Williams Gas Processing - Gulf Coast Co. v. Federal Energy Regulatory Commission

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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 10, 2004 Decided July 13, 2004

No. 03-1179

WILLIAMS GAS PROCESSING – GULF COAST COMPANY, L.P., ET AL.,
PETITIONERS

v.

FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT

SHELL OFFSHORE INC., ET AL.,
INTERVENORS

Consolidated with
03-1199, 03-1201

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

James T. McManus argued the cause for petitioners.
With him on the briefs were Craig R. Rich, Mari M. Ramsey,
David A. Glenn, and Gregory Grady.
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

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.
Thomas J. Eastment argued the cause for producer inter-
venors. With him on the brief were Charles J. McClees, Jr.,
James M. Costan, T. Alana Deere, Douglas W. Rasch, and
Stephen L. Teichler.

Before: GINSBURG, Chief Judge, and SENTELLE and ROBERTS,
Circuit Judges.
Opinion for the Court filed by Circuit Judge ROBERTS.
ROBERTS, Circuit Judge:

I.
The Natural Gas Act (NGA), 15 U.S.C. §§ 717–717w,
grants FERC jurisdiction over rates charged by any ‘‘natural-
gas company for or in connection with the transportation or
sale of natural gas.’’ Id. § 717c(a). A ‘‘natural-gas compa-
ny,’’ in turn, includes any firm ‘‘engaged in the transportation
of natural gas in interstate commerce.’’ Id. § 717a(6). The
‘‘gathering’’ of gas — ‘‘generally defined as the process of
taking natural gas from the wells and moving it to a collection
point for further movement through a pipeline’s principal
transmission system,’’ Williams Gas Processing – Gulf Coast
Co., L.P. v. FERC, 331 F.3d 1011, 1013 (D.C. Cir. 2003)
(internal quotation marks omitted) — is explicitly excluded,
however, from FERC’s jurisdiction. See 15 U.S.C. § 717(b)
(‘‘this chapter TTT shall not apply to TTT the production or
gathering of natural gas’’). Notwithstanding that jurisdic-
tional limitation, FERC historically exercised jurisdiction
over gathering services provided directly by interstate pipe-
lines on the theory that such gathering services are provided
‘‘in connection with’’ the interstate transportation of gas.
See, e.g., Northern Natural Gas Co., 43 FERC ¶ 61,473
 3

(1988), reh’g denied, 44 FERC ¶ 61,384 (1988) (citing 15
U.S.C. §§ 717c, 717d); see also Conoco Inc. v. FERC, 90 F.3d
536, 540 (D.C. Cir. 1996). FERC, however, has never claimed
jurisdiction over stand-alone gathering entities, i.e., gathering
facilities that are neither owned by nor affiliated with a
pipeline within FERC’s jurisdiction.
In response to this regulatory environment, several juris-
dictional pipelines that provided gathering services sought
either to ‘‘spin off’’ their gathering facilities as unrelated
corporations or to ‘‘spin down’’ the gathering operations to
corporate affiliates by transferring ownership of the gather-
ing facilities from the pipeline to a subsidiary. While a
gathering service spun off from a jurisdictional pipeline into a
separate corporation was clearly beyond FERC’s NGA juris-
diction, the jurisdictional status of gatherers spun down from
an interstate pipeline was less clear. FERC had claimed that
it retained ‘‘in connection with’’ jurisdiction over the rates
charged by spun-down gatherers. See Natural Gas Gather-
ing Services Performed by Interstate Pipelines and Inter-
state Pipeline Affiliates — Issues Related to Rates and
Terms and Conditions of Service, 65 FERC ¶ 61,136, 61,689–
90 (1993) (citing Northwest Pipeline Corp., 59 FERC ¶ 61,115,
61,436–37 (1992)). But FERC never found occasion to exer-
cise its authority over such an entity. In fact, when the
gathering affiliate in Northwest Pipeline challenged FERC’s
statutory authority for such jurisdiction in the court of ap-
peals, ‘‘[t]he Commission represented TTT that its orders
neither assert[ed] jurisdiction nor impl[ied] that it ha[d] juris-
diction over [the gathering affiliate] at the present time.’’
Williams Gas Processing Co. v. FERC, 17 F.3d 1320, 1322
(10th Cir. 1994). The Tenth Circuit therefore dismissed the
petition for review for lack of a case or controversy. See id.
The Commission sought to resolve the jurisdictional status
of spun-down gathering entities in Arkla Gathering Services
Company, 67 FERC ¶ 61,257 (1994). FERC there reviewed
a jurisdictional pipeline’s proposal to spin down its gathering
facilities to an affiliate and various objections to that applica-
tion. The Commission concluded that, as a general matter, it
lacked jurisdiction over ‘‘companies that perform only a gath-
 4

