Williams Companies v. Federal Energy Regulatory Commission

Notice: This opinion is subject to formal revision before publication in the
Federal Reporter or U.S.App.D.C. Reports. Users are requested to notify
the Clerk of any formal errors in order that corrections may be made
before the bound volumes go to press.
United States Court of Appeals
FOR THE THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 16, 2003 Decided October 10, 2003
No. 02-5056
THE WILLIAMS COMPANIES AND
DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP,
APPELLEES
v.
FEDERAL ENERGY REGULATORY COMMISSION,
APPELLANT
DEVON ENERGY CORPORATION, ET AL.,
APPELLEES
CHEVRON U.S.A. INC., ET AL.,
INTERVENORS
Consolidated with
02-5077, 02-5078, 02-5081, 02-5082, 02-5085, 02-5086
–————
Bills of costs must be filed within 14 days after entry of judgment.
The court looks with disfavor upon motions to file bills of costs out
of time.
2
Appeals from the United States District Court
for the District of Columbia
(No. 01cv01580)
(No. 01cv01624)
(No. 01cv01976)
Dennis Lane, Solicitor, Federal Energy Regulatory Com-
mission, argued the cause for appellant. With him on the
briefs were Cynthia A. Marlette, General Counsel, and Lona
T. Perry, Attorney.
John W. Wilmer, Jr., James M. Costan, and T. Alana
Deere were on the briefs for appellees Producer Coalition and
Independent Petroleum Association of America.
Henry S. May, Jr. argued the cause for appellees The
Williams Companies, et al. With him on the brief were
Charles D. Tetrault, Daniel A. Petalas, Howard L. Nelson,
Jay V. Allen, James T. McManus, Joseph S. Koury, and
Mari M. Ramsey. Jeffrey G. DiSciullo and G. Mark Cook
entered appearances.
Katherine B. Edwards, Thomas J. Eastment, Melissa E.
Maxwell, Douglas W. Rasch, Charles J. McClees, Jr., and
Frederick T. Kolb were on the briefs for intervenors Chevron
U.S.A. Inc., et al.
Before: GINSBURG, Chief Judge, ROBERTS, Circuit Judge,
and WILLIAMS, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
WILLIAMS.
WILLIAMS, Senior Circuit Judge: On April 10, 2000 the
Federal Energy Regulatory Commission, exercising authority
it claimed under the Outer Continental Shelf Lands Act
(‘‘OCSLA’’), 43 U.S.C. §§ 1331–1356, issued regulations af-
fecting companies providing natural gas transportation ser-
vice—including ‘‘gathering’’ service—in the Outer Continental
Shelf. The regulations required the companies to periodically
file information with FERC concerning their pricing and
3
service structures, thereby implementing FERC’s view that
the resulting transparency would enhance competitive and
open access to gas transportation. Order No. 639, FERC
Stats. & Regs. (CCH) ¶ 31,097, at 31,514 (April 10, 2000). On
petitions for rehearing and clarification, the Commission es-
sentially adhered to its initial decision. Order No. 639–A,
FERC Stats. & Regs. (CCH) ¶ 31,103 (July 26, 2000). Sever-
al of the subject companies sought judicial relief from the
orders, suing in federal district court because FERC’s action
was under OCSLA rather than the Natural Gas Act. Com-
pare 43 U.S.C. § 1349 (providing jurisdiction in district court
for most challenges to orders under OCSLA), with 15 U.S.C.
§ 717r (providing for circuit court review of FERC decisions
under the Natural Gas Act). Gas producers who ship or
expect to ship on the covered pipelines intervened.
On January 11, 2002 the district court granted the plain-
tiffs’ motion for summary judgment, denied FERC’s motion
for dismissal, and denied the intervenors’ motion for sum-
mary judgment. Chevron U.S.A., Inc. v. FERC, 193 F. Supp.
2d 54, 58–59 (D.D.C. 2002). It ruled among other things that
OCSLA did not give the Commission the authority it claimed
to establish a general open access regime on the Outer
Continental Shelf. Of course the Natural Gas Act gives the
Commission broad authority over pipelines transporting gas
in interstate commerce, but § 1(b) of that act, 15 U.S.C.
§ 717(b), expressly withholds jurisdiction over gathering, see,
e.g., Sea Robin Pipeline Co. v. FERC, 127 F.3d 365, 368 (5th
Cir. 1997), which the Commission’s new regulations explicitly
covered.
FERC appealed, arguing that the court had interpreted
FERC’s OCSLA authority too narrowly. We affirm.
