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


ANR PIPEL CO

v.

FERC


99-1010a

D.C. Cir. 2000


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Silberman, Circuit Judge: ANR Pipeline Company peti- tions for review
of an order of the Federal Energy Regulato- ry Commission (FERC)
permitting a competitor to build and  operate a natural gas pipeline.
Insofar as ANR contends  FERC acted unreasonably in refusing to hold a
comparative  hearing, we deny the petition. And to the extent
petitioner  raises environmental objections to FERC's decision, we
con- clude that it lacks standing and therefore dismiss the


I.


ANR operates a natural gas pipeline system. The system  takes gas from
several different platforms, including Ship  Shoal Block 207 in the
Gulf of Mexico off the coast of  Louisiana, where it receives gas from
Manta Ray Offshore  Gathering Company. It transports this gas to its
onshore  compression station in Patterson, Louisiana. From there, its 
interstate pipelines deliver the gas directly to customers,  most of
whom are in the Midwest, or to connections with  other pipeline
systems for delivery elsewhere.


Manta Ray is owned by affiliates of Shell Offshore, Inc.,  Marathon Oil
Company, and Leviathan Gas Pipeline Part- ners, L.P. Affiliates of
those three companies formed the  Nautilus Pipeline Company, L.L.C.,
to build a new pipeline  from Ship Shoal Block 207 to the onshore
pipeline grid. In  September 1996, Nautilus filed an application with
the Com-


mission under s 7(c) of the Natural Gas Act for permission to 
construct and operate 101 miles of 30-inch diameter pipe.  The
proposed line was to run from Block 207 to an onshore  station in
Garden City, Louisiana.


A month later, ANR petitioned for a certificate under  s 7(c) for
permission to expand the capacity of its existing  offshore system. It
sought to add about 37 miles of 30-inch  mainline loop, increasing its
capacity to transport gas from  Block 207 to the mainland. And then it
promptly filed  motions in both the ANR and the Nautilus dockets to
consoli- date the two proceedings and set the projects for a compara-
tive evidentiary hearing. It argued that Ashbacker Radio  Corp. v.
FCC, 326 U.S. 327 (1945), required a comparative  hearing because its
application and the Nautilus application  were mutually exclusive.
Since it contended the capacity of  the Manta Ray system was not
sufficient to supply gas to  both projects, ANR reasoned that the
construction of one  project would preclude construction of the other.
It invoked  a 1968 FERC policy statement directing the Commission
staff  to review applications to construct facilities in the Gulf "on 
both a joint and individual company basis" with a view toward 
promoting joint arrangements that would ensure the full  utilization
of those facilities. See 18 C.F.R. s 2.65. And it  raised as further
support for a comparative hearing leading to  a choice of only one
pipeline the National Environmental  Policy Act (NEPA), 42 U.S.C. s


The Commission denied ANR's motion for consolidation  and a comparative
hearing because in its view the two pro- jects were not necessarily
mutually exclusive and the public  interest could best be served by
allowing market forces to  channel demand. See Nautilus Pipeline Co.,
78 F.E.R.C.  p 61,325 (1997); ANR Pipeline Co., 78 F.E.R.C. p 61,326 
(1997) ("ANR I"). It approved the Nautilus application,  allowing
construction to begin. At the same time it issued a  preliminary
determination that ANR's application was also in  the public interest,
subject to completion of an environmental  assessment. ANR requested
rehearing of both orders. A  few days later it sought a stay of the
order allowing Nautilus  to begin construction. The Commission denied
the stay, see 


Nautilus Pipeline Co., 79 F.E.R.C. p 61,151 (1998), and we  denied
ANR's petition for a writ of prohibition and stay. The  Commission
ultimately granted ANR's certificate but denied  its motions for
rehearing. See Nautilus Pipeline Co., 85  F.E.R.C. p 61,200 (1998);
ANR Pipeline Co., 85 F.E.R.C.  p 61,056 (1998) ("ANR II"). ANR
petitioned for review of the  Commission's rulings in the Nautilus


II.


Petitioner claims that the Commission was obliged under  the Ashbacker
doctrine to hold a comparative hearing before  it granted the Nautilus
certificate. But Ashbacker, which  involved a grant of a broadcast
license by the FCC, applies  only if the certificates are, in fact,
mutually exclusive. In that  case both applications could not have
been granted because  both petitioning companies could not broadcast
on the same  frequency (two men on second base). And "where two bona 
fide applications are mutually exclusive the grant of one  without a
hearing to both deprives the loser of the opportuni- ty which Congress
chose to give him." Ashbacker, 326 U.S.  at 333.


