*1 247 preserved samples, primarily samples men” when split breath requirements legislation to allow urine employed testing employ- included to determine an DOT would have samples level, to be retested. or that suspi- ee’s alcohol “reasonable authority determine that blood sam- testing cion” be based on the observations of similarly handled. This ples should be supervisors. petition two at least requirement is not relevant in the specific review is therefore denied. alcohol, testing for but DOT case breath So ordered. legislation provide is directed this area to necessary safeguards ensure validity of test results. Cong.Rec. (Oct. 1991) (state- 16, 137 added). Hollings) (emphasis
ment of Sen. history,
light legislative we are unable of this Secretary's construction
to conclude that the sample” limiting “specimen the term to —
bodily fluids like blood urine —“fails primary purpose of a recognize the subdivid- INDIANA MUNICIPAL POWER specimen.” ed AGENCY, Petitioner, Finally, that even if the IBT claims Secre tary’s interpretation “split specimen” v. reasonable,
requirement “a more reason FEDERAL ENERGY REGULATORY provide an interpretation [would] ... able COMMISSION, Respondent, right, positive of a employee the the event test, to have breath ana confirmation his/her Company, (em laboratory” lyzed at a second certified Intervenor. added). phasis argument misappre This scope of our review. We have hends the No. 93-1855. task for the Court “[t]he often observed interpret Appeals not to the statute as [is] Appeals, States Court of United best but rather the narrower [we] th[ink] of Columbia Circuit. District [agency’s] construc inquiry into whether the 7, ‘sufficiently Argued 1995. accept reasonable’ to be Feb. [is] tion court_” See, reviewing e.g., Na ed 9, Decided June Treasury Employees v. United tional Union Board, Systems Merit Protection 743 States (D.C.Cir.1984) (citing v.
F.2d FEC Campaign Commit
Democratic Senatorial
tee, 27, 39, 38, 46, 102 S.Ct. U.S. (1981)).4 L.Ed.2d 23 Because we have deter Secretary’s interpretation is
mined that the
reasonable, inquiry is at an end. our
III. Conclusion
Petitioner has failed to demonstrate
“split speci-
Testing
requires
Act
respon
reply
reply
[a
brief ...
is not
unfair to
brief introduces for the first
4. Petitioner's
improvident
it is a violation of “due
also entails the risk of an
dent]
time the claim that
preserve
legal
process”
opinion
breath for
not to
driver's
on the
issues ten
or ill-advised
independent testing.
Reply
Petitioner's
Brief at
context,
v.
Dow Pharmaceuti
dered.” McBride Merrell
cals, Inc.,
that,
(D.C.Cir.1986).
4-9.
IBT
in the criminal
indicates
800 F.2d
People
Therefore,
found.
v.
process
at least one state court has so
due
[IBT’s
"consideration of
Hampton,
pro
Misc.2d
Before: SILBERMAN and TATEL, Judges. Circuit for the court filed Circuit Judge TATEL.
Dissenting opinion Judge filed Circuit WALD.
TATEL, Judge: Circuit Municipal Agency, an The Indiana association of wholesale consumers electric power, petitions this court for review of Energy Regulatory order of the Federal ceiling price per ton of coal that on the ruling that intervenor Michigan include in its whole could violate the Company did not Michigan Power 1-3, electricity at Tanners Creek sale rate Act, regulations, or a Federal Power Michigan an incentive to giving Indiana thus agreement FERC-approved settlement suppliers at the purchase coal from other arising from its fuel including costs certain continuing to use and market rate instead electricity in its wholesale expensive charge ratepayers for the decision to rates. Because McDowell settlement Price River coal. The of Indiana Mich- the reasonableness evaluate apply any allowed Indiana also under its established igan’s fuel contracts price of coal between the actual difference market rate standards prudence and 1-3 and the used at Tanners Creek discretion, and because sub- well within its *4 amortizing portion of its ceiling towards a findings supports its stantial evidence mines, in River investment the Price question priced in were the coal million, approximately one-third of up to $75 average price compa- weighted for below the expense. Michi that amortization Indiana charged Indiana Michi- rable contracts and remaining gan to recover the would have coal, deny petition solely we for gan source, likely most a two-thirds from another review. buyer or American Electric’s shareholders. Ass’n, Mich. Mun. Distribs. See Indiana & I. ¶ 61,189, 62,228-29 [hereinaf 62 F.E.R.C. Michigan Company, a The Indiana Opinion], Both FERC and the ter FERC subsidiary wholly-owned of the American ap Exchange Commission Securities and electricity Company, provides Electric Power Because proved the McDowell settlement. Michigan. In the portions of Indiana and to Price River coal exceeded the the cost 1970’s, Elec- early at the behest of American settlement, ceiling in and because tric, Michigan acquired Indiana substantial Michigan apparently Indiana had no other Utah, known as low-sulfur coal reserves coal, production it ceased customers for this anticipating properties, the Price River shortly agreeing to at the Utah mines after provide this coal would the American Elec- Although cut its the settlement. it wanted to tric with a reliable of the subsidiaries mines, by selling it losses its interest necessary satisfy “clean” fuel to new federal buyer willing pay could not