Court Opinion

ID: 7801888
Source: CourtListenerOpinion
Date Created: 2022-08-19 00:00:26.294989+00
Date Added: 2024-06-11T16:29:21.634038
License: Public Domain

Case: 22-60225    Document: 00516438866         Page: 1   Date Filed: 08/18/2022

           United States Court of Appeals
                for the Fifth Circuit                             United States Court of Appeals
                                                                           Fifth Circuit

                                                                         FILED
                                                                   August 18, 2022
                                 No. 22-60225                       Lyle W. Cayce
                                                                         Clerk

   Midship Pipeline Company, L.L.C.,

                                                                  Petitioner,

                                     versus

   Federal Energy Regulatory Commission,

                                                                 Respondent.

                     Petition for Review of an Order of the
                      Federal Energy Regulatory Comm.
                         Agency No. 177 FERC 61,186
                         Agency No. 178 FERC 62,100
                         Agency No. 178 FERC 61,202

   Before Higginbotham, Haynes, and Wilson, Circuit Judges.
   Cory T. Wilson, Circuit Judge:
         Midship Pipeline Company, L.L.C. challenges part of a Federal
   Energy Regulatory Commission (FERC) order directing an administrative
   law judge to determine the “reasonable cost” for Midship to complete
   remediation activities at Sandy Creek Farms in Oklahoma. The FERC, like
   all administrative agencies, must ground its actions “in a valid grant of
   authority from Congress,” Food & Drug Admin. v. Brown & Williamson
   Tobacco Corp., 529 U.S. 120, 161 (2000), and Midship contends that the
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   FERC’s governing statutes do not grant the agency authority to determine
   “reasonable cost” of remediation. Thus, Midship asserts the FERC’s order
   is ultra vires. The FERC counters that this issue is not ripe for appeal, and,
   in any event, its order is entitled to deference. We conclude this dispute is
   ripe for our review and vacate the provision of the FERC’s order requiring
   a determination of “reasonable cost.” We otherwise remand for further
   proceedings.
                                           I.
          On August 13, 2018, the FERC issued a certificate order under the
   Natural Gas Act (NGA) allowing Midship to construct and operate a 200-
   mile natural gas pipeline crossing privately held land in Oklahoma. 164
   F.E.R.C. ¶ 61,103. Midship’s certificate, like most issued under the NGA,
   contained requirements related to rates, environmental analyses, and
   restoration of affected land. Id.
          Midship completed the pipeline in March 2020.              174 F.E.R.C.
   ¶ 61,220, 62,111. It then put the pipeline in operation and proceeded to
   restore land impacted by the construction. Id. A year later, the FERC
   directed Midship “to take immediate action to remedy unresolved
   restoration issues on certain landowner tracts.” Id. at 62,110. This included
   “[c]orrect[ing] ponding, restor[ing] preconstruction contours,” and
   “[r]emov[ing] known construction debris” on property held by Sandy Creek.
   Id. at 62,113. The FERC noted that it had previously directed Midship to
   address these issues, id. at 62,113 n.1, and recommended that Midship and
   the landowners negotiate a settlement through the FERC’s Dispute
   Resolution Service, id. at 62,112. The FERC caveated this suggestion by

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   acknowledging that if negotiations failed it lacked the authority to require
   Midship to compensate the landowners, id. at 62,112 n.13. 1
          After several months, Sandy Creek and Midship were unable to reach
   a settlement. 177 F.E.R.C. ¶ 61,186. Sandy Creek filed a statement before
   the FERC indicating that, although its land still needed to be restored, it did
   not want Midship to remediate the land because Midship’s continued
   presence would lead to “irreparable impacts.” Id. Instead, Sandy Creek
   preferred a settlement that would compensate Sandy Creek for restoring its
   land itself. Id.
          In response, the FERC entered another order recognizing that
   Midship and Sandy Creek remained at an impasse. Id. It found that “despite
   general agreement as to the proper scope of the restoration work
   needed . . . , Midship and Sandy Creek Farms have not been able to agree on
   a specific plan or cost thereof.” Id. at *4. The FERC then appointed an
   administrative law judge (ALJ) to resolve two questions: “(1) the methods
   and scope of work activities remaining in order to restore the Sandy Creek
   Farms property in accordance with the Certificate Order . . . and (2) the
   reasonable cost to complete such activities.”             Id.   The FERC again
   acknowledged that it could not award damages but stated that “developing a
   record as to the necessary measures and their cost will assist [the FERC] in
   evaluating what further remediation is required and what further steps to take
   to resolve the issues here.” Id.

