[Federal Register Volume 60, Number 75 (Wednesday, April 19, 1995)]
[Rules and Regulations]
[Pages 19494-19509]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-9594]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Parts 343 and 385
[Docket No. RM91-12-000]
[Order No. 578]
Alternative Dispute Resolution
Issued April 12, 1995.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule.
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SUMMARY: The Federal Energy Regulatory Commission (Commission) is
issuing a Final Rule to implement the Alternative Dispute Resolution
Act of 1990 (ADRA). To implement its policy in support of alternative
dispute resolution, the Commission is amending its Rules of Practice
and Procedure to add regulations adopting provisions authorized in the
ADRA and to establish procedures for approving ADR in particular
proceedings.
In particular, the new rules: Adopt guidelines for applying ADR
techniques and definitions from the ADRA; establish procedures for
submitting, reviewing, and monitoring proposals to use ADR in specific
proceedings; incorporate the provisions of the ADRA regarding binding
arbitration proceedings, arbitral awards, and review of arbitration
results; and adopt the provisions of the ADRA regarding confidentiality
in ADR proceedings established under the new rules. The Commission is
also amending its Rules of Practice and Procedure to modify existing
regulations and to add new regulations with respect to the submission
and review of offers of settlement. Finally, the Commission is
consolidating almost all of its regulations dealing with the use of ADR
in oil pipeline rate proceedings into its Rules of Practice and
Procedure.
EFFECTIVE DATE: May 19, 1995.
FOR FURTHER INFORMATION CONTACT: Barry Smoler, Office of the General
Counsel, Federal Energy Regulatory Commission, 825 N. Capitol Street,
NE., Washington, DC 20426, (202) 208-1269.
SUPPLEMENTARY INFORMATION: In addition to publishing the full text of
this document in the Federal Register, the Commission also provides all
interested persons an opportunity to inspect or copy the contents of
this document during normal business hours in Room 3104, 941 North
Capitol Street, NE., Washington, DC 20426.
The Commission Issuance Posting System (CIPS), an electronic
bulletin board service, provides access to the texts of formal
documents issued by the Commission. CIPS is available at no charge to
the user and may be accessed using a personal computer with a modem by
dialing (202) 208-1397. To access CIPS, set your communications
software to 19200, 14400, 12000, 9600, 7200, 4800, 2400, 1200 or
300bps, full duplex, no parity, 8 data bits, and 1 stop bit. The full
text of this document will be available on CIPS for 60 days from the
date of issuance in ASCII and WordPerfect 5.1 format. After 60 days the
document will be archived, but still accessible. The complete text on
diskette in Wordperfect format may also be purchased from the
Commission's copy contractor, La Dorn Systems Corporation, located in
Room 3104, 941 North Capitol Street, NE., Washington, DC 20426.
Table Of Contents
I. Introduction
II. Background
III. ADR Rules
A. Initiating the Use of ADR
B. Mechanism for Using ADR
C. Arbitration
D. Confidentiality
IV. Settlement Rules
A. Omnibus Settlements
B. Uncontested Settlements
C. Contested Settlements
V. Miscellaneous
A. ADR in Oil Pipeline Rate Proceedings
B. ADR and Other Agencies
VI. Administrative Findings
A. Regulatory Flexibility Act
B. Environmental Review
C. Information Collection Requirements
VII. Effective Date
Before Commissioners: Elizabeth Anne Moler, Chair; Vicky A. Bailey,
James J. Hoecker, William L. Massey, and Donald F. Santa, Jr.
I. Introduction
The Federal Energy Regulatory Commission (Commission) is issuing a
Final Rule to implement the Alternative Dispute Resolution Act of 1990
(ADRA).\1\ To implement its policy in support of alternative dispute
resolution, the Commission is amending Subparts E and F of Part 385 of
its Rules of Practice and Procedure\2\ to add regulations adopting
provisions authorized in the ADRA and to establish procedures for
approving ADR in particular proceedings.
\1\5 U.S.C. 571-83 (1988), as amended by Pub. L. 102-354, 106
Stat. 944 (Aug. 26, 1992).
\2\18 CFR Part 385.
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In particular, new Rule 604 adopts guidelines for applying ADR
techniques and definitions from the ADRA and establishes procedures for
submitting, reviewing, and monitoring proposals to [[Page 19495]] use
ADR in specific proceedings. New Rule 605 incorporates the provisions
of the ADRA regarding binding arbitration proceedings, arbitral awards,
and review of arbitration results. New Rule 606 adopts the provisions
of the ADRA regarding confidentiality in ADR proceedings established
under proposed new Rules 604 and 605. The Commission is amending
Subparts E, F, and G of Part 385 of its Rules of Practice and Procedure
to modify existing regulations and to add new regulations with respect
to the submission and review of offers of settlement. Finally, the
Commission is consolidating almost all of Sec. 343.5 of its
regulations, dealing with the use of ADR in oil pipeline rate
proceedings, into Part 385.\3\
\3\The provision implementing the statutory requirement for
negotiation in oil pipeline rate proceedings remains in Sec. 343.5.
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The Commission's purpose in adopting these new rules and amendments
is to provide optional opportunities for regulated entities and other
parties who come before the Commission to simplify and expedite their
proceedings. We stress that all of these newly authorized procedures
are purely voluntary on the part of the parties affected by them, and
are in addition to all previously authorized procedures and informal
practices that parties have used or had available for use. We encourage
regulated entities and other parties to try these new procedures and
experiment with them. They are intended to alleviate the costs and
other burdens of regulatory litigation.
The Commission will continue to seek means of further streamlining
and expediting its litigatory processes, including any revisions or
supplements to today's new rules that may in the future appear
appropriate. We welcome suggestions on how to refine these rules after
they have gone into practice.
II. Background
The ADRA amended Chapter 5 of Title 5, United States Code, by
adding a new subchapter to provide explicit statutory authorization
allowing federal agencies to use ADR techniques in lieu of litigation
to resolve a dispute in the agency's administrative programs when all
the participants to the dispute voluntarily agree to its use. ADR
methods include the use of a neutral, an individual who functions to
aid the participants in resolving the controversy. The ADRA provides
that ADR methods may include, but are not limited to, settlement
negotiations, conciliation, facilitation, mediation, factfinding,
minitrials, and arbitration, or any combination of these.\4\
\4\See Administrative Conference of the U.S., Sourcebook:
Federal Agency Use of Alternative Means of Dispute Resolution
(Office of the Chairman, 1987) (Sourcebook) at 44-45.
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The ADRA requires each agency to adopt a policy that addresses the
use of alternative means of dispute resolution and case management in
connection with the agency's administrative actions. The Commission
will fulfill this requirement with this rulemaking proceeding and
through revisions to its regulations with respect to the matters under
the Commission's substantive jurisdiction.\5\ As required by the ADRA,
the Commission has consulted with the Administrative Conference of the
United States (ACUS) and reviewed the ACUS guidance to agencies in
developing their ADR policies and in implementing those policies.\6\
\5\Under the Department of Energy Organization Act, Pub. L. No.
95-91, 91 Stat. 565 (Aug. 4, 1988) and E.O. No. 12009, 42 FR 46267
(Sept. 15, 1977), the Chair is responsible for the administrative
functions of the agency. With respect to those matters, the
Commission's ADR policy has developed separately.
\6\Administrative Conference of the U.S., The Administrative
Dispute Resolution Act: Guidance for Agency Dispute Resolution
Specialists (Office of the Chairman, 1992).
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The Congress further encouraged the use of ADR procedures in the
Energy Policy Act of 1992. Section 1802(e) of that Act directed the
Commission to establish appropriate ADR procedures, including required
negotiations and voluntary arbitration, early in oil pipeline
proceedings as a method preferable to adjudication in resolving
disputes related to rates. The Commission did so by issuing Order No.
561, Revisions to Oil Pipeline Regulations Pursuant to the Energy
Policy Act of 1992 on October 22, 1993.\7\ Additionally, Vice President
Gore's National Performance Review recommended that federal agencies
expand their use of ADR techniques.
\7\58 FR 58753 (Nov. 4, 1993), III FERC Stats. & Regs. Preambles
30,985; order on reh'g, Order No. 561-A, 59 FR 40243 (Aug. 8,
1994), III FERC Stats. & Regs. Preambles 31,000 (July 28, 1994).
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On April 17, 1991, the Commission issued a Notice of Inquiry (NOI)
seeking comments on: (1) How best to implement the ADRA, (2) whether
changes in the Commission's regulations are necessary or appropriate to
facilitate the use of alternative means of dispute resolution, and (3)
whether changes in the Commission's regulations governing settlements
are necessary or appropriate.\8\
\8\56 FR 18789 (Apr. 24, 1991), IV FERC Stats. & Regs. Notices
35,523 (1991).
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On November 10, 1994, in response to the comments on the NOI, the
Commission issued a Notice of Proposed Rulemaking (NOPR).\9\ The NOPR
discussed at length the application of ADR to Commission proceedings.
The specific proposals in the NOPR are discussed below, in the context
of the comments received thereon.
\9\59 FR 59,715 (November 18, 1994), IV FERC Stats. & Regs.
Preambles 32,510.
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In response to the NOPR, the Commission received 27 comments. The
commenters are identified in an Appendix to this Final Rule, and their
comments are summarized and discussed below.
III. ADR Rules
Because the use of ADR complements current settlement practices,
the NOPR proposed to include the new rules in Subpart F of Part 385 of
the Commission's Rules of Practice and Procedure concerning
settlements. Specifically, the NOPR proposed to amend Rule 601(a) to
provide for the convening of conferences to evaluate whether ADR is
practicable in a particular proceeding. New Rule 604 was proposed to
establish a mechanism for filing proposals to use ADR; new Rule 605 was
proposed to adopt the provisions in the ADRA for binding arbitration
procedures; and new Rule 606 was proposed to adopt the provisions in
the ADRA for confidentiality in ADR proceedings. As the NOPR explained,
the settlement rules were retained separately so that as many options
as possible would be available for expediting resolution of disputes
before the Commission.
EEI asks us to confirm that the new rules do not in any way
preclude parties from engaging in informal settlement discussions with
each other outside the scope of organized ADR activities.\10\ We so
confirm. We reject all suggestions by PG&E\11\ that the Final Rule in
any way limits or precludes settlement discussions. The Final Rule does
not preclude any other form of informal discourse, negotiation or
agreement among any combination of participants on any combination of
issues. ADR is an additional alternative.
\10\EEI at 3.
\11\See PG&E at 3-5.
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The NOPR explained that, apart from the provisions in proposed Rule
605 for binding arbitration proceedings, the proposed rules did not
include separate provisions for the Commission's review of the ultimate
outcome of an ADR proceeding. The Commission's intent is that the
ultimate outcome of an ADR proceeding, like any other settlement, be
subject to Commission review in a [[Page 19496]] manner that conforms
with the Commission's statutory duties using existing procedures for
evaluating settlements. As with the outcome of any settlement, the
Commission's approval of the outcome of the ADR method used in a
particular proceeding will not constitute approval of, or precedent
regarding, any principle or issue in that proceeding. To the extent ADR
techniques are used to resolve issues in licensing or certificate
cases, that resolution will become part of the Commission's evaluation
of any license or certificate that might be issued.
The commenters generally support the use of ADR.\12\ The
Industrials, noting that section 11 of the ADRA provides for an October
1, 1995 sunset provision, ask us to clarify whether the Commission
intends for new Rules 604, 605 and 606 to expire on that date.\13\ The
Missouri PSC suggests a ``sunset review'' within ``the next two to four
years.''\14\
\12\See, e.g., American Public Power Association; Consumers
Power Company; New England Power Service; and Wisconsin Municipal
Group.
