Continental Oil Company v. Federal Power Commission, 23188
| Decision Date | 24 May 1967 |
| Docket Number | 23325,23455,21575,23408,21286,23189,23454,23333,No. 23188,21856.,23188 |
| Citation | 378 F.2d 510 |
| Parties | CONTINENTAL OIL COMPANY, Austral Oil Company, Incorporated, Bright and Schiff, Blanco Oil Company and Killian and Hurd, Shell Oil Company, Petitioners, v. FEDERAL POWER COMMISSION, Respondent, The Brooklyn Union Gas Company, Long Island Lighting Company, Philadelphia Gas Works, Division of the United Gas Improvement Company, Intervenors. The BROOKLYN UNION GAS COMPANY, Long Island Lighting Company, Philadelphia Gas Works, Division of the United Gas Improvement Company, Public Service Commission of the State of New York, Petitioners, v. FEDERAL POWER COMMISSION, Respondent, Texaco, Inc., Gulf Oil Corporation, Inc., Humble Oil Company, Inc., Austral Oil Company, Inc., McCurdy and McCurdy, Sun Oil Company, Pan American Petroleum Corp., Jonnell Gas, Inc., Bright and Schiff, Shell Oil Company, Intervenors. Margaret Hunt HILL, Trustee for Hassie Hunt Trust, H. L. Hunt, Hunt Oil Company, Lamar Hunt, Trustee for William Herbert Hunt Trust Estate, A. G. Hill, Trustee for Lamar Hunt Trust Estate, George W. Graham, Inc., Placid Oil Company, Petitioners, v. FEDERAL POWER COMMISSION, Respondent. HUNT OIL COMPANY, Lamar Hunt, Trustee for William Herbert Hunt Trust Estate, A. G. Hill, Trustee for Lamar Hunt Trust Estate, Placid Oil Company, Petitioners, v. FEDERAL POWER COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Fifth Circuit |
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COPYRIGHT MATERIAL OMITTED No. 23188:
Thomas H. Burton, Joseph C. Johnson, Bruce R. Merrill, Houston, Tex., Francis H. Caskin, Washington, D. C., for petitioners.
W. H. Drushel, Jr., J. Evans Attwell, Houston, Tex., for petitioners.
George B. Mickum, III, Washington, D. C., for petitioners.
Thomas G. Johnson, New York City, for petitioners.
Edwin F. Russell, Harry G. Hill, Jr., Barbara M. Suchow, Brooklyn, N. Y., William T. Coleman, Jr., Robert W. Maris, Philadelphia, Pa., Edward M. Barrett, Bertram D. Moll, Mineola, N. Y., Morton L. Simons, Washington, D. C., for petitioners.
Kent H. Brown, Albany, N. Y., Barbara M. Suchow, Brooklyn, N. Y., for petitioners.
Nos. 21286 and 21575:
Richard F. Generelly, Washington, D. C., Thomas G. Crouch, Robert W. Henderson, Paul W. Hicks, Dallas, Tex., for petitioners.
Paul W. Hicks, Thomas G. Crouch, Dallas, Tex., for petitioners.
Howard E. Wahrenbrock, Sol., FPC, Richard A. Solomon, Gen. Counsel, FPC, Paul A. Sweeney, Atty., for FPC in Nos. 21286, 21575 and 21856.
Robert A. Jablon, Atty., for FPC in Nos. 23188, 23189, 23325, 23333, 23408, 23454 and 23455.
Nos. 23188, 23189, 23333, and 23408:
Edwin F. Russell, Harry G. Hill, Jr., Barbara M. Suchow, Brooklyn, N. Y., William T. Coleman, Jr., Robert W. Maris, Philadelphia, Pa., Edward M. Barrett, Bertram D. Moll, Mineola, N. Y., Morton L. Simons, Washington, D. C., Martin N. Erck, Houston, Tex., for intervenors.
Nos. 23454 and 23455:
W. H. Drushel, Jr., J. Evans Attwell, Houston, Tex., Robert B. Payne, Thomas G. Crouch, Dallas, Tex., Richard F. Generelly, Robert E. May, Washington, D. C., Phillip D. Endom, Philadelphia, Pa., Philip R. Ehrenkranz, Carroll L. Gilliam, Washington, D. C., J. P. Hammond, Clifford O. Stone, Jr., Tulsa, Okl., Dean J. Capp, Houston, Tex., Warren M. Sparks, Donald R. Arnett, Tulsa, Okl., Carl Illig, Houston, Tex., Jesse H. Foster, Houston, Tex., James K. Schooler, Houston, Tex., William R. Slye, Houston, Tex., Leo J. Hoffman, Dallas, Tex., for intervenors.
Oliver Stone, New York City, for intervenor only in No. 23454.
Thomas G. Johnson, New York City, for intervenor only in No. 23454.
Before BROWN, BELL and DYER, Circuit Judges.
Three groups of cases raise in a variety of ways the validity of the Federal Power Commission's "in-line" price pronouncement, its statement of general policy, moratorium ceilings, and refund requirements.
