DEK Energy Co. v. Federal Energy Regulatory Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 20, 2001 Decided May 4, 2001

No. 00-1020

DEK Energy Company,
Petitioner

v.

Federal Energy Regulatory Commission,
Respondent

Pan-Alberta Gas, Ltd., et al.,
Intervenors

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

MaryJane Reynolds argued the cause and filed the briefs
for petitioner.

Beth G. Pacella, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With her on

the brief was Dennis Lane, Solicitor. Susan J. Court, Spe-
cial Counsel, entered an appearance.

John R. Staffier argued the cause for intervenors Pan-
Alberta Gas, Ltd., et al. With him on the brief were Marisa
A. Sifontes, Mary Ann Walker and Lee A. Alexander. Neil
L. Levy, Carl M. Fink and Stefan M. Krantz entered appear-
ances.

Before: Williams, Sentelle and Rogers, Circuit Judges.

Opinion for the Court filed by Circuit Judge Williams.

Williams, Circuit Judge: This dispute arises out of a
proposal to restructure a contractual relationship providing
for the transportation and sale of gas from Pan-Alberta
Natural Gas Ltd. in Canada ("Pan-Alberta") to Southern
California Gas Company ("SoCal"). Petitioner DEK Energy
Company, which sells gas in Northern California, objects to
one element of the transaction. Under the restructuring, an
entitlement to ship 244,000 million Btu ("MMBtu") per day of
gas from the Canadian border to Stanfield, Oregon was
transferred from Pacific Interstate Transmission Company to
Pan-Alberta's affiliate, Pan-Alberta Gas (U.S.), Inc. ("Pan-
Alberta-US"). DEK objects that, pursuant to the Federal
Energy Regulatory Commission's approval, Pan-Alberta-US
will enjoy a lower rate for this service than DEK believes
would prevail if FERC had not made various legal errors.
DEK claims that it will suffer a competitive injury if the gas
in question ends up being sold in Northern California. Be-
cause DEK has not shown that any competitive injury is more
than highly speculative, we dismiss the petition for want of
Article III standing.

* * *

Under a now superseded agreement, Pan-Alberta sold
244,000 MMBtu per day of Canadian gas to Northwest Alas-
kan Pipeline Company. Northwest Alaskan then sold it to
the Pacific Interstate Transmission Company, a wholly owned
SoCal subsidiary that had been created as a middleman to
overcome regulatory restrictions on gas purchases at an

international border by local distribution companies such as
SoCal. Pacific Interstate Transmission used facilities of Pa-
cific Gas & Electric Company Gas Transmission, Northwest
Corporation ("PG&E GT-NW") to deliver the gas to Stan-
field, Oregon. Thereafter the gas traveled on other pipelines
through Ignacio, Colorado to the Arizona/California border
and SoCal's California transmission system. To fulfill its
delivery obligations for the leg of the journey from the
Canadian border to Stanfield, Oregon, Pacific Interstate
Transmission held 244,000 MMBtu per day capacity on the
PG&E GT-NW pipeline.

In 1998 the parties to the agreement filed petitions under
s 7(b) of the Natural Gas Act (NGA), 15 U.S.C. s 717f(b),
and s 9 of the Alaska Natural Gas Transportation Act, 15
U.S.C. s 719, seeking approval from the Commission for a
restructured arrangement removing Northwest Alaskan and
Pacific Interstate Transmission from the process and allowing
SoCal to purchase Canadian gas directly from Pan-Alberta-
US. The new agreement provided that Pacific Interstate
Transmission would assign its full entitlement to 244,000
MMBtu/day of PG&E GT-NW's capacity to Pan-Alberta-US,
which would pay the same rate as Pacific Interstate Trans-
mission had. At the same time, the sales obligation to SoCal
picked up by Pan-Alberta-US was reduced to 144,000
MMBtu/day, thereby leaving 100,000 MMBtu/day in excess
capacity. As consideration for Pan-Alberta-US's assumption
of these obligations (and the attendant risks), Pacific Inter-
state Transmission proposed to pay Pan-Alberta-US $31
million.

