United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 15, 2008 Decided July 25, 2008
No. 07-1065
DOMINION TRANSMISSION, INC.,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
PSEG ENERGY RESOURCES & TRADE LLC ET AL.,
INTERVENORS
On Petition for Review of Orders of the
Federal Energy Regulatory Commission
Catherine E. Stetson argued the cause for the petitioner. J.
Patrick Nevins, Jessica L. Ellsworth and Margaret H. Peters
were on brief.
Holly E. Cafer, Attorney, Federal Energy Regulatory
Commission, argued the cause for the respondent. Cynthia A.
Marlette, General Counsel, and Robert H. Solomon, Solicitor,
Federal Energy Regulatory Commission, were on brief.
Kenneth T. Maloney argued the cause for the intervenors.
Before: HENDERSON and ROGERS, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.
2
Opinion for the court filed by Circuit Judge HENDERSON.
KAREN LECRAFT HENDERSON, Circuit Judge: In June 2001
and April 2005, Dominion Transmission, Inc. (Dominion)—a
major provider of natural gas transportation and storage services
in six Mid-West and Mid-Atlantic states—along with the
majority of its customers, submitted two proposed settlement
agreements to the Federal Energy Regulatory Commission
(FERC or Commission) for its approval.1 Both agreements
provided, inter alia, for a fixed set of rates and fuel retention
percentages for Dominion’s services for a fixed time period.
They also required Dominion to file an annual report with FERC
containing sixteen discrete items about Dominion’s fuel
accounting practices. FERC reviewed and approved both of the
proposed settlements, ultimately finding them “fair and
reasonable and in the public interest.” Dominion Transmission,
Inc., 96 F.E.R.C. ¶ 61,288, at 62,089 (Sept. 13, 2001); Dominion
Transmission, Inc., 111 F.E.R.C. ¶ 61,285, at 62,237 (May 27,
2005). Just seven months after it approved the second
settlement, however, FERC—at the request of Dominion’s
customers—ordered Dominion to supplement its annual reports
with additional information about its fuel accounting practices.
For the reasons set forth below, we believe FERC’s order is
invalid under the Mobile-Sierra doctrine and we therefore grant
Dominion’s petition for review.
I.
On September 29, 2000, Dominion filed a request with
FERC under section 4 of the Natural Gas Act (NGA), Pub. L.
No. 75-688, § 4, 52 Stat. 821, 822 (1938) (codified as amended
1
As an interstate transporter of natural gas, Dominion is regulated
by FERC. See 15 U.S.C. § 717(b).
3
at 15 U.S.C. § 717c), to increase the rates for its natural gas
transportation and storage services.2 See Annual Transportation
Cost Rate Adjustment Filing, No. RP00-632-000, at 1 (Sept. 29,
2000). Several of Dominion’s customers protested the proposed
rate increase. See, e.g., Mot. to Intervene & Protest of City of
Richmond, Va., No. RP00-632-000, at 1 (Oct. 11, 2000). After
nine months of negotiations, on June 22, 2001, Dominion, its
customers and other interested parties submitted a proposed
settlement agreement to FERC. See Stipulation & Agreement
(2001 Settlement), Nos. RP00-632-000 et al., §§ 2.5-2.9 (June
22, 2001). On September 13, 2001, FERC approved the
Settlement without modification, finding it “fair and reasonable
and in the public interest.” Dominion Transmission, Inc., 96
FERC at 62,089. Under the 2001 Settlement, Dominion agreed
not to seek any rate increase under section 4 of the NGA before
July 1, 2003. 2001 Settlement § 11.2. Dominion also agreed to
include in its next section 4 filing a report containing sixteen
types of information “detailing the pipeline’s actual System Gas
Requirements . . . and gas retained” during the relevant time
periods. Id. § 11.4.3 In the event that Dominion did not make
2
Section 4 of the NGA provides, in relevant part, that “[w]henever
any such new [rate] schedule is filed [by a pipeline] the Commission
shall have authority, either upon complaint of any State, municipality,
State commission, or gas distributing company, or upon its own
initiative without complaint . . . to enter upon a hearing concerning the
lawfulness of such rate, charge, classification, or service.” 15 U.S.C.
§ 717c(e).
