Midcoast Interstate Transmission and two groups oflandowners/environmentalists have lost their year-long battle incourt to overturn FERC orders awarding a certificate to SouthernNatural Gas to build and operate an extension into northernAlabama.
Midcoast, which has enjoyed a monopoly over pipelinetransportation in the region for years, challenged the orders inthe U.S. Court of Appeals in Washington, D.C., arguing FERC failedto make a “reasoned” comparison of the competing environmental andeconomic factors of Southern Natural’s extension with the twosystem alternatives it proposed — the Alabama-TennesseeAlternative and the Hartselle System alternative. It alsochallenged FERC’s approval of rolled-in pricing for the extension.
Although FERC in its decision conceded the “environmentalsuperiority” of Midcoast’s Alabama-Tennessee option, the Commissionsaid it approved the Southern Natural extension “for countervailingpolicy reasons” — namely it would provide for the first time in50 years a competitive alternative to the captive pipelinecustomers of Midcoast. It conditioned Southern’s certificate on thepipeline agreeing to comply with sterner environmental measures toeven the scale with Midcoast’s alternative.
The Commission’s action “strikes us as responsible agencydecision-making,” wrote Senior Judge James Buckley in the opinionissued earlier this week. Also, he said the court couldn’t faultFERC for rejecting Midcoast’s claims that its system alternativeswere economically superior, especially since Midcoast’s two largestcustomers — the municipal utilities of Huntsville and Decatur, AL— had signed long-term contracts to take service on Southern’sextension.
The construction of the extension has been completed. It extendsabout 118 miles from Tuscaloosa, AL, to Huntsville and will carry70 MMcf/d of gas to Huntsville and Decatur.
Midcoast further argued that the rejection of its two proposalswas unreasonable and an abuse of discretion. But the court beggedto differ, saying the applications were dismissed because theyfailed to show project need and for a host of filing shortcomingson Midcoast’s part. “…..[I]n light of Midcoast’s failure tocomply with the regulations, FERC’s dismissal of the applicationsis hardly surprising and certainly not unreasonable, arbitrary orcapricious,” the court opined.
Although the court found that Midcoast would be “aggrieved” as aresult of FERC’s decision to allow rolled-in pricing of SouthernNatural’s extension, it upheld the Commission’s approval ofrolled-in rates anyway because it met the “two-pronged test” underFERC’s previous pricing policy – the extension would providesystem-wide benefits and the rate impact to existing customerswould be less than 5%.
The court said the Commission’s new policy on pipelineconstruction, which would have required incremental pricing ofSouthern Natural’s extension, had “no bearing” in this case becauseit couldn’t be applied retroactively.
The two environmental/landowner groups, the GASP Coalition andthe Citizens Opposing the North Alabama Pipeline Project (CONAPP)challenged the Southern Natural project, arguing that FERC hadauthorized the pipeline to exercise the power of eminent domain inviolation of the Fifth Amendment. But the appellate courtdisagreed, saying the matter was out of the Commission hands.
Upon being granted a certificate, the Natural Gas Act “allowsthe certificate holder to obtain needed private property by eminentdomain. The Commission does not have the discretion to deny acertificate holder the power of eminent domain,” it said. BecauseFERC deemed the North Alabama extension to be in the publicconvenience and necessity, “we hold that the takings [of privateproperty] complained of served a public purpose.”
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