          United States Court of Appeals
                        For the First Circuit

No. 12-1386

                       BANGOR GAS COMPANY, LLC,

                        Plaintiff, Appellant,

                                  v.

                   H.Q. ENERGY SERVICES (U.S.) INC,

                         Defendant, Appellee.


          APPEAL FROM THE UNITED STATES DISTRICT COURT

                      FOR THE DISTRICT OF MAINE

              [Hon. Nancy Torresen, U.S. District Judge]


                                Before

                         Lynch, Chief Judge,

                Torruella and Boudin, Circuit Judges.


     Richard N. Selby, II with whom Dworken & Bernstein Co.,
L.P.A., Adam R. Lee and Skelton, Taintor & Abbott were on brief for
appellant.
     Linda M. Glover with whom Justin B. Whitley, John B. Rudolph,
Winstead PC, Jotham D. Pierce, Jr., Nolan L. Reichl and Pierce
Atwood LLP were on brief for appellee.



                          September 26, 2012
          BOUDIN, Circuit Judge.       A pipeline owner--Bangor Gas

Company, LLC ("Bangor")--and a natural gas supplier--H.Q. Energy

Services (U.S.) Inc. ("HQUS")--entered into a contract for the

transportation of HQUS' natural gas.         The parties later became

embroiled in a dispute and submitted their dispute to binding

arbitration.   After the arbitrators issued a decision largely

favorable to HQUS, Bangor sought to vacate the decision in the

district court, failed, and has now brought this appeal.

          HQUS, a wholly owned American subsidiary of the Canadian

government-owned   utility   Hydro-Quebec,    sells   natural   gas   and

electricity in the United States. Bangor provides services related

to the natural gas industry in Maine.   In 1999, Bangor entered into

an agreement with HQUS (the "Agreement") to build and operate a

Bangor pipeline, later named the Bucksport Pipeline, to deliver

HQUS' natural gas from an international pipeline nine miles away

called the Maritimes Pipeline, owned and operated by Maritimes &

Northeast Pipeline, LLC ("Maritimes"), to the Bucksport Energy

Facility (an energy plant that served a paper mill).

          The contract provided that HQUS' gas would be delivered

over the Bucksport Pipeline for fifteen years for a fixed annual

charge of $1,150,662, paid by HQUS in monthly installments.

However, Bangor did not connect the origin end of the Bucksport

Pipeline directly to the existing Maritimes Pipeline; instead,

Bangor contracted to have Maritimes build a 410-foot lateral


                                 -2-
pipeline (the "Lateral") that connected the Maritimes Pipeline to

the Bucksport Pipeline and agreed that Bangor would pay Maritimes

for the Lateral's use pursuant to a tariff filed by Maritimes with

the Federal Energy Regulatory Commission ("FERC").

            Bangor's expert later explained that this was done for

technical reasons relating to proximity to electric power lines.

Nonetheless, the Lateral was not mentioned in the Agreement, and

the Agreement's    language   may   suggest   that   the   parties   to   it

contemplated that the Bucksport Pipeline would directly connect to

the Maritimes Pipeline.       It was apparently not until 2006, six

years after the Bucksport Pipeline opened, that HQUS learned of the

Lateral and that the Bucksport Pipeline did not connect directly to

the Maritimes Pipeline.

            During this six-year period, HQUS paid the agreed upon

rate to Bangor; Bangor in turn compensated Maritimes for the use of

the short Lateral pipeline of whose existence HQUS was ignorant.

This harmonious state of affairs began to dissolve when Bangor was

itself acquired by a parent company which apparently concluded that

Bangor's compensation of Maritimes might be in violation of rules

or policies of the FERC, the federal agency which now regulates

much of the traffic in natural gas in the United States.

            Under a FERC edict known as the "shipper-must-have-title"

rule, a shipper of natural gas must hold title to the gas it is

shipping.   The rule is not a codified regulation but was announced


                                    -3-
by FERC in an adjudication of a specific dispute.1   The aim of the

rule is to prevent big natural gas distributors from buying up

pipeline capacity that they do not need for shipment of their own

gas and leveraging their market power by selling the capacity to

third parties at excessive prices.

