Northern Natural Gas Co. v. Federal Power Com'n

• Decision Date: 21 June 1968
• Docket Number: No. 21333.,21333.
• Parties: NORTHERN NATURAL GAS COMPANY and Northern Natural Gas Transportation Company, Petitioners, v. FEDERAL POWER COMMISSION, Respondent, Union Gas Company of Canada, Limited, et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

399 F.2d 953 (1968)

NORTHERN NATURAL GAS COMPANY and Northern Natural Gas Transportation Company, Petitioners, v. FEDERAL POWER COMMISSION, Respondent Union Gas Company of Canada, Limited, et al., Intervenors.

No. 21333.

United States Court of Appeals District of Columbia Circuit.

Argued March 31, 1968.

Decided June 21, 1968.

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Messrs. Charles A. Case, Jr., Washington, D. C., and George C. Kern, Jr., of the bar of the Court of Appeals of New York, pro hac vice, by special leave of court, New York City, with whom Messrs. Justin R. Wolf, David B. Ward, Washington, D. C., and F. Vinson Roach, Omaha, Neb., were on the brief, for petitioners.

Mr. William H. Arkin, Atty., Federal Power Commission, of the bar of the Court of Appeals of New York, pro hac vice, by special leave of court, with whom Messrs. Richard A. Solomon, Gen. Counsel, Peter H. Schiff, Sol., and Joseph J. Klovekorn, Atty., Federal Power Commission, were on the brief, for respondent.

Mr. Charles V. Shannon, Washington, D. C., with whom Mr. Louis Flax, Washington, D. C., was on the brief for intervenors Michigan Wisconsin Pipe Line Co. and Michigan Consolidated Gas Co., argued for all intervenors.

Messrs. Bradford Ross and James D. McKinney, Jr., Washington, D. C., were on the brief for intervenors Great Lakes Gas Transmission Co. and Trans-Canada Pipe Lines Limited.

Mr. Jerome Maslowski, Lansing, Mich., was on the brief for intervenor Michigan Public Service Commission.

Mr. William E. Torkelson, Madison, Wis., was on the brief for intervenor Public Service Commission of Wisconsin.

Mr. David R. Kaplan, Detroit, Mich., was on the brief for intervenor County of Wayne, Michigan.

Messrs. Robert H. Gorske, Milwaukee, Wis., and George P. Lamb, Washington, D. C., were on the brief for intervenors Wisconsin Natural Gas Co. and Wisconsin Michigan Power Co.

Mr. Seymour Tabin, Chicago, Ill., was on the brief for intervenor Wisconsin Public Service Corp.

Messrs. W. C. Braden, Jr., Houston, Tex., Jack Werner and Dale A. Wright, Washington, D. C., were on the brief for intervenor Midwestern Gas Transmission Co.

Messrs. William J. Grove and Philip R. Ehrenkranz, Washington, D. C., were on the brief for intervenor The Consumers' Gas Co.

Mr. Jerome Ackerman, Washington, D. C., was on the brief for intervenors Northern and Central Gas Co. Limited and Union Gas Co. of Canada, Limited.

Mr. George P. Lamb, Washington, D. C., was on the brief for intervenor Wisconsin Fuel & Light Co.

Mr. Vernon A. Swanson, Milwaukee, Wis., was on the brief for intervenor Wisconsin Gas Co.

Messrs. William J. Lebuhn and Raymond N. Shibley, Washington, D. C., entered appearances for intervenor Panhandle Eastern Pipe Line Co.

Mr. George P. Lamb, Washington, D. C., entered an appearance for intervenor Madison Gas and Electric Co.

Mr. Jerome D. Truhn, Bloomington, Minn., entered an appearance for intervenor State of Minnesota.

Before BASTIAN, Senior Circuit Judge, and WRIGHT and ROBINSON, Circuit Judges.

WRIGHT, Circuit Judge:

This is a petition by Northern Natural Gas Company (Northern) and its subsidiary, Northern Natural Gas Transportation Company (Northern Transportation), to review an order of the Federal Power Commission. The challenged order, issued June 20, 1967, authorized the Great Lakes Gas Transmission Company, a Delaware corporation owned jointly by Trans-Canada Pipe Lines Limited and American Natural Gas Company, to construct and operate a 989-mile, 36-inch, natural gas pipeline extending from the Canadian border in northern Minnesota through northern Wisconsin and the Upper Peninsula of Michigan, across the straits of Mackinac, and through the lower Michigan peninsula to the Canadian border at Sarnia, Ontario.¹ By the fifth year of operation, the pipeline is expected to be delivering 734,000 Mcf of gas per day, with approximately 57,000 Mcf per day being purchased by Michigan Consolidated Gas Company² and the remainder going to Trans-Canada in eastern Canada.

