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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 14, 2003 Decided April 29, 2003
No. 02-1141
INTERMOUNTAIN MUNICIPAL GAS AGENCY,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
QUESTAR GAS COMPANY,
INTERVENOR
On Petition for Review of Orders of the
Federal Energy Regulatory Commission
J. Craig Smith argued the cause for the petitioner. Scott
M. Ellsworth and Charles F. Wheatley, Jr. were on brief.
Lona T. Perry, Attorney, Federal Energy Regulatory
Commission, argued the cause for the respondent. Cynthia
Bills of costs must be filed within 14 days after entry of judgment.
The court looks with disfavor upon motions to file bills of costs out
of time.
2
A. Marlette, General Counsel, and Dennis Lane, Solicitor,
Federal Energy Regulatory Commission were on brief. Lar-
ry D. Gasteiger, Attorney, Federal Energy Regulatory Com-
mission, entered an appearance.
David S. Andersen and C. Scott Brown were on brief for
the intervenor.
Before: SENTELLE, HENDERSON and TATEL, Circuit Judges.
Opinion for the court filed by Circuit Judge HENDERSON.
KAREN LECRAFT HENDERSON, Circuit Judge: Petitioner In-
termountain Municipal Gas Agency (Intermountain) is an
association of southern Utah and northern Arizona municipal-
ities. Intervenor Questar Gas Company (Questar), formerly
Mountain Fuel Supply Company (Mountain Fuel), operates a
pipeline that delivers natural gas to customers in southern
Utah, including members of Intermountain. In response to a
joint petition by Intermountain and Questar, the Federal
Energy Regulatory Commission (FERC or Commission) is-
sued an order declaring that Questar’s pipeline will lose its
exemption from FERC regulation under the Hinshaw
Amendment to the Natural Gas Act (NGA), 5 U.S.C. § 717(c),
if Intermountain transports gas received from Questar in
Utah across the state line into Arizona—either for delivery to
one or more member municipalities in northern Arizona or for
transportation through Arizona and back across the state line
to a municipality in southern Utah. Intermountain Mun.
Gas Agency, No. CP01–376–000 at 11 (Dec. 21, 2001) (Decl.
Ord.). Intermountain filed a petition for rehearing which the
Commission denied. Intermountain Mun. Gas Agency, No.
CP01–376–001 (Feb. 28, 2002) (Reh’g Ord.). Intermountain
has petitioned the court for review of the Commission’s
orders. As we explain infra, Intermountain has preserved
but a single ground for consideration in this court—that
Intermountain’s members’ status as municipalities exempts
them and Intermountain from FERC jurisdiction over the
proposed distribution—and we conclude this ground does not
warrant granting review.
3
I.
FERC’s regulatory jurisdiction under the Natural Gas Act,
15 U.S.C. § 717 et seq., generally extends ‘‘to the transporta-
tion of natural gas in interstate commerce, to the sale in
interstate commerce of natural gas for resale for ultimate
public consumption for domestic, commercial, industrial, or
any other use, and to natural-gas companies engaged in such
transportation or sale.’’ 15 U.S.C. § 717(b). In 1954 the
Congress enacted the Hinshaw Amendment, which ‘‘carves
out an exception to FERC jurisdiction for natural and legal
persons engaged in the transportation of ‘natural gas received
by such person from another person within or at the bound-
ary of a State if all the natural gas so received is ultimately
consumed within such State.’ ’’ Pub. Utilities Comm’n of
Cal. v. FERC, 143 F.3d 610, 614 (D.C. Cir. 1998) (quoting 15
U.S.C. § 717(c)).1
Intermountain was formed for the purpose of securing
natural gas delivery for its member municipalities from Ques-
tar’s predecessor Mountain Fuel, which provided Hinshaw-
1 The amendment provides in full:
The provisions of this chapter shall not apply to any person
engaged in or legally authorized to engage in the transporta-
tion in interstate commerce or the sale in interstate commerce
for resale, of natural gas received by such person from another
person within or at the boundary of a State if all the natural
gas so received is ultimately consumed within such State, or to
any facilities used by such person for such transportation or
sale, provided that the rates and service of such person and
facilities be subject to regulation by a State commission. The
matters exempted from the provisions of this chapter by this
subsection are declared to be matters primarily of local concern
and subject to regulation by the several States. A certification
from such State commission to the Federal Power Commission
that such State commission has regulatory jurisdiction over
rates and service of such person and facilities and is exercising
such jurisdiction shall constitute conclusive evidence of such
regulatory power or jurisdiction.
