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This Honorable Court is again in session.

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Case number 21-1122 et al.

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New Fortress Energy Inc.

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petitioner versus Federal Energy Regulatory Commission.

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Mr. Zorotsky for the petitioner.

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Mr. Solomon for the respondent.

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Good morning, Your Honors, may it please the Court.

[00:00:36] Speaker 05:
Good morning.

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Shai Voretsky on behalf of New Fortress Energy.

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If I could, I'd like to reserve three minutes for rebuttal.

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This case arises from FERC's failure to follow its precedent.

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Shell made clear, based on history, Supreme Court case law, and the common understanding of natural gas facilities, that the Commission's authority under Section 3 of the Natural Gas Act reaches only LNG facilities that are connected to a pipeline.

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Since Shell, FERC has applied that requirement consistently.

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No pipeline, no jurisdiction.

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But that's not the test that FERC applied here.

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Instead, FERC applied a new piping of any kind requirement.

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What's more, FERC moved the goalposts without... Why do you say piping of any kind?

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FERC's view is that it's a pipeline.

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It transports gas, therefore it's a pipeline.

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Yeah, a short one, but it's a pipeline.

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I don't understand why you say it's piping of any kind.

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It's just a shorter pipeline than a longer pipeline.

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In Shell itself, the Shell decision never uses the word piping.

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Well, but in Shell, in Shell, as I understand it, and the Lake Michigan facility, that's the one that's relevant, right?

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Because that's an important facility.

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There just wasn't a pipeline, correct?

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There was not a pipeline, so there wasn't one there and there is one here.

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So why aren't they perfectly consistent?

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I think it goes to the fundamental difference in the industry and in common usage between the term pipeline and first says first says a pipeline is a pipe that transmits gas.

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Period.

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I mean, and it's it's interpreting its own.

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President.

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which says in no way depends on the characteristics of the pipe.

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The only question is, is gas transmitted by pipeline or in which case it's jurisdictional or is it transmitted by boat or train, in which case it isn't.

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It just, it seems, pardon the expression, simple.

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Judge Taylor, I think that when- What am I missing?

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Tell me what I'm missing.

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When Shell used the term pipeline repeatedly.

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First of all... But there wasn't a pipeline in the Lake Michigan facility in Shell.

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I understand.

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But the term pipeline has to be understood against the common usage in the industry of what that means, against the history of the statute that Fert explained in the Shell decision, and even in light of the Shell decision's own language,

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when talking about the Geismar facility, when describing short segments of pipe.

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That was the interstate facility, right?

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That's right.

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Which doesn't relate to the issue in the Michigan facility or this case.

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But what I think it does relate to is the Commission's own use of language.

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The Commission used the word pipeline repeatedly, 23 times in the opinion.

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In talking about the Geismar facility, it talked about short segments of pipe.

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Those are not the same thing.

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They're also not the same thing in Supreme court, Supreme court case law, the Supreme court and the Phillips decision talked about pipelines.

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It also talked about segments of pipe.

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The case where they talked about pipeline in this way, where there was a short pipe or a short segment like this.

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And they said, no, no, no, that's not a pipeline.

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When you, you point to a lot of cases where there were great big things that

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look like great big complicated pipelines.

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But what you don't have is precedent where they've said if it's short or it's a single pipe, that can never be a pipeline.

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Do you?

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We don't have that case because there is not a case that I'm aware of for this one in which FERC has attempted to assert jurisdiction over a pipe rather than a pipeline.

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And that's not surprising.

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In Southern LNG in 2010,

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They said, when companies construct a pipeline to transport import or export volumes, only a small segment of the pipeline close to the border is deemed to be the import or export facility for which Section 3 authorization is necessary.

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They pretty much thought there that a small segment of a pipeline would be sufficient to trigger Section 3 authority.

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But not a freestanding independent 75-foot pipe of the sort

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But you don't have any.

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Suppose this pipeline, excuse me.

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Suppose, according to your terminology, this pipe was much longer and actually went for hundreds of miles across Puerto Rico.

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Would we have a different case?

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Same diameter, just 100 miles long.

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To a power plant.

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No, it was delivering gas to a power plant 100 miles.

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Different case?

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I think as a matter of physics, if you had one that was running hundreds of miles, it would likely have a larger diameter, just reflecting the volume.

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Forget the diameter issue.

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I'm sorry I brought that up.

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It's twice the diameter, but going 100 miles across the island.

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Yes?

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Pipeline?

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I think if we were talking 100 miles or more, that's likely a pipeline.

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How about 50?

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How about 50?

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I think 50 probably is a pipeline.

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What about 25?

[00:06:24] Speaker 04:
probably a pipeline okay one um i mean i think one's a much closer case there is what's the standard you're applying here first standard is simple if it's a pipe that transmits gas it's jurisdictional and i didn't see you cite any case maybe you can tell me one where for first decision relied

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not on the distinction between pipeline and other methods of transportation, but on the characteristics of the pipeline.

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Now, I know you cite cases where the discussion, they discuss the different characteristics of a pipeline, but is there a case that you can cite where FERC jurisdictional decision turned on the characteristics?

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No, Judge Cato, but there's also not a case

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for this one in which FERC said that the standard is any type of piping as opposed to a pipeline.

