On Petition for Review of Orders of the Federal Energy Regulatory Commission
Before: Ginsburg, Chief Judge, and Rogers and Tatel,
The opinion of the court was delivered by: Tatel, Circuit Judge
In this case, we consider an energy producer's challenge to the Federal Energy Regulatory Commission's decision to permit a neighboring natural gas pipeline operator to expand an underground gas storage facility onto the producer's property. Although we reject FERC's argument that the producer lacks standing to pursue this challenge, because FERC's orders are supported by substantial evidence and are neither arbitrary nor capricious, we deny the petition for review.
Under section 7(c) of the Natural Gas Act (NGA), natural gas companies seeking to construct new gas transportation or storage facilities, or to expand existing ones, must obtain a certificate of "public convenience and necessity" from the Federal Energy Regulatory Commission. See 15 U.S.C. § 717f(c)(1)(A) (2000) ("No natural-gas company - shall engage in the transportation or sale of natural gas -, or undertake the construction or extension of any facilities therefor -, unless there is in force - a certificate of public convenience and necessity issued by the Commission authorizing such acts or operations - "); Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 295 n.1 (1988) (stating that "transportation" within the meaning of the NGA includes storage). Such certificates enable gas companies unable to purchase the property rights needed to construct or operate their certificated facilities to acquire the property from unwilling owners through eminent domain. 15 U.S.C. § 717f(h).
Dominion Transmission, Inc., intervenor in this case, owns and operates an interstate gas transmission system that transports and stores natural gas for customers in several east coast states. As part of this system, Dominion runs an underground storage facility in central West Virginia called the Fink–Kennedy/Lost Creek Storage Reservoir. FERC's predecessor, the Federal Power Commission, certificated the Fink Reservoir in 1956. See Dominion Transmission, Inc., 97 F.E.R.C. ¶ 61,344, 62,598 (2001) (relying on Hope Natural Gas Co., 16 F.P.C. ¶ 955 (1956)). The Fink Reservoir spans nearly 50,000 acres within the Gantz Formation, a geologic formation located approximately 1600 to 2600 feet underground. According to Dominion, the Fink Reservoir is one of the country's largest natural gas storage facilities.
Petitioner B&J Oil and Gas operates fourteen oil and gas wells, ten of which are located within the Gantz Formation adjacent to the current boundary of Dominion's Fink storage field. In these proceedings, B&J acts "on behalf of the working interest owners and royalty interest owners that it represents as the operator of [these] fourteen wells." Pet'r's Br. at 2.
In February 2001, Dominion asked FERC to revise the Fink Reservoir's certificated boundary. In its application filed pursuant to NGA section 7(c), Dominion asserted that data acquired and analyses performed after the field's initial certification indicated that gas could easily migrate out of the reservoir area and that third-party wells located outside the current boundary likely were "producing," i.e., extracting, gas from Dominion's storage field. To prevent this loss, Dominion asked FERC to amend the Fink Reservoir's certificated boundary to encompass an additional 3063 acres, which would enlarge the storage area to the reservoir's actual geologic border. This proposed expansion would incorporate neighboring private property, including B&J's.
To protect its property interests, B&J intervened and objected to Dominion's application. Claiming that Dominion had failed to present sufficient engineering and geologic information to justify boundary expansion, B&J submitted its own expert report challenging the accuracy of some of Dominion's data. Staff from FERC's Office of Energy Projects subsequently sent "deficiency letters" to both Dominion and B&J requesting more information about their filings. In response, Dominion submitted additional materials, requesting confidential treatment for five documents on the ground that they contained sensitive or proprietary information. B&J promptly filed a Freedom of Information Act request to obtain one of the five assertedly privileged documents, explaining that the other four appeared on a publicly accessible FERC information management system. After determining that it had mistakenly posted Dominion's confidential documents, FERC removed the materials from its information system, ordered parties who had downloaded them to destroy the documents and not to use them in any way, and denied B&J's FOIA application. See Dominion Transmission, Inc., 96 F.E.R.C. ¶ 61,238, 61,955 (2001) (document destruction order); Dominion Transmission, Inc., 97 F.E.R.C. ¶ 61,120, 61,584 (2001) (denying rehearing of the document destruction order and noting that the Commission's Office of External Affairs had denied B&J's FOIA request). Concluding that the public record contained sufficient information for it to decide Dominion's boundary revision application, FERC also rejected B&J's request to stay the Dominion certificate proceedings until after the agency resolved B&J's FOIA appeal, see Dominion, 97 F.E.R.C. at 61,584, and later affirmed the denial of B&J's FOIA application, see Dominion Transmission, Inc., 100 F.E.R.C. ¶ 61,168, 61,601 n.3 (2002).
In December 2001, FERC approved Dominion's application to expand the Fink Reservoir. Dominion, 97 F.E.R.C. at 62,598. Relying only on publicly available information, FERC found that the Gantz Formation was larger than the Fink Reservoir's currently certificated boundary and that Dominion storage gas was in fact migrating toward B&J's wells. Id. at 62,601. FERC thus found it "in the public convenience and necessity to expand the storage boundary for the Fink Reservoir as proposed, in order to maintain the operational integrity of the storage field and to enable Dominion to continue to provide reliable natural gas storage service." Id. Balancing the need to ensure the storage field's integrity against B&J's interests, FERC concluded that preventing gas migration outweighed B&J's property interests because B&J would be compensated for the loss of its oil and gas wells through eminent domain proceedings. Id. In addition, the Commission rejected B&J's proposal to allow the company to continue producing oil and return any Dominion storage gas that it extracted. According to the Commission, permitting third-party drilling in the area could interfere with storage operations and encourage other producers to poach Dominion gas. Id. at 62,601–02. In a second order, FERC denied B&J's petition for rehearing. Dominion, 100 F.E.R.C. at 61,603.
B&J now petitions for review, challenging both FERC orders. It claims that FERC acted arbitrarily and capriciously in granting Dominion's application and that the Commission's decision is unsupported by substantial evidence.
Before considering the merits of B&J's petition, we must address FERC's argument -- supported by Dominion -- that B&J lacks standing. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94–102 (1998) (holding that federal courts must ensure that they have jurisdiction before considering the merits of a case). To establish Article III standing, B&J must demonstrate that it has suffered an injury-in-fact, that FERC's action caused its injury, and that a favorable order would likely redress its harm. See ...