Valero Interstate Transmission Co. v. Federal Energy Regulatory Commission (903 F.2d 364, 1990)

THORNBERRY, Circuit Judge:

Valero Interstate Transmission Company (“Vitco”), a natural gas pipeline company, challenges, on jurisdictional and substantive grounds, two orders of the Federal Energy Regulatory Commission (“FERC”) modifying a prior FERC order. The prior order authorized Transcontinental Gas Pipe Line Corporation (“Transco”), also a natural gas pipeline company, to abandon its obligation to purchase natural gas from Vitco prospectively from May 5, 1987, the date of the order. The orders that Vitco challenges in its petition for review made the abandonment authorization retroactive to December 12, 1983, when the natural gas purchase contract between Transco and Vitco expired. Finding no error in the challenged orders, we affirm.

BACKGROUND

Vitco gathered and sold natural gas from South Texas to Transco under a contract dated February 17, 1959. On November 4, 1983, Transco timely notified Vitco in accordance with the gas purchase contract that it intended to terminate the contract effective December 12, 1983.

In January 1984, Transco filed a petition with FERC pursuant to section 7(b) of the Natural Gas Act (“NGA”), requesting authorization to abandon the jurisdictional service rendered by means of Transco’s purchases of gas from Vitco. Section 7(b) provides:

No natural-gas company shall abandon all or any portion of its facilities subject to the jurisdiction of the Commission, or any service rendered by means of such facilities, without the permission and approval of the Commission first had and obtained after due hearing, and a finding by the Commission that the available supply of natural gas is depleted to the extent that the continuance of service is unwarranted, or that the present or future public convenience or necessity permit such abandonment.

15 U.S.C. § 717f(b). Vitco protested the abandonment application and requested a hearing.

On November 16, 1984, Transco and Vit-co entered into a letter agreement allowing Transco to stop purchasing gas from Vitco, with the exception of about 10,000 MCF per day that Transco agreed to continue purchasing until June 30, 1985. This letter agreement was conditioned upon FERC approval. Transco continued to purchase the quantities of gas required by the letter agreement until June 30, 1985.

Meanwhile Vitco applied to FERC for authorization for it and its producers to abandon sales to Transco in excess of whatever amount FERC might order Transco to continue purchasing, and authorization to sell the gas to other customers in interstate commerce. Vitco’s request was designed to allow it temporarily to make limited-term sales to new customers until a long-term arrangement could be worked out, because Vitco was experiencing problems with its producers as a result of Transco’s diminished purchases. One of Vitco’s producers separately applied for authorization to abandon sales to Vitco. Additionally, Vitco was ordered by a Texas district court to continue purchasing gas from another one of its producers until June 30, 1985.

On August 2, 1985, FERC issued an order approving a settlement agreement between Vitco and its producers of gas dedicated to Transco. Transcontinental Gas Pipe Line Corp., 32 FERC 11 61,208 (1985). The agreement temporarily authorized Vit-co to abandon sales of gas to Transco, to abandon purchases of the Transco-dedicat-ed gas from its producers, and to seek to market that gas to other customers. In the same order FERC dismissed Transco’s application for abandonment authorization for lack of jurisdiction, relying on its earlier order in Mississippi River Transmission Corp., 30 FERC 1161,155 (1985). In Mississippi River Transmission the Commission held that the cessation of purchases upon the expiration of a gas purchase contract does not constitute abandonment of a jurisdictional service, and hence regulatory approval is not required.

Valero petitioned this court for review of that part of the FERC order of August 2, 1985 dismissing Transco’s application. We reversed and remanded to FERC for further proceedings. Valero Interstate Transmission Co. v. FERC, 804 F.2d 1406 (5th Cir.1986). In doing so, we relied on the D.C. Circuit decision reversing Mississippi River Transmission, holding that purchases of gas constitute a jurisdictional service under section 7(b) of the NGA. and therefore FERC approval is required for abandonment of such purchases. See Panhandle Eastern Pipe Line Co. v. FERC, 803 F.2d 726 (D.C.Cir.1986).

Thereafter, Transco filed a motion urging FERC either to approve or to expedite its application for abandonment authorization. For the first time Transco requested that permission to abandon its purchase obligations be granted retroactively to December 12, 1983, the date on which the contract with Vitco terminated. Vitco again opposed abandonment authorization and requested a hearing.

