Occidental Permian Ltd., Et Al . v. Federal Energy Regulatory Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 14, 2012 Decided March 27, 2012
No. 10-1381
OCCIDENTAL PERMIAN LTD., ET AL .,
PETITIONERS
v.
FEDERAL ENERGY REGULATORY COMMISSION ,
RESPONDENT
PSEG ENERGY RESOURCES & TRADE LLC, ET AL .,
I NTERVENORS
On Petition for Review of Orders of the
Federal Energy Regulatory Commission
Earle H. O'Donnell argued the cause for petitioners.
With him on the briefs were Jane E. Rueger and Jennifer L.
Mersing.
Jennifer S. Amerkhail, Attorney, Federal Energy
Regulatory Commission, argued the cause for respondent.
With her on the brief was Robert H. Solomon, Solicitor.
David B. Raskin was on the brief for intervenor Tres
Amigas LLC in support of respondent.

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Before: HENDERSON, ROGERS , and BROWN, Circuit
Judges.
Opinion for the Court filed by Circuit Judge BROWN.
BROWN, Circuit Judge: Occidental Permian
(“Occidental”) and a number of its subsidiaries petition for
review of final orders of the Federal Energy Regulatory
Commission (“FERC”) granting negotiated rate authority to
Tres Amigas, a proposed energy transmission project.
Occidental argues Tres Amigas does not satisfy the criteria
FERC has set out as preconditions for such authority.
Because we conclude Occidental lacks standing to challenge
these orders, we do not reach this question and instead
dismiss the petition.
I
Tres Amigas is a multi-billion dollar energy transmission
project being developed in New Mexico. Its goal is to tie
together all three of the independent electrical grids in the
United States. As these grids currently operate, power cannot
automatically flow between them but instead must be
converted at each interchange. Tres Amigas says its facility
will address this problem and remove structural barriers to the
movement of power across the country by providing a three-
way transmission “superstation” with a transfer capability
greater than all the existing interconnections combined. New
technological developments will also permit Tres Amigas to
move power across the grids at shorter notice and lower cost
while at the same time integrating renewable sources of
energy like wind and solar power. In order for any of these
goals to reach fruition, though, regional utilities will
themselves have to build new transmission lines connecting to
Tres Amigas, at significant cost. The Tres Amigas project

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itself is solely an interconnection facility; like a train station
without any tracks, it alone connects to nothing.
Under the Federal Power Act (“the Act”), utilities must
file tariff schedules with FERC, and FERC must determine
that the rates the utility plans to charge are just, reasonable,
and lawful. 16 U.S.C. §§ 824d, 824e. Traditionally, utilities
and FERC rely on a cost-based pricing model when assessing
the reasonableness of rates. But merchant transmission
developers are unlike ordinary utilities. Transmission projects
have no preexisting transmission network in which costs can
be determined—they seek to create a network, not operate
within one—and no captive pool of customers from which
they can recoup those costs. For these reasons, FERC allows
transmission developers to request permission to charge
reasonable negotiated rates, rather than cost-based rates. To
do so, a transmission project developer must meet a set of
criteria designed to ensure that the negotiated rate authority
will not lead to unjust rates: among other things, the
developer must have no captive customers, must not have the
ability to exercise monopoly power, and must bear the full
market risk of the project failing. See Chinook Power
Transmission, LLC, 126 FERC ¶ 61,134, 61,765 (2009);
TransEnergie U.S., Ltd., 91 FERC ¶ 61,230, 61,838–39
(2000).
In December 2009, Tres Amigas filed an application with
FERC requesting authorization to sell transmission services at
negotiated rates. In its application, Tres Amigas explained
that it cannot realistically use cost-based pricing because it
has no captive customers and, because its beneficiaries will be
in all three grid regions, it will have no regional transmission
organization in which it can recover costs or determine cost-
based rates. Occidental filed a motion to intervene, protest,
and request summary denial of Tres Amigas’s application. It

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argued that Tres Amigas failed to meet the Chinook criteria
because Tres Amigas has captive customers and would
exercise monopoly power while bearing none of the project’s
risk. FERC found that Occidental’s concerns were misplaced
and approved Tres Amigas’s request over Occidental’s
objections in March 2010. Tres Amigas LLC, 130 FERC ¶
61,207 (2010). Occidental requested a rehearing, and FERC
denied that request in September 2010. Tres Amigas LLC,
132 FERC ¶ 61,233 (2010). This petition for review
followed.
II
Before we may reach the merits of Occidental’s
objection, we must first be satisfied that Occidental has
standing to challenge these orders. Pub. Util. Dist. No. 1 of
Snohomish Cnty. v. FERC, 272 F.3d 607, 613 (D.C. Cir.
2001). The “irreducible constitutional minimum” of standing
requires a petitioner to show a concrete injury that has either
transpired or is “imminent,” that is causally connected to the
agency action, and that will likely be redressed by a favorable
decision from this Court. Lujan v. Defenders of Wildlife, 504
U.S. 555, 560–61 (1992). A “conjectural or hypothetical”
injury will not do. Id. at 560. Occidental advances three
possible injuries it has suffered as a result of FERC’s orders
approving negotiated rate authority for Tres Amigas. All are
conjectural or hypothetical. Because none meets the
constitutional standard, we lack jurisdiction and dismiss
Occidental’s petition.
First, Occidental complains that neighboring utilities will
themselves have to build transmission lines to connect to Tres
Amigas. Those utilities will, Occidental argues, in turn
recover the costs of that construction and connection from
regional energy consumers like some of Occidental’s