ering function’’; ‘‘whether they are independent or affiliated
with an interstate pipeline,’’ such gathering entities ‘‘are not
natural gas companies’’ under the NGA. Id. at 61,871. The
Commission, though, found it hard to let go: FERC still
maintained that it could, ‘‘in particular circumstances,’’ reas-
sert jurisdiction over a jurisdictional pipeline’s gathering affil-
iate ‘‘where such action is necessary to accomplish the Com-
mission’s policies for the transportation of natural gas in
interstate commerce.’’ Id. The Commission warned that ‘‘if
an affiliated gatherer acts in concert with its pipeline affiliate
TTT and in a manner that frustrates the Commission’s effec-
tive regulation of the interstate pipeline,’’ the Commission
would set aside ‘‘the separate corporate structures and treat
the pipeline TTT as it would if the gathering facilities were
owned directly by an interstate pipeline.’’ Id.
The Commission went on to explain, however, that only
certain ‘‘types of affiliate abuses’’ — those ‘‘arising specifically
from the interrelationship between the pipeline and its affili-
ate’’ — would ‘‘trigger the Commission’s authority to disre-
gard the corporate form’’ and permit it to assert jurisdiction
over a spun-down gathering affiliate. Id. Such abuses in-
cluded ‘‘the affiliate’s giving preferences to market affiliate
gas or tying gathering service to the pipeline’s jurisdictional
transmission service; the pipeline’s giving transportation dis-
counts only to those utilizing the affiliate’s gathering service;
and actions resulting in cross-subsidization between the affili-
ate’s gathering rates and the pipeline’s transmission rates.’’
Id. While the Commission acknowledged that ‘‘an affiliate
could undertake other types of anti-competitive activities,’’
the Commission viewed its residual jurisdiction as reaching
only scenarios ‘‘where the abuse is directly related to the
affiliate’s unique relationship with an interstate pipeline.’’ Id.
Only that brand of anti-competitive behavior breached ‘‘the
arm’s length relationship between the pipeline and an affiliat-
ed gathering company’’ and thereby authorized the Commis-
sion to treat a jurisdictional pipeline and its gathering affiliate
‘‘together as a single ‘natural gas company’ ’’ subject to
FERC jurisdiction. Id.
 5

We affirmed FERC’s approval of the spin-down of the
Arkla gathering facilities. See Conoco, 90 F.3d at 544–50.
Specifically, we rejected the objections of various gas produc-
ers to the Commission’s determination that it generally
lacked NGA jurisdiction over gathering affiliates. Id. at 544–
49. We also approved — ‘‘[a]s an abstract matter’’ — the
Commission’s new policy concerning NGA gathering affiliates,
stating ‘‘we have no reason to doubt the Commission’s conclu-
sion that a nonjurisdictional entity could act in a manner that
would change its status by enabling an affiliated interstate
pipeline to manipulate access and costs of gathering.’’ Id. at
549. We explicitly acknowledged, however, that the question
had not yet been squarely presented for resolution ‘‘because
the Commission has yet to assert its jurisdiction over a
gathering affiliate.’’ Id. That time has now come.