FERC found a hearing to be unnecessary and on May 5, 1987, issued an order authorizing Transco to abandon permanently its purchases of gas from Vitco prospectively from that date and authorizing Vitco to abandon permanently its sales to Transco. Mississippi River Transmission Corp., 39 FERC 1161,113 (1987). FERC recognized that retroactive abandonment might be warranted by the fact that FERC’s initial misinterpretation of its jurisdiction was what caused the delay in the order’s issuance, but then ruled that it was unnecessary to make abandonment retroactive in light of the settlement agreement approved on August 2, 1985, allowing Vitco temporarily to abandon sales to Transco and purchases from its producers.

Even though the Commission granted Transco’s abandonment authorization prospectively and not retroactively as Transco requested, Transco did not apply for rehearing of the May 5, 1987 order. Vitco and other parties whose abandonment applications were also covered by the May 5, 1987 order sought rehearing of various aspects of the order other than its nonretro-active effect. On February 5, 1988, FERC denied those petitions for rehearing. Mississippi River Transmission Corp., 42 FERC ¶ 61,171 (1988).

On March 7, 1988, Transco filed a timely petition for rehearing of the February 5, 1988 order on the ground that the order had generated confusion as to Transco’s minimum bill and related obligations to Vit-co under the expired contract. A minimum bill is a provision of a gas purchase contract or certificate approved by FERC requiring a pipeline customer to pay for a minimum volume of gas whether or not the customer actually purchases that amount of gas. See Wisconsin Gas Co. v. FERC, 770 F.2d 1144, 1150 (D.C.Cir.1985), cert. denied, 476 U.S. 1114, 106 S.Ct. 1968, 90 L.Ed.2d 653 (1986). Transco urged the Commission to clarify the order because Vitco had recently sued Transco, asserting that Transco had substantial minimum bill liability for the period between contract expiration and the May 5, 1987 order. Transco suggested that the best means of clarifying the order would be to make abandonment retroactive to the date of expiration of the contract, December 12,1983.

Vitco opposed this rehearing request on the ground that it was really an attempt to relitigate the effective date of abandonment authorization, which had been resolved in the May 5, 1987 order. Vitco argued that Transco could not now request a rehearing of that order issued more than ten months earlier.

On April 6, 1988, FERC issued a tolling order granting rehearing “solely for the purpose of affording the Commission additional time to consider the request for rehearing.” On July 11, 1988, FERC issued an order dismissing Transco’s request for rehearing as not timely filed within 30 days after the issuance of the May 5,1987 order, because the request in fact addressed the effective date of the abandonment, which was decided in the May 5 order and not in the February 5, 1988 order. Transcontinental Gas Pipe Line Corp., 44 FERC 1161,046 (1988).

On its own motion, however, FERC modified its May 5, 1987 order to authorize abandonment retroactive to December 12, 1983. With respect to volumes of gas actually delivered between December 12, 1983 and June 30, 1985 pursuant to the agreement between Transco and Vitco (10,000 MCF per day), FERC made the abandonment effective retroactive to June 30, 1985. FERC said it was acting to correct its previous misunderstanding of the situation between Transco and Vitco on which it had based its belief that retroactive abandonment was unnecessary. It explained that its May 5, 1987 order had erroneously held that Transco did not need retroactive abandonment in order to be relieved of any potential minimum bill obligations incurred after the underlying contract had expired because the settlement agreement approved on August 2, 1985 allowed temporary abandonment by Vitco and its producers.

Vitco filed a timely application for rehearing of the July 11, 1988 order. FERC denied rehearing on November 17, 1988, maintaining that it had authority to modify the May 5, 1987 order because that order had never become final. Transcontinental Gas Pipe Line Corp., 45 FERC 11 61,238 (1988). FERC also reiterated that the only reason it had not authorized retroactive abandonment in its earlier order was because it believed such action to be unnecessary under the terms of the settlement agreement approved on August 2, 1985. Vitco now petitions this court to set aside the July 11, 1988 and November 17, 1988 orders.

DISCUSSION

I. FERC’s Jurisdiction to Modify a Pri- or Order

Vitco first argues that FERC did not have jurisdiction to modify its May 5, 1987 abandonment order so as to make Tran-sco’s abandonment authorization retroactive because Transco did not file a timely petition for rehearing raising the issue of retroactivity, and therefore the May 5,1987 order became final as to that issue when the time for filing a petition for rehearing expired.

FERC modified the May 5, 1987 order on its own motion pursuant to section 19(a) of the NGA, which provides, in pertinent part:

Until the record in a proceeding shall have been filed in a court of appeals, as provided in subsection (b), the Commission may at any time, upon reasonable notice and in such manner as it shall deem proper, modify or set aside, in whole or in part, any finding or order made or issued by it under the provisions of this Act.

