CITY OF WILLCOX, ARIZONA, ET AL., PETITIONERS V. FEDERAL ENERGY REGULATORY COMMISSION, ET AL. No. 90-806 In The Supreme Court Of The United States October Term, 1990 On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The District Of Columbia Circuit Brief For The Federal Energy Regulatory Commission In Opposition TABLE OF CONTENTS Question Presented Opinions below Jurisdiction Statutory provision involved Statement Argument Conclusion OPINIONS BELOW The opinion of the court of appeals (Pet. App. 1a-46a) is reported at 912 F.2d 1496. The orders of the Federal Energy Regulatory Commission (Pet. App. 47a-230a, 231a-344a) are reported at III FERC Stats. & Regs. (CCH) Paragraph 30,867 and Paragraph 30,880. JURISDICTION The judgment of the court of appeals was entered on August 24, 1990. The petition for a writ of certiorari was filed on November 21, 1990. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). STATUTORY PROVISION INVOLVED Section 7(b) of the Natural Gas Act, as codified at 15 U.S.C. 717f(b), is reproduced at Pet. App. 346a. QUESTION PRESENTED Whether Section 7(b) of the Natural Gas Act, 15 U.S.C. 717f(b), permits the Federal Energy Regulatory Commission to prescribe in advance and on a generic basis the conditions under which the abandonment of service will be authorized, rather than requiring case-by-case adjudication. STATEMENT 1. In Order No. 436, /1/ the Federal Energy Regulatory Commission promulgated regulations that "envisage(d) a complete restructuring of the natural gas industry" by changing the role of interstate pipelines from that of merchants to that of transporters of natural gas. Associated Gas Distributors v. FERC, 824 F.2d 981, 993-994 (D.C. Cir. 1987) (AGD I), cert. denied, 485 U.S. 1006 (1988). Under this new regime, pipelines may secure a blanket certificate of public convenience and necessity, pursuant to Section 7(c) of the Natural Gas Act, 15 U.S.C. 717f(c), to transport natural gas on behalf of others. If they do so, they must agree to assume "open access" status -- i.e., must agree to accept gas shipments from all would-be shippers. AGD I, 824 F.2d at 997. To foster a transition to "open access" transportation, the Commission promulgated regulations under which any sales customer of an open-access pipeline could convert specified percentages of its contract right to purchase a certain volume of gas from the pipeline to a right to have the pipeline transport gas that the customer might purchase elsewhere. In AGD I, the D.C. Circuit sustained most features of Order No. 436, but vacated and remanded the Commission's regulations for further consideration of a few issues -- principally, for the Commission either to address the pipelines' take-or-pay problems in connection with its new open-access policy, or to explain adequately its reasons for not doing so. On remand, the Commission adopted Order No. 500, /2/ an interim rule and policy statement that instituted a plicy of "equitable sharing" of take-or-pay liability across the natural gas industry -- i.e., among producers, pipelines and customers. The Commission also repromulgated, as part of Order No. 500, the regulations offering the contract-demand conversion option. As set forth in the final version of the rule, /3/ the repromulgated regulations provide for pre-granted abandonment of transportation service "upon the expiration of the contractual term of each individual transportation arrangement." 18 C.F.R. 284.221(d). This regulation applies to all transportation agreements -- those embodied in new contracts and those that resulted from customers' conversion from sales to transportation service. 2. In the decision below, the court of appeals sustained Order No. 500 in part, reversed the Order in part, and remanded for further proceedings. Pet. App. 1a-46a. As relevant here, the court of appeals remanded the pre-granted abandonment regulation for further consideration. Id. at 42a-43a. The court of appeals rejected petitioners' contention that Section 7(b) of the Act does not permit the Commission to adopt the general rule in Order Nos. 500-H and 500-I allowing pre-granted abandonment upon the occurrence of a specified condition -- expiration of the transportation contract -- because it effectively delegates the abandonment decision to the pipeline. Pet. App. 36a-38a. But in the court's view, the Commission had not stated a sufficient justification for that rule, because it "has not