Mobil Oil Exploration and Producing Southeast, Inc. v. Federal Energy Regulatory Commission

885 F.2d 209

Opinions

JOHNSON, Circuit Judge:

Footnotes

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Petitioners, joint opponents of the Federal Energy Regulatory Commission’s Order Nos. 451 and 451-A, seek review by this Court contending that the Commission exceeded the scope of its authority in promulgating those Orders. For the reasons cited herein, we agree and vacate the orders complained of.

I. AN HISTORICAL PERSPECTIVE

The instant controversy finds its genesis in the enactment of the Natural Gas Act of 1938 (NGA),¹ which was Congress’ first attempt to provide a workable system of natural gas regulation. Congress, aware of the regulatory gap precipitated by a lack of state power to control interstate pipelines, undertook efforts to bridge that gap through the enactment of the NGA. The regulatory policies of the NGA, which were basically designed to deal with what was considered the burgeoning monopoly power of the pipelines,² had significant effects on the future regulation of the nation’s natural gas industry.

The provisions of the NGA called for cost based price ceilings for the “sale in interstate commerce of natural gas for resale.”³ Section 4(a) of the NGA⁴ provided that the standard for first sale natural gas pricing would be a “just and reasonable” rate calculated in accordance with traditional public utility method principles. The public utility pricing methodology, which allowed pipelines to recover only their actual costs plus a reasonable rate of return and depreciation, was a consumer oriented approach designed to preclude the possibility of pipeline windfalls. In essence, Congress had, through the pricing provisions of the NGA, chosen consumer protection as the overriding objective in the implementation of the nation’s first natural gas regulatory scheme. See, e.g., FPC v. Hope Natural Gas Co., 320 U.S. 591, 610, 64 S.Ct. 281, 291, 88 L.Ed. 333 (1944) (“The primary aim of [the NGA] was to protect consumers against exploitation at the hands of natural gas companies.”).

The Federal Power Commission (the “Commission”)⁵ was authorized to administer the NGA’s provisions. While the Commission initially construed the provisions of the NGA to regulate gas sales at the down stream end of interstate pipelines,⁶ the Supreme Court, in Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035 (1954), directed the Commission to regulate pricing upstream at the wellhead. In so doing, the Supreme Court interpreted the NGA as “[giving] the Commission jurisdiction over the rates of all wholesales of natural gas in interstate commerce, whether by a pipeline company or not and whether occurring before, during, or after transmission by an interstate pipeline company.” Id. at 682, 74 S.Ct. at 799 (footnote omitted) (emphasis supplied).

Responding to the Supreme Court’s directive in Phillips, the Commission began regulating rates for individual producers in accordance with the NGA’s just and reasonable standards through the application of traditional public utility rate setting principles. Because the Commission initially undertook this task by calculating producer rates on an individualized basis, the Commission soon became unable to keep up with its workload.⁷ Accordingly, the Commission shifted from its individualized rate setting scheme to an area rate regulation system whereby producer rates were calculated on the basis of a particular region’s average production costs, average investment costs, and average rates of return. See Statement of General Policy 61-1, 24 F.P.C. 818 (1960). While the Commission’s new regional system preserved the earlier method of calculating prices on the basis of historical costs rather than projected Costs, it established a two-tiered rate structure for each area regulated. The area rates, one for “old gas” and one for “new gas” were governed by a Commission set control date. Wells drilled after the control date were priced at a “new gas” rate and wells drilled before the control date were priced at an “old gas” rate. The new pricing system, known as “vintage pricing” or “vintaging”⁸ was based on the theoretical assumption that for gas that was already flowing, “price could not serve as an incentive, and since any price above average historical costs, plus an appropriate return, would merely confer windfalls.” Permian Basin Area Rate Cases, 390 U.S. 747, 797, 88 S.Ct. 1344, 1375, 20 L.Ed.2d 312 (1968). The Supreme Court, in the Permian Basin Area Rate Cases, 390 U.S. 747, 88 S.Ct. 1344, 20 L.Ed.2d 312 (1968) affirmed the Commission’s area rate system concluding that not only did the Commission’s new regional system yield reasonable prices, but that the Commission’s prior individualized approach had become unworkable. Id. at 777, 88 S.Ct. at 1365.

With the implementation of the two-tiered vintage pricing system, the Commission hoped that its higher “new gas” prices would stimulate the development of new gas reserves while at the same time ensuring continued consumer protection through lower “old gas” prices. Significantly, however, the Commission was empowered only to regulate the wellhead price of natural gas to be sold for resale in the interstate market. Rates on the intrastate market on the other hand remained largely uncontrolled. The result of interstate only regulation was that prices for gas sold on the interstate market were kept relatively low while prices for gas sold on the intrastate market continually rose as demand rose. Natural gas shortages increased as a result of sharp pipeline delivery curtailments on the lower priced interstate market.

In an effort to relieve the disturbing shortages, the Commission abandoned the area rate pricing system in favor of a national rate pricing approach. See Southern Louisiana Area Rate Proceeding, 46 F.P.C. 86, 110-111 (1971); National Rates for Natural Gas, 51 F.P.C. 2212 (1974) (Opinion No. 699). The new national rate approach applied to gas produced from all wells that were drilled after January 1, 1973, and applied across the board to independent producers, pipelines and pipeline affiliates. Additionally, the Commission, in order to ameliorate production shortages, abandoned its prior pure historical cost based approach in favor of an incentive price approach in order to stimulate development of new reserves. National Rates for Natural Gas, 52 F.P.C. 1604, 1615-18 (1974) (Opinion No. 699-H) Concurrently, the Commission abandoned, at least temporarily, vintage pricing.

Albeit well intentioned, the Commission’s efforts to correct shortages on the interstate natural gas market were inadequate. Recognizing the need to take action, and after some nineteen months of heated debate between the members of Congress who favored deregulation and those who did not,⁹ Congress enacted the Natural Gas Policy Act (NGPA).¹⁰ In the NGPA, Congress gave the Commission power to do what the Commission had been unable to do before — regulate wellhead prices in the intrastate market. As a compromise measure, the NGPA contemplated the eventual deregulation of certain categories of natural gas, provided for the gradual price increase of all categories of natural gas, and authorized Commission regulation of natural gas transportation between interstate and intrastate markets.¹¹

The NGPA established a pricing system which was based, in part, on the genre of the gas to be regulated, namely, “old gas”, “new gas,” and “high cost gas.” More specifically, the NGPA set price ceilings on gas depending on when or how the gas was produced. Newer, harder to produce gas commanded higher price ceilings while older gas already under production was pegged with lower price ceilings. Congress had, through the pricing provisions of the NGPA, sought to balance the interests of the consumer by keeping old gas prices low while at the same time encouraging the development of new reserves through incentive pricing.¹²

Recognizing that for certain categories of gas, the new NGPA price ceilings might be set too low, Congress provided an escape valve for the Commission. NGPA sections 104, 106 and 109 authorized the Commission to raise prices in accordance with traditional NGA “just and reasonable” principles for three particular categories of gas. Similarly, section 110(a)(2) appeared to give the Commission the authority to raise price ceilings for the other five categories of gas enumerated in the NGPA. Congress, however, declined to give the Commission the authority to mandate lower price ceilings than those provided for by the NGPA.

