## Facts

- Interstate natural-gas shortages led the federal regulator to require pipelines anticipating shortages to file revised tariffs specifying how reduced supplies would be allocated among customers.
- Curtailment approaches generally included (1) pro rata reductions tied to contract entitlements and (2) end-use priority schemes that protect higher-priority uses (e.g., residential heating) over lower-priority uses (e.g., certain industrial uses).
- The regulator adopted a policy preference for end-use curtailment as a more efficient, public-interest allocation method and approved an end-use curtailment plan for the Texas Eastern system.
- Texas Eastern’s plan prioritized deliveries across multiple end-use categories and did not include any customer-to-customer compensation or equalization mechanism for disparate curtailment impacts.
- Consolidated Edison (a Texas Eastern customer) would receive below-average quantities under the plan due to its downstream mix including substantial lower-priority uses.
- Consolidated Edison petitioned for review, asserting that approval of the plan (without compensation) amounted to a Fifth Amendment taking and was arbitrary and capricious under the APA and inconsistent with the Natural Gas Act.

## Issues

1. Whether approval of an end-use curtailment plan that imposes below-average deliveries on a customer, without any compensation mechanism, constitutes a taking of property without just compensation under the Fifth Amendment.
2. Whether the regulator acted arbitrarily or capriciously by approving the plan without requiring compensation or equalization among customers experiencing different curtailment levels.

## Decision

- The court denied the petition for review and upheld the regulator’s approval of the end-use curtailment plan.
- The court held that the approval did not effect a Fifth Amendment taking.
- The court held that the agency’s decision not to require customer-to-customer compensation was not arbitrary or capricious.

## Legal Principles

- In the natural-gas regulatory scheme, contractual entitlements and tariff rights are subject to agency modification in the public interest during shortage conditions; a customer lacks a constitutionally protected right to a fixed share of a pipeline’s limited supply.
- Regulatory measures that redistribute the burdens of scarcity among regulated entities to serve priority-of-use and public-interest objectives generally constitute permissible economic regulation, not a compensable taking.
- Courts give substantial deference to the regulator’s technical and policy judgments on curtailment design if the agency provides a reasoned explanation grounded in the record.
- Neither the Fifth Amendment nor the Natural Gas Act requires the regulator to impose customer-to-customer compensation or equalization to offset disparate impacts produced by an end-use priority curtailment plan.

## Conclusion

The D.C. Circuit upheld the regulator’s end-use curtailment plan for a pipeline system during gas shortages, ruling that unequal curtailment outcomes without compensation reflect lawful public-interest regulation within the statutory framework, not a taking, and that the agency’s refusal to mandate equalization was adequately reasoned and lawful.


Consolidated Edison Co. of N.Y., Inc. v. FERC, 676 F.2d 763 (D.C. Cir. 1982)