Pngts Shippers' Group , Et Al . v. Federal Energy Regulatory Commission

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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 16, 2009 Decided January 26, 2010
No. 09-1029
PNGTS SHIPPERS' GROUP , ET AL .,
PETITIONERS
v.
FEDERAL ENERGY REGULATORY COMMISSION ,
RESPONDENT
PORTLAND NATURAL GAS TRANSMISSION SYSTEM,
I NTERVENOR
On Petition for Review of Orders
of the Federal Energy Regulatory Commission
John B. Rudolph argued the cause for petitioners. With him
on the briefs was Timothy W. Bergin.
Samuel Soopper, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. On the brief
were Thomas R. Sheets, General Counsel, Robert H. Solomon,
Solicitor, and Kathrine L. Henry, Attorney.

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Carl M. Fink, Mark F. Sundback, Kenneth L. Wiseman,
Jennifer L. Spina, and Lisa M. Purdy were on the brief for
intervenor in support of respondent.
Before: HENDERSON , ROGERS and BROWN , Circuit Judges.
Opinion for the Court by Circuit Judge ROGERS .
ROGERS , Circuit Judge: Shippers with long-term (twenty-
year) firm contracts on the Portland Natural Gas Transmission
System (“PNGTS”) petition for review of two orders of the
Federal Energy Regulatory Commission (“FERC”) certifying
PNGTS’s capacity. The Shippers’ Group contends FERC’s
determination was arbitrary and capricious because FERC failed
to take into account the potential economic impact of a reduction
in capacity. Noting the pipeline’s historical capacity and an “at-
risk” condition imposed by FERC on PNGTS, the shippers fear
that their rates will increase as a result of the reduction. In the
challenged orders, however, FERC concluded that any potential
impact on rates would be better addressed in PNGTS’s
subsequent rate case. Portland Natural Gas Transmission Sys.,
123 F.E.R.C. ¶ 61,275 (June 19, 2008) (“Declaratory Order”),
reh’g denied, 125 F.E.R.C. ¶ 61,198 (Nov. 18, 2008)
(“Rehearing Order”). Because the shippers cannot show an
actual or imminent injury as a result of the challenged orders,
they are not aggrieved pursuant to section 19(b) of the Natural
Gas Act, 15 U.S.C. § 717r(b). Accordingly, the court lacks
jurisdiction and the petition for review must be dismissed.
I.
The Natural Gas Act provides that pipelines must obtain a
certificate of public convenience and necessity before they can
construct, acquire, or operate interstate natural gas pipeline
facilities. 15 U.S.C. § 717f(c). Facilities subject to FERC’s

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jurisdiction or services rendered by such facilities may not be
abandoned without FERC’s prior approval, based on a finding
that the available supply of natural gas is depleted or that the
present or future public convenience and necessity permit
abandonment. § 717f(b); see 18 C.F.R. §§ 157.1–.22 (Part 157,
Subpart A). A pipeline, however, may file a petition for a
declaratory order “to terminate a controversy or remove
uncertainty.” 18 C.F.R. § 385.207(a)(2). PNGTS filed such a
petition in 2008 in view of several orders by FERC addressing
the construction of two pipelines.
In the Declaratory Order now challenged by the Shippers’
Group, FERC summarized the background to its decision. In
July 1996 FERC issued preliminary determinations in two
proceedings in which PNGTS and Maritimes & Northeastern
Pipeline, LLC (“Maritimes”) sought authorization to construct
pipeline facilities in the Northeastern United States.
Declaratory Order ¶ 3. Because the southern portion of each
proposed pipeline “would run along essentially the same route,
[FERC] urged the pipelines to consider jointly owning pipeline
where their proposed routes converged.” Id. They did and
subsequently they filed an additional application to construct
jointly a 101-mile long, thirty-inch diameter pipeline extending
from Westbrook, Maine, to Dracut, Massachusetts, as well as
various laterals (“joint facilities”).
In July 1997 FERC made a preliminary determination,
pending favorable environmental review, authorizing PNGTS to
construct and operate an individually owned 142-mile long, 24-
inch diameter pipeline from the Canadian border near Pittsburg,
New Hampshire to Westbrook, Maine, as well as facilities
jointly owned with Maritimes from Westbrook, Maine to Wells,
Maine. At the border, PNGTS’s facilities would interconnect
with facilities of TransQuebec & Maritimes Pipeline, Inc.
(“TQM”). FERC also made a preliminary determination to