Simultaneously with the approval of the Great Lakes proposal, the Commission rejected a competitive application by Northern and Northern Transportation which proposed that the Canadian gas imported into northern Minnesota be utilized by Northern in its northern Minnesota markets and that Northern Transportation fulfill the needs of Michigan Consolidated and Trans-Canada by transporting domestic gas, originating in southwestern United States, from Northern's terminal at Ogden, Iowa, through Michigan to the Canadian border at Sarnia, Ontario. To accomplish this exchange-displacement, Northern Transportation would have constructed a 285-mile, 36-inch pipeline from Emerson, Manitoba, to Sandstone, Minnesota, and a 731-mile, 36-inch line from Ogden, Iowa, to Sarnia, Ontario.

Both proposals contemplated exportation of gas from northern Michigan to Sault Sainte Marie (in each case this would entail construction of a short lateral line) and additional importation of 116,000 Mcf per day of Canadian gas by Midwestern Gas Transmission Company and sale of this gas to Michigan Wisconsin Pipe Line Company. Thus the essential difference between the proposals was that Great Lakes would utilize an entirely new pipeline to transport Canadian gas from western Canada to eastern Canada whereas Northern and Northern Transportation would utilize both existing and new facilities to effect an exchange of Canadian gas for United States production.

The principal question raised by this petition is whether the Great Lakes joint venture substantially lessened actual or potential competition and, if so, whether the Commission adequately took account of this factor. Although the Commission is not bound by the dictates of the antitrust laws, it is clear that antitrust concepts are intimately involved in a determination of what action is in the public interest, and therefore the Commission is obliged to weigh antitrust policy. People of State of California v. F. P. C., 369 U.S. 482, 484-485, 82 S.Ct. 901, 8 L.Ed.2d 54 (1962); United States v. Borden Co., 308 U.S. 188, 198-199, 60 S.Ct. 182, 84 L.Ed.181 (1939); Lynchburg Gas Co. v. F. P. C., 119 U.S.App. D.C. 23, 27, 30-31, 336 F.2d 942, 946, 949-950 (1964); City of Pittsburgh v. F. P. C., 99 U.S.App.D.C. 113, 126, 237 F.2d 741, 754 (1956); Pennsylvania Water & Power Co. v. F. P. C., 89 U.S. App.D.C. 235, 240, 193 F.2d 230, 235 (1951), affirmed, 343 U.S. 414, 72 S.Ct. 843, 96 L.Ed. 1042 (1952).³ This much is conceded by the Commission and the intervenors. We think that implementation of the Commission's order will have serious anticompetitive effects and that, in issuing it, the Commission gave inadequate consideration to the antitrust policy of the United States. We therefore remand the case to the Commission for further consideration.

I

Petitioners have challenged the Commission's handling of the antitrust issues on three basic grounds: (1) the refusal by Trans-Canada either to deliver Canadian gas to petitioners or to purchase domestic gas from petitioners, the refusal by Michigan Consolidated to purchase gas from petitioners, and Midwestern's refusal to participate in petitioners' project constituted an illegal group boycott which contaminated the comparative proceeding conducted by the Commission and prejudiced petitioners' application; (2) the Commission's finding that the potential benefits from competition between Great Lakes and Northern in the taconite region of northern Minnesota outweighed the possible benefits afforded by the entry of Northern Transportation into the lower Great Lakes region was not supported by substantial evidence; and (3) the joint venture resulted in an illegal division of the consumer market between Trans-Canada and American Natural, substantially lessened competition between United States distributors for the supply of Canadian gas, and illegally eliminated competition between independent applicants (Trans-Canada versus American Natural and Midwestern) in a Commission comparative proceeding.

It is the latter ground which is most troubling. The group boycott, though undesirable, did not overtly affect this proceeding because the Commission weighed petitioners' proposal as if the threatened boycott did not exist. As for the relative benefits of Great Lakes competition in the taconite region and Northern Transportation competition in the lower Great Lakes region, we believe there is sufficient evidence to support the finding in favor of competition in the taconite region. Thus the principal question to which we address ourselves is whether there is sufficient evidence to support the Commission's conclusion that "from the standpoint of enhanced competition, we do not think it very significant whether or not the American Natural system participates in the Great Lakes proposal."

A. The Relevance of Antitrust Law to Regulatory Agencies.

Even though the Commission concedes that it must consider the antitrust implications of its action, in order to determine the required extent of that consideration we think it helpful to examine the overall relationship between antitrust law and regulatory agencies. Despite a continuing debate,⁴ it appears that the basic goal of direct governmental regulation through administrative bodies and the goal of indirect governmental regulation in the form of antitrust law is the same — to achieve the most efficient allocation of resources possible.⁵ For instance, whether a regulatory body is dictating the selling price or that price is determined by a market free from unreasonable restraints of trade, the desired result is to establish a selling price which covers costs plus a reasonable rate of return on capital, thereby avoiding monopoly profits.⁶ Another example of their common purpose is that both types of regulation seek to establish an atmosphere which will stimulate innovations for better service at a lower cost. This analysis suggests that the two forms of...