\13\Industrials at 8.
\14\Missouri PSC at 6-7.
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If and when the ADRA expires, the Commission will review the
continued legal viability of the binding arbitration provisions. The
other provisions are all independently sustainable, absent ADRA, under
the Commission's own organic statutes. All of the Commission's
regulations are in any event reviewable at any time to determine
whether they can be improved, just as the Final Rule herein adds
improvements to previously adopted regulations, and all such
regulations can and will be deleted if and when they are determined to
be no longer useful or appropriate.
A. Initiating the Use of ADR
New Rule 604(a)(1) provides that participants may, subject to the
limitations of subparagraph (a)(2) of that section, use ADR to resolve
any issue in a pending matter as long as all of the participants agree
to using ADR. The NOPR explained that, under the ADRA, any use of ADR
proceedings must be voluntary on the part of the participants, and that
the Commission is not willing to create different levels of
participants for purposes of determining whether the participants
support using an ADR proceeding. Thus, the NOPR proposed to require the
unanimous consent contemplated by the ADRA.\15\
\15\As discussed below, the NOPR emphasized that under Rule
601(b)(3), any party who fails to attend a conference convened for
the purpose of determining whether to use ADR waives any objection
to decisions made about an ADR proposal at that conference. Thus,
the unanimous consent is by those participants who choose to attend
a conference convened for the purpose of determining whether to use
ADR. As the NOPR indicated, there is an exception for binding
arbitration proposals under new Rule 605(a)(5), which requires
express consent of all parties in such a proposal.
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A number of commenters want to be able to use ADR procedures even
if the participants are less than unanimous in requesting such use.\16\
Two commenters support the requirement for unanimous request before ADR
procedures can be implemented.\17\
\16\AGD at 3-4; EEI at 3-4; Electric Generation at 4-5; Northern
Distributors at 1-6; ANR and CIG at 3-4; PG&E at 5-6; Transco; and
Williams and Northwest at 6.
\17\Natural Gas Supply at 2; Natural Gas Clearinghouse at 8-9.
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Commenters who oppose the requirement for unanimous consent contend
that one reluctant participant ought not to be able to frustrate the
ability of everyone else in the case to use ADR procedures to resolve
their disagreements. They suggest that there is a public interest in
using ADR procedures under those circumstances. Some contend that only
participants who have a ``substantial interest'' in the outcome of the
case should be able to, in effect, ``veto'' use of ADR; participants
with an ``indirect or attenuated interest'' should not be able to
preclude ADR, but should be free to ``opt out'' and pursue their own
remedies. They characterize this approach as ``non-binding ADR.''
Another variation would be to sever one or more issues so as to use ADR
procedures, unanimously requested, to resolve the rest of the issues.
Commenters who support the unanimity requirement as proposed in the
NOPR stress the importance of protecting the procedural rights of all
of the parties to a proceeding, not just the big parties or the
majority of the parties.
There is considerable merit to the positions expressed on both
sides of this issue. ADR cannot work unless the users of it want it to
work and want to use it. A single peripheral party ought not to be able
to prevent everyone else from using ADR, but significant interests
cannot be excluded. It is very difficult to codify a bright line test
in the regulations. We will adopt the rule as proposed. We strongly
urge all participants and decisional authorities to be flexible and
creative in adapting ADR to their needs and to the facts and
circumstances of particular cases, and in devising alternative
procedures that facilitate informal resolution of most issues by all
participants, or of all issues by most participants, while preserving
the rights of non-participants to disagree.
The NOPR explained that the Commission seeks to encourage parties
to consider the use of ADR as a routine part of the Commission's
decision-making processes. Accordingly, the NOPR proposed to amend Rule
601(a) by adding the words ``or the use of alternative dispute
resolution procedures'' to specifically provide for a conference to
address the possibility of using ADR techniques. The NOPR also proposed
to amend Rule 504(b)(7) to conform to the amendment proposed in Rule
601(a). As under the existing rule, a conference could be convened at
any time during any proceeding.
The NOPR noted that Rule 601(b)(3) provides that the failure of any
party to attend a conference convened under Rule 601(a) constitutes
waiver of all objections that party may have to any order or ruling
arising out of, or agreement reached at, the conference. That condition
would apply as well in the context of a conference at which an
agreement to use ADR was reached. Thus, Rule 601(b)(3) would operate to
waive an absent party's objections to an ADR proposal reached in the
conference if the conference was noticed in advance as a conference
addressing the possibility of using ADR.
The Commission proposed an exception for proposals to use binding
arbitration under proposed new Rule 605. In those cases, Rule 605(a)(5)
would require the express consent of all interested parties to such an
agreement. Thus, a party's absence from a conference under Rule 601
would not waive the party's rights to object to the use of binding
arbitration under Rule 605.
The PEC Pipeline Group raises the possibility that a participant in
a proceeding might seek to disrupt potentially promising settlement
discussions by moving to convene a conference to discuss the use of ADR
procedures or moving to consolidate proceedings for disposition of a
settlement.\18\ The regulatory devices in the Final Rule are intended
to facilitate resolution of conflicts, not to postpone them. The
Commission expects that the appropriate decisional authorities will be
able to distinguish between the two and rule accordingly.
\18\PEC Pipeline Group at 7-8.
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Several commenters object to the provisions that failure to attend
the conference will in effect constitute waiver of any objection to the
use of ADR. Interior asks us to clarify the procedures for objecting to
the use of ADR. Commerce and Natural Gas Supply state that some
participants may be unable to attend due to financial or
[[Page 19497]] logistical constraints, or schedule conflicts. Commerce
requests that telephone conferences be permitted, and that written
objection be accepted upon a showing of good cause for inability to
object in person. Supply and EEI would make written objection as
effective as personal objection without a showing of good cause for
failure to attend in person.\19\ All of these commenters stress the
importance of receiving timely and accurate notice of the conference.
\19\EEI at 4; Natural Gas Supply at 2-3.
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Rule 601(b)(1) already requires that the participants be given
notice of the time and place ``of the conference'' and ``of the matters
to be addressed at the conference.'' We encourage the decisional
authorities to make every effort to accommodate the financial,
logistical and schedule conflict needs and constraints of the
participants, and to be flexible and creative in setting the time,
place and format of the conference, including use of telephone or video
communication (as that technology becomes more widely available). We
do, however, want the participants to make a meaningful effort to
communicate with each other, even if only for the purpose of engaging
in a dialogue over why they are or are not willing to consider use of
ADR procedures to resolve their differences. Therefore, we will not
allow participants to block the use of ADR procedures by mailing in a
written objection without any discussion with other participants about
whether ADR might or might not be useful.
B. Mechanism for Using ADR
Existing Rule 603 provides procedures for the parties or the
Commission to incorporate the use of settlement negotiations in
Commission proceedings, while existing Rule 602 provides procedures for
the submission and review of written offers of settlement at any time
during a proceeding. New Rule 604 provides similar procedures by which
participants can use any other ADR method. The mechanism consists of
the filing and review of a proposal to use a particular ADR method.
The ADRA lists six factors for an agency to consider when
identifying cases in which the use of ADR would not be appropriate. The
NOPR proposed to adopt these factors in subparagraph (a)(2) of Rule 604
and to require that they be considered whenever a proposal to use ADR
is made. Thus, the new rule provides that the appropriate decisional
authority will consider not using ADR if: (1) A definitive resolution
is required for precedential value; (2) the matter involves significant
questions of policy requiring additional procedures before final
resolution; (3) maintaining established policy is of special
importance; (4) the matter significantly affects persons or
organizations who are not parties to the proceeding; (5) a full public
record of the proceeding is important and the record cannot be provided
by dispute resolution; or (6) the Commission must maintain continuing
jurisdiction over the matter and dispute resolution would interfere
with the Commission's authority to alter the disposition of the matter
if circumstances change.
The use of ADR when any of these factors is present is not
absolutely prohibited under the rule. New Rule 604(a)(3) provides that
ADR may be used if the dispute resolution proceeding can be structured
to avoid the identified problem or if other concerns significantly
outweigh one or more of the factors.
New Rule 604(a)(4) incorporates the ADRA's provision that the
agency's decision to use or not to use an ADR proceeding is not subject
to judicial review. New Rule 604(a)(5) provides that settlement
agreements reached through the use of ADR will be subject to Rule 602,
notice and comment procedures, unless the decisional authority, upon
motion or otherwise, orders a different procedure.
Rule 604(b) incorporates various ADRA definitions. ``Party'' and
``participant'' are defined in Rule 102.\20\ While staff is not
included in the definition of ``party,'' it is a ``participant.'' The
proposed rules provide for the full participation of parties and staff
in the ADR process to the same extent as in the settlement process.
\20\18 CFR 385.102 (b) and (c).
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The NOPR explained that the definition of participant in Rule 102
does not expressly identify the additional entities that are permitted
to participate in the application procedures in the Commission's rules
for a license or exemption to construct, operate, and maintain a
hydroelectric project. To ensure that all participants in such
hydroelectric proceedings also may participate in any matters
concerning ADR under Subpart F of the Commission's regulations, the
Commission proposed to adopt a definition of ``participant'' in Rule
604(b)(8) that includes these entities, which may be state and federal
agencies and Indian tribes having statutory roles or a direct interest
in the hydroelectric proceedings, as participants in ADR proceedings.
New Rule 604(e)(1) permits the participants to submit a written
proposal at any time during a proceeding to use ADR to resolve all or
part of any matter in controversy or anticipated to be in controversy
in the proceeding. The proposal should be written to avoid procedural
disagreements during the ADR proceeding. A written proposal also is
needed by the decisional authority to determine the appropriateness of
using ADR in the proceeding and whether to suspend action on a matter
to give participants the opportunity to resolve their disputes by means
of an ADR process. The NOPR explained that, except for the binding
arbitration process identified in the ADRA and incorporated in new Rule
605, the Commission does not intend to identify the specific ADR
methods available to the parties nor to mandate specific procedures for
each type of ADR, but leaves the selection and procedures to the
discretion of the participants.
New Rule 604(e)(2) provides that, if a proceeding is pending before
an administrative law judge (ALJ), the proposal must be filed with the
ALJ. New Rule 604(e)(3) provides that, if a proposal involves binding
arbitration, it must be filed with the Secretary for consideration by
the Commission. For all other matters, new Rule 604(e)(4) provides that
a proposal to use ADR may be filed with the Secretary, who will
transmit the proposal to the appropriate decisional authority. New Rule
604(e)(6) allows the participants to modify the ADR proposal once it
has been approved and provides that requests to modify must follow the
same procedure as proposals for ADR.
Cinergy urges us to convene the ADR conference as quickly as
possible, preferably within 20 days of the filing of the motion. We
will encourage decisional authorities to expedite this process, but all
potentially affected participants must be afforded ample time to
consider their positions and make appropriate arrangements.
Cinergy also proposes that the proposal be deemed approved unless
an order denying approval is issued within 10 days, rather than the
proposed 30 days. While we encourage decisional authorities to act as
quickly as possible under the circumstances presented (e.g., if there
is clear unanimity among participants), because of the sometimes large
number of parties and need for notice, it is not practical to shorten
the [[Page 19498]] period after which ADR will be deemed approved.\21\
\21\The Industrials (at 4) question what happens if the 30th day
falls on a weekend or holiday. Consistent with long-established
Commission practice, the time period is extended until the day after
the weekend or holiday. See Rule 2007(a)(2).