3
The sixteen items are set forth in section 16.5 of the “General
Terms and Conditions” which is included in Appendix B to the 2001
Settlement. Section 16.5 provides that Dominion’s “report shall
contain the following information:”
4
a section 4 filing by the close of the rate moratorium
period—that is, by June 30, 2003—Dominion agreed to provide
the same sixteen items to FERC in a separate “informational
filing” (Fuel Report) for the 12-month period ending on March
31, 2003. Id. § 11.6. Dominion also agreed to provide the Fuel
Report on June 30 of each year until its next section 4 filing. Id.
The 2001 Settlement also provided for a set of fixed fuel
(1) the volume of fuel purchased; (2) the cost of fuel; (3) the
source from which Pipeline purchased the fuel; (4) the amount
of fuel retained by service; (5) actual fuel usage by function
and station; (6) information detailing any adjustments made
to inventory related to storage gas losses; (7) the fuel
requirements of each third-party pipeline transporter; (8) the
month-end balance in Account No. 117.4 attributable to Non-
Purchased Supply in the same format provided in
[Dominion’s] Annual TCRA filing made in Docket No.
RP00-632; (9) System Lost and Unaccounted For Gas broken
out by month and function; (10) aggregate customer storage
inventory, by month, and physical storage inventory levels, by
month; (11) aggregate injections and withdrawals, by month
and broken out by customer activity and physical activity;
(12) monthly values used for storage valuation purposes
pursuant to the Valuation Method; (13) monthly balances in
system gas accounts (as provided annually in FERC Form 2);
(14) cumulative MCS parks and loans, by month; (15)
monthly breakdown of a) exchange imbalance volumes, b)
transportation imbalance volumes, and c) net storage volumes
and (16) throughput and billing determinant information, by
month, with an explanation of any billing determinant
changes.
2001 Settlement App. B, Gen. Terms & Conditions § 16.5.
5
retention percentages to remain in effect until at least July 1,
2003.4 2001 Settlement § 11.1.
Dominion filed the required Fuel Report on June 30, 2003
and again on June 30, 2004. See Informational Fuel Report, No.
RP00-632-012 (June 30, 2003); Informational Fuel Report, No.
RP00-632-013 (June 30, 2004). It is undisputed that these two
Fuel Reports contained each of the sixteen items required under
the 2001 Settlement. See, e.g., Order Accepting Fuel Reports
4
When a pipeline transports natural gas, some of the gas becomes
lost or is used by the pipeline to fuel compressor stations. To recover
for the cost of lost and spent fuel, the pipeline establishes a generally
applicable “fuel retention percentage”—approved by FERC—whereby
it retains a small percentage of the gas sent through the pipeline. See
generally Fuel Retention Practices of Natural Gas Cos., 120 F.E.R.C.
¶ 61,255 (Sept. 20, 2007). A pipeline must permit its customers to
select this “recourse” fuel retention percentage; see Natural Gas
Pipeline Negotiated Rate Policies and Practices, 104 F.E.R.C.
¶ 61,134, at 61,482 (July 25, 2003); however, a pipeline may also
negotiate specific fuel retention rates with individual customers, see
Interstate Natural Gas Ass’n of Am. v. FERC, 285 F.3d 18, 54 (D.C.
Cir. 2002). The negotiated fuel retention percentage may fall below,
at or above the recourse fuel retention percentage. Id. “[W]hen a
pipeline enters into a negotiated rate transaction, it assumes the risk of
under-recovery of its costs, as well as the benefit of negotiating rates
higher than those for recourse rate shippers. Therefore, when [a
pipeline] negotiates its surcharge and fuel retainage, it must assume
any under-recovery of costs from negotiated shippers in order to
ensure that its recourse shippers are no worse off due to the
negotiation of rates with individual shippers.” Columbia Gas
Transmission Corp., 92 F.E.R.C. ¶ 61,080, at 61,340 (July 27, 2000)
(footnote omitted). The pipeline must separately account for
negotiated fuel retention rates and “protect recourse rate customers
from subsidizing negotiated rate customers.” Id.