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subsidiaries. These subsidiaries and other captive customers
will thus face higher rates along those transmission lines.
This parade of horribles is far too speculative to represent a
“concrete” injury to Occidental. Lujan, 504 U.S. at 560.
Even if all of these additional events transpired, Occidental’s
injury would be caused by some action other than FERC’s
approval of the orders before us.
Occidental’s alleged injury necessarily relies on the
premises that neighboring utilities will in fact build
connecting transmission lines to Tres Amigas, and that they
will recover costs from captive customers, and that doing so
will mean higher rates for Occidental’s subsidiaries. None of
these eventualities is about to occur. First, it remains possible
that no neighboring utility will successfully build a
transmission line that connects to Tres Amigas. Though some
utilities have apparently “stated their willingness” to do so,
Pet. Br. 16, even the most enthusiastic of plans would not give
rise to Occidental’s injury since, as Occidental recognizes,
those utilities’ plans are “subject to appropriate support and
favorable ratemaking treatment from . . . regulators,” Payton
Aff. ¶ 16 (quoting an interested utility describing its support
for the project). No such support has materialized. Those
connecting utilities have yet to secure siting and planning
approvals, and FERC has made no decision, favorable or
otherwise, regarding the rates those connecting utilities would
be able to charge their customers.
Even if we knew with certainty that a given utility was
going to connect to Tres Amigas, the remaining links in
Occidental’s chain of injury remain uncertain. All FERC has
done is granted Tres Amigas the authority to negotiate the
rates it charges connecting utilities; FERC has not granted any
utility the authority to recover costs from its customers, or for
that matter, to charge any given rate to its customers at all.

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The question of what rate Occidental’s subsidiaries will pay
on future connecting lines would thus be the subject of some
future FERC proceeding, at which FERC would have to
determine whether that rate was just and reasonable. See
Tres Amigas LLC, 132 FERC ¶ 61,233, 62,302 (2010) (order
denying rehearing) (noting that if neighboring utilities
connect with Tres Amigas, “their customers are protected by
independent review” of rates charged). If the utility sought to
shift costs to customers like Occidental’s subsidiaries, FERC
would have to determine at that time whether or not the
benefits those customers derived from the connection were
“trivial in relation to the costs sought to be shifted” to them,
Illinois Commerce Comm’n v. FERC, 576 F.3d 470, 476 (7th
Cir. 2009), and Occidental could argue then that the costs
outweighed the benefits.
In fact, Occidental’s very argument on the merits neatly
reveals the paucity of its present injury. Occidental claims the
project “fails the most basic element of FERC’s merchant
transmission policy because it cannot by itself provide
transmission service to anyone” and because it is “an island
that is electronically remote from each of the
interconnections.” Pet. Br. 9, 23–24 (emphasis added). But
an island that “leaves it to the neighboring utilities to fund the
construction of the interconnecting” lines, Pet. Br. 27, poses
no imminent danger to Occidental. Since the Tres Amigas
project can itself transmit no energy, it would be other
utilities, their independent decisions to connect to the project,
and FERC’s future approval of the rates they may charge that
may cause an injury to Occidental. Such an injury would
result from some future agency action; it is therefore “not
traceable” to the agency’s present action. Commuter Rail
Div. of Reg’l Transp. Auth. v. Surface Transp. Bd., 608 F.3d
24, 31 (D.C. Cir. 2010).

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In short, FERC has simply not yet determined or
approved the rates Occidental’s subsidiaries will pay—it has
not even been asked to do so—so it is impossible to say now
that Occidental has been harmed. Occidental’s theory of
injury “stacks speculation upon hypothetical upon
speculation, which does not establish an actual or imminent
injury.” New York Reg’l Interconnect v. FERC, 634 F.3d 581,
587 (D.C. Cir. 2011).
Occidental responded at oral argument that although it
will be able to challenge rates set by connecting utilities at
future FERC proceedings, the sixty-day window for a
challenge to a FERC order set out in the Act, 16 U.S.C. §
825l(b), means this is the only opportunity to challenge the
decision to grant Tres Amigas negotiated rate authority, Oral
Arg. 8:30–11:10. Even if Occidental were correct, it goes
astray in insisting there is something unjust about that result.
This supposed “catch-22,” as Occidental puts it, is a red
herring: Occidental cannot challenge the negotiated rate
orders in this Court because Occidental cannot show an injury
in fact. Occidental’s lamentations about the absurdity of the
“catch-22” thus seem to confuse a result which means it
cannot challenge these negotiated rate orders with a result
which means no one can challenge these orders. See Pet.
Reply Br. 8. The latter is plainly not true; some entity
actually harmed by the negotiated rate orders—perhaps a
competing transmission project or one of the prospective
connecting utilities—could have challenged them. And
Occidental, for its part, will have every opportunity to
challenge any future orders which do harm its subsidiaries.
Occidental’s remaining alleged injuries suffer from the
same flaws. Occidental claims the FERC orders failed to
“impose sufficiently stringent limitations” that would “ensure
that Tres Amigas’s transmission rates will be held to a just