The effects of the NGPA were bittersweet. Clearly, the NGPA’s regulatory scheme ameliorated, if not eliminated, the disparity between the interstate and intrastate natural gas markets which existed prior to the passage of the Act. Also, the increased prices provided by the NGPA stimulated increased production of natural gas by providing producers with the incentive to develop additional natural gas supplies. Accordingly, natural gas shortages were alleviated. On the down side, the NGPA’s new pricing system created market distortions because it priced categories of natural gas at various levels. Additionally, during the gas shortages of the 1970s and early 1980s, many pipelines entered into take or pay contracts which commanded high prices for large volumes of gas. Later, after the NGPA’s provisions had effectively cured earlier shortages, gas became more plentiful and prices became lower. Producers nevertheless continued seeking higher than market prices for gas covered by earlier executed take or pay contracts. As one consequence of higher prices, pipelines had difficulty selling gas.¹³ An oversupply resulted along with the inevitable negative economic consequences flowing therefrom. Producers curtailed exploration and development of new reserves. Pipelines were burdened with substantial take or pay obligations. In sum, as a result of all of these circumstances brought on by the implementation of the NGPA, the natural gas market became fraught with distortions.

In an initial attempt to correct these market distortions, the Commission issued a Notice of Inquiry wherein the Commission proposed to increase old gas prices. Notice of Inquiry, Impact of the NGPA on Current and Projected Natural Gas Markets, IV F.E.R.C. Stats. & Regs. ¶ 35,512 at 35,-560, 47 Fed.Reg. 19,157 (1982). Specifically, the Commission’s attempt in that regard was ultimately abandoned because of congressional opposition. See S. Res. 331, 97th Cong., 2d Sess. (1982). Some three years later on November 18, 1985, the Secretary of Energy (the “Secretary”), pursuant to Section 403 of the Department of Energy Organization Act,¹⁴ tendered to the Commission a notice of proposed rulemak-ing which, in turn, ultimately prompted the Commission’s promulgation of Order No. 451. The Secretary, in his proposal, advanced the argument that the Commission’s existing pricing scheme for old gas inhibited the production of vast reserves of old gas, encouraged the importation of oil and gas, and promoted higher prices to consumers. Significantly, the Secretary admitted that while legislative decontrol of gas prices would be the optimal solution for the problems caused by the old gas pricing structure, until such time as Congress did institute deregulation of old gas, the initiatives which eventually were embodied in Order No. 451 would provide an interim solution.

After notice and comment rulemaking and a two day public conference, the Commission issued Order No. 451 on June 6, 1986. The Commission, in Order No. 451, had adopted the Secretary’s proposal with some modifications. In Order No. 451, the Commission collapsed the vintaging system which had prevailed under the NGPA and applied a replacement cost methodology to set an above market, purportedly “just and reasonable” price ceiling applicable to all categories of old gas. Thus, the Commis sion had essentially achieved de facto deregulation of old gas.¹⁵ First sellers of section 104 and section 106(a) gas were now able to charge up to the maximum lawful price, if the price were allowable under a contract entered into after July 18, 1986. Additionally, the Commission determined in Order No. 451 that the contractual authority for the increased sales prices of section 104 and section 106(a) gas was to be found in indefinite price escalator clauses present in existing contracts. The Commission, while acknowledging that the new price ceiling exceeded existing market prices, contended that market forces would reduce the actual price paid for old gas to levels consistent with the NGA’s consumer protection mandate. Further, the Commission concluded that sections 104(b)(2) and 106(c) of the NGPA gave the Commission sweeping authority to raise old gas prices, and that there was no requirement that the Commission find the present gas prices unreasonable before raising them.¹⁶ Nevertheless, in Order No. 451, the Commission specifically found that the existing pricing scheme with respect to old gas was, in fact, unjust and unreasonable because it contributed to serious market distortions and thwarted gas reserve replacement.¹⁷

In Order No. 451, and its successor, Or der No. 451-A,¹⁸ the Commission prohibited the automatic collection of the new higher ceiling price for old gas explicitly acknowledging that the new ceiling would yield unjust and unreasonable prices. Order No. 451-A at 128. To prevent such a result, the Commission provided for a good faith negotiation (GFN) procedure governing price increases.

The GFN process, which can only be initiated by a producer, consists of three steps. Step One allows a producer to request a pipeline to nominate the price at which the pipeline would be willing to continue buying old gas under any existing contract.¹⁹ Step Two requires the pipeline to nominate the maximum price up to the ceiling price it would be willing to pay for the old gas if it wishes to maintain the contract. During Step Two, the pipeline also has the prerogative to request the producer to nominate a price at which the producer would be willing to continue sales of any gas (old or new) under any other existing multi-vintage contracts. Finally in Step Three, the producer has the prerogative to nominate a price for gas covered by the pipeline’s Step Two request. During Step Three, the producer then may also request that the pipeline nominate a price for any old gas included in the multi-vin-tage contracts designated by the pipeline in Step Two.

As seen above, the producer (in Step One) is vested with the unilateral right to initiate the GFN process.²⁰ In the event that the pipeline (in Step Two) nominates anything less than the new, above market ceiling price for old gas as provided for in Order No. 451, the producer has an additional alternative: the producer has the unilateral right to terminate the existing sales contract, receive automatic abandonment of the underlying sales obligation, and require the contracting non-open access pipeline to transport the released gas to new purchasers. To exercise its unilateral right to terminate the contract accordingly, the producer must provide the former pipeline purchaser with thirty days notice of contract termination, and must comply with certain requirements governing the subsequent sale of the released gas. In Step Three, if the producer does not nominate a price covered by the pipeline’s Step Two request, the pipeline may terminate its purchases of all or part of the gas named in its request.

