GA Indust Grp v. FERC

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued January 27, 1998 Decided March 17, 1998
No. 93-1705
Georgia Industrial Group,
Petitioner
v.
Federal Energy Regulatory Commission,
Respondent
South Georgia Natural Gas Company, et al.,
Intervenors
Consolidated with
Nos. 94-1056 and 94-1272
On Petition for Review of Orders of the
Federal Energy Regulatory Commission
Edward J. Grenier, Jr. argued the cause for petitioner,
with whom Gail S. Gilman was on the briefs.
Susan J. Court, Special Counsel, Federal Energy Regula-
tory Commission, argued the cause for respondent, with
whom Jay L. Witkin, Solicitor, John H. Conway, Deputy
Solicitor, and Joel M. Cockrell, Attorney, were on the brief.
Before: Ginsburg, Randolph and Rogers, Circuit Judges.
Opinion for the Court filed by Circuit Judge Rogers.
Rogers, Circuit Judge: The Georgia Industrial Group
("GIG") 1 petitions for review of four orders of the Federal
Energy Regulatory Commission ("Commission") 2 that ap-
prove tariff revisions filed by the South Georgia Natural Gas
Company ("South Georgia") 3 to implement Order No. 636.4
__________
1 The Georgia Industrial Group is an association of Georgia and
Alabama industrial users of natural gas obtained or transported
through the South Georgia Natural Gas Company pipelines.
2 South Georgia Natural Gas Co., 63 F.E.R.C. p 61,190 (1993)
("First Order"), reh'g granted and denied, 64 F.E.R.C. p 61,251
(1993) ("Second Order"), reh'g granted and denied, 65 F.E.R.C.
p 61,265 (1993) ("Third Order"), reh'g denied, 66 F.E.R.C. p 61,112
(1994) ("Fourth Order").
3 South Georgia operates an 831 mile gas pipeline that extends
from a single receipt point at its interconnection with Southern
Natural Gas Company in Alabama to 68 delivery points in Georgia
and Florida. See First Order, 63 F.E.R.C. p 61,190 at 62,420.
Prior to Order No. 636, South Georgia became a transportation-only
pipeline on May 5, 1992, following customer conversions from firm
sales to firm transportation. See id. It provides both firm trans-
portation service and interruptible transportation service to its
customers. See id.
4 Order No. 636, Pipeline Service Obligations and Revisions to
Regulations Governing Self-Implementing Transportation Under
Part 284 of the Commission's Regulations, and Regulation of
Natural Gas Pipelines After Partial Wellhead Decontrol, F.E.R.C.
Stats. & Regs. p 30,939 (1992), order on reh'g, Order No. 636-A,
The revisions added a pre-granted abandonment requirement
and a right-of-first-refusal mechanism setting the conditions
under which South Georgia's firm transportation customers
could continue to receive service after their contracts expire.
South Georgia also sought to retain its pre-Order No. 636
capacity allocation and service priority plan for interruptible
transportation customers. GIG principally contends that the
Commission acted in an unduly discriminatory manner in
approving revised tariffs that treat similarly situated custom-
ers differently by permanently exempting former firm sales
customers from pre-granted abandonment requirements and
subjecting non-exempted customers to the onerous right-of-
first-refusal mechanism. GIG further contends that South
Georgia's method for allocating interruptible capacity, its so-
called "no-bump" rule, has become unjust and unreasonable
in post-Order No. 636 circumstances. To the extent GIG
challenges the fairness of the right-of-first-refusal mechanism
in light of the exemption from pre-granted abandonment
requirements for some long-term firm transportation ship-
pers, the petition is a collateral attack on Order No. 636, and
we dismiss that part of the petition. Insofar as GIG requests
a waiver of pre-granted abandonment regulations, it fails to
explain why the South Georgia pipeline is so unusual that the
Commission should be required to grant a waiver. Finally,
because the Commission chose between two reasonable op-
tions for allocating interruptible capacity--a monthly no-
bump rule and a permanent no-bump rule--and GIG fails to
present persuasive reasons to conclude that the Commission's
choice was arbitrary and capricious, we deny the remaining
portions of the petition.