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authorize PNGTS to provide service using its capacity on the
joint facilities from Wells, Maine and Dracut, Massachusetts,
and to construct and operate the remaining joint facilities from
Wells, Maine to Westbrook, Maine. FERC found:
In the first year of service, PNGTS will have a capacity
of 178,000 Mcf [one thousand cubic feet] per day on
its 24-inch mainline and . . . 169,400 Mcf per day on
the joint facilities. In subsequent years, the upstream
mainline and PNGTS’ share of the joint facilities’
capacity will increase to 210,000 Mcf per day.
Therefore, PNGTS must revise its initial rates to reflect
billing determinants based on [these capacities].
Id. ¶ 5 (quoting Portland Natural Gas Transmission Sys., 80
F.E.R.C. ¶ 61,134 at 61,448 (1997)). The preliminary
determination “also noted that PNGTS had not entered into
contracts for the full capacity of its system and placed PNGTS
at risk for the recovery of the costs for the unsubscribed
capacity.” Declaratory Order ¶ 5. The increased capacity after
the first year of service would result from installation of
additional compression by TQM on its Canadian facilities to
accommodate Maritimes’s proposal to construct upstream
facilities to be placed in service after a year. FERC conditioned
PNGTS’s certificate authorization on TQM receiving the
necessary approvals.
In September 1997 FERC issued final certificates to
PNGTS authorizing construction and operation of the
individually-owned pipeline facilities between Pittsburg, New
Hampshire and Westbrook, Maine, as well as construction and
operation of the joint facilities between Westbrook and Wells,
and the operation of the joint facilities between Wells and
Dracut. The 1997 final certificate order also addressed
PNGTS’s petition for rehearing on the issue of the increase in

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capacity and the at-risk condition after the first year. Because
it was uncertain exactly when the Maritimes upstream facilities
would go on line and when TQM would install its new planned
compression, FERC concluded it was “premature to require
PNGTS to revise its rates or to be placed at risk for higher
capacity after its first year of operation,” Declaratory Order ¶
8 (quoting Portland Natural Gas Transmission Sys., 80 F.E.R.C.
¶ 61,345 at 62,146 (1997)), and stated it would “review this
matter when PNGTS makes its section 4 [rate] filing,” id. In
December 2006 PNGTS and Maritimes filed a settlement
resolving various issues involving the joint facilities, which
FERC approved in part in March 2007.
On January 31, 2008, PNGTS filed a petition for a
declaratory order requesting a determination that physical
capacity across its system would be 168,000 Mcf per day on a
firm year-round basis once Maritimes Phase IV Expansion
facilities were placed in service on November 1, 2008. It also
requested a determination that it could lawfully deny future
requests for firm service that together with its existing contracts
would cause it to exceed 168,000 Mcf per day. According to
FERC, the 1997 final certificate orders did not establish a
certificated firm level of service and PNGTS’s most recent
section 4 rate case had resulted in a settlement without resolving
that issue. PNGTS explained that its previously available
capacity would diminish when Maritimes’s Phase IV Expansion
facilities were placed in service. Because there was no
contractual basis for obligating TQM to construct more
compression upstream, the increased pressure downstream
would reduce PNGTS’s capacity. PNGTS also requested that
the rate consequences of its petition be addressed in its
subsequent section 4 filing.
In the Declaratory Order granting PNGTS’s petition, FERC
made four determinations. First, FERC concluded that PNGTS