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It's always said pipeline.

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Pipeline as a matter of judicial industry and common usage means a large scale.

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Since you say there is no case, then I'm not sure how we could accept your argument that they departed from precedent.

[00:07:39] Speaker 05:
I think the baseline precedent is that in Shell, the commission was talking about a pipeline and what a pipeline means, what it means to the commission in numerous decisions.

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If the commission is issued, what it means to courts, what it means to the industry.

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When you say what it means in common, one for common usage, I'm not at all clear what the common industry usage is.

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I think you just cited the FERC cases.

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And since FERC cases were simply describing the facts before them, and there isn't a case where they said if it's only 75 feet,

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It won't be a pipeline.

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And again, I was struggling as I read your brief to find where this evidence of a contrary common usage is in their decisions.

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I mean, it so happens that most of the time there's multiple pipes and they're longer and bigger, but it so happens doesn't mean that that's definitional, let alone jurisdictionally definitional, does it?

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I think it's helpful to look at how the commission itself in Shell

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justified the pipeline requirements.

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And when it talked about pipelines, it was talking about large-scale transmission systems that typically cross state lines, which is how companies evaded state regulation over these pipelines.

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That was the concern that Congress was trying to target in granting the commission jurisdiction.

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So when the commission uses the term pipeline, when it applies the pipeline requirement, that is what it means by it.

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Excuse me, but I didn't think this case had to do with interstate shipments.

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Isn't this an import facility?

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It is.

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So what you're talking about doesn't relate to the question in this case, does it?

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The commission also explained in shell, I think this is a paragraph 40, that the same standard for pipeline for section seven, which deals with interstate transmission, will also apply to section three, which deals with foreign importation, which is what we have here.

[00:09:35] Speaker 05:
Let me ask you, is it there?

[00:09:37] Speaker 03:
Go ahead, David.

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Isn't there a procedural opportunity where New Fortress could have sought a FERC declaratory order establishing the jurisdiction?

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It was puzzling to me because there was a lot of lawyering around the threshold, you know, decision whether to go with New Fortress and where to site the facility.

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I wasn't a FERC declaratory order.

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on this issue, it mattered a lot.

[00:10:12] Speaker 05:
Two points, Judge Pillard.

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One, there was a lot of lawyering, not only by New Fortress, but also by PREPA, and the FERC staff provided assurances that if this 75-foot pipe would likely not be considered a pipeline.

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So there was a lot of lawyering, and FERC staff read FERC's orders the same way that we do.

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which is that there's a distinction between a pipeline and a pipe.

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In addition to that, while a, while a declaratory ruling is something that can be sought, those take a very long time.

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And in fact, there's no deadline by which the commission ever asked.

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We're familiar with those issues of deadline and FERC, but on the, uh, at the time, am I wrong that there was a lot of focus on the gas being trucked elsewhere?

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Was it less prominent in people's minds at that time, whether it would be also substantially fueling the adjacent power plant?

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It seemed like that was less prominent at the time that this decision was being made.

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No, Judge Porter, I think it was clear to commission staff that that's what we were talking about.

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A joint appendix, I think 51 to 59, this is where the history of these dealings with commission staff

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Uh, is recounted and while trucking was discussed, so too was the 75 foot pipe, um, new fortress submitted to FERC in memo summer staff in memo summarizing the discussions.

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restating what staff's position had been that didn't object and say, actually, no, we think there's a question about it.

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So there was quite a lot of assurance going into this project that it would not be jurisdictional.

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And there was no, while there is no precedent involving a pipeline, a pipe of this length, at the same time, um, there is also no example of FERC asserting jurisdiction over a facility with a pipe of this length.

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There is no example of somebody seeking a declaratory ruling.

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If you could just step back and give me the common sense importance of the assertion of jurisdiction, what rides on this?

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I mean, here they've said we wouldn't require that to stop, but is this all about NEPA?

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What else hinges on whether the facility is jurisdictional?

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substance of the regulatory regime that's triggered?

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Sure.

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So I think the threshold question is that if a facility is subject to FERC's jurisdiction, then it can't be operated without submitting an application that FERC reviews and approved.

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That is a lengthy, expensive process that's currently ongoing.

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There is, of course, no guarantee that FERC will approve the facility or that it will approve the facility without modification.

[00:13:09] Speaker 03:
Why not?

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What is it looking at?

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Or is it principally the environmental impacts?

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What else is it looking at?

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Safety?

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Is it looking at national security?

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I mean, I know I should read the law and notice, but it's not really in the briefs what the practical issue is here.

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So I think as a practical matter, there's a significant amount of data that FERC seeks to collect about the operation of the facility.

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There's a lot of back and forth between FERC and New Fortress' lawyers.

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In addition, as a practical matter, when you have a jurisdictional facility, if New Fortress wanted in some way to expand the facility, it would need approval from FERC for that.

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If New Fortress wanted to sell the facility, it would need

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approval for that.

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And so there are significant consequences to being a regulated entity in this space.

[00:14:02] Speaker 02:
Do you have to comply with NEPA as well?

[00:14:04] Speaker 05:
I'm sorry.

[00:14:04] Speaker 02:
Would you have to comply with NEPA now as well?