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Rule 604(c) provides that a neutral may be a permanent or temporary
officer or employee of the Federal Government, (including an ALJ), or
any other individual who is acceptable to the participants in an ADR
proceeding. A neutral may not have any official, financial, or personal
conflict of interest with respect to the issues in controversy.\22\ The
NOPR explained that, if a staff member serves as a neutral, in no event
could that person thereafter serve in any other capacity in the
proceeding.\23\
\22\A non-governmental neutral may, however, have a personal
conflict of interest provided that the conflict is disclosed to all
of the participants and given that disclosure they nonetheless
consent to that neutral's service.
\23\The NOPR explained that this is consistent with the
Commission's current settlement procedures. Under Rule 603, the
settlement judge serves a single function as a mediator or
facilitator and cannot be a decisionmaker or advisor in that
proceeding.
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Rule 604(c)(3) provides that neutrals may be selected from rosters
kept by the Federal Mediation and Conciliation Service, ACUS, and the
American Arbitration Association, as well as any other source. Pursuant
to proposed Rule 604(c)(2), neutrals will be selected by the
participants and will serve at the will of the participants unless the
ADR agreement provides otherwise.
Missouri PSC suggests that an ALJ who participates as a neutral
should not participate thereafter in a decisional capacity without the
written consent of all parties. The short answer is that once an ALJ or
any other Commission employee has participated as a neutral in an ADR
procedure, they are permanently barred from any role in the decisional
process involving that case, with or without consent.
Missouri PSC also suggests that the Commission compile a roster of
neutrals familiar with utility regulation. Knowledge of utility law and
commercial practice would have obvious relevance to a neutral's ability
to function effectively in that role, but the Commission does not wish
to put itself in the position of screening and endorsing the
qualifications of persons who wish to serve in that capacity. The
participants should be free to choose whomever they wish, unencumbered
by semi-official rosters.
The Industrials request clarification of the responsibility of the
participants for compensating a Commission employee, including an ALJ,
who serves as a neutral.\24\ Any Commission employee, including an ALJ,
who serves as a neutral does so in his or her official capacity as a
federal employee and cannot properly accept any additional compensation
of any kind from any participant in the proceeding. With respect to
other neutrals, we agree with the Industrials that it would be useful
for the participants to clarify matters of compensation in the ADR
agreement.
\24\Industrials at 3.
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The Industrials ask us to clarify in Rule 604 what authority the
neutral has, particularly with respect to such matters as issuing
subpoenas, compelling production of documents and issuing protective
orders.\25\ The Industrials misunderstand the role and posture of the
neutral. The neutral's authority to issue orders is derived from the
participants, not from the Commission. The participants, in their ADR
agreement, are free to authorize or not authorize the neutral to direct
production of their documents, issue protective orders, or issue any
other order to which they may or may not wish to be bound. The one
exception, as the Industrials themselves recognize, is that ALJ's
retain all of their delegated authority as presiding officers of the
Commission; selection as a neutral does not serve to in any way suspend
or diminish their authority. Thus, if the participants want their
neutral to exercise judicial-type authority, they can either select an
ALJ to serve as their neutral or select an outsider and authorize that
person to exercise whatever powers they wish to confer and by which
they wish to be bound.\26\
\25\Industrials at 6-8.
\26\Columbia Gas at 4 suggests adding several more words to
subsection 604(c)(1), believing that they may have been
inadvertently omitted. There was no omission, and the extra words
are unnecessary. Columbia Gas also alleges that there is an
inconsistency between subsections (c) and (e) of section 604.
Although phrased differently, we believe that both subsections are
clear and we do not perceive any substantive inconsistency.
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New Rule 604(e)(5) provides for the issuance of an order by the
decisional authority approving or denying a proposal filed under Rule
604 or Rule 605. The decisional authority will determine whether ADR
would be appropriate for a particular proceeding on a case by case
basis, using the guidelines set forth in new Rules 604(a) (2)and (3). A
proposal to use ADR will be deemed approved unless the decisional
authority issues an order denying approval within 30 days after the
proposal is filed.
New Rule 604(f) allows the decisional authority to require status
reports on the proceeding at any time. The NOPR explained that this
provision is designed to prevent parties from using ADR as a stalling
tactic.
New Rule 604(g) gives the decisional authority, upon motion or
otherwise, the authority to terminate an ADR proceeding under Rule 604
or 605 if it appears that ADR is no longer appropriate. New Rule
604(g)(2) provides that a decision to terminate an ADR proceeding is
not subject to judicial review because the decision is interlocutory in
nature. This is consistent with the existing settlement negotiation
procedures in Rules 603 (h) and (i). The NOPR explained that parties
may seek Commission review of such a decision under Rule 715 in cases
pending before an ALJ or, in all other cases, under Rule 212 as a
motion for reconsideration.
Several commenters\27\ ask us to define standards for terminating
ADR proceedings. We prefer not to provide standards because it is not
practical to attempt to anticipate in a generic rule all of the
circumstances that might justify termination of such a proceeding. It
is best left to case by case determination, based on the peculiar facts
and circumstances presented.
\27\Northwest Users at 4-5; Electric Generation at 7. Electric
Generation also urges us to aggressively monitor the status of ADR
proceedings. We will monitor them as appropriate.
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EEI urges us to encourage greater use of ADR by announcing a policy
of adopting whatever result the parties reach without modification
unless it would contravene a statutory obligation.\28\ Natural Gas
Pipeline urges us to overturn the results of an ADR procedure ``only
under exceptional circumstances.'' PG&E urges us to accord
``substantial deference'' to the results of ADR procedures.\29\
\28\EEI at 3.
\29\PG&E at 6-9.
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The Commission obviously must reserve authority to ensure that
decisions reached through ADR procedures are not contrary to the public
interest or inconsistent with statutory requirements. Within those
broad parameters, the Commission can and will give substantial
deference to whatever consensus participants reach through the ADR
process.
C. Arbitration
New Rule 605 incorporates the arbitration provisions as they appear
in the ADRA, with a few modifications as discussed below. The NOPR
explained that, to the extent participants wish to use a different
arbitration procedure, they are free to propose one rather than using
the procedure set forth in Rule 605.
New Rule 605(a) provides that the participants may at any time
submit a [[Page 19499]] proposal to use the binding arbitration
provisions of Rule 605 to resolve all or part of any matter in
controversy before the Commission. New Rule 605(a)(2) requires that a
proposal to use binding arbitration follow the procedures outlined in
Rule 604(d). New Rule 605(a)(3) requires that the proposal be submitted
in writing and contain the information listed in Rule 604(e). Under new
Rule 605(a)(4), the arbitration process can be monitored and terminated
just as other ADR methods under Rules 604 (f) and (g). To ensure that
arbitration is truly voluntary on all sides, new Rule 605(a)(5)
provides that the Commission will not require any person to consent to
an arbitration proposal as a condition of receiving a contract or
benefit. Similarly, no company regulated by the Commission may impose
such a condition. New Rule 605(a)(5) further requires that an
arbitration proposal under Rule 605 have the express written consent of
all parties to the dispute.
Under new Rule 605(b), the participants in an arbitration
proceeding are entitled to select the arbitrator. The particular
procedure to be used in selecting an arbitrator is not provided;
however, the arbitrator is required to meet the requirements of the
neutral as described in new Rule 604(d). Rule 605(c) sets forth the
arbitrator's duties, including conducting hearings, administering
oaths, and issuing subpoenas to compel attendance of witnesses and
production of evidence at hearing. As explained in the NOPR, the
arbitrator has the power to issue awards but not the authority to issue
licenses and certificates.
New Rule 605(d) incorporates the provisions in section 579 of the
ADRA that establish basic rules for the conduct of binding arbitration
proceedings, including hearings. Rule 605(d)(1) provides that the
arbitrator will set the time and place for the hearing and notify the
participants. New Rules 605(d) (2) and (3) provide for preparation of a
record, if desired, and for presenting evidence. Under new Rule
605(d)(3)(iv), the arbitrator may exclude evidence that is irrelevant,
immaterial, unduly repetitious or privileged. New Rule 605(d)(4)
prohibits ex parte communications with the arbitrator, allowing the
arbitrator to impose sanctions for a violation of this prohibition. New
Rule 605(d)(5) requires the arbitrator to issue an award within 30 days
of the close of the hearing unless the participants and arbitrator
agree to a different schedule.
New Rule 605(e) incorporates the ADRA standards for issuing and
appealing arbitral awards. The award will be in writing and include a
brief, informal discussion of the factual and legal basis for the
award. The prevailing participants will file the award with the
Commission and any other relevant agencies and serve all participants.
The award becomes final 30 days after it is served on all participants.
However, the Commission, upon motion or otherwise, can extend this
period for one additional 30-day period upon notice of the extension to
all participants. New Rule 605(e)(3) provides that a final award is
binding on the participants.
Several commenters\30\ ask us to clarify that the terms
``arbitrator'' and ``arbitration'' are broad enough to authorize use of
a panel of arbitrators and not just a single person. We so confirm; the
singular includes the plural.
\30\Cinergy at 3; PGC Pipeline Group at 11.
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CIG and ANR ask us to indicate in advance the outer range of
potentially acceptable results of the arbitration.\31\ It is simply
impractical for the Commission to do this, because it would in effect
require the Commission to partially prejudge the case before there is
an adequate record on which to make such decisions. It would also
defeat the purpose of inviting the parties to work out their own
solution before the Commission becomes heavily involved in the
decisional process.
\31\CIG and ANR at 2-3.
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Columbia Gas asks us to incorporate various interpretations of ADRA
in the regulations.\32\ ADRA speaks for itself on these matters, and we
perceive no need to construe these particular statutory provisions in
the regulations, or to address them in this preamble to the
regulations. Contrary to Columbia Gas' suggestion, nothing in Rule 605
precludes the filing of an arbitration award with any other agency,
regardless of whether such an award is also filed with the Commission.
In other words, the award should be filed with whichever agency or
agencies it is relevant. Also contrary to Columbia Gas' suggestion,
while section 580(a)(1) of ADRA allows the Commission to omit formal
findings and conclusions, it does not preclude the Commission from
requiring findings and conclusions on its own authority.
\32\Columbia Gas at 4-6.
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In response to PEC Pipeline Group,\33\ we clarify that Rule
605(a)(5) does not prevent parties to a settlement from agreeing to the
use of future binding arbitration to resolve disputes under a
settlement, and does not prevent parties from entering into
transportation and storage arrangements that include an arbitration
clause.
\33\PEC Pipeline Group at 12-13.
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New Rule 605(f) provides procedures for the Commission to vacate an
award. New Rule 605(f)(1) permits any person to request, within ten
days of the filing of an award under Rule 605(e), that the Commission
vacate the award and requires that person to provide notice of the
request to all participants. Responses to such a request must be filed
within ten days after the request is filed. Under new Rule 605(f)(2),
the Commission, upon request or otherwise, may vacate an arbitration
award before the award becomes final. New Rule 605(e) adopts the ADRA's
provision that the award need only discuss informally the factual and
legal bases for the award. The NOPR explained that if the participants
wish to require that an award include formal findings of fact and
conclusions of law, they may do so by adopting a different standard.
New Rule 605(f)(4) adopts the ADRA's provision for monetary relief.
Thus, if the Commission vacates an arbitration award, a party to the
arbitration proceeding may petition the Commission for an award of the
attorney fees and expenses incurred in connection with the arbitration
proceeding. The Commission must award the petitioning party those fees
and expenses that would not have been incurred in the absence of the
arbitration proceeding, unless the Commission finds that special
circumstances make the award unjust. As provided by the ADRA, new Rule
605(f)(6) establishes that a decision by the Commission to vacate an
arbitration award is not subject to judicial review.