6
Subject to Conditions, Nos. RP00-632-013, RP00-632-017, at 4
(Dec. 21, 2005) (Conditions Order). Based on information
contained in Dominion’s 2004 Fuel Report, KeySpan Corp.—a
Dominion recourse customer—and its subsidiaries (collectively
KeySpan) became concerned that Dominion’s recourse
customers may have been subsidizing certain of its negotiated-
rate customers. See Mot. to Intervene & Comments, Nos. CP04-
370 et al., at 3 (July 12, 2004) (2004 KeySpan Mot.); see also
supra note 4. KeySpan filed a motion with FERC asking, inter
alia, that it require Dominion to disclose three additional pieces
of information about its fuel retention practices which were not
required under the 2001 Settlement but which KeySpan believed
were necessary to determine whether subsidization had in fact
occurred. See 2004 KeySpan Mot. 5.5
In the fall of 2004, before FERC had acted on KeySpan’s
motion, the New York Public Service Commission (PSCNY)
notified Dominion that it intended to file a complaint under
section 5 of the NGA, 15 U.S.C. § 717d, challenging
Dominion’s rates as excessive.6 See Offer of Settlement &
5
KeySpan requested, inter alia, that FERC “require
[Dominion] . . . to identify any negotiated rate fuel collections or
credits included in its [2004] Fuel Report . . . [and] to identify both
amounts of fuel collected and credited pursuant to negotiated rate
agreements in future Fuel Reports.” 2004 KeySpan Mot. 5.
6
Section 5 of the NGA provides, in relevant part:
Whenever the Commission, after a hearing had upon
its own motion or upon complaint of any State,
municipality, State commission, or gas distributing
company, shall find that any rate, charge, or
classification demanded, observed, charged, or
collected by any natural-gas company in connection
7
Explanatory Statement, Nos. RP97-406-033 et al., at 5.
Dominion and PSCNY jointly proposed a second settlement
agreement which was ultimately accepted—or, in some cases,
not opposed—by the majority of Dominion’s customers. See id.
at 1; Stipulation & Agreement (2005 Settlement), Nos. RP97-
406-003 et al., App. A (April 1, 2005). Under the 2005
Settlement, Dominion agreed to lower its rates, totaling
approximately $49 million per year (“a $40 million per year
reduction in transportation rates and a reduction in the storage
fuel retention percentage of $9 million per year”) in rate relief
for Dominion’s customers. Dominion Transmission, Inc., 111
F.E.R.C. at 62,236. The parties also agreed to a five year
“Moratorium Period” during which the parties were prohibited
from seeking any changes to Dominion’s “generally applicable
transportation or storage rates” or fixed fuel retention percentage
under sections 4 and 5 of the NGA. 2005 Settlement § 4.2. The
2005 Settlement did not, however, preclude FERC from
initiating a section 5 proceeding against Dominion so long as
with any transportation or sale of natural gas, subject
to the jurisdiction of the Commission, or that any
rule, regulation, practice, or contract affecting such
rate, charge, or classification is unjust, unreasonable,
unduly discriminatory, or preferential, the
Commission shall determine the just and reasonable
rate, charge, classification, rule, regulation, practice,
or contract to be thereafter observed and in force, and
shall fix the same by order . . . .
15 U.S.C. § 717d(a).
8
FERC acted “on its own volition.” Id. § 4.6 (emphasis added).7
Moreover, the 2005 Settlement continued the 2001 Settlement’s
requirement that Dominion file an annual Fuel Report each June
30th until Dominion’s next section 4 filing sometime after the
end of the Moratorium Period in 2010. Id. § 4.3. The 2005
Settlement provided that it was “an integrated package” and that
“[n]one of the terms . . . [we]re agreed to without each of the
others.” Id. § 7.1. On May 27, 2005, FERC approved the 2005
Settlement, finding it “fair and reasonable and in the public
interest.” Dominion Transmission, Inc., 111 F.E.R.C. at 62,236.
On June 30, 2005, Dominion filed its 2005 Fuel Report. See
Fuel Report (2005 Fuel Report), No. RP00-632-017 (June 30,
2005). As with the earlier Reports, it is undisputed that
Dominion’s 2005 Fuel Report contained each of the specified 16
items of information. See, e.g., Conditions Order ¶ 11. About
this time, KeySpan asserts, it became aware from postings on
Dominion’s website that Dominion was “waiving” a significant
quantity of fuel for certain of its customers. KeySpan Br. 9.8
KeySpan filed a second motion with FERC on July 12, 2005,
requesting that it “require Dominion to modify its Fuel Report”
7
Section 4.6 provides: “This Article IV shall not purport to
preclude the Commission from initiating an NGA Section 5
proceeding on its own volition.”