__________
F.E.R.C. Stats. & Regs. p 30,950 (1992); order on reh'g, Order No.
636-B, 61 F.E.R.C. p 61,272 (1992); aff'd in part, rev'd in part,
United Distrib. Cos. v. FERC, 88 F.3d 1105 (D.C. Cir. 1996), cert.
denied, 117 S. Ct. 1723 (1997); on remand, Order No. 636-C, 78
F.E.R.C. p 61,186 (1997).
I.
Beginning in 1978, following enactment of the Natural Gas
Policy Act,5 the Commission began to restructure its regula-
tions to enable the market to play a greater role in determin-
ing the supply, demand, and price of natural gas. See Conoco
Inc. v. FERC, 90 F.3d 536, 539-40 (D.C. Cir. 1996), cert.
denied, 117 S. Ct. 1017 (1997); United Distrib. Cos. v. FERC,
88 F.3d 1105, 1122-23 (D.C. Cir. 1996). As part of this
restructuring, on April 16, 1992, the Commission issued Order
No. 636, which was designed "to ensure that all shippers have
meaningful access to the pipeline transportation grid so that
willing buyers and sellers can meet in a competitive, national
market to transact the most efficient deals possible." Order
No. 636, F.E.R.C. Stats. & Regs. p 30,939 at 30,393. To
achieve this goal, the Commission required interstate pipe-
lines to restructure their services to separate the transporta-
tion of gas from the sale of gas, to change the design of their
transportation rates, and to take other actions to promote a
free market in gas transportation. See Order No. 636-C, 78
F.E.R.C. p 61,186 at 61,766.
On December 1, 1992, South Georgia submitted a compli-
ance filing of revised tariffs, providing, as relevant here, for a
"pre-granted abandonment" requirement under which firm
transportation service 6 of one year or more ends automatical-
ly at the end of a service agreement. See First Order, 63
F.E.R.C. p 61,190 at 62,431. The filing expressly exempted
customers who converted from sales to firm transportation
service after February 13, 1991, and before May 18, 1992,
from this requirement.7 See id. The filing also provided for
__________
5 Pub. L. No. 95-621, 92 Stat. 3350 (1978) (codified as amended
at 15 U.S.C. ss 3301-3432 (1994)).
6 "Firm" transportation service is guaranteed, while "interrup-
tible" transportation service is not.
7 "Pre-grant of abandonment" is authorized by the Commission
under 18 C.F.R. s 284.221(d)(1) (1997). Under 18 C.F.R.
a right-of-first-refusal mechanism to allow firm transportation
customers whose service would stop due to the pre-granted
abandonment requirement an opportunity to continue to re-
ceive service.8 See id. The filing further provided for alloca-
tion of interruptible transportation service whereby South
Georgia would deliver service on a first-come, first-served
basis according to a queue: if a customer significantly
changed its initial order for gas, it would lose its place in the
queue, and a customer could not increase the volume of gas in
its order if to do so would decrease the amount of gas already
on order by another customer (the "no-bump" rule), while a
customer would be required to pay scheduling penalties 9 for
__________
s 284.221(d)(3), however, pre-grant of abandonment is not permit-
ted for customers who converted from sales to firm transportation
service after February 13, 1991, and before May 18, 1992.
8 Under 18 C.F.R. s 284.221(d)(2), tariffs must include a right-
of-first-refusal mechanism whereby a customer with a firm trans-
portation contract for a year or longer may avoid pre-granted
abandonment of service at the expiration of the contract or other
Commission-authorized arrangement by (1) giving the pipeline time-
ly notice that it will match the longest term and the highest rate for
firm service (limited to the maximum rate permitted by the Com-
mission) offered by any other person, and (2) executing such a
matching contract.
9 The scheduling penalties in this filing greatly exceeded the
penalties in effect prior to the filing. Over four Commission
proceedings, GIG and others protested the fairness of these penal-
ties, and the Commission ordered South Georgia to alter them in
various ways. See First Order, 63 F.E.R.C. p 61,190 at 62,426-28;
Second Order, 64 F.E.R.C. p 61,251 at 62,764-66; Third Order, 65
F.E.R.C. p 61,265 at 62,239-42; Fourth Order, 66 F.E.R.C. p 61,112
at 61,184-86. Ultimately, South Georgia provided for two schedul-
ing penalties. First, a customer must pay a penalty of $0.1681 per
million British thermal units ("MMBtu") for takes in excess of the
greater of 50 MMBtu or 10% of daily orders at each delivery point.
