UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


NY ST ELEC & GAS

v.

FERC


97-1430b

D.C. Cir. 1999


*	*	*


Rogers, Circuit Judge: New York State Electric & Gas  Corporation
("NYSEG"), a customer of Columbia Gas Trans- mission Company
("Columbia"), petitions for review of two  orders by the Federal
Energy Regulatory Commission, allow- ing Columbia to build additional
facilities on its pipeline  system and finding that absent changed
circumstances Co- lumbia may roll-in the cost of the expansion into
systemwide  rates in its next rate case. See Columbia Gas Transmission
 Corp., 78 F.E.R.C. p 61,030 (1997), reh'g denied, 79 F.E.R.C.  p
61,160 (1997). Although Columbia proceeded under section  7 of the
Natural Gas Act ("NGA"), 15 U.S.C. s 717f (1994),  NYSEG contends that
because the Commission established a  presumption in favor of Columbia
rolling-in the cost of its new  facilities at its next section 4 rate
proceeding, the Commission  erred by failing to proceed under section
4. See 15 U.S.C.  s 717c (1994). Because this appeal is not ripe for
review, we  dismiss NYSEG's petition without reaching the merits of


I.


In February 1996, Columbia filed an application under  NGA section 7 to
construct and expand its pipeline opera- tions, as well as abandon
certain pipelines and lease firm  capacity from Texas Eastern
Transmission Corporation  ("Texas Eastern") at an estimated cost of
$350 million.1 




__________

n 1 Columbia's Expansion Project proposed the construction of  over
forty miles of new pipeline, the replacement of eight miles of  other
pipeline, the uprating of nearly 280 miles of pipeline, the  addition
of 45,699 horsepower of compression, the increase in  capacity of 14
storage fields, the sale of 8,200 million cubic feet 


Columbia further sought an "upfront determination that it  may roll the
costs associated with the Expansion Project into  its systemwide Part
284 rates in its next rate case," rather  than impose such charges
"incrementally," i.e. solely on ex- pansion facility customers. See
Columbia  Gas, 78 F.E.R.C. at 61,117. The Commission agreed, relying 
on its Pricing Policy Statement, which established a presump- tion in
favor of rolled-in rates where the rate impact is five  percent or
less and the pipeline shows specific system-wide  operational and
financial benefits to its customers. See id. at  61,119; see also
Pricing Policy for New and Existing Facili- ties Constructed by
Interstate Natural Gas Pipelines, 71  F.E.R.C. p 61,241, at 61,916-17
(1995), reh'g denied, 75  F.E.R.C. p 61,105 (1996). Finding that
Columbia's project  met these criteria, the Commission determined that
Columbia  could "roll-in" its costs associated with the expansion
project  "in Columbia's next rate proceeding unless there has been a 
significant change from the facts and circumstances underly- ing this
order." Columbia Gas, 78 F.E.R.C. at 61,124.


In rejecting NYSEG's arguments that Columbia's rate  impact study was
flawed and that a substantial part of its  operational benefits were
withdrawn, the Commission con- cluded that Columbia had sufficiently
demonstrated that the  rate impact of the Expansion Project was below
the five  percent threshold and that Columbia had "shown ample oper-
ational and financial benefits to its system."2 Id. at 61,119.  Hence,
the Commission ruled, the burden of proof shifted to  the objecting
customer to show that the benefits of rolled-in  pricing were so
"insignificant" that such rates were not 




__________

n (MMcf) of its fixed asset base gas, and the leasing of additional 
capacity from Texas Eastern.


2 The Commission found that the benefits to customers includ- ed
greater storage deliverability and turnover capacity, additional 
facility integrity and operational flexibility with the establishment
of  a third high pressure pipeline system, reductions in the required 
base gas in the system, lowered costs associated with retained 
storage, and system-wide fuel savings. Id. at 61,118-19.


justified. Id. The Commission found that NYSEG had not  met this
burden, because Columbia's impact study had relied  on appropriate
considerations and "not all customers must  benefit equally to justify
rolled-in rate treatment." Id. It  therefore preliminarily determined
that Columbia could pro- ceed with its expansion project, subject to
environmental  review and issuance of a final order. Id. at 61,124.