find a quality Actual de- and state air standards. asking price approximately breakeven coal, however, Price River fell mand for the million, the amortiza the two-thirds of $150 projections, far American Electric’s re- below expense tion it could not recover whole sulting significant for Indiana Mich- losses ratepayers. sale See Indiana & Mich. Mun. years. igan several over Ass’n, 65,- Distribs. ]. ALJ Decision [hereinafter Michigan used coal from Price Indiana generating plants known at one of its River Michigan finally In Indiana found a facility. as Tanners Creek 1-3 Several AMAX, Inc., corpora- prospect in serious including ratepayers, members of wholesale holdings in midwest- tion with mine several here, objected petitioner to Indiana AMAX, For the Price River ern states. the full of this Michigan’s inclusion of presented opportunity to enter the mines rate, electricity arguing coal in its wholesale agreed to western market. AMAX lease on the market at a that coal was available twenty years period an initial mines for significantly compa and that the million, lower approximately $160 unreasonably ny passing through that, together with n. an amount ratepayers high River coal to its permitted recoup cost of Price million was $75 River. ratepayers in order to reduce its losses on Price under from its wholesale settlement, following investigation In a formal McDowell would allow Indiana Michigan Electric and Indiana the mines from its books American remove charge against earnings. Michigan signed agreement taking settlement without staff, time, Michigan signed with trial the “McDo At the same Indiana sup- AMAX to providing well The settlement established three settlement.” grounds, midwestern mines to three on all three ply coal from its the ALJ found that Michigan generating agreed purchase facilities—Tan- would not have Indiana contracts, 1-3, the mines without the coal ners Creeks Tanners Creek effect of the transaction was to shift up years. Id. at periods Breed —for ten portion of the Price current, River amortization dispute on these centers The expense Michigan’s from Indiana sharehold- contracts. ratepayers ers wholesale at the Tan- closing of the The simultaneous ners Creek and Breed facilities. River supply contracts and Price lease view, ALJ’s this transfer violated the terms suspicion petitioner aroused the of the imposing McDowell settlement Agency, an association of Municipal Power more than million of the River Price $75 Michigan municipalities served ratepayers. losses on Violating wholesale participated members had the earli- whose settlement, turn, charging amounted to n proceedings. McDowell settlement er ratepayers an unreasonable and exces- complaint Agency filed a with the price in violation of sive section 205 of the challenging legality 65,087-88. Federal Power Act. Id. at Final- covering AMAX coal contracts Tanners two ly, because the sweetener in the contract According 4 and Breed. to the com- Creek price covered an expense amortization associ- long- entered the plaint, Indiana *5 ated with the Price River mines rather than in to AMAX term coal contracts order induce coal, the cost of the the ALJ ruled that purchase price, at its the mines breakeven including full cost the of the contracts in its buyer price no other had will- a been Fuel Stock account violated FERC’s fuel cost ing pay. interdependence of Because the 65,089. accounting regulation. Id. at transactions, Agency the two the Power granted Michigan’s pe- The FERC Indiana Indiana-Michigan had no incen- claimed tition for review and reversed the ALJ’s negotiate possible price for the lowest tive beginning analysis decision. Instead contrary, To the for the coal. the Power settlement, with the McDowell the Commis- surmised, Agency higher the the ruled apply sion that the ALJ had failed to pay Indiana wanted AMAX to appropriate legal the standard under section mines, higher price' it had to the the the Act, 205 of the Federal Power 16 U.S.C. agree pay a AMAX for the coal. As 62,- § 824d See FERC result, Agency the Power claimed that the justness Analyzing 237-39. the and reason- “pre- a contract for the coal contained ableness the contracts under the frame- mium” or a “sweetener” to offset the inflated decisions, prior work established in its the paid for the troubled mines. Commission first examined the record to de- proceedings a the initial before FERC Agency if termine the Power had raised a judge, Agency law administrative the Michigan’s “serious doubt” about Indiana Michigan’s passing that Indiana contended entering in the contracts. Id. at allegedly the costs of coal under these 62,239. Although the Commission found through “sweetened” contracts to its whole- doubt, nothing raising requisite the level ratepayers sale on three unlawful id., recognized it that the circumstances sur- grounds: unjust it resulted and unrea- rounding negotiations these could foster rate in violation of 205 of the sonable section something self-dealing existing akin to the Act; Federal Power it violated FERC’s cost companies. transactions between affiliated accounting regulations that limit the costs apply It on to strin- therefore went the more utility’s to a account to allocable Fuel Stock usually gent employs market rate it standard invoice of fuel certain attendant a to determine whether fuel costs; cap and it utility supplier violated the established between a and an affiliated 62,241. by effectively pass- 62,238, McDowell settlement just and reasonable. Id. ing through study more than million of the upon prepared Based a market $75 staff, amortization of the Price River investment to trial the Commission con- Commission’s ratepayers. the wholesale ALJ Decision cluded that the AMAX contract were See 65,089-90. Ruling Agency weighted average price compa- for the Power below upon substantial evidence sion based therefore rea- and were coal contracts rabie FERC, 962 Norwood v. Town Id. at record.” by section 205. required as sonable (D.C.Cir.1992). 