8
If a natural gas shipment does not require the use of any fuel
during transportation (e.g., when no compressors are used during the
shipment), a pipeline may “waive” a portion of the general fuel
retention percentage to reflect the savings. See, e.g., Columbia Gas
Transmission Corp., 101 F.E.R.C. ¶ 61,378, at 62,573-74 (Dec. 26,
2002). The pipeline may not, however, ordinarily waive the portion
of the fuel retention percentage covering lost and unaccounted-for
fuel. Id.
9
to include three additional pieces of information relating to
Dominion’s fuel retention practices. Request of the KeySpan
Delivery Companies for Further Information, No. RP00-632-
000, at 4 (July 12, 2005) (2005 KeySpan Mot.).9
After considering KeySpan’s motions, FERC found “under
section 5 of the NGA” that the 2005 Settlement was “unjust and
unreasonable insofar as it fails to require [the] additional
information” requested by KeySpan. See Conditions Order ¶ 12.
FERC directed Dominion to re-file its 2004 and 2005 Fuel
Reports with the additional information and to include the
additional information in all future Fuel Reports. See id. ¶¶ 13-
14. FERC reasoned that “granting KeySpan’s request for more
detailed information in Dominion’s Fuel Reports would enhance
the transparency of Dominion’s transactions, and assure all
parties and the Commission that there is no cost-shifting or
subsidization on Dominion’s system.” Id. ¶ 11. FERC
explained that although Dominion’s fuel retention percentage
was fixed during the Moratorium Period, the additional
information was “important . . . because of its potential use in
any subsequent fuel retention proceeding after the moratorium
expires.” Id.
Dominion requested rehearing. See Request for Reh’g, Nos.
RP00-632-013, RP00-632-017 (Jan. 20, 2006). In its request,
9
KeySpan “request[ed] that the Commission require Dominion to
modify its Fuel Report to identify (1) the quantity of fuel waived by
Dominion by function, (2) the quantity of fuel collected or credited
under negotiated rate agreements that reflect negotiated fuel retention
percentages, and (3) the amounts of fuel that should be reflected in
Dominion’s fuel retainage accounts as a result of the Commission’s
orders that require Dominion to credit fuel retainage levels to its
retainage accounts for any negotiated transaction.” 2005 KeySpan
Mot. 4.
10
Dominion argued, inter alia, that FERC (1) “erred in failing to
apply the Mobile-Sierra doctrine10 to KeySpan’s request to
abrogate the terms of the . . . 2005 Rate Settlement;” (2) “erred
in deviating from its policy supporting the sanctity of
settlements;” (3) “violated section 5 of the NGA in ordering
[Dominion] to modify . . . its tariff without adequately
demonstrating . . . [that Dominion’s t]ariff is unjust and
unreasonable and that the Commission’s proposed change is just
and reasonable;” and (4) “erred . . . by retroactively applying the
ordered changes to [Dominion’s] June 30, 2004 and June 30,
2005 Fuel Reports.” Id. at 5 (footnote added). FERC
acknowledged that Dominion’s last assignment of error was
correct and modified its order so that Dominion was required to
disclose the additional information prospectively only. See
Order on Reh’g, Compliance Filing & Fuel Report, Nos. RP00-
632-019 et al., ¶¶ 23-24 (Jan. 19, 2007) (Rehearing Order).
FERC rejected each of Dominion’s other arguments. On March
14, 2007, Dominion timely filed a petition for review pursuant
to 15 U.S.C. § 717r(b).
II.
A. Standing
FERC opens by challenging Dominion’s standing to
challenge its order to provide the additional information.
“Pursuant to § 19(b) of the NGA, 15 U.S.C. § 717r(b), only a
party that is ‘aggrieved’ by an order issued under the Act may
obtain judicial review thereof.” El Paso Natural Gas Co. v.
FERC, 50 F.3d 23, 26 (D.C. Cir. 1995). “ ‘A party is aggrieved
within the meaning of [the NGA] if it can establish both the
constitutional and prudential requirements for standing.’ ” Wis.
10
See discussion infra page 13.
11
Pub. Power, Inc. v. FERC, 493 F.3d 239, 267 (D.C. Cir. 2007)
(quoting Pub. Util. Dist. No. 1 of Snohomish County v. FERC,
272 F.3d 607, 613 (D.C. Cir. 2001)). In order to establish
constitutional standing, “ ‘a plaintiff must[, inter alia,] show . . .
it has suffered an ‘injury in fact’ that is (a) concrete and
particularized and (b) actual or imminent, not conjectural or
hypothetical.” Friends of the Earth, Inc. v. Laidlaw Envtl.