On rehearing NYSEG challenged the Commission's deter- minations on
several grounds, including that the policy state- ment provided an
insufficient basis on which the Commission  could evaluate the merits
of Columbia's application, that the  Commission failed to consider its
precedent, that the impact  determination was unsupported by record
evidence and based  on an inflationary scheme that encouraged
uneconomic invest- ments, that the Commission's order lacked any
reasoned  analysis to support the finding of benefits to existing
custom- ers and, in any event, that the claimed benefits were
illusory.  The Commission found NYSEG's challenges unpersuasive  and
also rejected NYSEG's request for an evidentiary hear- ing because no
material fact was in dispute. 79 F.E.R.C.  at 61,759. The Commission
then issued cer- tificates of convenience and necessity generally
authorizing  Columbia to proceed with its expansion program. Id. at 


In its petition for review, NYSEG contends that the Com- mission's
presumption in favor of rolled-in rates will, in fact,  control
Columbia's next section 4 rate case, and therefore the  Commission
erred by failing to follow its usual section 4  procedures with a full
evidentiary hearing.3 It further main-




__________

n 3 The Pricing Policy provides, in part, that:


The decision made in the certificate order will apply to the  pricing
of the facilities in the first rate case after the facilities  go into
operation, unless the parties demonstrate that circum- stances have
changed significantly between the time the certifi- cate is issued and
the pipeline files the rate case. If there is no  significant change
in circumstance between the certificate or- der and the first rate
case, the Commission will summarily 


tains that the Commission acted arbitrarily and capriciously  by
placing the burden on customers to show that the system  benefits were
not sufficiently substantial to warrant rolled-in  pricing and by
adopting five percent as a threshold for its  presumption favoring
rolled-in rates. Finally, it contends  that the Commission failed to
apply Battle Creek Gas Co. v.  FPC, 281 F.2d 42, 47 (D.C. Cir. 1960),
and its progeny, which  require the Commission when imposing rolled-in
rates to  identify how the new facilities are integrated into the main
 system and how they will benefit all the customers in the  system.
See also TransCanada Pipelines Ltd. v. FERC, 24  F.3d 305, 308 (D.C.
Cir. 1994). The Commission responds  that the appeal is not ripe
because Columbia has not yet filed  a section 4 rate case, nor has the
Commission actually ap- proved rolled-in rates.


II.


A claim is unripe for review when it rests "upon contingent  future
events that may not occur as anticipated, or indeed  may not occur at
all." Texas v. United States, 523 U.S. 296,  ___, 118 S. Ct. 1257,
1259 (1998) (quotation marks omitted).


The primary focus of the ripeness doctrine as applied to  judicial
review of agency action "has been a prudential  attempt to time review
in a way that balances the  petitioner's interest in prompt
consideration of allegedly  unlawful agency action against the
agency's interest in  crystallizing its policy before that policy is
subjected to  judicial review and the court's interests in avoiding
un- necessary adjudication and in deciding issues in a con- crete


Mississippi Valley Gas Co. v. FERC, 68 F.3d 503, 508 (D.C.  Cir. 1995)
(quoting Eagle-Picher Indus. v. EPA, 759 F.2d 905,  915 (D.C. Cir.
1985)). To evaluate ripeness, a court must  therefore consider "both
the fitness of the issues for judicial 




__________

n resolve the pricing issue in the first rate case consistent with  its
certificate decision.


71 F.E.R.C. at 61,918.


decision and the hardship to the parties of withholding court 
consideration." Texas, 118 S. Ct. at 1260 (quoting Abbott  Labs. v.
Gardner, 387 U.S. 136, 149 (1967)); see also Tennes- see Gas Pipeline
Co. v. FERC, 736 F.2d 747, 749 (D.C. Cir.  1984). This doctrine allows
courts to "postpone review of  administrative action when delay would
facilitate examination  of the issues without causing significant
hardship to the  petitioner."4 Great Lakes Gas Transmission Ltd.
Partner- ship v. FERC, 984 F.2d 426, 431 (D.C. Cir. 1993).


The two orders challenged by NYSEG do not actually  impose rolled-in
rates, and they specifically provide that the  issue will be revisited
at the next section 4 rate proceeding  upon a showing of a significant
change in circumstances. The  Commission suggests that the next
section 4 proceeding "may  not come to pass" and that it will not
occur, at a minimum,  before February 1, 2000, as a result of an
agreement settling  Columbia's prior section 4 rate case. See Columbia
Gas  Transmission Corp., 79 F.E.R.C. p 61,044, at 61,201 (1997). 
NYSEG responds that rate cases, like "death and taxes," are  an
inevitable fact of life. As to inevitability, NYSEG may  have the
better of the argument, but its effort to obtain  review now


Although NYSEG views these orders to establish a pre- sumption that
will control Columbia's next case, it does not  deny that it will have
the opportunity to appeal the rolled-in  rates if the Commission fails
to follow the requirements of  section 4, including the requirement
that Columbia bear the  burden of proving that rolled-in rates are
"just and reason- able." See 15 U.S.C. s 717c. As in Tennessee Valley
Mun.  Gas Ass'n v. FERC, 140 F.3d 1085 (D.C. Cir. 1998), where the 