20, 22 62,242, 62,244. standards, the con- we con Applying had found these the ALJ While the loss within its premium to offset was well a clude that Commission tracts included River on rejecting on the Price the ALJ’s reliance to suffer discretion expected otherwise, finding that and his concluded McDowell settlement mines, risky as mines were a the contracts contained noting that while determining compliance with AMAX, they were consider- touchstone investment for long used Commission has company with the section 205. The to a ably more valuable to enforce prudence and market rate tests AMAX its networks marketing and distribution just provision rate and reasonable like they were to possessed than 205, see, e.g., Ohio Consequently, the Com- section Michigan. Indiana ¶ 61,098 (1987), find and we can no that AMAX to assume mission saw no reason rely fully justified in why it was not mines at reason purchase “induced” had to be Indeed, had ing them in this case as well. price by in- Michigan’s breakeven challenge to section 205 petitioner limited its contracts. Id. in the coal cluding premium Act, look no further of the Power we would 62,240. contracts did not Because analysis. market rate than the Commission’s Commission conclud- premium, contain obligation under the Since the Commission’s Michigan had not violated ed pay that consumers Power Act is to ensure accounting regulations. Id. at rate, settlement, if market than a reasonable no more Regarding McDowell study that the coal con Agency price demonstrates ruled reasonably priced our task is at an applied tracts are either that had not demonstrated *6 contracts, end, regardless whether the contract rate of 4 and Breed to the Tanners Creek premium of some kind. challenged in its com- includes a only or, apply those facili- plaint, if it did even dissenting colleague takes us Our violated, ties, had been the settlement adopting interpretation of sec to task for paying for ratepayers were since view, that, in her the Commission tion 205 coal, premium, and the not a sweetener or proposed. See Dissent at 256- itself has not they paying was below the aver- price were agree that neither the Com 257. While we 62,244-45. market. Id. at age price in the argument brief nor its oral was mission’s Agency petitions this Court The Power was, issue, opinion entirely clear on this its review. arguments opinions, not oral or and it is briefs, that we review. See Motor Vehicle II. Ins. v. State Farm Mut. Auto. Ass’n Mfrs. 2870, 29, 50, 2856, 77 103 S.Ct. of the Fed 463 U.S. begin section 205
We with (1983); 443 North Carolina Utils. Act, requires that rates for L.Ed.2d eral Power (D.C.Cir. FERC, 663 v. energy ... sub Comm’n transmission of electric “the 1994). that the Trial ... The Commission found ject jurisdiction the Commission 824d(a) “un study § Staffs market demonstrated just 16 U.S.C. and reasonable.” test, comparable market design are der the ‘issues of rate “Because paid prices Michigan] and, they [Indiana are not fairly insofar as technical excessive, costs technical, not and thus the judgments that lie at coal were policy involve mission,’ ratepayers through passed on to our re for this regulatory the core of unjust or un Company’s rates were design rate particular of whether a view 62,242. Opinion at reasonable.” FERC ‘just highly deferential.” and reasonable’ is “ FERC, ‘[t]he on to note that F.3d Commission went v. Northern States Co. test,’” objective (D.C.Cir.1994) FERC market test is an (quoting Town (D.C.Cir. Opinion (quoting Public Service 962 F.2d Norwood v. Mexico, 61,457- 1992)). only with whether New are concerned We (1983)), paid accordingly “if the deci- 58 made “a reasoned the Commission has utility does not exceed the market the cash expected flow AMAX to receive price, particular it does not matter what the from both the Price River mines and the coal components paid by utility of the cost Opinion contracts. FERC (Public As No. 164 are. Service projections, these management AMAX’s had Mexico) clear, New makes under the market assigned negative present net value to the test, utility’s always fuel costs are mines, which, according Agen- to the Power using a examined standard of reasonableness cy, showed that AMAX expect did not which allows the to recover the market money make as much from the mines as it price.” Id. paying for them. See Memorandum however, Agency, The Power did not limit Management, J.A. Olsen to AMAX challenge Act; its to section 205 of the Power 1985) (September 3, Manage- [hereinafter alleged it also the contracts violated (J.A.) ment Appendix Presentation] in Joint accounting regulations and the McDo- 322, at 355. claims, well settlement. Resolution of these The ALJ found persuasive, this evidence III,
as we shall see
section
turn on
does
the Commission did not.
