In response to ongoing natural gas shortages, Congress enacted
the Natural Gas Policy Act of 1978 (NGPA), which,
inter
alia, established higher price ceilings for "new" gas in order
to encourage production and carried over the preexisting system of
"vintage" price ceilings for "old" gas in order to protect
consumers. However, recognizing that some of the vintage ceilings
might be too low, Congress, in § 104(b)(2) of the NGPA, authorized
the Federal Energy Regulatory Commission to raise them whenever
traditional pricing principles under the Natural Gas Act of 1938
(NGA) would dictate a higher price. After the new production
incentives resulted in serious market distortions, the Commission
issued its Order No. 451, which, among other things, collapsed the
existing vintage price categories into a single classification and
set forth a single new ceiling that exceeded the then-current
market price for old gas; established a "Good Faith Negotiation"
(GFN) procedure that producers must follow before they can collect
a higher price from current pipeline customers, whereby producers
may in certain circumstances abandon their existing obligations if
the parties cannot come to terms; and rejected suggestions that the
Commission undertake to resolve in the Order No. 451 proceeding the
issue of take-or-pay provisions in certain gas contracts. Such
provisions obligate a pipeline to purchase a specified volume of
gas at a specified price, and, if it is unable to do so, to pay for
that volume. They have caused significant hardships for gas
purchasers under current market conditions. On review, the Court of
Appeals vacated Order No. 451, ruling that the Commission lacked
authority to set a single ceiling price for old gas under §
104(b)(2) of the NGPA; that the ceiling price actually set was
unreasonable; that the Commission lacked authority to provide for
across-the-board, preauthorized abandonment under § 7(b) of the
NGA; and that the Commission should have addressed the take-or-pay
issue in this proceeding, even though it was considering the matter
in a separate proceeding.
Page 498 U. S. 212
Held: Order No. 451 does not exceed the Commission's
authority under the NGPA. Pp.
498 U. S.
221-231.
(a) Section 104(b)(2) of the NGPA -- which authorizes the
Commission to prescribe "
a . . . ceiling price, applicable
to . . .
any natural gas (
or category thereof; as
determined by the Commission) . . . , if such price" is (1)
"higher than" the old vintage ceilings, and (2) "just and
reasonable" under the NGA (emphasis added) clearly and
unambiguously gives the Commission authority to set a single
ceiling price for old gas. The NGPA's structure -- which created
detailed incentives for new gas, but carefully preserved the old
gas vintaging scheme -- does not require a contrary conclusion,
since the statute's bifurcated approach implies no more than that
Congress found the need to encourage new gas production
sufficiently pressing to deal with the matter directly, but was
content to leave old gas pricing within the Commission's discretion
to alter as conditions warranted. Further, the Commission's
decision to set a single ceiling fully accords with the two
restrictions § 104(b)(2) does establish, since the "higher than"
requirement does nothing to prevent the Commission from
consolidating existing categories and setting one price, and since
the "just and reasonable" requirement preserves the pricing
flexibility that the Commission historically exercised and accords
the Commission broad ratemaking authority that its decision to set
a single ceiling does not exceed. Respondents' contention that the
Commission's institution of the GFN process amounts to an
acknowledgment of the unreasonableness of the new ceiling price is
rejected, since there is nothing incompatible in the belief that a
price is reasonable and the belief that it ought not to be imposed
without prior negotiations. An otherwise lawful rate should not be
disallowed because additional safeguards accompany it. Respondents'
objection that no order "deregulating" the price of old gas can be
deemed just and reasonable is also rejected, since Order No. 451
does not deregulate in any legally relevant sense, and it cannot be
concluded that deregulation results simply because a given ceiling
price may be above the market price. Pp.
498 U. S.
221-226.
(b) Order No. 451's abandonment procedures fully comport with
the requirements of § 7(b) of the NGA, which,
inter alia,
prohibits a gas producer from abandoning its contractual service
obligations to a purchaser unless the Commission has (1) granted
its "permission and approval" of the abandonment; (2) made a
"finding" that "present or future public convenience or necessity
permit such abandonment" and (3) held a "hearing" that is "due."
First, although Order No. 451's approval of the abandonment at
issue is not specific to any single abandonment, but is instead
general, prospective, and conditional, nothing in § 7(b) prevents
the Commission from giving advance approval or mandates
individualized proceedings involving interested parties before a
specific abandonment
Page 498 U. S. 213
can take place. Second, in reviewing "all relevant factors
involved in determining the overall public interest," and in
finding that preauthorized abandonment under the GFN regime would
generally protect purchasers, safeguard producers, and serve the
market by releasing previously unused reserves of old gas, the
Commission made the necessary "finding" required by § 7(b), which
does not compel the agency to make "specific findings" with regard
to every abandonment when the issues involved are general. Finally,
the Commission discharged its § 7(b) duty to hold a "due hearing,"
since, before promulgating Order No. 451, it held a notice and
comment hearing and an oral hearing.
See, e.g., Heckler v.
Campbell, 461 U. S. 458,
461 U. S. 467.
United Gas Pipe Line Co. v. McCombs, 442 U.
