Panhandle Eastern Pipe Line Co. v. Federal Energy Regulatory Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 12, 1999 Decided December 14, 1999

No. 98-1409

Panhandle Eastern Pipe Line Company,
Petitioner

v.

Federal Energy Regulatory Commission,
Respondent

Semco Energy Gas Company, et al.,
Intervenors

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

Lawrence G. Acker argued the cause for petitioner. With
him on the briefs were Mary A. Murphy and Merlin E.

Remmenga. F. Nan Todd Wagoner and Richard J. Kruse,
Jr., entered appearances.

Judith A. Albert, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With her on
the brief were Jay L. Witkin, Solicitor, and Susan J. Court,
Special Counsel.

Before: Edwards, Chief Judge, Silberman and Rogers,
Circuit Judges.

Opinion for the Court filed by Chief Judge Edwards.

Edwards, Chief Judge: Petitioner, Panhandle Eastern Pipe
Line Co. ("Panhandle"), implores this court to vacate two
opinions of the Federal Energy Regulatory Commission
("FERC" or the "Commission") that have been rendered
moot by a settlement entered into between Panhandle and a
group of its customers. Panhandle argues that, because
FERC concedes that the two opinions do not reflect final
orders and because the settlement ensures that the chal-
lenged opinions will never become final, this court should
remand the opinions to FERC with instructions to vacate
them.

FERC responds that, because Panhandle is not an "ag-
grieved" party, as required by Section 19(b) of the Natural
Gas Act ("NGA"), see 15 U.S.C. s 717r(b) (1994), the court
has no jurisiction over the instant case. In other words,
FERC claims that the now moot opinions are nothing more
than general statements of policy that give rise to no justicia-
ble claims. Alternatively, FERC contends that, under U.S.
Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S.
18 (1994), absent extraordinary circumstances, a federal court
will not vacate a judgment that has been rendered moot by
voluntary settlement. FERC is right on the first count;
accordingly, we deny Panhandle's petition for review.

We reject FERC's alternative argument resting on U.S.
Bancorp. This case differs from U.S. Bancorp, because the
disputed issues here were rendered moot while the case was
still before the agency and before any jurisdiction was found

in federal court. U.S. Bancorp and other such cases apply
only to determine the jurisdiction of Article III courts, not
administrative agencies, and to instruct when an opinion must
be vacated after a federal court loses its jurisdiction. For
example, in American Family Life Assurance Co. v. FCC,
129 F.3d 625 (D.C. Cir. 1997), we held that "federal courts
should vacate agency orders they decline to review on
grounds of mootness." Id. at 630. Here, however, no federal
court has had jurisdiction over the instant case, because the
agency never issued a final, appealable order. In short, there
are no "unreviewed administrative orders" extant. Id.
Therefore, U.S. Bancorp and American Family Life have no
sway in the resolution of this matter.

I. Background

In September 1991, Panhandle initiated a rate proceeding
under Section 4 of the NGA. FERC accepted and suspended
the filing, and set the proposed rates for hearing. In August
1994, an Administrative Law Judge issued an initial decision
relating to numerous issues concerning Panhandle's proposed
rates. Unhappy with many of the judge's conclusions, "[v]ari-
ous parties filed exceptions to most of the [Administrative
Law Judge's] rulings." Panhandle Eastern Pipe Line Co., 83
F.E.R.C. p 61,353, at 62,419 (1998). On May 25, 1995, the
Commission addressed these exceptions in Panhandle East-
ern Pipe Line, 71 F.E.R.C. p 61,228, at 61,819 (1995) ("Opin-
ion No. 395"), the first of the two challenged opinions. Pan-
handle and several of its customers were dissatisfied, and
they requested rehearing.

In May 1992, while the fate of its first filing was still
pending, Panhandle initiated a second Section 4 rate filing.
Just as it had with the first filing, the Commission accepted
and suspended the filing, and set the proposed rates for
hearing. In December 1994, the Administrative Law Judge
in this second case issued an initial decision, which, like its
predecessor, met with exceptions. On February 5, 1996,
FERC issued Panhandle Eastern Pipe Line Co., 74 F.E.R.C.
p 61,109, at 61,351 (1996) ("Opinion No. 404"), the second of
the challenged opinions. A petition for rehearing followed.