Considering
whether the coal contract
contain the
alleged
projected
earnings figures
“sweetener.” Because the
Commis-
the context
findings regarding
alleged
sion made its
presentation,
of the whole
premium in
prudence
the context of its
anal-
concluded that
present
the AMAX
fig-
value
ysis,
application
we must review FERC’s
of ures
intentionally
reflected an
conservative
prudence
its
standard as well as that of its
example,
scenario. For
while the Price Riv-
market
test.
properties
er
contained reserves sufficient to
support production
years,
for more than 35
begin,
We thus
as did the Commis
petitioners
exhibit cited
included earn-
sion,
with the
standard.
It re
ings
just
years.
Id. Under the terms
quires
complainant
alleging that some as
lease,
acquired
control of the
pect
utility’s
practice
of a
unjust
rate or
Price
up
years.
River reserves for
to 80
See
present
unreasonable to
evidence sufficient
Management Presentation at
in J.A. at
to raise serious doubt that a reasonable utili
addition,
331. In
management presenta-
ty manager, under the same circumstances
tion
“significant upside
observed the
poten-
faith,
acting
good
would not have
tial”
properties, stating
“[p]roject-
made
same decision and incurred the
*7
operating
ed
costs and realizations are felt to
Co.,
England
same costs. New
31
realistic,
¶
surpassed.”
and could be
61,047,
61,084 (1985),
Mem-
F.E.R.C.
sub
aff'd
FERC,
(1st
orandum from J.A. Olsen to R.B. Mesehke
nom. Violet v.
documents additional surrounding figures contracts as evidence these indicated that supply the text premium. included a question, coal contracts for the the “alternative frequent reference to documents made These price” represented AMAX’s estimation the revenues,” “margin,” and “add ons” “net the price for the coal in it would have received supply contracts. The the coal included question immediate sale for short-term or on revenue,” Pow- “margin” and “net the terms spot-market over the life of contracts. claimed, Agency described er presenta- revenue increase” in the “net compensate in the contracts to included tion, observed, simply purchasing the mines at for long-term con- the difference between the asking price. According to the breakeven spot-market tract and this estimated Agency, documents and finan- other price. The Commission thus concluded that that American cial worksheets indicated “premium” use of the terms AMAX’s charge had how much to Electric determined “margin” in other documents described supply upon based for the than the nothing more difference between pay it had to the mines that a amount for under the contracts and to a the mines lead lower spot-market. Id. price. See Brief Petition- lower are satisfied that the Commis We 27, 29-32. er at application sion’s of its standard in Acknowledging may “there been have arbitrary supported by this case is not and is linkage” transfer of between the the Price “It substantial evidence. ‘examined rel properties and the con- River satisfactory evant ex data and articulated a 62,237, tracts, FERC the Com- planation including its action rational “AMAX’s mission observed that and Indiana found and connection between facts selecting Michigan’s intentions in ” City choice made.’ Mesa v. they agreed to do not establish whether (D.C.Cir.1993) (quoting Motor just prices were and reasonable.” Indiana Ass’n v. Farm Mutual Vehicle State Mfrs. Ass’n, 65 Mun. Distribs. & Mich. Co., 29, 43, Auto. Ins. 103 S.Ct. U.S. 61,087 at n. 21 [hereinafter (1983)). 2856, 2866, 77 L.Ed.2d Instead, Denying Rehearing ]. Order require. all we Once assured the Commis Hope v. Commission relied on FPC Natural engaged sion decisionmak has reasoned 591, 602, 320 U.S. 64 S.Ct. 287- Gas ing, it to reweigh conflicting is not for us (1944), L.Ed. 333 in which the Court our judg evidence or otherwise substitute “[ujnder statutory standard of stated ment for that of the Commission. See id. ‘just and reasonable’ it is the result reached equally We are satisfied with the Commis- employed method not the is control- application sion’s of its market rate standard. Id.; ling.” Denying see Re- FERC Order standard, gives *8 Under that the Commission Focusing hearing at atten- n. its “special scrutiny” supply to fuel contracts here, tion on the results subsidiary a and or between an nothing by the found the documents cited company comparing the affiliated Agency Power which raised serious doubt challenged the contract to other contracts in prices the contract were exorbitant or that market. relevant See Public Service Co. Commission, To the final unreasonable. v. New Mexico upon management presentation relied Cir.1987). (10th comparison 1212-14 This Agency support Power its contention that objective prevents serves as “an test that premium contract included a of- manipulation” by a “providing] rate substi- perfectly proper expla- another —and fered — arms-length negotiations tute that for the “premi- of the nation AMAX’s use terms dealing in provide objectivity and fair non- “margin.” presentation um” and That listed transactions.” Power figures challenged sup- of the affiliate Ohio three each (1987) (internal ¶ 61,098 at price,” the ply contracts: the “base “alterna- omitted). punctuation price,” and the “net revenue increase.” and citation tive why, notwithstanding petitioner’s concerns, But Michigan and AMAX are not affiliates. allegations that coal con- light study of the found the FERC be reliable evi- something negotiated at less tracts here were reasonably dence that these contracts were Commission, length, than arm’s after ex- priced. The Commission’s choice is no amining the contracts under the way arbitrary, precisely and is the kind of standard, went on to evaluate the exercise discretion to which we defer. We using market rate test. finding therefore affirm the Commission’s Michigan that Indiana did not violate section study prepared by The by entering 205 of the Power Act the AMAX prices trial that in both staff revealed passing through coal contracts and the full challenged AMAX contracts were lower than ratepayers. cost of those contracts to its weighted average price comparable surveyed in coal the two Commission, To this
relevant markets.