* * *
The case turns entirely on the meaning of certain provi-
sions of OCSLA, 43 U.S.C. §§ 1331–1356. Congress initially
adopted the statute in 1953 and amended it in 1978. Among
other changes, the 1978 amendments amplified the pre-
existing open access provisions and accounted for administra-
4
tive changes arising from the passage in 1977 of the Depart-
ment of Energy Organization Act, 42 U.S.C. § 7171ff. In the
latter category was the transfer of OCSLA responsibilities
formerly exercised by the Interstate Commerce Commission
to the Federal Energy Regulatory Commission, a new agency
replacing the Federal Power Commission and located in the
Department of Energy. The OCSLA sections relevant to this
appeal are §§ 5(e) & (f), 43 U.S.C. §§ 1334(e) & (f), which we
reprint below in full, with the critical text highlighted:
(e) Pipeline rights-of-way; forfeiture of grant
Rights-of-way through the submerged lands of the outer
Continental Shelf, whether or not such lands are includ-
ed in a lease maintained or issued pursuant to this
subchapter, may be granted by the Secretary for pipeline
purposes for the transportation of oil, natural gas, sul-
phur, or other minerals, [ ]1 under such regulations and
upon such conditions as may be prescribed by the Secre-
tary, or where appropriate the Secretary of Transporta-
tion, including (as provided by section 1347(b) of this
title) assuring maximum environmental protection by
utilization of the best available and safest technologies,
including the safest practices for pipeline burial[,]2 and
upon the express condition that oil or gas pipelines shall
transport or purchase without discrimination, oil or
natural gas produced from submerged lands or outer
1 The current official text contains an ‘‘or’’ here, so that the
statute states that rights-of-way can be granted ‘‘for pipeline pur-
poses for the transportation of oil, natural gas, sulphur, or other
minerals, or under such regulations and upon such conditions as
may be prescribed by the SecretaryTTTT’’ (emphasis added). The
underscored ‘‘or’’ is not present in the 1953 version of the statute,
67 Stat. 462 (1953). As we can imagine no plausible interpretation
with this wording, we take the insertion to have been a scrivener’s
error.
2 Without the inserted comma, the nondiscrimination provisions
appear to be a subset of the treatment of environmental practices.
Again seeing no plausible interpretation under that reading, we
suspect a scrivener’s error.
5
Continental Shelf lands in the vicinity of the pipelines
in such proportionate amounts as the Federal Energy
Regulatory Commission, in consultation with the Secre-
tary of Energy, may, after a full hearing with due notice
thereof to the interested parties, determine to be reason-
able, taking into account, among other things, conserva-
tion and the prevention of waste. Failure to comply with
the provisions of this section or the regulations and
conditions prescribed under this section shall be grounds
for forfeiture of the grant in an appropriate judicial
proceeding instituted by the United States in any United
States district court having jurisdiction under the provi-
sions of this subchapter.
(f) Competitive principles governing pipeline operation
(1) Except as provided in paragraph (2), every permit,
license, easement, right-of-way, or other grant of au-
thority for the transportation by pipeline on or across
the outer Continental Shelf of oil or gas shall require
that the pipeline be operated in accordance with the
following competitive principles:
(A) The pipeline must provide open and nondis-
criminatory access to both owner and nonowner
shippers.
(B) Upon the specific request of one or more owner
or nonowner shippers able to provide a guaranteed
level of throughput, and on the condition that the
shipper or shippers requesting such expansion shall
be responsible for bearing their proportionate share
of the costs and risks related thereto, [FERC] may,
upon finding, after a full hearing with due notice
thereof to the interested parties, that such expansion
is within technological limits and economic feasibil-
ity, order a subsequent expansion of throughput
capacity of any pipeline for which the permit, li-
cense, easement, right-of-way, or other grant of
authority is approved or issued after September 18,
1978. This subpara[g]raph shall not apply to any
6
such grant of authority approved or issued for the
Gulf of Mexico or the Santa Barbara Channel.
(2) [FERC] may, by order or regulation, exempt from
any or all of the requirements of paragraph (1) of this
subsection any pipeline or class of pipelines which
feeds into a facility where oil and gas are first collect-
ed or a facility where oil and gas are first separated,
dehydrated, or otherwise processed.
(3) The Secretary of Energy and [FERC] shall consult
with and give due consideration to the views of the
Attorney General on specific conditions to be included
in any permit, license, easement, right-of-way, or
grant of authority in order to ensure that pipelines
are operated in accordance with the competitive prin-
ciples set forth in paragraph (1) of this subsection. In
preparing any such views, the Attorney General shall
consult with the Federal Trade Commission.
(4) Nothing in this subsection shall be deemed to limit,
abridge, or modify any authority of the United States
under any other provision of law with respect to pipe-
lines on or across the outer Continental Shelf.