The Commission never had the opportunity, however, to
address either of the pending requests for rehearing. In

September 1996, while both requests were still pending, and
before any final orders were issued by the agency, Panhandle
and a group of its customers filed a settlement aimed at
resolving both of the previous rate cases and related proceed-
ings. On December 20, 1996, the Commission approved the
settlement "as a fair and equitable resolution." Panhandle
Eastern Pipe Line Co., 83 F.E.R.C. p 61,353, at 62,419. On
December 2, 1997, Panhandle filed a motion to vacate the
challenged opinions. On April 1, 1998, the Commission de-
nied Panhandle's motion to vacate, holding that, because
vacatur is an equitable remedy, it is unjustified when the
party seeking vacatur has settled the underlying case and
thus rendered it moot. See Panhandle Eastern Pipe Line
Co., 83 F.E.R.C. p 61,008, at 61,029-31 (1998) (citing U.S.
Bancorp, 513 U.S. at 18). The Commission also noted that it
had invested significant resources in conducting hearings and
that the challenged opinions offered useful discussions of
recurring issues. See id. at 61,030. On May 1, 1998, Panhan-
dle sought rehearing on FERC's refusal to vacate the opin-
ions. On June 30, 1998, FERC denied Panhandle's request.
See Panhandle, 83 F.E.R.C. p 61,353, at 62,418. This petition
for review followed.

II. Analysis

Section 19(b) of the NGA requires a party seeking judicial
review to be "aggrieved." See 15 U.S.C. s 717r(b); see also
El Paso Natural Gas Co. v. FERC, 50 F.3d 23, 26 (D.C. Cir.
1995) ("[O]nly a party that is 'aggrieved' by an order issued
under the Act may obtain judicial review thereof."). Because
such a party must also satisfy the requirements of constitu-
tional standing, a petitioner must establish "at a minimum,
'injury in fact' to a protected interest." El Paso, 50 F.3d at
26 (quoting Shell Oil Co. v. FERC, 47 F.3d 1186, 1200 (D.C.
Cir. 1995)). A party establishes an injury-in-fact under Arti-
cle III by alleging "an invasion of legally protected interests
that is both (a) concrete and particularized and (b) actual or
imminent, not conjectural or hypothetical." Id. In addition,
"[j]udicial review is limited to 'orders of definitive impact,
where judicial abstention would result in irreparable injury to
a party.' " CNG Transmission Corp. v. FERC, 40 F.3d 1289,

1292 (D.C. Cir. 1994) (quoting Papago Tribal Util. Auth. v.
FERC, 628 F.2d 235, 238 (D.C. Cir. 1980)).

Panhandle's problem in this case is twofold: It is not an
aggrieved party under the NGA, and it lacks standing to
appear in federal court. There is no aggrievement in this
case, because FERC never issued final judgments disposing
of Panhandle's rate filings. Both filings were pending re-
hearing when Panhandle voluntarily entered into a settlement
that rendered moot the claims before FERC. Thus, there
was no "order issued by the Commission" from which Pan-
handle could obtain judicial review under 15 U.S.C. s 717r(b).

Panhandle resists this conclusion by arguing that it was
"injured" enough to satisfy both section 19(b) and Article III
standing requirements when FERC refused to vacate the
contested opinions that were pending rehearing. FERC, in
turn, contends that the disputed opinions are nothing more
than "policy statements," binding on no party and having no
precedential effect. On this view, FERC asserts that the
mere existence of the disputed opinions causes Panhandle no
harm. FERC surely has the better argument.

