631 F. 2d 811 - Arizona Electric Power Cooperative Inc v. Federal Energy Regulatory Commission

Joel L. Greene and Richard H. Silverman, Phoenix, Ariz., entered appearances for Salt River Project Agricultural Improvement and Power District, intervenor in No. 77-1754.

Malcolm H. Furbush and Howard V. Golub, San Francisco, Cal., entered an appearance for Pacific Gas and Electric Co., intervenor in Nos. 77-1754, 77-1794, 77-1837 and 77-1844.

Robert J. Haggerty, Washington, D. C., entered an appearance for Southern Union Co., intervenor in Nos. 77-1754, 77-1794 and 77-1844.

J. Calvin Simpson, San Francisco, Cal., entered an appearance for The People of the State of California, et al., intervenors in No. 77-1794.

C. H. McCrea, Las Vegas, Nev., entered an appearance for Southwest Gas Corp., intervenor in Nos. 77-1837 and 77-1844.

Edward J. Grenier, Jr., Richard P. Noland and William H. Penniman, Washington, D. C., entered appearances for General Motors Corp., intervenor in No. 77-1844.

Before BAZELON, Senior Circuit Judge, and WALD and EDWARDS, Circuit Judges.

Opinion PER CURIAM.

At issue in these consolidated cases are a June 21, 1977 order of the Federal Power Commission, now the Federal Energy Regulatory Commission, and an August 19, 1977 Commission order denying rehearing. Those two orders found that El Paso Natural Gas Company (El Paso) violated its interim curtailment plan and § 4(d) of the Natural Gas Act (the Act) by delivering natural gas to two of its California customers, Southern California Gas Company (SoCal) and Pacific Gas and Electric Company (PG&E), for injection into storage fields. The Commission found a violation because the gas was delivered under Priority Two (P2) of El Paso's five-priority curtailment plan, despite the fact that the plan made no provision for P2 deliveries for injection into storage. The orders also instituted hearings at the Commission to determine whether those deliveries unlawfully deprived other El Paso customers of gas.

These same parties are before the court in a related set of cases, the Load Equation Cases, Nos. 75-1952, et al., --- U.S.App.D.C. ----, 631 F.2d 802 (D.C.Cir. May 22, 1980), also decided today. We will not repeat the discussion in those cases of the relationship between the parties or how El Paso's curtailment plan operates, except as necessary to resolve the separate issues raised in these cases.

We affirm the Commission's conclusion that El Paso violated § 4(d). We also reject the argument of two of El Paso's east-of-California (EOC) customers, Arizona Electric Power Cooperative, Inc., and the City of Willcox, Arizona (collectively AEPCO), that the issues they raise relating to the proper remedy for El Paso's unauthorized action are ripe for review.

El Paso's interim five-priority curtailment plan was approved by the Commission and made part of El Paso's tariff as the result of FPC Opinions 634 and 634-A, 48 F.P.C. 931 & 1369 (1972). None of the five priorities, or any other provision of El Paso's tariff, authorized deliveries for injection into storage under P2 or any other priority. El Paso nevertheless honored nominations from SoCal and PG&E for deliveries of gas for injection into storage under P2 without filing a proposed amendment to its tariff or otherwise asking the Commission whether such deliveries were proper. Storage injection deliveries under P2 for El Paso were not approved by the Commission until FPC Opinion 697, 51 F.P.C. 2053, modified, Opinion 697-A, 52 F.P.C. 1876 (1974), which was not effective until July 1, 1977.

In November 1975 AEPCO filed a complaint with the Commission challenging El Paso's P2 storage injection deliveries to SoCal and PG&E under § 4(c) of the Act,1 which requires all natural gas companies to file tariffs showing their delivery practices with the Commission. AEPCO also alleged that El Paso violated the § 4(b)2 prohibitions against undue preferences and unreasonable differences in services.

As the remedy for its § 4(c) claim, AEPCO asked for a Commission order prohibiting El Paso's P2 storage injection deliveries to SoCal and PG&E. Regarding its § 4(b) claim, AEPCO stated:

the FPC should order El Paso to correct the injustice already suffered by east-of-California customers by reducing future deliveries to its California distributors in the amount of the storage volumes unlawfully provided and thereby return such volumes to the customers from whom they have been unlawfully diverted. AEPCO further respectfully submits that such action can be taken without hearing, except to the extent that a hearing may be necessary in order to establish the exact amount of gas unlawfully taken and appropriate procedures for its return.

J.A. 8.

The Commission decided AEPCO's complaint on a stipulated record.3 It found § 4(d), which requires Commission approval for tariff changes,4 to be "more pertinent" than § 4(c) to AEPCO's first contention and relied on § 4(d) in finding El Paso's delivery practice unlawful; as noted above, the Commission also concluded that hearings were necessary to decide AEPCO's § 4(b) claim. El Paso and SoCal seek review of the Commission's determination that El Paso violated § 4(d), and AEPCO challenges the Commission's conclusion that hearings are necessary to determine whether AEPCO or other El Paso customers were unlawfully deprived of gas because of El Paso's unlawful P2 storage injection deliveries.

El Paso attempts to justify its delivery of storage injection gas to SoCal and PG&E under P2 on the ground that the "contemplated" end-use of the gas fell within P2. El Paso concedes that nothing in Opinions 634 and 634-A authorized those deliveries. It nevertheless argues that because the priorities set forth in its interim curtailment plan were based on end-use, it could reasonably interpret that plan to allow for P2 storage injection deliveries based on nominations from its California customers that stated the gas would be used to satisfy P2 needs.