OCSLA §§ 5(e) & (f), 43 U.S.C. §§ 1334(e) & (f).
* * *
The statutory language
The crux of § 1334(e) is to require the Secretary (of the
Interior) to impose open access conditions in his or her
issuance of rights-of-way through submerged lands of the
Outer Continental Shelf. To help achieve the open access
goal, § 1334(e) grants FERC a single power: to determine,
along with the Secretary of Energy, the proportions of oil,
gas, or other minerals that each member of any relevant
group of pipelines may be required to transport or purchase
pursuant to those conditions. The resulting orders appear to
be what in ordinary oil and gas industry parlance are called
‘‘ratable take’’ orders. See Howard Williams & Charles J.
Meyers, Manual of Oil and Gas Terms 613–14 (1981). In a
7
rhetorical device that it also uses with respect to § 1334(f),
FERC likes to paraphrase subsection (e) in a way that
completely omits the means selected by Congress to achieve
non-discrimination on the Outer Continental Shelf. It argues
before us, for example, that both (e) and (f) ‘‘require that gas
service providers offer nondiscriminatory access on the OCS.’’
Appellant’s Initial Br. at 19. Not so. In fact the provision
simply requires the Secretary of Interior to condition grants
of rights-of-way on the holder’s agreeing to non-
discriminatory transportation duties. Without some explicit
provision to the contrary (as exists for quantification of the
ratable take duty), Congress presumably intended that en-
forcement would be at the hands of the obligee of the
conditions, the Secretary of the Interior (or possibly other
persons that the conditions might specify). Except as to
ratable take orders, the language supports no such role for
FERC.
Section 1334(f) similarly fails to provide FERC with a
general power to enforce OCSLA’s open access provisions.
Subsection (f)(1) states that permits, licenses, easements, etc.,
granted to pipelines for transportation through the OCS,
‘‘shall require’’ the firms in question to operate their pipelines
in accordance with the ‘‘following competitive principles,’’
which it then sets forth in subparts (A) and (B). Obviously
when FERC issues a license covered by § 1334(f), such as a
certificate of convenience and necessity under § 7(c) of the
Natural Gas Act for transportation of gas through the Outer
Continental Shelf, 15 U.S.C. § 717f(c), it is to include terms
meeting the requirements set out in § 1334(f)(1). Subsection
(f)(3) recognizes FERC’s role as licensor, directing FERC (as
well as the Secretary of Energy) to consult with the Attorney
General on the ‘‘specific conditions’’ to be imposed when
crafting any ‘‘license,’’ etc., governed by (f)(1). FERC, in-
deed, has not hesitated to impose such conditions. See
Tennessee Gas Pipeline Co. v. FERC, 972 F.2d 376, 381 (D.C.
Cir. 1992) (reviewing orders imposing conditions on pipelines
operating in the OCS in respect to services within FERC’s
jurisdiction under the Natural Gas Act).
8
Section 1334(f)(1)(B) grants FERC narrow and specific
authority similar to that supplied by subsection (e). It allows
FERC, on application by shippers and after a hearing and
suitable findings, to order a pipeline to expand the capacity of
an OCS pipeline for which a permit, license, etc., ‘‘is approved
or issued after September 18, 1978,’’ the date of the 1978
amendment adding subsection (f) to OCSLA. Such a narrow
(and reactive) grant of power cannot be read as creating
general enforcement authority.
Nor is subsection (f)(2) of any use to FERC. It permits
FERC to exempt from subsection (f)(1) any facility that first
collects, separates, dehydrates, or processes gas. A provision
allowing FERC to exempt a subset of facilities from (f)(1)’s
competitive principles is plainly not an authorization for it to
impose and enforce such principles over all facilities.
Finally, as we have seen, § 1334(f)(3) simply adds a consul-
tation procedure to the way in which FERC is to go about its
specification of open access requirements, under (f)(1), in
licenses that it issues within the scope of authority provided
elsewhere—most obviously § 7(c) of the Natural Gas Act.
Legislative history and Shell Oil Co. v. FERC
The statutory language being of no help to FERC, even to
create an ambiguity that might enable it to claim deference
under Chevron, U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984),
the Commission makes the ritual turn to legislative history.
While such history can be used to clarify congressional intent
even when a statute is superficially unambiguous, the bar is
high. See U.S. Telecom Ass’n v. FBI, 276 F.3d 620, 625 (D.C.
Cir. 2002) (noting Supreme Court’s observation in Ratzlaf v.
