Court Opinion

ID: 9439112
Source: CourtListenerOpinion
Date Created: 2023-08-03 06:21:35.597812+00
Date Added: 2024-06-11T17:26:09.557445
License: Public Domain

WALD, Circuit Judge,
concurring in the judgment:
Although I agree that this case must be remanded for further consideration, I write separately to emphasize the breadth of the analysis FERC should undertake on remand. Although the ultimate issue in this case is who is to bear Iroquois’s litigation costs, not whether Iroquois’s conduct was legal or illegal, the latter consideration is certainly relevant, in my view. It is worth noting, therefore, that Iroquois admitted violating several environmental-related conditions of its section 7 certificate, and our discussion of whether it is “just and reasonable” for the company to then shift the litigation costs related to those violations to its ratepayers should in no way be read as directing FERC to ignore the harm to the environment that has been suffered as a result of those violations. Rather, I think it important that the calculus of whether a rate is reasonable take into consideration noneconomic benefit as well as economic benefit. It may well be true that a thoroughly informed ratepayer will prefer a cheaper product obtained by way of environmental violations over a more expensive product produced legally. But I’m not sure that this can be presumed to be the ease, as the majority opinion appears to assume. In an antitrust ease, as Mountain States II recognized, the analysis is easier: A presumption that litigation expenses associated with a violation of the antitrust laws are disallowed is reasonable because we can assume that consumers would prefer to buy products in a competitive market, since competition is presumed to make products both cheaper and better. Thus, it would be difficult to show that anticompetitive conduct *404would be beneficial to ratepayers in any way. Here, however, the equation is not so simple: We cannot presume that noncompliance with environmental regulations would be a benefit to ratepayers if the economic costs of compliance outweigh the economic costs of noneom-pliance, since the noneconomic benefit of compliance must also enter the calculus. It may well be the ease, for example, that a ratepayer would prefer to pay higher rates in exchange for the assurance that the pipeline from which it obtains its gas is in compliance with environmental laws. (I can imagine several reasons for this preference: for the goodwill benefits compliance confers, to aid in thwarting litigation, or even because the ratepayer lives in the geographic area for which noncompliance is proposed and will suffer as a citizen.) I agree that under our precedent FERC’s simple assertion that ratepayers have an interest in compliance with the law is insufficient to disallow recovery of Iroquois’s litigation costs. As Mountain States II holds, FERC must also také into consideration the economic benefits noncompliance may confer, though I must admit I have a good deal of trouble with the proposition that FERC can validly attach an environmental condition on a section 7 permit, but the company is simultaneously encouraged by ratemaking principles to violate it if it can build the pipeline cheaper or faster by doing so. That kind of law makes no sense to me. But I also believe that even the Mountain States II calculus is far more expansive than the majority opinion suggests. By seeming to give priority to economic over noneconomic considerations, I fear that the majority will dissuade FERC from adequately considering the environmental costs of Iroquois’s conduct, costs that may well affect the decision about whether forcing ratepayers to bear its litigation costs is indeed “just and reasonable.”