Northern Natural Gas Co. v. Federal Energy Regulatory Commission
700 F.3d 11
D.C. Cir.2012Background
- Northern Natural Gas Co. challenged FERC's interpretation of § 4(f) of the Natural Gas Act, as applied in 2010 order and 2011 rehearing denial.
- § 4(a) requires just and reasonable rates, historically cost-based with market-based rates only where a firm shows lack of market power.
- § 4(f) authorizes market-based rates for new storage capacity related to a facility placed in service after August 8, 2005 if public interest and customer protections are satisfied.
- Northern secured a 2006 declaratory order authorizing market-based rates for an Iowa storage expansion, with limits that market-based rates not apply to sales outside winning bids and precedent agreements.
- In 2010, FERC rejected Northern's tariff amendments to extend market-based rates to resale of capacity; it approved market-based rates for certain turn-back/resale scenarios under the 20-year term.
- The court applies Chevron review to determine if FERC's § 4(f) interpretation is reasonable and consistent with the statute.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FERC's § 4(f) interpretation is reasonable under Chevron. | Northern contends interpretation advances incentive goal unjustly. | FERC's reading aligns with statute's incentive and public-interest requirements. | Yes; interpretation is reasonable under Chevron. |
| Whether § 4(f) applies to resale of capacity beyond original term in the Iowa project. | Northern asserts resale right fits § 4(f) as incentive to construct and preserve capacity. | FERC's order tied market-based rates to new capacity and not to preexisting capacity rescissions outside exceptions. | Court upholds FERC's limitation; resale under specified conditions may be allowed only as framed. |
| Whether the Iowa project should be exempt from the current interpretation on reliance grounds. | Northern relied on 2007 Order language suggesting possible future market-based rates. | Reliance must be reasonable and not deter investment; 2007 Order language was dictum and did not guarantee post-expiration rates. | Denied; reliance does not warrant prospective-only application. |
Key Cases Cited
- Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837 (Supreme Court, 1984) (interpreting agency statutory authority under Chevron deference)
- Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208 (Supreme Court, 2009) (statutory interpretation within Chevron framework; scope of deference)
- Pub. Serv. Co. of Colorado v. FERC, 91 F.3d 1478 (D.C. Cir. 1996) (reasonableness of reliance and prospective effect considerations)