S. 529, distinguished. Respondents cannot claim that the
Commission made no provision for individual determinations under
its abandonment procedures where appropriate, since Order No. 451
authorizes a purchaser objecting to a given abandonment on the
grounds that the conditions the agency has set forth have not been
met to file a complaint with the Commission. Pp.
498 U. S.
226-229.
(c) The Court of Appeals erred in ruling that the Commission had
a duty to address the take-or-pay problem more fully in this
proceeding. The court clearly overshot its mark if it meant to
order the Commission to resolve the problem, since an agency enjoys
broad discretion in determining how best to handle related yet
discrete issues in terms of procedures, and it is likely that the
Commission's separate proceeding addressing the matter will
generate relevant data more effectively. The court likewise erred
if it meant that the Commission should have addressed the
take-or-pay problem insofar as Order No. 451 "exacerbated" it,
since an agency need not solve every problem before it in the same
proceeding, and the Commission has articulated rational grounds for
concluding that the order would do more to ameliorate the problem
than worsen it. This Court is neither inclined nor prepared to
second-guess the Commission's reasoned determination in this
complex area. Pp.
498 U. S.
229-231.
885 F.2d 209 (CA 5 1989), reversed.
WHITE, J., delivered the opinion of the Court, in which all
other Members joined, except KENNEDY, J., who took no part in the
decision of the case.
Page 498 U. S. 214
Justice WHITE delivered the opinion of the Court.
These cases involve the validity of two orders, No. 451 and No.
451-A, promulgated by the Federal Energy Regulatory Commission
(Commission) to make substantial changes in the national market for
natural gas. On petitions for review, a divided panel of the Court
of Appeals for the Fifth Circuit vacated the orders as exceeding
the Commission's authority under the Natural Gas Policy Act of 1978
(NGPA), 92 Stat. 3352, 15 U.S.C. § 3301
et seq. 885 F.2d
209 (1989). In light of the economic interests at stake, we granted
certiorari and consolidated the cases for briefing and oral
argument.
Page 498 U. S. 215
496 U.S. 904 (1990). For the reasons that follow, we reverse and
sustain the Commission's orders in their entirety.
I
The Natural Gas Act of 1938 (NGA), 52 Stat. 821, 15 U.S.C. § 717
et seq. was Congress' first attempt to establish
nationwide natural gas regulation. Section 4(a) mandated that the
present Commission's predecessor, the Federal Power Commission,
[
Footnote 1] ensure that all
rates and charges requested by a natural gas company for the sale
or transportation of natural gas in interstate commerce be "just
and reasonable." 15 U.S.C. § 717c(a). Section 5(a) further provided
that the Commission order a "just and reasonable rate, charge,
classification, rule, regulation, practice, or contract" connected
with the sale or transportation of gas whenever it determined that
any of these standards or actions were "unjust" or "unreasonable."
15 U.S.C. § 717d(a).
Over the years, the Commission adopted a number of different
approaches in applying the NGA's "just and reasonable" standard.
See Public Serv. Comm 'n of N. Y. v. Mid-Louisiana Gas
Co., 463 U. S. 319,
463 U. S.
327-331 (1983). Initially, the Commission, construing
the NGA to regulate gas sales only at the downstream end of
interstate pipelines, proceeded on a company-by-company basis with
reference to the historical costs each pipeline operator incurred
in acquiring and transporting gas to its customers. The Court
upheld this approach in
FPC v. Hope Natural Gas Co.,
320 U. S. 591
(1944), explaining that the NGA did not bind the Commission to "any
single formula or combination of formulae in determining rates."
Id. at
320 U. S.
602.
The Commission of necessity shifted course in response to our
decision in
Phillips Petroleum Co. v. Wisconsin,
347 U. S. 672
(1954).
Phillips interpreted the NGA to require that the
Commission regulate not just the downstream rates
Page 498 U. S. 216
charged by large interstate pipeline concerns, but also upstream
sales rates charged by thousands of independent gas producers.
Id. at
347 U. S. 682.
Faced with the regulatory burden that resulted, the Commission
eventually opted for an "area rate" approach for the independent
producers, while retaining the company-by-company method for the
interstate pipelines. First articulated in 1960, the area rate
approach established a single rate schedule for all gas produced in
a given region based upon historical production costs and rates of
return.
See Statement of General Policy No. 61-1, 24
F.P.C. 818 (1960). Each area rate schedule included a two-tiered
price ceiling: the lower ceiling for gas prices established in
"old" gas contracts and a higher ceiling for gas prices set in
"new" contracts.
Id. at 819. The new two-tier system was
termed "vintage pricing" or "vintaging." Vintaging rested on the
premise that the higher ceiling price would provide incentives for
the production of new gas that would be superfluous for old gas
already flowing because
"price could not serve as an incentive, and since any price
above historical costs, plus an appropriate return, would merely
confer windfalls."
Permian Basin Area Rate Cases, 390 U.
S. 747,
390 U. S. 797
(1968). The balance the Commission hoped to strike was the
development of gas production through the "new" gas ceilings while
ensuring continued protection of consumers through the "old" gas
price limits. At the same time, the Commission anticipated that the
differences in price levels would be "reduced and eventually
eliminated as subsequent experience brings about revisions in the
prices in the various areas." Statement of General Policy,
supra, at
390 U. S. 818.
We upheld the vintage pricing system in
Permian Basin,
holding that the courts lacked the authority to set aside any
Commission rate that is within the "
zone of reasonableness.'"
