A federal appeals court in New Orleans has vacated a FERC order requiring major intrastate pipelines to post operational information on their websites, saying the agency had exceeded the scope of its authority.
“We grant review and vacate both orders [No. 720 and 720-A] because they exceed the scope of FERC’s authority under the Natural Gas Act [NGA] of 1938,” said a three-judge panel withe the U.S. Court of Appeals for the Fifth Circuit. The decisions by the Federal Energy Regulatory Commission were challenged by the Texas Pipeline Association (TPA) and the Railroad Commission of Texas.
The decision “resolves a significant question concerning the scope of the Commission’s jurisdiction under the NGA. The court reaffirms that the basic jurisdictional limitations established in the NGA in 1938 that provided the Commission authority to regulate the transportation or sale of natural gas in interstate commerce and entities engaged in those activities remain in place, and that these limitations can only be changed through clear and unambiguous language from Congress,” said the Washington, DC-based law firm of Van Ness Feldman, which argued the case for TPA.
Order 720, which was issued in November 2008, established new posting requirements under Section 23 of the NGA that called for major intrastate pipelines, as well as interstate pipelines, to post on their publicly accessible websites daily operational information, such as scheduled volume information and design capacity for certain receipt and delivery points [RM08-2].
The order defined a major intrastate pipeline as a pipe that is not classified as a natural gas company under the NGA and delivers on average more than 50 Bcf/year during a three-year period. Intrastate pipes with deliveries at this level contribute to price formation, FERC said. The Commission said Section 23 of the Environmental Policy Act of 2005 (EPAct), which amended the NGA, empowered it with the authority to subject intrastate gas pipelines to its transparency regulations. This — the scope of FERC’s authority under Section 23 — was the central issue in the court case.
The Commission argued that Section 23 allows it to obtain information about “the availability and prices of natural gas sold at wholesale in interstate commerce” from “any market participant.” It focused on the broad or ambiguous phrase — “any market participant” — and argued that it could “reasonably be interpreted to include major intrastate pipelines because they are so integrated with the interstate market.”
The Commission further argued that the jurisdictional limitations under Section 1(b) of the NGA were not applicable to Section 23. Section 1(b) limits FERC’s jurisdiction “to the transportation of natural gas in interstate commerce [and] to the sale in interstate commerce of natural gas for resale…but shall not apply to any other transportation or sale of natural gas or to the local distribution of natural gas or to facilities used for such distribution.”
The appellate court did not agree with the Commission. “All attempts by FERC to show that Section 1(b) does not limit the scope of Section 23 of the NGA are unavailing, and the NGA unambiguously precludes FERC from issuing the posting rule so as to require wholly intrastate pipelines to disclose and disseminate capacity and scheduling information.
“Indeed, other parts of the NGA, as well as its history, confirm our conclusion that Congress did not intend to regulate ‘the entire natural gas field to the limit of constitutional power,’ but chose instead to leave regulation of certain entities, including intrastate transactions and pipelines, to the states,” the court said.
“Where Congress has decided to expand FERC’s jurisdiction, it has done so explicitly and unambiguously, as it did with the inclusion, within FERC’s purview, the foreign importation and exportation of natural gas in the Energy Policy Act of 2005 — the very law that created Section 23 by modifying Section 1(b).”
“Although the Chevron framework [a two-step framework articulated in a 1984 decision] requires courts to give administrative agencies [like FERC] a substantial amount of deference in interpreting the statutes they administer, agencies cannot manufacture statutory ambiguity with semantics to enlarge their congressionally mandated border. ‘Ambiguity is a creature not of definitional possibilities but of statutory context.’ The context provided by Section 1(b) answers the question whether this phrase includes intrastate pipelines with a definitive ‘No.’ Because congressional intent is clear, the question is answered at Chevron step one, and we need not proceed to step two. FERC has no statutory authority to promulgate Order Nos. 720 and 720-A.”
FERC has the option to seek rehearing of the decision or appeal it to the U.S. Supreme Court.
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