AL Muni Distr Grp, et al v. FERC, No. 01-1299 (D.C. Cir. 2002)

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 1, 2002 Decided December 17, 2002

No. 01-1299

Alabama Municipal Distributors Group, et al.,

Petitioners

v.

Federal Energy Regulatory Commission,

Respondent

Southern Natural Gas Company, et al.,

Intervenors

On Petition for Review of Orders of the

Federal Energy Regulatory Commission

Joshua L. Menter argued the cause for petitioners and

supporting intervenors. With him on the briefs were Wil-

liam T. Miller and James R. Choukas-Bradley. L. Clifford

Adams Jr. entered an appearance.

 Beth G. Pacella, Attorney, Federal Energy Regulatory

Commission, argued the cause for respondent. With her on

the brief were Cynthia A. Marlette, General Counsel, and

Dennis Lane, Solicitor. Lona T. Perry and Monique L.

Watson, Attorneys, entered appearances.

Patrick B. Pope, R. David Hendrickson, Howard L. Nel-

son, Roy R. Robertson, Jr., Lyle D. Larson and Bridget E.

Shahan were on the brief for intervenors Southern Natural

Gas Company, et al., in support of respondent. Daniel F.

Collins and Donna J. Bailey entered appearances.

Before: Randolph and Rogers, Circuit Judges, and

Williams, Senior Circuit Judge.

Opinion for the Court filed By Senior Circuit Judge

Williams.

Williams, Senior Circuit Judge: Petitioners either are

purchasers or represent purchasers of gas transported on

Southern Natural Gas Company's pipeline system. They

protest the Federal Energy Regulatory Commission's grant

to Southern of a certificate of public convenience and necessi-

ty for construction and operation of pipeline facilities intended

to provide fuel to Southern Company Services ("SCS") for

some new gas-fired power facilities planned by SCS for

Alabama. See s 7(c)(1)(A) of the Natural Gas Act, 15 U.S.C.

s 717f(c)(1)(A) (requiring certification for new service).

Their specific objection is to FERC's having certificated the

transaction at discount rates, lower than those paid by peti-

tioners. We dismiss the petitions for want of jurisdiction.

* * *

In deciding exactly where to locate new gas-fired electric

generation facilities, SCS sought to have the gas delivered as

economically as possible. At least two potential carriers were

available, Southern and Transcontinental Gas Pipe Line Cor-

poration. Competition between the two carriers evidently

ensued--or so FERC concluded, over objections by petition-

ers that the appearance of competition was illusory. Hence

in seeking certification Southern claimed that it could not

have won the SCS business without offering discounted rates.

The Commission was persuaded, and approved Southern's

application for a certificate embodying the proposed initial

rates. Southern Natural Gas Co., 94 FERC p 61,297, order

on reh'g, 95 FERC p 61,220 (2001).

At the outset FERC and a group of intervenors (SCS,

Southern and another pipeline) raise jurisdictional issues.

FERC questions petitioners' standing, specifically whether

they have suffered or are in imminent peril of suffering injury

in fact--"invasion of a legally protected interest which is (a)

concrete and particularized ... and (b) 'actual and imminent,

not conjectural or hypothetical.' " Lujan v. Defenders of

Wildlife, 504 U.S. 555, 560 (1992) (citations omitted). And the

intervenors argue that petitioners' claims are unripe, a claim

that the court could in fact raise on its own. Reno v. Catholic

Soc. Servs., Inc., 509 U.S. 43, 57 n.18 (1993). The ripeness

inquiry is familiar: we must evaluate the "fitness of the issues

for judicial decision and the hardship to the parties of with-

holding court consideration." Abbott Laboratories v. Gard-

ner, 387 U.S. 136, 149 (1967). The two issues overlap signifi-

cantly, as we shall see. The contingencies that stand between

the orders here and any injury to petitioners tend both to

show the injury's lack of imminence and to render their claim

unripe.