Petitioner contends that Ashbacker is not limited to cases  of physical
exclusivity but extends to situations in which  economic or other
factors preclude the granting of both  licenses. The Commission does
not dispute this, at least  directly. Instead, it responds that the
applications of ANR  and Nautilus were not mutually exclusive; indeed
both were  granted. ANR's substantive objection then is that the Com-
mission unreasonably concluded that the projects were not  mutually
exclusive.


The pipelines do run roughly parallel. But "[m]any exist- ing pipelines
share similar routes while serving different  production areas and
linking different fields." ANR I, 78  F.E.R.C. at 62,405. Here FERC
found that the proposals  were not necessarily "dependent upon
transporting the same  reserves or upon serving the same customers."




__________

n 1 Nautilus has completed its pipeline--which would raise an inter-
esting remedial question if we agreed with ANR.


the Commission recognized that Manta Ray could not deliver  enough gas
to fill both the Nautilus pipeline and the ANR  expansion, it noted
that ANR's system "accesses an area of  the OCS [Outer Continental
Shelf] where ... large new gas  reserves are being developed." ANR II,
85 F.E.R.C. at  61,177. ANR is hardly in a position to dispute this
finding,  for its own application asserted that "there are currently 
under development significant new gas reserves" that will  lead to a
"substantial increase in offshore production." Peti- tioner seems to
argue that the Commission was not entitled  to look down the road, to
consider further development in its  certificate proceeding. But that
contention runs afoul of the  specific language of s 7(e) of the
Natural Gas Act which  directs FERC to approve a project when it "is
or will be  required by the present or future public convenience and 
necessity." 15 U.S.C. s 717f(e) (emphasis added).


The Commission recognized in issuing ANR's certificate as  well that
"if the shippers of the additional reserves coming on  line find that
ANR's project is attractive from an economic  standpoint, they will
subscribe to ANR's project and assure  its ultimate success." ANR II,
85 F.E.R.C. at 61,177. It  imposed an at-risk condition on ANR's
certificate (as it had  on Nautilus's) so that the pipelines'
customers would not bear  any of the risk associated with either
project. This approach  left ANR "free to compete with Nautilus and
other projects  for markets and shippers," allowing ANR to "consider
the  likelihood that market forces will respond to the need for 
upstream feeder capacity that can move the additional gas  reserves
being developed" in deciding whether to proceed  with construction.
Id. Presumably, that leaves ANR in the  position of building its
pipeline extension only when sufficient  demand justifies it, or when
it can effectively wean existing  customers away from Nautilus.


To be sure, this leaves ANR at something of a disadvan- tage, for the
Nautilus pipeline is already in place and serving  customers, because
Nautilus filed its application first. So it  might be thought that the
short-term difficulty of competing  with an incumbent pipeline makes
the two pipelines in some  sense exclusive. But FERC seems at least
implicitly to have 


concluded that this kind of economic disadvantage is different  from a
situation in which economic factors make it possible to  grant only
one license, so that Ashbacker does not apply here.  We think its
judgment was reasonable.


ANR protests the Commission's reliance on market  forces--even in this
limited fashion--is inconsistent with the  premise of the Natural Gas
Act. It is up to the Commission,  not the market, to determine what is
in the public interest.  We do not understand, however, how the
Commission could  determine the public interest without taking into
account  future demand which is what the Commission means by  "market
forces," nor do we think that the general language of  s 7(e)
precludes FERC from encouraging competition.


It may well be that petitioner's more basic concern is that 
competition will not really be free in this setting because  Nautilus
is affiliated with Manta Ray. "Due to the vertically  integrated
nature of the Nautilus project," it argues, "it  cannot be assumed
that the owner-shippers of Nautilus will  choose the least cost
transportation alternative." But Manta  Ray has the same incentive to
minimize its shipping cost as  any other producer in the competitive
market for natural gas  (petitioner does not claim that the downstream
market is not  competitive). Its owners would have no reason to build
the  Nautilus pipeline if it would be cheaper for them to use  ANR's.
There is nothing inherently suspicious about the  vertical integration
of Nautilus and Manta Ray. Cf. Jack  Walters & Sons Corp. v. Morton
Building, Inc., 737 F.2d 698,  710-11 (7th Cir. 1984).