III.
conclusive evidence that the AMAX con-
was
us, then,
brings
to the two is
all,
prices
After
tract
were reasonable.
that
turn
premi
sues
do
on the existence of a
arguably
could
maintain
petitioner’s
um:
challenges under FERC’s
any price
between the lowest and the
accounting regulation and the McDowell set
highest comparable
prices
in each
former,
respect
tlement. With
market should be deemed reasonable. The
Agency
Power
contends that Indiana Michi
prices
high-
were not
within
gan
regulation governing
violated the FERC
range
low
the lower half. See FERC
utility’s
“Fuel Stock” account—known as
62,241-42.
addition,
Opinion at
In
the Com-
designed
“Account
capture
151”—which is
unlikely
highly
mission found it
that AMAX
designated expenditures
certain
on fuel used
premium
top
charge
could
of its bona
utility’s
power
generating
facilities.
provide
fide costs
still
coal at
pt.
See 18 C.F.R.
Account
weighted average in
below the
the market.
statutory argument,
Like its
the Power
62,244.
Id.
Agency’s Account 151 claim rests on the
Agency
maintains that the
The
proposition
in
that the coal contract
rely
Commission’s decision to
on the FERC
premium
allegedly
cluded a
to offset the
study
arbitrary.
disagree.
was
We
unreasonably high asking price for the Price
explained
the trial staff
premium,
River mines.
Such
study,
upon
reported
based
actual data
Agency argues,
among
is not
the items iden
basis,
monthly
FERC on a
accounted
permissible
tified as a
allocation to this ac
differing
quality,
age
and duration of
count.
contracts,
and the contract size.
Id.
contrast,
study
submitted
62.242.
gives to
One answer the Commission
Agency’s expert
relied on unverifi
argument
response
is the same as its
mining
transportation
able estimates of
Act, namely,
under
205 of the Power
section
Denying Rehearing
costs. See FERC Order
price proven
a contract
to contain a
even
Agency points
The Power
out that
not violate
the Account 151
comparable
most of the
contracts included in
regulation
long
so
as the
was reason
study
renegotiated
the FERC
had been
rath
able under the market rate standard. See
initially
during
er than
formed
the relevant
62,245-46.
But whether
period,
reasonably
time
but the Commission
expense
prudently
reasonably in
*9
renegotiated
concluded that these
can
curred under section 205 and
therefore
provided meaningful comparison
a
since the
utility’s ratepayers and
be recovered from a
negotiating parties
expected
could be
to
expense may
whether that
be included
reach a
near the market
at the
questions.
Account 151 are different
Thus
renegotiation.
time of
See FERC
expenses
to
there are
which “while related
62.243.
through
properly
fuel and
recoverable
incurred,
sum,
ratemaking process
prudently
In
if
the Commission considered the
Agency’s
explained
in Account 151 and there-
criticisms and
are not mentioned
weighted
price of
assigned
average
compa-
to that account.” below
properly
fore not
Co.,
Light
will “sustain an
rable contracts. Because we
Indianapolis
&
¶
(1989);
61,040,
61,201
Minne
resting
indepen-
agency decision
on several
F.E.R.C.
FERC,
F.2d
Light
any
grounds validly
Co. v.
if
grounds
sota Power &
of those
dent
Cir.1988).
