Columbia Gas Transmission Corp. v. Federal Energy Regulatory Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 15, 2005 Decided April 15, 2005

No. 04-1049

COLUMBIA GAS TRANSMISSION CORPORATION,
PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION AND
UNITED STATES OF AMERICA,
RESPONDENTS

NICOLE GAS PRODUCTION, LTD ,
INTERVENOR

On Petition for Review of Orders of the
Federal Energy Regulatory Commission

Barbara K. Heffernan argued the cause for petitioner. With
her on the briefs were Debra Ann Palmer, Stephen R. Melton,
and Kurt L. Krieger.

David H. Coffman, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With him on the
brief were Cynthia A. Marlette, General Counsel, and Dennis
Lane, Solicitor.

Robert C. Sanders was on the brief for intervenor.
 2

Before: TATEL, GARLAND, and ROBERTS, Circuit Judges.

Opinion for the Court filed by Circuit Judge GARLAND.

GARLAND, Circuit Judge: Petitioner Columbia Gas
Transmission Corporation challenges orders of the Federal
Energy Regulatory Commission (FERC) that require Columbia
to install and pay for meters on certain natural gas wells.
Columbia argues that FERC’s orders exceed the Commission’s
jurisdiction, and we agree.

I

In 1999, Columbia Natural Resources, Inc., a Columbia
affiliate, sold 143 natural gas wells to Nicole Gas Production,
Ltd. The gas from the wells flows into gathering lines owned
and operated by Columbia, and from there into the transmission
lines of Columbia’s interstate pipeline system. At the time of
the sale, Columbia entered into a service agreement with Nicole
that incorporated several provisions of Columbia’s FERC tariff,
including section 26. Section 26.9(b) of the tariff stated:
“Unless otherwise agreed to in writing, . . . [Columbia] will
install, operate and maintain measuring stations and equipment
by which the volumes of natural gas or quantities of energy
received by [Columbia] are determined.” But section 26.9(m)
stated: “Nothing in this Section 26.9 shall be construed to
require [Columbia] to construct any facilities.”

Most of the 143 wells had meters to measure the amount of
gas Nicole gathered from the wells. Fifty-five of the wells,
however, had no meters, and gas production was measured
through “one-minute pickup tests.” On January 12, 2003, a
Nicole affiliate filed a petition with FERC, seeking a declaratory
order that Columbia’s tariff required Columbia to pay for and
install meters at each of Nicole’s 55 unmetered wells, pursuant
 3

to the terms of section 26.9(b). Columbia opposed the petition,
contending that FERC was without jurisdiction to order the
installation of meters on Nicole’s gathering facilities. Relying
in part on section 26.9(m), Columbia also disputed that the tariff
required it to pay for and install the meters.

In an order issued June 11, 2003, FERC determined that it
had jurisdiction over the matter and that Nicole’s interpretation
of the tariff was correct. Nicole Gas Prod., Ltd., 103 F.E.R.C.
¶ 61,328 (2003). Columbia petitioned for clarification and
rehearing. On December 24, 2003, FERC denied rehearing in
an order that affirmed and clarified the Commission’s ruling
regarding both jurisdiction and interpretation of the tariff.
Nicole Gas Prod., Ltd., 105 F.E.R.C. ¶ 61,371 (2003).

Columbia now petitions for review of FERC’s orders. It
argues that FERC cannot compel Columbia to install and pay for
the meters because FERC lacks jurisdiction over gathering
facilities. It also contends, inter alia, that FERC has
misinterpreted the tariff as requiring Columbia to pay for the
installation of meters on such facilities. Because we conclude
that FERC’s orders exceed the Commission’s jurisdiction, we do
not address the latter issue.

II

Columbia’s principal argument is that the Commission’s
order requires the company to install and pay for meters on
“gathering facilities,” which are exempt from FERC’s
jurisdiction. Section 1(b) of the Natural Gas Act (NGA) states
that FERC’s jurisdiction over the transportation and sale of
natural gas “shall not apply . . . to the production or gathering of
natural gas.” 15 U.S.C. § 717(b). As we have previously noted,
“Section 1(b) of the NGA distinguishes between facilities that
are used for ‘the transportation of natural gas in interstate
 4

commerce,’ which are subject to FERC’s jurisdiction, and those
used for ‘gathering,’ which are not.” Williams Gas Processing--
Gulf Coast Co., L.P. v. FERC, 331 F.3d 1011, 1013 (D.C. Cir.
2003). FERC does not dispute that the meters are to be installed
on gathering facilities, but contends that it has jurisdiction over
them nonetheless.