Northwest Users question how extensively arbitration awards will be
vacated. They contend that persons who are not parties to the
proceeding should not be able to move to vacate an arbitration award,
nor should such nonparties be allowed to intervene out of time for that
purpose.\34\ Electric Generation urges us to articulate a stringent
standard for review of arbitration awards, suggesting ``manifest
injustice.''\35\ Natural Gas Pipeline suggests that we confine vacature
to ``exceptional circumstances.''\36\
\34\Northwest Users at 5-7.
\35\Electric Generation at 8.
\36\Natural Gas Pipeline at 7.
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As AGD notes,\37\ the Commission has a statutory responsibility to
vacate an arbitration award if it contravenes the public interest or is
in any other way inconsistent with statutory requirements. The
Commission does, however, want to encourage parties to
[[Page 19500]] explore and use ADR procedures, and recognizes that
extensive vacature of arbitration awards would discourage parties from
using them. The Commission would be very loath to allow last minute
interventions to disrupt a settlement or arbitration award after the
parties have laboriously reached such a resolution. On balance, given
the Commission's statutory responsibilities, decisions on vacature will
necessarily have to be made on a case by case basis. We confirm for PEC
Pipeline Group\38\ that if an arbitration award is vacated the parties
return to the status quo ante as if the arbitration proceeding had
never occurred.
\37\AGD at 4.
\38\PEC Pipeline Group at 12.
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Several commenters asked us to clarify who has to reimburse whom
for fees and expenses in the event that an arbitration award is
vacated, and who can petition for it.\39\ Electric Generation urges us
to make the losers reimburse the winners.\40\ The PEC Pipeline Group
expresses strong opposition to the proposed rule and urges us not to
adopt it.\41\ The rule is required by the last sentence of section
580(g) of the ADRA, which is unmistakably clear on its face and should
assuage the commenters' concerns: ``Such fees and expenses shall be
paid from the funds of the agency that vacated the award.'' We have
added a sentence to subsection 605(f)(4) to clarify it. All
participants to the arbitration proceeding can petition the Commission
for reimbursement by the Commission of the fees and expenses they
incurred in the arbitration process if the Commission vacates the
arbitration award at the end of that process. We confirm to the PEC
Pipeline Group that parties may agree to forego the right to petition
for fees and expenses, and may also agree in advance on conditions
pursuant to which an arbitration award can be reviewed by the
Commission.
\39\Cinergy at 3; Cig and ANR at 4; see also Natural Gas
Pipeline at 7.
\40\Electric Generation at 8-9.
\41\PEC Pipeline Group at 10-11.
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D. Confidentiality
New Rule 606 governs confidentiality in ADR proceedings established
under new Rules 604 and 605, and incorporates most of the
confidentiality provisions for neutrals and participants that are found
in the ADRA. Under new Rule 606(a), confidentiality must be maintained
by a neutral unless: (1) All participants in the ADR proceeding and the
neutral consent in writing to the disclosure; (2) the communication has
already been made public; (3) the communication is required by statute
to be made public; or (4) a court determines, after a balancing of
considerations, that disclosure is necessary to prevent a manifest
injustice, to help establish a violation of law, or to prevent harm to
the public health or safety.
Under new Rule 606(b), a participant in the ADR proceeding must not
disclose information concerning any dispute resolution communication
unless, pursuant to five of the seven exceptions set out in the ADRA:
(1) All participants consent in writing; (2) the communication has
already been made public; (3) the communication is required by statute
to be made public; (4) a court determines, after balancing
considerations, that disclosure is necessary to prevent manifest
injustice, establish a violation of law, or prevent harm to the public
health or safety; or (5) the communication is relevant to determining
the existence or meaning or the enforcement of an agreement or award
resulting from the proceeding.
Under new Rule 606(c), any communication disclosed in violation of
this section will not be admissible in any proceeding relating to the
issues in controversy. New Rule 606(d) provides that the participants
may agree to alternative confidentiality procedures for disclosure by a
neutral, but should inform the neutral of any modifications prior to
the commencement of the ADR procedure. If the neutral is not so
informed, the provisions of new Rule 606(a) would apply. Under new Rule
606(e), the participants must be notified of a demand for disclosure,
whether by discovery or other legal process. Proposed Rules 606(f)
through (i) adopt the remaining provisions of the ADRA, including the
provision that nothing in the section would prevent discovery or
admissibility of evidence that is otherwise discoverable, merely
because the evidence was presented in the course of a dispute
resolution proceeding.\42\
\42\The NOPR explained that existing Rule 2101 permits a
participant to appear in a proceeding in person or by an attorney or
other qualified representative, and that existing Rule 2102 provides
for suspension or disqualification (temporary or permanent) of
representatives when necessary.
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AGD supports the rule as proposed.\43\ Cinergy suggests revisions
to subsections 606(a)(4) and (b)(4); we will not make those revisions
because, as proposed and adopted, those subsections directly track the
language of section 574 of the ADRA.
\43\AGD at 4-5.
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We have made several revisions in response to the comments of the
PEC Pipeline Group.\44\ First, we have revised Rules 606(a)(2) and
(b)(2) by inserting the word ``otherwise,'' so that they now read ``The
dispute resolution communication has otherwise already been made
public.'' Next, we have tightened Rule 606(c) by deleting the latter
part of it, so that it now reads ``Any dispute resolution communication
that is disclosed in violation of paragraphs (a) or (b) of this section
shall not be admissable in any proceeding.'' Third, we have substituted
the word ``participant'' for the word ``neutral'' in Rule 606(e), so
that it now reads ``If a demand for disclosure, by way of discovery
request or other legal process, is made upon a participant before the
commencement of the dispute resolution communication, the participant
will make reasonable efforts to notify the neutral and the other
participants of the demand.'' (Emphasis added) Finally, we have added a
new Rule 606(k), which reads as follows: ``Where disclosure is
authorized by this section, nothing in this section precludes use of a
protective agreement or protective orders.''\45\
\44\PEC Pipeline Group at 14-16.
\45\New Rule 606(k) should also help alleviate the problem
raised by Natural Gas Supply (at 5) with respect to protection of
proprietary information related to research and development
projects. We have also added to Rule 606(f) the cross-references
that Natural Gas Supply requested to sections 385.410 and 388.112.
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We have not adopted the other changes suggested by PEC Pipeline
Group or by Electric Generation\46\ because we do not believe they are
warranted. The matters raised by Electric Generation with respect to
the Freedom of Information Act are not addressed here because they are
beyond the scope of this rulemaking.
\46\Electric Generation at 9-10.
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IV. Settlement Rules
A. Omnibus Settlements
The NOPR explained that the authority of the ALJ and the Commission
to consolidate multiple proceedings exclusively under their respective
jurisdictions for review in an omnibus settlement is established,
respectively, in Rules 503(a), 101(e), and 212. The NOPR proposed to
codify current practice and amend Rule 503(a) by adding that the Chief
ALJ may order multiple proceedings that are pending before ALJs to be
consolidated for settlement, as well as hearing, on any or all matters
in issue. The Commission is amending the procedures in Rule 602(b) for
the submission of offers of settlement to provide specifically for
requests to be filed with the Commission for consolidation or other
appropriate procedural relief to enable proceedings pending before ALJs
to be [[Page 19501]] transmitted to the Commission for consideration in
an omnibus settlement together with proceedings pending before the
Commission. The amendment adds new paragraph (b)(3) to permit any
participant in a proceeding covered by an offer of settlement submitted
under (b)(1) to file a consolidation request when the settlement covers
multiple proceedings pending in part before the Commission and in part
before one or more ALJs.
The Industrials request that the Commission codify standards for
determining when party severance would be appropriate in an omnibus
settlement. In particular, they state that ``[i]n effect, we believe,
the Commission should clarify its new rules providing for the severance
of parties to state that severance should be by party, by contested
issue of material fact.'' In the alternative, they ``recommend that the
final rule be clarified to provide that severance of parties should
proceed by docket, rather than by omnibus settlement.''\47\
\47\Industrials at 10.
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The issue of severance, generally, is discussed below. We see no
reason to treat severance differently in the context of omnibus
settlements than in any other context.
B. Uncontested Settlements
Rule 602(g) provides for the certification to the Commission of
uncontested settlements filed with an ALJ. If an offer is uncontested,
the ALJ is required under Rule 602(g)(1) to certify to the Commission
the offer of settlement with the hearing record and any related
pleadings. Under the standard set out in Rule 602(g)(3), the Commission
may approve an uncontested offer ``upon a finding that the settlement
appears to be fair and reasonable and in the public interest.''
The NOPR explained that the court in Tejas Power Co. v. FERC held
that the Commission is required to make an independent determination
that the settlement is in the public interest.\48\ On some issues, an
exercise of the Commission's independent review may be required even
though the parties may not want to develop a record. In these
circumstances, the Commission is entitled to require the development of
an adequate record before it can determine whether an uncontested
settlement is in the public interest.
\48\Tejas Power Co. v. FERC, 908 F.2d 998 (D.C. Cir. 1990).
Specifically, the court found that the issues in that rate
proceeding required the Commission to examine the impact of the
settlement and collect evidence that the consumers' interest would
be served by the agreement, that the parties had adequate bargaining
power to produce an equitable agreement, and that the agreement's
terms are acceptable under the Commission's requirements.
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AGD maintains that the Commission should amend its rules to provide
that it will act on an uncontested settlement within 45 days after it
is certified to the Commission. In the alternative, it asks that an
uncontested settlement be treated the same way as an uncontested
initial decision under Rules 708 and 712 by its becoming effective
within 45 days after transmission to the Commission unless it is stayed
by the Commission pending further review.\49\
\49\AGD at 7-8.
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Natural Gas Pipeline maintains that uncontested settlements should
be deemed approved and become effective without a Commission order,
absent contrary Commission action, within 30 days after the close of
the comment period.\50\
\50\Natural Gas Pipeline at 4.
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While the Commission attempts as a matter of course to act on
uncontested settlements as expeditiously as possible, a time constraint
would not be in the public interest because some settlements, even
though not contested, are complicated nevertheless. It cannot be
assumed that every aspect of every uncontested settlement is consistent
with the public interest and in conformity with key Commission
policies. We note in this regard, however, that the Commission's goal
is to act on uncontested electric and gas rate settlements within 45
days of the close of the comment period or date of certification to the
Commission, and to act on contested electric and gas rate settlements
within 90 days of those trigger dates. In most cases the Commission has
been able to adhere to these goals, particularly with respect to the
uncontested cases.
The Industrials maintain that the Commission should review, and not
refashion, uncontested settlements. In addition, they claim the
Commission cannot order the parties to provide more support for the
settlement; they contend the Commission can only reject it or return it
to the parties to decide how to fix deficiencies.\51\
\51\Industrials at 18-21.
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The Commission is not limited to rejecting an uncontested
settlement or returning it to the parties to decide how to fix it. Of
course, the Commission may take both approaches. In addition, the
Commission may refashion an uncontested settlement to comport with the
public interest and the Commission may conclude that it is in the
public interest that there be more support for all or part of an
uncontested settlement.
C. Contested Settlements
Rule 602(h) provides for processing settlements that are contested
in whole or in part by any participant. Rule 602(h)(1) governs the
Commission's evaluation and decision of contested settlements. Rule
602(h)(2) sets out the standards that govern the ALJ's evaluation of
contested settlements in proceedings before the ALJ and provides for
the certification of the settlement to the Commission for a decision on
the merits of the contested issues.
As discussed in the NOPR, under Rule 602(h)(1) the Commission may
decide the merits of the issues in a contested settlement if the record
contains substantial evidence upon which to base a reasoned decision or
the Commission determines there is no genuine issue of material fact.