The joint opponents, petitioners herein, challenged the provisions of Order No. 451 through rulemaking comments and rehearing requests. The petitioners contended that the Commission did not have authority to adopt the Secretary’s proposal because it 1) effectively deregulated old gas and eliminated vintaging contrary to congressional intent; and 2) used replacement costs as the starting point for the calculation of the new price ceilings on the old gas. The petitioners additionally asserted that current market conditions, specifically the surplus of natural gas, did not justify the need for such severe measures. Additionally, the petitioners objected to the Commission’s failure to effectively address the problem of high cost take or pay contracts in its promulgation of Order No. 451. The petitioners complained that unless the Commission made the problem “take or pay” contracts market responsive, a tremendous increase in the old gas price ceiling would exacerbate the already serious problem and would ultimately result in higher consumer prices. Finally, the petitioners assert that the Commission’s desire to protect against premature abandonment of certain old gas production and stimulate additional production from certain flowing gas reserves could be achieved through alternative measures and in a far less costly manner.²¹

The Commission rejected the contentions of the petitioners and, on December 15, 1986, the Commission, by a unanimous vote, issued Order No. 451-A denying petitions for rehearing of Order No. 451. Thereafter, petitioners filed for review by this Court of the Commission’s Order Nos. 451 and 451-A.

II. DISCUSSION

The petitioners object to the pricing, abandonment, take or pay and transportation components of Order Nos. 451 and 451-A. We will address each objection in turn.

A. Pricing

Perhaps the most salient and controversial provision of Order No. 451 is the Commission’s new pricing structure for old gas. In establishing this new pricing structure, which, as mentioned previously, collapses the previous vintage system and sets a single higher than market ceiling price on old gas, the Commission relies on the “just and reasonable” standard articulated in sections 104(b)(2) and 106(c) of the NGPA. The petitioners strenuously argue that the Commission’s reliance on sections 104(b)(2) and 106(c) as justification for raising ceiling prices on old gas is misplaced, and assert that the Commission has ignored congressional intent and exceeded its authority by allowing for de facto deregulation of old gas. We are constrained to agree.

An examination of the legislative history of the NGPA reveals that its passage was the result of some nineteen months of heated Capitol Hill debates on the issue of whether the natural gas industry should be deregulated.²² As discussed above, the NGPA was Congress’ response to natural gas shortages precipitated by the Commission’s lack of regulatory authority over the intrastate market. The NGPA, as recognized by the Supreme Court in Public Serv. Comm’n of the State of New York v. Mid-Louisiana Gas Co., 463 U.S. at 331, 103 S.Ct. at 3031, was the result of congressional compromise of two “strong, but divergent” positions with regard to the optimal strategy for stimulating increased production of natural gas without higher consumer prices. As we have previously recognized, the essence of the NGPA compromise was the adoption of “an incentive-based approach to rate-setting for gas production, providing substantially higher prices for ‘new’ gas than was currently available [while ensuring] consumer protection [through] lower prices on flowing gas, providing only limited future price deregulation in 1985, and extending price controls to intrastate sales of gas.” Pennzoil v. FERC, 645 F.2d 360, 367 (5th Cir.1981) (footnotes omitted).

In that regard, we are persuaded that Congress deliberately chose to maintain lower old gas prices in order to “[concentrate] the rewards of higher prices where they are most needed — on the development of new, high cost gas” and to elicit “[t]he maximum supply response at a minimum cost to consumers.” 124 Cong. Rec. S.14869 (daily ed. Sept. 11,1978) (Remarks of Sen. Jackson). Further, remarks made by legislators during the NGPA debates support the conclusion that Congress did not intend for the Commission to abrogate, as Order No. 451 has done, the NGPA prescribed pricing structure. See, e.g., 124 Cong. Rec. 28,884 (1978) (Remarks of Sen. Hart: “[Consumers should be protected by regulations which prevent the price of old, inexpensive gas from rising”); 124 Cong. Rec. 28,865 (1978) (Remarks of Sen. Do-menici: Elimination of vintaging and deregulation of old gas “not doable” or “ever suggested”).

While we do not suggest that the Commission’s contentions that the disorder in the natural gas market has resulted, at least in part, from the NGPA’s vintage pricing structure which compelled natural gas producers to sell gas at below replacement costs are misguided, we nevertheless are constrained to recognize what we perceive to be a clear congressional intent to preserve the old gas pricing provisions of the NGPA. The Commission contends, that in promulgating Order No. 451, it has preserved the intent of Congress to protect consumers from higher prices. The Commission argues that, even though it has raised the price ceiling for old gas greatly in excess of current competitive market levels, market forces will nevertheless eventually act to hold old gas prices down. Further, the Commission reasoned that Order No. 451 would cause more old gas to be brought into the market place and that the increased volume of old gas in the market would bring pressure upon the existing sales of high priced new gas and that, as a competitive matter, new gas prices (or quantity of sales) would be reduced. Consequently, according to the Commission, these circumstances would more than offset the increased prices charged for old gas under Order No. 451’s new high ceiling.

The Commission, in glossing over the mandates of the old gas pricing provisions of the NGPA, has attempted to rely on a somewhat ingenious application of the plain meaning rule²³ of statutory construction to implement its own scheme through an expansive reading of its authority under NGPA sections 104(b)(2) and 106(c). On rehearing, the Commission’s own words betray its logic:

[T]he Commission recognizes that section 104(b)(1) of the NGPA was intended to directly incorporate the just and reasonable rates, and thus the cost-based prices according to vintage, in effect at the time of the NGPA’s enactment. Further, the Commission agrees that Congress considered this provision for old gas prices to be a significant feature of the NGPA’s design, intended to mitigate the effects on consumers of allowing higher prices for new gas_ However, ... the Commission [has not] found any legislative history whatsoever on section 104(b)(2), or the virtually identical section 106(c) and 109(b)(2), that raises any doubt about its plain meaning. If Congress had intended old gas prices to be forever subject to the ceilings in effect when the NGPA was enacted, ... sections 104(b)(2) and 106(c) would not have been included in the NGPA.

Order No. 451-A at 11-12 (footnote omitted). As we view the above language, Congress’ intent was, as it has been in the past, to protect the interests of the consumer through the incorporation of a vintaged old gas pricing scheme “as a significant feature of the NGPA’s design. ” Id. (emphasis supplied).

