Craig Field v. FERC ( 2000 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
FEB 4 2000
TENTH CIRCUIT
PATRICK FISHER
Clerk
CRAIG FIELD LANDOWNERS’
ASSOCIATION,
Petitioner-Appellant,
v. No. 99-9510
FEDERAL ENERGY REGULATORY No. CP98-280-000
COMMISSION,
Respondent-Appellee.
__________________
WILLIAMS GAS PIPELINES
CENTRAL, INC.,
Intervenor.
ORDER AND JUDGMENT *
Before TACHA and BRISCOE , Circuit Judges, and ROGERS, Senior District
Judge. **
Craig Field Landowners’ Association (the Association) appeals the Federal
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
**
The Honorable Richard D. Rogers, Senior United States District Judge
for the District of Kansas, sitting by designation.
Energy Regulatory Commission’s (FERC) denial of its motion for rehearing on
FERC’s order authorizing Williams Gas Pipelines Central, Inc. (Williams Gas) to
abandon Craig Field, a natural gas storage field. We exercise jurisdiction
pursuant to 15 U.S.C. § 717r(b) and affirm.
I.
Williams Gas owned and operated the Craig Field natural gas storage field
in Johnson County, Kansas. Storage leases required Williams Gas to furnish gas
free or at reduced prices to domestic customers within the storage field
boundaries. Williams Gas filed an Abbreviated Application for Authorization to
Abandon Storage Facility with FERC, asserting that abandonment of Craig Field
was necessary because of safety concerns, namely well deterioration and
encroaching residential development.
The Association, comprised of residents who lived within the storage field
boundaries, filed a Motion to Intervene and Protest, asserting Williams Gas failed
to show that the affected properties would be satisfactorily restored after
abandonment (an issue not raised on appeal), that Craig Field could not continue
to serve customers, that there was any basis for the asserted safety concerns, or
that Craig Field was in a state of disrepair. Williams Gas responded to the
Association’s protest by filing an answer emphasizing that Craig Field was
Williams Gas’ oldest currently operating storage field, that casings in many of the
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wells were not cemented properly to their full depth, and that a significant
maintenance investment would be required to prevent gas leaks between the
casing and the well bore. After a public hearing, FERC issued an order granting
abandonment. The Association filed a request for rehearing and for a stay
pending appeal, both of which FERC denied.
II.
FERC’s compliance with 15 U.S.C. § 717f(b)
The Association first contends FERC failed to comply with the hearing
requirement of 15 U.S.C. § 717f(b). That provision 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
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) (emphasis added). FERC considered the request for
abandonment, and the Association’s objections to it, after a public hearing.
The Association asserts it was entitled to an evidentiary hearing. We
review FERC’s decision to deny an evidentiary hearing for abuse of discretion.
Louisiana Pub. Serv. Comm’n v. FERC , 184 F.3d 892, 895 (D.C. Cir. 1999).
The purpose of the § 717f(b) hearing requirement is to “‘permit[] all interested
parties to be heard and therefore facilitate[] full presentation of the facts
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necessary’ to the Commission’s determination.” Cascade Natural Gas Corp. v.
FERC , 955 F.2d 1412, 1425 (10th Cir. 1992) (quoting United Gas Pipe Line Co.
v. McCombs , 442 U.S. 529, 538 (1979)). FERC is not always required to
conduct a trial-type evidentiary hearing to achieve this purpose. The Association
must meet at least three conditions before FERC will consider conducting a
formal evidentiary hearing. First, it must make allegations of fact material to
FERC’s determination. Second, it must make an adequate proffer of evidence to
support those allegations of fact. Third, the material facts alleged by the
Association must be in dispute. Id. at 1425-26. Even if these conditions are met,
there is no guarantee that the Association will be allowed to present evidence
orally or to cross-examine witnesses. “Depending on the nature of the inquiry
and the evidence, the ‘full presentation of facts’ necessary for the Commission’s
determination may be achieved by the written submission of evidence.” Id. at
1426. We conclude that the Association has established the first two conditions,
but has failed to establish the third. As a result, we cannot conclude that FERC
abused its discretion in denying the Association’s request for an evidentiary
hearing.
