City of Hastings, Nebraska v. Federal Power Com'n

Citation221 F.2d 31
Decision Date16 December 1954
Docket NumberNo. 11824.,11824.
PartiesCITY OF HASTINGS, NEBRASKA, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Kansas-Nebraska Natural Gas Company, Inc., Intervenor.
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

Messrs. Albert P. Madgett, Hastings, Neb., and Lloyd J. Marti, Lincoln, Neb., with whom Mr. Sherman E. Burt, Washington, D. C., was on the brief, for petitioner.

Mr. William J. Grove, Asst. Gen. Counsel, Federal Power Commission, Washington, D. C., with whom Messrs. Willard W. Gatchell, Gen. Counsel, Federal Power Commission, Reuben Goldberg and Abraham R. Spalter, Attys., Federal Power Commission, Washington, D. C., were on the brief, for respondent.

Mr. Oscar Cox, Washington, D. C., with whom Messrs. Ezekiel G. Stoddard and Donald F. Turner, Washington, D. C., were on the brief, for intervenor.

Before WILBUR K. MILLER, FAHY and DANAHER, Circuit Judges.

Writ of Certiorari Denied May 9, 1955. See 75 S.Ct. 660.

DANAHER, Circuit Judge.

The City of Hastings, Nebraska (hereinafter called City) seeks review of an "Opinion and Order" of the Federal Power Commission (hereinafter called Commission) dismissing the City's complaint against Kansas-Nebraska Natural Gas Company, Inc. (hereinafter called Kansas-Nebraska). The Commission decided it lacked jurisdiction after determining that the sale of gas used in the City's power plant was a transaction separate from and not part of a "sale for resale" of gas purchased under a town-border resale rate schedule which contained an exclusionary clause reading in part: "This rate schedule * * * shall not apply to gas used or consumed by the City for industrial purposes." In its Opinion and Order the Commission found that the natural gas consumed in the City's power plant was a direct sale for the City's own use, and hence not within Section 1(b) of the Natural Gas Act1 which provides in part: "The provisions of this Act shall apply * * * to the sale in interstate commerce of natural gas for resale for ultimate public consumption for domestic, commercial, industrial or any other use, * * * but shall not apply to any other * * * sale of natural gas * * *." (Emphasis supplied.)

Kansas-Nebraska is a natural-gas company within the meaning of Section 2(6) of the Natural Gas Act.2 Its sales for resale come squarely within the Commission's regulatory authority but excluded therefrom are direct sales, even by a natural-gas company, which are primary sales for use or consumption by the purchaser. "By the statute, Commission jurisdiction extends to `sales for resale,' `but not to any other sale' * * * The problem, then, * * * is to decide just what * * * transaction falls within this category of `sale for resale' * * *." United States v. Public Utilities Commission of California, 1953, 345 U.S. 295, 317, 73 S.Ct. 706, 719, 97 L.Ed. 1020. A few years earlier the Court had considered the nature of the "problem" and then said: "The omission of any reference to other sales, that is, to direct sales for consumptive use, in the affirmative declaration of coverage was not inadvertent. It was deliberate. For Congress made sure its intent could not be mistaken by adding the explicit prohibition that the Act `shall not apply to any other * * * sale * * *.' Those words plainly mean that the Act shall not apply to any sales other than sales `for resale for ultimate public consumption for domestic, commercial, industrial, or any other use.' Direct sales for consumptive use of whatever sort were excluded.

"The line of the statute was thus clear and complete. It cut sharply and cleanly between sales for resale and direct sales for consumptive use. No exceptions were made in either category for particular uses, quantities, or otherwise. And the line drawn was that one at which the decisions had arrived in distributing regulatory power before the Act was passed." Panhandle Eastern Pipe Line Co. v. Public Service Commission of Indiana, 1947, 332 U.S. 507, 516-517, 68 S.Ct. 190, 195, 92 L.Ed. 128. This was "unusual legislative precision," Id., 332 U.S. at page 517, 68 S.Ct. at page 195, in an Act "drawn with meticulous regard for the continued exercise of state power * * *." Id., 332 U.S. at pages 517-518, 68 S.Ct. at page 195. (Emphasis supplied.) Thus spoke the Court where a natural-gas company made direct sales for industrial consumption which were held subject to state — not federal regulation. "Three things and three only Congress drew within its own regulatory power, delegated by the Act to its agent, the Federal Power Commission." Id., 332 U.S. at page 516, 68 S. Ct. at page 195. (Emphasis supplied.) There would seem to remain no doubt that "Direct sales for consumptive use were designedly left to state regulation." Panhandle Eastern Pipe Line Co. v. Michigan Public Service Commission, 1951, 341 U.S. 329, 334, 71 S.Ct. 777, 780, 95 L.Ed. 993.