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1 In footnote 30 of the Declaratory Order, FERC stated that
its finding PNGTS will be incapable of transporting volumes in excess
of 168,000 Mcf on a firm year-round basis from Pittsburg to Dracut
after the in-service date of Maritimes’ Phase IV Expansion “does not
. . . affect PNGTS’s capacity rights of 210,000 Mcf/d in the joint
facilities between Westbrook and Dracut as defined by the Definitive
Agreements between PNGTS and Maritimes.” Id. ¶ 28 n.30.
was not required to file an abandonment application because (A)
the 1997 final certificate order authorizing PNGTS’s facilities
did not establish a system-wide certificated capacity level after
the first year of service, due to the uncertainty involving the
timing and impact of additional compression and use of joint
facilities, and (B) PNGTS’s subsequent rate case was resolved
by uncontested settlement, which also did not establish a
certificated capacity for PNGTS. Second, FERC concluded that
it was appropriate to determine PNGTS’s certificated level of
service going forward because that would “remove uncertainty
and provide transparency to the market,” including PNGTS and
its shippers. Id. ¶ 27. Third, upon reviewing the engineering
information submitted by PNGTS, FERC found that adopting
168,000 Mcf per day as PNGTS’s annual certificated system-
wide capacity was in the public convenience and necessity.
Although “PNGTS historically has been able to provide service
in excess of this level,” FERC stated its “primary focus is
whether natural gas service will be jeopardized.” Id. ¶ 29. It
found “no basis to conclude that requiring PNGTS to operate its
system at a capacity level greater than 168,000 is needed to
continue to serve current or anticipated customers.” Id.1 No
party, FERC noted, took issue with PNGTS’s assertions that it
will have more than sufficient capacity to meet all of its
“contractual obligations for service after October 31, 2008, that
are now in effect, and that it is not aware of any interest for
additional firm service that would exceed the 168,000 Mcf/d
capacity level.” Id. Fourth, FERC stated that the “action here

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does not prejudge the impact of our decision on PNGTS’s rates
and . . . any rate issues associated with our decision here,
including the appropriate determinants to use to design
PNGTS’s rates, are more appropriately determined in PNGTS’s
next rate proceeding.” Id. ¶ 30.
On rehearing, FERC rejected the objections presented by
the Shippers’ Group, including that PNGTS was required to file
for abandonment. FERC explained that an abandonment
proceeding was not required because it had deferred the
determination of future capacity to PNGTS’s subsequent rate
case and the issue of capacity had never been resolved in view
of the settlement of that rate case. Rehearing Order ¶ 16.
Further, FERC explained that the record did not support
requiring PNGTS to maintain its system design at a higher level,
id. ¶ 19, and that there was no reason to inquire whether PNGTS
could contract for additional existing compression from its
affiliates, or whether cheap compression could be built, because
there were no pending requests for additional firm service, id. ¶
18. Rejecting the Shippers’ Group’s assertion that FERC had
ignored the rate impact on the shippers, FERC stated the
Declaratory Order
specifically limited our ruling to the certificated
capacity of the PNGTS system . . . [and] did not
prejudge the impact of PNGTS’ rates and any rate
issues, including the appropriate determinants to use to
design PNGTS’ rates . . . . Similarly, the [Declaratory
Order] did not address or change the at-risk condition
imposed on PNGTS by the Commission’s certificate
orders. The at-risk condition relates to the design of
PNGTS’ rates and is more appropriately addressed in
PNGTS’ next rate case.

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Id. ¶ 20. The Shippers’ Group petitions for review of the
Declaratory Order and the Rehearing Order.
II.
Ordinarily when a pipeline seeks to reduce its certificated
level of capacity it must seek prior approval of the abandonment
of capacity pursuant to the Natural Gas Act. 15 U.S.C.
§ 717f(b); see 18 C.F.R. § 157.5; see also Tenn. Gas Pipeline
Co. v. FERC, 972 F.2d 376, 384 (D.C. Cir. 1992). The
Shippers’ Group contends that FERC failed to provide an
adequate explanation of why PNGTS’s capacity reduction does
not constitute an abandonment. In seeking rehearing, they had
argued that the 1997 final certificate order did not reduce
PNGTS’s liability for a capacity of 210,000 Mcf per day under
the at-risk condition. Now, referencing footnote 30 of the
Declaratory Order, supra note 1, the shippers express concern
that they will be liable for the contractually determined 210,000
Mcf per day portion of the costs of the jointly owned facilities
without any corresponding benefit. In their view, FERC had a
statutory duty to consider circumstances such as rates and the
potential for future obligations on shippers, rather than deciding
certificated capacity based on whether service to current
shippers would be jeopardized. They further contend that
because PNGTS and TQM are affiliated with the same operator,
FERC erroneously took into account incapability to provide
certificated capacity when that was not a result of physical
incapability but an operational choice by PNGTS.
As a threshold matter, however, FERC maintains that the
Shippers’ Group lacks standing because it cannot show concrete
and particularized harm as a result of the Declaratory Order and
the Rehearing Order. Because those orders were limited to
establishing PNGTS’s certificated capacity, and did not prejudge
the impact of FERC’s decision on any rate issues, including the