390 U.S. at 390 U. S. 797
(citation omitted).
By the early 1970's, the two-tiered area rate approach no longer
worked. Inadequate production had led to gas shortages, which in
turn had prompted a rapid rise in prices. Accordingly,
Page 498 U. S. 217
the Commission abandoned vintaging in favor of a single national
rate designed to encourage production.
Just and Reasonable
National Rates for Sales of Natural Gas, 51 F.P.C. 2212
(1974). Refining this decision, the Commission prescribed a single
national rate for all gas drilled after 1972, thus rejecting an
earlier plan to establish different national rates for succeeding
biennial vintages.
Just and Reasonable National Rates for Sales
of Natural Gas, 52 F.P.C. 1604, 1615 (1974). But the single
national pricing scheme did not last long either. In 1976, the
Commission reinstated vintaging with the promulgation of Order No.
770.
National Rates for Jurisdictional Sales of Natural
Gas, 56 F.P.C. 509 (1976). At about the same time, in Order
No. 749, the Commission also consolidated a number of the old
vintages for discrete areas into a single nationwide category for
all gas already under production before 1973.
Just and
Reasonable National Rates for Sales of Natural Gas, 54 F.P.C.
3090 (1975). Despite this consolidation, the Commission's price
structure still contained 15 different categories of old gas, each
with its own ceiling price. Despite all these efforts, moreover,
severe shortages persisted in the interstate market because low
ceiling prices for interstate gas sales fell considerably below
prices the same gas could command in intrastate markets, which were
as yet unregulated.
Congress responded to these ongoing problems by enacting the
NGPA, the statute that controls this controversy.
See
Mid-Louisiana Gas Co., supra, 463 U.S. at
463 U. S.
330-331. The NGPA addressed the problem of continuing
shortages in several ways. First, it gave the Commission the
authority to regulate prices in the intrastate market as well as
the interstate market.
See Transcontinental Gas Pipe Line Corp.
v. State Oil and Gas Bd. of Miss., 474 U.
S. 409,
474 U. S.
420-421 (1986) (
Transco). Second, to encourage
production of new reserves, the NGPA established higher price
ceilings for new
Page 498 U. S. 218
and hard-to-produce gas, as well as a phased deregulation scheme
for these types of gas. §§ 102, 103, 105, 107 and 108; 15 U.S.C. §§
3312, 3313, 3315, 3317, 3318. Finally, to safeguard consumers, §§
104 and 106 carried over the vintage price ceilings that happened
to be in effect for old gas when the NGPA was enacted while
mandating that these be adjusted for inflation. 15 U.S.C. §§ 3314
and 3316. Congress, however, recognized that some of these vintage
price ceilings "may be too
low and authorize[d] the
Commission to raise [them] whenever traditional NGA principles
would dictate a higher price."
Mid-Louisiana Gas, supra,
463 U.S. at
463 U. S. 333.
In particular, §§ 104(b)(2) and 106(c) provided that the
Commission
"may, by rule or order, prescribe a maximum lawful ceiling
price, applicable to any first sale of natural gas (or category
thereof, as determined by the Commission) otherwise subject to the
preceding provisions of this section."
15 U.S.C. §§ 3314(b)(2) and 3316(c). The only conditions that
Congress placed on the Commission were, first, that the new ceiling
be higher than the ceiling set by the statute itself, and second,
that it be "just and reasonable" within the meaning of the NGA. 15
U.S.C. §§ 3314(b)(1), 3316(a).
The new incentives for production of new and
difficult-to-produce gas transformed the gas shortages of the 1970s
into gas surpluses during the 1980s. One result was serious market
distortions. The higher new gas price ceilings prevented the
unexpected oversupply from translating into lower consumer prices,
since the lower, vintage gas ceilings led to the premature
abandonment of old gas reserves. App. 32-36. Accordingly, the
Secretary of Energy, in 1985, formally recommended that the
Commission issue a notice of proposed rulemaking to revise the old
gas pricing system. 50 Fed.Reg. 48540 (1985). After conducting two
days of public hearings and analyzing approximately 113 sets of
comments, the Commission issued the two orders under dispute in
this case: Order No. 451, promulgated in June 1986, 51 Fed.Reg.
22168 (1986), and Order No. 451-A, promulgated
Page 498 U. S. 219
in December, 1986, which reaffirmed the approach of its
predecessor, while making certain modifications. [
Footnote 2] 51 Fed.Reg. 46762 (1986).
The Commission's orders have three principal components. First,
the Commission collapsed the 15 existing vintage price categories
of old gas into a single classification, and established an
alternative maximum price for a producer of gas in that category to
charge, though only to a willing buyer. The new ceiling was set at
$2.57 per million BTUs, a price equal to the highest of the
ceilings then in effect for old gas (that having the most recent,
post-1974, vintage) adjusted for inflation. 51 Fed.Reg. 22183-22185
(1986);
see 18 CFR § 271.402(c)(3)(iii) (1986). When
established, the new ceiling exceeded the then-current market price
for old gas. The Commission nonetheless concluded that this new
price was "just and reasonable" because, among other reasons, it
generally approximated the replacement cost of gas based upon the
current cost of finding new gas fields, drilling new wells, and
producing new gas.