See First Order, 63 F.E.R.C. p 61,190 at 62,426-28; Second Order,
64 F.E.R.C. p 61,251 at 62,765. This penalty is the same as prior
penalties. See First Order, 63 F.E.R.C. p 61,190 at 62,426-28.
Second, a customer must pay a penalty of $0.1681 per MMBtu for
volumes shipped that are less than 95% of the daily orders at each
shipping more or less gas than it ordered. See id. at 62,424-
26.
GIG objected to South Georgia's filings on two grounds.
First, GIG claimed that the pre-granted abandonment re-
quirement, subject to the right-of-first-refusal mechanism,
unduly discriminates against customers who are not exempt-
ed from it. See First Order, 63 F.E.R.C. p 61,190 at 62,431.
Second, GIG complained that the "no-bump" rule could pre-
vent a customer with a preferable queue position from in-
creasing its volume of gas shipped and could prevent a
customer who had previously reduced its daily orders for the
purpose of avoiding scheduling penalties from restoring its
daily orders to previous levels. See id. at 62,425. We
describe the Commission's proceedings relating to these two
issues in turn.
The Commission's consideration of GIG's challenge to the
pre-granted abandonment requirement spanned two proceed-
ings. In the First Order, the Commission dismissed GIG's
concern about undue discrimination, observing that customers
not exempted from pre-granted abandonment could protect
themselves from loss of service at the end of a service
agreement by negotiating an "evergreen" or "roll-over"
clause 10 into their service agreements. See First Order, 63
__________
delivery point. See Second Order, 64 F.E.R.C. p 61,251 at 62,764-
66. This penalty is new. See First Order, 63 F.E.R.C. p 61,190 at
62,427-28. For both scheduling penalties, where the scheduling
variance "causes extreme harm to the system," the customer must
pay a penalty of $10 per MMBtu for the relevant variance--more
than 59 times the regular penalty rate. Second Order, 64 F.E.R.C.
p 61,251 at 62,765. This super-penalty also is new. See First
Order, 63 F.E.R.C. p 61,190 at 62,426-28. Without providing evi-
dence in the record, GIG contends and the Commission does not
dispute that the super-penalty is the norm because the pipeline is
usually at capacity, resulting in significant increases in penalties
over those in effect prior to these proceedings. GIG does not
appeal the reasonableness of the penalties themselves, however,
only noting their allegedly unreasonable effect in conjunction with
South Georgia's no-bump rule.
10 The Commission permits a pipeline and customer to negoti-
ate an "evergreen" or "roll-over" clause into their service agree-
F.E.R.C. p 61,190 at 62,432. In the Second Order, in re-
sponse to GIG's assertion that the pre-granted abandonment
requirement was unduly discriminatory because only a small
minority of South Georgia's firm transportation customers
were subject to it,11 the Commission observed that in addition
to being protected by the right to negotiate evergreen or roll-
over clauses, non-exempted customers were also protected
from automatic cessation of service by the right-of-first-
refusal mechanism, "which permit[s] a continuation of service
as long as the [customer] is willing to pay the maximum rate
[permitted by the Commission] and match the contractual
term of a competing offer." Second Order, 64 F.E.R.C.
p 61,251 at 62,769.
The Commission's consideration of GIG's protest to the no-
bump rule spanned four proceedings, during which the Com-
mission vacillated in its approach. Initially, the Commission
ruled that GIG's complaints had already been addressed
within South Georgia's filings. See First Order, 63 F.E.R.C.
p 61,190 at 62,426. But this conclusion was based on the
Commission's misinterpretation of a longstanding South
Georgia tariff provision that historically had permitted cus-
tomers to prearrange a reduction in their orders without loss
of queue position for such rare occurrences as facilities main-
tenance; the Commission misinterpreted this provision to
mean that on any day, a customer could decrease its orders to
avoid scheduling penalties but would still maintain its queue
position. See id. As GIG's complaint was that customers
would not be able to do just that, the Commission ruled that
__________
ment to allow them to extend the agreement prior to its termination
and thus avoid automatic termination pursuant to pre-granted
abandonment regulations. See Order No. 636-A, F.E.R.C. Stats. &
Regs. p 30,950 at 30,627-28; see also United Distrib. Cos., 88 F.3d
at 1139.
