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Association of Oil Pipe Lines v. Federal Energy Regulatory Commission

United States Court of Appeals, District of Columbia Circuit

November 28, 2017

Association of Oil Pipe Lines, Petitioner
v.
Federal Energy Regulatory Commission and United States of America, Respondents Air Transport Association of America, Inc., d/b/a Airlines for America, et al., Intervenors

          Argued September 12, 2017

         On Petition for Review of an Order of the Federal Energy Regulatory Commission

          Steven Reed argued the cause for petitioner. With him on the briefs were Steven H. Brose, Daniel J. Poynor, and Steven M. Kramer.

          Susanna Y. Chu, Attorney, Federal Energy Regulatory Commission, argued the cause for respondents. With her on the brief were James J. Fredricks and Robert J. Wiggers, Attorneys, U.S. Department of Justice, Robert H. Solomon, Solicitor, Federal Energy Regulatory Commission, and Beth G. Pacella, Deputy Solicitor.

          Richard E. Powers Jr., Steven A. Adducci, Matthew D. Field, Thomas J. Eastment, Gregory S. Wagner, David A. Berg, Jeffrey M. Petrash, and James H. Holt were on the brief for Shippers Intervenors in support of the Federal Energy Regulatory Commission.

          Before: Kavanaugh and Srinivasan, Circuit Judges, and Edwards, Senior Circuit Judge.

          OPINION

          EDWARDS, SENIOR CIRCUIT JUDGE:

         Pursuant to authority granted to it under the Interstate Commerce Act, 49 U.S.C. app. § 15(1) (1988), and the Energy Policy Act of 1992, Pub. L. No. 102-486, § 1801(a), 106 Stat. 2776, 3010 (codified at 42 U.S.C. § 7172 note (2006)), the Federal Energy Regulatory Commission ("FERC" or "Commission") employs an indexed ratemaking system to govern oil pipeline rates. See Order No. 561, Revisions to Oil Pipeline Regulations Pursuant to the Energy Policy Act of 1992, 58 Fed. Reg. 58, 753, 58, 753-54 (Nov. 4, 1993). The Commission calculates the index each year using a formula aimed at capturing the change in costs experienced by the oil pipeline industry. Id. at 58, 754. It reexamines the formula it utilizes to set the annual index every five years. Id. With limited exceptions, it has applied a generally consistent methodology, approved by this court, to calculate the change in normal industry costs at each five-year interval. See Ass'n of Oil Pipe Lines v. FERC (AOPL I), 83 F.3d 1424 (D.C. Cir. 1996).

         On December 17, 2015, after engaging in notice and comment rulemaking, the Commission issued an order adopting the index formula for the 2016 to 2021 period. Five-Year Review of the Oil Pipeline Index, 80 Fed. Reg. 81, 744 (Dec. 31, 2015) [hereinafter 2015 Order]. The Association of Oil Pipelines ("AOPL") filed a petition for review of the 2015 Order in this court on February 16, 2016. AOPL alleges that the Commission acted arbitrarily and capriciously in violation of the Administrative Procedure Act ("APA") by departing in two ways from the methodology used in past index reviews: First, according to AOPL, FERC, without reasoned explanation, impermissibly relied solely on the middle 50 percent of pipeline cost-change data and failed to incorporate the middle 80 percent of cost-change data. Second, AOPL asserts that FERC, without adequate justification, impermissibly used "Page 700" cost-of-service data to calculate the index level instead of the "Form No. 6" accounting data that had been employed in the past. We find no merit in AOPL's claims.

         Because "[t]he Commission, not this or any court, regulates" oil pipeline rates, our role on review of the 2015 Order is limited. FERC v. Elec. Power Supply Ass'n, 136 S.Ct. 760, 784 (2016). The record makes it plain that the Commission adequately and reasonably explained its decision not to consider the middle 80 percent of pipelines' cost-change data. Furthermore, contrary to AOPL's assertion, nothing in any of FERC's past index review orders bound the agency to use the middle 80 percent of pipelines' cost-change data. Likewise, the Commission's rationale for utilizing the cost-of-service data from Page 700 is clear and reasonable. And there is nothing in the record to support AOPL's claim that FERC's decision to use Page 700 data indicates an unexplained shift in its measurement objective. In this situation, the words of the Supreme Court are quite apt:

The disputed question[s in this case involve] both technical understanding and policy judgment. . . . Our important but limited role is to ensure that the Commission engaged in reasoned decisionmaking- that it weighed competing views, selected [an index] with adequate support in the record, and intelligibly explained the reasons for making that choice. FERC satisfied that standard. . . . [T]he Commission met its duty of reasoned judgment. FERC took full account of the alternative policies proposed, and adequately supported and explained its decision.

Id. The conclusions reached by the Court in FERC v. Electric Power Supply Association apply here as well. We therefore deny the petition for review.

         I. Background

         A. Statutory and ...


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