II.
Transcontinental Gas Pipe Line Corporation (Transco) is a
FERC-regulated natural gas transportation company that
operates approximately 10,500 miles of natural gas pipeline
extending from the Gulf of Mexico to New York. In Novem-
ber 2000, Transco sought permission from FERC to spin
down its gathering facilities in the Gulf of Mexico located
offshore of North Padre Island, Texas to its gathering affili-
ate Williams Gas Processing – Gulf Coast Company, L.P.
(WGP).1 The North Padre Island (NPI) gathering facilities
consist of two small offshore legs — 3.83 miles of 10-inch
pipeline and 18.79 miles of 20-inch pipeline — both of which
gather and move gas before converging offshore and connect-
ing to Transco’s separate 24-inch pipeline that provides IT-
feeder service2 to an onshore processing facility and eventual-
ly to Transco’s main pipeline in Texas.
1 Both Transco and WGP are wholly owned by The Williams

Companies, Inc., a publicly-traded corporation.
2 This IT-feeder service is an interruptible gas transportation
service that has higher priority than Transco’s other interruptible
service. See Exxon Mobil Corp. v. FERC, 315 F.3d 306, 308 (D.C.
Cir. 2003).
 6

FERC approved the spin-down of the NPI gathering facili-
ties to WGP over the objections of numerous producers and
shippers, including Shell Offshore Inc., an intervenor in this
proceeding. See Transcontinental Gas Pipe Line Corp., 96
FERC ¶ 61,115, 61,433, 61,442 (2001) (Spin-Down Order),
aff’d, Williams Gas Processing – Gulf Coast Co., 331 F.3d at
1020–23. Moreover, as WGP engaged only in gathering and
other nonjurisdictional activities, the Commission concluded
that once ownership of the NPI facilities was transferred
from Transco to WGP, those facilities would become exempt
from FERC’s NGA jurisdiction. Spin-Down Order, 96
FERC at 61,442. The Commission, however, noted on sever-
al occasions that, as the NPI gathering facilities were located
offshore, they would remain subject to FERC’s jurisdiction
under the Outer Continental Shelf Lands Act (OCSLA), 43
U.S.C. §§ 1331–1356, and OCSLA’s requirement that service
be provided on an open access and nondiscriminatory basis,
id. § 1334(f)(1)(A). Spin-Down Order, 96 FERC at 61,435–
37. Transco closed the spin-down of the NPI gathering
facilities to WGP on December 1, 2001, and those facilities are
now operated by Williams Field Services (WFS), a wholly-
owned subsidiary of WGP.
Intervenor Shell Offshore Inc. (Shell) produced gas off-
shore of North Padre Island, Texas and delivered its gas into
the NPI 20-inch gathering pipeline at an interconnection 3.08
miles from that pipe’s interconnection to Transco’s 24-inch
IT-feeder line. Prior to the spin-down of the NPI facilities,
Transco charged Shell $0.08 per dekatherm to gather and
transport Shell’s gas 230 miles from Shell’s NPI interconnec-
tion to Transco’s main line. After the spin-down, WFS
informed Shell that it intended to charge Shell $0.12 per
dekatherm to gather and move Shell’s gas just the 3.08 miles
from Shell’s NPI interconnection to Transco’s 24-inch IT-
feeder line. For its part, Transco proposed to maintain its
transportation rate of $0.08 per dekatherm for the remaining
227 miles of IT-feeder service. Shell was thus being asked to
pay $0.20 per dekatherm to move its gas to Transco’s main
line, whereas before the spin-down it had paid $0.08 per
dekatherm for the same 230-mile haul.
 7