(8th
example,
For
result,
1072-73
to
supports the
unless there is reason
utilities
has refused to allow
the[ ]
the combined force of
otherwise
believe
in
types
prudently
of
to allocate several
independent grounds influenced the out-
151, including
to Account
expenses
FERC,
curred
come,” Carnegie
v.
Natural Gas Co.
arising
litigation costs
attorneys
fees
(D.C.Cir.1992),
and be-
costs;
supply
to reduce fuel
from efforts
we have
that
cause
no evidence
latter
pollution from
used to reduce
limestone
occurred,
finding
we affirm the Commission’s
coal;
evaluating
fees incurred
burning
audit
Michigan
Indiana
not
did
violate
invoice;
annual
and an ad
supplier’s
a coal
regulation.
Account 151
a
justment
utility’s acquisition
to a
of
related
finally
turnWe
to the McDowell set
used to
fifty
interest
in rail ears
percent
Commission,
According
tlement.
Villages
See Cities and
transport
fuel.
facility
Michigan generating
ex
922 F.2d
863-64
Bangor v.
agreement
pressly covered
the settlement
(D.C.Cir.1991) (citing
Coops. Kan
Electric
facility,
¶
the Tanners Creek 1-3
the one
sas,
61,176 (1981); Minnesota
14 F.E.R.C.
¶
Agency
challenge
the Power
did not
Co.,
contract
61,192
Light
39 F.E.R.C.
Power &
However,
complaint.
perhaps
Co.,
in its
because
(1987);
Light
Indianapolis Power &
¶
(1989);
entirely
the Commission was not
certain that
City Power
Kansas
(1988)).
cap
million
on
the settlement’s
Light
$75
&
light
precedents,
do not believe
amount of the Price River amortization
of these
we
assign
could
to its Fuel Stock
chargeable
ratepayers
that a
did not
wholesale
full
a contract which
ratepayers
Account the
apply to
at Tanners Creek 4 and
of,
the cost
“premium”
Breed,
a
to cover
contained
it went on
that even if the
to rule
ears,
acquisition of rail
even
example,
its
apply to the
McDowell settlement did
Tan
priced reasonably
if
were
near
that contract
facilities, petitioner
4 and
ners Creek
Breed
coal,
market
without
relevant
rate
not
a violation.
had
demonstrated
violating
regulation.
the Account
62,244-45.
Opinion at
We sustain that rul
pronouncement
in this
Commission’s broad
ing for the same reason that we affirmed the
any
a reason
invoice
within
case
ruling
reg
fuel
Commission’s
on the
account
can be
range
able
of the relevant market
finding
ulations:
the Commission’s
151, however, would
to Account
allocated
did not
include a
offset
just
seem allow
such a result.
supported by
price paid for
mine is
substantial evidence.
on this
Had the
relied
Commission
alone,
no choice
proposition
we would have
reasons,
deny
foregoing
For the
we
a
for more reasoned
to remand
petition for review.
thorough
departure
from
discussion
ordered.
So
precedent. But the Commission
Commission
also
its decision on
conclusion that
rested
its
WALD,
dissenting:
Judge,
Circuit
premium,
contracts did
contain
significant
Mindful
deference owed the
that,
above,
sup
as we note
conclusion
the inferences
be drawn
ported by
substantial evidence. While
evidence,
disputed
I
nonetheless remain
maintains that the Commission failed
dissent
cursory
deeply troubled
record
take into account evidence
treatment of
substantial amount
record
support
read to
the existence of
that could be
supporting
Agency’s
evidence
premium,
are
we
satisfied that
Com
charges
into
entered
considered the entire record and
mission
with AMAX
supported by
evi
finding is
substantial
dence,
inflated
in order to induce AMAX to
particularly
light of the market
*10
priced
the
at their
study showing
purchase
were
Price River mines
book
Thus,
agency
to the
use
I would remand the ease
the review of an
value.
decision as an
adequate explanation
Commission for more
occasion to announce a rule of law not
Chevron,
glaring pieces
to
of what I consider
adopted by the Commission. Under
in
point
the direction
the
evidence that
S.A.,
Inc. v. Natural Resources De
U.
alleged
contracts.