Servs. (TOC) Inc., 528 U.S. 167, 180 (2000) (quoting Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)). According
to the Commission, Dominion’s petition does not allege that
Dominion has suffered a “concrete and particularized” injury.
FERC Br. 16. Specifically, FERC argues that Dominion’s
petition “leaves unclear whether its alleged injury derives from:
1) the precedent set by the Commission’s addition of filing
requirements to the tariff or Settlements; 2) the filing
requirement itself; 3) the potential for future changes to
Dominion’s rates based upon the informational filings; or
something else.” Id. at 15–16. We, however, do not share
FERC’s confusion. Dominion’s opening brief makes clear that
it has been “aggrieved” by FERC’s “altering the terms of its
Settlement Agreements.” Dominion Br. 23. FERC’s alteration
of Dominion’s obligations under the 2001 and 2005 Settlements
suffices to establish standing under the NGA. Indeed, it would
be difficult to see how FERC could order Dominion to disclose
private data about its operations and that Dominion could
nonetheless lack standing to challenge the order. Cf. Sierra
Club v. EPA, 292 F.3d 895, 899–900 (D.C. Cir. 2002) (“In many
if not most cases the petitioner’s standing to seek review of
administrative action is self-evident . . . . In particular, if the
complainant is ‘an object of the action . . . at issue’—as is the
case usually in review of a rulemaking and nearly always in
review of an adjudication—there should be ‘little question that
the action or inaction has caused him injury . . . .’ ” (quoting
12
Lujan, 504 U.S. at 561–62)).11
B. Standard of Review
We review the Commission’s interpretation of the 2001 and
2005 Settlements under “a variation of the now familiar ‘two-
step’ first performed by the United States Supreme Court in
Chevron U.S.A., Inc. v. Natural Resources Defense Council,
Inc., 467 U.S. 837 (1984).” Ameren Servs. Co. v. FERC, 330
F.3d 494, 498 (D.C. Cir. 2003). “[F]irst, [we] consider de novo
whether the settlement agreement unambiguously addresses the
matter at issue. If so, the language of the agreement controls for
we ‘must give effect to the unambiguously expressed intent of’
the parties.” Id. (quoting Chevron, 467 U.S. at 843) (citation
omitted). “If the settlement agreement is ambiguous, however,
we then examine the Commission’s interpretation of that
agreement ‘under the deferential ‘reasonable’ standard.’ ” Id.
(quoting Cajun Elec. Power Coop. v. FERC, 924 F.2d 1132,
1136 (D.C. Cir. 1991) (footnote omitted)).
C. Mobile-Sierra Doctrine
“Under the Mobile-Sierra doctrine12 FERC may abrogate or
11
FERC also argues that, to the extent Dominion asserts injury
based on FERC’s future use of the additional information in a
subsequent rate proceeding or the potential precedential effect of
FERC’s action, Dominion’s petition is not ripe for review. See FERC
Br. 18-19. This argument, however, is based on a misreading of
Dominion’s position. As we have noted, Dominion’s asserted injury
is based on FERC’s alteration of the terms of the 2005 Settlement
Agreement.
12
The Mobile-Sierra doctrine is derived from the Supreme Court’s
companion cases United Gas Pipe Line Co. v. Mobile Gas Service
Corp., 350 U.S. 332 (1956), and Federal Power Commission v. Sierra
13
modify freely negotiated private contracts that set firm rates or
establish a specific methodology for setting the rates for
service . . . only if required by the public interest.” Atl. City
Elec. Co. v. FERC, 295 F.3d 1, 14 (D.C. Cir. 2002) (citing
Texaco Inc. v. FERC, 148 F.3d 1091, 1095 (D.C. Cir. 1998))
(footnote added). The doctrine requires FERC to “presume that
the rate set out in a freely negotiated . . . contract meets the ‘just
and reasonable’ requirement imposed by law. The presumption
may be overcome only if FERC concludes that the contract
seriously harms the public interest.” Morgan Stanley Capital
Group Inc. v. Pub. Util. Dist. No. 1 of Snohomish County, 128
S. Ct. 2733, 2736 (2008). Generally, this requires “a finding
that the existing rate ‘might impair the financial ability of [a]
public utility to continue its service,’ or that the rate would ‘cast
upon other consumers an excessive burden, or be unduly
discriminatory,’ [or that there are] other ‘circumstances of
unequivocal public necessity.’ ” Wis. Pub. Power, 493 F.3d at
271 (quoting Fed. Power Comm’n v. Sierra Pac. Power Co., 350
U.S. 348, 355 (1956); Permian Basin Area Rate Cases, 390 U.S.