11 Most of South Georgia's current firm transportation service
customers converted to firm transportation service from sales ser-
vice after February 13, 1991, and before May 18, 1992, and thus
only a small minority are not exempted from automatic termination
under the pre-granted abandonment mechanism. See Second Or-
der, 64 F.E.R.C. p 61,251 at 62,769.
GIG's complaint was resolved. See id. Following South
Georgia's protests that this longstanding tariff provision was
meant to apply only in narrow circumstances, and not to
customers wishing to decrease their orders to avoid schedul-
ing penalties, the Commission reversed itself in the Second
Order and adopted South Georgia's interpretation of the
provision, reasoning that its previous interpretation of South
Georgia's tariff would lead to "gamesmanship" that would
harm South Georgia and its customers with less preferable
queue positions. See Second Order, 64 F.E.R.C. p 61,251 at
62,762.
Also in its Second Order, however, the Commission inter-
preted a different South Georgia tariff provision as meaning
South Georgia intended the no-bump rule to operate on a
monthly basis, whereby at the beginning of the month cus-
tomers with preferable queue positions could increase the
volume of their orders of gas, even if doing so would "bump"
(decrease) the volume of gas available to customers with less
preferable queue positions. See id. at 62,763. The Commis-
sion approved this monthly basis because it would "narrow
the application of the no-bump rule and [would] avoid unfair-
ness to high-queue-position [interruptible transportation cus-
tomers] while maintaining system stability." Id. This Com-
mission interpretation was consistent with GIG's request and
addressed its concerns because it meant that customers with
preferred (i.e., high) queue positions could bump those with
less preferred queue positions at the beginning of each
month. See Third Order, 65 F.E.R.C. p 61,265 at 62,237.
South Georgia protested, explaining that the purpose of the
no-bump rule was to protect customers who consistently
shipped a steady volume of gas, at the expense of those who
varied the volumes they shipped through the pipeline. See
id. According to South Georgia, removing this protection
would discourage long-term contracts for steady volumes and
could reduce the amount of gas South Georgia is able to ship
through its system overall, thus hurting its business.12 See
__________
12 Essentially, South Georgia argued that its business is best
served by discriminating in favor of long-term, steady volume
id. Once again the Commission reversed itself, this time
explaining that South Georgia had not intended its no-bump
rule to operate on a monthly basis, adopting South Georgia's
rationale as its own, and declaring South Georgia's no-bump
rule, as outlined in its original filing, to be reasonable. See
id. at 62,238. The Commission acknowledged that GIG's
preferred monthly no-bump rule was also reasonable, but
concluded that there was no good reason to reject South
Georgia's proposal in favor of GIG's. See id.
GIG sought rehearing of the Third Order, again requesting
that the Commission direct South Georgia to establish a
monthly no-bump rule. See Fourth Order, 66 F.E.R.C.
p 61,112 at 61,184. For the first time, GIG argued that
because capacity on the South Georgia pipeline was con-
strained, the approved no-bump rule created a Hobson's
choice for interruptible transportation customers, forcing
them either to pay high penalties or to lose preferred queue
positions. See id. GIG maintained that this situation was
fundamentally unfair and that a monthly no-bump rule was
more reasonable than that approved by the Commission.
The Commission disagreed, maintaining that the "use-or-lose"
feature of the approved no-bump rule was not unreasonable
and that if GIG and similarly situated customers were con-
cerned about reserving capacity, they could avoid scheduling
penalties by requesting firm transportation capacity and pay-
ing a reservation charge or by seeking to obtain released firm
transportation capacity on a short-term basis from a firm
transportation service customer. See id.