Unable to reach an agreement with WFS on an appropriate
gathering charge, on November 30, 2001, Shell filed a com-
plaint with the Commission against Transco, WGP, and WFS,
and shortly thereafter shut in its gas. See Shell Offshore Inc.
v. Transcontinental Gas Pipe Line Corp., Docket No. RP02-
99-000, Complaint Requesting Fast Track Processing and
Request for Interim Relief (Nov. 30, 2001). The complaint
alleged that Transco and WFS were unlawfully leveraging
their dominance in the North Padre Island gathering and
transportation markets in an effort to force Shell to pay
unjust and unreasonable gathering rates and to accept anti-
competitive terms and conditions of gathering service, such as
promising to dedicate its North Padre gas reserves to WFS
gathering for the life of production. Id. at 3. The complaint
urged the Commission to find that Transco and WFS were
acting in concert and in an anti-competitive manner that
frustrated the Commission’s ability to regulate Transco’s
jurisdictional pipeline, and further requested that FERC
reassert jurisdiction over the NPI gathering facilities pursu-
ant to its Arkla Gathering theory of residual jurisdiction. Id.
at 13-21.
Shortly thereafter, Superior Natural Gas (Superior), a mar-
keter, and Walter Oil & Gas (Walter), a producer, filed their
own complaint against WGP and WFS, alleging violations of
OCLSA. See Superior Natural Gas Corp. v. Williams Gas
Processing – Gulf Coast Co., L.P., Docket No. RP02-144-000,
Complaint of Superior Natural Gas Corporation and Walter
Oil & Gas Corporation (Jan. 15, 2002). Specifically, Superior
and Walter alleged that WFS was ‘‘imposing anticompetitive
and discriminatory rates and terms and conditions for gather-
ing service,’’ id. at 2, in violation of OCSLA’s requirement of
‘‘open and nondiscriminatory access.’’ 43 U.S.C. §
1334(f)(1)(A).
WFS attempted to reach a settlement with Shell, offering
to provide gathering service for $0.08 per dekatherm. Shell
countered with an offer of $0.019 per dekatherm, which WFS
rejected. With the parties at loggerheads, the dispute was
thrown to the Commission for resolution. The Commission
set both the Shell and the Superior/Walter complaints for
 8

expedited hearing before an administrative law judge. See
Shell Offshore Inc. v. Transcontinental Gas Pipe Line Corp.,
98 FERC ¶ 61,253 (2002). In doing so, the Commission
reaffirmed its ability to reassert jurisdiction over spun-down
gathering affiliates whenever ‘‘an affiliated gatherer acts in
concert with its pipeline affiliate in connection with the trans-
portation of gas in interstate commerce and in a manner that
frustrates the Commission’s effective regulation of the inter-
state pipeline.’’ Id. at 62,017 (quoting Arkla Gathering
Servs., 67 FERC at 61,871). The Commission directed the
ALJ to develop a record on that issue and also on whether
WFS violated OCSLA’s open access and nondiscrimination
provision. Id. at 62,017–18.
The hearing before the ALJ commenced in April 2002.
Within three days, WFS had reached a settlement with
Superior and Walter disposing of their OCSLA complaint.
See Shell Offshore Inc. v. Transcontinental Gas Pipe Line
Corp., 99 FERC ¶ 63,034, 65,231 (2002). Superior and Walter
accordingly withdrew their pre-filed testimony and did not
participate further in the hearing. Id. at 65,231–32. Shell,
though, carried on, and in June 2002 the ALJ ruled in Shell’s
favor, concluding that Transco and WFS ‘‘in fact have acted
in concert in offering gathering services and have abused
their monopoly market power in a manner that frustrates the
Commission’s effective regulation of Transco and the inter-
state transportation of natural gas from the North Padre
Island (NPI) system.’’ Id. at 65,230; see also id. at 65,239–
59. Consistent with the Commission’s instructions, the ALJ
left it for the Commission to decide whether or not to
reassert NGA jurisdiction over the NPI gathering facilities.
Id. at 65,260.
The Commission affirmed the ALJ’s factual findings, con-
cluding that the ALJ’s analysis was ‘‘generally well-reasoned
and provide[d] a sound basis for reasserting NGA jurisdiction
over the TTT spundown NPI gathering facilities.’’ See Shell
Offshore Inc. v. Transcontinental Gas Pipe Line Corp., 100
FERC ¶ 61,254, 61,912 (2002) (Order). The Commission ap-
plied the two-part test set forth in Arkla Gathering, though it
did so in a manner that ‘‘diverge[d] slightly from the ALJ.’’
 9