Under Rule 602(h)(2), a settlement that is contested by a party and
that is before an ALJ may be certified to the Commission for a merits
decision if, under Rule 602(h)(2)(ii), no genuine issue of material
fact exists. If genuine issues of material fact exist, the ALJ may
still certify the contested settlement but only if the following three
conditions specified in Rule 602(h)(2)(iii) are met: (1) The parties
concur on a motion for omission of the initial decision, (2) the
presiding officer determines that the record contains substantial
evidence from which the Commission may reach a reasoned decision on the
merits of the contested issues, and (3) the parties have an opportunity
to avail themselves of their rights with respect to the presentation of
evidence and cross-examination of opposing witnesses.
As we explained in the NOPR, the rules permit either the Commission
or the ALJ, as appropriate, to sever contested issues from a settlement
and resolve them separately.\52\ The uncontested issues may be
considered under the expedited procedures for Commission review of
uncontested settlements, while the contested issues proceed with
further review on the merits. In establishing the settlement rules in
1979, the Commission encouraged the parties to a settlement to indicate
whether parts of the settlement are severable and to advise the ALJ or
the Commission to permit a prompt decision on the uncontested parts of
the settlement.\53\ This Final Rule amends [[Page 19502]] Rule
602(h)(1) (ii) and (iii) and Rule 602(h)(2)(iv) to permit the ALJ or
the Commission to sever contesting parties as well, by adding the
phrase ``contesting parties or'' before the discussion beginning with
``contested issues''.
\52\Rule 602(h)(1)(iii) and Rule 602(h)(2)(iv). See, e.g.,
Tennessee Gas Pipeline Co., 31 FERC 61,308 (1985), in which the
Commission approved a settlement in the public interest on issues
where the record was sufficient, but severed an issue for later
decision where the record was insufficient.
\53\FERC Stats. & Regs. Preambles, 1977-1981 30,061, at 30,433.
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Natural Gas Clearinghouse\54\ maintains that contesting parties
should not be involuntarily severed from contested settlements. It
contends there are many reasons to reaffirm the no-severing policy of
Arkla.\55\ It argues that an exercise of raw power due to unequal
bargaining power is against public policy and violates the Tejas
decision's emphasis on adequate bargaining power.\56\
\54\Natural Gas Clearinghouse at 3-7.
\55\Arkla Energy Resources, 48 FERC 61,602, reh'g denied, 49
FERC 61,051 (1989).
\56\Tejas Power Co. v. FERC, 908 F.2d 998 (D.C. Cir. 1990).
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The rule merely recognizes that the Commission permits the severing
of parties in certain circumstances.\57\ Such a policy has been
approved by the United States Court of Appeals for the District of
Columbia Circuit.\58\ Nothing in Tejas is to the contrary. Tejas merely
dealt with the weight to be given to the settling parties' position in
a contested settlement where the Commission approved the settlement for
all parties. Severing a party, of course, no longer makes that party
bound by the settlement.
\57\Columbia Gas Transmission Corp., 64 FERC 61,366, reh'g
denied and order clarified, 66 FERC 61,214 (1994); Southern Natural
Gas Co., 67 FERC 61,156 (1994), appeal docketed, Mississippi Valley
Gas Co. v. FERC, No. 94-1486 (D.C. Cir. filed July 1, 1994).
\58\United Municipal Distribution Group v. FERC, 732 F.2d 102
(D.C. Cir. 1984).
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Of course, there are no hard and fast criteria for determining
whether party severing is appropriate. That decision depends on the
circumstances of the particular settlement. The Commission must
consider the nature of the issue or issues contested, the state of the
record, and the impact of the Commission's decision on the settlement.
Those factors are illustrated by the Commission's decisions in Arkla
and Columbia. In Arkla, the Commission refused to sever contesting
parties because, as there described, that would create a ``no lose''
situation for those parties, who were interruptible customers.\59\
Instead, the Commission stated that it would resolve the contested
issues on the merits. However, in Columbia, the Commission concluded
that it was appropriate to sever the contesting party with respect to
its firm rates, where the contesting party would not be in a ``no
lose'' situation and the record was inadequate for reaching a decision
on the merits. This refinement of Arkla enabled Columbia and the
settling parties to reap the benefits of their bargain while enabling
the contesting party to litigate its case.
\59\Arkla Energy Resources, 48 FERC 61,602 at p. 61,303, reh'g
denied, 49 FERC 61,051 (1989).
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The PEC Pipeline Group maintains that ``the Commission should
abandon its sweeping prohibition against severing parties from Part 284
transportation and storage rate settlements * * * (and) clarify that
severance of contesting parties is allowed in Part 284 transportation
and storage rate settlements when the contesting parties have no direct
economic interest in the settlement.''\60\ The Commission does permit
parties to be severed in Part 284 settlements as indicated by the
recent Columbia and Southern proceedings.\61\ A party's lack of direct
economic interest in the settlement should be considered when such a
circumstance arises.
\60\PEC Pipeline Group at 7.
\61\Columbia Gas Transmission Corp., 64 FERC 61,366, reh'g
denied and order clarified, 66 FERC 61,214 (1994); Southern Natural
Gas Co., 67 FERC ] 61,156 (1994).
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The Industrials ask the Commission to clarify ``what are the
effects, if a party is severed, tries an issue such as rate design, and
the outcome dictates that party is entitled to rates lower than the
rates applicable to the consenting parties.''\62\ For example, they
assert that the refund floor in the next rate case should be the lower
of the settled or litigated result. In addition, they ask for
clarification about terms and conditions, such as it is unduly
discriminatory to have differing quality or pressure standards owing to
a settlement and a merits decision. The Commission concludes that the
Industrials' clarification requests should be considered in case-
specific situations.
\62\Industrials at 12.
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Under paragraph (ii) of Rule 602(h)(2), the ALJ determines whether
a settlement that is contested by any participant contains a genuine
issue of material fact. If the settlement does not, the ALJ may certify
the settlement directly to the Commission. If the settlement contains a
genuine issue of material fact, the ALJ may certify the settlement only
if the three conditions under paragraph (iii) are met. The NOPR
proposed to amend Rule 602(f) to require a strong showing by contesting
parties detailing any genuine issues of material fact that they contend
exist.
Natural Gas Clearinghouse maintains that the Commission should not
require contesting parties to submit affidavits detailing genuine
issues of material fact because this will encourage extensive discovery
rather than produce more certifiable settlements. It submits that
disciplining parties for superficial claims is a more ``surgical''
solution.\63\ Other commenters support the requirement for
affidavits.\64\
\63\Natural Gas Clearinghouse at 7-8.
\64\AGD at 6; Electric Generation at 12; Natural Gas Supply at
4.
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The Commission continues to believe that the affidavit approach is
the appropriate way to ensure that genuine issues of material fact
exist. This is a more efficient approach than disciplining parties at
some later date. As with a motion for summary disposition, the ALJ can
determine if discovery is needed for a party to determine whether
genuine issues of material fact exist.
Under the previous Rule 602(h)(2)(iii), the ALJ could certify an
offer of settlement or part of any offer of settlement even if the
settlement contained genuine issues of material fact. In these
circumstances, the ALJ was entitled to certify an offer that is
contested by a party if all of the following conditions, contained in
subparts (A), (B), and (C), were met:
(A) The parties concur on a motion for omission of the initial
decision as provided in Rule 710;
(B) The presiding officer determines that the record contains
substantial evidence from which the Commission may reach a reasoned
decision on the merits of the contested issues; and
(C) The parties have an opportunity to avail themselves of their
rights with respect to the presentation of evidence and cross-
examination of opposing witnesses.
If any one of these conditions was not present, the judge could direct
further procedures as deemed appropriate, including certification of
the settlement at a later time if the conditions were then met.
The NOPR proposed to modify the regulations to permit the ALJ to
certify a settlement if there is less than unanimous concurrence of the
parties under condition (A) to a motion filed under Rule 710 for
omission of the initial decision. To accomplish this, the NOPR proposed
to amend both condition (A) and Rule 710 to delegate to the ALJ the
authority to determine that, if a motion filed under Rule 710 has less
than unanimous concurrence, omission of the initial decision is
appropriate to the same extent the Commission is able to make that
determination under Rule 710. The NOPR concluded that condition (C) is
subsumed by condition (B) and [[Page 19503]] proposed to eliminate
condition (C) entirely.
Natural Gas Pipeline submits that the ALJ should certify to the
Commission a settlement that is sponsored or supported by the applicant
and also has substantial support among other participants. It maintains
that the Commission, not the ALJ, is better able to decide policy
issues, decide whether the record is adequate, establish special
procedures, and effect severance procedures.\65\
\65\Natural Gas Pipeline at 4-7.
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The ALJ is best suited to rule in the first instance about whether
a settlement should be certified and, if not, what procedures should be
pursued. Natural's approach in essence would limit the ALJs to record
fashioners only.
The Industrials maintain that the ALJs are better equipped than the
Commission to sift through a record to find facts and that the initial
decision process is not a roadblock. At a minimum, they assert the
Commission should clarify that omission of the initial decision is
discretionary.\66\ Omission of an initial decision is only mandatory if
all parties join or concur in the motion.
\66\Industrials at 21-23.
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Natural Gas Supply is concerned about the lack of standards on
omission of an initial decision in Rules 602(h)(2)(iii)(A) and 710.\67\
The Commission concludes that those sections should be applied on a
case-specific basis.
\67\Natural Gas Supply at 4.
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Natural Gas Supply maintains that the existence of record evidence
is unrelated to the credibility of the evidence and that a mini-hearing
should not be a material imposition on the parties or the fact finder.
Northern Distributors also opposes the deletion of the right to cross-
examination, which it says will not be inconsistent with the use of
affidavits because it will allow the testing of and developing of
assertions in the affidavits.\68\ Northeast and New Jersey also oppose
the limits on cross-examination because, they contend, that is the only
true test of contested facts. They also oppose the proposed limit on an
opportunity to present evidence.\69\
\68\Northern Distributors at 6-8.
\69\Northeast and New Jersey at 3-4.
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The commenters are incorrect in their view that the Commission has
limited the opportunity to present evidence and to cross-examine
witnesses. The Commission has merely eliminated previous Rule
602(h)(2)(iii)(C) because it is subsumed within subsection (B)'s
requirement of substantial evidence. The ALJ will have to determine
whether a party is entitled to present evidence and to cross-examine
witnesses when the determination is made concerning whether the
``record contains substantial evidence from which the Commission may
reach a reasoned decision on the merits of the contested issues.''\70\
In this vein, the Commission emphasizes that substantial evidence
pertains to the quality and not the quantity of the evidence; evidence
elicited through cross-examination of witnesses may be necessary and
appropriate in some instances but not in others.
\70\Rule 602(h)(2)(iii)(B).
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The Industrials ask the Commission to clarify the role of the trial
staff in prehearing and settlement discussions and during and after any
hearings are held for severed parties or on severed issues. They state
that the trial staff is an advocate of the public interest with an
independent position of its own and should continue to participate in
hearings on the merits even if it supports a settlement. They argue
that the staff should not be permitted to withhold its witnesses or
withdraw its testimony during contested party litigation.\71\
\71\Industrials at 14.
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The rule adopts nothing that affects the trial staff's role in
proceedings. It is well settled that trial staff members can not be
required to testify on behalf of a private litigant.\72\ The trial
staff often acts as an informal mediator, although it is not a pure
neutral in that it can also advance a position on the merits. Continued
litigation of unsettled issues may or may not be in the public
interest, depending on the circumstances presented. There is often a
public interest benefit in avoiding the societal cost of continued
litigation. In those circumstances, the trial staff may decide that it
can best serve the public interest by supporting a settlement rather
than proceeding with litigation of unresolved issues.