See Shell Oil Co. v. FPC, 520 F.2d 1061
(CA5 1975) (holding that replacement cost formula appropriate for
establishing "just and reasonable" rates under the NGA). In taking
these steps, the Commission noted that the express and unambiguous
terms of §§ 104(b)(2) and 106(c) gave it specific authorization to
raise old gas prices so long as the resulting ceiling met the just
and reasonable requirement. 51 Fed.Reg., at 22179.
The second principal feature of the orders establishes a "Good
Faith Negotiation" (GFN) procedure that producers must follow
before they can collect a higher price from current pipeline
customers. 18 CFR § 270.201 (1986). The GFN process consists of
several steps. Initially, a producer may request a pipeline to
nominate a price at which the pipeline would be willing to continue
purchasing old gas under
Page 498 U. S. 220
any existing contract. § 270.201(b)(1). At the same time,
however, this request is also deemed to be an offer by the producer
to release the purchaser from any contract between the parties that
covers the sale of old gas. § 270.201(b)(4). In response, the
purchaser can both nominate its own price for continuing to
purchase old gas under the contracts specified by the purchaser,
and, further, request that the producer nominate a price at which
the producer would be willing to continue selling any gas, old or
new, covered under any contracts specified by the purchaser that
cover at least some old gas. If the parties cannot come to terms,
the producer can either continue sales at the old price under
existing contracts or abandon its existing obligations, so long as
it has executed a new contract with another purchaser, and given
its old customer 30-days' notice. §§ 157.301, 270.201(c)(1),
(e)(4). The Commission's chief rationale for the GFN process was a
fear that automatic collection of the new price by producers would
lead to market disruption, given the existence of numerous gas
contracts containing indefinite price-escalation clauses tied to
whatever ceiling the agency established. 51 Fed.Reg. at 22204. The
Commission further concluded that NGA § 7(b), which establishes a
"due hearing" requirement before abandonments could take place, did
not prevent it from promulgating an across-the-board rule rather
than engage in case-by-case adjudication. 15 U.S.C. § 717f(b).
Finally, the Commission rejected suggestions that it undertake
completely to resolve the issue of take-or-pay provisions in
certain natural gas contracts in the same proceeding in which it
addressed old gas pricing. [
Footnote 3] The Commission explained that it was already
addressing the take-or-pay problem in its Order 436 proceedings. It
further pointed out that the GFN procedure, in allowing purchaser
to propose new higher prices for old gas in return for
renegotiation of take-or-pay obligations, would help resolve many
take-or-pay
Page 498 U. S. 221
disputes. The Commission also reasoned that the expansion of old
gas reserves resulting from its orders would reduce new gas prices,
and thus reduce the pipelines' overall take-or-pay exposure. 51
Fed.Reg. at 22174-22175, 22183, 22196-22197, 46783-46784,
22197.
A divided panel of the Court of Appeals for the Fifth Circuit
vacated the orders on the ground that the Commission had exceeded
its statutory authority. The court first concluded that Congress
did not intend to give the Commission the authority to set a single
ceiling price for old gas under §§ 104(b)(2) and 106(c). The court
also dismissed the ceiling price itself as unreasonable, since it
was higher than the spot market price when the orders were issued,
and so amounted to "
de facto deregulation." 885 F.2d at
218-222. Second, the court rejected the GFN procedure on the basis
that the Commission lacked the authority to provide for
across-the-board, preauthorized abandonment under § 7(b).
Id. at 221-222. Third, the court chided the Commission for
failing to seize the opportunity to resolve the take-or-pay issue,
although it did acknowledge that the Commission was addressing that
matter on remand from the District of Columbia Circuit's decision
in
Associated Gas Distributors v. FERC, 824 F.2d 981 (CADC
1987),
cert. denied, 485 U.S. 1006 (1988). The dissent
disagreed with all three conclusions, observing that the majority
should have deferred to the Commission as the agency Congress
delegated to regulate natural gas. 885 F.2d at 226-235 (Brown, J.,
dissenting). We now reverse and sustain the Commission's
orders.
II
Section 104(a) provides that the maximum price for old gas
should be computed as provided in § 104(b). [
Footnote 4] The general
Page 498 U. S. 222
rule under § 104(b)(1) is that each category of old gas would be
priced as it was prior to the enactment of the NGPA, but increased
over time in accordance with an inflation formula. This was the
regime that obtained under the NGPA until the issuance of the
orders at issue here. Section 104(b)(2), however, plainly gives the
Commission authority to change this regulatory scheme applicable to
old gas:
"The Commission may, by rule or order, prescribe a maximum
lawful ceiling price, applicable to any first sale
Page 498 U. S. 223
of any natural gas (or category thereof, as determined by the
Commission) otherwise subject to the preceding provisions of this
section, if such price is -- "
"(A) higher than the maximum lawful price which would otherwise
be applicable under such provisions; and"
"(B) just and reasonable within the meaning of the Natural Gas
Act [15 U.S.C. § 717 et seq.]."