[00:14:08] Speaker 04:
So as I read your brief, your basic argument is the one you've made here today, which is that Burke's decision here represents dramatic change in policy.

[00:14:23] Speaker 04:
When you say that,

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several times throughout the brief in several different ways.

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If I don't agree with you about that, is there any other argument that you have other than that?

[00:14:34] Speaker 04:
In other words, if it's not a change in policy, if we think this decision is consistent with previous policy, perhaps an explanation of it, but consistent, does that end the case?

[00:14:45] Speaker 05:
It does not.

[00:14:47] Speaker 04:
Would you just list for us what the other arguments are?

[00:14:50] Speaker 05:
Sure.

[00:14:50] Speaker 05:
So one argument is that under this court's decision in the American gas case,

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FERC has an obligation to respond to the views, to the arguments raised by... Okay, good point.

[00:15:00] Speaker 04:
Now, let me just ask you about that.

[00:15:02] Speaker 04:
The way I read it, FERC didn't mention, I don't think FERC mentioned the dissent, but FERC's position is we responded to the same, to the issues raised by the dissent because they were the same as the issues that you raised.

[00:15:15] Speaker 04:
Is that not accurate?

[00:15:17] Speaker 05:
I think that's not accurate.

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And I also think, not only did FERC not name Commissioner Dan,

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You're not serious about that, are you?

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Do we have a case that says that for FERC to satisfy its obligation to respond to a dissent, it has to name the dissenter?

[00:15:36] Speaker 05:
I think the point is not whether the dissenter is named.

[00:15:39] Speaker 04:
Well, you just said it.

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That's why I asked you the question.

[00:15:42] Speaker 05:
I think the point here is not only didn't they name him, but they didn't respond to his substantive argument.

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FERC says they did.

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because they were the same arguments raised by the parties.

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And what what argument did the dissenter make that didn't respond?

[00:16:01] Speaker 05:
The dissent argued as Perk did.

[00:16:03] Speaker 05:
I'm sorry, the dissent as New Fortress did.

[00:16:05] Speaker 05:
Right.

[00:16:05] Speaker 05:
That there is a distinction between pipes and pipelines.

[00:16:08] Speaker 05:
Perk's response to that was that the distinction is not relevant.

[00:16:12] Speaker 03:
Period.

[00:16:13] Speaker 04:
Yeah, that's the same argument.

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See?

[00:16:15] Speaker 04:
I think they explained why it wasn't relevant.

[00:16:17] Speaker 04:
Exactly.

[00:16:18] Speaker 04:
OK, so what's what's the next argument that's not

[00:16:21] Speaker 04:
That's not a change.

[00:16:24] Speaker 05:
But if I may just briefly respond to what I think was Judge Pillard's question.

[00:16:28] Speaker 05:
The problem with saying it's not relevant is that they didn't give an explanation for why it isn't relevant that we are dealing here with something that is not a pipeline.

[00:16:40] Speaker 04:
They said it's not relevant because the question isn't the character of the pipeline.

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It's the distinction between pipeline and other modes of transportation.

[00:16:50] Speaker 04:
Now, you don't agree with that.

[00:16:51] Speaker 04:
I understand that.

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But Fert responded to it.

[00:16:55] Speaker 05:
Not only do I not agree with that, but I also don't agree that that explanation is in the order.

[00:17:00] Speaker 05:
That's an explanation that is offered by the briefs.

[00:17:03] Speaker 05:
That's not an explanation that the Commission provided.

[00:17:05] Speaker 04:
But this is all the discussion we're having is in response to my question about whether the Commission adequately responded to the dissenter.

[00:17:14] Speaker 04:
I take your point that you don't think their response was adequate, but Fert responded

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to the argument the dissenter was making, because as you just pointed out, you made the same argument.

[00:17:32] Speaker 04:
So let's just keep going.

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Is there another argument that you want to be sure we don't miss?

[00:17:38] Speaker 05:
So just to finish on the dissenting commissioner point, I think the point is FERC didn't adequately respond to either argument.

[00:17:44] Speaker 05:
I understand that.

[00:17:46] Speaker 04:
What's the second argument?

[00:17:47] Speaker 04:
What's another argument that you want to be sure we don't miss?

[00:17:50] Speaker 05:
Sure.

[00:17:52] Speaker 05:
If you think that the commission did not depart from precedent in Shell, that in this case, simply applying the same standard that it applied in Shell, which is the pipeline standard, then as a substantive matter, it is an unreasonable conclusion to say that a 75 foot by 10 inch pipe is a pipeline.

[00:18:14] Speaker 05:
In other words, FERC did one of things different from your primary argument?

[00:18:17] Speaker 05:
Yes, FERC did one of two things here.

[00:18:20] Speaker 05:
it either changed the pipeline requirement to an any type of piping test.

[00:18:25] Speaker 05:
That is a different test that it hasn't adequately explained.

[00:18:28] Speaker 05:
Or, if it didn't do that, and you think that it adhered to the pipeline requirement, then it is improperly applying the pipeline standard to the facility that we have an issue here.

[00:18:41] Speaker 04:
What's the third?

[00:18:42] Speaker 04:
Is there another argument?

[00:18:44] Speaker 05:
So I think the last argument that I would make is

[00:18:50] Speaker 05:
FERC has come up with a standardless rule here, because it hasn't given us.