Id. at 61,913. As to the first part — whether Transco and
WFS had acted in concert — the Commission adopted the
ALJ’s finding that they had. Id. To address the second half
of the test — whether the concerted action frustrated the
Commission’s effective regulation of Transco — the Commis-
sion first made a predicate finding: Because Transco’s and
WFS’s actions were ‘‘conducted on a concerted basis, the
actions of WFS can be attributed to Transco, and vice versa,
as if the facilities were still part of the Transco system.’’ Id.
The Commission therefore reframed the second question,
asking ‘‘whether the rates and terms and conditions of service
exacted directly by WFS, and indirectly by Transco, for the
subject gathering services, are unjust and unreasonable or
unduly discriminatoryTTTT’’ Id. The answer was yes, and
the Commission thus concluded that ‘‘[b]y demanding a mo-
nopolistically egregious rate in conjunction with anti-
competitive terms and conditions of service, TTT the single
entity, Transco/WFS, frustrated the Commission’s regulation
over the rates and services provided on Transco.’’ Id. at
61,914. Based on these findings, the Commission reasserted
NGA jurisdiction over the NPI gathering facilities and estab-
lished $0.0169 per dekatherm as a just and reasonable unbun-
dled gathering rate for Shell. Id. at 61,915.
Even though WFS had settled the Superior/Walter com-
plaint and the ALJ neither accepted evidence nor reached
any conclusion as to whether WFS’s actions violated OCSLA,
the Commission nevertheless addressed Superior’s and Wal-
ter’s OCSLA claim. The Commission’s analysis was curt,
concluding that ‘‘[i]n light of our findings that Transco and
WFS, in concert, have abused their monopoly power,’’ Tran-
sco had violated the open access and nondiscrimination re-
quirements of OCLSA. See id. at 61,914–15. The Commis-
sion thus ‘‘also assert[ed] OCSLA jurisdiction over the rates
and services provided by Transco/WFS.’’ Id. at 61,915.
On rehearing, Transco and WFS argued, inter alia, that
the Commission lacked any authority under the NGA to
assert jurisdiction over an affiliated gatherer, misapplied its
Arkla Gathering test, erred in finding a violation of OCSLA,
and erred in setting a cost-based rate as a remedy. See Shell
 10

Offshore Inc. v. Transcontinental Gas Pipe Line Corp., 103
FERC ¶ 61,177, 61,661 (2003) (Order on Rehearing). Calling
the NPI spin-down ‘‘a sham’’ ‘‘designed to circumvent the
Commission’s regulation,’’ the Commission denied rehearing,
affirming its previous order in all respects. Id. at 61,662,
61,663–71.
WGP now seeks review in this court, raising substantially
the same arguments as in its petition for rehearing before the
Commission. We vacate the Commission’s Order and Order
on Rehearing and remand for further proceedings.

III.
We review orders of the Commission under the standards
of the Administrative Procedure Act, upsetting agency action
only when it is ‘‘arbitrary, capricious, an abuse of discretion,
or otherwise not in accordance with law.’’ 5 U.S.C.
§ 706(2)(A). Under this standard, while we will defer to an
agency’s reasonable application of its own precedents, see,
e.g., Vernal Enters., Inc. v. FCC, 355 F.3d 650, 658 (D.C. Cir.
2004), we will not countenance an agency’s departure from its
precedent without explanation, see, e.g., Ramaprakash v.
FAA, 346 F.3d 1121, 1124 (D.C. Cir. 2003). Under the NGA,
the Commission’s factual findings will be upheld so long as
they are supported by substantial evidence. See 15 U.S.C.
§ 717r(b).
In this case, the Commission posited two statutory bases
for reasserting jurisdiction over the NPI gathering facilities
and setting a cost-based gathering rate — the NGA and
OCSLA. We address each in turn.
A. NGA Jurisdiction
As discussed above, the NGA expressly disclaims jurisdic-
tion over gas gathering. See 15 U.S.C. § 717(b). Where,
however, the gathering entity is a corporate affiliate of a
jurisdictional pipeline, the Commission, in its Arkla Gather-
ing order, reserved the right to reassert jurisdiction over the
gathering affiliate ‘‘in particular circumstances’’ pursuant to
its ‘‘in connection with’’ jurisdiction under Sections 4 and 5 of
 11