15 U.S.C. §§ 3314(b)(2) and 3316(c).
Nothing in these provisions prevents the Commission from either
increasing the ceiling price for multiple old gas vintages or from
setting the ceiling price applicable to each vintage at the same
level. To the contrary, the statute states that the Commission may
increase the ceiling price for "
any natural gas (
or
category thereof, as determined by the Commission)." Likewise,
§ 104(b)(2) allows the Commission to "prescribe a ceiling price"
applicable to any natural gas category. Insofar as "any"
encompasses "all," this language enables the Commission to set a
single ceiling price for every category of old gas. As we have
stated in similar contexts,
"[i]f the statute is clear and unambiguous, 'that is the end of
the matter, for the court, as well as the agency, must give effect
to the unambiguously expressed intent of Congress.'"
Sullivan v. Stroop, 496 U. S. 478,
496 U. S. 482
(1990) (quoting
K Mart Corp. v. Cartier, Inc.,
486 U. S. 281,
486 U. S. 291
(1988)).
Respondents counter that the structure of the NGPA points to the
opposite conclusion. Specifically, they contend that Congress could
not have intended to allow the Commission to collapse all old gas
vintages under a single price where the NGPA created detailed
incentives for new and difficult-to-produce gas on one hand, yet
carefully preserved the old gas vintaging scheme on the other.
Brief for Respondents 33-37. We disagree. The statute's bifurcated
approach implies no more than that Congress found the need to
encourage new gas production sufficiently pressing to deal with
the
Page 498 U. S. 224
matter directly, but was content to leave old gas pricing within
the discretion of the Commission to alter as conditions warranted.
The plain meaning of § 104(b)(2) confirms this view.
Further, the Commission's decision to set a single ceiling fully
accords with the two restrictions that the NGPA does establish.
With respect to the first, the requirement that a ceiling price be
"higher than" the old vintage ceilings carried over from the NGA
does nothing to prevent the Commission from consolidating existing
categories and setting one price equivalent to the highest previous
ceiling. 15 U.S.C. §§ 3314(b)(2)(A) and 3316(c)(1). With respect to
the second, collapsing the old vintages also comports with the
mandate that price ceilings be "just and reasonable within the
meaning of the Natural Gas Act." 15 U.S.C. §§ 3314(b)(2)(B) and
3316(c)(2).
Far from binding the Commission, the "just and reasonable"
requirement accords its broad ratemaking authority that its
decision to set a single ceiling does not exceed. The Court has
repeatedly held that the just and reasonable standard does not
compel the Commission to use any single pricing formula in general
or vintaging in particular.
FPC v. Hope Natural Gas Co.,
320 U. S. 591,
320 U. S. 602
(1944);
FPC v. Natural Gas Pipeline Co., 315 U.
S. 575,
315 U. S. 586
(1942);
Permian Basin, 390 U.S. at
390 U. S.
776-777;
FPC v. Texaco, Inc., 417 U.
S. 380,
417 U. S.
386-89 (1974);
Mobil Oil Corp. v. FPC,
417 U. S. 283,
417 U. S. 308
(1974). Courts of appeal have also consistently affirmed the
Commission's use of a replacement cost-based method under the NGA.
E.g. Shell Oil Co. v. FPC, 520 F.2d 1061, 1082-1083 (CA5
1975),
cert. denied, 426 U.S. 941 (1976);
American
Public Gas Assn. v. FPC, 567 F.2d 1016, 1059 (CADC 1977),
cert. denied, 435 U.S. 907 (1978). By incorporating the
"just and reasonable" standard into the NPGA, Congress clearly
meant to preserve the pricing flexibility the Commission had
historically exercised under the
Page 498 U. S. 225
NGA.
See Merrill Lynch, Pierce, Fenner & Smith, Inc. v.
Curran, 456 U. S. 353,
456 U. S.
378-382 (1982). In employing a replacement cost formula,
the Commission did no more than what it had previously done under
the NGA: collapse vintage categories together because the
replacement cost for natural gas is the same regardless of when it
was placed in production.
See Opinion No. 749,
Just
and Reasonable National Rates for Sales of Natural Gas, 54 FPC
3090 (1975),
aff'd sub nom. Tenneco Oil Co. v. FERC, 571
F.2d 834 (CA5),
cert. dismissed, 439 U.S. 801 (1978).
[
Footnote 5]
Respondents contend that, even if the statute allows the
Commission to set a single old gas ceiling, the particular ceiling
it has set is unjustly and impermissibly high. They first argue
that the Commission conceded that actual collection of the new
price would not be just, and therefore established the GFN
procedures as a requisite safeguard. The Commission correctly
denies having made any such concession. In its orders, in its
briefs, and at oral argument, the agency has been at pains to point
out that its ceiling price, which was no higher than the highest of
the ceilings then applicable to old gas, falls squarely within the
"zone of reasonableness" mandated by the NGA.