15 U.S.C. § 717(c).
4
exempt distribution to various Utah municipalities through its
southern pipeline.2 On July 21, 1995 Intermountain peti-
tioned FERC for a declaratory order determining whether
FERC would acquire jurisdiction over Mountain Fuel’s south-
ern pipeline if the pipeline distributed natural gas to Inter-
mountain’s members. On March 4, 1996 FERC issued an
order declaring that Mountain Fuel could retain its Hinshaw
exemption from FERC jurisdiction for the proposed service
to Intermountain’s Utah members but that Mountain Fuel
would require an NGA certificate from FERC to provide
service to the Arizona members. Intermountain Mun. Gas
Ass’n, 74 F.E.R.C. 61,254 (1996). Mountain Fuel subsequent-
ly began providing service to Intermountain’s Utah members,
its Hinshaw exemption intact.
Intermountain remained eager to secure distribution to its
unserved members, while Mountain Fuel adamantly declined
to provide service that would subject it to FERC jurisdiction.
On May 25, 2001 Intermountain filed a joint petition, with
Questar, seeking a declaration from FERC of the regulatory
consequences of seven possible pipeline operations. Two of
the scenarios are relevant here. The petition asked if Ques-
tar would lose its Hinshaw exemption, first, if it delivered gas
to Hildale, Utah for transportation by a municipally owned
pipeline across the border into Arizona and back into Utah
for use in Kanab, Utah and, second, if it delivered gas to
Hildale either for immediate distribution to and consumption
in adjoining Colorado City, Arizona3 or for delivery to another
municipal pipeline that would transport the gas to Colorado
City and thence southeast to Fredonia, Arizona and finally
2 Mountain Fuel also operated a non-Hinshaw northern pipeline
serving northern Utah and southern Idaho.
3 Colorado City had previously sought a declaration from FERC
that the city could file a request pursuant to Section 7(a) of the
NGA, 15 U.S.C. § 7117f(a), for an order requiring Questar to
transport interstate natural gas to Colorado City. In a decision
issued January 15, 1999 FERC denied the petition on the ground
that the Hinshaw Amendment precluded its exercising jurisdiction
over Questar. Town of Colo. City, Ariz., 86 F.E.R.C. 61,043 (1999).
5
four miles north to Kanab, Utah, for consumption in each of
the three cities.
On December 21, 2001 FERC issued an order declaring
that under either of the two scenarios Questar would lose its
Hinshaw exemption and would require a ‘‘blanket certificate’’
from FERC under 18 C.F.R. § 284.224 to operate the pipe-
line.4 Preliminarily, FERC determined that, although munic-
ipalities are generally exempt from NGA regulation, the
municipal status of Intermountain’s members’ did not fore-
close jurisdiction in this instance because a municipality is
authorized to act as a municipality only within its state of
incorporation. FERC concluded that, if a municipality oper-
ates outside the state, it is subject to federal regulation by
FERC like any other entity. Otherwise, FERC noted, mu-
nicipalities would be able to avoid regulation of all manner of
interstate activity. FERC then examined the various scenar-
ios presented.
On the first proposal—to transport gas from Hildale, Utah
through northern Arizona to Kanab, Utah—FERC declared:
‘‘Once the gas has been received by the pipeline within the
state, it is our interpretation of the statute that [the] tests for
exemption are not met if, instead of being consumed in the
state, the gas is once again transported beyond the state
border—even if it is later transported back into the state for
consumption.’’ Decl. Ord at 11. In FERC’s view, ‘‘it is
inconsistent with the spirit and plain meaning of the exemp-
tion if gas is transported beyond the regulatory control of the
state before being consumed.’’ Id. at 11. FERC rejected the
second scenario—transportation of the gas delivered in Utah
to the Arizona cities—‘‘[f]or the same reasons set out in
response to the first scenario,’’ namely, because the pipeline
4 Section 284.224 provides for a ‘‘blanket certificate’’ permitting a
‘‘local distribution company’’ or ‘‘Hinshaw pipeline’’ ‘‘to engage in
the sale or transportation of natural gas that is subject to the
Commission’s jurisdiction under the Natural Gas Act, to the same
extent that and in the same manner that intrastate pipelines are
authorized to engage in such activities.’’ 18 C.F.R. § 284.224(b).
6
‘‘will cross the state line after it receives gas from Questar’s
Hinshaw facility.’’ Decl. Ord. at12.
On January 22, 2002 Interstate petitioned for rehearing,
arguing that municipalities are exempt from regulation under
the NGA and that FERC therefore lacks jurisdiction over the
proposed delivery of natural gas to Intermountain’s member
municipalities. FERC denied the petition in an order issued
February 28, 2002, iterating its jurisdiction over Intermoun-
tain’s interstate service and concluding, in any event, that
‘‘Intermountain’s jurisdictional status has no bearing on how
the ultimate consumption requirement affects Questar’s sta-
tus as a Hinshaw pipeline for the purposed [sic] of NGA
section 1(c).’’ Reh’g Ord. at 8.