As one basis for standing, petitioners claim that FERC's

allegedly improper certification will raise demand for gas in

the region, and thus the prices they will pay for gas. But

they are unable to demonstrate any connection between the

allegedly improper FERC action and higher prices. It is

likely true that construction and operation of the SCS facility

will increase the regional demand for gas. But petitioners

nowhere suggest that SCS was contemplating use of any

other fuel for its new facilities; indeed, the assumption that

SCS had already settled on gas was the basis for petitioners'

proclaiming that the case raised fundamental issues of gas-on-

gas competition. See Petitioners' Initial Br. at 3-4. Nor do

petitioners suggest that without a discount SCS might have

completely abandoned any plan for new generation facilities.

So the only way Southern's transportation discount could

raise demand would be if it were to cause SCS's delivered gas

costs to be lower than they would otherwise have been, and

thus its electricity prices to be ever so slightly lower than

they would have been, thereby driving up electricity con-

sumption, and with it gas consumption, compared to what

they would have been without the discount. But petitioners

have not even mentioned this possibility, much less offered

supporting empirical analysis. So we need not decide wheth-

er the possible effect is sufficiently non-speculative to support

standing. See Florida Audubon Soc'y v. Bentsen, 94 F.3d 658, 667-68 (D.C. Cir. 1996) (en banc).

At oral argument petitioners hinted at a related theory of

standing based on direct competitive injury--specifically, that

the lower electricity costs that might result from this discount

could prompt consumers to choose electricity over gas for

their energy needs. But petitioners never made such an

argument in their briefs, and have given us no evidence of

such competitive injury. Their mere invocation of the con-

cept in response to a question from the bench is not an

adequate basis for standing.

Petitioners also assert that the Commission's action here

will adversely affect them as users of Southern's transporta-

tion services. Here an initial hurdle to their claim of injury is

their acknowledgement that they will ultimately benefit from

Southern's service to SCS. Because a carrier's unit rate is

normally determined by dividing its total throughput into its

"revenue requirements" (i.e., total cost), see Interstate Natu-

ral Gas Ass'n of America v. FERC, 285 F.3d 18, 56 (D.C. Cir.

2002) ("INGAA"), an increase in throughput will decrease the

unit rate, unless there is a more-than-offsetting rise in aver-

age costs. As there is no evidence of such a rise in average

costs, it appears undisputed that once Southern adopts sys-

tem rates reflecting the new service, the effect will be to

reduce petitioners' rates.

Thus petitioners' claim is not that they will be worse off

under the Commission orders than if there were no SCS-

Southern transaction, but that they will be worse off than

under a Commission decision by which Southern carried the

SCS gas but at a lower discount or none at all. This

argument draws on the Commission's practice of making

"discount adjustments." In dividing throughput into cost to

yield a unit rate, the Commission makes a downward adjust-

ment to the volume of throughput expected under a discount,

to reflect the reality that its contribution to revenue will be

lower than that of a similar volume carried under undiscount-

ed rates. INGAA, 285 F.3d at 56. But the Commission

grants these adjustments only if it finds the discount to have

been required by competitive conditions. See Williston Ba-

sin Interstate Pipeline Co., 67 FERC p 61,137 at 61,378-80

(1994), order on reh'g, 71 FERC p 61,019 (1995). Some critics

of the Commission contend that where the only competition is

from another gas pipeline--as is evidently true here--this

constraint on discounts and discount adjustments is not

enough. For gas-on-gas competition, they say, discounts and

discount adjustments do not increase overall gas transporta-

tion but merely shift it among pipelines, giving competitive

customers a lower rate but forcing the non-competitive cus-

tomers to shoulder a higher proportion of fixed costs. See

INGAA, 285 F.3d at 57. The Commission has promised to

review this issue more fully. Id.

The orders that petitioners challenge here do not resolve or

even tackle the issue of what discount adjustment, if any, the

Commission should allow. The effect that the SCS transac-

tion will have on petitioners' rates will be decided in South-

ern's next rate case under s 4 of the Natural Gas Act, 15

U.S.C. s 717c (or conceivably in a Commission-initiated rate

proceeding under s 5, 15 U.S.C. s 717d). What that precise

effect will be, no one can now say. The injury has not yet

materialized nor has the factual record related to that injury

been established. The case closely parallels Mississippi Val-

ley Gas Co. v. FERC, 68 F.3d 503 (D.C. Cir. 1995), where "the

future impact of the FERC orders [embodying its discount

adjustment policy was] uncertain ..., and [would] likely be

more clear once [the] actual rates ... have been finalized" in

the then pending s 4 rate cases, and we accordingly found

attacks on the policy not fit for judicial review. Id. at 509.