the Act, id. §§ 717c, 717d. 67 FERC at 61,871. In fleshing
out the ‘‘particular circumstances’’ that might give rise to a
reclamation of jurisdiction, the Arkla Gathering decision es-
tablished a two-part test: (1) concerted action between the
jurisdictional pipeline and its gathering affiliate, (2) undertak-
en in a manner that frustrates the Commission’s ability to
regulate the jurisdictional pipeline. Id.
But the Arkla Gathering decision did not end there. The
Commission went on to elaborate that its ability to reassert
jurisdiction was ‘‘limited to’’ abuses ‘‘directly related to the
affiliate’s unique relationship with an interstate pipeline,’’
such as ‘‘tying gathering service to the pipeline’s jurisdiction-
al transmission service’’ or ‘‘cross-subsidization between the
affiliate’s gathering rates and the pipeline’s transmission
rates.’’ Id. Only those types of activities — where the
affiliate is leveraging its relationship with the pipeline to
enhance its market power — would ‘‘trigger the Commission’s
authority to disregard the corporate form’’ and treat the
pipeline and its affiliate as a single entity. Id.
The allegedly anti-competitive actions undertaken by WFS
against Shell fall outside this category. Shell lays two main
charges: that WFS (1) charged an exorbitant gathering rate;
and (2) attached anti-competitive conditions to its gathering
service, including that Shell commit all its remaining reserves
to be gathered by WFS. WFS could do these things for one
reason only — because it was a recently deregulated monopo-
list in the North Padre gathering market. The fact that
WFS is an affiliate of Transco is utterly irrelevant to its
ability to charge high rates, or to impose onerous conditions
for gathering service. This irrelevance is demonstrated by
the fact that WFS, as a deregulated monopolist, could have
(and likely would have) undertaken the same course of con-
duct had Transco been owned by someone else entirely. The
fact that WFS had an affiliate relationship with Transco
neither enhanced nor detracted from its ability to charge high
rates or impose onerous conditions.
In this respect, WFS’s conduct is quite different from the
tying or cross-subsidization examples in Arkla Gathering. A
 12

tying arrangement — conditioning the sale of a good or
service on the purchase of another different (or tied) good or
service, see Eastman Kodak Co. v. Image Technical Servs.,
504 U.S. 451, 461 (1992) — creates a relationship between the
tied products. If the tie is the result of the affiliation
between two firms, with each firm producing one of the
underlying goods, then it is that relationship that gives rise to
the market-distorting competitive advantage of the tied prod-
uct. So too in a cross-subsidization scenario. Cross-
subsidization occurs when a carrier attributes costs from its
unregulated services to its regulated services, resulting in an
inflated cost-based rate for the regulated service. Customers
of the regulated monopoly thus bear part of the costs of —
i.e., they subsidize — the unregulated service. See Computer
& Communications Indus. Ass’n v. FCC, 693 F.2d 198, 205
n.25 (D.C. Cir. 1982). The competitive advantage for the
subsidized unregulated service depends on its relationship
with the regulated service.
WFS, though — unlike a participant in a tying or cross-
subsidization scheme — is able to engage in its allegedly anti-
competitive conduct even in the absence of its affiliate rela-
tionship with Transco. Thus because WFS’s actions do not
‘‘aris[e] specifically from the interrelationship between [Tran-
sco] and [WFS],’’ they are not among the types of ‘‘affiliate
abuses which would trigger the Commission’s authority to
disregard the corporate form’’ and to reassert jurisdiction.
Arkla Gathering Servs., 67 FERC at 61,871.
Moreover, the Commission misapplied its two-part Arkla
Gathering test. The point of the Arkla Gathering test is to
identify the limited scenarios when the Commission ‘‘may look
through, or disregard, the separate corporate structures and
treat the pipeline and gatherer as a single entity.’’ Id. Only
when the Commission finds both concerted action between a
jurisdictional pipeline and its gathering affiliate and that the
concerted action frustrates the Commission’s effective regula-
tion of the pipeline, may it then pierce the corporate veil and
treat the legally distinct entities as one. Id.
 13