Although the deferential interpretive canon announced in
Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984), applies to
our review of FERC’s construction of the NGA’s jurisdictional
provisions, see Detroit Edison Co. v. FERC, 334 F.3d 48, 53
(D.C. Cir. 2003), the first step under Chevron is to ask whether
“the intent of Congress is clear,” Chevron, 467 U.S. at 842. If
it is, we “must give effect to the unambiguously expressed intent
of Congress,” regardless of the interpretation pressed by the
Commission. Id. at 843. Because Congress’ intent is clear here,
we have no occasion to proceed to Chevron’s deferential second
step. See id.

In its initial order, FERC addressed the question of its
jurisdiction in a single sentence:

The fact that the facilities on which the meters may be
located may function in a gathering capacity is not
relevant as the tariff does not limit the obligation to
install meters only to transmission facilities and, in any
event, Columbia’s gathering services are subject to our
jurisdiction as they are in connection with Columbia’s
interstate transmission services.

Nicole Gas Prod., Ltd., 103 F.E.R.C. at 62,262 (emphasis
added). As the parties understand this sentence, it rests
jurisdiction over the installation of meters on Nicole’s gathering
facilities on two rationales: (1) Columbia voluntarily submitted
to FERC’s jurisdiction by filing a tariff that covered the meters;
 5

and (2) the meters fall within the Commission’s “in connection
with” jurisdiction. See 15 U.S.C. § 717c(a) (“All rates and
charges made, demanded, or received by any natural-gas
company for or in connection with the transportation or sale of
natural gas subject to the jurisdiction of the Commission . . .
shall be just and reasonable . . . .” (emphasis added)).

In FERC’s order on rehearing, the Commission abandoned
the “in connection with” rationale, Nicole Gas Prod., Ltd., 105
F.E.R.C. at 62,653, and it expressly disclaims any desire to
resurrect that rationale here, see FERC Br. 15 n.4; Oral Arg.
Tape at 16:15-17:15. We therefore do not consider it. Instead,
we consider the only jurisdictional rationale that FERC now puts
forward: that it has jurisdiction to compel compliance with the
tariff provision regarding meters on gathering facilities solely
because the tariff was “voluntarily filed by the pipeline,” even
if FERC would not otherwise have jurisdiction over such meters.
Nicole Gas Prod., Ltd., 105 F.E.R.C. at 62,653.

We must first address FERC’s contention that we cannot
question its tariff-based rationale because Columbia did not
object to that rationale below. See 15 U.S.C. § 717r(b)
(providing that “[n]o objection to the order of the Commission
shall be considered by the court unless such objection shall have
been urged before the Commission in the application for
rehearing”). The short answer to FERC’s contention is that it is
factually incorrect. Columbia expressly argued in its petition for
rehearing that “[t]he Commission cannot extend indirectly its
jurisdictional reach by defining Columbia’s obligations under its
FERC authorized tariff to include construction of non-
jurisdictional facilities.” Pet. for Reh’g at 12. And it insisted
that “incorporation by reference of certain tariff provisions
cannot expand the Commission’s jurisdictional reach.” Id. at 12
n.9. FERC’s further suggestion that Columbia’s objection to the
tariff-based rationale was too terse to put the Commission on
 6

notice is particularly audacious for two reasons. First, FERC’s
own reference to the rationale in its initial decision -- the only
FERC statement to which Columbia could have objected in its
petition for rehearing -- had itself consisted of only half a
sentence. See Nicole Gas Prod., Ltd., 103 F.E.R.C. at 62,262.
Second, it is clear that Columbia’s objection “was adequately
specific to put the Commission on notice of the ground on which
rehearing was being sought -- as evidenced by the fact that
FERC responded on the merits” in its order on rehearing.
Louisiana Intrastate Gas Corp. v. FERC, 962 F.2d 37, 41-42
(D.C. Cir. 1992) (internal quotation marks omitted).