We agree with the Commission that Congress did not intend, through enactment of the NGPA, to “render the Commission impotent in effectuating its statutory responsibility to serve the public interest.” Respondent’s Brief at 33. We are also compelled to observe, however, that Congress likewise did not intend, through enactment of the NGPA, to render the Commission omnipotent. Although sections 104(b)(2) and 106(c) do vest the Commission with the authority to raise the NGPA’s ceiling prices in accordance with the “just and reasonable” standards of the NGA, this authority does not translate into unfettered discretion.²⁴ For the Commission to jettison a “significant feature of the NGPA’s design” by abrogating the vintage pricing structure, represents, in our view, an improper exercise by the Commission of its limited authority to raise ceiling prices under NGPA sections 104(b)(2) and 106(c). As such, it is an untenable, albeit arguably meritorious,²⁵ solution to the problem of market distortion in the natural gas industry. More simply put, the Commission has exceeded the scope of its authority under the NGPA.²⁶

B. Abandonment

When Congress enacted the NGPA, it retained, for most “committed or dedicated” natural gas, the abandonment requirements of Section 7(b) of the NGA.²⁷ Under the Commission’s Order No. 451, a producer may, in the event of unsuccessful good faith negotiation, receive automatic abandonment by executing a new sales agreement with a new purchaser and by providing the former pipeline purchaser with at least thirty days notice of contract termination. Thus, the Commission essentially has authorized “pre-granted” abandonment. The controlling regulation, found at 18 C.F.R. § 157.301(b), is captioned “Pre-granted abandonment” and provides that “[a]ny first seller who sells natural gas under the blanket certificate authority of paragraph (a) of this section is authorized to abandon the sale upon termination of the contract under which the sale is made.”

The petitioners argue that the automatic abandonment procedures promulgated by the Commission amount to a flagrant and unacceptable evasion by the Commission of its regulatory responsibilities under Section 7(b) of the NGA. Further, the petitioners argue that by allowing abandonment determinations to “turn on producer discretion” and by precluding pipeline challenge to producer abandonment and subsequent fact-specific Commission review, the Commission has exceeded its authority under the NGA. The petitioners contend that through the blanket abandonment provisions adopted in Order No. 451, the “Commission withdrew its regulatory presence and allowed abandonment [to turn on] virtually absolute unilateral producer discretion, as guided by economic self-interest.” Petitioner’s Brief at 41.²⁸ The Commission, on the other hand, cites Associated Gas Distributors v. FERC, 824 F.2d 981, (D.C.Cir.1987), cert. denied sub nom. Interstate Natural Gas Assoc. v. FERC, — U.S. -, 108 S.Ct. 1468, 99 L.Ed.2d 698 (1988), for the proposition that there is “no procedural objection to the Commission’s identification of circumstances, in an otherwise valid rulemaking, which automatically trigger its approval of abandonment....” Id. at 1015 n. 17 (citations omitted).

The petitioners point to the “after due hearing” language of section 7(b) as support for their argument that the Commission is obligated by the plain language of the statute to conduct a case specific review regarding abandonment. The Commission on the other hand contends that pre-granted abandonment in the context of Order No. 451 serves the overall public interest by ensuring that old gas is kept flowing to a willing purchaser. Further, the Commission disputes the petitioners’ “after due hearing” argument by citing Kansas Power & Light Co. v. FERC, 851 F.2d 1479 (D.C.Cir.1988), for the proposition that, even in abandonment cases, “it is well established that the Commission need not hold an evidentiary hearing when no issue of material fact is in dispute.” Id. at 1483. The Commission argues that the abandonment provisions of Order No. 451 represent Commission policy that the propriety of abandonment is governed by a balancing of the needs of current gas consumers being served by the gas reserves with the benefits that would be conferred on the natural gas market as a whole if these reserves were released from dedication.²⁹

The pre-grant of abandonment runs contrary to the instruction of the Supreme Court in United Gas Pipe Line Co. v. McCombs, 442 U.S. 529, 99 S.Ct. 2461, 61 L.Ed.2d 54 (1979). In McCombs, the Supreme Court reversed a court of appeals' decision which held that, upon depletion of reserves, a producer may abandon sales without obtaining prior Commission approval. The Supreme Court concluded that such abandonment, without prior Commission approval, would, in effect, allow producers to determine when abandonment would be appropriate. This result, the Court reasoned, was inconsistent with congressional intent. The Commission distinguishes the McCombs case by noting that in the instant case, prior abandonment approval has, in fact, been granted by the Commission. We are not persuaded, however, that such a distinction is helpful to the Commission’s argument. Rather, it appears that the pre-grant of abandonment contemplated by Order No. 451 would, as in the McCombs case, allow a producer, for all practical purposes, to control abandonment through the largely one sided GFN procedure.

In Public Serv. Comm’n of the State of New York v. FPC, 511 F.2d 338 (D.C.Cir.1975), the D.C. Circuit emphasized that “[t]here may be reason for the legislature to enact a deregulation for the natural gas industry, but so long as it prescribes a system of regulation by an agency subject to court review the courts may not abandon their responsibility by acquiescing in a charade or a rubber stamping of nonregulation in agency trappings.” (citations omitted). Id. at 354. Accordingly, we are constrained to conclude that, in the instant case, the Commission has abdicated its responsibility under Section 7(b) of the NGA by providing for an across the board, pre-authorized abandonment provision. Surely such abandonment procedure, being altogether in the producer’s control and which may be implemented only at the behest of the producer, would be used only when such utilization would serve the producer’s economic interest. As the Supreme Court noted in United Gas Pipeline Corp. v. McCombs, 442 U.S. 529, 99 S.Ct. 2461, 61 L.Ed.2d 54 (1979), the absence of provisions for factual inquiry into the circumstances of an abandonment allows for the “abandonment determination [to] rest, as a practical matter, in the producer’s control, a result clearly at odds with Congress’ purpose to regulate the supply and price of natural gas.” Id. at 539, 99 S.Ct. at 2467 (citations omitted).³⁰

C. Take or Pay

The take or pay problem was born during the 1970s when critical shortages of natural gas allowed producers to virtually dictate the terms and conditions of contracts for sale of natural gas to pipelines. During those years, the prevailing thought was that natural gas supply shortages would continue for quite some time and pipelines were frequently unable to procure enough gas to meet consumer demand. As a result, pipelines entered into take or pay contracts which typically required the pipeline to take a specified volume of gas from the producer or, in the event the gas was not taken, pay for the specified volume agreed to be taken but not taken. Additionally, take or pay contracts frequently contained automatic price escalation clauses which obligated the pipeline to pay either the highest price allowed by law or the highest price paid in a specific geographic area.

Pipelines today are faced with a market vastly different from the market in the 1970s. Conditions now are such that numerous pipelines simply are unable, in many circumstances, to take the quantity of gas required by existing take or pay contracts. Additionally, the natural gas market of today is characterized by oversupply, substantially lower rates for natural gas, and competition. Accordingly, pipelines with high liability take or pay contracts must pay prices for natural gas that are substantially in excess of current market prices. The end result is that both interstate and intrastate pipelines are currently burdened with take or pay contracts which potentially threaten their very existence as public utilities. At stake may be the spectre of unacceptable rate increases, of unpredictable price movements and even of the unavailability of gas supply.

