Ruling that the case was not ripe for review yet, the D.C.Circuit Court of Appeals has denied challenges to FERC’s policystatement and subsequent orders that gave interstate gas pipelinespermission to enter into negotiated rates with their customers.

Burlington Resources Oil & Gas Co. et al petitioned thecourt to review FERC’s 1996 policy statement on alternative pricingmethods, arguing that it was “aggrieved” by the Commission’saction. It further claimed the policy was, in fact, a rule, andthat FERC in promulgating it did not follow the requirednotice-and-comment procedures [No. 96-1160 et al.].

Separately, the Northern Municipal Distributors Group et al tookissue with five orders that awarded pipelines the authority tonegotiate rates. The LDCs argued that, by allowing negotiated ratesto take effect with only a one-day suspension, the Commissionabdicated its statutory responsibility under Section 5 to reviewfiled rates, and unlawfully put customers in the position of havingto prove that a rate was unreasonable [No. 96-1455 et al]. Thecases were consolidated by the appellate court for the purpose ofreview.

“The legal significance of the case is in the reviewability of apolicy statement. It reaffirms that a policy statement is notappealable,” said Lorraine Cross of the Interstate Natural GasAssociation of America. “As a policy matter, I don’t think that youcould read into it one way or another whether the court woulduphold negotiated rates.”

The court agreed with FERC’s position that neither group ofpetitioners was aggrieved by the policy statement and/or subsequentorders, and that neither challenge was ripe for review. For a partyto prove it is aggrieved, it must show that an order imposes uponit concrete injury, actual or imminent, the court said.

“Burlington does not meet any of these conditions. Burlingtonpoints to no injury, concrete or otherwise, that is in any wayactual or imminent. The rates [it] pays have not changed – nor,indeed, did anything concrete change by virtue of the policystatement alone. Each potential problem on Burlington’s list isentirely speculative,” the court wrote in an eight-page decision.

“Further, even assuming that Burlington would surely be harmedif negotiated rates were in use, the policy statement does notapprove any such rate. The policy statement does not even approveany particular proposal to negotiate a rate, let alone any actualnegotiated rate; rather, it simply indicates the Commission’swillingness to accept proposals from pipelines seeking to negotiaterates – if they meet the guidelines laid out in the policystatement,” the ruling said. Consequently, FERC’s policy statementby itself is not fit for judicial review, the court noted.

To date, only seven pipelines have used their authority to enterinto a negotiated-rate contract, and – “so far as we know” – FERChas approved at least one such negotiated deal involving NorAm GasTransmission, it said. The court has delayed its review of thatcase pending the outcome of this case.

Citing many of the same reasons, the court also rejected thechallenges of the municipal distributors to five orders thatawarded pipelines permission to negotiate rates. “…[N]one of theorders says enough about the real-world consequences of the policyto illuminate it sufficiently for review.” The orders did notapprove a specific negotiated rate, but rather merely grantedgeneral permission for a pipeline “to seek to persuade its customerto agree to a negotiated rate,” it said. “Such permission is nottied to the details of any rate and, therefore, [we] cannot addressthe future consequences of a particular rate to any particularcustomer or competitor.”

The distributors will not suffer “any significant hardship fromour deferring review of the orders, but such delay will permit moreinformed review,” the court concluded. As to Burlington’s claimthat the policy statement was, in fact, a rule subject tonotice-and-comment procedures, the court said the argument was”meritless.”

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