GIG timely petitioned for review of all four Commission
orders. GIG contends that South Georgia's pre-granted
abandonment requirement unduly discriminates, within the
__________
customers at the expense of variable volume customers; the former
either ship a steady volume of gas or pay a scheduling penalty, and
in return are guaranteed their queue position and their desired
volume of gas, while the latter avoid scheduling penalties by sched-
uling only the volume of gas that they need but face loss of
preferred queue positions and may not always increase the volume
of gas they ship as they might like.
meaning of 15 U.S.C. ss 717c(b), 717d(a) (1994), against all
customers not subject to its exemption. GIG points to the
facts that only a small minority of customers are not exempt-
ed from the pre-granted abandonment requirement and that
these customers must "go through cumbersome, risky, poten-
tially expensive [right-of-first-refusal] procedures." See su-
pra note 11. Treating two sets of similarly situated custom-
ers differently in this way is per se unduly discriminatory,
GIG maintains, and the discriminatory impact is exacerbated
because capacity on South Georgia's system is constrained.
GIG also contends that the Commission did not offer a
justification for such disparate treatment. With regard to the
no-bump rule, GIG contends that the Commission failed to
provide an adequate explanation for its numerous reversals of
its position and failed to address significant arguments, in-
cluding that: (1) the new scheduling penalties, see supra note
9, combined with the no-bump rule provide an incentive for
South Georgia to unjustly enrich itself by frustrating variable
customers' efforts to receive service, and (2) whereas, prior to
1992, the South Georgia system was rarely at capacity, and
thus variable customers were generally able to increase or
decrease volumes shipped, at present variable customers can-
not do so because capacity is not always available.
II.
Initially, the Commission contends, and we agree, that
GIG's challenge to South Georgia's pre-granted abandonment
requirement is an impermissible collateral attack on Order
No. 636, on which the 60-day time limit for challenges
provided in 15 U.S.C. s 717r(b) (1994) has long since expired.
See Transwestern Pipeline Co. v. FERC, 988 F.2d 169, 174
(D.C. Cir. 1993); cf. ANR Pipeline Co. v. FERC, 71 F.3d 897,
900-01 (D.C. Cir. 1995); American Gas Ass'n v. FERC, 912
F.2d 1496, 1514-15 (D.C. Cir. 1990). Order No. 636 exempts
from pre-granted abandonment requirements those custom-
ers who converted from sales to firm transportation service
after February 13, 1991, and before May 18, 1992. See Order
No. 636, F.E.R.C. Stats. & Regs. p 30,939 at 30,636; 18
C.F.R. s 284.221(d)(3). The Commission explained that it
approved South Georgia's revised tariffs because they imple-
mented the pre-granted abandonment requirement and the
right-of-first-refusal mechanism required by Order No. 636,
see Second Order, 64 F.E.R.C. p 61,251 at 62,769, an assess-
ment GIG does not dispute. GIG's complaint, that the pre-
granted abandonment requirement subjects a minority of
customers to riskier and costlier procedures for preserving
their service while treating similarly situated customers dif-
ferently, was considered during the Order No. 636 proceed-
ings. In response to a challenge that under Order No. 636
firms not exempted from pre-granted abandonment would
encounter greater difficulty and cost in maintaining service at
the end of a contract, the Commission concluded that the
exemption is not discriminatory because parties have the
right to defer pre-granted abandonment by either negotiating
a roll-over clause into their contracts or utilizing their guaran-
teed right-of-first-refusal. See Order No. 636, F.E.R.C.
Stats. & Regs. p 30,939 at 30,452. Further, during the Order
No. 636-A proceedings, the Commission concluded that there
was no reason to expand the exemption from pre-granted
abandonment to cover all converted firm sales customers.
