In re Hugoton-Anadarko Area Rate Case, 71-1036.

• Decision Date: 31 July 1972
• Docket Number: No. 71-1036.,71-1036.
• Citation: 466 F.2d 974
• Parties: In re HUGOTON-ANADARKO AREA RATE CASE. The PEOPLE OF the STATE OF CALIFORNIA, and the Public Utilities Commission of the State of California, Petitioners, v. FEDERAL POWER COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

466 F.2d 974 (1972)

In re HUGOTON-ANADARKO AREA RATE CASE The PEOPLE OF the STATE OF CALIFORNIA, and the Public Utilities Commission of the State of California, Petitioners, v. FEDERAL POWER COMMISSION, Respondent.

No. 71-1036.

United States Court of Appeals, Ninth Circuit.

July 31, 1972.

COPYRIGHT MATERIAL OMITTED

Lawrence Q. Garcia (argued), Mary Moran Pajalich, Rufus G. Thayer, Attys., Public Utilities Commission, San Francisco, Cal., for petitioners.

Charles F. Wheatley, Jr. (argued), William T. Miller, Grace Powers Monaco, Washington, D. C., Mark L. Goldstein (argued), Bernard Rane, Mathias M. Mattern, Asst. Corp. Counsel for Public Utilities, Richard L. Curry, Corp. Counsel, Chicago, Ill., Max P. Zall, City Atty., Denver, Colo., for intervenors American Public Gas Assn., City of Chicago, Ill., and City and County of Denver, Colo.

Leo R. Forquer, Sol. (argued), William P. Diener, Asst. Sol., J. Richard Tiano, First Asst. Sol., Gordon Gooch, Gen. Counsel, Federal Power Comm., Washington, D. C., for respondent.

Carroll L. Gilliam (argued), of Grove, Jaskiewicz & Gilliam, Washington, D. C., George J. Meiburger (argued), of Gallagher, Connor & Boland, Washington, D. C., Thomas G. Johnson (argued), Houston, Tex., Tom Burton, Houston, Tex., George C. Mastor, Minneapolis, Minn., Lloyd J. Marti, of Marti, O'Gara, Dalton & Bruckner, Lincoln, Neb., John F. Gaston, Joe A. Greenlief, Cedar Rapids, Iowa, Charles A. Crampton, Davenport, Iowa, Mark W. Putney, Des Moines, Iowa, Jack F. Kinney, Ira E. Delk, Sioux City, Iowa, C. S. Brubaker, Omaha, Neb., Arthur R. Renquist, Minneapolis, Minn., James Van Vliet, Jr., Chicago, Ill., J. P. Hammond, William H. Emerson, Tulsa, Okl., for intervenors Mobil Oil & Northern Producing Pipeline Co., Shell Oil Co., Continental Oil Co., Northern Distributor Group and Amoco Production Co.

Before HAMLEY, KOELSCH and DUNIWAY, Circuit Judges.

HAMLEY, Circuit Judge:

The People of the State of California and The Public Utilities Commission of the State of California (petitioners), proceeding under section 19(b) of the Natural Gas Act (Act), 15 U.S.C. § 717r, filed a joint petition in this court to review Opinion No. 586 and accompanying order of the Federal Power Commission (Commission). The opinion and order are reported at 44 F.P.C. 761 (1970). The American Public Gas Association, City of Chicago, Illinois, and City and County of Denver, Colorado, have jointly intervened here in favor of petitioners' petition and are collectively referred to herein as the consumer-intervenors.

The Commission's Opinion No. 586, and accompanying order, issued on September 18, 1970, determines rates for natural gas produced in the Hugoton-Anadarko Area.¹ Numerous natural gas producing, transmission and distribution companies, some individuals and a trust have intervened here in favor of respondent Commission's position.²

By its order of November 27, 1963, 30 F.P.C. 1354, the Commission instituted a proceeding, pursuant to sections 4, 5, 10, 14, 15 and 16 of the Act (15 U.S.C. §§ 717c, 717d, 717i, 717m, 717n and 717o), to determine the just and reasonable rate or rates for the sales of natural gas subject to the jurisdiction of the Commission, produced in the Hugoton-Anadarko Area (Docket No. AR64-1), as well as for the Texas Gulf Coast Area (Docket No. AR64-2).³ The Commission named several hundred respondents in the Hugoton-Anadarko portion of the joint proceeding. Joint hearings were held in these area rate proceedings.⁴ The record in Docket No. AR64-1 (Hugoton-Anadarko) comprises one hundred and eighty-one joint and thirty-seven separate hearing volumes containing 28,650 pages; one hundred and thirty-four joint and seventy-three separate exhibits; and nineteen joint exhibits incorporated by reference from other area rate proceedings. The hearings commenced September 14, 1965 and concluded January 27, 1967.