The petitioners contend that the Commission effectively ignored take or pay issues in Order No. 451 notwithstanding its obligation to resolve the problem. In Order No. 451, the Commission stated that it “believes that the natural forces of competition will resolve the issues surrounding high cost contracts.” Order No. 451 at 76. In further deference to forces outside its ambit of control, the Commission, in Order No. 451, reaffirmed its previous position that “problem contracts are primarily a matter for resolution between the parties involved.” (footnote omitted).³¹ Id. Con tinuing, the Commission emphasized that “[f]or largely the same reasons expressed in Order Nos. 436 and affirmed in 436-A, the Commission ... has confidence that the free operation of market forces will provide a resolution of this issue.” Id. at 76-77 (footnotes omitted) (emphasis supplied).

In Associated Gas Distributors v. FERC, 824 F.2d 981 (D.C.Cir.1987), the D.C. Circuit, vacating Order No. 436, rejected the Commission’s adoption of the above rationale because it failed to effectively address the take or pay problem. The Court observed that the rationale “reflects questionable legal premises” and fails to meet the requirement of ‘reasoned decisionmaking.’ ” Id. at 1023. We agree with the D.C. Circuit and conclude that the Commission’s continued inaction on the take or pay problem is regrettable and unwarranted. As the D.C. . Circuit remarked, the Commission’s failure to take action on the take or pay problem “reflects a pervasive frame of mind of the Commission about a crucial problem in the natural gas industry.” Consolidated Edison, 823 F.2d at 641-42. It simply cannot and “will not be wished away.” Id. at 639.

The Commission also takes the position that the provisions of Order No. 451 will serve to facilitate the renegotiation of high cost contracts. In support of that contention, the Commission projects that under Order No. 451, pipelines will be able to offer higher old gas prices in return for reductions in new gas prices, and that contract reformations will thus ensue.³² We are persuaded, however, by the petitioners’ contention that the “producers with the new gas problem contracts and the producers with the old gas contracts differ markedly.” Petitioners’ Brief at 63 (footnote omitted). More directly, the producers with the least amount of old gas have the largest amount of nonmarket responsive contracts. Additionally, even if a contract provides for the sales of old and new gas, the pipeline would probably not get much benefit at the bargaining table since only one-third of all new gas is contained in the multi-vintage contracts that the pipeline can bring to the table.

Most damaging to the Commission’s position, however, is the previously discussed one-sided nature of the GFN process. Surely producers would not initiate the GFN process if by so doing, they ran the risk of giving up more on new gas contracts than they would receive in return for their old gas. As we view the operation of Order No. 451, it would not, as the Commission asserts, alleviate the take or pay problem. Rather, the prospect for exacerbating the take or pay problem runs rampant throughout the provisions of Order No. 451. Accordingly, we conclude that the Commission’s inaction on the take or pay problem is based on a rationale which is arbitrary and unsupportable.³³

D. Transportation

We turn now to the last component of Order No. 451 which is challenged by the petitioners — the mandatory transportation of released gas. As mentioned previously, Order No. 451 provides that an existing pipeline purchaser, that is not an open access pipeline,³⁴ must continue to transport any released gas if 1) the pipeline fails to nominate a price in response to the producer’s initial request for such nomination, 2) nominates a price less than the highest price as provided for in the escalation provisions of the sales contract, 3) ceases to purchase gas when the first seller fails to submit a timely price nomination, or 4) ceases to purchase gas after rejecting the price nominated by the first seller. As observed by some commentators, this mandatory transportation provision of Order No. 451 appears, at first glance, to impose a common carrier obligation on pipelines in contravention of the Commission’s authori ty under the NGA. See e.g., Mogel, Transportation and Marketing of Natural Gas 175 et seq. (1985); see also Mogel & Gregg, Appropriateness of Imposing Common Carrier Status on Interstate Natural Gas Pipelines, 4 Energy L.J. 155 (1983).

The petitioners likewise adopt the position that the mandatory transportation requirements of Order No. 451 amount to nothing more than the imposition of common carrier obligations on natural gas pipelines, and that such obligations are not permitted under the NGA. In support of this position, the petitioners rely heavily on Florida Power & Light v. FERC, 660 F.2d 668 (5th Cir.1981), cert. denied, 459 U.S. 1156, 103 S.Ct. 800, 74 L.Ed.2d 1003 (1982). In Florida Power & Light, the Commission ordered Florida Power and Light Company to file a tariff provision which required the Company to provide transportation to a point beyond that which it had agreed on. While Florida Power & Light arose under Sections 205 and 206 of the Federal Power Act, its holding is nevertheless apposite to the facts in the instant case since NGA sections 4 and 5 were patterned after the Federal Power Act and are virtually identical to Sections 205 and 206 of the Federal Power Act. See United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332, 346, 76 S.Ct. 373, 381, 100 L.Ed. 373 (1956); FPC v. Sierra Pacific Power Co., 350 U.S. 348, 353, 76 S.Ct. 368, 371, 100 L.Ed. 388 (1956). In reversing the Commission’s imposition of common carrier status in Florida Power & Light, this Court found that

[t]he imposition of common carrier status on FP & L, which the orders at issue accomplish, is precisely the authority which the [Federal Power Act] denies the Commission. The legislative history of the [Federal Power Act] makes clear that the Commission lacks the authority to require electric utilities to provide wheeling even on a reasonable request. Accordingly, we conclude that the Commission lacked statutory authority to issue the orders in question.

Florida Power & Light, 660 F.2d at 676 (footnote omitted).

The legislative history of the NGA, when viewed along side its predecessor, the Federal Power Act, leaves little room for doubt that the Commission has exceeded its authority in implementing the transportation requirements of Order No. 451. As the petitioners note, in the first legislation ever undertaken which affected natural gas pipelines, the Interstate Commerce Act of 1906, Congress expressly exempted transporters of natural gas from the definition of common carrier.³⁵ Later, in 1914, the House rejected a bill which would have imposed common carrier status on the pipelines.³⁶ Again, in 1935, Congress rejected a bill which would have required pipelines, among others, to transport gas for any person upon reasonable request.³⁷ As recently as 1978, Congress, in passing the NGPA, specifically precluded the Commission from treating pipelines as common carriers.³⁸ Even the Commission itself has recognized that the NGA fails to give it the authority to impose common carrier status on pipelines. See Order No. 490, “Abandonment of Sales and Purchases of Natural Gas Under Expired, Terminated, or Modified Contracts,”' III F.E.R.C. Stats. & Regs., Regulations Preambles, (CCH) 1130,797 at 31,036 (1988). (“Pipelines are not common carriers and only have the duty imposed on them by their certificate.”) Nevertheless, the Commission here has inexplicably exceeded its authority and essentially made non-open-access pipelines common carriers.