SoCal bolsters that argument by asserting that Opinions 634 and 634-A are internally inconsistent. In those opinions the Commission required that withdrawals from storage by SoCal and PG&E be counted as an independent source of supply for them in computing their needs under El Paso's curtailment plan; the Commission refused, however, to adjust that computation to reflect the fact that some of the gas already in storage when those opinions were issued in 1972 came from El Paso. SoCal asserts that refusal created an "irreconcilable inconsistency" in how El Paso's curtailment plan was to operate and argues that when El Paso accepted the P2 storage injection nominations, it was simply following the maxim that inconsistent provisions in decisions requiring compliance should be reconciled in a reasonable fashion.5

Finally, El Paso relies on Standard Oil Co. v. DOE, 596 F.2d 1029 (Em App.1978), to support its P2 storage injection deliveries. In Standard Oil, companies confronted with ambiguous Federal Energy Administration (FEA) regulations asked for and received guidance from FEA auditors and compliance officers. The court rejected the Department of Energy's later contrary interpretation, in part because "the statements by the FEA auditors and other lower level officials are entitled to weight in determining the thoroughness of the FEA's consideration of its regulations, the validity of its reasoning, and its consistency with earlier and later pronouncements." 596 F.2d at 1056. El Paso focuses on the 1972 testimony of a Commission staff member in the hearings on El Paso's interim curtailment plan to justify its decision to honor the P2 storage injection nominations of its California customers under the Standard Oil rationale. El Paso also reasons that Standard Oil supports the actions it took relying on that testimony, because the staff member's statements were "consisten(t) with (the Commission's) . . . later pronouncements" on curtailment plans, specifically FPC Order 467-B, 49 F.P.C. 583 (1973), which dictated that customer storage injection nominations were to be included in P2.

We reject the argument that a pipeline may make deliveries not allowed by its curtailment plan simply because the expected end-use of that gas appears to be consistent with the plan.6 See Pennsylvania R.R. v. International Coal Mining Co., 230 U.S. 184, 197, 33 S.Ct. 893, 896, 57 L.Ed. 1446 (1913) (a rate tariff filed with the Interstate Commerce Commission, "so long as it was of force, was . . . to be treated as though it had been a statute," binding upon the filing party as well as its customers). The purpose of § 4(d) is to provide public notice of the services a pipeline actually provides. Section 4(d) unequivocally states that unless the Commission otherwise orders, "no change" shall be made in a tariff "except after thirty days' notice to the Commission and to the public." 15 U.S.C. § 717c(d) (1976) (emphasis supplied). AEPCO did not learn of El Paso's P2 storage injection deliveries to SoCal and PG&E until long after they began; AEPCO promptly complained to the Commission when it learned of that practice. Section 4(d) would become meaningless if we accepted El Paso's argument that it can effectively change the terms of its filed tariff without notice to the Commission and the public.

We intimate no view onwhether SoCal is correct in asserting that Opinions 634 and 634-A are internally inconsistent; we reject SoCal's argument, however, that it and El Paso could cure on their own what SoCal asserts was "an irreconcilable inconsistency." There may be circumstances where a pipeline and some of its customers may remedy minor apparent ambiguities or inconsistencies in a tariff or in Commission orders, but the asserted internal conflict in Opinions 634 and 634-A and the response of El Paso and its California customers were clearly significant enough to require either an explicit request for guidance from the Commission or an amendment to El Paso's tariff.

We also conclude that the staff testimony relied upon by El Paso to support its P2 storage injection deliveries was far removed from the type of specific guidance given by FEA in Standard Oil after the companies there expressly brought the regulatory ambiguity to the FEA's attention. Here, neither El Paso nor its California customers asked for guidance from the Commission, either formally or informally. And the staff testimony was in fact not consistent with the Commission's later pronouncement on the question, Order 467-B.7 The staff witness stated that the ultimate use of the injected gas should determine its priority, specifically agreeing that if used for residential purposes, it would fall within P1;8 Order 467-B explicitly provided that customer storage injections should fall within P2.9

AEPCO admitted at oral argument that the actual end-use of the storage gas at issue has not been determined and conceded in its brief (AEPCO Br. 14) that the Commission has not yet denied any of the relief AEPCO seeks. We therefore conclude that AEPCO's petition for review is premature.10

The Commission has begun a broad inquiry into the issues raised by AEPCO's complaint. As the Commission put it, "the investigation herein instituted is charged with the complex task of reconstructing the actual impact of El Paso's unauthorized delivery of its California customers' respective storage injection requirements." J.A. 110. And Commission counsel at oral argument asserted that the Commission can and will consider AEPCO's claim for restitution as a possible remedy.

After the Commission's inquiry is completed, judicial review will be available. We therefore conclude that AEPCO's allegations and its claim for relief can best be resolved after the Commission's hearings are concluded. Chicago & Southern Air Lines, Inc. v. Waterman Steamship Corp., 333 U.S. 103, 113, 68 S.Ct. 431, 437, 92 L.Ed. 568 (1948) (administrative orders are not properly subject to judicial review unless "they impose an obligation, deny a right or fix some legal relationship as a consummation of the administrative process").

The orders of the Commission here under review are affirmed and the petitions for review are dismissed.