Petitioner DEK sells gas in the Northern California mar-
ket. It holds about 11,000 MMBtu/day capacity on PG&E
GT-NW from the Canada/Idaho border all the way to the
Oregon/California border under a firm 20-year contract ex-
piring in 2013. Its theory of competitive injury stems largely
from the rate structure on PG&E GT-NW, under which
shippers pay (at least) three different rates, evidently depend-
ing on the time at which they started taking service (the
lower rates being associated with the earlier dates). Pan-
Alberta-US enjoys the middle rate, the same as formerly

paid by Pacific Interstate Transmission, whereas DEK pays
the highest rate. (By October 2002, evidently, virtually all
shippers will pay the same rates.) DEK claims that if Pacific
Interstate Transmission's capacity had been disposed of in
what it regards as the legally required manner, under the
"capacity release" program, the successor shipper would, like
DEK, have been subjected to the highest rate. Although the
Commission and intervenors (Pan-Alberta and Pan-Alberta-
US) contest this claim, we assume it to be correct.

In the proceedings before the Commission, DEK pressed
its contention that the capacity could be transferred only
through the capacity release mechanism; FERC rejected the
claim on the merits, offering several reasons, including its
view that Pan-Alberta-US was not truly a new or replace-
ment shipper intended to be covered by the generic capacity
release rate policy. It therefore approved the proposed
restructuring. See Pacific Interstate Transmission Co., 85
FERC p 61,378 (1998). DEK reiterated its objections in a
request for rehearing, and was rebuffed again. See Pacific
Interstate Transmission Co., 89 FERC p 61,246 (1999). Be-
fore us, FERC not only defends its decision on the merits but
presses two jurisdictional defenses. First it argues that DEK
has failed to establish injury-in-fact as required under Article
III of the U.S. Constitution (and s 19(b) as well). And it
argues that DEK's challenge is a collateral attack on a 1996
rate settlement order, and thus precluded by the 60-day time
limit imposed on petitions for review of FERC decisions. See
NGA s 19(b), 15 U.S.C. s 717r(b). Because of our decision
on Article III standing, we need not reach the other jurisdic-
tional defense and we cannot reach the merits.

Article III requires that a petitioner seeking access to
federal courts must allege an "an injury in fact" that is
"concrete and particularized" and "actual or imminent, not
conjectural or hypothetical." Lujan v. Defenders of Wildlife,
504 U.S. 555, 559-61 (1992) (internal quotation omitted).
Here DEK claims only that Pan-Alberta-US's enjoyment of a
lower tariff may injure DEK by enabling Pan-Alberta-US to
sell the 100,000 MMBtu per day in the Northern California
market under conditions that might either completely under-

cut DEK's sales, or force it to reduce its prices. There is no
claim that Pan-Alberta-US has yet exploited the PG&E GT-
NW capacity to sell a single molecule of gas in Northern
California. As any substantial new delivery of gas into
DEK's market area would presumably tend to lower the
market-clearing price, we take it that Pan-Alberta-US's es-
pecially favorable rate is relevant largely because it would
enhance Pan-Alberta-US's ability to sell profitably in DEK's
areas and thus would increase the probability of such entry,
and, moreover, to sell at rates and in quantities that might
force DEK to cut its prices or lose sales.

There is quite a gulf between the antipodes of standing
doctrine--the "imminent" injury that suffices and the merely
"conjectural" one that does not. We have insisted that to
escape the latter characterization the claimant must show a
substantial (if unquantifiable) probability of injury. In a
recent case involving extension of natural gas pipelines we
said, "The nub of the 'competitive standing' doctrine is that
when a challenged agency action authorizes allegedly illegal
transactions that will almost surely cause petitioner to lose
business, there is no need to wait for injury from specific
transactions." El Paso Natural Gas Co. v. FERC, 50 F.3d
23, 27 (D.C. Cir. 1995) (emphasis supplied). In that case
petitioner El Paso, a potential competitor in the Baja Califor-
nia market, claimed to be injured by FERC's decision that
certain local distribution companies attempting to extend
their pipelines into that part of Mexico would not be subject
to FERC regulations but instead to those of the California
Public Utilities Commission. We found no standing, as El
Paso had failed to show that it was really going to compete in
Baja California, not having satisfied certain pre-conditions to
FERC approval of its entry into that market. See id.