United States, 510 U.S. 135, 147–48 (1994), that ‘‘we do not
resort to legislative history to cloud a statutory text that is
clear’’). FERC cites two items that are clearly inadequate to
the task. First, it points to a House Report stating that
§ 1334(f) ‘‘is a reaffirmation and strengthening’’ of § 1334(e).
H.R. Cong. Rep. No. 95–1474 at 87, reprinted at 1978
U.S.C.C.A.N. 1674, 1686. So? FERC lacks the authority
under either section to constitute itself a general regulator of
open access for oil and gas on the OCS, regardless of whether
9
the sections are read together or individually; there is no
miraculous synergy here that can spin a sweeping power out
of the narrow ones provided.
The second item is the following colloquy between Senators
Johnston and Kennedy:
Mr. Johnston: These regulations [OCSLA] would be
promulgated and run by the Secretary of the Interior,
would they not, and not by the ICC? If so, do we not
then have bifurcation of regulatory authority here which
can only result in conflicts? Is that not true?
Mr. Kennedy: TTTT Quite frankly, what I would see
happening is that this would be boilerplate language in
the leasing arrangements and that would be the most
important part of the Interior’s involvement, and the
enforcement of that could be done by the ICCTTTT I
think the enforcement could be done by the ICC. An
arrangement could be worked out between the Energy
Department and the ICC.
Mr. Johnston: Certainly, the Secretary of the Interior is
going to enforce his own regulations under this, is he
not?
Mr. Kennedy: Yes. He would enforce it, but in terms of
working out the enforcement mechanism, it seems to me
that something could be worked out. The Secretary of
the Interior is going to insure that these provisions are
complied with. Between the Department of the Interior
and the ICC there can be an agreement on the imple-
mentation. We have a division of responsibility now
between the Federal Trade Commission and the Anti-
trust Division for antitrust enforcement, just as we have
other divisions of responsibilities between agencies. Ob-
viously, these are matters that can be worked out.
123 Cong. Rec. S23,253 (daily ed. July 15, 1977) (emphasis
added). FERC argues that this exchange demonstrates Sen-
ator Kennedy’s desire that the ICC should be able to enforce
the conditions that, under subsections (e) and (f), were to be
included in OCS transportation permits, licenses, etc., by
10
agencies issuing such grants. (The ICC was in the end
supplanted by FERC, an entity created after the colloquy and
then substituted for the ICC in a later amendment to the
OCSLA amendments as they worked their way through
Congress.) As we have seen, FERC does issue such licenses,
namely, certificates of convenience and necessity under § 7(c)
of the Natural Gas Act, and doubtless enforces the attached
conditions. The emphasized passage explicitly states Senator
Kennedy’s recognition that the Secretary of Interior would
enforce the conditions in licenses issued by Interior; his
suggestion about a theoretical ‘‘agreement on implementa-
tion’’ is too frail a basis for the statutory rewrite that FERC
invites. What we said in an earlier case where a litigant
invoked ‘‘bits and pieces of legislative history surrounding the
1978 Amendments to OCSLA’’ is equally true today: ‘‘[S]nip-
pets of legislative history do not a law make.’’ ExxonMobil
Gas Marketing Co. v. FERC, 297 F.3d 1071, 1088 (D.C. Cir.
2002).
Finally, FERC argues that in Shell Oil Co. v. FERC, 47
F.3d 1186, 1199–1200 (D.C. Cir. 1995), we have already up-
held its broad reading of §§ 1334(e) & (f). In fact Shell is far
narrower.
In Shell, FERC had ordered Pennzoil, operator of the
‘‘Bonito’’ pipeline in the OCS, to interconnect Bonito with
Shell’s pipeline and to carry its oil. All parties appear to
have accepted the proposition that as a general matter FERC
had authority to order such interconnections. After we re-
jected Pennzoil’s claim that the order was really a capacity
allocation order under subsection (e), and thus could occur
only through its procedures, id. at 1198–99, we considered its
argument that the Bonito order was really an expansion
order under subsection (f)(1)(B) and thus subject to that
provision’s geographic limits (which excluded the Gulf of
Mexico, where the Bonito lay). Id. at 1200. See also Penn-
zoil’s Opening Br. at 42–43 in Shell Oil Co. v. FERC. Find-
ing that the interconnection ordered by FERC was not ‘‘an
expansion of throughput capacity,’’ we rejected the claim. 47
F.3d at 1200. There the parties had not questioned FERC’s
11
general authority to order open-access enhancing conduct on
the OCS; here they have.
* * *
Sections 5(e) and (f) of OCSLA do not grant FERC general
powers to create and enforce open access rules on the OCS,
but merely assign it a few well-defined tasks. As FERC was
without authority to issue the regulations at issue here, the
judgment of the district court is
Affirmed.