On May 24, 1968, certain parties filed a Petition for Promulgation of Settlement Proposal. Responses were received from numerous parties; but the Commission took no action with respect to this settlement proposal. On September 16, 1968, FPC Examiner Max L. Kane issued his two-hundred-and-fifty-eight-page decision proposing rates in the Hugoton-Anadarko Area. This initial decision divides the rate structure as between the ancient, shallow, low-pressure Hugoton-Panhandle Field and the socalled Other Fields, which are newer, deeper and of higher pressure than the Hugoton-Panhandle Field. The initial decision established one set of prices for "new gas" from all fields and "old gas" from the Other Fields, and another set of prices for "old gas" from the Hugoton-Panhandle Field.⁵

Following the submission of briefs on exceptions, the Commission heard oral argument on October 31, 1969, in the Hugoton Anadarko proceeding as well as in the Texas Gulf Coast Area rate proceeding referred to above. On January 29, 1970, a new settlement proposal was filed by twenty-seven independent producers. This was done pursuant to sections 1.7 and 1.18 of the Commission's Rules of Practice and Procedure, 18 C.F.R. §§ 1.7 and 1.18. The Commission gave notice of this filing and advised the parties that comments or objections relating thereto might be filed with the Commission on or before March 2, 1970. A number of responses were received by the Commission concerning this new settlement proposal, including responses by petitioners and the consumer-intervenors before this court.⁶

On September 18, 1970, the Commission issued its Opinion No. 586, now under review. In this opinion the Commission adopted the second settlement proposal, announcing that it was doing so after considering the proposal upon its merits.⁷

We note the following points of comparison between the Examiner's initial decision and the settlement proposal approved by the Commission:

1. The proposal approved by the Commission generally permits higher maximum rates for the sale of gas than did the Examiner\'s decision.

2. The Examiner established one set of maximum rates for new gas from all fields in the Hugoton-Anadarko Area and for old gas from the so-called Other Fields, and a second set of rates for old gas from the Hugoton-Panhandle Field. By contrast, the Commission-approved proposal provides for three sets of base area rates, one for new gas from all fields in the area, a second for old gas from the Other Fields, and a third for old gas from the Hugoton-Panhandle Field.

3. As observed in footnote 5 herein, the Examiner had used January 1, 1961 as the date for distinguishing between new and old gas. The Commission, however, chose November 1, 1969 as its dividing date. Because new gas rates for the Hugoton-Panhandle Field, under both the Examiner\'s decision and the Commission order, are considerably higher than old gas rates for that field, the Commission\'s choice of the later date has the interesting effect of establishing lower rates than those set by the Examiner for Hugoton-Panhandle Field gas sold under contracts executed between 1961 and November 1, 1969.

4. The Examiner\'s decision had required all casinghead gas⁸ from the Hugoton Panhandle Field, no matter what the vintage, to be sold at or below the maximum old gas rate for that field. The settlement proposal approved by the Commission, on the other hand, permits casinghead gas from the Hugoton-Panhandle Field to be sold at the higher old gas rate for the Other Fields. Further the Commission order provides for the possibility that "new" casinghead gas prices may in the future be raised to the same levels permitted for gas-well gas of comparable vintage.

5. The Commission-approved proposal permits, on or after July 1, 1972, an automatic one cent per Mcf increase in all basic area rates; following this increase, the Commission order imposes a five-year moratorium on further increases. The Examiner, by contrast, had permitted no automatic increases, but had prescribed only a two and one-half year moratorium, after which producers could file for further increases.

6. Both the initial decision and the settlement proposal permit additional charges for gas which can be delivered only after substantial off-lease gathering. For Other Field gas of all vintages, and for pre-1961 gas from the Hugoton-Panhandle Field, these "gathering charges" are almost identical as between the Examiner\'s decision and the Commission-approved proposal.⁹ But for Hugoton-Panhandle Field gas in the 1961-1972 period, the proposal approved by the Commission permits gathering charges which are higher by nine-tenths of a cent to one cent per Mcf than the charges permitted by the Examiner; and the Commission-approved proposal permits a further one-half cent per Mcf gathering charge for Hugoton-Panhandle Field gas after July 1, 1972.

7. The settlement proposal, as approved by the Commission, permits substantial relaxation of the quality standards for natural gas set by the Examiner\'s decision. Under the Commission order, most quality standards would be left open to negotiation by the contracting parties.

8. The Examiner\'s decision would have required producers to make full refunds of all amounts previously collected in excess of the rates determined to be just and reasonable by the decision. However, the Commission order approving the settlement proposal requires no refunds of excess amounts collected on sales made prior to 1961, requires refunds on seventy percent of such excess amounts for 1961 and 1962, and requires full refunds of such amounts on sales for 1963 and thereafter.

There are other points of difference between the initial decision and the Commission-approved settlement proposal, but they are minor in nature and have not been treated as significant by any of the parties in this court.

After the Commission had adopted the settlement proposal and denied petitions for rehearing, petitioners filed for review in this court.

Petitioners and the consumer-intervenors first argue that the Commission opinion and...