Moreover, the Commission ignored the requirements of the Administrative Procedure Act³⁹ in promulgating Order No. 451’s mandatory transportation require ment. The Commission’s notice failed to request comment on its proposed authority, or lack thereof, to impose common carrier status on pipelines. Because the Commission’s failure to do so precluded the presentation of relevant evidence essential to reasoned decisionmaking in this case, we must conclude that the Commission has avoided a fundamental responsibility under the Administrative Procedure Act. See, e.g., Texaco, Inc. v. FPC, 412 F.2d 740 (3d Cir.1969). Accordingly, and for the reasons mentioned above, we are constrained to conclude that the Commission has exceeded its authority by imposing common carrier status on non-open-access pipelines through the mandatory transportation requirements of Order No. 451.

III. CONCLUSION

Having relied on the language, purposes and history of natural gas regulation as evidenced by the provisions of the NGA and the NGPA, we are constrained to conclude that the Commission has, in the promulgation of Order Nos. 451 and 451-A, exceeded its authority as conferred by Congress. Further, while we remain poignantly aware that the problems facing the natural gas industry are numerous and complex, we nevertheless emphasize that Congress alone has the power to do — or authorize the Commission to do — what the Commission has done in Order Nos. 451 and 451-A. We must therefore vacate Order Nos. 451 and 451-A in their entirety; it is so ordered.

VACATED.

Judge Brown reserves the right to file a further concurring or dissenting opinion pursuant to Court Policy 15(J).

1

. Pub.L. No. 75-688, 52 Stat. 821 (codified in 15 U.S.C. §§ 717-717w (1976)).

2

. For a series of Federal Trade Commission Reports documenting the alleged abuses by natural gas companies, including monopoly control over consumer prices, see Federal Trade Comm'n, Utility Corporations, S.Doc. No. 92, 70th Cong., 1st Sess. See also S. Res. 83, 70th Cong., 1st Sess., 69 Cong.Rec. 3054.

3

. NGA § 1(b), 15 U.S.C. § 717(b) (1976).

4

. 15 U.S.C. § 717c(a) (1976).

5

. Throughout this opinion, the term "Commission" will refer to the Federal Power Commission and its successor, the Federal Energy Regulatory Commission.

6

.The Supreme Court, in Public Service Comm’n of New York v. Mid-Louisiana Gas Co., 463 U.S. 319, 103 S.Ct. 3024, 77 L.Ed.2d 668 (1983), explained that the NGA

authorized rates that were “just and reasonable” within the meaning of [the NGA] by examining whatever costs the pipeline had incurred in acquiring and transporting the gas to the consumer. If the pipeline itself or a pipeline affiliate had produced the gas, the actual expenses historically associated with production and gathering were included in the rate base to the extent proper and reasonable. However, if the pipeline had purchased the gas from an independent producer, the Commission did not take jurisdiction over the producer to evaluate the reasonableness of its rates; it only considered the broad issue of whether, from the pipelines’ perspective, the purchase price was "collusive or otherwise improperly excessive."

Id. at 328, 103 S.Ct. at 3030 (citations omitted) (emphasis supplied).

7

. The Commission estimated that it would be unable to finish its 1960 workload until 2043. See Statement of General Policy 61-1, 24 F.P.C. 818 (1960).

8

. Under vintaging, natural gas is priced with reference to the date of the sales contract, or as has been the case lately, the date when the gas was first produced. The rate for older vintages is lower than the rate for later vintages. Logically, the difference is explained by the fact that production and development costs were lower when the earlier gas was discovered. The purpose of vintaging is to provide producers with a reasonable, but not excessive, return on their sunk investment. See, e.g., Opinion No. 770, "National Rates for Jurisdictional Sales of Natural Gas,” 56 F.P.C. 509, 521 (1976).

9

. Attempts by those who favored deregulation to enact laws which effect deregulation were numerous, but unsuccessful. The most serious attempt was made during the 84th Congress when both Houses passed H.R. 6645, which would deregulate wellhead prices. 101 Cong. Rec. 11930 (1955) (House vote); 102 Cong.Rec. 2096 (1956) (Senate vote). Then President Eisenhower vetoed the bill on grounds totally unrelated to the merits of deregulation. See D. Eisenhower, Pub. Papers 256 (1956).

10

. 92 Stat. 3350, (codified in 15 U.S.C. § 3301 et seq. (1982)). See Transcontinental Gas Pipe Line Corp. v. State Oil and Gas Board of Mississippi, 474 U.S. 409, 420, 106 S.Ct. 709, 715, 88 L.Ed.2d 732 (1986). (Although in enacting the NGPA, Congress moved towards a less regulated natural gas market, Congress expanded in some respects federal control.)

11

. The NGPA specified the maximum lawful price which could be charged for "first sales" of gas produced in each of eight enumerated categories of gas. The NGPA also prescribed rules for raising prices each month on “first sale” gas and for passing those price increases down to ultimate purchasers.

12

. This Court has previously recognized this delicate balance of interests struck by Congress. In Pennzoil Co. v. FERC, 645 F.2d 360 (5th Cir.1981), we noted that the NGPA "adopted an incentive-based approach to rate-setting for gas production, providing substantially higher prices for ‘new’ gas than was currently available. At the same time, the NGPA provided consumer protection by maintaining lower prices on flowing gas, providing only limited future price deregulation in 1985, and extending price controls to intrastate sales of gas.” Id. at 367 (footnotes omitted).

13

. Other factors also contributed to this circumstance. Among them were warmer temperatures and an economic recession.

14

. 42 U.S.C. § 7173 et seq.

15

. The Commission's new price ceiling greatly exceeded the competitive market price that existed in June 1986, and continues to exceed the competitive market price today. Thus, de facto deregulation of old gas appears to have been the Commission’s real goal, and that circumstance is best illustrated by the Commission’s decision to base the "old gas” ceiling price on a replacement cost methodology that "fbjest reflected] the level at which prices would be established if deregulation of old gas were to occur." Order No. 451 at 95 (emphasis supplied). Moreover, the Commission concedes that it has never before applied a replacement cost methodology to flowing (old) gas.

16

. Sections 104(b)(2) and 106(c) of the NGPA are virtually identical and provide that

... The Commission may, by rule or order, prescribe a maximum lawful ceiling price, applicable to any first sale of any natural gas (or category thereof, as determined by the Commission) otherwise subject to the preceding provisions of this section, if such price is—

(A) higher than the maximum lawful price which would otherwise be applicable under such provisions; and

(B) just and reasonable within the meaning of the Natural Gas Act.

15 U.S.C. §§ 3314(b)(2); see also 3316(c) (1982).

The above mention of the Natural Gas Act’s "just and reasonable” language refers to the following provisions contained in section 4(a) of that Act:

All rates and charges made, demanded, or received by any natural-gas company for or in connection with the transportation or sale of natural gas subject to the jurisdiction of the Commission, and all rules and regulations affecting or pertaining to such rates or charges, shall be just and reasonable, and any such rate or charge that is not just and reasonable is declared to be unlawful.

