Phillips Petroleum Co. v. Federal Energy Regulatory Commission

Summary

The Tenth Circuit held that FERC's "expressly authorized" requirement for production-related cost allowances under NGPA Section 110 creates a procedural, rebuttable "bursting bubble" presumption (not a substantive rule), consistent with Pennzoil II, and that protest procedures may extend to all NGPA price-regulated gas regardless of NGA jurisdiction. The court affirmed FERC's orders requiring express contract authority for interest on retroactive fuel and power allowances, but remanded for clarification that this requirement applies only to retroactive allowances and not to interest on late or unpaid non-retroactive payments. The decision addresses FERC's authority, contract interpretation, retroactive cost recovery, and the interplay between NGPA presumptions and state contract law.

Holdings

1. The Commission's characterization is in fundamental error; the presumption is procedural and must be treated as a 'bursting bubble' presumption that only shifts the burden of producing evidence in protest proceedings, without substantive effect outside those proceedings.
2. The protest procedures properly apply to all NGPA price-regulated gas sales, including non-NGA gas, because the Commission's authority stems from Section 110 of the NGPA, which contains no jurisdictional restraint.
3. The Commission acted reasonably within its discretion in requiring express contract authority for interest on retroactive fuel and power allowances; this is consistent with the parity requirement and the overall regulatory scheme.
4. The Commission must clarify that its requirement for express contract authority for interest in Orders 473 and 473-A applies only to 'retroactive' allowances as stated in 18 C.F.R. § 271.1104(e), and not to non-retroactive late paid or unpaid production-related cost allowances.

Questions Presented

1. Whether the Commission failed to comply with the Fifth Circuit's mandate regarding the 'expressly authorized' definition and the nature of the presumption (substantive vs. procedural).
2. Whether the Commission erred in applying protest procedures to non-NGA gas contracts.
3. Whether the Commission properly required express contract authority for interest on retroactive fuel and power allowances.
4. Whether the Commission must clarify that the express contract authority requirement applies only to retroactive allowances, not to late or unpaid payments.

Disposition

affirmed_in_part_and_remanded_in_part