            Bangor concluded that, as the party who controlled the

capacity of the Lateral by virtue of its lease, it would be deemed

under FERC's nomenclature "the shipper" of gas traveling over the

Lateral.    And, as HQUS owned gas traveling through the Lateral,

Bangor might be deemed in violation of the shipper-must-have-title

rule.    Bangor consulted with FERC with the result that, in 2007,

FERC found that Bangor had violated the shipper-must-have-title

rule with respect to the Lateral (as well as another pipeline), and

approved a consent agreement by which Bangor paid a $1 million

fine.    Bangor Gas Co., LLC, 118 F.E.R.C. ¶ 61,186 (2007).

            Beginning in 2006, Bangor sought to comply with the rule

by entering into "capacity releases" with HQUS in which HQUS would

replace Bangor as the party who held capacity rights in the

Lateral, and thus as the "shipper" on the Lateral.   In the earliest

of these capacity releases HQUS did not pay the costs of using the

Lateral; but HQUS began paying those costs in August 2009 after



     1
      Tex. E. Transmission Corp., 37 F.E.R.C. ¶ 61,260, at 61,685
(1986); see also Demarest, Gas Marketing by the Operator Under a
JOA--Unrecognized Regulatory Risks and Practical Solutions, 64
Okla. L. Rev. 135, 136-38 (2012).

                                 -4-
Bangor threatened to place its capacity rights on the Lateral up

for competitive bidding. Whether HQUS should pay became one of the

two main issues in the ensuing dispute between the two companies.

           The other dispute involved the costs for heater fuel to

heat the gas at two points: at the connection between the Lateral

and the start of Bucksport Pipeline, and at the end of the

Bucksport Pipeline as the gas enters the energy plant.             The latter

satisfied a contractual obligation of Bangor to deliver the gas at

80EF or above.      The Agreement was silent on who was to pay for

heating.   Bangor had been paying for the heater fuel since the

inception of the agreement, but in 2009 Bangor asserted that HQUS

should pay those costs.

           The Agreement provided that irreconcilable disputes would

be   submitted     to   binding    arbitration,     and   Bangor   initiated

arbitration   on    December      6,   2010.     Each   party   selected   one

arbitrator, and those two arbitrators chose a third arbitrator; all

three were experienced in the energy industry, and one was a former

FERC Commissioner. Bangor sought to have HQUS pay both the Lateral

costs and the heater fuel costs.             HQUS denied responsibility and

counterclaimed for a reimbursement of payments it had made for the

Lateral since 2009.2


     2
      The Agreement specified that Bangor was responsible for
delivering gas from the point of receipt, defined as "[t]he outlet
of the meter installed at the interconnection between the Maritimes
Pipeline and the distribution facilities of [Bangor]." The meter
is located at the connection between the Lateral and the Bucksport

                                       -5-
           The arbitration panel reviewed briefs, written testimony

and documents submitted by the parties, and held a three-day

hearing.   On September 1, 2011, the panel issued a written award

that was largely favorable to HQUS, deciding that Bangor was

responsible for paying Maritimes for use of the Lateral.               As to

heater costs, the arbitrators placed the future cost burden for

heating at the delivery end upon HQUS but declined to order it to

pay for past heating.

           On the Lateral costs issue, the arbitrators noted that

the   Agreement   contemplated   that    the   Bucksport    Pipeline   would

connect to the Maritimes Pipeline, which meant that the parties

thought that HQUS was purchasing for its original monthly payment

transportation of gas all the way from the Maritimes Pipeline to

the   energy   plant.   The    panel    inferred   from    Bangor   internal

documents that the contract rate in Bangor's bid to HQUS already

accounted for the cost of transporting gas on the 410 feet that

comprised the Lateral and the cost of the junction point meter

installed by Maritimes.       Thus, forcing HQUS to pay Maritimes in

addition to paying Bangor would unjustly require HQUS to pay twice

for the transportation and meter.

           The panel acknowledged that the shipper-must-have-title

rule posed difficulties but the panel adopted a two-part solution:


Pipeline, so Bangor argued that it should not be responsible for
paying for transportation on the Lateral, which occurs before the
gas reaches the meter.

                                   -6-
(1) Bangor would continue to release its capacity on the Lateral to

HQUS, and HQUS would pay Maritimes for use of the Lateral, but (2)

Bangor would reimburse HQUS for the Lateral costs in the form of a

comparably reduced rate for use of the Bucksport Pipeline.                  In

addition, the panel ordered Bangor to reimburse HQUS for costs that

HQUS (under threat) had already paid to Maritimes.

