from curtailment ahead of low priority uses.” North Carolina v. FERC, supra, 584 F.2d at 1010.

. See July 1980 Proposed Rulemaking at 49095.

. See July 1980 Proposed Rulemaking at 49097; Recent Decisions, 47 Geo. Wash.L.Rev. 829, 842 (1978). Among the identified problems with a “current requirements” standard are: choosing a method and frequency for determining “current requirements”; determining the credibility of estimates prepared by distributors who know that their pipeline supply is a function of those estimates; and the effect of fluctuation in “current requirements” on industry and administrative planning.

. Final Rule, 44 Fed.Reg. 28782, 28785 (May 19, 1979), J.A. 163.

. See Order No. 29, 44 Fed.Reg. 26855, 26857 (May 2, 1979), J.A. 315-16.

. Under the final rule, distributors will receive an allocation computed from a base year profile for all priorities except agricultural uses, which will be computed (within contract levels) according to current requirements. Ballooning *208agricultural uses could thus cut off both the supply to lower priority users and to new uses of higher priority users. In fact, in times of shortage, distributors serving primarily agricultural users may receive a higher percentage of their normal supply than distributors serving primarily customers in the highest priority class.
One of the petitioners cites an example of the gross discrimination that could result as follows:
Distributor A Distributor B (Farm Belt) (City)
Contract 100,000 dts 100,000 dts
Base Period High Priority Users Volumes 25,000 50,000
Base Period Agricultural Users Volumes • 25,000 0
Post Base Period High Priority Market 0 50,000
Post Base Period Agricultural Market 50,000 0
Assuming that only 150,000 dt of gas were available for both distributors, Distributor A would, under the Commission’s rule, acquire volumes for its post base period agricultural market up to its contract with the pipelines. Here it would receive the full 50,000 dts. Distributor B’s post base period high priority market would receive not one dt because its high priority users would be limited to their base period volumes. In essence, gas would be taken away from high priority markets and given to a Congressionally dictated lower priority.
Application of Consolidated Edison Company for Rehearing, FERC Docket No. RM 79-15, J.A. 1638.

. Section 401(f) of the NGPA, 15 U.S.C. § 3391(f), defines high priority users as:
(2) High-Priority User. — The term “high-priority user” means any person who—
(A) uses natural gas in a residence;
(B) uses natural gas in a commercial establishment in amounts of less than 50 Mcf on a peak day;
(C) uses natural gas in any school, hospital, or similar institution; or
(D) uses natural gas in any other use the curtailment of which the Secretary of Energy determines would endanger life, health, or maintenance of physical property.

. However, in its initial and interim rule proposals, the FERC took a broader view of its statutory authority and proposed to compute the “requirements for essential agricultural uses” on a base year period. See Notice of Proposed Rulemaking, 44 Fed.Reg. 3052, 3053-54 (Jan. 10, 1974), J.A. 184; Notice of Proposed Rulemaking, 44 Fed.Reg. 3725, 3727 (Jan. 12, 1979), J.A. 270-71.

. The five were the Energy Tax Act of 1978, Pub.L.No.95-618, the National Energy Conservation Policy Act of 1978, Pub.L.No.95-619, the Powerplant and Industrial Fuel Use Act of 1978, Pub.L.No.95-620, the Public Utility Regulatory Policies Act of 1978 (“PURPA”), Pub.L. No.95-617, and the NGPA. All were signed into law on November 9, 1978.

. See 123 Cong.Rec. S15771 (daily ed. Sept. 27, 1977) (remarks of Sen. Bumpers).

. See, e.g., id. at S15772 (remarks of Sen. Bumpers) (“In February 1977, for example, 4.7 million chickens died in Arkansas as the result of lack of natural gas, either because of feed mills being shut down, or because no gas was available to heat chickenhouses. In March of 1977, 1.8 million chickens died from the same causes.”).

. 123 Cong.Rec. S15160 (daily ed. Sept. 19, 1977).

. See 123 Cong.Rec. S15772 (daily ed. Sept. 17, 1977) (remarks of Sen. Ford) (“It is our intention that all activities encompassed within the term ‘food processing’ should be eligible for priority consideration.”); cf. 124 Cong.Rec. S14957 (daily ed. Sept. 12, 1978) (remarks of Sen. Talmadge) (“The definition of essential uses in agriculture should be interpreted in the broadest possible concept so that our food and fiber production continues without impairment.”).

.Senators Pearson and Bentsen had proposed an amendment to the Senate bill on September 16, 1977, which provided for an agricultural priority. When explaining their amendment, Senator Pearson remarked of the curtailment scheme:
The intent of this section is to specify by statutory language those categories of service to receive natural gas in order of priority pursuant to Federal curtailment plans. New section 25 does not expand the statutory scope as judicially construed, of current curtailment authority....
123 Cong.Rec. S15099 (daily ed. Sept. 16, 1977). Senators Ford and Jackson then proposed their amendment to the bill which would have included local distribution companies within the coverage of curtailment plans. 123 Cong.Rec. S15159 (daily ed. Sept. 19, 1977). Senator Jackson later proposed a further amendment dealing with agricultural priorities identical in language to the earlier PearsonBentsen amendment. 123 Cong.Rec. S15771 (daily ed. Sept. 27, 1977). On October 4, 1977, the day the bill passed the Senate, Senators Pearson and Bentsen submitted a revised amendment, as a substitute for their earlier amendment, which reiterated their earlier limitation on the scope of curtailment plans. This amendment was then adopted, and became an integral part of the Senate’s energy package. 123 Cong.Rec. S16323-25 (daily ed. Oct. 4, 1977).

. H.R.Rep.No. 1752, 95th Cong., 2d Sess. 114 (1978), U.S.Code Cong. & Admin.News 1978, p. 9030.

. Id. at 113 (emphasis supplied).

. Id. at 113, U.S.Code Cong. & Admin.News 1978, p. 9029. See also 124 Cong.Rec. S15431 (daily ed. Sept. 19, 1978) (remarks of Sen. Melcher) (the FERC “explain[s] in their assessment that ‘that will require a limited reopening of the existing curtailment cases before the Commission for the purpose of establishing the entitlements’”); H.R.Rep.No.1750, 95th Cong., 2d Sess. 112-13 (1978) (PURPA-Title II) (“the revisions required in title IV of the Natural Gas Policy Act of 1978 ... do[ ] not require an updating of the base period data”), J.A. 40. If updating is required, PURPA’s specific requirement of computation or conservation comes into effect.

. In American Smelting & Refining Co. v. FPC, 494 F.2d 925 (D.C.Cir.), cert. denied, 419 U.S. 882, 95 S.ct. 148, 42 L.Ed.2d 122 (1974), we remanded to the Commission for reconsideration an order using a different standard for computing curtailment allocations for one group of customers than for another.

.I am puzzled by the majority opinion’s reference to the “mammoth assessment of historical usage” involved in use of the base year method, maj. op. at 749. Quite the opposite is true— the base year allocations are already in place in individual pipeline curtailment plans and would remain generally static whereas the administrative complications of keeping up with constantly fluctuating and expanding “current requirements” are truly mind staggering.