[00:18:56] Speaker 04:
No, I was asking you, if we think this is consistent with FERC's precedent, then that answers that question.

[00:19:08] Speaker 04:
I mean, that means that the standard they're applying here is a standard they applied in Shell.

[00:19:14] Speaker 04:
And so that's really not a different argument.

[00:19:17] Speaker 05:
I think it's a different argument

[00:19:19] Speaker 05:
because what this case then shows is that the standard applied in Shell is not a coherent standard because FERC has never explained what constitutes a pipeline.

[00:19:35] Speaker 05:
It hasn't explained.

[00:19:36] Speaker 04:
Anything else?

[00:19:39] Speaker 03:
No.

[00:19:39] Speaker 03:
Okay.

[00:19:40] Speaker 03:
Thank you.

[00:19:41] Speaker 03:
Mr. Doraski, you said that.

[00:19:43] Speaker 03:
the argument that they make about the physical characteristics being not relevant is not an argument in the order, but I see it in the order at J109 to 110 where they talk about, but the argument that your client made that design specifications, length, diameter pipe matter, the commission says we've not ever considered that to matter.

[00:20:12] Speaker 03:
It's that relates to the volume, but section three has no minimum size limit.

[00:20:18] Speaker 03:
Rather, we're looking at whether a pipeline is is in case of transportation or there's some other function.

[00:20:24] Speaker 03:
And so it basically does explain it's not relevant understanding.

[00:20:34] Speaker 03:
So I guess I'm not I'm not following why you say they just brushed it off as irrelevant.

[00:20:42] Speaker 03:
rather than saying, you know, this wasn't transferred by truck or train or boat, because the end user got it by pipe.

[00:20:55] Speaker 05:
Judge Pillard, I think you're looking at paragraph 23 of the order.

[00:20:59] Speaker 05:
Yeah, and I make a couple of points about paragraph 23.

[00:21:04] Speaker 05:
One, the commission says here that it has never considered physical characteristics.

[00:21:11] Speaker 05:
I would point you again to the language in Shell, where the commission was talking about pipelines in one place, but it was talking about short segments of pipe in another.

[00:21:21] Speaker 05:
And even though the short segments of pipe discussion was in the discussion of the Geismar facility, the point is that the commission has taken into account and has distinguished between pipes and pipelines.

[00:21:32] Speaker 05:
And in a sense, it has to, because when we're talking about a pipeline, we're talking about something that inherently is defined by its physical character.

[00:21:39] Speaker 05:
So of course, when you're looking at a facility, you have to ask, does this facility have the physical characteristics of a pipeline?

[00:21:46] Speaker 05:
So it's simply not true to say that the commission has never considered physical characteristics.

[00:21:50] Speaker 05:
The language in Shell itself shows that it has.

[00:21:53] Speaker 05:
As for the language about sections three and seven not having a minimum size requirement, but what Shell says is that they do have a pipeline requirement.

[00:22:03] Speaker 05:
That's how the commission interpreted sections three and seven in Shell.

[00:22:07] Speaker 03:
In the domestic

[00:22:10] Speaker 05:
In both contexts, again, I'll take you back to paragraph 40 of Shell.

[00:22:14] Speaker 05:
It starts with a domestic context, that's section seven, but then in paragraph 40, the commission is saying that it is applying the same understanding of pipeline from section seven to section three, which is what's at issue here.

[00:22:27] Speaker 05:
And so we have the same understanding of pipeline for both in that respect.

[00:22:32] Speaker 05:
And you have the Shell decision itself, again, talking about pipeline and talking about short segments of pipeline.

[00:22:38] Speaker 05:
Again, what I would say is you have to take into account the physical characteristics because there's no other way to understand what a pipeline is.

[00:22:45] Speaker 02:
I think I mentioned the Southern LNG case, which is cited in FERC's brief.

[00:22:53] Speaker 02:
In that case itself then cites, after it makes that point about just a short segment of pipeline is all that's needed.

[00:23:00] Speaker 02:
It cites other cases, including a FERC case that granted section three authorization for a 30 foot pipeline.

[00:23:07] Speaker 02:
3 foot by 4 inch diameter pipe.

[00:23:10] Speaker 02:
That's the Sword Energy case.

[00:23:12] Speaker 02:
The New Mexico case was 150 foot pipe, in their words, with an 8 inch diameter.

[00:23:17] Speaker 02:
So it seems like, at least in the Section 3 tax, which is all we have to decide before us,

[00:23:23] Speaker 02:
pipes, those two, and even smaller than the pipe at issue here have been held sufficient to trigger section three authority.

[00:23:33] Speaker 02:
And so isn't that, doesn't that just, you may want them to care about the characteristics, but they, they don't.

[00:23:39] Speaker 02:
And so your core argument would have to be not that it's standard list because they clearly have said pipes of any length in this case and in others.

[00:23:49] Speaker 02:
And simply that that,

[00:23:51] Speaker 02:
You would have to argue that's just beyond their authority under the statute to reach just a pipe, a single pipe of these relative diameters.

[00:24:02] Speaker 02:
But you haven't made that argument, have you?