          1
            The landowners filed a motion for rehearing and asked the FERC to retract its
   statement about ordering compensation. But the FERC reiterated that it had “no
   authority to direct payment of compensation for damages . . . . Should Landowners seek
   compensation from Midship, Landowners may pursue these claims in the appropriate state
   court.” 175 F.E.R.C. ¶ 61,145, 61,932.

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          Midship filed a petition for rehearing, asserting that the FERC lacked
   authority to determine the “reasonable cost” of remediation. 178 F.E.R.C.
   ¶ 61,202, *2. The FERC denied Midship’s petition and reiterated the
   rationale from its prior order. Id. at *3. Roughly three weeks later, Midship
   filed a request for a stay with the FERC and a petition for review before this
   court challenging the directive that the ALJ determine the reasonable cost
   of remediation. Shortly thereafter, while its stay motion before the FERC
   remained pending, Midship requested a stay from this court pending appeal.
          The FERC denied Midship’s stay motion, but shortly after, we
   granted Midship a stay of the challenged portion of the FERC’s order.
   Midship Pipeline Co., L.L.C. v. Fed. Energy Regul. Comm’n, No. 22-60225,
   slip. op. at 1 (5th Cir. May 25, 2022) (per curiam order). We also expedited
   the appeal. Id. at 5. Meanwhile, the remainder of the order is in effect, and
   proceedings before the ALJ are ongoing.
                                        II.
          The NGA states that:
          [a]ny party to a proceeding under this chapter aggrieved by an
          order issued by [the FERC] in such proceeding may obtain a
          review of such order in the court of appeals of the United States
          for any circuit wherein the natural-gas company to which the
          order relates is located or has its principal place of business.

   15 U.S.C. § 717r(b). In reviewing FERC orders pursuant to § 717r(b), we
   also apply the overarching appellate framework of the Administrative
   Procedure Act (APA), 5 U.S.C. § 701. El Paso Elec. Co. v. Fed. Energy Regul.
   Comm’n, 832 F.3d 495, 503 (5th Cir. 2016) (citing La. Pub. Serv. Comm’n v.
   Fed. Energy Regul. Comm’n, 771 F.3d 903, 909 (5th Cir. 2014)).

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                                         A.
          As threshold matters, the FERC first argues that this dispute is not
   ripe for review. Next, if it is, the FERC contends its interpretation of the
   NGA ought to be accorded deference under Chevron, U.S.A., Inc. v. Natural
   Resources Defense Council, Inc., 467 U.S. 837 (1984).
                                         1.
          Whether an issue is ripe for appeal turns on “(1) the fitness of the
   issues for judicial decision; and (2) the hardship to the parties of withholding
   court consideration.” Gulfport Energy Corp. v. Fed. Energy Regul. Comm’n,
   41 F.4th 667, 679 (5th Cir. 2022) (quoting Cochran v. Sec. & Exch. Comm’n,
   20 F.4th 194, 212 (5th Cir. 2021)). “A matter is fit for review when it
   presents pure legal questions that require no additional factual
   development.” Id. (citing Cochran, 20 F.4th at 212). “To assess hardship,
   we examine the effect of the agency decision on the petitioner”; if the effect
   “is ‘sufficiently direct and immediate,’ review is appropriate.” Id. (quoting
   Abbott Lab’ys v. Gardner, 387 U.S. 136, 152 (1967)); see Energy Transfer
   Partners, L.P. v. Fed. Energy Regul. Comm’n, 567 F.3d 134, 139 (5th Cir. 2009)
   (discussing “factors set forth by the Supreme Court in Abbott Laboratories”).
          The FERC contends that the challenged order is not ripe for review
   because it is not a “final agency action” that carries a cognizable effect on
   Midship. The FERC reasons that just as in Energy Transfer Partners,
   regardless of whether the order exceeded its authority, the ALJ or the FERC
   could eventually rule favorably to Midship, and Midship could appeal an
   adverse determination, such that the instant order has no binding effect. We
   disagree. “Our court has long recognized that [Section 717r(b)] does not
   require that an order be a ‘final’ one; rather, the inquiry is whether a party
   has been ‘aggrieved’ by an order of the [FERC].” Energy Transfer Partners,
   567 F.3d at 139 (citing Atlanta Gas Light Co. v. Fed. Power Comm’n, 476 F.2d