           On the heater fuel issue, the panel decided that HQUS

should pay for the fuel for the heater at the site of the energy

plant, later making clear that Bangor would pay for heating at the

origin   end.      The    panel   stated    that    under   standard   industry

practice, the customer ordinarily paid for the heater fuel required

to meet a customer-specific need and it viewed this to be the basis

for the heating at the delivery point.

           The panel decided to make the award as to the heater fuel

prospective and not retroactive, citing a number of equitable

factors: (1) that the issue is "a close question that is not

directly addressed in the Agreement"; (2) that Bangor's history of

paying for the fuel led HQUS to legitimately expect continued

payment; and (3) that documenting and calculating past heater fuel

costs would be "difficult and contentious."                   HQUS ultimately

accepted this disposition of the heating cost issue; Bangor did

not.

           After    the    award,   both    sides    sought   clarification.

Pertinently, Bangor expressed concern that the panel's capacity


                                      -7-
release   and   reimbursement   solution   could   still   violate   FERC

regulations, and that Bangor could end up paying further large

penalties.      Bangor asked the panel to stay the award until it

received a response to a letter Bangor had sent to FERC staff

seeking assurance against a FERC enforcement action.          The panel

denied the request, stating that it was "not at all likely" that

FERC would find the arrangement illegal.      However, the panel

           direct[ed] that HQUS promptly provide to
           Bangor written confirmation that it will
           return any reimbursement amounts it receives
           from Bangor, and will repay any capacity
           release payment amounts it credits against
           payments otherwise due under the Bangor/HQUS
           service agreement, to the extent necessary to
           comply with any finding by the FERC that the
           reimbursement and crediting arrangements are
           not consistent with FERC policy.

HQUS subsequently provided Bangor with the written commitment.

           On November 10, 2011, FERC's General Counsel and Director

of the Office of Enforcement denied Bangor's request that FERC

staff issue a "No-Action Letter" promising that enforcement actions

would not be brought against Bangor for implementing the panel's

reimbursement remedy.    Instead, the staff expressed its view that

"[t]he Panel's remedy . . . would violate the Commission's posting

and bidding regulations," which state that a capacity release must

be posted for competitive bidding, unless it is done at the maximum

applicable rate under the pipeline's tariff filed with FERC.          18

C.F.R. § 284.8(c)-(e), (h)(1) (2012).



                                  -8-
              Although Bangor's release of capacity on the Lateral to

HQUS in terms required HQUS to pay the maximum rate, the FERC staff

stated that the reduced Bucksport Pipeline charges accepted by

Bangor      amounted   to   a   discount   on     the    Lateral    payments     that

triggered the competitive bidding requirements.                    The staff noted

that "this response only expresses Staff's position on enforcement

action and does not express any legal conclusions on the questions

presented," and that it "is not binding on the Commission."                      In a

subsequent letter to HQUS, the same FERC staff reiterated that its

previous letter was not binding, stating that if "HQ Energy or

Bangor wants a definitive answer from the Commission, it may file

for a declaratory order, as the Commission speaks through its

orders."

              On November 30, 2011, Bangor Gas filed a motion with the

district court under the Federal Arbitration Act ("FAA"), 9 U.S.C.

§§   1-16    (2006),   to    vacate   in   part    and    confirm    in   part   the

arbitration award.          The request to vacate aimed at the panel's

imposition of Lateral costs on Bangor and at the panel's refusal to

require repayment by HQUS of past destination-end heater costs

incurred by Bangor.         Bangor also argued that the FERC staff letter

triggered HQUS' commitment to refund past Lateral reimbursements to

Bangor.     Ultimately, the district court denied Bangor's motion and

granted HQUS' motion to confirm the award.




                                       -9-
           We review the district court's decision de novo, but our

review of the arbitration award itself is "extremely narrow and

exceedingly deferential."    Bull HN Info. Sys., Inc. v. Hutson, 229

F.3d 321, 330 (1st Cir. 2000) (quoting Wheelabrator Envirotech

Operating Servs. Inc. v. Mass. Laborers Dist. Council Local 1144,

88 F.3d 40, 43 (1st Cir. 1996)).           The FAA "embodies a national

policy   favoring   arbitration,"    Buckeye   Check   Cashing,   Inc.   v.