[00:24:03] Speaker 05:
The main argument that we're making is that if you're going to reach just a simple pipe, they have to provide an explanation for why the statute

[00:24:13] Speaker 05:
In shell, they provided an explanation for why the statute reaches pipelines.

[00:24:19] Speaker 04:
Why isn't the explanation they gave adequate?

[00:24:21] Speaker 04:
They say, maybe I'm wrong about this, but the explanation they give is that it's transmission by pipeline.

[00:24:33] Speaker 04:
It's not transmission by boat or truck.

[00:24:36] Speaker 04:
That's their explanation.

[00:24:40] Speaker 04:
Why isn't that enough?

[00:24:42] Speaker 05:
Judge Tatel, that's not the explanation that the commission gave in its order.

[00:24:47] Speaker 05:
That is an explanation that the commission has argued in its brief.

[00:24:51] Speaker 05:
That is not the explanation that the commission gave.

[00:24:54] Speaker 05:
If I may briefly respond to Judge Millett on FERC's cases.

[00:24:58] Speaker 05:
So I think there are two different categories of cases that FERC is relying on.

[00:25:02] Speaker 05:
One is the Aguayra and the Ecoelectrica case.

[00:25:06] Speaker 05:
Those are ones where an application was submitted to FERC.

[00:25:11] Speaker 05:
There was, at most, cursory analysis of jurisdiction.

[00:25:15] Speaker 05:
Those were not developed analyses of whether FERC had jurisdictional authority.

[00:25:19] Speaker 05:
And the pipelines that issue there were over one mile and four miles long respectively.

[00:25:24] Speaker 05:
So that doesn't tell us what to do with a 75-mile pipe.

[00:25:26] Speaker 05:
There may be some gray area between a pipe and a pipeline, but 75 feet is out.

[00:25:32] Speaker 05:
The other cases that I believe you're citing don't appear anywhere in the orders.

[00:25:36] Speaker 05:
Those are cases that the commission is relying on for the first time in its pilot brief.

[00:25:40] Speaker 05:
And in addition to that, all of those cases involved, I think your question.

[00:25:44] Speaker 02:
Is it true?

[00:25:46] Speaker 02:
Under Chenery, we don't come up with the reasons.

[00:25:49] Speaker 02:
But if in fact, it's a matter of objective record, Burke has other cases.

[00:25:54] Speaker 02:
Or it's exercise section three authority over even smaller pipes.

[00:26:01] Speaker 02:
Do we have to turn our head away and ignore those just because they didn't cite the cases?

[00:26:07] Speaker 02:
As long as it's not adding any more reason,

[00:26:09] Speaker 02:
That's fine.

[00:26:09] Speaker 02:
It's just confirming their reasoning.

[00:26:12] Speaker 05:
I think if FERC wants to say the reason that we can exercise jurisdiction over this facility with a pipe is, look, we've done it before.

[00:26:22] Speaker 05:
That's a reason that they ought to give in their order.

[00:26:25] Speaker 05:
But I also think those cases don't support the point, because as Your Honor's quotes from the cases suggested, those cases are dealing with segments of pipe that are connected to a larger pipeline.

[00:26:37] Speaker 05:
You have a branch system.

[00:26:40] Speaker 05:
Those are not cases involving freestanding independent 75 foot segments.

[00:26:46] Speaker 05:
We're just talking about a segment of pipe next to a larger system.

[00:26:49] Speaker 05:
And it's that larger system that makes it.

[00:26:56] Speaker 04:
Okay, thanks.

[00:26:56] Speaker 04:
We'll hear from her.

[00:27:18] Speaker 01:
May it please the court, Robert Solomon for the commission.

[00:27:22] Speaker 01:
I think your honor as well understand the agency's points and the agency's explanations.

[00:27:30] Speaker 01:
Judge Tatel, you are correct.

[00:27:32] Speaker 01:
All that matters for purposes of whether this is an LNG import facility is whether the 75 foot pipe transports gas.

[00:27:43] Speaker 01:
What the commission explained

[00:27:46] Speaker 01:
is that the pipeline rule is not simply that there be a pipeline somewhere of some indeterminate length, rather what the commission explained in the Shell case and explained in the orders on review is that a pipeline for this purpose is one that enables the LNG facility, if it's an export facility, to receive gas

[00:28:14] Speaker 01:
for liquefaction and if the facility is an import facility, whether the pipeline enables the facility to send away gas after it has been vaporized.

[00:28:30] Speaker 01:
Judge Patil, you asked whether there is really at bottom any issue other than simply whether the commission has changed its policy.

[00:28:41] Speaker 01:
And I submit that that is in fact the only question that petitioner raises.

[00:28:49] Speaker 01:
The other issues such as reliance and response to the dissenting commissioner, those all devolve back to the issue of whether the commission changed its policy.

[00:29:06] Speaker 03:
Mr. Solomon, if this is so clear,

[00:29:08] Speaker 03:
why was there so much confusion when the company and the Puerto Rican government were conferring with FERC upfront?

[00:29:20] Speaker 03:
It seems like the FERC senior staff got it wrong and I'm just curious why that is if the issue is so clear.

[00:29:31] Speaker 01:
Well, on the record, I'm not so certain that the current staff got it wrong.