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and reasonable level.” Pet. Br. 18–19. This failure,
Occidental argues, will increase the energy prices “ultimately
paid” by its consumer subsidiaries and reduce the profit
margins of its wholesale seller and marketing subsidiaries. Id.
But because FERC “has not yet determined . . . rates,”
Occidental’s fear of a “possible rate increase in the future” is
“not enough to show the requisite injury.” PNGTS Shippers’
Grp. v. FERC, 592 F.3d 132, 137 (D.C. Cir. 2010). To be
sure, we have said that the “failure to impose more stringent
limitations on the prices that . . . utilities would be allowed to
charge” is a cognizable injury, Envtl. Action v. FERC, 996
F.2d 401, 407 (D.C. Cir. 1993), but we have always required
actual, decided-upon numbers and limitations before finding
an injury—“rate ceilings,” in that case, id. at 405—because
without them, we would have no way of assessing a claim of
unreasonableness. Here, FERC has made no such decision,
and once rates are set, Occidental will have the chance to
challenge them. See Sacramento Mun. Util. Dist. v. FERC,
616 F.3d 520, 542 (D.C. Cir. 2010). For now, all Occidental
has is its concern that FERC’s safeguards will “ultimately”
prove too weak. This is sheer speculation.
Moreover, Occidental cannot even show it will
necessarily suffer the kind of injury discussed in
Environmental Action. As Occidental acknowledges, it is just
a “potential” customer of Tres Amigas and will not “transfer
electric energy or ancillary services over the facility” if Tres
Amigas raises its prices “above a competitive rate.” Payton
Aff. ¶ 26. In other words, Occidental plans to avoid the injury
caused by uncompetitive prices by not marketing or selling
energy routed through the Tres Amigas facility. As a result,
all it has is an “interest in [this] problem,” which does not
satisfy the “requirement of aggrievement” for standing. City
of Orrville v. FERC, 147 F.3d 979, 985 (D.C. Cir. 1998).
Because Tres Amigas’s rates may not be unjust, because

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Occidental may not choose to pay them, and because, if the
rates are unjust and Occidental wants to challenge them, it has
the chance to seek relief from FERC in the future, this alleged
injury is also neither cognizably concrete nor traceable to the
orders under review.
Finally, Occidental claims that its power marketing
subsidiaries will suffer increased competition.1 We have held
that “parties suffer constitutional injury in fact when agencies
lift regulatory restrictions on their competitors or otherwise
allow increased competition,” Louisiana Energy & Power
Auth. v. FERC, 141 F.3d 364, 367 (D.C. Cir. 1998), but no
such increased competition has happened yet, nor is it even
imminent, Sherley v. Sebelius, 610 F.3d 69, 73 (D.C. Cir.
2010) (“[T]he basic requirement common to all our cases is
that the complainant show an actual or imminent increase in
competition.”). The orders under review did not authorize or
create transmission lines connected to Tres Amigas, nor did
they lift any restrictions on those lines. Occidental has also
not even shown that, should those lines be built, cheaper
power will flow through them and cause Occidental’s
subsidiaries to actually lose business or lower their prices. As
we explained in DEK Energy Co. v. FERC, 248 F.3d 1192,
1196 (D.C. Cir. 2001), “We recognize that whenever a . . .
vendor secures transport capacity that enables it to ship
[power] closer to another vendor at competitive rates, the
latter may perceive an increased risk of competition. But
[there is only] some vague probability that any [power] will
actually reach that market and a still lower probability that its
arrival will cause [petitioner] to lose business or drop its
1 Occidental argues its ancillary service subsidiaries will also face
increased competition, but FERC expressly reserved this issue for
another proceeding. Tres Amigas LLC, 130 FERC ¶ 61,207, 61,909
(2010).

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prices. More is needed to move an injury from ‘conjectural’
to ‘imminent.’” Occidental has not shown anything more, so
this final claim of injury is, like the others, insufficient to
confer standing.
III
Because Occidental lacks standing to challenge the orders
before the Court, we dismiss the petition for review and
express no opinion on the merits of Occidental’s objections.
So ordered.

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