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n 4 Because the petition is unripe, we do not reach the Commis- sion's
alternative argument that NYSEG is not aggrieved under the  NGA, see
15 U.S.C. s 717r(b) (1994), or under Article III, see  Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560-61 (1992); Shell  Oil Co. v.
FERC, 47 F.3d 1186, 1200-01 (D.C. Cir. 1995). The  hardship inquiry
under ripeness review, however, "overlaps with the  'injury in fact'
facet of standing doctrine." Navegar, Inc. v. United  States, 103 F.3d
994, 998 (D.C. Cir. 1997).


court held that the petitioner's challenge was unripe because  the
Commission had only "tentatively concluded that the  evidence in the
record did not justify" rolled-in pricing and  had deferred "making a
final decision until the parties had  the opportunity to present
further evidence in Tennessee's  ongoing rate case," id. at 1088, so
too here there is no final  agency decision on rolled-in rates that
will govern future  proceedings. See Mississippi Valley, 68 F.3d at
506. Al- though the Commission has indicated its predisposition to 
allow Columbia to roll-in the costs of its expansion program at  its
next section 4 rate proceeding, it remains for Columbia to  file for
new rates and, in that event, to show that such rates  are just and
reasonable. Under the Commission's challenged  orders, opponents of
rolled-in rates could still show that  changed circumstances
necessitate reexamination of the ques- tion, and NYSEG can challenge
the presumption created by  the Pricing Policy Statement as well as
what it views as the  Commission's improper placement of a burden on
it to dem- onstrate changed circumstances. In any event, even assum-
ing that NYSEG's rates will assuredly increase, its challenges  are
presently unfit for judicial resolution because it is unclear  just
how the Commission will apply the policy statement in a  future
section 4 proceeding. See Clean Air Implementation  Project v. EPA,


NYSEG nonetheless contends that it suffers current hard- ship and
injury as a result of the orders because it is paying  rates resulting
from "the cost of Columbia's payments to  Texas Eastern through the
Transmission Cost Recovery Ad- justment ("TCRA")." NYSEG points to the
Commission's  statement that "[Columbia] intends to account for the
costs  associated with the lease as operational Account 858 costs. It 
proposes to recover these costs pursuant to its tariff's  [TCRA]
mechanism." Columbia Gas, 78 F.E.R.C. at 61,110  (emphasis added). In
fact, the costs contested were approved  in other orders. NYSEG admits
that "[c]urrent recovery was  agreed to in the settlement of
Columbia's previous rate case  [under section 4], subject to
litigation of the case here on  appeal." Reply Br. at 3 n.5; see also


F.E.R.C. p 61,044. Indeed, a 1998 Commission order at- tached to
NYSEG's reply brief provides that "[i]n accordance  with the
Commission's May 14, 1997 order in Docket No.  CP96-213 [the second
order here on appeal], authorizing the  lease, Columbia is including
$7,245,180 in its Current Opera- tional TCRA Rate associated with the
[Texas Eastern] lease  agreement." Letter Order from the Office of
Pipeline Regu- lation, to Columbia Gas Transmission Corp., No.
RP99-12- 000, at 1 (Oct. 27, 1998). That letter order explains that a 
stipulation approved in the settlement agreement "allows  Columbia to
include and collect the subject lease payments in  and through its
TCRA mechanism contingent upon the ap- proval of the lease agreement
in Columbia's Docket No. CP  96-213 (Market Expansion Application)."
Id. The order ap- proving the settlement agreement is not challenged
in NY- SEG's petition, as counsel for NYSEG acknowledged during  oral
argument. Moreover, counsel for NYSEG acknowledged  at oral argument
that under the settlement it is entitled to  receive a refund if the
court or the Commission disapproves  rolled-in rates. Of course,
NYSEG's failure to seek review of  the orders approving the settlement
and the imposition of the  TCRA costs bars us from reviewing those
orders. See 15  U.S.C. s 717r(b) (1994); Process Gas Consumers Group
v.  FERC, 912 F.2d 511, 514 (D.C. Cir. 1990). Furthermore, the  refund
provision would appear to mitigate any potential inju- ry, which the
court may consider in evaluating the hardship  NYSEG may face. Cf.
Papago Tribal Util. Auth. v. FERC,  628 F.2d 235, 240 (D.C. Cir.
1980). But in any event, the two  orders that NYSEG challenges in its
current petition do not  impose the costs creating the alleged


Accordingly, because the Commission has not rendered a  final order
approving Columbia's request for rolled-in rates,  see id. at 239, we
dismiss NYSEG's petition as unripe and do  not reach the merits of its
contentions. Even if it is virtually  inevitable that Columbia will
request rolled-in rates at its  next section 4 proceeding, it is not
inevitable that the Com- mission will approve such rates. NYSEG has
not demon- strated that it suffered current hardship as a result of
the  orders under appeal, see Mississippi Valley, 68 F.3d at 508, 


and to the extent the Commission's orders bind Columbia's  next section
4 rate proceeding, NYSEG can seek review at  that time.