[00:29:36] Speaker 01:
And I believe in your questions to petitioner, the actual mechanics and characteristics of the facility were evolving in 2017.

[00:29:47] Speaker 01:
The plan was to have trucks take away the capacity.

[00:29:53] Speaker 01:
The commitment with the Puerto Rican power authority to

[00:29:58] Speaker 01:
fuel its San Juan plant wasn't developed until 2018.

[00:30:04] Speaker 01:
So I submit that the record is somewhat more equivocal.

[00:30:07] Speaker 01:
You can find this on J89 where you have the testimony of the power authority, but even taking New Fortress at its word as to its recollection of the meeting.

[00:30:24] Speaker 01:
Judge Pillar, I think you were correct in focusing on whether

[00:30:29] Speaker 01:
And why not New Fortress didn't petition for a declaratory order?

[00:30:34] Speaker 01:
Everybody agrees that Shell is the leading authority here.

[00:30:39] Speaker 01:
The Shell order was in response to a petition for a declaratory order.

[00:30:45] Speaker 01:
Indeed, the other leading cases, the 2014 and 2015 pivotal LNG cases,

[00:30:52] Speaker 01:
the AmeriCase, the Andalusian case, those were all orders in response to the petition.

[00:31:00] Speaker 02:
How long does it take to get one of these declaratory orders?

[00:31:03] Speaker 02:
How long does it take on average to get one of these declaratory orders?

[00:31:09] Speaker 01:
Petitioner suggests that a new portion has been filed because it would take a long time.

[00:31:15] Speaker 01:
I am not aware of any particular

[00:31:20] Speaker 01:
extreme length of time in issuing the declaratory order.

[00:31:24] Speaker 01:
And I think the commission would be responsive to a plea for expedition if the declaratory order petition is premised on having a decision on jurisdiction by a certain time so that financial... Have you seen cases like this where people ask for, parties ask for expedited declaratory order and they get them?

[00:31:49] Speaker 02:
Have you seen that happen?

[00:31:50] Speaker 01:
Yes, the commission does try to oblige.

[00:31:53] Speaker 02:
Do you have a sense then of how expedited that is?

[00:31:54] Speaker 02:
I mean, are we talking six months a year?

[00:31:58] Speaker 02:
I mean, FERC, they have a lot on their plate.

[00:32:02] Speaker 02:
Two years, I just don't have any sense of, I'm not asking you to sort of put it off the top of your head.

[00:32:06] Speaker 02:
I'm just trying to get some sense.

[00:32:08] Speaker 01:
If an applicant files a petition for declaratory order and says that the applicant needs a FERC response in two months or three months, the

[00:32:18] Speaker 01:
commission will try to oblige.

[00:32:20] Speaker 01:
The one thing we don't want to perceive is some type of petition for rid of mandamus.

[00:32:26] Speaker 01:
And I believe that the commission has been quite timely in the cases that I mentioned.

[00:32:32] Speaker 01:
There was no claim from the applicant that the commission acted in an untimely manner.

[00:32:43] Speaker 01:
The petitioner here is well represented by qualified lawyers.

[00:32:48] Speaker 01:
The regulations are clear that when the applicant seeks the informal advice from commission staff, that those are not the official views of the commission.

[00:33:04] Speaker 01:
The other thing New Fortress could have done, other than petitioning for a declaratory order, is to file its application.

[00:33:13] Speaker 01:
If the commission thought that there wasn't a jurisdictional basis for acting,

[00:33:18] Speaker 01:
On that application, the Commission would have done what it did in the 2013 Hawaii case, the gas company case.

[00:33:31] Speaker 01:
It would have dismissed the application for want of jurisdiction.

[00:33:35] Speaker 04:
Well, Council's argument is that preparing an application is big and complex, and they want a jurisdictional finding before they go through that.

[00:33:46] Speaker 01:
Only if they want a jurisdictional finding before they have to go through the effort of filing an application, the vehicle is to petition for a declaratory.

[00:33:57] Speaker 04:
Is there something, is that significant to the case we have before us today in some way?

[00:34:03] Speaker 01:
Excuse me, is there something so significant?

[00:34:05] Speaker 04:
Yeah, what's the significance of that?

[00:34:08] Speaker 04:
We have a clean, straightforward legal question before us today about the FERC's decision.

[00:34:13] Speaker 04:
We have a petition for review of that decision.

[00:34:16] Speaker 04:
Are you arguing that because they didn't seek a declaratory opinion that that's somehow relevant to how we handle this case?

[00:34:25] Speaker 01:
Now, it really isn't relevant to the jurisdictional question presented.

[00:34:29] Speaker 01:
We're just responding to the argument of the petitioner who argues that the commission's decision was unfair, that it came out of the blue.

[00:34:42] Speaker 01:
Judge Malletta

[00:34:43] Speaker 01:
You asked whether there are any cases where the commission found that a short piece of pipe is not a pipeline, and there are no such cases.

[00:34:56] Speaker 01:
And in fact, the Shell case itself said in paragraph 38, note 71, that the length of the pipe, for purposes of section seven, not section three, but the length of the pipe, actually using the word pipe,

[00:35:13] Speaker 01:
does not matter.

[00:35:15] Speaker 01:
In the interstate context, all that matters is that the pipe connect to the interstate grid.