Against the background of interpretation by the courts of the sweep of Section 1(b) and the criteria described, the Commission concluded "that the gas consumed by the City at its electric generating plant is not the subject of a sale for resale but rather of a separate sale for consumptive use * * *." Hence it found itself "directly forbidden by Section 1(b) to fix the rate for such sale." It failed "to find any basis for the charge of discrimination" on which ground the City had sought elimination of the exclusionary clause complained of. It took into account the fact that the customer here is a municipality, but "having determined that this is a direct sale for consumption use, we are not permitted by the Act to alter the result because of that fact."3

In reviewing the order of the Commission dismissing the City's complaint against Kansas-Nebraska, and the findings and conclusions assailed by the City, we must regard Section 19(b) of the Act, 15 U.S.C.A. § 717r(b), which provides that "The finding of the Commission as to the facts, if supported by substantial evidence, shall be conclusive." Our role in this particular was well defined in Cities Service Gas Co. v. Federal Power Comm., 10 Cir., 1946, 155 F.2d 694, 698, certiorari denied, 1946, 329 U.S. 773, 67 S.Ct. 191, 91 L.Ed. 664: "It is of first importance to take account of the respective provinces assigned to the Commission and the courts on review in order that we may perform the functions assigned to us without trespass upon the administrative prerogatives." See also State Corp. Comm. of Kan. v. Federal Power Commission, 8 Cir., 1953, 206 F. 2d 690, 698, certiorari denied, 1954, 346 U.S. 922, 74 S.Ct. 307.

The Commission's opinion notes "There is no serious dispute as to the relevant facts." We may comment as we proceed.

In April 1942 the City operated its own electric power plant which then and previously used coal and oil as fuel. If it then sought to transfer to the use of natural gas as fuel, a tap line from Kansas-Nebraska's interstate line to the power plant would have served the power plant fuel needs, and the State of Nebraska would have had "full power under the act and the decisions to regulate such direct sales of natural gas for consumption within its borders." Colorado Interstate Gas Co. v. Federal Power Commission, 3 Cir., 1950, 185 F.2d 357, 361. See also, Panhandle Eastern Pipe Line Co. v. Michigan Public Service Commission, 1951, 341 U.S. 329, 334, 71 S.Ct. 777, 95 L.Ed. 993.

In April 1942 the local gas distribution system was privately owned and operated by one Grosser, doing business as the Hastings Gas Company. The latter as of September 27, 1941 had entered into a town-border contract with Kansas-Nebraska under the terms of which Kansas-Nebraska agreed for a term of ten years to sell and deliver to the Hastings Gas Company and the buyer agreed to purchase and receive "natural gas for the entire requirements (except as hereinafter otherwise provided) of gas of Buyer and of the customers supplied by Buyer in the City of Hastings * * *." The contract provided separate rates for differing classes of sales for resale and specifically set forth that: "Gas used or consumed by buyer for industrial use shall not be covered by the foregoing schedule, but shall be covered by separate agreement." This town-border contract was assigned to the City when it purchased the distribution system. On April 13, 1942, Kansas-Nebraska began selling gas to the City, and such sale for resale was clearly within the Commission's jurisdiction.

Instead of running a separate tap line to its power plant to deliver the gas it was to consume, the City and Kansas-Nebraska agreed that gas, whether for resale or for use in the production of power, was to be delivered and title was to pass at the Kansas-Nebraska town-border station. But the City executed a separate contract for the purchase of power plant gas. The parties further agreed that the City would provide a metering and regulating station site at the power plant where all power plant gas was separately measured, as used. Kansas-Nebraska installed and maintained the metering station although it did not construct a pipeline into the plant. Thereafter, the 1942 power plant contract was superseded by a separate plant contract dated July 1, 1945, which in turn was superseded by a separate plant contract dated June 18, 1948. Under each of these plant contracts, the City since April 1942 has been billed monthly and has paid for plant gas separately from that acquired and resold in the City's distribution system.4

In 1947 following a survey looking to a proposed revision of the rate structure of Kansas-Nebraska, the latter tendered to the Commission for filing its Rate Schedule G-1 providing a new rate schedule covering the sale of natural gas for resale to all of its town-border customers, including the City of Hastings. Rate Schedule G-1 provided that "This rate schedule shall apply separately to all natural gas delivered by the...

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