15 U.S.C. § 717c(a) (1982).

17

.The Commission was driven, in part, by the explicit expectation that the provisions of Order No. 451 would stimulate increased production. In that regard,

[T]he Commission found most persuasive studies showing that if current old gas prices were held at their present levels, approximately 11 Tcf of old gas reserves would not be produced. The 11 Tcf of old gas reserves not produced as a result of vintaging would have been replaced by higher-priced energy supplies. In part, these incremental supply requirements would be met by foreign imports of both oil and gas and the nation’s energy security would thereby be compromised and its trade balance weakened. Regardless of the source of the incremental supplies, however, the nation’s energy users would be required to pay more for these incremental supplies than would be necessary.

Order No. 451-A at 18. Other benefits were also expected by the Commission as a result of Order No. 451:

Producers with old gas reserves will obtain additional revenue for exploration and development of gas reserves. Customers will benefit from increased competition and may pay lower gas prices, free from regional disparities, as they gain access to alternative sources of supply and transportation through Order Nos. 451 and 436. The competitive pressures of a wide-open market may also benefit pipelines with increased throughput and the settlement of take-or-pay disputes with producers in exchange for the pipelines' agreement to pay higher old gas prices. Producers may also be persuaded to renegotiate high-cost gas contracts as old gas prices rise, in order to take advantage of increased marketing opportunities for their gas.

Shoneman & McConnell, FERC Order No. 451: Freedom (Almost) for Old Gas, 7 Energy LJ. 299, 324 (1986).

18

. Order No. 451-A clarified Order No. 451. For a discussion of those clarifications, see Mo-gel and Mann, Natural Gas: Current Federal and State Developments 16-20 (1987).

19

. Order No. 451 defines an existing contract to include an expired contract by which gas is being sold pursuant to an obligation imposed by a certificate of public convenience and necessity. The GFN procedure does not apply to contracts entered into after July 18, 1986, nor does it apply if, after that date, the parties renegotiate the sale price or any other sale terms of old gas under an existing contract. The Commission, on rehearing, did, however, allow for parties to agree in writing to preserve their rights under the GFN procedure even though an existing contract for old gas was amended after July 18, 1986.

20

.Although Order No. 451 became effective on July 18, 1986, a producer could not request pipeline nominations until November 1, 1986. Subsequently, that date was moved to December 18, 1986. Finally, as a result of the issuance of Order No. 451-A on December 15, 1986, the date was again postponed until 30 days after Order No. 451-A was published in the Federal Register.

21

. For example, the petitioners contend that the Commission could have targeted specific old gas reserves rather than raising old gas price ceilings across the board.

22

. The following are excerpts from the Congressional record which demonstrate the challenges faced by Congress in resolving the differences of its members concerning decontrol of the natural gas industry and the complex problems involved in resolving the deficiencies of the NGA’s regulatory devices.

124 Cong.Rec. S15019-20 (daily ed. Sept. 13, 1978) (remarks of Senator McIntyre).

Mr. President, it is time to resolve the conflict over natural gas pricing policy.... During the debate nearly a year ago, I was against the proposal to decontrol the price of natural gas. Instead, I favored a policy that would have provided incentives to the natural gas industry to bring in more gas, yet at the same time protect consumers from unwarranted increases and the inflationary effects of sudden- price increases.

******

Clearly, we need a compromise between these two extremes. Clearly, we must establish a Federal policy that protects consumers and at the same time provides assurances and incentives to gas producers. Congress as a whole and the energy conferees have labored for nearly 17 long months to come up with a bill that provides this policy. They have put their collective wisdom into the compromise bill that is now before us.

******

It is apparent to all of us that the compromise is not perfect. Some of its flaws are obvious. For example, both the Senate and House passed so-called incremental pricing provisions to protect residential consumers of gas from being hit with the biggest increases. Somehow, the compromise ended up with an incremental pricing provision that protects residential consumers less than either the Senate or House bill.

******

And if we defeat this compromise, what policy will we put in its place for the long run? Are we to cave in to full decontrol, which would create about as much new supply as this bill, but at substantially higher cost? That is what the gas lobby is hoping for. That is why they are prowling the halls of Congress. And the other opponents of this compromise — the consumers organizations, whom I count as my friends — they want to defeat the compromise in the hope that the Federal bureaucracy will roll back gas prices and will on its own begin regulating the gas that producers are now keeping in their own states.

But this is Congress’ job. The time has come for this body to put aside regional differences and partisan bickering. Both sides of the debate in the Congress have fought hard for what each thought was best. We now have before us a gas bill that gives neither side all that it wants. But this compromise does provide certainty; it does provide a unified Federal policy for the first time. It does provide substantial incentives for the production of more domestic natural gas. And at the same time it provides a measure of protection for consumers from sudden and unwarranted price increases.

124 Cong. Rec. S14869 (daily ed. Sept. 11, 1978) (remarks of Senator Jackson).

We a proposing a policy which concentrates the rewards of higher prices where they are most needed — on the development of new, high cost gas.

******

We wanted to elicit the maximum supply response at a minimum cost to consumers.... [i]t also allowed the conferees to achieve a bill that will encourage production while protecting consumers from applying unnecessarily high prices for gas that they could expect to receive at lower prices under current policies.

124 Cong. Rec. H13242 (daily ed. Oct. 14, 1978) (remarks of Rep. Sharp).

What we are proposing to do and asking Members to act upon is not a perfect solution.

******

Mr. Speaker, we put the highest incentive where the highest risks are and where the greatest gains might come from. The next highest incentives are where there are new gas supplies and major risks, but we think there are pretty good chances that gas can be found.

We tried to see to it that we were protecting the consumers from paying the highest prices where it was not deserved. We tried to focus those prices incentives where they would do the most good.

For additional discussion of the legislative history behind the NGPA, see Note, Legislative History of the Natural Gas Policy Act, 59 Texas L.Rev. 101' (1980).

23

. See, e.g., FERC v. Martin Exploration Management Co., 486 U.S. 204, 108 S.Ct. 1765, 1768, 100 L.Ed.2d 238 (1988) (“The plain meaning of the statute decides the issue presented.”) (citation omitted).