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appropriate billing determinants and the at-risk condition
previously imposed on PNGTS, FERC concludes that the
Shippers’ Group is not aggrieved and the court lacks jurisdiction
over its claims.
Section 19(b) of the Natural Gas Act allows only
“aggrieved” persons to seek judicial review of a FERC order.
15 U.S.C. § 717r(b); see Interstate Natural Gas Ass’n of Am. v.
FERC, 285 F.3d 18, 45 (D.C. Cir. 2002). A party is aggrieved
only “if it can establish both the constitutional and prudential
requirements for standing.” Exxon Mobil Corp. v. FERC, 571
F.3d 1208, 1219 (D.C. Cir. 2009) (quoting Pub. Util. Dist. No.
1 v. FERC, 272 F.3d 607, 613 (D.C. Cir. 2001)). A petitioner
must “establish, at a minimum, ‘injury in fact’ to a protected
interest.” Interstate Natural Gas Ass’n, 285 F.3d at 45 (quoting
Shell Oil Co. v. FERC, 47 F.3d 1186, 1200 (D.C. Cir. 1995)).
“Injury in fact” requires harm that is both “concrete and
particularized,” and “actual or imminent, not conjectural or
hypothetical.” Lujan v. Defenders of Wildlife, 504 U.S. 555,
559–61 (1992); N.C. Util. Comm’n v. FERC, 653 F.2d 655, 662
(D.C. Cir. 1981). The petitioner also must show there is “a
causal connection between the injury and the conduct
complained of – the injury must be fairly . . . traceable to the
challenged action of the [respondent].” Lujan, 504 U.S. at
560–61. The burden is on the petitioner to show “the specifics
of the aggrievement alleged.” N.C. Util. Comm’n, 653 F.2d at
663. The Shippers’ Group has not met its burden.
Each member of the Shippers’ Group has a long-term firm
transportation agreement with PNGTS that obligates the shipper
to pay PNGTS’s firm transportation rates. Before FERC the
Shipper’s Group argued that its members would be “directly
affected by any ruling which could impact PNGTS’ cost
responsibilities imposed by the orders issued during its system
certification.” Motion to Intervene and Protest of the PNGTS

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Shippers’ Group (“Shippers’ Protest”) at 4. It notes that
PNGTS’s rates are calculated under an at-risk condition by
apportioning system costs according to billing determinants,
factors based on the total system costs and the total capacity of
the pipeline. Id. at 10–11; see also Declaratory Order ¶¶ 5, 26;
Rehearing Order ¶¶ 11, 16. The shippers’ concern is that by
setting PNGTS’s certificated capacity at a level at least 20%
below that recognized in the 1997 preliminary certificate order,
without a corresponding reduction in system costs or facilities,
the shippers’ costs may increase if the billing determinants are
based on the certificated capacity. Reducing capacity under an
at-risk condition reduces PNGTS’s incentive to pay for system
costs by seeking contracts for interruptible service rather than by
shifting costs to shippers with long-term firm service contracts;
it also will relieve PNGTS of the burden of having to obtain
extra compression facilities. The Shippers’ Group therefore
maintains that “FERC has set the stage for capacity-based
billing determinants that could increase rates by over 22%, an
increase that is not merely speculative but readily quantifiable.”
Pet’r’s Br. 29. In its view, the challenged orders “undermine
any likelihood that PNGTS’ original at-risk condition will
govern its rates and provide the same shipper protections in the
future, and accordingly inhibit negotiation of long-term contract
and rate issues, forcing further administrative litigation.” Id.
The potential for “future economic injury,” even assuming
it is “readily quantifiable” into a possible rate increase in the
future, id., is not enough to show the requisite injury for Article
III standing. The Shippers’ Group does not contend that this
rate increase is inevitable once FERC established PNGTS’s
certificated capacity below the capacity stated in the 1997 final
certificate order. FERC has not yet determined PNGTS’s rates
at its certificated capacity level and FERC has stated that it will
determine the rates in PNGTS’s section 4 rate proceeding. See
Declaratory Order ¶ 30; Rehearing Order ¶ 20. Neither did