747, 822 (1968)).
In its Rehearing Order, FERC concluded that the Mobile-
Sierra doctrine was inapplicable for three reasons. First, FERC
explained that the Conditions Order “has not modified the terms
of the 2005 Settlement by directing [Dominion] to add more
information items to the annual Fuel Reports.” Reh’g Order
¶ 14 (emphasis added). FERC explained that “[n]one of the 16
enumerated informational filing requirements . . . is modified or
eliminated. The Commission has merely directed that . . . the
information to be submitted to the Commission each June 30 be
supplemented to include additional information the Commission
Pacific Power Co., 350 U.S. 348 (1956).
14
finds would be helpful.” Id. (emphasis added); see also id. ¶ 15
(“The December 21, 2005 Order does not modify that settled list
of information [i.e, the Fuel Report]; it will still be filed.
Rather, the Commission’s order simply adds to it.”).13 We find
this argument cannot withstand Chevron review under step one.
During the “intensive” settlement negotiations, Notification of
Settlement Filing, No. RP00-632-003, at 1, the parties precisely
defined the information to be contained in Dominion’s annual
Fuel Reports. See, e.g., 2001 Settlement § 11.4 (“D[ominion]
shall be required to make an informational filing . . . as
described in . . . Section 16.5 attached on Appendix B.”); see
also supra note 3. We find no ambiguity in this language and
therefore decline to defer to FERC’s suggestion that it can
“add[] to” or “supplement” a contractual obligation without at
the same time modifying it. See, e.g., Oxford English
Dictionary 952 (2d ed. 1989) (“modify” means, in part, “make
partial or minor changes in; to change (an object) in respect to
some of its qualities; to cause to vary without radical
transformation”); Webster’s Third New Int’l Dictionary 1452
(1993) (“modify” means “make minor changes in form or
structure of: alter without transforming”).
Second, FERC suggests that the Conditions Order does not
implicate Mobile-Sierra because it is consistent with the
“purpose and intent” of the Settlements. Reh’g Order ¶ 15.
There are two variations on this theme. First, FERC argues that
so long as it does not change “ ‘the terms of primary service for
which the parties have bargained . . . [its order] does not modify
13
FERC noted that “[r]ather than directing this information be
reported on an ad hoc basis in a filing separate from the settlement’s
informational reports, as a matter of efficient administration, the
order . . . requires their inclusion in the same report in which the other
settled information items are reported.” Reh’g Order ¶ 15.
15
[the] contracts, even if it affects them.’ ” FERC Br. 25 (quoting
Am. Gas Ass’n v. FERC, 428 F.3d 255, 263 (D.C. Cir. 2005)
(emphases added)).14 According to FERC, “[t]he [primary]
bargain struck by the settling parties relates to the rates . . . .
Requiring additional information to be submitted does not, in
and of itself, change those settled rates.” Reh’g Order ¶ 15; see
also FERC Br. 27. FERC claims that its “reasonabl[e]”
interpretation of the Settlements is entitled to deference under
Chevron. FERC Br. 20, 23. We disagree. Even granting that
the “primary” purpose of the 2005 Settlement was to establish
Dominion’s transportation and storage service rates, the 2005
Settlement made clear that the information contained in the Fuel
Report was also an integral part thereof. Indeed, the 2005
Settlement specifies that it is “an integrated package” and that
“[n]one of the terms of the Settlement [is] agreed to without
each of the others.” 2005 Settlement § 7.1.
FERC’s second variation on the theme, its “intent of the
parties” argument, fares no better. FERC argues that “[t]he
14
In American Gas we upheld a FERC regulation authorizing
“shippers to segment their capacity and use any receipt and delivery
point within the zone for which they pay reservation charges.” 428
F.3d. at 261. The regulation “created a secondary market for
[pipeline] capacity.” Id. “Various pipelines . . . argue[d] that FERC’s
policy effectuated an increase in shippers’ delivery point entitlements
. . ., thereby modifying existing contracts” and triggering Mobile-
Sierra. Id. at 262. We disagreed, explaining that the regulation
directly affected only the secondary market for pipeline capacity—“a
basis not covered by the contract[s]” and outside their domain. Id. at
263. “Because the terms of primary service for which the parties ha[d]
bargained remain[ed] unchanged,” we held that the regulation did not
alter the contracts. Id. Not so with the Settlements. The Conditions
Order “affected” the Settlements by “altering” the content of the Fuel
Reports.