Here, however, the Commission found the requisite frustra-
tion of regulation by piercing WFS’s corporate veil one step
earlier in the Arkla Gathering analysis. After finding con-
certed action between WFS and Transco, but before address-
ing the second part of the Arkla Gathering test, the Commis-
sion jumped to the conclusion, reasoning that ‘‘[b]ecause their
actions have been found to have been conducted on a concert-
ed basis, the actions of WFS can be attributed to Transco,
and vice versa, as if the facilities were still part of the
Transco system.’’ Order, 100 FERC at 61,913. By conflating
WFS and Transco into a single unit — in FERC’s words ‘‘the
Transco/WFS monopoly,’’ id. at 61,914 — the Commission
could thus attribute the gatherer’s alleged malfeasance to the
pipeline, and apply the pipeline’s regulatory requirements to
the gatherer. This absolved the Commission of the burden of
showing that the concerted action frustrated the Commis-
sion’s ability to regulate the pipeline. If WFS is Transco,
and Transco is subject to just and reasonable rate regulation,
then WFS’s (Transco’s) price hikes frustrate FERC’s ability
to maintain just and reasonable rates on Transco (which
includes WFS).
This line of reasoning founders as it adopts as its first
premise (WFS is Transco) the Arkla Gathering test’s ulti-
mate conclusion — that the corporate form may be set aside.
This is a plainly unreasonable application of the Commission’s
Arkla decision. Therefore we must set aside the Commis-
sion’s orders reasserting NGA jurisdiction over the NPI
gathering facilities as arbitrary and capricious. Because our
conclusion is based on deficiencies in the Commission’s or-
ders, we need not today confront WGP’s broader statutory
argument that NGA does not ever permit the Commission to
assert jurisdiction over gas gatherers, including those affiliat-
ed with jurisdictional pipelines. We express no opinion on
that question, leaving it for another day.
B. OCSLA Jurisdiction
The Commission also concluded that it had jurisdiction
under OCSLA to regulate the NPI gathering facilities and
that WFS’s violations of that statute’s open access and non-
 14

