Commissioner James Danly Statement
December 8, 2023
Docket Nos. CP20-528-002 and CP20-529-001
I dissent from today’s order[1] because I am persuaded by Stingray Pipeline Company, L.L.C.’s (Stingray) arguments on rehearing. This case underscores the importance in Natural Gas Act (NGA) section 7[2] proceedings (both abandonment and certificate proceedings) of parties challenging conditions when they believe that the Commission has exceeded its authority.
While I had misgivings over the Abandonment Order’s imposition of the condition[3] that is the subject of Stingray’s July 17, 2023 Rehearing Request, I did not address it in my separate statement.[4] After reading Stingray’s Rehearing Request and following further review of the record, I am now confident that the Commission was in error when conditioning Stingray’s abandonment authority for the West Cameron 509 System to Triton upon Stingray either putting Segment 3394 back into service prior to abandonment or filing a statement with the Commission demonstrating Energy Resource Technology GOM, Inc. (ERT) accepts Segment 3394 remaining out of service.
In retrospect, the Commission should have done one of two things in the Abandonment Order: either (1) approved the requested abandonment without the condition in Ordering Paragraph (H); or (2) denied the requested abandonment due to concerns with continuity of contracted-for service with the firm shipper.
Of the two options above, the Commission should probably have found that the requested abandonment was permitted by the public convenience or necessity under NGA section 7(b)[5] and not imposed the condition.
As to the condition, an agency’s decision is
arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.[6]
The Commission “must examine the relevant data and articulate a satisfactory explanation for its action including a ‘rational connection between the facts found and the choice made.’”[7] The Commission must also base its decisions on substantial record evidence. Substantial evidence means “more than a mere scintilla,” that is, “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.”[8]
The Commission’s Rehearing Order[9] fails to demonstrate a “‘rational connection between the facts found and the choice made.’”[10] Stingray points to the following evidence relied upon by the Commission in the Abandonment Order, stating that,
the Commission made its determination after specifically identifying the numerous benefits of the abandonment by sale to Triton, including but not limited to, its recitation of the following record evidence: (i) although Stingray’s certificated system capacity is 350,000 Mcf/d, the West Cameron 509 System’s total average firm throughput declined from 6,771 Dth/d in 2018 to 16 Dth/d in 2022; (ii) “[t]he disinclination of Stingray’s shippers to sign non-discounted contracts for firm transportation service provides a reasonable basis under these circumstances for projecting a lack of growing demand in the future”; (iii) “Stingray held an open season for firm transportation service in 2020 and received no bids”; (iv) “Stingray’s data responses establish that Stingray’s costs associated with operating and maintaining the West Cameron 509 System exceed its revenue and are likely to continue to do so in the future”; (v) “[u]nder these circumstances, we will not require Stingray to continue to maintain and operate these underused facilities awaiting potential firm demand . . .”; and (vi) “we will not require Stingray to maintain and operate facilities that are not needed to meet the relatively low level of existing firm service obligations and for which there is no demonstration of market demand.”[11]
Stingray also asserts that:
although the Commission referenced the record evidence that Stingray’s operation and maintenance (‘O&M’) costs exceed its revenues, specifically that Stingray’s annual revenues in 2020 for the West Cameron 509 System were $447,095 while total O&M expenses were $2,477,915, and in 2022, total revenues fell to $72,696 while O&M expenses increased to $3,514,007, the Commission failed to examine and explain how requiring Stingray to expend any additional resources to make Segment 3394 operational or obtain shipper consent does not further exacerbate this disparity between Stingray’s annual revenues and O&M expenses.[12]
As the Supreme Court has explained, under NGA section 7(b) the Commission is “given control over the abandonment of [jurisdictional] facilities or of service.”[13] I recognize that the primary consideration in assessing an abandonment is continuity of service.[14] Based on the foregoing record evidence, however, I am not convinced that the Commission made a “‘rational connection between the facts found and the choice made.’”[15] The Commission should have found that the proposed abandonment is permitted by the public convenience or necessity without the condition in Ordering Paragraph (H),[16] especially considering that there is “record evidence that Segment 3394 . . . was damaged by Hurricane Delta”[17] and has therefore “been out of service since 2020, which means that there is not a continuity of service issue.”[18] Regardless, the Commission should not be in the business of issuing illusory authorizations in which permission to act under NGA section 7 is granted, but under conditions so onerous that an authorization holder is unable to act under its terms. Outright acceptance or a rejection based on the applicant’s failure to demonstrate that its proposed action is permitted by the public convenience or necessity would have been far preferable, and well within the Commission’s authority.
For these reasons, I respectfully dissent.[1] Stingray Pipeline Co., L.L.C., 185 FERC ¶ 61,171 (2023) (Rehearing Order).
[2] 15 U.S.C. § 717f.
[3] See Stingray Pipeline Co., L.L.C., 183 FERC ¶ 61,201, at Ordering Para. (H) (2023) (Abandonment Order) (“Stingray’s abandonment authority for the West Cameron 509 System to Triton is conditioned upon Stingray either putting Segment 3394 back into service prior to abandonment or filing a statement with the Commission demonstrating ERT accepts Segment 3394 remaining out of service.”).
[4] See id. (Danly, Comm’r, concurring).
[5] 15 U.S.C. § 717f(b).
[6] Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (emphasis added) (State Farm).
[7] Id. (quoting Burlington Truck Lines, Inc. v. U.S., 371 U.S. 156, 168 (1962)); see also id. at 56 (finding that “the agency . . . failed to offer the rational connection between facts and judgment required to pass muster under the arbitrary and capricious standard”).
[8] Consol. Edison Co. of N.Y. v. NLRB, 305 U.S. 197, 229 (1938) (citations omitted).
[9] Rehearing Order, 185 FERC ¶ 61,171.
[10] State Farm, 463 U.S. at 43 (quoting Burlington Truck Lines, Inc. v. U.S., 371 U.S. at 168).
[11] Rehearing Request at 10 (internal citations omitted) (emphasis in original).
[12] Id. at 10-11 (citation omitted).
[13] FPC v. Hope Nat. Gas Co., 320 U.S. 591, 611 (1944); see also Sunray Mid-Continent Oil Co. v. FPC, 364 U.S. 137, 141 (1960) (“Section 7(b) of the Natural Gas Act regulates the abandonment by natural-gas companies of their facilities and services subject to the jurisdiction of the Commission.”) (footnote omitted).
[14] See, e.g., Transcon. Gas Pipe Line Co., LLC, 170 FERC ¶ 61,055, at P 15 (2020) (“The Commission has stated that continuity and stability of existing service are the primary considerations in assessing the public convenience or necessity of a permanent cessation of service under section 7(b).”) (citing Mich. Consol. Gas Co. v. FPC, 283 F.2d 204, 214 (D.C. Cir. 1960); Transcon. Gas Pipe Line Corp. v. FPC, 488 F.2d 1325, 1328 (D.C. Cir. 1973)). Cf. Sunray Mid-Continent Oil Co., 364 U.S. at 143 (“If the pipeline company were left free to cease its service to the local distribution company, a local economy which had grown dependent on natural gas as a fuel would be at its mercy. And this, though the primary practical problem that led to the passage of the [NGA] was the great economic power of the pipeline companies as compared with that of communities seeking natural gas service.”) (citation omitted).
[15] 463 U.S. at 43 (quoting Burlington Truck Lines, Inc. v. U.S., 371 U.S. at 168).
[16] See Abandonment Order, 183 FERC ¶ 61,201 at Ordering Para. (H).
[17] Rehearing Request at 12.
[18] Id. at 15 (citation omitted).