II.
Intermountain offers three arguments to support reading
the National Gas Act to permit Questar to retain its Hinshaw
exemption if it delivers natural gas to Intermountain that
Intermountain then either transports by pipeline through
northern Arizona to Kanab, Utah or distributes directly from
Hildale, Utah to Colorado City, Arizona. ‘‘Our analysis of the
Commission’s interpretation of the Natural Gas Act is con-
trolled by Chevron U.S.A. Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694
(1984).’’ Nat’l Fuel Gas Supply Corp. v. FERC, 899 F.2d
1244, 1247 (D.C. Cir. 1990). Chevron directs:
If TTT ‘‘ ‘Congress has directly spoken to the precise
question at issue,’ ’’ we ‘‘must give effect to Congress’s
‘unambiguously expressed intent.’ ’’ Secretary of Labor
v. [Fed. Mine Safety & Health Review Comm’n], 111
F.3d 913, 917 (D.C. Cir. 1997) (quoting Chevron USA,
Inc. v. Natural Resources Defense Council, Inc., 467
U.S. 837, 842–43, 104 S.Ct. 2778, 2781, 81 L.Ed.2d 694
(1984)). ‘‘If ‘the statute is silent or ambiguous with
respect to the specific issue,’ we ask whether the agen-
cy’s position rests on a ‘permissible construction of the
7
statute.’ ’’ Id. (quoting Chevron, 467 U.S. at 843, 104
S.Ct. at 2782, 81 L.Ed.2d 694).
Beverly Health & Rehab. Servs., Inc. v. NLRB, 317 F.3d 316,
321 (D.C. Cir. 2003) (quotations omitted). With these princi-
ples in mind, we discuss each of Intermountain’s arguments
in turn.
First, Intermountain challenges FERC’s interpretation of
the Hinshaw Amendment to preclude exempting a system
which delivers gas that is subsequently transported tempo-
rarily out of state but returned for ultimate consumption
within the state of delivery—as in Intermountain’s Kanab
proposal. We conclude that the court lacks jurisdiction to
address this contention because Intermountain did not raise it
in the petition for rehearing before FERC. NGA section
19(b) flatly states: ‘‘No objection to the order of the Commis-
sion shall be considered by the court unless such objection
shall have been urged before the Commission in the applica-
tion for rehearing unless there is reasonable ground for
failure so to do.’’ 15 U.S.C. § 717r(b). Intermountain con-
tends it sufficiently raised its objection on rehearing when it
‘‘argued that ‘by providing gas to [Intermountain] for trans-
portation to its constituents, Questar will not be violating the
Hinshaw exemption.’ ’’ Reply Br. at 13 (quoting Intermoun-
tain’s Req. for Reh’g at 7 (filed Jan. 22, 2002)). But so
general and vague a statement—which could apply to any of
the Hinshaw scenarios raised in Intermountain’s initial brief
before the agency—does not satisfy section 19(b) which re-
quires that ‘‘[a]n ‘objection’ must be ‘specifically urge[d],’ ’’
Louisiana Intrastate Gas Corp. v. FERC, 962 F.2d 37, 41
(D.C. Cir. 1992) (quoting Office of the Consumers’ Counsel v.
FERC, 914 F.2d 290, 295 (D.C. Cir. 1990)), so as ‘‘to ‘put the
Commission on notice of the ground on which rehearing was
being sought,’ ’’ id. at 41–42 (quoting City of Farmington v.
FERC, 820 F.2d 1308, 1311 n.1 (D.C. Cir. 1987)).5 Inter-
5 At oral argument Intermountain also cited the first page of its
rehearing request which recites that Intermountain ‘‘contemplates
receipt of interstate gas supplies, transported by interstate pipe-
lines to Questar’s Utah system to Hildale’s municipal pipeline,
thence by IMGA to municipalities within Utah, Hildale and Kanab,
as well as to two municipalities just within the Arizona border,
8
mountain’s failure to specifically urge its Kanab argument in
the rehearing petition is doubtless the reason FERC did not
address the issue in its rehearing denial. Cf. id. at 41–42
(that petitioner adequately raised argument in rehearing peti-
tion was ‘‘evidenced by the fact that FERC responded on the
merits’’).6
Second, Intermountain contends that the proposed direct
distribution of gas by Hildale to Colorado City is exempt from
the NGA because it is ‘‘local distribution,’’ which is expressly
exempted from regulation by NGA § 1(b). Because Inter-
mountain failed to raise this argument in its rehearing peti-
tion, we are foreclosed from considering it as well.7
Colorado City and Fredonia.’’ Req. for Reh’g at 1. This isolated
reference to Kanab in the factual recitation cannot be characterized
as an ‘‘objection’’ to FERC’s declaratory order.
