Court Opinion

ID: 184996
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:26:34+00
Date Added: 2024-06-11T17:26:12.545932
License: Public Domain

196 F.3d 1273 (D.C. Cir. 1999)
Panhandle Eastern Pipe Line Company, Petitionerv.Federal Energy Regulatory Commission, RespondentKansas Gas Service Company, et al., Intervenors
No. 98-1048
United States Court of AppealsFOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued January 11, 1999Decided November 26, 1999

On Petition for Review of Orders of the Federal Energy Regulatory Commission
Brian D. O'Neill argued the cause for petitioner.  With  him on the briefs were Merlin E. Remmenga and F. Nan  Wagoner.
David H. Coffman, Attorney, Federal Energy Regulatory  Commission, argued the cause for respondent.  With him on  the brief were Jay L. Witkin, Solicitor, John H. Conway,  Deputy Solicitor, and Susan J. Court, Special Counsel.
Douglas E. Winter was on the brief for intervenors Riverside Pipeline Company, L.P., et al.  James J. Murphy entered an appearance.
David A. Glenn, Gregory Grady and Michael J. Thompson  were on the brief for amicus curiae Transcontinental Gas Pipe  Line Corporation.
Before:  Silberman, Sentelle, and Garland, Circuit  Judges.
Opinion for the Court filed by Circuit Judge Garland.
Garland, Circuit Judge:

1
Petitioner Panhandle Eastern  Pipe Line Company ("Panhandle") transports natural gas  through its interstate pipeline system.  Motivated by an  earlier dispute over its responsibility to build pipeline interconnections ("interconnects") to permit access to its system,  Panhandle filed a proposed tariff with the Federal Energy  Regulatory Commission (FERC) intended to memorialize the  criteria under which it would be willing to construct such  interconnects in the future.  FERC struck certain provisions  of the proposed tariff and mandated that Panhandle adopt  modified criteria for pipeline interconnects.  See 81 F.E.R.C.  p 61,295, at 62,393-94 (1997) (denial of rehearing);  79  F.E.R.C. p 61,016, at 61,077-78 (1997).  Panhandle petitions  for review of FERC's orders.

2
FERC objected to three provisions in Panhandle's proposed tariff.  Those provisions required that a party requesting an interconnect:  1) be a "shipper";  2) demonstrate the  existence of "market demand commensurate with the facility  requested";  and 3) establish that construction of the new  interconnect would not result in "adverse economic impact to  Panhandle."  79 F.E.R.C. at 61,077.  FERC directed Panhandle to delete those requirements and to insert language  stating that Panhandle would construct an interconnect for  "any party willing to pay the reasonable costs and expenses of the construction and who meets the other conditions of  Panhandle's interconnect construction policy as modified by  the Commission...."  Id.

3
On request for rehearing, Panhandle raised a number of  objections to FERC's orders.  In particular, it contended that  the tariff modifications imposed by the Commission conflicted  with or changed established FERC policy.  As Panhandle  recounted, FERC's policy had been to require a pipeline to  build interconnects on a case-by-case basis if, but only if, the  Commission found that the pipeline had previously built them  for similarly situated parties.  See, e.g., Southwestern Pub.  Serv. Co. v. Red River Pipeline, 63 F.E.R.C. p 61,125, at  61,824, 61,825 (1993) (refusing to require pipeline to construct  mid-point tap because requester was "not similarly situated to  any other shipper on the system"), reh'g granted, 74 F.E.R.C.  p 61,133, at 61,475 (1996) (requiring construction after requester met similarly situated standard);  Southwestern Glass Co.  v. Arkla Energy Resources, 62 F.E.R.C. p 61,089, at 61,648  (1993) (refusing to find unduly discriminatory a pipeline's  refusal to construct bypass delivery tap because it had treated requester "the same as other similarly situated shippers");Arcadian Corp. v. Southern Natural Gas Co., 61 F.E.R.C.  p 61,183, at 61,679 (1992) ("[T]he Commission's regulations do  not directly require an open-access pipeline to construct  facilities to provide service ... [except] ... where the pipeline has voluntarily decided to construct facilities for similarly  situated customers."), vacated on other grounds sub nom.  Atlanta Gas Light Co. v. FERC, 140 F.3d 1392, 1404 (11th  Cir. 1998);  see also Missouri Gas Energy v. Panhandle  Eastern Pipe Line Co., 75 F.E.R.C. p 61,166, at 61,550 (1996);Texas Eastern Transmission Corp., 37 F.E.R.C. p 61,260, at  61,683 & n.114 (1986).