“sweetened”
Council, Inc.,
837,
467 U.S.
104 S.Ct.
fense
2778,
(1984),
259 end, however, expected. F.E.R.C. worse than In properties,” River 65 the Price ¶ 61,087 61,526, concludes that the Price “[projected operating AMAX chose those component of the transaction River mines costs and realizations” for the mines that it present value —that negative has a net “felt be realistic” to arrive at the final than half of the expected income is less cost. presented “Summary values in its of Trans- from J.A. Olsen to AMAX Memorandum analysis, actions.” Id. And this final Management, (September Attachment at 1 AMAX concluded that the River Price mines 1985) Presentation”), (“Management re- purchase negative had a value. FERC’s (“J.A.”) 322, Appendix printed in Joint suggestion actually that AMAX decided presentation The nevertheless recom- 323. consummate the transaction on of the basis to AMAX’s board that it enter the mends unquantified speculative “upside po- supply Price River mines and coal linked might bring marginal- tential” that the mines “Summary basis of its transactions on the ly closer black defies common sense.6 Transactions,” negative in which it offsets the Management Presentation’s recommen- purchase with of the Price River mines value dation that AMAX enter the transaction is present long-term value of the positive analysis presented based on the final supply contracts. Id. coal “Summary,” under which the Price River negative discounts this The Commission component Mines of the transaction has a Price River mines valuation of the value, negative present only by offset management by noting that the AMAX’sown present positive Supply value of the Coal negative years valuation “reflects Agreements. It takes no law and economies mining opera- from the Price River cash flow maven to conclude that a business would tion, though even the evidence shows nega- enter into a transaction assessed at a support than Price River reserve more countervailing tive value absent benefits. In mining. years This fact led AMAX to case, Agency argues that it properties that the Price River con- conclude linked, premiums long-term con- ‘significant upside potential’, much tained so worthwhile, tracts made the transaction mining so that AMAX even considered provided persua- and the Commission has no seam at Price River.” 65 F.E.R.C. second sive n. 18. alternative. reading equation of AMAX’svaluation Second, response FERC’s to statements in In of its is a strained one indeed. the course negotiators the record made certain of the transactions, analysis of the AMAX’s Man- involving of the deal the Price River Mines possibilities agement Presentation notes the supply equally and the coal contracts is dis- produc- mentioned the Commission—that comfiting. Internal documents stat- longer tion could continue and more coal be ing in no uncertain terms that the exploited projected states —and contracts are set at a level to earnings from the mines “could be sur- pur- the cost of the Price offset River mines passed.” expressly But it also finds it “con- pepper chase the record. AMAX re- One ... could be unsuc- [AMAX] ceivable view, instance, ques- possible identifies attempts profitably cessful reactivate presentation and answers for the tions ie., Mine,” up River it could end the Price proposal response to the Board. to an totally Management awith worthless mine. anticipated question 4, reprinted Presentation at J.A. at 326. that, mining property awfully high,” the Thus, “seems recognized any like busi- investment, suggests following answer: ness this one could do better or memo Indeed, present years value of the first 20 FERC identifies as one source of the than heavily possible "upside potential” production the fact that because it would be far more produce years present for'35 rather than 20. discounted. As the value of the mines could first year years present projected than half the Even if the income stream from of income is itself less ($26.7 included, year million of 20 to 35 were it would not raise value of the cost of the mines dollars), pre-tax $55.2 value of the mines above cost. The million in inclusion of the the present their making years approach income from those next 15 could not even value of the later significantly up years production would be less the deficit. million; erably than therefore paid less First, $140 is to be over million the $175 long contracts as an willing to include term present value is near $50 that its years, so from a to the consideration received offset unreasonable when price not million—a purchase. properties that other Utah compared with Second, as recently. have sold Wahl, insofar from J.A. Olsen to W.R. Memorandum *13 concerned, AEP[7] transaction has this is 26, 1985), 1, (September 1 Attachment and the acquisition aspects, the Utah two reprinted 2 at 375.9 J.A. any change in agreements; supply coal December, 1985, states: AMAX’sreview value one reflected therefore for pay permium [sic] AEP would AMAX change in the value offsetting in an cover compliance coal to both midwest Thus, Utah would a lower other. lease. Premi- the cost of the Price River pricing. contract result in lower payments payments and lease would be um from R.B. Meschke W.R. Memorandum equated present on a value basis. 