[00:35:25] Speaker 01:
In the foreign commerce context, all that matters is that the pipe be able to deliver natural gas and natural gas more.

[00:35:38] Speaker 02:
The southern LNG case which you cite

[00:35:41] Speaker 02:
in your brief, but just for a different proposition, makes the point about just needing in section three, you just need a segment pipeline, be enough to bridge the import line.

[00:35:57] Speaker 02:
It doesn't have to be the whole pipeline, just a segment.

[00:36:00] Speaker 02:
And then it cites a number of other FERC decisions, including ones that have relied on pipe of one was 150 feet, one was 30 feet.

[00:36:12] Speaker 02:
long.

[00:36:15] Speaker 02:
And we acknowledge the existence of those decisions since the commission didn't decide them.

[00:36:20] Speaker 02:
Or is that a January?

[00:36:22] Speaker 01:
Commission, of course, says that physical characteristics don't matter.

[00:36:25] Speaker 01:
The common usage of the word doesn't matter.

[00:36:30] Speaker 01:
We're dealing with a particular context here.

[00:36:34] Speaker 01:
A section three LNG terminal in a foreign

[00:36:39] Speaker 01:
commerce.

[00:36:40] Speaker 02:
But we're further responding to Tishner's argument that I'm just asking you whether we can look at in reviewing a decision that asks about the body of FERC decisional rulings.

[00:36:56] Speaker 02:
Are we allowed to look at ones FERC didn't cite?

[00:36:59] Speaker 02:
Does shuntering mean we can't even look

[00:37:02] Speaker 02:
cases?

[00:37:02] Speaker 01:
Well, you certainly don't need to look.

[00:37:05] Speaker 02:
Is that my question?

[00:37:05] Speaker 02:
I'm really, really, I'm really, I'm really asking, right?

[00:37:08] Speaker 02:
This is just a weird, weird take on Channery.

[00:37:10] Speaker 02:
I haven't thought about before, so I really am interested in your.

[00:37:12] Speaker 01:
Well, from a Channery perspective, the commission said that the physical characteristics don't matter, that the common usage of the word.

[00:37:23] Speaker 02:
I'm aware of what the commission said.

[00:37:24] Speaker 02:
I'm asking you.

[00:37:25] Speaker 02:
It seems to me that in fact,

[00:37:29] Speaker 02:
the commission has already crossed this bridge even before this case.

[00:37:33] Speaker 02:
In cases that are cited in a case you cited, is that something

[00:37:41] Speaker 02:
in addressing arguments about common understanding or departure from precedent that we can even take notice of.

[00:37:51] Speaker 02:
I'm just asking this Channery question, not whether I have to.

[00:37:54] Speaker 02:
Does Channery even say ignore, normally it says reasoning, that's the discussion, but ignore the body of case law?

[00:38:05] Speaker 01:
Well, the commission did not say that a smaller pipeline measured, height measured in feet can be a pipeline.

[00:38:14] Speaker 01:
So there is the chennery issue.

[00:38:17] Speaker 01:
But this also goes to the point that the commission did say.

[00:38:20] Speaker 02:
Is it a chennery problem if elsewhere the commission has said that's sufficient?

[00:38:24] Speaker 02:
That's sufficient to trigger section three.

[00:38:25] Speaker 01:
I would think that would be a problem elsewhere.

[00:38:28] Speaker 01:
But again, the issue here is that a pipeline for this particular purpose

[00:38:35] Speaker 01:
is one that transports gas and differentiates between the pipeline mode and the truck, train, and ship mode where the gas is delivered in liquid form.

[00:38:53] Speaker 01:
What the Commission did in the Shell case was to look at the history of pipeline

[00:39:02] Speaker 01:
regulation under the Natural Gas Act, which was enacted in 1938 when the only form of delivery of gas was in a stationary non-mobile pipeline manner.

[00:39:18] Speaker 01:
And the Commission found that it didn't want to engraft other modes of delivery.

[00:39:25] Speaker 01:
I do want to point out that the pipeline test is just one

[00:39:30] Speaker 01:
of one of the factors in a three-part test.

[00:39:35] Speaker 01:
If the concern is interstate commerce as opposed to foreign commerce, there is a fourth step, whether there is a connection.

[00:39:44] Speaker 02:
The commission had, and this is just an earlier hypothetical case, had a case and they said, we're making a new rule.

[00:39:54] Speaker 02:
We've never addressed this as a question of first impression.

[00:39:59] Speaker 02:
and then adopted rule X. And it turned out that there were actually 10 prior FERC cases that said, no, the rule is not X. But because the commission in the case before us didn't cite those other ones, did we avert our eyes to the existence of those under Jennery?

[00:40:18] Speaker 01:
No, I don't think you would avert your eyes, but the standard for the change

[00:40:25] Speaker 01:
is that the mission first acknowledge and recognize and then explain if the basis for the per order was that it is changing its policy.

[00:40:45] Speaker 01:
I think you would review the order based on the

[00:40:50] Speaker 01:
commission's motivation.

[00:40:52] Speaker 01:
If in fact there were pre-existing cases such that the commission erred in thinking that it had changed its policy when it really hadn't, I have to believe that that's something that the review in court would be able to take into account, because in fact the commission would not be

[00:41:18] Speaker 01:
changing its policy.