4
FERC did not dispute Panhandle's description of its established policy.  Nor did it attempt to justify its demand that  Panhandle delete the proposed interconnect criteria on the  ground that they inaccurately reflected the criteria the pipeline utilized in the past.  Instead, FERC rejected Panhandle's  proposed "market demand" criterion on the ground that it  was "unnecessary" to protect the pipeline's interests.  79 F.E.R.C. at 61,077.  It directed deletion of the tariff's limitation to shippers in order to ensure that entities such as  storage companies and market centers could seek an interconnect.  See id.  And it ordered removal of Panhandle's  "adverse economic impact" criterion on the ground that it was  "vague," and thus "might" allow Panhandle to deny an interconnect to a future requester that would have received one  under the similarly situated standard.  Id.

5
Notwithstanding the rationales it gave for its orders,  FERC insisted that its directions to Panhandle did not "conflict with or change" its policy of requiring the construction of  interconnects only when requesters were similarly situated to  parties whose requests had previously been granted.  81  F.E.R.C. at 62,395.  There was no conflict or change, the  Commission said, because "the subject order does not order  an interconnect to be constructed, for similarly situated shippers or otherwise."  Id.;  see id. at 62,396 n.8, 62,398.  Rather  than compel Panhandle to construct a specific interconnect,  FERC argued, it had merely required Panhandle to modify  its tariff language.  If and when a future applicant requested  an interconnect pursuant to that tariff, "the requesting party  [still would have] to meet numerous requirements," including  the requirements of the Natural Gas Act.  Id. at 62,396.

6
FERC's argument fails to persuade us that it has not  changed its policy.  Although FERC did not require Panhandle to build any interconnects immediately, it did require  Panhandle to adopt tariff language stating that the company  would construct an interconnect "for any party willing to pay  the reasonable costs and expenses of the construction and  who meets the other conditions of Panhandle's interconnect  policy as modified by the Commission...."  79 F.E.R.C. at  61,077.  At oral argument, FERC's counsel agreed with  Panhandle's contention that the pipeline would be required to  construct a requested interconnect if the FERC-modified  criteria in the new tariff were met, because FERC regulations bind companies to the terms of their tariffs.  See 18  C.F.R. § 154.3(a).  Yet, FERC also agreed that the modified  criteria were not based on Panhandle's historical practices. See also ANR Pipeline Co. v. Transcontinental Gas Pipe Line Corp., 84 F.E.R.C. p 61,106, at 61,534 (1998) (noting that  the tariff changes required in Panhandle "were not based on  any similarly-situated analysis").  Although it is true that a  requester would have to meet "numerous requirements" to  qualify for an interconnect, none would necessarily relate to  how Panhandle had treated others in the past.

7
In sum, were we to uphold FERC's orders, Panhandle  would be bound to construct an interconnect for any requester falling within its FERC-modified tariff, even if the requester were not similarly situated to any party for whom Panhandle had previously built an interconnect.  That constitutes  a clear change in FERC's policy.  Indeed, in an opinion  handed down soon after Panhandle, the Commission explained that its order "directing [Panhandle] to modify its  tariff provisions involved no Commission policy requiring a  similarly-situated analysis to establish undue discrimination."Id.

8
FERC may well be able to defend its new policy.  The  orders below, however, neither acknowledge the change nor  explain its rationale.  " 'An agency's view of what is in the  public interest may change, either with or without a change in  circumstances.  But an agency changing its course must  supply a reasoned analysis....' "  Motor Vehicle Mfrs. Ass'n  v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 57 (1983)  (quoting Greater Boston Television Corp. v. FCC, 444 F.2d 841, 852 (D.C. Cir. 1970)).  As we have repeatedly reminded  FERC, if it wishes to depart from its prior policies, it must  explain the reasons for its departure.  See, e.g., Williston  Basin Interstate Pipeline Co. v. FERC, 165 F.3d 54, 65 (D.C.  Cir. 1999);  Northeast Energy Assocs. v. FERC, 158 F.3d 150,  156 (D.C. Cir. 1998);  Grace Petroleum Corp. v. FERC, 815 F.2d 589, 591 (D.C. Cir. 1987).

9
Accordingly, we grant Panhandle's petition and remand the  case to the Commission for an explanation of its reasoning.In light of this disposition, at this juncture we have no  occasion to consider Panhandle's other challenges to FERC's  orders.