In Pacific Gas & Electric Co. v. Federal Power Commis-
sion, 506 F.2d 33 (D.C. Cir. 1974), this court delineated the
distinction between a substantive rule and a policy statement.
The court noted that 5 U.S.C. s 553(b)(A) allows an agency to
issue a general statement of policy, which differs from a
substantive rule in that a policy statement is "neither a rule
nor a precedent but is merely an announcement to the public
of the policy which the agency hopes to implement in future
rulemakings or adjudications." Id. at 38. In this sense, a
policy statement is "like a press release" in that it "presages
an upcoming rulemaking or announces the course which the
agency intends to follow in future adjudications." Id.; see
also American Hosp. Ass'n v. Bowen, 834 F.2d 1037, 1046-47
(D.C. Cir. 1987) (analyzing the nature of policy statements).

This advance-notice function of policy statements yields
significant informational benefits, because policy statements
give the public a chance to contemplate an agency's views
before those views are applied to particular factual circum-

stances. This opportunity to anticipate the agency's actions
"facilitates long range planning within the regulated industry
and promotes uniformity in areas of national concern." Pa-
cific Gas, 506 F.2d at 38. This period of foreshadowing is
made even more useful by the fact that, unlike substantive
rules,

[a] general statement of policy ... does not establish a
'binding norm.' It is not finally determinative of the
issues or rights to which it is addressed. The agency
cannot apply or rely upon a general statement of policy
as law because a general statement of policy only an-
nounces what the agency seeks to establish as policy. A
policy statement announces the agency's tentative inten-
tions for the future. When the agency applies the policy
in a particular situation, it must be prepared to support
the policy just as if the policy statement had never been
issued. An agency cannot escape its responsibility to
present evidence and reasoning supporting its substan-
tive rules by announcing binding precedent in the form of
a general statement of policy.

Id. at 38-39 (footnotes omitted). In other words, a policy
statement has neither the force of a substantive rule adopted
pursuant to rulemaking nor the binding effect of an order
following an adjudication.

The Commission has confused matters somewhat in this
case by noting the "ongoing precedential value" of the chal-
lenged opinions, Br. for Respondent FERC at 16, as if to
suggest that the opinions serve as binding precedent. See
also Panhandle Eastern Pipe Line Co., 83 F.E.R.C. p 61,353,
at 62,420 (noting that the parts of the challenged opinions
that "contain discussions of issues that appear before the
Commission time and time again ... can and do serve as
precedent"). More telling, however, is FERC's failure to
issue final judgments on the merits of Panhandle's claims and
the agency's acceptance of the settlement to moot the pend-
ing claims. In its brief to this court, FERC conceded that
the challenged opinions serve only as policy statements that
have no binding effect. See Br. for Respondent at 17 ("[T]he
only colorable effect, if any, of Opinion Nos. 395 and 404 is

that they leave in public view statements of Commission
policy which would not be judicially reviewable until the
Commission has applied it in a concrete situation."). And,
during oral argument, Government counsel acknowledged
unhesitatingly that the disputed opinions have no precedential
value. In short, for the most part, the Commission has been
unwavering in explaining that the challenged opinions are
"the functional equivalent of a Commission policy statement."
Id. at 27; see also Panhandle Eastern Pipe Line Co., 83
F.E.R.C. p 61,008, at 61,031 ("In future cases, Panhandle or
any other person may seek an outcome contrary to Opinion
Nos. 395 and 404, either based on arguments similar to those
contained in the requests for rehearing of Opinion Nos. 395
and 404 or for other reasons, and the Commission will
consider those contentions.").

In light of the record at hand, it is clear that Panhandle can
cite no injury-in-fact in support of standing. Panhandle's
rates for the relevant time periods were set by the settlement
agreement, so they were unaffected by the challenged opin-
ions. And there is no recognizable residual harm that can
result from FERC's continued publication of the opinions as
policy statements. FERC concedes that the challenged opin-
ions now serve only as policy statements that have no binding
effect on Panhandle. Thus, because Panhandle can point to
no harm that can be redressed by this court, it fails to satisfy
the requirements of section 19(b) of the NGA and Article III
standing.

III. Conclusion

The challenged opinions are non-binding policy statements.
As a result, Panhandle is not aggrieved and has not suffered
an injury-in-fact. We therefore deny Panhandle's petition for
review.