Cardegna, 546 U.S. 440, 443 (2006), and provides only a narrow set

of statutory grounds for a federal court to vacate an award:

           (1)   where  the   award   was  procured         by
           corruption, fraud, or undue means;

           (2) where there was evident partiality or
           corruption in the arbitrators, or either of
           them;

           (3) where the arbitrators were guilty of
           misconduct in refusing to postpone the
           hearing, upon sufficient cause shown, or in
           refusing to hear evidence pertinent and
           material to the controversy; or of any other
           misbehavior by which the rights of any party
           have been prejudiced; or

           (4) where the arbitrators exceeded their
           powers, or so imperfectly executed them that a
           mutual, final, and definite award upon the
           subject matter submitted was not made.

9 U.S.C. § 10(a).

           In addition, this court in the past recognized a common

law ground for vacating arbitration awards that are in "manifest

disregard of the law," McCarthy v. Citigroup Global Mkts. Inc., 463

F.3d 87, 91 (1st Cir. 2006) (quoting Wonderland Greyhound Park,


                                    -10-
Inc. v. Autotote Sys., Inc., 274 F.3d 34, 35 (1st Cir. 2001), while

limiting this notion primarily to cases where the award conflicts

with the plain language of the contract or where "the arbitrator

recognized the applicable law, but ignored it."     Gupta v. Cisco

Sys., Inc., 274 F.3d 1, 3 (1st Cir. 2001).

          The manifest-disregard doctrine has been thrown into

doubt by Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S.

576 (2008), where the Supreme Court "h[e]ld that [9 U.S.C. § 10] .

. . provide[s] the FAA's exclusive grounds for expedited vacatur."

Id. at 584 (emphasis added).    This has caused a circuit split,3

with this court saying (albeit in dicta) that "manifest disregard

of the law is not a valid ground for vacating or modifying an

arbitral award in cases brought under the Federal Arbitration Act,"

Ramos-Santiago v. United Parcel Serv., 524 F.3d 120, 124 n.3 (1st

Cir. 2008).

          Even if the manifest-disregard doctrine were assumed to

survive and were applied in this case, the award neither conflicts



     3
      Compare Wachovia Secs., LLC v. Brand, 671 F.3d 472, 480 (4th
Cir. 2012) (recognizing continuing validity of manifest disregard
doctrine), Johnson v. Wells Fargo Home Mortgage, Inc., 635 F.3d
401, 415 n.11 (9th Cir. 2011) (same), Stolt-Nielsen SA v.
AnimalFeeds Int'l Corp., 548 F.3d 85, 94 (2d Cir. 2008), rev'd on
other grounds, 130 S. Ct. 1758 (2010) (same), and Coffee Beanery,
Ltd. v. WW, L.L.C., 300 Fed. App'x 415, 418 (6th Cir. 2008)
(unpublished opinion) (same), with Frazier v. CitiFinancial Corp.,
604 F.3d 1313, 1324 (11th Cir. 2010) (rejecting manifest disregard
doctrine as invalid), Citigroup Global Mkts., Inc. v. Bacon, 562
F.3d 349, 350 (5th Cir. 2009) (same), and Crawford Grp., Inc. v.
Holekamp, 543 F.3d 971, 976 (8th Cir. 2008) (same).

                               -11-
with the plain language of the Agreement nor did the arbitrators

recognize the applicable law but ignore it.         The panel resolved

what is at best an argument about how a contract of questionable

meaning should be read and harmonized with a FERC doctrine on

leasing capacity.   Under settled precedent, an FAA award cannot be

overturned based on mere disagreement by the court with the panel

on a debatable issue, Advest, Inc. v. McCarthy, 914 F.2d 6, 9 (1st

Cir. 1990); and in this instance the panel's decision is in our

view entirely reasonable.

          The Lateral Issue.       Bangor argues that the panel's

decision to make Bangor pay for the Lateral costs was in manifest

disregard of the law on two grounds: that the panel's ruling

contravenes the clear language of the Agreement by making Bangor

responsible for Maritimes' charges for the Lateral's use, and that

the panel's remedy results in a violation of FERC regulations (and

by extension, a principle of Maine contract law that disfavors the

enforcement of illegal contracts).      Both claims are that the panel

ignored the law, but in two quite different ways.

          The   first   claim,   resting   on   interpretation   of   the

Agreement, is hopeless.     The better reading of the Agreement is

that HQUS' ongoing monthly payments to Bangor already compensate

Bangor for moving the gas from Maritimes' main line to HQUS'

customer; indeed, Bangor seemingly calculated the monthly charge on

that assumption.    In commissioning the Lateral, Bangor chose to


                                 -12-
hand off part of its obligation to Maritimes, and is now trying to

make HQUS shoulder the cost a second time over.            Nothing in the

Agreement mentions the Lateral, let alone obliges HQUS to pay

separately for its use.