16
purpose and intent in requiring information to be filed [i.e., the
16 items] . . . was to provide a minimum set of information to be
used to determine whether section 5 action adjusting the settled
fuel retention percentages would be appropriate . . . . The
purpose clearly was not to blind the Commission to additional
information if such information were deemed important to fulfill
the Commission’s oversight responsibilities under the NGA.”
Reh’g Order ¶ 15 (emphasis added). In effect, FERC argues that
its understanding of the “purpose” of the Settlements takes
precedence over their respective provisions. Not so. See
Ameren Servs Co., 330 F.3d at 498. Both Settlements
unambiguously define Dominion’s reporting obligations. See
supra note 3; 2005 Settlement § 4.3 (incorporating 2001
Settlement’s reporting requirement). The plain language of the
Settlements—which provides for a 16-item Fuel Report—cannot
be overridden by a purported “purpose and intent” that would
significantly alter that language.
Finally, FERC argues that the Mobile-Sierra doctrine is
inapplicable because the 2005 Settlement provides that it “ ‘shall
not . . . preclude the Commission from initiating an NGA section
5 proceeding on its own volition.’ ” Reh’g Order ¶ 17 (quoting
2005 Settlement § 4.6) (emphasis added). As we noted earlier,
section 5, in relevant part, authorizes FERC to establish “just
and reasonable” rules and regulations relating to the rates and
charges “collected by any natural-gas company in connection
with any transportation or sale of natural gas.” 15 U.S.C.
§ 717d(a). Because the 2005 Settlement expressly allows for a
section 5 proceeding on FERC’s initiation, FERC argues, it need
ensure only that the additional disclosure requirements are “just
and reasonable,” see id., which, as previously noted, is less
17
demanding than Mobile-Sierra. See discussion supra page 13.15
This argument too is without merit. Under section 5, FERC
initiates a proceeding either “ [1] upon its own motion or [2]
upon complaint of any . . . gas distributing company.” 15 U.S.C.
§ 717d(a) (emphases added). But section 4.6 of the 2005
Settlement refers only to FERC’s authority to bring a section 5
action only “on its own volition.” 2005 Settlement § 4.6
(emphasis added). As FERC acknowledges, the Conditions
Order issued at the behest of KeySpan. See Conditions Order
¶ 11 (“Although Dominion has complied with the specific
informational requirements of the [Settlement Agreements],
granting KeySpan’s request for more detailed information in
Dominion’s Fuel Reports would enhance the transparency of
Dominion’s transactions, and assure all parties and the
Commission that there is no cost-shifting or subsidization on
Dominion’s system.” (emphasis added)). FERC argues that it
did not run afoul of the “on its own volition” clause because it
acted “upon Dominion’s customers’ comments, distinguishable
from [their] complaints.” FERC Br. 31 (emphases added).16 In
other words, FERC apparently interprets section 4.6 as allowing
the settling parties to petition FERC for modification of the 2005
15
The 2001 Settlement does not contain a comparable “on its own
volition” clause.
16
FERC claims that it has previously interpreted similar language
not to limit its authority to modify a contract under section 5. See
FERC Br. 31. The two cases FERC highlights are distinguishable.
The first, Columbia Gas Transmission Corp., 79 F.E.R.C. ¶ 61,044,
at 61,203 (1997), interprets a contract that does not contain the “on its
own volition” language, and the second, CNG Transmission Corp., 85
F.E.R.C. ¶ 61,261, at 62,054 (1998), clarifies only that the clause does
“not limit the Commission’s authority to take future action under
Section 5 of the NGA . . . as a result of [a] rulemaking proceeding[].”
18
Settlement—without triggering the Mobile-Sierra
presumption—so long as they proceed informally.17
The parties agree that there is at least some ambiguity in the
meaning of the “on its own volition” clause, see Dominion Br.
