Michigan Consolidated Gas Co. v. Economic Regulatory Administration
Docket: No. 88-1791
Court: Court of Appeals for the D.C. Circuit; November 16, 1989; Federal Appellate Court
Michigan Consolidated Gas (MichCon) seeks judicial review of an Economic Regulatory Administration (ERA) order authorizing National Steel Corporation to import up to 25 Bcf of natural gas per year from Canada. This importation is part of National's plan to construct a pipeline under the Detroit River to connect its steel plant directly to Union Gas Ltd. MichCon, which has supplied National's gas needs for years, opposes this authorization, arguing that it undermines its business by allowing National to bypass its distribution facilities, potentially shifting fixed costs to MichCon’s other customers.
MichCon raises several points in its protest: (1) ERA allegedly failed to assess the implications of National's direct importation on MichCon's cost structure and its customers; (2) ERA did not adequately evaluate whether the wellhead price of gas in Canada would be competitive; (3) ERA improperly authorized National to import more gas than necessary; and (4) MichCon contests ERA's denial of its request for a hearing to address these concerns.
However, the court references a prior ruling that upheld FERC’s decision allowing another pipeline to bypass MichCon, which effectively negates the need to address MichCon’s arguments. Following its connection to the Panhandle pipeline, National has ceased purchasing gas from MichCon and instead sources it from the open market, indicating that without a Supreme Court reversal, MichCon faces little chance of regaining National as a customer.
National's decision to establish its own pipeline to Canadian sources, rather than relying solely on Panhandle, does not inflict any identifiable harm on MichCon, nor does it provide grounds for judicial review by the court. MichCon lacks standing to contest the ERA’s order under Section 19(b) of the NGA, which allows only "aggrieved" parties to seek review. Generally, competitors who risk losing business due to an import arrangement can challenge such approvals. However, MichCon has not demonstrated an injury that is directly traceable to the ERA's order, which was issued after FERC had already approved Panhandle's service to National.
As a result, MichCon's earlier inability to compete for National's business has already occurred, and the ERA's approval of the Canadian import did not negatively impact MichCon's competitive position. Despite MichCon's assertions that it wishes to provide service to National and could potentially step in during disruptions, there is insufficient evidence to suggest that such disruptions are likely enough to establish standing. MichCon's situation is characterized as preferring the possibility of competing in a duopoly rather than a triopoly, without any realistic expectation that it would regain National's business should Panhandle face issues. Additionally, MichCon's claim that denying them standing is akin to a "shell game" fails to adequately address the fundamental issue of redress, as FERC had determined that MichCon would not suffer injury from National's sourcing decisions.
National's termination of its supply relationship with MichCon, facilitated by the Panhandle bypass, raises questions about MichCon's claims of injury from both the bypass and the importation of Canadian gas. MichCon argues that it suffers harm from both sources and that it is unfair to analyze them separately. While this claim is intuitively appealing, the document notes that it does not need to resolve the philosophical issue of whether concurrent events can independently cause harm.
The Federal Energy Regulatory Commission (FERC) did not solely base its decision on the fact that MichCon would face detriments regardless of the bypass since National had alternative supply options. Instead, FERC emphasized the importance of competition between local distribution companies (LDCs) and pipelines for industrial customers, reinforcing its preference for competition in the energy market. MichCon had previously acknowledged that losing National as a customer would not necessitate a rate increase; however, it later claimed that it did seek and receive a rate increase due to the loss of National's business, impacting other customers financially.
Ultimately, MichCon lacks standing under Section 19(b) of the Natural Gas Act (NGA) to challenge the FERC decision regarding National's gas imports, leading to the dismissal of its petition for review.