          Admittedly, the Agreement requires Bangor to start paying

at the "Point of Receipt," which is defined as the meter that is

located at the origin end of the Lateral; but it was Bangor's own

undisclosed choice to make the connection with Maritimes--and thus

to locate the junction meter--at a point 400 feet away from where

HQUS reasonably expected it to be.       The Agreement, by contrast,

contemplated   a   pipeline   "between   the   Maritimes   and   Northeast

Pipeline and the Energy Plant."          Bangor's claim based on the

Agreement is plainly wrong.

          More difficult is Bangor's argument that the panel's

remedy of capacity releases and reimbursements places Bangor in

violation of FERC requirements.     There is, it should be stressed,

no basis for claiming the Agreement itself violated the FERC's

governing statute or its pertinent rules or regulations: had Bangor

built its Bucksport Pipeline to run from Maritimes' main line as

was contemplated, no Lateral line would have been required.

Bangor's difficulties with FERC ensued afterwards and from Bangor's

unilateral action in commissioning the Lateral.

          But FERC rules and regulations are, so far as they are

valid, in the nature of sovereign commands representing a public


                                  -13-
purpose; and we will assume (arguendo but with some confidence)

that an arbitration award would be vulnerable to the extent that it

directed one or both of the parties clearly to violate a such a

mandate.     Yet there is nothing clear-cut about FERC's actual

intentions, ample reason to think a reasonable agency would stay

its hand, and fair precautions adopted by the panel if FERC acts

otherwise.

           Here, the panel considered FERC rules and regulations and

structured its award in a way that it "believe[d] . . . [would be]

fully consistent with FERC policy."     In its initial decision, the

panel sought to accommodate the shipper-must-have-title rule by

having Bangor release its capacity to HQUS, which would thereby

become the shipper as well as the owner of the gas.           Thus, as a

formal matter, HQUS would become responsible to pay Maritimes for

the capacity,   albeit   compensated   by   a   reduced   charge   on   the

Bucksport Pipeline, the monthly payment for which already covered

the transportation of gas from Maritimes' main pipeline onward.4




     4
      Under the panel's arrangement, HQUS acquired usage rights to
the Lateral capacity and thus became "the shipper"; and, as it was
also the owner of the gas, the shipper-must-have-title was
satisfied--as it had not been when Bangor held the usage rights and
was heavily fined by FERC in the earlier consent order. The FERC
staff's problem with the panel's remedy does not concern the
shipper-must-have-title rule; rather, it concerns the separate
regulation dictating that capacity releases (such as Bangor's
release to HQUS on the Lateral) must be posted for competitive
bidding unless they are at the maximum FERC tariff rate. See 18
C.F.R. § 284.8(c)-(e), (h)(1).

                                -14-
              True enough, the FERC staff thereafter said that the

release of capacity by Bangor without competitive bidding could be

viewed as charging the required "maximum rate" in form, while in

substance reducing that price through the reimbursements Bangor

paid HQUS for transportation on the Bucksport Pipeline.              But, as

the staff admitted, FERC is not obliged to take this view.

Alternatively, FERC could accept the staff position but (in our

view) reasonably waive its maximum-rate regulations in the peculiar

circumstances of this case.

              The shipper-must-have-title rule was designed to deal

with a problem perceived by FERC as the agency sought to create a

competitive market in pipeline capacity as part of a long-term

effort to (in some measure) deregulate the industry.                Pipelines

potentially possess market power over gas transportation, but the

agency provided incentives and later mandates for the pipelines to

make       capacity   available   on     a    market   basis   to   competing

intermediaries; the aim to create and maintain that competitive

market in transportation capacity is the premise of the rules and

regulations of concern here.5


       5
      Order No. 436, Regulation of Natural Gas Pipelines After
Partial Wellhead Decontrol, 50 Fed. Reg. 42,408, 42,413, 42,424
(Fed. Energy Regulatory Comm'n Oct. 18, 1985) (providing incentives
for pipelines to offer unbundled transportation services); Order
No. 636, Pipeline Service Obligations and Revisions to Regulations
Governing Self-Implementing Transportation; and Regulation of
Natural Gas Pipelines After Partial Wellhead Decontrol, 57 Fed.
Reg. 13,267, 13,270 (Fed. Energy Regulatory Comm'n Apr. 16, 1992)
(mandating that pipelines offer unbundled transportation services

                                       -15-
              But maintaining a competitive market in pipeline capacity

transfers is primarily important in large capacity pipes that might

be used by multiple shippers and often for multiple destinations;

in that situation, if one "customer" or a small group were able to

buy up capacity beyond their own needs, they might forestall

competition by charging excessive prices for re-releases to others

or   impose     discriminatory   policies   that   disadvantage    smaller

competitors.       This is the expressed explanation for both the

shipper-must-have-title rule and the bidding regulation.          See note

4, above.