26, (September Wahl, at 1 Attachment to R.B. from J.E. Schroder Memorandum 1985), (empha- 2 J.A. reprinted in (December 4, 1984), reprinted Meschke at added). sis 2in J.A. at 437. try to not even ex- does June, analysis of And AMAX’s transaction understanding by away express plain 1984, explains: management officials that the AMAX’s to include Coal Prices will be structured supply long-term coal mines and the to reimburse AMAX premium sufficient Instead, simply in tandem. contracts move plant, equipment, and South East as the “state- the memorandum dismisses payments. lease reserve negotiator,” can only one ment of Brief at 37. “hardly dispositive.” FERC [be] R.B. from D.E. Coovert Memorandum “dispositive,” this certainly not mem- Though (June 1,1984), Detty reprinted in J.A. designed for the board’s under- orandum at 417. more than the standing the deal deserves only reply to this evi- The Commission’s cursory dismissal when there Commission’s nothing at all unusual dence that “there is any advancing a evidence is an absence of anticipating profits a business about explanation. different pay for another one of its transactions to Indeed, pointed to Agency has Brief at 40. But the transaction.” FERC analyses string of internal not one but a suggest far more than cited memoranda negotia- over the course prepared AMAX anticipation “profits from one AMAX’s Michigan, all characteriz- tions with another”; pay for [will] of its transactions “premiums” as ing long-term being they state that the deal is “structured” Mines, Price River to the cost of the offsets through the use of accomplish this result “premiums” for rather than the repeated and uncontra- premiums. These by supplies suggested the Commission.8 coal “pre- that the coal dicted statements Septem- Feasibility Study” of “Mine AMAX’s designed the cost of the miums” are to offset ber, 1985, says: River Mine Purchase demand more Price given them val- than the casual attention recognizes that on a fair market AEP worth consid- Commission. Mines] River [Price ue basis support eluding parent company Michi- that this assertion does of Indiana 7. AEP is the gan. properties overpriced are conclusion there is no indication whether that "because describe earlier ver- 8. of these documents Some sale, lease, premised figure on a direct or deal, same funda- but describe the sions of the arrangement." FERC Brief at other financial party suggested No has mental transactions. sidesteps entirely point response 36. This premiums shifted over the that the nature of the after the transaction was in the statement —made negotiations. course of the proper- its final form—which is because overpriced, will in- ties are by singling responds to this statement 9. FERC long-term contracts. clude the properties are "worth out the assertion that the million,” considerably $140 and con- less than ners Creek contracts. The Commission’s finding that all of the Finally, FERC’s premi- disposal this uncontradicted evidence that simply long-term “premiums” were record 1-3 premiums concrete the Tanners Creeks flatly contradicted ums decision long-term premiums is far The Commission’s contracts were not evidence. ‘premiums’ categorically “that breezy. “find[s]” too mentioned ‘net revenues’ repeated, substan- “[t]he As we have often much more simply refer to how documents tiality evidence must take into account selling money would earn fairly detracts from whatever in the record long-term con- Michigan] aon to [Indiana Corp. v. weight.” Universal Camera selling coal on the rather than tract basis NLRB, 95 L.Ed. 340 U.S. 71 S.Ct. ¶ 61,087 61,- spot market.” only “pre- concluding Michi- in the deal between Indiana miums” *14 however, “premiums,” of these As to some premiums long- gan and AMAX were wrong. The clearly the Commission coal, utterly has failed term “ in mentioned or ‘net revenues’ ‘premiums’ large portions account to take into were included AMAX documents” “detracting] weight” of [the] record from Breed, Tanners Creek long-term contracts pointing strongly toward this conclusion and 1-3, Although the 4. and Tanners Creek in- contrary the deal did conclusion not, end, challenge Agency does for the premiums involve inducement deed 1-3, it has pricing at Tanners Creek alleged by the Power sale of the mines as that for these pointed to record evidence counter Agency. the force of this Given expressly AMAX calculated evidence, I had believe the Commission premium revenue” —the “net —from and, directly if it could obligation to answer long-term contract. Under baseline not, change and hold for the its own result arrangements for the Tanners Creek mutual ground that the rec- Agency. On the contracts, long-term coal 1-3 in the end present state does not ord in its long-term party on a buys coal from a third necessary the “substantial evidence” provide it to around and sells and then turns decision, I re- to validate long-term contract. Michigan on spectfully dissent. 6-7, re Management Presentation See calculated at 328-29. The printed in J.A. two con
premium is between these definitely not between
tracts and most spot market contract. See
long-term and a id.10 (CORR NORTH, al. L. et In re Oliver analysis of the dispute this does not APPLICATION). FEE 1-3 con- Tanners Creek premiums Division No. 86-6. tracts, “simple answer” provides the Appeals, States Court “irrelevant” United premiums 1-3 are the Tanner’s challenged of Columbia Circuit. contracts are not District because those at 39. Agency. FERC Brief by the Power (Division In- Purpose Appointing for the are 1-3 contracts Though the Tanners Creek Counsels, Ethics Govern- dependent issue,” id., they “directly are assuredly not Amended) 1978, as ment Act of transaction between part of the same 9, 1995. June Michigan and —in combination and Indiana strongly suggest the other with evidence— underlying the about the intent inferences and Tan- “premiums” in the Breed
related Further, Blangiardo and R.B. Meschke T.M. tonnage Garson to for Tanners when the total 8, 1985), 800,000, (March reprinted J.A. at 474. changed 1-3 Creek remain con- fig- we must statement "On our calculation AMAXstated: delivered regardless of the amount of coal stant charge coal in order we have to for this ure what premi- conclusion that previously with FERC's cal- conflicts value that we to obtain the same spot premium. 600,000." long-term v. market P.M. um is Memorandum from culated at