See Permian
Basin, supra, 390 U.S. at
390 U. S. 767.
What the agency has acknowledged is that automatic collection of
prices up to the ceiling under the escalator clauses common to
industry contracts would produce "inappropriate" market distortion,
especially since the market price remains below the ceiling. Reply
Brief for Petitioner in No. 89-1453, p. 12. In consequence, the
Commission instituted the GFN process to mitigate too abrupt a
transition from one pricing regime to the next. Respondents have
not sought to challenge (and we do not today consider) the
Commission's authority
Page 498 U. S. 226
to require this process, but they assert that the requiring of
it amounts to an acknowledgment by the Commission that the new
ceiling price is in fact unreasonable. We disagree. There is
nothing incompatible between the belief that a price is reasonable
and the belief that it ought not to be imposed without prior
negotiations. We decline to disallow an otherwise lawful rate
because additional safeguards accompany it.
We likewise reject respondents' more fundamental objection that
no order "deregulating" the price of old gas can be deemed just and
reasonable. The agency's orders do not deregulate in any legally
relevant sense. The Commission adopted an approved pricing formula,
set a maximum price, and expressly rejected proposals that it truly
deregulate by eliminating any ceiling for old gas whatsoever. App.
170-171. Nor can we conclude that deregulation results simply
because a given ceiling price may be above the market price.
United Gas Pipe Line Co. v. Mobile Gas Serv. Corp.,
350 U. S. 332,
350 U. S. 343
(1956);
FPC v. Sierra Pacific Power Co., 350 U.
S. 348,
350 U. S. 353
(1956);
FPC v. Texaco, Inc., 417 U.
S. 380,
417 U. S. 397
(1974).
III
We further hold that Order No. 451's abandonment procedures
fully comport with the requirements set forth in § 7(b) of the NGA.
15 U.S.C. § 717f(b). In particular, we reject the suggestion that
this provision mandates individualized proceedings involving
interested parties before a specific abandonment can take
place.
Section 7(b), which Congress retained when enacting the NGPA,
states:
"No natural gas company shall abandon all or any portion of its
facilities subject to the jurisdiction of the Commission, or any
service rendered by means of such facilities, without the
permission and approval of the Commission first had and obtained,
after due hearing, and a finding by the Commission that the
available supply
Page 498 U. S. 227
of natural gas is depleted to the extent that the continuance of
service is unwarranted, or that the present or future public
convenience or necessity permit such abandonment."
15 U.S.C. § 717f(b). As applied to this case, § 7(b) prohibits a
producer from abandoning its contractual service obligations to the
purchaser unless the Commission has first, granted its "permission
and approval" of the abandonment; second, made a "finding" that
"present or future public convenience or necessity permit such
abandonment"; and third, held a "hearing" that is "due." The
Commission has taken each of these steps.
First, Order No. 451 permits and approves the abandonment at
issue. That approval is not specific to any single abandonment, but
is, instead, general, prospective, and conditional. These
conditions include: failure by the purchaser and producer to agree
to a revised price under the GFN procedures; execution of a new
contract between the producer and a new purchaser; and thirty-days'
notice to the previous purchaser of contract termination. 18 CFR §
270.201(c)(1) (1986). Neither respondents nor the Court of Appeals
holding directly questions the Commission's orders for failing to
satisfy this initial requirement. As we have previously held,
nothing in § 7(b) prevents the Commission from giving advance
approval of abandonment.
FPC v. Moss, 424 U.
S. 494,
424 U. S.
499-502 (1976).
See Permian Basin, 390 U.S. at
390 U. S.
776.
Second, the Commission also made the necessary findings that
"present or future public interest or necessity" allowed the
conditional abandonment that it prescribed. 51 Fed.Reg. at
46785-46787. Reviewing "all relevant factors involved in
determining the overall public interest," the Commission found that
preauthorized abandonment under the GFN regime would generally
protect purchasers by allowing them to buy at market rates
elsewhere if contracting producers insisted on the new ceiling
price; safeguard producers by allowing them to abandon service if
the contracting purchaser fails to come to terms; and serve the
market by releasing previously
Page 498 U. S. 228
unused reserves of old gas.
See Felmont Oil Corp. and Essex
Offshore, Inc., 33 FERC � 6l,333, p. 61,657 (1985),
rev'd
on other grounds sub nom. Consolidated Edison Co. of N. Y. v.
FERC, 262 U.S.App.D.C. 222, 823 F.2d 630 (1987). At bottom,
these findings demonstrate the agency's determination that the GFN
conditions make certain matters common to all abandonments.
Contrary to respondents' theory, § 7(b) does not compel the agency
to make "specific findings" with regard to every abandonment when
the issues involved are general. As we held in the context of
disability proceedings under the Social Security Act, "general
factual issue[s] may be resolved as fairly through rulemaking" as
by considering specific evidence when the questions under
consideration are "not unique" to the particular case.
Heckler
v. Campbell, 461 U. S. 458,
461 U. S. 468
(1983).
Finally, it follows from the foregoing that the Commission
discharged its § 7(b) duty to hold a "due hearing." Before
promulgating Order No. 451, the agency held both a notice and
comment hearing and an oral hearing. As it correctly concluded, §
7(b) required no more. Time and again,
"[t]he Court has recognized that, even where an agency's
enabling statute expressly requires it to hold a hearing, the
agency may rely on its rulemaking authority to determine issues
that do not require case-by-case consideration."