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   142, 147 (5th Cir. 1973)). “Questions of whether a petitioner is aggrieved and
   whether the case is ripe for review are often nestled in clusters of fact and
   circumstance unique to the case.” Brooklyn Union Gas Co. v. Fed. Energy
   Regul. Comm’n, 190 F.3d 369, 374 (5th Cir. 1999). “A party has not been
   ‘aggrieved’ by a FERC decision unless its injury is ‘present and
   immediate.’” Id. (quoting Brooklyn Union Gas Co., 190 F.3d at 373). Simply
   put, a challenged order must be “definitive,” and a party must be faced with
   some “substantial effect” caused by the challenged order that further action
   by the FERC cannot remedy. Id. (quoting Atl. Gas Light Co., 476 F.2d at
   147).
           The FERC supports its position first by pointing to precedent
   indicating that orders that merely initiate agency proceedings are not ripe.
   See, e.g., TOTAL Gas & Power North America, Inc. v. Federal Energy Regulatory
   Commission, 859 F.3d 325 (5th Cir. 2017); Energy Transfer Partners, 567 F.3d
   at 141; Veldhoen v. U.S. Coast Guard, 35 F.3d 222, 225 (5th Cir. 1994); Atlanta
   Gas Light, 476 F.2d at 147. The FERC posits that this general rule should
   control because its order in this case has no substantial effect on Midship
   other than requiring Midship to participate in proceedings before the ALJ.
           But the FERC overstates the applicability of the authority it offers.
   Some of the cases it cites weighed finality only under the APA’s more
   general standards, not under the “aggrieved” standard utilized in the NGA
   or its predecessor statutes. See Veldhoen, 35 F.3d at 225; accord Federal Trade
   Commission v. Standard Oil Co. of California, 449 U.S. 232, 235–43 (1980).
   Others have little bearing because there were no FERC orders actually on
   review. See TOTAL Gas & Power, 859 F.3d at 328–32; accord Fed. Power
   Comm’n v. Metro. Edison Co., 304 U.S. 375, 381–82 (1938). Energy Transfer
   Partners, perhaps a closer case, is also distinguishable because the underlying
   order in Energy Transfer Partners merely alleged preliminary findings of
   violations that framed subsequent adversarial proceedings. See 567 F.3d at

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   141–42. In other words, the order at issue was akin to an initial pleading; it
   would have no lasting effect because the petitioners could disprove the
   preliminary findings alleged by FERC during the ensuing proceedings. Id.
   (quoting Standard Oil, 449 U.S. at 243–44).
          By contrast, the order Midship challenges requires an ALJ to make a
   definitive finding as to the “reasonable cost” of remediation. 177 F.E.R.C.
   ¶ 61,186 at *4. Midship argues that the FERC lacks authority under the
   NGA to dictate remediation costs, or effectively order damages, such that
   the FERC’s order is ultra vires—a “pure legal question[] that require[s] no
   additional factual development.” Gulfport Energy Corp., 41 F.4th at 679; cf.
   Cochran, 20 F.4th at 212–13 (noting that forcing a litigant to appear in an
   unconstitutionally constructed forum is an injury sufficient to merit
   immediate review). Moreover, once the “reasonable cost” of restoration is
   fixed by the ALJ, that fact would likely dictate the FERC’s ultimate
   decision, even though Midship may have no chance to contest the FERC’s
   decision on this basis—if, for example, the FERC never expressly
   referenced the “reasonable cost” finding in its ultimate order. We conclude
   that the challenged order is thus both “fit for review,” i.e., definitive, and in
   practical effect gives rise to hardship that is “sufficiently direct and
   immediate,” i.e., has a substantial effect on Midship, to warrant review.
   Gulfport Energy Corp., 41 F.4th at 679 (quoting Abbott Lab’ys, 387 U.S. at
   152); Energy Transfer Partners, 567 F.3d at 139; see Atlanta Gas Light, 476
   F.2d at 148 (holding that an interim order allowing a gas company to reduce
   deliveries to another company was reviewable because the order was
   “definitive in its impact upon the rights of the parties and threaten[ed]
   irreparable harm”).