The Association made allegations of fact material to FERC’s determination
of the abandonment issue by raising the factual issues of whether abandonment
was required for safety reasons and whether Craig Field was necessary to
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adequately serve the public. The Association then made an adequate proffer of
evidence to support the alleged material facts. It asserted the clean safety record
on Craig Field belied any current safety concerns. The Association also alleged
an inconsistency between Williams Gas’ assertion of unsafe wells and its reports
filed with the Kansas Corporation Commission stating the wells were in good
condition.
Although the Association proffered evidence of material facts, it failed to
show those facts were in dispute. “There is simply no justification for ‘an
evidentiary hearing when the opposing presentations reveal that no dispute of
fact is involved.’” Cascade , 955 F.2d at 1426 (quoting Consolidated Oil & Gas,
Inc. v. FERC , 806 F.2d 275, 279 (D.C. Cir. 1986)). The Association does not
dispute the material facts stated in Williams Gas’ application for abandonment,
but rather it disputes whether these facts amount to a safety risk which would
justify abandonment. The parties here had an adequate opportunity to present
their views and FERC had an adequate record upon which to base its decision.
FERC’s approval of William Gas’ request for abandonment
Next, the Association asserts that FERC’s decision to allow Williams Gas
to abandon Craig Field was not based on substantial evidence. In reviewing
FERC’s decision we do not review its factual conclusions if they are supported
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by substantial evidence. Cascade , 955 F.2d at 1421-22 (citing 15 U.S.C. §
717r(b)). Our task is only to determine whether FERC’s action was “‘arbitrary,
capricious, . . . or otherwise not in accordance with law.’” Id. at 1422. We must
uphold FERC’s determination if it is “based on consideration of the relevant facts
and articulates a rational connection between the facts found and the choice
made.” Id.
The Association contends there was not substantial evidence to support
FERC’s finding that continued operation of Craig Field presented safety
concerns, arguing that photographs of a deteriorated casing or casings were the
only evidence of safety problems. The Association claimed the reports filed by
Williams Gas with the Kansas Corporation Commission showed the wells were in
good condition. Williams Gas responded that the wells were deteriorating and
presented a future safety risk. FERC found that some of the storage facilities had
significant deterioration. The age of Craig Field, which had been in operation
since 1931, combined with the evidence of deteriorating wells, provided
substantial evidence for FERC’s finding that safety hazards supported
abandonment. This conclusion is further bolstered by the fact admitted by the
Association that “substantial portions of land near the Craig Field have been
planned and/or zoned for commercial and industrial development.” Aplt. App. at
103.
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The Association argues FERC’s finding that continued operation of the
storage field would not be cost beneficial was not supported by the evidence.
FERC found that Williams Gas would need to perform significant maintenance
and repair to continue operating Craig Field. With the limited capacity of the
field, FERC found this was not cost beneficial or in the public interest. Craig
Field began as a natural gas storage field in 1931. There was evidence that the
storage wells were “placed in service beginning in the 1930’s and the age of the
casing corresponds with the wells in service dates.” Aplt. App. at 115. There
was also undisputed evidence that Craig Field has the smallest capacity for
working gas of any Williams storage fields. Id. at 113. There was evidence that
well casings had begun to deteriorate and that replacement efforts would not be
sufficient to maintain the integrity of the wells. Given the limited storage
capacity of Craig Field and the evidence that Williams could continue its same
level of deliverability and working storage capacity to meet its customers’ needs
without Craig Field, id. at 114, there was substantial evidence to support FERC’s
finding that continued operation of Craig Field would not be cost beneficial.
Finally, the Association asserts FERC acted arbitrarily and capriciously in
approving the order granting abandonment, contending that FERC failed to
address serious and material issues. The only claim which has not yet been
addressed is “[w]hether abandonment of the Craig Storage field is necessary or, if
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not necessary, will it nevertheless promote public convenience through efficient
service.” Aplt. Br. at 26. FERC concluded that Craig Field was unnecessary,
finding the abandonment would not adversely affect Williams Gas’ ability to
satisfy demand. There was evidence that Craig Field contained a relatively small
amount of gas and that Williams Gas’ “remaining eight storage fields [could]
provide the same level of deliverability and working storage capacity without the
Craig Storage Field.” Aplt. App. at 114. There was substantial evidence to
support FERC’s conclusion that Craig Field was not necessary and that its
continued operation would not promote public convenience through efficient
service.
III.
FERC’s orders allowing Williams Gas to abandon Craig Field and denying
the Association’s motion for rehearing are AFFIRMED.
Entered for the Court
Mary Beck Briscoe
Circuit Judge
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