              But the present 410-foot Lateral was designed simply to

serve the Bucksport Pipeline, which was itself aimed to send gas a

mere nine miles from the main Maritimes Pipeline to a single

customer, and Bangor had already committed the Bucksport Pipeline

to carry HQUS gas to the energy plant at the far end.             In these

circumstances, the rationale for the shipper-must-have-title rule

and maximum-tariff-rate regulations seems minimal; and imposed

bidding for the Lateral capacity would be of benefit only to a

spoiler who might aim to hold up Bangor and HQUS alike.

              Further, while Bangor might perhaps have been properly

sanctioned for a naked (albeit seemingly harmless) violation of the



on nondiscriminatory terms); see also U.S. Gen. Accounting Office,
GAO/RCED-87-133BR, Natural Gas Regulation: Pipeline Transportation
Under FERC Order 436, at 13-14 (1987); McGrew, FERC 118-19 (2d ed.
2009).

                                   -16-
shipper-must-have-title rule by its original decision to outsource

its obligations, forbidding the panel remedy would merely give

Bangor   an    unjustified   (and   probably   temporary)   advantage   by

transferring costs to HQUS--the innocent party--for which Bangor

was contractually responsible and for no obvious public end.

Assuming a court would permit FERC to so act, it is hard to see why

FERC would care to do so.

              It is hardly surprising that the staff felt unable to

provide assurance against such a risk or that it felt compelled to

point out the formal danger posed by the panel's remedy; this

follows both from bureaucratic imperatives familiar to anyone who

has served in government and from a due regard for the comparative

authority of the staff vis-à-vis the commissioners.         But the staff

itself pointed out that the ultimate decision as to the meaning of

its requirements belonged to the commissioners (as does the power

to waive regulations).

              Bangor claims that the staff's statement that "[t]he

Panel's remedy . . . would violate the Commission's posting and

bidding regulations" itself triggers HQUS' commitment to pay a

refund of $297,547.50 to Bangor; this is supposedly based on the

written assurance HQUS gave that it would return any reimbursements

it received from Bangor for the Lateral costs "to the extent

necessary to comply with any finding by FERC that the reimbursement

and crediting arrangements are not consistent with FERC policy."


                                    -17-
          But   the    statements    by    FERC    officials   are    not   FERC

findings. On the contrary, the FERC staff made abundantly clear in

two letters that their statements were not definitive and were not

binding on FERC.      FERC itself has warned that parties cannot rely

on non-binding opinions from FERC staff because "[t]he Commission

speaks through its orders."         Indianapolis Power & Light Co., 48

F.E.R.C. ¶ 61,040, at 61,203 (1989).                Finally, FERC has the

authority to grant waivers from its shipper-must-have-title rule

and its capacity release regulations.            See Atlanta Gas Light Co.,

85 F.E.R.C. ¶ 61,102 (1998).

          In sum, there is no clear indication that FERC will seek

to undo the reimbursement remedy crafted by the panel which has

been tailored to        avoid any direct affront to FERC rules or

regulations, requirements whose underlying purpose seems hardly

implicated by the peculiar circumstances of this case: a 410-foot

pipeline dedicated to connect to a single-customer spur pipeline.

And, if   the   premise that    FERC      will    tolerate   this    reasonable

improvisation proves false, the panel has made provision for this

contingency as well.

          Heater Fuel Cost Retroactivity.             As already explained,

the panel imposed destination-end heating costs on HQUS for the

future but declined to make this ruling retroactive, and Bangor

terms this refusal a "compromise" that violated the Agreement's "no

compromise" clause. Bangor says that the panel called the heating-


                                    -18-
cost issue a "close question" and, by imposing only the going

forward costs on HQUS, must have been compromising the matter.