\72\See United Gas Pipe Line Company, 47 FERC 61,035 (1989);
cf. Southern Natural Gas Company, 10 FERC 61,287 at p. 61,577
(1988).
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The PEC Pipeline Group maintains that the Commission should modify
the settlement regulations so that only parties with a direct economic
interest in the outcome of a proceeding have standing to contest a
settlement.\73\ We will not curtail the rights of parties to oppose a
settlement based on their degree of economic interest in the outcome.
Such parties have a right to their day in court regardless of their
economic stake in the outcome.
\73\PEC Pipeline Group at 4-6. The PEC Pipeline Group also
maintains that the Commission should not permit an ALJ to certify a
settlement ``unless, at a minimum, the contested settlement is
sponsored and supported by the primary party.'' We prefer to leave
this to the discretion of the ALJs.
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The Industrials maintain that to avoid ``settlement by ambush,''
the Commission should require settlement sponsors to hold at least one
formal settlement conference for outlining or summarizing the
settlement and to answer questions before a settlement is filed. They
add that a failure to do so should be deemed ``bad faith.''\74\
\74\Industrials at 15.
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The Commission sees no reason to require a formal settlement
conference in each case. Whether a conference should be convened is a
case-specific matter to be determined by the decisional authority on a
case by case basis.\75\ It might be appropriate only in those instances
when not all of the parties have been involved in the settlement
negotiation process. In those circumstances, there may be a reason to
believe, based on the record developed to that point, that the
settlement might be opposed. If, however, all of the parties have been
invited to participate in the settlement process then there would be no
purpose to requiring yet another meeting.\76\
\75\See Rule 601(a).
\76\In rate cases, for instance, the trial staff initiates
settlement discussions by the filing of top sheets which are
followed by settlement conferences where all parties are invited to
attend. If the discussions held at these conferences suggest that a
settlement is obtainable, further settlement conferences are held.
In all other cases, the trial staff explores with the parties
whether settlement discussions should be pursued. If settlement
discussions are held, no party is kept out of the process. There may
be occasions, however, when smaller meetings with selected parties
are held to advance settlement.
---------------------------------------------------------------------------
The Industrials maintain that, in light of the affidavit process,
the Commission should either (1) modify the time periods for initial
comments and reply comments to 45 and 30 days, respectively, or (2)
give the ALJs the authority to modify the time requirements. They
contend in the alternative that ``if one or more parties claims to have
been unfairly excluded from the settlement process, those parties
should be entitled to move at any time for a settlement judge to
preside over further proceedings. In such a situation, the dates for
comments on the settlement, as provided under Rule 602(f), should
automatically be suspended.''\77\ The Commission believes that the
current rules about settlements provide the ALJs with adequate
authority to act on any requests for extensions of time (Rule
[[Page 19504]] 602(f)(2)) or for a settlement judge (Rule 603).
\77\Industrials at 23-24.
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Natural Gas Supply suggests other steps to more efficiently resolve
rate matters. It recommends (1) requiring the filing of Statement P
with the case itself, (2) requiring staff to timely prepare and submit
top sheets, and (3) appointing a settlement judge for each new rate
filing.\78\ These matters fall beyond the scope of this proceeding. For
example, the Commission is proposing in another rulemaking to require
the submission of Statement P with a rate filing.\79\
\78\Natural Gas Supply at 5-7.
\79\Filings and Reporting Requirements for Interstate Natural
Company Rate Schedules and Tariff, 60 FR 311 (Jan. 13, 1995), IV
FERC Stats. & Regs. Proposed Regulations 32,511 (Dec. 16, 1994).
---------------------------------------------------------------------------
Finally, the Industrials ask us to codify the procedures for
technical conferences. That is also a matter that is beyond the scope
of this rulemaking.\80\
\80\Industrials at 23-24.
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V. Miscellaneous
A. ADR in Oil Pipeline Rate Proceedings
Section 1802(e) of the Energy Policy Act of 1992\81\ required the
Commission, to the maximum extent practicable, to establish ADR
procedures in oil pipeline rate proceedings including required
negotiations and voluntary arbitration for use early in contested rate
proceedings. In Order No. 561,\82\ the Commission established ADR and
arbitration procedures for oil pipelines at Sec. 343.5 of its
regulations. Those provisions are much the same as the ADR rules
proposed in the ADR NOPR in the instant proceeding except for a
provision that requires the Commission to refer all protested oil
pipeline rate filings to a settlement judge for recommended resolution.
\81\See 42 U.S.C.A. 7172 note (West Supp. 1993).
\82\Revisions to Oil Pipeline Regulations pursuant to the Energy
Policy Act of 1992, Order No. 561, 58 FR 58785 (November 4, 1993),
III FERC Stats. & Regs. 30, 985 (1993), order on reh'g and
clarification, Order No. 561-A, 59 FR 40243 (August 8, 1994), III
FERC Stats. & Regs. 31,000 (1994).
---------------------------------------------------------------------------
The NOPR asked for comments on whether to integrate the oil
pipeline provisions into the proposed ADR rules so that the Commission
would then have a single set of ADR rules. The Association of Oil
Pipelines (AOPL) supports integration but claims that the prohibitions
against judicial review in the proposed rules are not included in the
oil pipeline ADR rules and thus should not be made applicable to oil
pipelines in the final rules here. The PEC Pipeline Group observes that
the Congressional mandate for required negotiation does not apply to
gas pipelines and therefore that the required negotiation approach is
inappropriate in the gas pipeline context.\83\
\83\PEC Pipeline Group at 16-17.
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The Commission concludes that it would be more efficient and less
confusing for all participants in Commission proceedings to have a
single set of ADR rules. The Commission thus will make the ADR rules
adopted here applicable to oil pipelines. The Commission disagrees with
AOPL's position on judicial review because we did not intend special
judicial review provisions for oil pipelines,\84\ and thus will not
exclude oil pipelines from the provisions adopted here regarding
judicial review. The Commission agrees, however, that negotiation
should not be required other than for oil pipelines and thus will make
the required negotiation provision currently in the oil pipeline ADR
rules applicable only to oil pipelines. Therefore, we are deleting most
of Sec. 343.5 of the Commission's regulations, except for the required
negotiation provision previously at Sec. 343.5(b), which is now
renumbered simply as Sec. 343.5. We are also deleting some of the
related definitions in Sec. 343.1.
\84\See, for example, Order No. 561 at 30,974, where the
Commission specifically provided: ``A decision by the Commission to
vacate an arbitration award would not be subject to judicial
review.''
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B. ADR and Other Agencies
The U.S. Departments of Commerce\85\ and the Interior generally
support the use of ADR, but Interior expresses concern over how those
Departments' statutory functions in the hydropower licensing process
will be protected and integrated in the ADR process.
\85\The comments of the Department of Commerce were submitted by
its National Marine Fisheries Service.
---------------------------------------------------------------------------
Section 4(e) of the Federal Power Act (FPA) requires that
Commission licenses for projects located within United States
reservations must include all conditions that the Secretary of the
department under whose supervision the reservation falls shall deem
necessary for the adequate protection and utilization of such
reservation.\86\ Section 18 of the FPA requires the Commission to
require the licensee to provide ``such fishways as may be prescribed by
the Secretary of the Interior or the Secretary of Commerce.''\87\
Interior also refers to section 30(c) of the FPA,\88\ which requires
the Commission to include fish and wildlife protective conditions in
exemptions from licenses when those Departments so mandate, and to
section 7(a)(2) of the Endangered Species Act,\89\ which requires
certain consultation with Interior's U.S. Fish and Wildlife Service. We
also note that section 10(j) of the FPA,\90\ in conjunction with the
Fish and Wildlife Coordination Act,\91\ mandates consultation with both
Commerce and Interior on fish and wildlife mitigation conditions in
Licenses.
\86\16 U.S.C. 797(e).
\87\16 U.S.C. 811.
\88\16 U.S.C. 823a(c).
\89\16 U.S.C. 1536(a)(2).
\90\16 U.S.C. 803(j).
\91\16 U.S.C. 661 et seq.
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We assure both Departments that their statutory authority and
responsibilities will not be impaired. The ADR rules are not intended,
nor could they be lawfully construed, to in any way waive, evade, or
undermine any agency's statutory rights or responsibilities. Having
rendered that categorical assurance, we urge both Commerce and Interior
to join us in devising ways to integrate the conduct of their statutory
functions under the FPA with the Commission's. In particular, we
encourage Commerce and Interior to participate early and actively in
consultative, ADR, or any other informal fora for discussing
environmental problems and potential mitigatory and enhancement
measures with license applicants, other interested persons, and (where
appropriate) our staff, in an effort to resolve these matters as early,
cooperatively and efficiently as possible.\92\
\92\We are not willing to adopt Interior's suggestion that State
and Federal resource agencies be accorded the power to, in effect,
veto the use of ADR procedures in hydropower license cases. The
statutory rights of the resource agencies can be adequately
protected without precluding all of the other interested
participants in the process from meeting and trying to resolve their
differences through use of ADR procedures.
---------------------------------------------------------------------------
The Colorado River Energy Distributors Association (CREDA) comment
on the use of ADR techniques in the context of requests by Federal
Power Marketing Agencies (PMA's) for confirmation and approval of rates
proposed for the sale of power from federally-owned projects.
CREDA asserts that PMA rate proceedings at the Commission lend
themselves especially well to ADR proceedings. CREDA cites the
Commission's traditional advisory role in deciding whether to confirm
and approve PMA rates, and maintains that this role would be greatly
enhanced by the availability of ADR. CREDA further cites the sometimes
conflicting goals of the PMA's, the customers of PMA's, and the federal
power generating agencies that are charged with recovery of the costs
of operating the projects. CREDA concludes that in light of these
conflicting interests and the numerous complex issues involved in PMA
rate proceedings, informal resolution of these issues through ADR
proceedings [[Page 19505]] could greatly reduce the Commission's
workload in PMA rate proceedings.
CREDA generally supports the Commission's proposals to incorporate
use of ADR. CREDA recognizes that Sec. 300.1(a) of Part 300 of the
Commission's regulations already specifically states that, except as
otherwise provided by rule or order, the Commission's Rules of Practice
and Procedure apply to filings by PMA's in which confirmation and
approval is sought for proposed rates. CREDA nevertheless recommends,
out of an abundance of caution, that the Commission specifically state
in its regulations concerning Commission consideration of PMA rate
filings that ADR is available upon Commission order. It is not
necessary, however, to make specific provision for ADR in the
regulations concerning PMA rate filings because Sec. 300.1(a) makes the
Rules of Practice and Procedure generally applicable to all PMA rate
proceedings under Part 300.
VI. Administrative Findings
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)\93\ generally requires the
Commission to describe the impact that a rule will have on small
entities or to certify that the rule will not have a significant
economic impact on a substantial number of small entities. The
Commission is not required to make an analysis if a rule will not have
such an impact.\94\
\93\5 U.S.C. 601-612.
\94\5 U.S.C. 605(b).
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Pursuant to section 605(b) of the RFA, the Commission certifies
that the Final Rule adopted herein will not have a significant economic
impact on a substantial number of small entities.