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FERC “address or change the at-risk condition.” Rehearing
Order ¶ 20.
In Alabama Municipal Distributors Group v. FERC, 312
F.3d 470, 473 (D.C. Cir. 2002), the court held that even where
FERC had approved the initial rates for a new customer as part
of a certification order, other gas purchasers did not have
standing to challenge the certification because their rates would
not be determined until the pipeline had adopted new rates
reflecting the new service in a section 4 rate proceeding.
Similarly, in North Carolina Utilities Commission, 653 F.2d at
662–63, the court held that the projected use of an order in
future compensation proceedings did not constitute
aggrievement by that order. Instead, if the order did aggrieve
the North Carolina Utilities Commission in later proceedings,
the court explained that the order could be challenged both in
the later FERC proceedings and on appeal from those
proceedings. Id. at 662, 665. So too here.
In the challenged orders FERC stated it was deferring any
decisions on PNGTS’s rates and billing determinants to a
subsequent section 4 rate proceeding. The Shippers’ Group
suggests that FERC’s determination of reduced capacity cannot
be “without prejudice” to future ratemaking absent assurances
to shippers that PNGTS will not rely on the Declaratory Order
in a later rate proceeding. But at this point FERC has yet to
indicate how or whether PNGTS’s certificated capacity will
affect the shippers’ rates in view of the at-risk condition. FERC
proposes to address the matter in PNGTS’s subsequent section
4 rate proceeding. The Shippers’ Group presents no persuasive
reason why the shippers’ interests cannot be adequately
addressed in this manner.
An abandonment proceeding is a forum in which FERC
should consider the potential economic impact of a capacity

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reduction, see Transcon. Gas Pipe Line Corp. v. FPC, 488 F.2d
1325, 1330 (D.C. Cir. 1973); 18 C.F.R. § 157.18, and the
Shippers’ Group contends there was a capacity reduction for
PNGTS that FERC should have adjudicated in an abandonment
proceeding. It maintains that the upcoming section 4 rate
proceeding will “inevitably confront[]” questions such as “what
is the precise rate impact of an approved capacity reduction?”
and “do rates based on billing determinants above levels a
pipeline is ‘incapable’ of delivering satisfy due process?” that
already assume a reduction in capacity. Pet’r’s Br. 31.
However, being forced to confront questions in a future legal
proceeding does not rise to the level of injury required for
Article III standing. Shell Oil, 47 F.3d at 1202; see also Ala.
Mun. Distribs. Group, 312 F.3d at 473–74. Those questions
indicate a conceivable but not imminent effect on shippers’
rates. See Shell Oil, 47 F.3d at 1202. Even were it clear, as the
Shippers’ Group suggests, that PNGTS would argue in the rate
proceeding that retaining the same billing determinants would
violate its right to due process, how FERC would respond and
what the resulting effect on shippers’ rates would be are both
speculative. The Shippers’ Group can present its challenges to
FERC’s failure to require PNGTS to file an application for
abandonment if and when it petitions for review of the rates
established in the section 4 proceeding. See also N.C. Util.
Comm’n, 653 F.2d at 665.
Reliance on ANR Pipeline Co. v. FERC, 771 F.2d 507 (D.C.
Cir. 1985), does not assist the Shippers’ Group. In that case, the
costs had been allocated to the pipeline, rather than leaving that
allocation for a later section 4 rate proceeding, id. at 511,
making it “unavoidable” that the pipeline’s rates would increase
and the pipeline would be bound in a later rate proceeding by
FERC’s cost allocation, id. at 515–16. Here, costs have yet to
be allocated so as to require a rate increase, and the Shippers’
Group has not claimed a rate increase for its members is

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“unavoidable” under the challenged orders. Great Lakes Gas
Transmission Co. v. FERC, 984 F.2d 426, 431 (D.C. Cir. 1993),
on which the Shippers’ Group also relies, is likewise unhelpful.
There the court concluded that imposition of an at-risk condition
on the pipeline was immediately appealable by the pipeline
because the condition affected the pipeline’s “long-range
economic planning.” Here, FERC stated it had neither
addressed nor changed the at-risk condition in establishing
PNGTS’s certificated capacity. See Rehearing Order ¶ 20. The
Shippers’ Group’s projection of potential harm from the
challenged orders in a subsequent rate proceeding is one step
removed from the injury in Great Lakes. The capacity
certification in and of itself does not create the requisite injury
to shippers.
Accordingly, because the Shippers’ Group fails to
demonstrate that shippers are aggrieved by the challenged
orders, the court lacks jurisdiction to address its claims and the
petition must be dismissed.

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