Heckler v. Campbell, supra, at
461 U. S. 467;
Permian Basin, supra, 390 U.S. at
390 U. S.
774-777;
FPC v. Texaco Inc., 377 U. S.
33,
377 U. S. 41-44
(1964);
United States v. Storer Broadcasting Co.,
351 U. S. 192,
351 U. S. 205
(1956). The Commission's approval conditions establish, and its
findings confirm, that the abandonment at issue here is precisely
the type of issue in which
"[a] contrary holding would require the agency continually to
relitigate issues that may be established fairly and efficiently in
a single rulemaking proceeding."
Heckler v. Campbell, supra, 461 U.S. at
461 U. S. 467.
See Panhandle Eastern Pipe Line Co. v. FERC, 285
U.S.App.D.C. 115, 907 F.2d 185, 188 (1990);
Kansas Power &
Light Co. v.
Page 498 U. S. 229
FERC, 271 U.S.App.D.C. 252, 256-259, 851 F.2d 1479,
1483-1486 (1988);
Associated Gas Distributors v. FERC, 263
U.S.App.D.C. 1, 35, n. 17, 824 F.2d 981, 1015, n. 17 (1987),
cert. denied, 485 U.S. 1006 (1988).
Neither the Court of Appeals nor respondents have uncovered a
convincing rationale for holding otherwise. Relying on
United
Gas Pipe Line Co. v. McCombs, 442 U.
S. 529 (1979), the panel majority held that Order No.
451's prospective approval of abandonment was impermissible, given
the "practical" control the GFN process afforded producers. 885
F.2d at 221-223.
McCombs, however, is inapposite, since
that case dealt with a producer who attempted to abandon with no
Commission approval, finding, or hearing whatsoever. Nor can
respondents object that the Commission made no provision for
individual determinations under its abandonment procedures where
appropriate. Under Order No. 451, a purchaser who objects to a
given abandonment on the grounds that the conditions the agency has
set forth have not been met may file a complaint with the
Commission.
See 18 CFR § 385.206 (1986).
IV
We turn, finally, to the problem of "take-or-pay" contracts. A
take-or-pay contract obligates a pipeline to purchase a specified
volume of gas at a specified price and, if it is unable to do so,
to pay for that volume. A plausible response to the gas shortages
of the 1970s, this device has created significant dislocations in
light of the oversupply of gas that has occurred since. Today many
purchasers face disastrous take-or-pay liability without sufficient
outlets to recoup their losses. The Court of Appeals cited this
problem as a further reason for invalidating Order No. 451.
Specifically, the court chastised the Commission for its
"regrettable and unwarranted" failure to address the take-or-pay
problem in the rulemaking under consideration. 885 F.2d at 224.
Exactly what the court held, however, is another matter. The
dissent viewed the majority's discussion as affirmatively
Page 498 U. S. 230
ordering the Commission "once and for all to solve" the entire
take-or-pay issue. 885 F.2d at 234 (Brown, J., dissenting).
Respondents more narrowly characterize the holding as that the
Commission should have addressed the take-or-pay problem, at least
to the extent that Order No. 451 exacerbated it. Brief for
Respondents 6770. We have no need to choose between these
interpretations, because the Court of Appeals erred under either
view.
The court clearly overshot the mark if it ordered the Commission
to resolve the take-or-pay problem in this proceeding. An agency
enjoys broad discretion in determining how best to handle related
yet discrete issues in terms of procedures,
Vermont Yankee
Nuclear Power Corp. v. National Resources Defence Council,
Inc., 435 U. S. 519
(1978), and priorities,
Heckler v. Chaney, 470 U.
S. 821,
470 U. S.
831-832 (1985). We have expressly approved an earlier
Commission decision to treat the take-or-pay issue separately where
a different proceeding would generate more appropriate information
and where the agency was addressing the question.
FPC v. Sunray
DX Oil Co., 391 U. S. 9,
391 U. S. 49-51
(1968). The record in this case shows that approximately two-thirds
of existing take-or-pay contracts do not involve old gas. We are
satisfied that the agency could compile relevant data more
effectively in a separate proceeding. We are likewise satisfied
that "the Commission itself has taken steps to alleviate
take-or-pay problems."
Id. at
391 U. S. 50. In
promulgating Order No. 451, the agency explained that it had chosen
not to deal with the take-or-pay matter directly, primarily because
it was addressing the matter on remand from the D.C. Circuit.
Associated Gas Distributors v. FERC, supra. [
Footnote 6]
Page 498 U. S. 231
The court likewise erred if it meant that the Commission should
have addressed the take-or-pay problem insofar as Order No. 451
"exacerbated" it. This rationale does not provide a basis for
invalidating the Commission's orders. As noted, an agency need not
solve every problem before it in the same proceeding. This applies
even where the initial solution to one problem has adverse
consequences for another area that the agency was addressing.