B. Environmental Review
The Commission is not preparing an environmental assessment or
environmental impact statement in this proceeding because the new rules
and amendments are procedural only, changing only the Commission's
Rules of Practice and Procedure, and therefore have no significant
effect on the human environment.\95\
\95\Section 380.4(a)(2)(ii) of the Commission's regulations
categorically exempts from environmental review Commission proposals
for promulgation of rules that are clarifying, corrective, or
procedural, or that do not substantially change the effect of the
regulations being amended. See 18 CFR 380.4(a)(2)(ii).
---------------------------------------------------------------------------
C. Information Collection Requirements
Office of Management and Budget (OMB) regulations require OMB to
approve certain information collection requirements imposed by agency
rules.\96\ However, this Final Rule contains no new information
collection requirements in part 385 and therefore is not subject to OMB
approval.
\96\5 CFR 1320.13.
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VII. Effective Date
This rule is effective May 19, 1995.
List of Subjects
18 CFR Part 343
Pipelines, Reporting and recordkeeping requirements.
18 CFR Part 385
Administrative practice and procedure, Electric power, Penalties,
Pipelines, Reporting and recordkeeping requirements.
By the Commission.
Lois D. Cashell,
Secretary.
In consideration of the foregoing, the Commission amends parts 343
and 385, Chapter I, Title 18, Code of Federal Regulations, as set forth
below.
PART 343--PROCEDURAL RULES APPLICABLE TO OIL PIPELINE PROCEEDINGS
1. The authority citation for part 343 is revised to read as
follows:
Authority: 5 U.S.C. 571-583; 42 U.S.C. 7101-7352; 49 U.S.C.
60502; 49 App. U.S.C. 1-85.
Sec. 343.1 [Amended]
2. In Sec. 343.1, paragraphs (a), (b), (d), (e), (f), (g) and (h)
are removed, and paragraphs (c) and (i) are redesignated as paragraphs
(a) and (b), respectively.
3. Sec. 343.5 is revised to read as follows:
Sec. 343.5 Required negotiations.
The Commission or other decisional authority may require parties to
enter into good faith negotiations to settle oil pipeline rate matters.
The Commission will refer all protested rate filings to a settlement
judge pursuant to Sec. 385.603 of this chapter for recommended
resolution. Failure to participate in such negotiations in good faith
is a ground for decision against the party so failing to participate on
any issue that is the subject of negotiation by other parties.
PART 385--RULES OF PRACTICE AND PROCEDURE
1. The authority citation for part 385 continues to read as
follows:
Authority: 5 U.S.C. 551-557; 15 U.S.C. 717-717z, 3301-3432; 16
U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101-7352; 49
U.S.C. 60502; 49 App. U.S.C. 1-85.
2. In Sec. 385.503, paragraph (a) is revised to read as follows:
Sec. 385.503 Consolidation, severance and extension of close-of-record
date by Chief Administrative Law Judge (Rule 503).
(a) The Chief Administrative Law Judge may, on motion or otherwise,
order proceedings pending under this subpart consolidated for hearing
on, or settlement of, any or all matters in issue in the proceedings,
or order the severance of proceedings or issues in a proceeding. The
order may be appealed to the Commission pursuant to Rule 715.
* * * * *
3. In Sec. 385.504, paragraph (b)(7) is revised to read as follows:
Sec. 385.504 Duties and powers of presiding officers (Rule 504).
* * * * *
(b) Powers. * * *
(7) Hold conferences of the participants, as provided in Subpart F
of this part, including for the purpose of considering the use of
alternative dispute resolution procedures;
* * * * *
4. In Sec. 385.601, paragraph (a) is revised to read as follows:
Sec. 385.601 Conferences (Rule 601).
(a) Convening. The Commission or other decisional authority, upon
motion or otherwise, may convene a conference of the participants in a
proceeding at any time for any purpose related to the conduct or
disposition of the proceeding, including submission and consideration
of offers of settlement or the use of alternative dispute resolution
procedures.
* * * * *
5. In Sec. 385.602, paragraphs (b)(3) and (f)(4) are added and
paragraphs (h)(1)(ii) introductory text, (h)(1)(iii), (h)(2)(iii), and
(h)(2)(iv) are revised to read as follows:
Sec. 385.602 Submission of settlement offers (Rule 602).
* * * * *
(b) Submission of offer. * * *
(3) If an offer of settlement pertains to multiple proceedings that
are in part pending before the Commission and in part set for hearing,
any participant may by motion request the Commission to consolidate the
multiple proceedings and to provide any other appropriate procedural
relief for purposes of disposition of the settlement.
* * * * *
(f) Comments. * * *
(4) Any comment that contests an offer of settlement by alleging a
dispute as to a genuine issue of material fact [[Page 19506]] must
include an affidavit detailing any genuine issue of material fact by
specific reference to documents, testimony, or other items included in
the offer of settlement, or items not included in the settlement, that
are relevant to support the claim. Reply comments may include
responding affidavits.
* * * * *
(h) Contested offers of settlement.
(1) * * *
(ii) If the Commission finds that the record lacks substantial
evidence or that the contesting parties or contested issues can not be
severed from the offer of settlement, the Commission will:
* * * * *
(iii) If contesting parties or contested issues are severable, the
contesting parties or uncontested portions may be severed. The
uncontested portions will be decided in accordance with paragraph (g)
of this section.
(2) * * *
(iii) Any offer of settlement or part of any offer may be certified
to the Commission, if:
(A) The parties concur on a motion for omission of the initial
decision as provided in Rule 710, or, if all parties do not concur in
the motion, the presiding officer determines that omission of the
initial decision is appropriate under Rule 710(d), and
(B) The presiding officer determines that the record contains
substantial evidence from which the Commission may reach a reasoned
decision on the merits of the contested issues.
(iv) If any contesting parties or contested issues are severable,
the uncontested portions of the settlement may be certified immediately
by the presiding officer to the Commission for decision, as provided in
paragraph (g) of this section.
* * * * *
6. In Subpart F, Secs. 385.604 through 385.606 are added to read as
follows:
Sec. 385.604 Alternative means of dispute resolution (Rule 604).
(a) Applicability. (1) Participants may, subject to the limitations
of paragraph (a)(2) of this section, use alternative means of dispute
resolution to resolve all or part of any pending matter if the
participants agree. The alternative means of dispute resolution
authorized under Subpart F of this part will be voluntary procedures
that supplement rather than limit other available dispute resolution
techniques.
(2) Except as provided in paragraph (a)(3) of this section, the
decisional authority will not consent to use of an alternative dispute
resolution proceeding if:
(i) A definitive or authoritative resolution of the matter is
required for precedential value;
(ii) The matter involves or may bear upon significant questions of
policy that require additional procedures before a final resolution may
be made, and the proceeding would not likely serve to develop a
recommended policy;
(iii) Maintaining established policies is of special importance;
(iv) The matter significantly affects persons or organizations who
are not parties to the proceeding;
(v) A full public record of the proceeding is important, and a
dispute resolution proceeding cannot provide a record; or
(vi) The Commission must maintain continuing jurisdiction over the
matter with authority to alter the disposition of the matter in the
light of changed circumstances, and a dispute resolution proceeding
would interfere with the Commission's fulfilling that requirement.
(3) If one or more of the factors outlined in paragraph (a)(2) of
this section is present, alternative dispute resolution may
nevertheless be used if the alternative dispute resolution proceeding
can be structured to avoid the identified factor or if other concerns
significantly outweigh the identified factor.
(4) A determination to use or not to use a dispute resolution
proceeding under Subpart F of this part is not subject to judicial
review.
(5) Settlement agreements reached through the use of alternative
dispute resolution pursuant to Subpart F of this part will be subject
to the provisions of Rule 602, unless the decisional authority, upon
motion or otherwise, orders a different procedure.
(b) Definitions. For the purposes of Subpart F of this part:
(1) Alternative means of dispute resolution means any procedure
that is used, in lieu of an adjudication, to resolve issues in
controversy, including but not limited to, settlement negotiations,
conciliation, facilitation, mediation, factfinding, minitrials, and
arbitration, or any combination thereof;
(2) Award means any decision by an arbitrator resolving the issues
in controversy;
(3) Dispute resolution communication means any oral or written
communication prepared for the purposes of a dispute resolution
proceeding, including any memoranda, notes or work product of the
neutral, parties or non-party participant. A written agreement to enter
into a dispute resolution proceeding, or a final written agreement or
arbitral award reached as a result of a dispute resolution proceeding,
is not a dispute resolution communication;
(4) Dispute resolution proceeding means any alternative means of
dispute resolution that is used to resolve an issue in controversy in
which a neutral may be appointed and specified parties participate;
(5) In confidence means information is provided:
(i) With the expressed intent of the source that it not be
disclosed, or
(ii) Under circumstances that create a reasonable expectation on
behalf of the source that the information will not be disclosed;
(6) Issue in controversy means an issue which is or is anticipated
to be material to a decision in a proceeding before the Commission and
which is the subject of disagreement between participants who would be
substantially affected by the decision or between the Commission and
any such participants;
(7) Neutral means an individual who, with respect to an issue in
controversy, functions specifically to aid the parties in resolving the
controversy;
(8) Participants in a dispute resolution proceeding that is used to
resolve an issue in controversy in a proceeding involving an
application for a license or exemption to construct, operate, and
maintain a hydroelectric project pursuant to the Federal Power Act or
the Public Utility Regulatory Policies Act shall include such state and
federal agencies and Indian tribes as have statutory roles or a direct
interest in such hydroelectric proceedings.
(c) Neutrals. (1) A neutral may be a permanent or temporary officer
or employee of the Federal Government (including an administrative law
judge), or any other individual who is acceptable to the participants
to a dispute resolution proceeding. A neutral must have no official,
financial, or personal conflict of interest with respect to the issues
in controversy, except that a neutral who is not a government employee
may serve if the interest is fully disclosed in writing to all
participants and all participants agree.
(2) A neutral serves at the will of the participants, unless
otherwise provided.
(3) Neutrals may be selected from among the Commission's
administrative law judges or other employees, from rosters kept by the
Federal Mediation and Conciliation Service, the Administrative
Conference of the United States, the American Arbitration Association,
or from any other source.
(d) Submission of proposal to use alternative means of dispute
resolution. (1) The participants may at any time submit a written
proposal to use [[Page 19507]] alternative means of dispute resolution
to resolve all or part of any matter in controversy or anticipated to
be in controversy before the Commission.
(2) For matters set for hearing under Subpart E of this part, a
proposal to use alternative means of dispute resolution other than
binding arbitration must be filed with the presiding administrative law
judge.
(3) A proposal to use binding arbitration must be filed with the
Secretary for consideration by the Commission.
(4) For all other matters, a proposal to use alternative means of
dispute resolution may be filed with the Secretary for consideration by
the appropriate decisional authority.
(5) The appropriate decisional authority will issue an order,
approving or denying, under the guidelines in Rule 604(a) (2) and (3),
a proposal to use alternative means of dispute resolution. Denial of a
proposal to use alternative dispute resolution will be in the form of
an order and will identify the specific reasons for the denial. A
proposal to use alternative dispute resolution is deemed approved
unless an order denying approval is issued within 30 days after the
proposal is filed.
(6) Any request to modify a previously-approved ADR proposal must
follow the same procedure used for the initial approval.
(e) Contents of proposal. A proposal to use alternative means of
dispute resolution must be in writing and include:
(1) A general identification of the issues in controversy intended
to be resolved by the proposed alternative dispute resolution method,
(2) A description of the alternative dispute resolution method(s)
to be used,
(3) The signatures of all participants or evidence otherwise
indicating the consent of all participants; and
(4) A certificate of service pursuant to Rule 2010(h).
(f) Monitoring the alternative dispute resolution proceeding. The
decisional authority may order reports on the status of the alternative
dispute resolution proceeding at any time.