6 We do not mean to suggest Intermountain would necessarily
prevail on the Kanab challenge were it properly preserved. Assum-
ing the Hinshaw Amendment is ‘‘silent,’’ as Intermountain proposed
at oral argument, on the question whether it exempts gas that is
transported outside the delivery state for ultimate consumption
within the delivery state, FERC’s denial of the exemption might
well be reasonable under Chevron in light of the NGA’s underlying
policy of subjecting interstate transportation to FERC regulation,
see 15 U.S.C. § 717(b), and the narrow intent of the Hinshaw
Amendment ‘‘to exempt TTT persons from FERC regulation only
for the purposes of their involvement in intrastate gas transport,
not for the purposes of their involvement in interstate or other
regulated activities,’’ Pub. Utilities Comm’n of Cal., 143 F.3d at
615; see also General Motors Corp. v. Tracy, 519 U.S. 278, 284 n.3
(1997) (‘‘[T]he Hinshaw Amendment to the NGA, 5 U.S.C. § 717(c),
exempts from FERC regulation intrastate pipelines that operate
exclusively in one State and with rates and service regulated by the
State.’’) (citing ANR Pipeline Co. v. FERC, 71 F.3d 897, 898 n.2
(D.C. Cir. 1995)). ‘‘A Hinshaw pipeline can unquestionably come
under FERC authority when it engages in activities that go beyond
the intrastate transport of gas.’’ Pub. Utilities Comm’n of Cal., 143
F.3d at 615.
7 Intermountain contends it ‘‘adequately raised its objection TTT
when in its Petition for Rehearing, [it] stated that the transporta-
tion ‘proposed by [Intermountain] is of primary local concern,
9
Third, Intermountain asserts that, because municipalities
are specifically excluded from the NGA’s definition of ‘‘per-
son,’’8 they are exempt from FERC jurisdiction and FERC is
therefore powerless to regulate the proposed transportation
or distribution of natural gas by the member municipalities.
Whether or not FERC may regulate municipalities, however,
it has indisputable authority to regulate Questar if its Hin-
shaw exemption is lost.9 That FERC’s potential exercise of
jurisdiction over Questar may affect Intermountain’s member
focusing as it does entirely on municipal conveyance in an area
isolated from all other such serviceTTTT There will be no effect on
interstate commerce, since there is no other source of natural gas
with which [Intermountain] will be competing.’ ’’ Reply Br. at 14
(quoting Req. for Reh’g at 10). We disagree. Intermountain’s
rehearing request did not even cite the statute or use the statutory
phrase (‘‘local distribution,’’ 15 U.S.C. § 717(b)) on which it now
relies. FERC understandably missed this camouflaged argument.
In any event, Intermountain’s second argument is no more com-
pelling than its first. See supra note 6. It is true that section 1(b)
expressly exempts from regulation ‘‘the local distribution of natural
gas’’ but at the same time it also expressly confers jurisdiction over
‘‘the transportation of natural gas in interstate commerce,’’ which is
precisely what the proposed distribution to Colorado City would be.
See Federal Power Comm’n v. Panhandle Eastern Pipe Line Co.,
337 U.S. 498, 503–04 (1949); see also United Distribution Cos. v.
FERC, 88 F.3d 1105, 1154 (D.C. Cir. 1996) (NGA § 1(b) ‘‘local
distribution’’ proviso ‘‘does not withdraw from FERC’s jurisdiction
any aspect of the interstate transportation of natural gas’’).
8 The NGA defines ‘‘person’’ to ‘‘include[ ] an individual or a
corporation’’ but expressly excludes ‘‘municipalities’’ from its defini-
tion of ‘‘corporation’’ and defines ‘‘municipality’’ to ‘‘mean[ ] a city,
county, or other political subdivision or agency of a State.’’ 15
U.S.C. § 717a(1)-(3).
9 We express no opinion on whether FERC may regulate the
interstate transportation of natural gas by a municipality. See
United Distribution Cos. v. FERC, 88 F.3d at 1153 & n.63 (noting
FERC had ‘‘twice rejected the suggestion that it should invoke its
transportation jurisdiction over municipalities’’ but cautioning that
court’s ‘‘opinion should not be read to either approve or disapprove
the Commission’s reading of the Natural Gas Act’’).
10
municipalities does not defeat the agency’s jurisdiction. Cf.
N.Y. State Elec. & Gas Corp. v. FERC, 638 F.2d 388, 393–96
(2d Cir. 1980) (upholding FERC jurisdiction under Federal
Power Act to modify contract between utility company and
state agency, despite exemption of states and their subdivi-
sions from act’s provisions, where modification ‘‘d[id] not
require [state agency] to take or to refrain from taking
action’’ or ‘‘place any limitations on [its] powers or preroga-
tives’’).
For the foregoing reasons, the petition for review is
Denied.