15 U.S.C. § 717r(a). This provision gives the Commission the power to correct an order “until such time as the record on appeal has been filed with a court of appeals or the time for filing a petition for judicial review has expired.” Pan American Petroleum Corp. v. FPC, 322 F.2d 999, 1004 (D.C.Cir.1963).

Obtaining judicial review of a FERC order has a jurisdictional prerequisite: applying for rehearing within 30 days after issuance of the order. 15 U.S.C. § 717r(a). A party aggrieved by a FERC order has 60 days after FERC issues an order upon an application for rehearing in which to file a petition for judicial review. 15 U.S.C. § 717r(b). If no one files an application for rehearing within 30 days of the FERC order, the time for judicial review expires at the end of the 30-day period, the FERC order becomes final, and FERC can no longer modify the order. See Hirschey v. FERC, 701 F.2d 215, 217-18 (D.C.Cir.1983).

Vitco urges that because Transco failed to file a petition for rehearing requesting retroactive abandonment authorization within 30 days of the May 5, 1987 order, that order became final as to the issue of retroactivity. In other words, Vitco contends that a timely petition for rehearing keeps FERC’s jurisdiction alive only as to those particular issues raised in the petition. Since Vitco did not raise the issue of retroactivity in its petition for rehearing, Vitco contends FERC no longer had the authority to modify its order to authorize retroactive abandonment.

The recent case of Tennessee Gas Pipeline Co. v. FERC, 871 F.2d 1099 (D.C.Cir.1989), disposes of Vitco’s argument. In Tennessee Gas, the court upheld FERC’s conclusion that it had authority under the NGA to modify a prior order sua sponte, even as to matters not raised in a timely petition for rehearing, as long as a petition for rehearing of that order was timely filed on some other grounds. Tennessee Gas, 871 F.2d at 1107-09. In other words, the timely filing of any petition for rehearing prolongs the life of all issues for purposes of modification on the Commission’s own motion, even of issues not raised in that petition, because the order does not become final and nonreviewable until 60 days after the Commission rules on the pending petition. Id.; see also Swanson Mining Corp. v. FERC, 790 F.2d 96, 100-101 (D.C.Cir.1986) (interpreting the same language in § 313(a) of the Federal Power Act). The D.C. Circuit found support for this view in judicial interpretations of similar language in other statutes: “Virtually the same language in other statutes has been consistently interpreted as granting the agency power to modify any aspect of an order at any time until an appeal has been filed.” Tennessee Gas, 871 F.2d at 1108 (emphasis in original) (citing, inter alia, International Union of Mine, Mill and Smelter Workers v. Eagle-Picher Mining and Smelting Co., 325 U.S. 335, 65 S.Ct. 1166, 89 L.Ed. 1649 (1945) (National Labor Relations Act); New York v. United States, 568 F.2d 887, 893 & n. 9 (2d Cir.1977), cert. denied, 449 U.S. 887, 101 S.Ct. 242, 66 L.Ed.2d 113 (1980) (Interstate Commerce Act)).

Accordingly, Transco’s failure to apply for rehearing of the May 5, 1987 order within 30 days did not bar FERC from modifying that order on its own motion, because Vitco’s petition for rehearing prevented the order from becoming final.

Vitco offers an alternative reason why FERC lacked authority on July 11, 1988 to modify the May 5, 1987 order: The order of February 5, 1988 denying Vitco’s petition for rehearing became final and nonreviewable 60 days after February 5, or on April 5, 1988. FERC takes the position that the tolling order issued on April 6, 1988 in response to Transco’s March 7 rehearing request kept FERC’s jurisdiction alive until it issued the July 11, 1988 order. Vitco contends, however, that because FERC later vacated its tolling order and dismissed Transco’s March 7, 1988 petition as an untimely request for rehearing of the May 5, 1987 order, Transco’s March 7 petition was a legal nullity that could not prolong the Commission’s jurisdiction, and the tolling order was devoid of legal effect because it was issued one day too late.

We agree with FERC that by issuing the April 6 order keeping open consideration of Transco’s March 7, 1988 petition for rehearing, FERC indicated that it was considering action regarding the proceeding, and therefore the February 5 order did not become final so as to cause expiration of the time for filing for judicial review. The April 6 order was timely as a response to Transco’s petition for rehearing because it was issued on the 30th day after Transco timely filed its petition; if FERC had not issued the tolling order, Transco’s petition would have been deemed denied by operation of law after 30 days. See 15 U.S.C. § 717r