See Vermont Yankee, supra, 435 U.S. at
435 U. S.
543-544 (agencies are free to engage in multiple
rulemaking "[a]bsent constitutional constraints or extremely
compelling circumstances"). Moreover, the agency articulated
rational grounds for concluding that Order No. 451 would do more to
ameliorate the take-or-pay problem than worsen it. 51 Fed.Reg.
22196, 46783-46784. The agency reasoned that the GFN procedures
would encourage the renegotiation of take-or-pay provisions in
contracts involving the sale of old gas or old gas and new gas
together. 51 Fed.Reg. 22196-22197. The agency further noted that
the release of old gas would reduce the market price for new gas,
and thus reduce the pipelines' aggregate liability. We are neither
inclined nor prepared to second-guess the agency's reasoned
determination in this complex area.
See Motor Vehicle Mfrs.
Assn. of United States, Inc. v. State Farm Mutual Automobile Ins.
Co., 463 U. S. 29,
463 U. S. 43
(1983).
V
We disagree with the Court of Appeals that the Commission lacked
the authority to set a single ceiling price for old gas; possessed
no power to authorize conditional preauthorized abandonment of
producers' obligations to provide old gas; or had a duty to address
the take-or-pay problem more fully in this proceeding. Accordingly,
we reverse the judgment
Page 498 U. S. 232
of the Court of Appeals and sustain Orders No. 451 and 451-A in
their entirety.
So ordered.
Justice KENNEDY took no part in the decision in this case.
[
Footnote 1]
The term "Commission" will refer to both the Federal Energy
Regulatory Commission and its predecessor, the Federal Power
Commission.
[
Footnote 2]
Order No. 451 shall refer to both orders where the distinction
is not relevant.
[
Footnote 3]
A take-or-pay clause requires a purchasing pipeline to take a
specified volume of gas from a producer or, if it is unable to do
so, to pay for the specified volume.
See Transco,
474 U. S. 409,
474 U. S. 412
(1986).
[
Footnote 4]
Section 104 in its entirety reads:
"Ceiling price for sales of natural gas dedicated to interstate
commerce."
"(a) Application. -- In the case of natural gas committed to
dedicated interstate commerce on [November 8, 1978,] and for which
a just and reasonable rate under the Natural Gas Act [15 U.S.C. §
717
et seq.] was in effect on such date for the first sale
of such natural gas, the maximum lawful price computed under
subsection (b) shall apply to any first sale of such natural gas
delivered during any month."
"(b) Maximum lawful price. -- "
"(1) General rule. -- The maximum lawful price under this
section for any month shall be the higher of -- "
"(A)(i) the just and reasonable rate, per million Btu's,
established by the Commission which was (or would have been)
applicable to the first sale of such natural gas on April 20, 1977,
in the case of April 1977; and"
"(ii) in the case of any month thereafter, the maximum lawful
price, per million Btu's, prescribed under this subparagraph for
the preceding month multiplied by the monthly equivalent of the
annual inflation adjustment factor applicable for such month,
or"
"(B) any just and reasonable rate which was established by the
Commission after April 27, 1977, and before [November 9, 1978], and
which is applicable to such natural gas."
"(2) Ceiling prices may be increased if just and reasonable. --
The Commission may, by rule or order, prescribe a maximum lawful
ceiling price, applicable to any first sale of any natural gas (or
category thereof, as determined by the Commission) otherwise
subject to the preceding provisions of this section, if such price
is -- "
"(A) higher than the maximum lawful price which would otherwise
be applicable under such provisions; and"
"(B) just and reasonable within the meaning of the Natural Gas
Act [15 U.S.C. § 717
et seq.]."
Section 106(c), deals in almost identical language with the
ceiling prices for sales under "rollover" contracts, which the NGPA
defines as contracts entered into on or after November 8, 1978, for
the first sale of natural gas that was previously subject to a
contract that expired at the end of a fixed term specified in the
contract itself. 15 U.S.C. § 3301(12). A reference to § 104(b)(2)
is here used to refer to both provisions.
[
Footnote 5]
Even had we concluded that §§ 104(b)(2) and 106(c) failed to
speak unambiguously to the ceiling price question, we would
nonetheless be compelled to defer to the Commission's
interpretation. It follows from our foregoing discussion that the
agency's view cannot be deemed either arbitrary, capricious, or
manifestly contrary to the NPGA.
See
Chevron U.S.A., Inc.
v. Natural Resources Defense Council, Inc.,
467 U. S. 837,
467 U. S.
843-844 (1984);
K Mart Corp. v. Cartier, Inc.,
486 U. S. 281,
486 U. S. 292
(1988).
[
Footnote 6]
The Court of Appeals for the D.C. Circuit has since invalidated
the Commission's principal attempt at solving the problem.
Associated Gas Distributors v. FERC, 283 U.S.App.D.C. 265,
899 F.2d 1250 (1990).
See also American Gas Assn. v. FERC,
912 F.2d 1496 (1990) (approving other aspects of the Commission's
take-or-pay proceedings). Nothing in our holding today precludes
interested parties from petitioning the Commission for further
rulemaking should it become apparent that the agency is no longer
addressing the take-or-pay problem.
See Panhandle Eastern Pipe
Line Co. v. FERC, 281 U.S.App.D.C. 318, 890 F.2d 435
(1989).