discrimination requirements, see 43 U.S.C. § 1334(f)(1)(A),
provided an alternative justification for the remedies set out
in the Order. See Order, 100 FERC at 61,914–15; see also
Order on Rehearing, 103 FERC at 61,668–69. Ordinarily, we
do not entertain direct appeals from the orders of the Com-
mission undertaken pursuant to OCSLA authority; OCSLA
gives the district courts first crack at judicial review. 43
U.S.C. § 1349(b)(1). Where, however, ‘‘an agency order aris-
ing from a common factual background and addressing a
common question of law relies on two statutory bases that
give rise to separate paths for judicial review,’’ we have held
that, notwithstanding OCSLA’s grant of jurisdiction to the
district courts, ‘‘the entire order should be reviewed in a
comprehensive and coherent fashion, and that review should
take place in the court of appeals.’’ Shell Oil Co. v. FERC, 47
F.3d 1186, 1195 (D.C. Cir. 1995); see also id. at 1195 n.19. So
here.
WFS, relying on our recent decision in The Williams
Companies v. FERC, 345 F.3d 910 (D.C. Cir. 2003), contends
that FERC’s orders exceed its authority under OCSLA. We
agree.
In The Williams Companies, we held that FERC regula-
tions requiring OCS operators to file certain information
concerning their pricing and service structures exceeded the
authority granted to the Commission under Section 5(f) of
OCSLA, 43 U.S.C. § 1334(f). 345 F.3d at 914–16. We
examined the language of the statute and observed that the
text does not ‘‘provide FERC with a general power to enforce
OCSLA’s open access provisions,’’ but rather ‘‘merely as-
sign[s] it a few well-defined tasks.’’ Id. at 914, 916. Subsec-
tion 5(f)(1)(A) mandates only that ‘‘every permit, license, TTT
or other grant of authority for the transportation by pipeline
on or across the outer Continental Shelf of oil or gas shall
require’’ the firms in question to provide ‘‘open and nondis-
criminatory access.’’ 43 U.S.C. § 1334(f)(1), (f)(1)(A) (em-
phases added). The Commission, in its capacity as a licensor
under the NGA, thus is required to impose the OCSLA-
mandated conditions in its licenses for OCS operations and
has authority to enforce those conditions. See The Williams
 15

Cos., 345 F.3d at 914. Finding no statutory basis, however,
for ‘‘general powers to create and enforce open access rules
on the OCS,’’ we affirmed the district court’s vacatur of the
rules. Id. at 916.
The Williams Companies would seem to doom both the
Commission’s assertion of broad authority to enforce open
access and nondiscrimination principles on the OCS and its
OCSLA-based reclamation of jurisdiction over the rates
charged by WFS. See Order, 100 FERC at 61,914–15; Order
on Rehearing, 103 FERC at 61,668–69. The Commission,
though, raises two arguments in an effort to distinguish that
decision. Both are unconvincing.
First, FERC argues that our decision in The Williams
Companies was limited to rulemakings and does not extend
to ‘‘adjudicatory matters between parties.’’ FERC Br. 55.
While it is true that The Williams Companies resolved a
challenge to FERC regulations, its rationale was not limited
to that context. Indeed, we concluded that the text of Section
5(f)(1) of OCSLA unambiguously constrained FERC’s au-
thority to its role as ‘‘licensor’’ and did not grant the Commis-
sion ‘‘a general power to enforce OCSLA’s open access provi-
sions.’’ 345 F.3d at 914. Nothing in our opinion supports the
Commission’s proposed distinction between rulemakings and
adjudications. Whether the Commission acts in a rulemaking
or adjudicatory capacity, its authority under OCSLA is limit-
ed by the plain language of the statute to that of a licensor.
The Commission alternatively argues that it was enforcing
the open access and nondiscrimination conditions in an
OCSLA license — Transco’s tariff. WFS, the Commission
contends, became subject to Transco’s conditions when it
acted in concert with Transco to frustrate the Commission’s
regulation of the pipeline. See FERC Br. 56–57. Even if
Transco’s NGA tariff sufficed as a ‘‘permit, license, TTT or
other grant of authority’’ under Section 5(f)(1) of OCSLA, and
even if we had not already rejected the Commission’s applica-
tion of its Arkla Gathering test to extend NGA jurisdiction to
WFS, we could not sustain the Commission’s assertion of
OCSLA jurisdiction on this basis, for it is nowhere present in
 16

either the Order or the Order on Rehearing. It is axiomatic
that we may uphold agency orders based only on reasoning
that is fairly stated by the agency in the order under review,
see SEC v. Chenery Corp., 318 U.S. 80, 88 (1943); ‘‘post hoc
rationalizations by agency counsel will not suffice,’’ Western
Union Corp. v. FCC, 856 F.2d 315, 318 (D.C. Cir. 1988).

***
The petition for review is granted. The Order and the
Order on Rehearing are vacated and the case is remanded to
the Commission for proceedings not inconsistent with this
opinion.