(g) Termination of alternative dispute resolution proceeding. (1)
The decisional authority, upon motion or otherwise, may terminate any
alternative dispute resolution proceeding under Rule 604 or 605 by
issuing an order to that effect.
(2) A decision to terminate an alternative dispute resolution
proceeding is not subject to judicial review.
Sec. 385.605 Arbitration (Rule 605).
(a) Authorization of arbitration. (1) The participants may at any
time submit a written proposal to use binding arbitration under the
provisions of Rule 605 to resolve all or part of any matter in
controversy, or anticipated to be in controversy, before the
Commission.
(2) The proposal must be submitted as provided in Rule 604(d).
(3) The proposal must be in writing and contain the information
required in Rule 604(e).
(4) An arbitration proceeding under this rule may be monitored and
terminated as provided in Rule 604 (d) and (g).
(5) No person may be required to consent to arbitration as a
condition of entering into a contract or obtaining a benefit. All
interested parties must expressly consent before arbitration may be
used.
(b) Arbitrators. (1) The participants to an arbitration proceeding
are entitled to select the arbitrator.
(2) The arbitrator must be a neutral who meets the criteria of a
neutral under Rule 604(c).
(c) Authority of arbitrator. An arbitrator to whom a dispute is
referred under this section may:
(1) Regulate the course of and conduct arbitral hearings;
(2) Administer oaths and affirmations;
(3) Compel the attendance of witnesses and the production of
evidence to the extent the Commission is authorized by law to do so;
and
(4) Make awards.
(d) Arbitration proceedings. (1) The arbitrator will set a time and
place for the hearing on the dispute and must notify the participants
not less than 5 days before the hearing.
(2) Any participant wishing that there be a record of the hearing
must:
(i) Prepare the record;
(ii) Notify the other participants and the arbitrator of the
preparation of the record;
(iii) Furnish copies to all identified participants and the
arbitrator; and
(iv) Pay all costs for the record, unless the participants agree
otherwise or the arbitrator determines that the costs should be
apportioned.
(3) (i) Participants to the arbitration are entitled to be heard,
to present evidence material to the controversy, and to cross-examine
witnesses appearing at the hearing to the same extent as in a
proceeding under Subpart E of this part;
(ii) The arbitrator may, with the consent of the participants,
conduct all or part of the hearing by telephone, television, computer,
or other electronic means, if each participant has an opportunity to
participate.
(iii) The hearing must be conducted expeditiously and in an
informal manner.
(iv) The arbitrator may receive any oral or documentary evidence,
except that irrelevant, immaterial, unduly repetitious, or privileged
evidence may be excluded by the arbitrator.
(v) The arbitrator will interpret and apply relevant statutory and
regulatory requirements, legal precedents, and policy directives.
(4) No interested person will make or knowingly cause to be made to
the arbitrator an unauthorized ex parte communication relevant to the
merits of the proceeding, unless the participants agree otherwise. If a
communication is made in violation of this prohibition, the arbitrator
will ensure that a memorandum of the communication is prepared and made
a part of the record, and that an opportunity for rebuttal is allowed.
Upon receipt of such communication, the arbitrator may require the
offending participant to show cause why the claim of the participant
should not be resolved against the participant as a result of the
improper conduct.
(5) The arbitrator will make the award within 30 days after the
close of the hearing or the date of the filing of any briefs authorized
by the arbitrator, whichever date is later, unless the participants and
the arbitrator agree to some other time limit.
(e) Arbitration awards. (1)(i) The award in an arbitration
proceeding under Subpart F of this chapter will include a brief,
informal discussion of the factual and legal basis for the award.
(ii) The prevailing participants must file the award with the
Commission, along with proof of service on all participants.
(2) The award in an arbitration proceeding will become final 30
days after it is filed, unless the award is vacated. The Commission,
upon motion or otherwise, may extend the 30-day period for one
additional 30-day period by issuing a notice of the extension before
the end of the first 30-day period.
(3) A final award is binding on the participants to the arbitration
proceeding.
(4) An award may not serve as an estoppel in any other proceeding
for any issue that was resolved in the proceeding. The award also may
not be used as precedent or otherwise be considered in any factually
unrelated proceeding or in any other arbitration proceeding.
(f) Vacating an award. (1) Within 10 days after the award is filed,
any person may file a request with the Commission to vacate an
arbitration award and must [[Page 19508]] serve the request to vacate
on all participants. Responses to such a request are due 10 days after
the request is filed.
(2) Upon request or otherwise, the Commission may vacate any award
issued under this rule before the award becomes final by issuing an
order to that effect, in which case the award will be null and void.
(3) Rule 2202 regarding separation of functions applies with
respect to a decision to vacate an arbitration award.
(4) If the Commission vacates an award under paragraph (f)(3) of
this section, a party to the arbitration may, within 30 days of the
action, petition the Commission for an award of attorney fees and
expenses incurred in connection with the arbitration proceeding. The
Commission will award the petitioning party those fees and expenses
that would not have been incurred in the absence of the arbitration
proceeding, unless the Commission finds that special circumstances make
the award unjust. The fees and expenses awarded will be paid by the
Commission.
(5) An arbitration award vacated under this paragraph will not be
admissible in any proceeding relating to the issues in controversy with
respect to which the award was made.
(6) A decision by the Commission to vacate an arbitration award is
not subject to rehearing or judicial review.
Sec. 385.606 Confidentiality in dispute resolution proceedings (Rule
606).
(a) Except as provided in paragraphs (d) and (e) of this section, a
neutral in a dispute resolution proceeding shall not voluntarily
disclose, or through discovery or compulsory process be required to
disclose, any information concerning any dispute resolution
communication or any communication provided in confidence to the
neutral, unless:
(1) All participants in the dispute resolution proceeding and the
neutral consent in writing;
(2) The dispute resolution communication has otherwise already been
made public;
(3) The dispute resolution communication is required by statute to
be made public, but a neutral should make the communication public only
if no other person is reasonably available to disclose the
communication; or
(4) A court determines that the testimony or disclosure is
necessary to:
(i) Prevent a manifest injustice;
(ii) Help establish a violation of law; or
(iii) Prevent harm to the public health or safety of sufficient
magnitude in the particular case to outweigh the integrity of dispute
resolution proceedings in general by reducing the confidence of
participants in future cases that their communications will remain
confidential.
(b) A participant in a dispute resolution proceeding shall not
voluntarily disclose, or through discovery or compulsory process be
required to disclose, any information concerning any dispute resolution
communication, unless:
(1) All participants to the dispute resolution proceeding consent
in writing;
(2) The dispute resolution communication has otherwise already been
made public;
(3) The dispute resolution communication is required by statute to
be made public;
(4) A court determines that the testimony or disclosure is
necessary to:
(i) Prevent a manifest injustice;
(ii) Help establish a violation of law; or
(iii) Prevent harm to the public health and safety of sufficient
magnitude in the particular case to outweigh the integrity of dispute
resolution proceedings in general by reducing the confidence of
participants in future cases that their communications will remain
confidential; or
(5) The dispute resolution communication is relevant to determining
the existence or meaning of an agreement or award that resulted from
the dispute resolution proceeding or to the enforcement of the
agreement or award.
(c) Any dispute resolution communication that is disclosed in
violation of paragraphs (a) or (b) of this section shall not be
admissible in any proceeding.
(d) The participants may agree to alternative confidential
procedures for disclosures by a neutral. The participants must inform
the neutral before the commencement of the dispute resolution
proceeding of any modifications to the provisions of paragraph (a) of
this section that will govern the confidentiality of the dispute
resolution proceeding. If the participants do not so inform the
neutral, paragraph (a) of this section shall apply.
(e) If a demand for disclosure, by way of discovery request or
other legal process, is made upon a participant regarding a dispute
resolution communication, the participant will make reasonable efforts
to notify the neutral and the other participants of the demand. Any
participant who receives the notice and within 15 calendar days does
not offer to defend a refusal of the neutral to disclose the requested
information waives any objection to the disclosure.
(f) Nothing in Rule 606 prevents the discovery or admissibility of
any evidence that is otherwise discoverable, merely because the
evidence was presented in the course of a dispute resolution
proceeding. See sections 385.410 and 388.112 of this chapter.
(g) Paragraphs (a) and (b) of this section do not preclude
disclosure of information and data that are necessary to document an
agreement reached or order issued pursuant to a dispute resolution
proceeding.
(h) Paragraphs (a) and (b) of this section do not prevent the
gathering of information for research and educational purposes, in
cooperation with other agencies, governmental entities, or dispute
resolution programs, so long as the participants and the specific
issues in controversy are not identifiable.
(i) Paragraphs (a) and (b) of this section do not prevent use of a
dispute resolution communication to resolve a dispute between the
neutral in a dispute resolution proceeding and a participant in the
proceeding, so long as the communication is disclosed only to the
extent necessary to resolve the dispute.
(j) Nothing in this section precludes parties from seeking
privileged treatment for documents under section 388.112 of this
chapter.
(k) Where disclosure is authorized by this section, nothing in this
section precludes use of a protective agreement or protective orders.
7. In Sec. 385.710, paragraph (d) is added to read as follows:
Sec. 385.710 Waiver of the initial decision (Rule 710).
* * * * *
(d) Waiver by presiding officer. A motion for waiver of the initial
decision, requested for the purpose of certification of a contested
settlement pursuant to Rule 602(h)(2)(iii)(A), may be filed with, and
decided by, the presiding officer. If all parties join in the motion,
the presiding officer will grant the motion. If not all parties join in
the motion, the motion is denied unless the presiding officer grants
the motion within 30 days of filing the written motion or presenting an
oral motion. The contents of any motion filed under paragraph (d) of
this section must comply with the requirements in paragraph (b) of this
section. A motion may be oral or written, and may be made whenever
appropriate for the consideration of the presiding officer.
[[Page 19509]] Note.--This appendix will not be published in the
Code of Federal Regulations.
Appendix
Alternative Dispute Resolution
Docket No. RM91-12-000
Commenters
American Gas Distributors (AGD)
American Public Power Association
Association of Oil Pipelines (AOPL)
Colorado Interstate Gas Company and ANR Pipeline Company (CIG
and ANR)
Colorado River Energy Distributors Association (CREDA)
Columbia Gas Transmission Corporation and Columbia Gulf
Transmission Company (Columbia Gas)
Consumers Power Company (Consumers)
Edison Electric Institute (EEI)
Electric Generation Association (Electric Generation)
McCormack Institute of Public Affairs
Missouri Public Service Commission (Missouri PSC)
Natural Gas Clearinghouse
Natural Gas Pipeline Company of America (Natural Gas Pipeline)
Natural Gas Supply Association (Natural Gas Supply)
New England Power Service
Northeast Energy Associates and North Jersey Energy Associates
(Northeast and North Jersey)
Northern Distributors Group (Northern Distributors)
Northwest Industrial Gas Users (Northwest Users)
Pacific Gas and Electric Company (PG&E)
Process Gas Consumers Group, American Iron and Steel Institute,
and Georgia Industrial Group (Industrials)
Texas Eastern Transmission Corporation, Panhandle Eastern Pipe
Line Company, Trunkline Gas Company and Algonquin Gas Transmission
Company (PEC Pipeline Group)
Transcontinental Gas Pipe Line Corporation (Transco)
U.S. Department of Commerce (Commerce)
U.S. Department of the Interior (Interior)
Williams Natural Gas Company and Northwest Pipeline Company
(Williams)
Wisconsin Municipal Group
[FR Doc. 95-9594 Filed 4-18-95; 8:45 am]
BILLING CODE 6717-01-P
