Panhandle Producers and Royalty Owners Association v. Economic Regulatory Administration

822 F.2d 1105, 262 U.S. App. D.C. 43, 1987 U.S. App. LEXIS 8257
CourtCourt of Appeals for the D.C. Circuit
DecidedJune 30, 1987
Docket86-1058
StatusPublished
Cited by44 cases

This text of 822 F.2d 1105 (Panhandle Producers and Royalty Owners Association v. Economic Regulatory Administration) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Panhandle Producers and Royalty Owners Association v. Economic Regulatory Administration, 822 F.2d 1105, 262 U.S. App. D.C. 43, 1987 U.S. App. LEXIS 8257 (D.C. Cir. 1987).

Opinion

Opinion for the Court filed by Circuit Judge WILLIAMS.

WILLIAMS, Circuit Judge:

Petitioner seeks review of an Economic Regulatory Administration (“ERA”) order granting Northridge Petroleum Marketing U.S., Inc. blanket authorization under § 3 of the Natural Gas Act (“NGA”), 15 U.S.C. § 717b (1982), to import limited quantities of natural gas from Canada for a two-year period. Petitioner contends, among other things, that ERA improperly relied on a policy statement issued by the Secretary of Energy in February 1984, see 49 Fed.Reg. 6684 (1984) (the “Policy Statement”). We affirm.

I. Background

A. The Statutory Scheme and Evolving Regulatory Strategy

Section 3 of the NGA prohibits the exportation or importation of natural gas without authorization, which is to be issued “unless ... [the Commission] finds that the proposed exportation or importation will not be consistent with the public interest.” 15 U.S.C. § 717b (1982).

With the creation of the Department of Energy (“DOE”) in 1977, Congress reorganized administration of § 3. Department of Energy Organization Act (“DOE Act”), Pub.L. No. 95-91, 91 Stat. 565 (1977) (codified, as amended, primarily at 42 U.S.C. §§ 7101-7375 (1982)). It transformed the Federal Power Commission, which was originally charged with implementing § 3, into the Federal Energy Regulatory Commission, and shifted § 3 authority to the Secretary of Energy. See 42 U.S.C. § 7151(b) (1982) (granting import/export authority to Secretary); id. § 7172(f) (withdrawing import/export authority from FERC except to extent delegated by Secretary). The Secretary, in turn, issued delegation orders vesting most of his § 3 au *1107 thority in ERA. See id. § 7252 (authorizing delegation by the Secretary); DOE Delegation Order No. 0204-54, 44 Fed.Reg. 56,735, 56,735 (1979); DOE Delegation Order No. 0204-25, 43 Fed.Reg. 47,769, 47,772 (1978).

Until 1984, these delegation orders (especially Delegation Order No. 0204-54) guided ERA’S exercise of authority over imports. ERA evaluated applications for import authority case by case, comparing the proposed selling price with that of alternative fuels. It placed on the applicant the burden of proving that authorization would be in the public interest, see West Virginia Public Services Commission v. DOE, 681 F.2d 847, 851 (D.C.Cir.1982), demanding specifically that applicants make a “clear showing of regional need — i.e., a need on the applicants’ particular pipeline systems that cannot be met by domestic gas supplies,” id. at 860 (emphasis in original); see Tenneco Atlantic Pipeline Co., 1 E.R.A. ¶ 70,103, at 70,557 (1978) (“ERA will look for a demonstration of end-user market need, as opposed to a mere showing of an interstate pipeline company’s contractual obligations to deliver gas”). The declared policy also considered national “need,” security of supply and effect on balance of payments. And ERA required the applicant to make a showing that the imports would not adversely affect the development of domestic supplies. Tenneco, 1 E.R.A. at 70,554-56. See generally West Virginia, 681 F.2d at 860-61.

By the Fall of 1982 it became apparent that Delegation Order No. 0204-54 was ill-matched to prevailing conditions. Long-term contracts were binding domestic producers to take Canadian gas at prices that had since become uncompetitive. See 49 Fed.Reg. at 6686. In late 1982, DOE, in conjunction with FERC and the Department of State, began to review natural gas import policy, soliciting oral and written public comments. 48 Fed.Reg. 34,501 (1983); 47 Fed.Reg. 57,756 (1982). The process culminated in the Secretary’s issuance of the Policy Statement, “intended to provide a clear definition of public interest,” 49 Fed.Reg. at 6687. The Secretary also issued Delegation Order No. 0204-111, id. at 6690, explicitly superseding Delegation Order No. 0204-54. The new delegation order generally instructed ERA to follow the policies prescribed by the Secretary, and to give special (though not necessarily exclusive) attention to three factors — competitiveness of the import, need for the natural gas and security of supply. The Policy Statement discussed each of the factors at some length.

The Policy Statement declared that “[t]he policy cornerstone of the public interest standard is competition.” Id. at 6687. Further, it “presume[d]” that if buyers and sellers could negotiate “free of constraining governmental limits, [they would] ... be responsive to market forces over time.” Id. Accordingly, for assurance that the arrangements would be competitive, the Policy Statement looked to flexibility in a proposed transaction’s contractual arrangements. So long as flexibility as to price or volume allowed the buyer to respond to changing market forces, the gas would be presumed competitive in price. An opponent of the proposed import could, however, rebut the presumption. Id.

Similarly, the Policy Statement still treated “need” as relevant, but viewed it as “a function of competitiveness,” id. at 6687, and announced a second presumption:

[I]f the imported gas is competitive in the proposed market area and, through its contract terms, will remain competitive throughout the contract period, then the rebuttable presumption exists that the gas is needed in that market.

Id. at 6688. Again, opponents of a particular authorization could rebut the presumption, evidently in terms of either the regional or the national market, id., though the Policy Statement did not specify what evidence might be persuasive of lack of need.

Finally, the Policy Statement indicated that security of supply remained relevant, especially for long-term arrangements, and that ERA would “consider international trade policy, foreign policy, ... national security interests,” and “other factors as may be appropriate____” Id.

*1108 B. The Northridge Import Authorization

In July 1985, Northridge, a wholly owned subsidiary of a Canadian corporation, applied to ERA for blanket authorization to import up to 100 billion cubic feet (“Bcf”) of Canadian natural gas over a two-year period. Northridge intended to engage in individually negotiated, short-term transactions directly with purchasers located primarily in the midatlantic and midwestern United States. It anticipated that its sales would generally displace higher-priced energy supplies. Petitioner intervened to oppose Northridge’s application, requesting a trial-type hearing.

In Order No.

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822 F.2d 1105, 262 U.S. App. D.C. 43, 1987 U.S. App. LEXIS 8257, Counsel Stack Legal Research, https://law.counselstack.com/opinion/panhandle-producers-and-royalty-owners-association-v-economic-regulatory-cadc-1987.