In the first group the producer petitioners1 pursuant to § 19(b) of the Natural Gas Act,2 challenge an order of the FPC of September 30, 1965, in a consolidated proceeding entitled Turnbull & Zock Drilling Co. (operator) et al., Opinion No. 478, granting permanent certificates of public convenience and necessity under § 7(c) and (e) of the Act to sixty seven producers to undertake new sales of natural gas from Texas Railroad Commission District No. 43 to interstate pipelines contracted between 1956 and 1964.
The producers had proposed initial prices for their sales ranging from 14.5¢ to 20.045¢ per Mcf.4 The FPC applying its previously announced in-line price schedule issued its permanent certificates conditioning them so that the initial price for the sales contracted prior to September 28, 1960, should not exceed 15¢, and for those after that date 16¢. A temporary restriction (moratorium) was placed on the filing of increased rates above 18¢ until the issuance of a decision in the Area Rate Proceeding,5 covering District 4, or January 1, 1968, whichever is earlier.
The producer-petitioners6 variously object that the initial prices are too low, that exceptions from generally prescribed in-line initial price should have been allowed for some sales, and that the moratorium on increases over 18¢ was erroneously imposed. The second group, eastern seaboard distributor-petitioners7 object principally that the 16¢ initial price for contracts executed after September 28, 1960, was too high. They, as well as some of the producer-petitioners also object to the action of the Commission in deferring the question of whether or not refunds of amounts collected by the producer-petitioners in excess of the in-line prices should be required.
The Distributors8 intervened in partial support of the Commission's order in some of the Producers' cases.9 Producer-petitioner Austral Oil Co., Inc.10 intervened in partial support of the Commission's order in the Distributor cases.11
The third group comprises the three Hunt petitioners.12
In 21286 petitioner13 had negotiated gas purchase contracts in 1959 with interstate pipeline companies for sales for a twenty year period from reserves in Texas Railroad Commission Districts 2, 3 and 4 at an initial contract price of 20¢ per Mcf. By order of December 9, 1963, Opinion 412, the FPC issued permanent certificates conditioned so that the initial price should not exceed 15¢ for sales in Districts 2 and 4 and 16¢ in District 3; and that petitioners refund with 7% interest the difference between the contract rates and the initial prices determined by the Commission paid by the pipeline purchaser subsequent to November 2, 1961.
In No. 2157514 by order of February 24, 1964, opinion 412A granting permanent certificates, the FPC proscribed the filing of any price increase in excess of 19¢ in District 3 and in excess of 18¢ in Districts 2 and 4 until a final decision was issued by the Commission in the Area Rate Proceeding covering these districts, or until January 1, 1968, whichever is earlier.
In 21856 the producer-petitioners15 whose sales were in Districts 2 and 4 filed notices of change,16 reducing the price from 18¢ (which they were collecting under the temporary certificates) to 15¢ (the reduced price under Opinion 412) with an immediate increase to 18¢ (the moratorium level established in Opinion 412A). Similar action was taken as to sales in District 3. The 20¢ contract price was reduced to 16¢, the "in-line" price, and immediately increased to 19¢, the price moratorium level.
The FPC rejected the attempted change for Districts 2 and 4 and accepted for filing the change for District 3, then suspended it. The latter change ultimately was permitted to go into effect subject to refund.
The Hunt petitioners17 assert that the in-line prices are too low, that they were denied administrative due process, that 7% interest ordered to be paid on refunds is exorbitant, that the price moratorium was unreasonable, and that the price increase was improperly rejected.
All of the causes were set for oral argument at the same time because, although there are several peripheral questions involved, there is an identity of principal issues. The causes are likewise treated here.
"In-Line" in § 7 Applications
The nature and scope of the FPC's duty to review producer price proposals before permitting natural gas to enter the interstate market has been so thoroughly litigated in the past few years that it might be thought that the picture to be drawn from the decided cases could be painted with a light brush. Unfortunately this is not so. Not the least of the problems being the continuous flow of new opinions from our sister courts, five of which have come out since submission of this case, and requiring a choice among several conflicting holdings.18
When in 1954 it was held in Phillips I19 that the FPC had the statutory responsibility for regulating interstate sales by natural gas producers, the FPC was faced with two major problems. The first was to determine the just and reasonable rates under Sections 4 and 5 of the Natural Gas Act20 for producer sales in interstate commerce. The second was to develop a standard which would permit new sales to be made under pricing arrangements that would protect all interests pending determination of just and reasonable rates.
The Supreme Court made clear in Catco21 that in cases under § 7 of the Act,22 it is the responsibility of the FPC to make certain that the consumer is protected against excess charges between the time the gas first enters the interstate market and the time — many years later — that a rate investigation is concluded and a just and reasonable rate is fixed by final order. This is accomplished by the imposition of a rate condition in the grant of an initial certificate, either temporary or permanent, whenever an initial price is not in keeping with the public interest because it is "out of line".23
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