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                                              2.
           The FERC asserts that its determination that the NGA empowers it
   to establish the reasonable cost of remediation is entitled to deference under
   Chevron. 2 “But before leaping into the Chevron two-step, we must determine
   whether the agency construction is of a form that warrants application of the
   framework at all.” Residents of Gordon Plaza, Inc. v. Cantrell, 25 F.4th 288,
   297 (5th Cir. 2022). This means that we must first determine whether “‘the
   agency interpretation claiming deference was promulgated in the exercise of
   [delegated] authority’ to make rules carrying the force of law.” Id. (quoting
   United States v. Mead Corp., 533 U.S. 218, 227 (2001)).
           Generally, formalized pronouncements of broad application, such as
   official rulemaking or adjudication, are entitled to Chevron deference. Mead
   Corp., 533 U.S. at 229–30. By contrast, “fact-bound inquir[ies] into the
   application of a regulation to a particular party” or “individual, ad hoc
   determination[s]” are not. Gordon Plaza, 25 F.4th at 297–98. The order
   Midship challenges falls into the latter category. After reciting the history of
   the dispute between Midship and Sandy Creek, the order stated:
           [D]espite general agreement as to the proper scope of the
           restoration work needed . . . , Midship and Sandy Creek Farms
           have not been able to agree on a specific plan or cost thereof.
           Due to the impasse . . . the [FERC] finds the most efficient
           way to ensure the required restoration moves forward . . . is to
           establish procedures before an administrative law judge to
           determine: (1) the methods and scope of work activities
           remaining in order to restore the Sandy Creek Farms property

           2
             One treatise describes the Chevron doctrine as the notion that “[a] reviewing
   court should accord considerable weight to an executive department’s construction of the
   statutory scheme it is entrusted to administer, and statutory interpretations by agencies
   with rulemaking powers deserve substantial deference.” 2 Am. Jur. 2d Administrative
   Law § 469 (2022) (footnotes omitted).

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          in accordance with the Certificate Order (tract GR-0338.000)
          and (2) the reasonable cost to complete such activities. While,
          as noted, the [FERC] cannot award damages, developing a
          record as to the necessary measures and their cost will assist us
          in evaluating what further remediation is required and what
          further steps to take to resolve the issues here.

   177 F.E.R.C ¶ 61,186 at *4 (footnotes omitted). By its very terms, the order
   is a quintessential “individual, ad hoc determination,” Gordon Plaza, 25
   F.4th at 297–98, of “what further steps to take to resolve the issues here,”
   177 F.E.R.C ¶ 61,186 at *4, that is not entitled to Chevron deference.
          Moreover, the FERC only supports its pronouncement that the
   NGA allows it to determine the “reasonable cost to complete” restoration
   efforts in circular fashion—by reciting the NGA. See id. at *4 n.26 (quoting
   15 U.S.C. § 717m(a)). But merely quoting the statute to support an agency’s
   reading of the same statute, to justify an ad hoc order no less, hardly
   “warrants application of the [Chevron] framework at all.” Gordon Plaza, 25
   F.4th at 297; see also Mead, 533 U.S. at 230 (noting that the “overwhelming
   number of our cases applying Chevron deference have reviewed the fruits of
   notice-and-comment rulemaking or formal adjudication”) (footnote
   omitted).
          Nor does weaker deference under Skidmore v. Swift & Co., 323 U.S.
   134 (1944), salvage the FERC’s reading of the NGA. This court accords
   Skidmore deference to “agency interpretations of statutes they administer
   that do not carry the force of law[.]” Luminant Generation Co., L.L.C. v.
   EPA, 675 F.3d 917, 928 (5th Cir. 2012) (citing Mead, 533 U.S. at 234–35).
   Skidmore deference is applied when an agency’s non-authoritative
   determinations “constitute a body of experience and informed judgment to
   which courts and litigants may properly resort for guidance.” Gordon Plaza,
   25 F.4th at 298 (quoting Skidmore, 323 U.S. at 140). The “fair measure of