24

. The Commission, in construing §§ 104(b)(2) and 106(c) to authorize the implementation of a new, higher than market ceiling price for old gas and the elimination of the old gas vintaging system, breaks virgin ground. The Commission has previously construed §§ 104(b)(2) and 106(c) far differently and much more narrowly than it does now. Its prior interpretation of §§ 104(b)(2) and 106(c) was to the effect that those provisions are more appropriately interpreted as special relief measures to be utilized in the event that existing congressional ceiling prices become confiscatory. See, e.g., Order No. 72, "Final Regulations Implementing Section 109 of the Natural Gas Policy Act of 1978,” F.E.R.C. Stats. & Reg. (CCH) ¶ 30,135 at 30,965 (1980). Moreover, this Court in Pennzoil Co. v. FERC, 645 F.2d 360 (5th Cir.1981), emphasized that FERC has a “narrow[ ] authority to administer the NGPA and to prescribe higher price ceilings only in certain circumstances." Id. at 379 (emphasis omitted) (citations omitted).

We also note that if this Court were to uphold the Commission’s new ceiling price on old gas, the issue could never be revisited except by congressional action. The NGPA does not allow the Commission to lower natural gas ceiling prices.

25

. In Mid-Louisiana Gas Co. v. FERC, 664 F.2d 530 (5th Cir.1981), vacated on other grounds, Public Serv. Comm'n of the State of New York v. Mid-Louisiana Gas Co., 463 U.S. 319, 103 S.Ct. 3024, 77 L.Ed.2d 668 (1983), this Court remarked that ”[t]he Commission’s duty is to administer the law Congress passed in light of the purposes for which it was passed. It is not an agency’s prerogative to alter a statutory scheme even if its alteration is as good or better than the congressional one." Id. at 535 (emphasis supplied). Moreover, the Senate, on Wednesday, June 14, 1989, voted 82-17 in favor of a bill that would lift natural gas price controls on January 1, 1993.

26

. In further support of its contentions, the Commission argues that its new ceiling price is not really an “across the board” increase because the Commission explicitly declined to allow for an automatic rate increase. The Commission points to the good faith negotiation process as a fundamental component of Order No. 451 in support of this argument. The GFN process is, however, itself a source of dispute. During oral argument and on brief, the petitioners urged that the GFN process is unacceptably unilateral in nature, and as such, is unreasonable. The petitioners contend that while ostensibly labeled a negotiating device, the GFN process is more of a mechanism by which a producer can unilaterally rewrite the terms of a sales contract within, of course, prescribed parameters. The petitioners point to the fact that prior to the Commission’s issuance of Order No. 451, many parties asked the Commission to allow pipelines as well as producers to initiate the GFN process; the Commission, however, rejected this proposal. Other parties requested authority for greater rights of first refusal for pipeline customers under the GFN process, but the Commission likewise rejected those proposals. In fact, the petitioners contend that every single proposal tendered by the petitioners to make the GFN process a more balanced procedure was denied by the Commission.

27

. Section 7(b) of the NGA reads as follows:

(b) No natural-gas company shall abandon all or any portion of its facilities subject to the jurisdiction of the Commission, or any service rendered by means of such facilities, without the permission and approval of the Commission first had and obtained, after due hearing, and a finding by the Commission that the available supply of natural gas is depleted to the extent that the continuance of service is unwarranted, or that the present or future public convenience or necessity permit such abandonment.

15 U.S.C. § 717f(b) (emphasis supplied).

28

. In the past, the Commission has stated that "Section 7(b) ... prohibits abandonments through the unilateral decision of particular producers based upon the economic considerations affecting them.” Arkansas Louisiana Gas Co. v. Amarex Inc., Opinion No. 798, 58 F.P.C. 1617, 1635 (1977). Yet, it would appear that the pre-authorized abandonment provisions and the GFN procedures promulgated by the Commission which are at issue here, would, for all practical purposes, do just that. For the first time, the Commission has placed abandonment authority in the hands of private parties.

29

. The Commission first equated the public interest with the interest of the "market as a whole” in an abandonment context in Felmont Oil Corp. and Essex Offshore, Inc., Opinion No. 245, 33 F.E.R.C. (CCH) ¶ 61,333 (1985), reh'g. denied, Opinion No. 245-A, 34 F.E.R.C. (CCH) ¶ 61,296 (1986), rev'd and remanded on other ground sub nom. Consolidated Edison of New York v. FERC, 823 F.2d 630 (D.C.Cir.1987). As the joint opponents point out, however, the Fel-mont case involved limited term abandonment after a case specific hearing. In Felmont, the Commission jettisoned the "comparative needs” test which calls for a comparison of the needs of the existing purchaser of the gas with the needs of the particular purchaser that would obtain the gas in the event of abandonment. In its place the Commission adopted a test which compares the needs of the existing purchaser with the needs of the "market as a whole.” Nevertheless, the Commission emphasized that such a shift would not eliminate the need for a factual showing sufficient to justify the proposed abandonment, and that fact-specific consideration of the interests of existing beneficiaries of dedicated service, including mitigation of losses to such beneficiaries, would be preserved.

30

. We note that the Commission’s reliance on Felmont Oil Corp. and Essex Offshore, Inc., supra, is misplaced. Felmont involved limited term abandonments of shut-in gas. Moreover, Felmont's limited term abandonments were granted after a case specific evidentiary hearing. Nor are we persuaded by the Commission’s assertions that the right to first refusal granted to a pipeline’s firm sales customers protects consumer interests. As the petitioners point out, the Commission, in this assertion, fails to take into account that the right of first refusal has no effect on a pipeline’s ability to continue to meet its systemwide obligation to provide adequate supplies of gas at reasonable prices.

31

. See Order No. 436, Regulation of Natural Gas Pipelines After Partial Wellhead Decontrol, Docket No. RM85-1-000, 50 Fed.Reg. 42,408, at 42,462-64 (Oct. 18, 1985); Order No. 436-A, 50 Fed.Reg. 52,217 (Dec. 23, 1985), vacated by Associated Gas Distributors v. FERC, 824 F.2d 981 (D.C.Cir.1987).

32

. Order No. 451 at 148.

33

. The joint opponents recommended a bilaterally initiated GFN process, expansion of renegotiation rights for problem contracts, and a provision for producer refund of take or pay payments which could no longer be "made up” because of Order No. 451.

34

.On the date this case was orally argued some 19 out of 21 major pipelines were either open access, or had filed for open access status.

35

. Pub.L. No. 59-337, 34 Stat. 584.

36

. S. 3345 63rd Cong., 2d Sess., 50 Cong.Rec. 5847-49 (1913).

37

. H.R. 5423, 74th Cong. 1st Sess. 303, 304 (1935). See abo Hearings Before the Committee on Interstate and Foreign Commerce, House of Representatives on H.R. 5423, 74th Cong. 1st Sess. 1646 (1935).

38

. See NGPA Section 602(b), 15 U.S.C. § 3432(b).

39

. 5 U.S.C. § 551 et seq.