[00:41:20] Speaker 01:
But here, the Commission explained the basis for the rule, explained the application of the rule to New Fortress, and explained in its orders that, in fact, there was no departure from the rule, and that is all that matters for purposes of review in this particular case.

[00:41:44] Speaker 04:
Thank you.

[00:41:46] Speaker 04:
Let's see.

[00:41:47] Speaker 04:
Mr. Dvorsky, I think you are out of time, but you can have two minutes.

[00:41:57] Speaker 05:
Thank you.

[00:41:58] Speaker 05:
If I could, I'd like to make four quick points.

[00:42:00] Speaker 05:
One, Mr. Solomon pointed to PREPA's testimony in the record at Joint Appendix 9.

[00:42:06] Speaker 05:
If you look at that testimony, it is talking about what was presented to FERC staff and the understanding of the facility was that

[00:42:14] Speaker 05:
Gas would be delivered from the vaporizer through power plant piping located entirely within San Juan Power Station property.

[00:42:23] Speaker 05:
Staff representatives focused on the absence of a natural gas pipeline extending a substantial distance, suggesting that the absence of such facilities would make it less likely that the commission would assert jurisdiction.

[00:42:33] Speaker 05:
Our meeting left us confident that in FERC staff's view, the configuration which NFE ultimately proposed made it like other LNG facilities which the commission had concluded did not require its authorization.

[00:42:44] Speaker 05:
But the interactions with FERC staff were clear, and FERC staff understood Shell to mean what we understand.

[00:42:51] Speaker 04:
Second, Shell... FERC's own regulations say that they can't speak for the Commission.

[00:42:56] Speaker 04:
I'm sorry, Judge Haley.

[00:42:57] Speaker 04:
FERC's own regulations say they can't speak for the Commission.

[00:43:00] Speaker 05:
They can't speak for the Commission, but I think this supports the argument that what FERC has done here is a departure, and FERC's own staff understood it that way.

[00:43:07] Speaker 04:
Well, that's that's reversing the standard.

[00:43:10] Speaker 04:
I mean, it can't you can't be right about that.

[00:43:12] Speaker 04:
If they can't speak to the staff, they can't you can't use what they said.

[00:43:16] Speaker 04:
If they can't speak to the commission, you can't use what the staff said to argue the commission has changed its position.

[00:43:22] Speaker 05:
I think what the regulations provide is that you can't rely in an estoppel sort of way on what the staff says.

[00:43:29] Speaker 05:
But I do think that the evidence is relevant.

[00:43:32] Speaker 04:
You have three more points.

[00:43:34] Speaker 05:
Second, Shell rooted the pipeline requirement in history.

[00:43:37] Speaker 05:
The Commission has to similarly explain how a piping of any kind requirement, which is the test they applied here, comports with that history and with the statute.

[00:43:46] Speaker 05:
Third, Mr. Solomon relied on footnote 71 of Shell.

[00:43:51] Speaker 05:
If you look at footnote 71 and at

[00:43:53] Speaker 05:
in paragraph 38, it says, quote, all of the liquefaction facilities over which the commission has exercised Section 7 jurisdiction have had pipeline interconnections with the interstate pipeline grid.

[00:44:05] Speaker 05:
So what footnote 71 is talking about, as I was trying to explain to Judge Millett earlier, when you have a short segment of pipe that connects a facility to the interstate grid, that's one thing, but that's not the same thing as what we have here.

[00:44:18] Speaker 05:
We have an independent freestanding short pipe.

[00:44:22] Speaker 05:
Last point I would make, and this goes back to Judge Tatel, your question earlier about Commissioner Danley's dissent.

[00:44:28] Speaker 05:
Commissioner Danley pointed to common usage.

[00:44:31] Speaker 05:
He pointed to dictionary definitions.

[00:44:33] Speaker 05:
The commission didn't engage with any of it.

[00:44:35] Speaker 05:
Also in paragraph 18, talked about this very point that in shell, the commission thought it was very significant, whether you had a pipeline that connected to the interstate transportation system.

[00:44:47] Speaker 05:
He specifically raised that point in paragraph eight of his dissent.

[00:44:51] Speaker 05:
first order, it doesn't respond to that argument and explaining why that connection is normal.

[00:44:56] Speaker 03:
Why would that matter?

[00:44:57] Speaker 03:
What matters when you're talking about import is not the interstate system, but the boundary between foreign and domestic.

[00:45:05] Speaker 05:
Because the commission in Shell, and this is again in paragraphs 40 to 43, said that the same standard for section seven applies to section

[00:45:14] Speaker 05:
When Congress added the definition of LNG terminal in 2005, it didn't mean to change that understanding.

[00:45:22] Speaker 05:
And that's what the Commission expressly said in Shell, that it was applying the same standard.

[00:45:25] Speaker 05:
That is the standard on which the industry has relied and built up expectation.

[00:45:29] Speaker 05:
The Commission now wants to depart from that.

[00:45:31] Speaker 05:
It needs to explain itself, and it's failed.

[00:45:35] Speaker 04:
Mr. Dvorsky, Mr. Solomon, thank you.

[00:45:37] Speaker 04:
The case is submitted.