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   deference to an agency administering its own statute has been understood to
   vary with circumstances, and courts have looked to the degree of the agency’s
   care, its consistency, formality, and relative expertness, and to the
   persuasiveness of the agency’s position.” Mead, 533 U.S. at 228 (footnotes
   and citations omitted). The last factor, persuasiveness, is the touchstone in
   determining how much to defer to an agency interpretation. Baylor Cnty.
   Hosp. Dist. v. Price, 850 F.3d 257, 261–62 (5th Cir. 2012) (quoting Skidmore,
   323 U.S. at 140); Luminant Generation, 675 F.3d at 928 (citing Mead, 533 U.S.
   at 228).
          As noted, the FERC’s reading of the NGA to allow it to determine
   “reasonable cost” of restoration is conclusory and grounded only on ad hoc
   reasoning that “developing a record as to the necessary measures and their
   cost will assist . . . in evaluating what further remediation is required and
   what further steps to take to resolve the issues” between Midship and Sandy
   Creek. 177 F.E.R.C ¶ 61,186, at *4. Given the lack of “thoroughness,”
   Mead, 533 U.S. at 228 (quoting Skidmore, 323 U.S. at 140), and the dearth of
   explanatory reasoning, there is little, if anything, in the order to persuade us
   of the correctness of the FERC’s interpretation of the NGA on this point.
   See Gordon Plaza, 25 F.4th at 298–99 (noting that an agency decision
   “lack[ing] the hallmarks of persuasion . . . is not entitled to Skidmore
   deference”). Accordingly, we afford no deference to the FERC’s reading of
   the statute.
                                         B.
          Satisfied that this dispute is ripe and that the FERC’s interpretation
   of its underlying authority under the NGA is not subject to deference, we
   turn to the merits of Midship’s appeal. Midship advances four arguments:
   (1) the NGA does not authorize the FERC to determine the reasonable cost
   of restoration; (2) the FERC lacks authority to order Midship to compensate

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   Sandy Creek; (3) any attempt by the FERC to order Midship to compensate
   Sandy Creek runs afoul of the Seventh Amendment and state law tort
   remedies; and (4) because the FERC cannot determine the reasonable costs
   of restoration, it cannot order an ALJ to do so. We need address only
   Midship’s first argument, as it is dispositive. 3
           “Agencies have only those powers given to them by Congress, and
   ‘enabling legislation’ is generally not an ‘open book to which the agency
   [may] add pages and change the plot line.’” West Virginia v. Env’t Prot.
   Agency, 142 S. Ct. 2587, 2609 (2022) (quoting Ernest Gellhorn & Paul
   Verkuil, Controlling Chevron Based Delegations, 20 Cardozo L. Rev. 989,
   1011 (1999)). Administrative agencies must ground their actions “in a valid
   grant of authority from Congress.” Brown & Williamson, 529 U.S. at 161. To
   determine “the authority that Congress has provided,” we examine an
   agency’s authorizing statutes. Nat’l Fed’n of Indep. Bus. v. Dep’t of Labor,
   Occupational Safety & Health Admin., 142 S. Ct. 661, 665 (2022).
           The FERC draws its authority to regulate Midship from the NGA.
   See 15 U.S.C. § 717. Specifically, the FERC is granted authority to:
           [i]nvestigate any facts, conditions, practices, or matters which
           it may find necessary or proper in order to determine whether
           any person has violated or is about to violate any provisions of
           this chapter or any rule, regulation, or order thereunder, or to

           3
             We lack jurisdiction to consider Midship’s second and third arguments because
   Midship did not raise them in its motion for rehearing before the FERC. NICOR Expl. Co.
   v. Fed. Energy Regul. Comm’n, 50 F.3d 1341, 1346–47 (5th Cir. 1995) (first quoting 15 U.S.C.
   § 717r(b); and then citing Tennessee Gas Pipeline Co. v. Fed. Energy Regul. Comm’n, 871 F.2d
   1099, 1107 (D.C. Cir. 1989)) (stating that the courts of appeal lack jurisdiction to consider
   objections to Commission orders not raised on rehearing before the FERC). And because
   the FERC does not contend that it could order an ALJ to determine the reasonable costs
   of remediation even if the FERC lacks authority to do so itself, we need not address
   Midship’s fourth issue.