See Order No. 636-A, p 30,950 at 30,635-36. The court, in
turn, concluded that while "roll-over" clauses would not alone
suffice to protect customers' ability to renew their service
contracts, the "mandatory right-of-first-refusal mechanism
... provides substantially more protection to existing custom-
ers" and the complaint procedure 13 provides back-up protec-
tion. United Distrib. Cos., 88 F.3d at 1139-40 & n.42. Thus,
the court affirmed pre-granted abandonment requirements
including the exemption, subject to one remanded issue not
relevant here, because the combination of roll-over clauses,
the right-of-first-refusal mechanism, and the complaint proce-
dure adequately guaranteed that customers would be able to
extend service at the end of their contracts. See id. at 1138-
41. Consequently, to the extent that GIG contends that
South Georgia's pre-granted abandonment requirement is
__________
13 The Commission provides a complaint mechanism to remedy
an unjustified loss of service. See 18 C.F.R. s 385.206 (1997);
United Distrib. Cos., 88 F.3d at 1139 n.42.
inherently discriminatory for treating like customers differ-
ently, or that the risks and costs placed on non-exempt
customers are unduly burdensome, its challenge is a collateral
attack on Order No. 636, and the court lacks jurisdiction to
consider it now.
As to GIG's request for a waiver due to special factors, the
only question is whether the Commission's refusal to grant a
waiver was based on reasoned and principled decisionmaking
supported by the record. See Pennsylvania Office of Con-
sumer Advocate v. FERC, 131 F.3d 182, 185-86 (D.C. Cir.
1997) (citing Western Resources, Inc. v. FERC, 9 F.3d 1568,
1572 (D.C. Cir. 1993)). GIG contends that the Commission
should have waived its pre-granted abandonment requirement
because, in the unique context of South Georgia's system, this
requirement creates undue discrimination not present in oth-
er pipelines. The only unique factors GIG identifies, howev-
er, are the small percentage of customers subject to the pre-
granted abandonment requirement and the capacity con-
straint of South Georgia's system. GIG contends that be-
cause South Georgia is the only pipeline on which all of the
pipeline's local distribution customers converted from sales
service to firm transportation service during the exemption
period designated in Order No. 636, see supra note 11, the
amount of capacity now held by non-exempt customers is
small, and because the system is at capacity, the pipeline has
greater monopoly power in contract renewal negotiations to
hold out for maximum terms and high rates. GIG's conten-
tion is unpersuasive, however, for several reasons. First,
because the maximum contract term is five years, see Order
No. 636-C, 78 F.E.R.C. p 61,186 at 61,774, and the maximum
rates allowable are those set by the Commission, which must
be just and reasonable, see 18 U.S.C. s 717c(a), the worst that
non-exempt members can expect in contract negotiations is to
face a five year term at a just and reasonable rate. GIG
makes no plausible argument that this situation is particularly
bleak. Second, although GIG asserts that South Georgia is
the only pipeline whose customers all converted from sales to
firm transportation service between February 13, 1991, and
May 18, 1992, GIG offers no evidence that other pipelines are
not similarly capacity-constrained, or that customers of other
pipelines subject to a right-of-first-refusal mechanism negoti-
ate shorter terms and lower rates significantly more often
than South Georgia's customers. In short, while its argu-
ment has facial appeal, GIG fails to support it with any hard
data on actual impact or an adequate explanation of why the
South Georgia pipeline is unusual compared to other pipelines
such that the Commission should be required to grant a
waiver. Therefore, the Commission's approval of South
Georgia's compliance filings was not unreasonable.
III.
GIG's contentions regarding the no-bump rule fare no
better. At issue is whether it was unreasonable, or arbitrary
and capricious, for the Commission to allow South Georgia to
continue its historic practice of rewarding steady volume
interruptible customers at the expense of variable volume
customers. See Pennsylvania Office of Consumer Advocate,
131 F.3d at 185-86. Where the Commission chooses among
reasonable alternatives, the court defers to the Commission's
selection so long as its decision is reasonable and consistent
with the intent of the statutes it is implementing. See United
Distrib. Cos., 88 F.3d at 1166. Where the Commission vacil-
lates in its reasoning, the court's role is to ensure that it has
justified its ultimate decision and responded to substantial
arguments raised by petitioners. See Williams Natural Gas
Co. v. FERC, 3 F.3d 1544, 1550-51 (D.C. Cir. 1993); K N
Energy, Inc. v. FERC, 968 F.2d 1295, 1303-04 (D.C. Cir.
1992).
While GIG correctly notes that the Commission vacillated
regarding the no-bump rule, we disagree with its contention
that the Commission failed to justify its ultimate decision.
