284
Opinion of the Court
Energy Regulatory Commission (FERC) took the further step of promulgating Order No. 436, which contained an "open access" rule providing incentives for pipelines to offer gas transportation services, see 50 Fed. Reg. 42408. In 1992, this evolution culminated in FERC's Order No. 636, which required all interstate pipelines to "unbundle" their transportation services from their own natural gas sales and to provide common carriage services to buyers from other sources that wished to ship gas. See 57 Fed. Reg. 13267.
Although FERC did not take the further step of requiring intrastate pipelines to provide local transportation services to ensure that gas sold by producers and independent marketers could get all the way to the point of consumption,3 under the system of open access to interstate pipelines that had emerged in the mid-1980's "larger industrial end-users" began increasingly to bypass utilities' local distribution networks by "construct[ing] their own pipeline spurs to [interstate] pipeline[s] . . . ." Fagan, From Regulation to Deregulation: The Diminishing Role of the Small Consumer Within the Natural Gas Industry, 29 Tulsa L. J. 707, 723 (1994). Bypass posed a problem for LDC's, since the departure of large end users from the system left the same fixed costs to be spread over a smaller customer base. The State of Ohio consequently took steps in 1986 to keep some income from large industrial customers within the utility system by adopting regulations that allowed industrial end users in Ohio to buy natural gas from producers or independent marketers, pay interstate pipelines for interstate transportation, and pay LDC's for local transportation. See In re Commis-3 Section 1(b) of the NGA, 52 Stat. 821, 15 U. S. C. § 717(b), explicitly exempts "local distribution of natural gas" from federal regulation. In addition, the Hinshaw Amendment to the NGA, 15 U. S. C. § 717(c), exempts from FERC regulation intrastate pipelines that operate exclusively in one State and with rates and service regulated by the State. See ANR Pipeline Co. v. FERC, 71 F. 3d 897, 898, n. 2 (CADC 1995). See also infra, at 293.
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