We therefore turn to FERC’s claim that Columbia’s tariff
is alone sufficient to provide the Commission with jurisdiction
to enforce all the provisions contained therein. For this claim,
FERC relies on the “filed rate doctrine,” which “forbids a
regulated entity to charge rates for its services other than those
properly filed with the appropriate federal regulatory authority.”
Arkansas La. Gas Co. v. Hall, 453 U.S. 571, 577 (1981)
(“Arkla”). According to FERC, the filed rate doctrine
“authorizes FERC to enforce tariff language requiring
installation of meters on gathering facilities, regardless of
whether FERC” would have jurisdiction “in the absence of such
language.” FERC Br. 8; see Nicole Gas Prod., Ltd., 105
F.E.R.C. at 62,653. The breathtaking scope of FERC’s claim is
made clear by its response to a hypothetical raised at oral
argument. In the Commission’s view, if a filed tariff stated that
its provisions “shall apply to the production or gathering of
natural gas,” FERC would have jurisdiction over those activities,
Oral Arg. Tape at 19:55-21:15, notwithstanding that they are
precisely the activities that the NGA excludes from FERC’s
purview, see 15 U.S.C. § 717(b).

FERC cites no case, and we cannot find one, in which a
court has permitted the Commission to use the filed rate doctrine
 7

as such a jurisdictional boot-strap. An examination of the
statutory language explains the lack of precedent in support of
FERC’s view. The filed rate doctrine derives from sections 4
and 5 of the NGA. See Consolidated Edison Co. v. FERC, 958
F.2d 429, 432 (D.C. Cir. 1992). Yet NGA section 1(b) states
that “[t]he provisions of this chapter” -- of which sections 4 and
5 are two -- “shall not apply to . . . the production or gathering
of natural gas.” 15 U.S.C. § 717(b); see FPC v. Panhandle E.
Pipe Line Co., 337 U.S. 498, 508 (1949) (“Sections 4, 5 and 7
do not concern the producing or gathering of natural gas; rather
they have reference to the interstate sale and transportation of
gas and are so limited by their express terms.”). A doctrine that
rests on these sections likewise cannot apply to the gathering of
natural gas.

This conclusion is consistent with the Supreme Court’s
holding that the petitioner in the Arkla case was bound by the
filed rate doctrine only during the period in which it was
otherwise subject to FERC’s jurisdiction. 453 U.S. at 584 &
n.14. It is also consistent with this court’s ruling in Conoco Inc.
v. FERC that, “[w]here an activity or entity falls within NGA §
1(b)’s exemption for gathering, the provisions of NGA §§ 4, 5
and 7 . . . neither expand the Commission’s jurisdiction nor
override § 1(b)’s gathering exemption.” 90 F.3d 536, 552 (D.C.
Cir. 1996). And it is confirmed by our holding in Detroit Edison
that FERC may neither accept the filing of a tariff provision that
covers non-jurisdictional activity (in that case, unbundled retail
distribution service), nor assert jurisdiction over such an
activity. 334 F.3d at 54-55.

FERC endeavors to distinguish Detroit Edison by noting
that there was an objection to the initial filing of the tariff in that
case, while there was no such objection here. But jurisdiction
cannot arise from the absence of objection, or even from
affirmative agreement. To the contrary, “as a statutory entity,
 8

the Commission cannot acquire jurisdiction merely by
agreement of the parties before it.” American Mail Line Ltd. v.
FMC, 503 F.2d 157, 170 (D.C. Cir. 1974); see California Indep.
Sys. Operator Corp. v. FERC, 372 F.3d 395, 398 (D.C. Cir.
2004). As the Supreme Court has explained, “parties . . . cannot
confer jurisdiction; only Congress can.” Weinberger v. Bentex
Pharms., Inc., 412 U.S. 645, 652 (1973). In this case, Congress
has clearly declined to do so.

III

Because the Natural Gas Act unambiguously denies FERC
jurisdiction to issue the orders challenged in the petition for
review, we grant the petition and vacate the orders.

So ordered.