This is a misreading of the "no compromise" clause, which states:

           In the event that the arbitration requires a
           decision (I) as to the allocation or payment
           of any monetary amounts or valuations to be
           reduced to monetary amounts, or (ii) the
           methodology or accuracy of any calculation
           related thereto, the arbitrators shall select
           the   position  of   that Party    which   the
           arbitrator believes most appropriate under the
           circumstances. No "compromise" determination
           or alternate calculations shall be made by the
           arbitrator who is bound to adopt the position
           of one Party to the exclusion of the other on
           such matters.

           This provision, governing a class of amount-related

controversies that might arise in arbitrated disputes, requires the

panel to pick the better position as between the conflicting ones

offered by each side on how to read or implement the Agreement on

each particular point, rather than merely adopt some intermediate

compromise position and thereby split the difference.            But the

panel in this case was deciding two different issues and each was,

in substance, decided on the merits.

           The first question was whether to impose liability for

the disputed costs on HQUS or Bangor: the contract did not address

the   question;   Bangor   had   itself   apparently   assumed   it   was

responsible for six years which is hardly surprising since the

Agreement required it to deliver the gas at the specified minimum

temperature; but industry practice allegedly favored imposing the


                                  -19-
cost on HQUS so the panel adopted Bangor's position.        It did not

say, as a compromise might, that each side should pay half the

cost.

             The panel then faced the second question whether HQUS

should now compensate Bangor for past costs it had voluntarily

borne since the start of the contract.       The Agreement was equally

silent on this issue; and the panel cited prudential considerations

in rejecting backward-looking compensation, deciding for HQUS on

the issue.    That the panel decides one issue on the merits for one

side and another on the merits for the other, giving reasons for

each, is hardly what the no compromise clause aimed to forbid.

             Bangor assumes that by some principle the forward-looking

solution invincibly entails a remedy that tries to make the past

conform to the future but this is mistaken.           In fact, courts,

usually having less freedom than we associate with arbitration,

regularly treat issues of retroactivity as distinct from rules

crafted to meet the future.       See, e.g., Johnson v. New Jersey, 384

U.S. 719, 726-32 (1966) (declining to apply the rule of Miranda v.

Arizona retroactively).

             Disputed Exhibits.    Bangor's final argument is that the

arbitrators committed "misconduct," justifying vacating the award

under section 10(a)(3) of the FAA, by considering in its decision

two documents (Attachments 1 and 2) among the three that the panel

attached to its written decision.          Two of these had not been


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submitted by the parties but were taken from filings that Maritimes

had submitted in public FERC filings.

            Attachment 1 contained budgetary figures for Maritimes'

provision of the Lateral, which revealed that over ninety percent

of the cost arose from the meter facility, and less than ten

percent arose from the pipeline itself.         Attachment 2 was an

excerpt from a general statement of Maritimes' policies, revealing

that Maritimes requires customers to pay for connecting pipelines

and   associated   facilities   (such   as   meters)   constructed   by

Maritimes.   Attachment 3 (submitted by both sides and plainly part

of the record), indicated that Bangor's bid included the cost for

the meter.

            Considering these documents together, the panel concluded

that Bangor's fixed charge to HQUS specified in the Agreement at

the outset already accounted for the meter, which formed the vast

majority of the cost of the Lateral.    Such a fact was unhelpful to

Bangor's overall attempt to now shift the Lateral's costs to HQUS;

but given that the agreed charge was all that HQUS had ever agreed

to pay for what Bangor appeared to have promised, showing that

Bangor had built in these costs to the monthly charge was mere

frosting.

            So even if we were to assume dubitante that consideration

of these two additional documents was "misconduct" under the FAA,

it could not have been prejudicial, a requirement for vacating an


                                 -21-
award under section 10(a)(3).    Hoteles Condado Beach, La Concha &

Convention Ctr. v. Union de Tronquistas Local 901, 763 F.2d 34, 40

(1st Cir. 1985).   Bangor says that it was unjustly deprived of the

opportunity to respond to the documents and the arbitrators'

assumptions but does not explain what it would have said if allowed

to do so.

            The judgment of the district court is affirmed. HQUS has

asked that we order Bangor to pay double HQUS' costs and attorneys'

fees for filing a frivolous appeal, Fed. R. App. P. 38; although we

find Bangor's appeal to fail on the merits, its positions are not

so weak as to be deemed frivolous, and HQUS' request for sanctions

is denied, although it is entitled to the usual costs of the

appeal.

            So ordered.




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