yet adequately explained how pre-granted abandonment trumps another basic precept of natural gas regulation -- protection of gas customers from pipeline exercise of monopoly power through refusal of service at the end of a contract period." Id. at 42a. ARGUMENT Petitioners argue (Pet. 9-10) that Section 7(b) of the Natural Gas Act does not permit the Commission, by rule, to prescribe in advance and on a generic basis the conditions under which abandonment of specified services will be authorized. In their view, Section 7(b) requires the Commission to engage in case-by-case adjudication of abandonment applications and to hold a hearing on each proposed abandonment. Petitioners further contend (Pet. 11-13) that the holding by the court below on that point conflicts with the Fifth Circuit's decision in Mobil Oil Exploration & Producing Southeast, Inc. v. FERC, 885 F.2d 209, 222-223 (1989), and they urge (Pet. 14-15) the Court to grant the petition in this case and consider it together with Mobil Oil. Since the petition for a writ of certiorari was filed, this Court reversed the Fifth Circuit's decision in Mobil Oil. Mobil Oil Exploration & Producing Southeast, Inc. v. United Distribution Cos., Nos. 89-1452 & 89-1453 (Jan. 8, 1991). In so doing, the Court sustained the Commission's authority under Section 7(b) to issue a rule that prescribes in advance the conditions under which abandonment is authorized, and it specifically rejected the argument, advanced by petitioners in this case as well (Pet. 9-10), that Section 7(b) requires the Commission to conduct an individualized hearing on each abandonment application. Slip op. 13-16. Because this Court has recently and unanimously rejected petitioners' position, the petition for a writ of certiorari should be denied. /4/ Review is especially unwarranted in view of the interlocutory posture of this case. The court of appeals did not finally decide the validity of the regulation petitioners challenge. Instead, it remanded to the Commission for further proceedings on that question. If the Commission retains the regulation (accompanied by the more complete explanation required by the court of appeals), and if the court of appeals sustains the regulation on further review, there will be time enough for this Court to consider whether to review the validity of the particular abandonment regulation petitioners challenge. CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. KENNETH W. STARR Solicitor General WILLIAM S. SCHERMAN General Counsel JEROME M. FEIT Solicitor JOEL M. COCKRELL Attorney Federal Energy Regulatory Commission JANUARY 1991 /1/ Regulation of Natural Gas Pipelines After Partial Wellhead Decontrol, 50 Fed. Reg. 42,408, 1982-1985 FERC Stats. & Regs. (Regs. Preambles) (CCH) Paragraph 30,665 (1985). /2/ Regulation of Natural Gas Pipelines After Partial Decontrol, FERC Stats. & Regs. (Regs. Preambles) Paragraph 30,761 (1987). /3/ Order No. 500-H, 54 Fed. Reg. 52,344 (1989), FERC Stats. & Regs. (Regs. Preambles) Paragraph 30,867 (1989), on reh'g, Order No. 500-I, FERC Stats. & Regs. (Regs. Preambles) Paragraph 30,880 (1990). Order Nos. 500-H and 500-I were issued on the limited remand in American Gas Ass'n v. FERC, 888 F.2d 136 (D.C. Cir. 1989), in which the court considered challenges to Order No. 500 as originally promulgated. /4/ Moreover, petitioners did not raise before the court of appeals the broad statutory argument they present in this Court: that Section 7(b) absolutely bars the Commission from authorizing abandonment of service by rule, on a generic basis. To the contrary, as the court of appeals observed, petitioners "quite rightly" conceded that Section 7(b) permits the Commission to do so. See Pet. App. 36a-37a. Accordingly, petitioners should not be permitted to challenge the Commission's statutory authority in this Court -- quite aside from the fact that their argument is now foreclosed by Mobil Oil. See Patrick v. Burget, 486 U.S. 94, 99 n.5 (1988); EEOC v. FLRA, 476 U.S. 19, 24 (1986). Petitioners framed the abandonment issue much more narrowly in the court below, arguing that the particular pre-granted abandonment authorization in this case exceeded the Commission's authority under Section 7(b) because it effectively delegates the abandonment decision to the pipeline. The court of appeals rejected that argument, see Pet. App. 36a-37a, and this Court rejected a similar argument in Mobil Oil, see slip op. 16.