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          aid in the enforcement of the provisions of this chapter or in
          prescribing rules or regulations thereunder, or in obtaining
          information to serve as a basis for recommending further
          legislation to the Congress.

   Id. § 717m(a). Further, “[t]he [FERC] shall have power to perform any and
   all acts, and to prescribe, issue, make, amend, and rescind such orders, rules,
   and regulations as it may find necessary or appropriate to carry out the
   provisions of this chapter.” Id. § 717o. Notably, the NGA is silent as to the
   FERC’s power to determine costs (reasonable or otherwise) of restoration.
          The FERC asserts that it needs to determine reasonable restoration
   costs in order to evaluate “what further remediation is required.” It argues
   that “[t]he reasonable cost of restoration methods is information ‘necessary
   or appropriate’” for the FERC to police Midship’s compliance with its
   certificate order. At essence, the FERC’s argument is that it has implied
   authority to establish the reasonable cost of restoration, derived from its
   express authority to regulate Midship through its certificate order. This
   argument is unavailing.
          The FERC can certainly enforce the terms of a certificate order, as
   the NGA states. Id. § 717m(a). And it can determine when an entity
   violates, or is about to violate, one of its orders. Id. But, as the commissioner
   who dissented from the order denying Midship a stay aptly observed,
          [t]he relevant certificate terms specify only an outcome—
          meaning whether Midship has or will violate those terms turns
          only on one finding: have the required outcomes (restoration
          of preconstruction contours and removal of construction
          debris) been achieved. Put simply, did Midship complete its
          tasks or not. And while the [FERC] oversees the restoration
          to ensure compliance, the cost of completing such compliance
          tasks, or for that matter the specific method by which those
          tasks are completed . . . are irrelevant. [Using a] painting

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          analogy, whether you paint the wall using a brush or a roller,
          and how much each method costs is of no concern to the
          [FERC] and lies outside [its] authority.

   Midship Pipeline Co., L.L.C., No. 22-60225, slip. op. at 3-4 (quoting 179
   F.E.R.C. 61,096, at *4). Thus, the FERC’s argument that it is “necessary”
   or “appropriate” under the NGA to “develop[] a record as to the necessary
   measures and their cost” in order to assist “in evaluating what further
   remediation is required,” 177 F.E.R.C. ¶ 61,186 at *4, not only has no explicit
   support in the NGA’s text but also lacks support in the context of this case.
   The first part of the FERC’s order (determining “the methods and scope of
   [restoration] work activities remaining”)—which Midship does not
   challenge—easily falls within the FERC’s grant of authority from Congress.
   The second part (setting “the reasonable cost to complete such activities”)
   does not.
          We hasten to add that our decision today does not circumscribe the
   ALJ’s ability to receive and consider evidence related to the cost or relative
   efficacy of competing methods of restoration as the ALJ fulfills the balance
   of the FERC’s investigatory order. In other words, it is not taboo for a
   witness to mention the cost of competing remedial measures as a basis for
   recommending one or the other, and it is not out-of-bounds for the ALJ to
   consider such evidence in determining “the methods and scope of work
   activities remaining in order to restore the Sandy Creek Farms property”
   consonant with Midship’s certificate order. 177 F.E.R.C. ¶ 61,186 at *4. Our
   holding is limited to proscribing the FERC’s directive that the ALJ
   affirmatively determine “the reasonable cost to complete such activities,” a
   power that the NGA does not confer upon the FERC.

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                                      III.
         “Agencies have only those powers given to them by Congress . . . .”
   West Virginia, 142 S. Ct. at 2609. The FERC’s interpretation of the NGA
   to give the agency power to determine “the reasonable cost” of remediation
   efforts “change[d] the plot line” of its enabling legislation, id., and was
   therefore erroneous. The FERC lacks such authority under the NGA, and
   it likewise lacked authority to order an ALJ to make such a determination
   indirectly. Accordingly, we VACATE that portion of the challenged order
   as ultra vires. The remainder of the order is REMANDED to the FERC
   for further proceedings.
                                   VACATED IN PART; REMANDED.

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