Harper Oil Company v. Federal Power Commission, 6316.

• Decision Date: 12 November 1960
• Docket Number: No. 6316.,6316.
• Citation: 284 F.2d 137
• Parties: HARPER OIL COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Tenth Circuit

284 F.2d 137 (1960)

HARPER OIL COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent.

No. 6316.

United States Court of Appeals Tenth Circuit.

November 12, 1960.

T. Murray Robinson, Oklahoma City, Okl., for petitioner.

Peter H. Schiff, Washington, D. C. (Willard W. Gatchell, Gen. Counsel, Howard E. Wahrenbrock, Sol., and Robert L. Russell, Asst. Gen. Counsel, Washington, D. C., on the brief), for Federal Power Commission.

C. H. Mullendore, Jr., Oklahoma City, Okl. (C. C. Mount and Charles V. Wheeler, Oklahoma City, Okl., on the brief), for intervenor.

Before HUXMAN, LEWIS and BREITENSTEIN, Circuit Judges.

HUXMAN, Circuit Judge.

Harper Oil Company¹ has appealed from an order of the Federal Power Commission denying it permission to abandon sales of natural gas to Cities Service Gas Company.² Appeal to this court is authorized under the provisions of Section 19 of the Natural Gas Act (15 U.S.C.A. § 717r).

Harper is an independent producer of natural gas in Oklahoma County, Oklahoma. In 1953, Harper, then Harper-Turner Oil Company, contracted to deliver to Cities Service merchantable natural gas at a pressure of 500 pounds per square inch for 6 cents per thousand cubic feet (M. c. f.). This contract was to expire January 1, 1958. Title to the gas leases involved was transferred to appellant from Harper-Turner in 1954, Harper assuming the Cities Service contract. Gas sold Cities Service by Harper is produced and delivered at three separate locations. Two of these deliveries are direct wellhead connections with Cities Service line. Harper does not desire to abandon these sales. The delivery which Harper seeks to terminate is that which emanates from its Edmond Gasoline Plant where operations were commenced late in 1956. There gas from Harper's gathering lines is compressed and dehydrated, the liquid hydrocarbons being removed, with roughly half of the residue compressed to 500 pounds per square inch and discharged into the Cities Service connecting line. The other half is further compressed for injection into Harper's oil reservoir in a sweeping process which forces to the surface additional liquid hydrocarbons.

In contemplation of the 1958 expiration of the Cities Service contract, Harper negotiated a contract with the Oklahoma Resources Development Company to sell the gas currently delivered to Cities Service from the Edmond plant at 11 cents per Mcf. This second contract calls for Harper to deliver the residue gas at only 370 pounds per square inch, the pressure at which it is normally discharged from the extraction process. This arrangement would allow Harper to employ elsewhere the power currently utilized to boost the gas pressure to the 500 pounds per square inch required to enter the Cities Service line.

Pursuant to this local contract, Harper applied to the Commission on February 6, 1958, for authority to abandon delivery to Cities Service of gas discharged from its Edmond gas plant. This application was under 7(b) of the Natural Gas Act (15 U.S.C.A. § 717f(b)) which allows discontinuance of service only if the available supply of natural gas is depleted or the present or future public convenience or necessity permit. In its application, Harper alleged that the present and future public convenience would be better served by allowing a cessation of its sales to Cities Service in that the gas would still be consumed by the public, but the power freed under the local contract could be used to recover currently wasted low pressure gas. Cities Service was allowed to interplead at the hearing on Harper's application.

The evidence adduced before the examiner was concerned primarily with two questions: (1) The validity of Harper's claim that the abandonment would result in considerable conservation of gas supplies which would otherwise be wasted. (2) Whether Cities Service actually has a need for gas supplied by Harper. The examiner found that Harper presently had sufficient unused power in its extraction plant to carry on the contemplated conservation procedures under the Cities Service obligation if it chose to apply it to that purpose. He also found that Cities Service had a true need for Harper's gas to make up deficiencies in that particular portion of the line during the winter months of peak consumption. The examiner therefore concluded that the abandonment sought by Harper would be primarily for its own economic benefit and not in the interest of public convenience and necessity. The commission adopted the Examiner's conclusions and denied Harper's application for authority to abandon its service to Cities Service. Harper's timely application for rehearing was denied and this appeal followed.

On appeal Harper raises two issues. (1) Can the Federal Power Commission compel an independent producer of gas to continue a sale to an interstate pipeline where the sale was commenced under a short-term contract that has since expired? (2) Was the Commission's order denying Harper authority to abandon delivery unsupported by substantial evidence on the record because of the failure of the Commission to give proper weight to the public interest in conserving natural resources and because the gas supply at issue is not necessary to the maintenance of Cities Service's obligations to the public?

In substance, appellant's first contention is that the Commission's jurisdiction over it terminated with the 1958 expiration of the Cities Service contract and therefore Harper was free to discontinue its sales to the transmission company at...