First, the Commission accepted as its own South Georgia's
reasoning that the pipeline would lose interruptible transpor-
tation service if it could not guarantee capacity to customers
willing to maintain steady volumes. See Third Order, 65
F.E.R.C. p 61,265 at 62,237-38. Second, the Commission
explained that there is nothing improper in making an initial
allocation of interruptible capacity on a first-come, first-
served basis but requiring a customer to maintain its volume
in order to preserve its place in the queue. See id. at 62,238.
This mechanism is reasonable, the Commission explained,
because it gives an advantage to customers with preferred
queue positions in the initial allocation of capacity and in
allocation of additional capacity that comes available, while
preventing customers with less preferable queue positions
from losing their capacity to those with better queue positions
and thus enabling lower queue customers to maintain steady
volumes of gas and encouraging them to continue contracting
with South Georgia. See id. Moreover, the Commission
reasoned, a customer seeking additional capacity has the
option of requesting firm transportation capacity and paying
the associated reservation charge, or obtaining released firm
transportation capacity on a short-term basis from a firm
shipper. See Fourth Order, 66 F.E.R.C. p 61,112 at 61,184.
For these reasons, the Commission determined that "[r]equir-
ing [interruptible transportation customers] to use, or lose,
their capacity is not unreasonable." Id. Although the Com-
mission also found that the monthly no-bump rule proposed
by GIG was reasonable, it concluded that the choice between
South Georgia's proposal and GIG's amounted to a policy
decision as to which customers ought to receive a preference
when the system is at capacity, and there was no reason to
reject South Georgia's choice in the matter. See Third Order,
65 F.E.R.C. p 61,265 at 62,238. So viewed, the Commission
adequately explained its ultimate conclusion.
As to GIG's complaint that the Commission failed to ad-
dress substantive concerns presented to it, we find it no more
persuasive. Contrary to GIG's position that the Commission
did not address its concerns regarding the newly developed
capacity constraints on the system, the Commission makes
clear that its analysis is premised on the assumption that the
system is at capacity, for when it is not, the no-bump rules do
not constrain variable customers. See Third Order, 65
F.E.R.C. p 61,265 at 62,238. It reasons that when the system
is at capacity, some customers will be unable to ship maximal-
ly desired volumes; in determining which customers will be
constrained, South Georgia's mechanism is as reasonable as
GIG's. See id. South Georgia's proposal requires high-
queue shippers either to use or to lose their service, and
makes clear that although high-queue shippers are preferred
in initial allocation and when additional capacity becomes
available, such shippers are not guaranteed "the right to
capacity at the expense of lower queue positioned shippers
that desire to continue their flows of gas under the IT
service." Id. The balance the Commission chose is clearly
not an unreasonable one.
Also, contrary to GIG's contention that the Commission
failed to consider the fact that the new scheduling penalties
provided an opportunity for South Georgia to reap substantial
profits while purposefully frustrating the ability of variable
volume customers to receive service, see supra note 9, the
Commission made clear that it did consider the impact of the
new scheduling penalties when it explained how variable
customers could avoid paying the penalties. See Fourth
Order, 66 F.E.R.C. p 61,112 at 61,184. In addition, the
Commission noted that GIG could file a complaint under
section 5 of the Natural Gas Act, 15 U.S.C. s 717d, when it
believes the pipeline is abusing its discretion or acting unrea-
sonably. See Fourth Order, 66 F.E.R.C. p 61,112 at 61,186.14
Accordingly, we dismiss the petition insofar as it collateral-
ly attacks Order No. 636 with respect to the Commission's
approval of South Georgia's pre-granted abandonment re-
quirements, subject to the right-of-first-refusal mechanism,
and deny the petition with respect to the Commission's
refusal to waive its pre-granted abandonment requirement or
modify South Georgia's historic no-bump tariff provision.
__________
14 While GIG contends that the Commission failed to address
the fact that the first-come, first-served rule had been in South
Georgia's tariffs since 1987, it fails to explain why this fact should
alter the Commission's conclusions. Furthermore, while GIG con-
tends that the Commission also failed to address unclear tariff
language, the Commission's ultimate interpretation of the tariffs is
sufficient. See Fourth Order, 66 F.E.R.C. p 61,112 at 61,185-86.