Even if FERC's decision is in conformity with its statutory  authority,
ANR contends that 18 C.F.R. s 2.65 required  FERC to hold a
comparative hearing. That provision states,  it will be recalled, that
the Commission directs its staff to  review applications for
construction of pipelines in the Louisi- ana offshore area "on both a
joint and individual company  basis with a view toward the development
of pipeline compa- ny gas exchange procedures that will minimize
cross-hauls  and toward the promotion of joint use arrangements that
will  assure the early full utilization of large capacity facilities
in  the Outer Continental Shelf area." It is argued that this 


section imposes "legal requirements that are designed to  foster the
maximum use of these high-cost facilities," and that  the Commission
unlawfully disregarded its own regulation.


The difficulty with this argument is that s 2.65 is a policy 
statement, not a regulation. Tellingly, the section begins: "It  will
be the general policy of the Commission...." It is not a  rule that is
binding on FERC or the public--nor could it be,  for it was
promulgated without notice and comment. See  Order No. 363, 39 F.P.C.
925, 926 (1968) ("The statement  issued herein concerns a matter of
general policy which does  not require notice or hearing" under the
APA.). A policy  statement does not become a regulation simply because
an  agency chooses to publish it in the Code of Federal Regula-


An agency may not of course depart from prior policy  without
explanation. But FERC explained how changed  circumstances justified a
new policy. It pointed out that the  "structure of the natural gas
industry as well as the Commis- sion's regulatory approach have
undergone significant  changes" since s 2.65 was promulgated. ANR II,
85  F.E.R.C. at 61,176. More specifically, it explained that new 
technology has made it possible to produce gas from very  deep waters,
giving access to reserves of gas that are much  larger than those
available in the 1960s. For that reason,  "[t]he challenge facing
today's offshore industry is in estab- lishing an infrastructure
capable of transporting new OCS  production to diverse onshore markets
rather than allocating  limited production among existing pipelines."
ANR I, 78  F.E.R.C. at 62,406. It was entirely appropriate for the 
Commission to change its regulatory approach in response to 


III.


ANR's remaining argument is that the Commission violated  NEPA by
failing to conduct a comparative hearing. NEPA 




__________

n 2 In light of the extensive changes in FERC's regulatory ap- proach
since 1968, we think that it might be appropriate for the  Commission
to amend s 2.65 to reflect its new policy.


requires agencies to evaluate the environmental impact of a  project as
compared to its alternatives. See 42 U.S.C.  s 4332(2)(C)(iii). ANR
contends that its project is a more  environmentally friendly
alternative to that of Nautilus, and  one pipeline is environmentally
better than two, so FERC  should have considered the two pipelines
together before  approving either. Although neither FERC nor the
interve- nor has questioned ANR's standing to raise this claim, we are
 obliged to do so sua sponte. See, e.g., De Jesus Ramirez v.  Reich,
156 F.3d 1273, 1276 (D.C. Cir. 1998).


The jurisdictional section of the Natural Gas Act provides  that "[a]ny
party ... aggrieved by an order issued by the  Commission" may
petition for review. 15 U.S.C. s 717(b).  To be "aggrieved," a party
must assert an interest that is  arguably within the zone of interests
intended to be protected  by the statute on which it relies. See
Association of Data  Processing Serv. Orgs. v. Camp, 397 U.S. 150
(1970). NEPA,  of course, is a statute aimed at the protection of the
environ- ment. But ANR has not alleged that it will suffer any 
environmental injury as a result of the Commission's action.  Indeed,
it has not alleged that it has any interest in the  environment at
all. Its only concern is with suppressing  competition from Nautilus,
and that economic interest is not  within the zone of interests
protected by NEPA. See Nevada  Land Action Ass'n v. United States
Forest Serv., 8 F.3d 713,  716 (9th Cir. 1993); cf. Competitive
Enterprise Inst. v.  NHTSA, 901 F.2d 107, 123-24 (D.C. Cir. 1990)
(informational  injury confers standing under NEPA only when the
informa- tion sought relates to environmental interests). We therefore
 conclude that ANR lacks prudential standing to bring a  NEPA


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The petition for review is denied in part and dismissed in  part.


So ordered.