As there was no showing that delay of adjudication would

inflict hardship, we found the claim unripe. Id. at 509-10.

Because the petitioners' theory of an immediate impact on the

price of gas has failed, and no rate change (of whatever

degree) will take effect independently of Southern's next rate

case, here too delay will cause them no harm. See also New

York State Elec. & Gas Corp. v. FERC, 177 F.3d 1037, 1040-

41 (D.C. Cir. 1999) (finding a rate-related claim unripe before

completion of the actual rate proceeding under s 4).

Petitioners argue, however, that in a future s 4 proceeding

their claims will be compromised by the Commission's deter-

minations here. They say that the test for allowing a dis-

count adjustment in a rate proceeding is essentially the same

as for allowing a discount in a s 7 certification, and that the

current ruling will be binding on them when that issue is

resolved in the s 4 rate case. The Commission is somewhat

obscure on the relationship between the two proceedings,

stressing only that the burden will be on the pipeline to

justify any discount adjustment. Commission Br. at 31-32.

Although petitioners present the argument in the context of

standing, it would--if correct--tend to supply ripeness as

well: if failure to obtain judicial review now would lead to

dispositive issue preclusion, petitioners' hardship would be

severe indeed.

In so far as petitioners rely on precedential effect within

the Commission, they assert a type of "injury" that is clearly

insufficient to satisfy our Article III jurisdictional require-

ments. Sea-Land Serv., Inc. v. Dep't of Transp., 137 F.3d 640, 648 (D.C. Cir. 1998). Obviously the Commission's deci-

sion here will not be a binding precedent for any reviewing

court. But petitioners suggest that the adverse administra-

tive determination here might bind them, via collateral estop-

pel, in a later judicial review of the s 4 rate setting. They

argue that this possible effect might confer Article III stand-

ing, citing our dictum in International Brotherhood of Elec-

trical Workers v. ICC ("IBEW"), 862 F.2d 330, 334 (D.C. Cir.

1988).

In Sea-Land we discussed but did not resolve whether the

possibility of a collateral estoppel effect could afford standing.

As we noted, neither IBEW nor any decision of the Supreme

Court had actually found standing on the basis of collateral

estoppel. Sea-Land, 137 F.3d at 648. We thought the issue

complicated and possibly circular, in that if there were ap-

pealability, and if the other prerequisites of collateral estop-

pel were present, then collateral estoppel would follow;

whereas absent appealability there would be no basis for

collateral estoppel under standard doctrine. Id. at 648-49.

But in fact it seems inescapable that neither standing nor

ripeness could properly grow out of a harm predicated on a

potential collateral estoppel effect. The argument for stand-

ing would necessarily have a bootstrap quality: it would infer

standing in an initial case from the possibility of collateral

estoppel in a later one--a possibility that of course could only

materialize if standing were found in the first case. To

create standing out of the preclusive effect that would flow

from granting standing is to create it ex nihilo. In contrast,

our denial of standing here necessarily implies that petition-

ers may not be estopped from challenging these findings in a

later court case. Sea-Land, 137 F.3d at 648. Whatever

weight the present orders may have in the Commission, in

court petitioners will be able to point to any errors in the

present agency action that prove to affect their interests

adversely in the rate case. For the same reasons, collateral

estoppel possibilities could not ripen an otherwise unripe

claim.

As we lack jurisdiction to hear petitioners' claims, we

dismiss their petition. That dismissal moots FERC's conten-

tion that the interventions on petitioners' behalf must be

dismissed because of those intervenors' failure to seek re-

hearing as required by s 19(b) of the Natural Gas Act, 15

U.S.C. s 717r(b).

So ordered.