33–34 (“Whatever th[e] provision might mean, it is not
applicable to the Commission’s Orders in this case. Indeed, this
clause equally could be read to confirm the Commission retains
the right to modify the settlement agreement when the public
interest so requires, in accord with the Mobile-Sierra
doctrine.”); FERC Br. 32-33 (arguing for ambiguity). We turn,
therefore, to step two of the Chevron analysis to determine
whether FERC’s interpretation of the clause to allow regulation
in response to customer comments, but not complaints, is a
reasonable interpretation. See Ameren Servs., 330 F.3d at 498-
99. We think not. FERC’s interpretation of section 4.6 would
effectively void other provisions of the 2005 Settlement that
prohibit the settling parties from “initiat[ing] or support[ing]”
modification of the 2005 Settlement through a section 5 action.
See, e.g., 2005 Settlement §§ 4.2(a) (“[N]o Settling Party shall
initiate or support a proceeding under NGA Section 5 that would
cause a change in [Dominion’s] generally applicable
transportation or storage rates . . . .”), 4.5 (parties prohibited
from “initiating a proceeding under Section 5 of the NGA . . . [to
seek] a result inconsistent with any other provisions established
. . . by this Settlement”). In addition, FERC has previously
declared that, in interpreting a settlement, “no word in a contract
(or settlement) is to be treated as surplusage or redundant if any
17
Neither the Conditions Order nor the Rehearing Order discusses
the scope of the clause. See Condition Order § 3 (not discussing “on
its own volition” language); Reh’g Order ¶ 16 (quoting section 4.6 of
the 2005 Settlement but not discussing “on its own volition”
language).
19
reasonable meaning, consistent with the other parts, can be
given to it.” Pac. Gas. Transmission Co., 73 F.E.R.C. ¶ 61, 276,
at 61,760 (1995); accord Grynberg v. FERC, 71 F.3d 413, 416
(D.C. Cir. 1995).
D. NGA Section 10
Finally, FERC argues that the Conditions Order is a
legitimate exercise of its authority under section 10 of the NGA,
15 U.S.C. § 717i. Under section 10, FERC may require a
regulated natural gas company to supply informational reports
that FERC deems necessary to carry out its regulatory duties.18
But the Conditions Order makes no mention of section 10;
instead, it declares that FERC is acting under its section 5
authority. See Conditions Order ¶ 12 (“We find, therefore, that
under section 5 of the NGA, [the 2005 Settlement] is unjust and
unreasonable . . . .”). Similarly, the Rehearing Order repeatedly
affirms that FERC is acting under section 5. See, e.g., Reh’g
Order ¶ 6 (“The Commission found that under section 5 of the
NGA, [the 2005 Settlement] was unjust and
unreasonable . . . .”), ¶ 21 (“The Commission made the requisite
section 5 findings . . . .”). The first and only mention of section
18
Section 10(a) provides, in relevant part:
Every natural-gas company shall file with the Commission
such annual and other periodic or special reports as the
Commission may by rules and regulations or order prescribe
as necessary or appropriate to assist the Commission in the
proper administration of this chapter. The Commission may
prescribe the manner and form in which such reports shall be
made, and require from such natural-gas companies specific
answers to all questions upon which the Commission may
need information.
15 U.S.C. § 717i(a).
20
10 is FERC’s observation—unsupported by any explanation or
analysis—at the close of the Rehearing Order. See id. ¶ 21
(“The Commission . . . is granted express authority under
section 10 of the NGA to require reports.”). This does not
suffice. See Mo. Pub. Serv. Comm’n v. FERC, 234 F.3d 36, 41
(D.C. Cir. 2000) (“A passing reference . . . is not sufficient to
satisfy the Commission’s obligation to carry out reasoned and
principled decisionmaking. We have repeatedly required the
Commission to fully articulate the basis for its decision.”
(quotations omitted)); Great Lakes Gas Transmission Ltd.
P’ship v. FERC, 984 F.2d 426, 432 (D.C. Cir. 1993) (“By
requiring the Commission to explain its decisions fully and
rationally, we can be confident that missing facts, gross flaws in
agency reasoning, and statutorily irrelevant or prohibited policy
judgments will come to a reviewing court’s attention.”
(quotation omitted)); see also SEC v. Chenery Corp., 318 U.S.
80, 95 (1942) (“[A]n administrative order cannot be upheld
unless the grounds upon which the agency acted in exercising its
powers were those upon which its action can be sustained.”).
For the foregoing reasons, we grant Dominion’s petition and
vacate FERC’s Conditions Order, 113 F.E.R.C. ¶ 61,302 (Dec.
21, 2005).
So ordered.