In the present case DEK's claimed injury is similarly too
speculative. The basic proposition is that FERC's alleged
error increased the likelihood that DEK will be exposed to
additional competition in its Northern California markets--
competition weighty enough either to reduce DEK's sales or
force it to cut its prices. To consider the degree of likelihood,
we need to focus on the alternative outcomes of the proceed-

ing. There seem to be three relevant possibilities: (1)
FERC, accepting DEK's view of the law, might have insisted
on applying the regular capacity release procedures, demand-
ing that the rate on the transferred entitlement to ship to
Stanfield be the higher one, and this insistence would have
torpedoed the entire restructuring. (This is FERC's view of
what would have happened.) (2) FERC, accepting DEK's
view of the law, might have insisted on the capacity release
provisions, but the restructuring would have survived, and
Pan-Alberta-US would have paid the highest rate for its use
of the Canada-to-Stanfield capacity. (This is DEK's view of
what would have happened.) (3) FERC might have acted as
it did, allowing Pan-Alberta-US to use the Canada-to-
Stanfield capacity at the previously prevailing rate. There is
a fourth alternative: FERC might have insisted on the
increased rate and the restructuring would have gone
through, but at the higher rate the capacity might have
attracted no takers and the daily 100,000 MMBtu would not
have flowed south from Canada at all. For DEK this fourth
possibility might have been the most appealing, as it would
likely preclude the gas from ever reaching (and thereby
affecting) the Northern California market, but neither DEK
nor any party asserts it as a possibility and we therefore
discard it. Accordingly, the key issue is the likely difference
in impact on DEK as between FERC's actual choice (alterna-
tive (3)) and the other two.

Alternative (1) leaves the capacity in Pacific Interstate
Transmission's hands under the terms of the original agree-
ment. Superficially that might appear to favor DEK, with
the capacity committed to the SoCal transaction. But the
restructured deal sought to reduce SoCal's purchase obli-
gation by the very 100,000 MMBtu/day in question, suggest-
ing that that quantity was surplus to SoCal. Thus, even
assuming that under this scenario the gas proceeds on to
Southern California, we have no clue whether DEK's interest
in the Northern California market is any more jeopardized by
gas that has reached Stanfield, Oregon (as under FERC's
actual order) than by gas held by SoCal in Southern Califor-
nia and viewed by it as surplus. DEK has given no detail on

the location of its Northern California markets, or on the
options for moving gas to those markets from Stanfield or
from Southern California. We note, purely by way of exam-
ple, that the distance from Stanfield to San Francisco appears
to be nearly 600 miles as the crow flies and over 800 miles by
road.

Under alternative (2) the restructuring goes forward and
the Canada-to-Stanfield rate is higher for Pan-Alberta-US
than under FERC's order. But it is unclear whether
FERC's order makes it more likely that DEK will be subject
to material competition from Pan-Alberta-US. Everything
else being equal, DEK would prefer to see potential rivals'
costs high than low. But the gas reaches Stanfield either
way, and Pan-Alberta-US's decisions whether to sell it in
DEK's Northern California markets or elsewhere will depend
on both gas market conditions there and in alternative mar-
kets reachable from Stanfield, and on transportation costs
from Stanfield to the alternative markets. DEK presents no
evidence on these matters, even though it is entitled on
appeal to supplement the agency record in order to demon-
strate standing. See Western Power Trading Forum v.
FERC, 2001 WL 339469, *4 (D.C. Cir. 2001); Northwest
Environmental Defense Center v. Bonneville Power Admin-
istration, 117 F.3d 1520, 1527 (9th Cir. 1997).

At oral argument, counsel for intervenor Pan-Alberta-US
noted that Pan-Alberta-US's current practice is to sell its
capacity on a spot market without any regard to the trans-
ported gas's final destination, deferring any long term com-
mitment of the excess capacity. Some of this gas may well
wend its way into DEK's markets But without more informa-
tion from which to infer quantities capable of having a market
effect, that is an inadequate basis for saying that that
FERC's decision "will almost surely" cause DEK "to lose
business," El Paso, 50 F.3d at 27, or to cut prices in order to
preserve business.

We recognize that whenever a gas vendor secures trans-
port capacity that enables it to ship gas closer to another
vendor at competitive rates, the latter may perceive an in-

creased risk of competition. But under any of the scenarios
relevant here, the 100,000 daily MMBtu of gas will arrive at a
point several hundreds of miles from DEK's market, with
some vague probability that any gas will actually reach that
market and a still lower probability that its arrival will cause
DEK to lose business or drop its prices. More is needed to
move an injury from "conjectural" to "imminent."

The petition is

Dismissed.