Ashland Oil & Refining Co. v. FEDERAL POWER COM'N

• Decision Date: 15 January 1970
• Docket Number: No. 19260.,19260.
• Citation: 421 F.2d 17
• Parties: ASHLAND OIL & REFINING COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Sixth Circuit

421 F.2d 17 (1970)

ASHLAND OIL & REFINING COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent.

No. 19260.

United States Court of Appeals Sixth Circuit.

January 15, 1970.

B. J. Bradshaw, Houston, Tex., for petitioner; Alan R. Vogeler, Cincinnati, Ohio, Richard L. McGraw, Jay W. Elston, Houston, Tex., on brief; Kyte, Conlan, Wulsin & Vogeler, Cincinnati, Ohio, Fulbright, Crooker, Freeman, Bates & Jaworski, Houston, Tex., of counsel.

David F. Stover, Atty., F. P. C., Washington, D. C., for respondent; Richard A. Solomon, Gen. Counsel, Peter H. Schiff, Solicitor, Leo E. Forquer, Asst. Gen. Counsel, F. P. C., Washington, D. C., on brief.

Kenneth Heady, Bartlesville, Okl., for intervenor; Lloyd G. Minter, John R. Rebman, Bartlesville, Okl., Augustus Beall, III, Cincinnati, Ohio, on brief; Hoover, Beall & Eichel, Cincinnati, Ohio, of counsel.

Before PHILLIPS, Chief Judge, and CELEBREZZE and McCREE, Circuit Judges.

PHILLIPS, Chief Judge.

Ashland Oil & Refining Company (Ashland) petitions to review and set aside a declaratory order of the Federal Power Commission issued September 3, 1968, rehearing denied, November 1, 1968. 40 FPC 390, 1202. The controversy originated in a contract dispute between Ashland and Phillips Petroleum Company (Phillips).¹ Ashland claims a right to recover for certain increased rates involved in the sale of natural gas to Phillips. Phillips resists the claim. The Commission interpreted its regulations to mean that Ashland is not entitled to recover from Phillips for the period prior to 1966 because Ashland had not filed rate increase notices with the Commission during that period.

In 1945 the Michigan-Wisconsin Pipe Line Company (Michigan-Wisconsin) applied to the Commission for a certificate of public convenience and necessity covering the construction of a proposed pipeline from the Texas Panhandle area to customers in Michigan and Wisconsin. Michigan-Wisconsin proposed to buy gas from Phillips, which in turn was to obtain part of its supply from a group of producers, including Ashland's predecessor. Phillips entered into two contracts with Ashland's predecessor. One was executed in 1945 and amended in 1950; the other was executed in 1953. These contracts provided that Phillips would pay a specific initial price for gas purchased by it, with periodic increases every five years. The contracts further provided that if Phillips increased its resale rate, Ashland's predecessor would be entitled to a proportional increase in its base rate. The latter provision is described as a spiral escalation clause, the effect of which is to allow increased rates to Ashland's predecessor in event Phillips increased its rates to Michigan-Wisconsin. The gas purchased from Ashland is gathered by Phillips and transported to its plant in Sherman, Texas, where it is processed and the residue sold to Michigan-Wisconsin.

The contracts and amendments were executed prior to the decision of the Supreme Court in 1954 in Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035, holding producers to be subject to federal regulation. Soon after this decision was rendered the Commission determined that contract rates in effect as of the date of the Supreme Court decision should be filed as initial producer rates. Ashland's predecessor made this required filing with the Commission to reflect its contract prices as of June 7, 1954. During the period between 1954 and 1966 Ashland and its predecessor did not make any filings with the Commission for any rate increases. During the same period Phillips had filed for a number of increases on its sales to Michigan-Wisconsin, and the Phillips increases had become effective. The Commission found that none of the filings of Phillips purported to cover Ashland or could be treated as filings on behalf of Ashland. The declaratory order expressly states that under the regulations of the Commission Phillips was "neither obligated nor authorized to make any filing for Ashland." In 1966 Ashland filed rate increase notices for its sales to Phillips, which were permitted to become effective. After that date Ashland has received from Phillips the price it considers proper. The present controversy involves the period between February 1, 1955, and April 30, 1966. Ashland claims, inter alia, that Phillips owes it $527,194.97, based on rate increases made by Phillips during that period. Phillips maintains that it cannot pay the claimed increases lawfully because Ashland did not file rate increase notices. The Commission so interpreted its regulations in its declaratory order.

On March 28, 1967, Ashland sued Phillips in the United States District Court for the Southern District of Texas to recover the sums claimed to be due under the contracts, as well as for certain other relief not involved in this review. This action subsequently was transferred to the Northern District of Oklahoma, where it is still pending. Phillips filed a motion in the District Court to dismiss that suit on the ground that the complaint failed to state a cause of action, since Ashland had not filed its claimed increases with the Commission, or, alternatively, on the ground that the controversy was within the exclusive jurisdiction of the Commission. This motion to dismiss was denied by the District Court on November 7, 1968, after the entry of the declaratory order of the Commission under review in the present proceeding.

On November 15, 1967, after the initiation of the action in the District Court, Phillips filed a petition with the Commission for a declaratory order. On September 3, 1968, the Commission issued its declaratory order, ruling that under its regulations Ashland and its predecessor made no proper filing of the claimed rates between 1954 and April 30, 1966, and therefore Ashland cannot recover increased rates for this period.

We affirm.

I.

Ashland contends that the Commission wrongfully asserted primary jurisdiction. We agree with the Commission that the issue of primary jurisdiction is not presented in this case.

The doctrine of primary jurisdiction, first enunciated by Justice White (later Chief Justice) in Texas & Pacific Ry. Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51 L.Ed. 553, is a rule of judicial forebearance.

In United States v. Western Pacific R. Co., 352 U.S. 59, 63, 77 S.Ct. 161, 165, 1 L.Ed.2d 126, the Court said:

"The doctrine of primary jurisdiction, like the rule requiring exhaustion of administrative remedies, is concerned with promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties. `Exhaustion\' applies where a claim is cognizable in the first instance by an administrative agency alone; judicial interference is withheld until the administrative process has run its course. `Primary jurisdiction,\' on the other hand, applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views."

This Court has viewed the doctrine as one of judicial self restraint. See, Elgin Coal Co. v. Louisville & Nashville R. R. Co., 411 F.2d 1043 (6th Cir.); Crain v. Blue Grass Stockyards Co., 399 F.2d 868 (6th Cir.). In Crain the doctrine is discussed in some detail. We view the doctrine as setting out a rule which is applied by courts in proper cases to permit administrative agencies to make initial determinations of matters affecting a controversy. The doctrine of primary jurisdiction is not a grant of power to regulatory agencies, but a self-imposed restraint adopted by a court so as to enable an administrative agency to exercise a power it already possesses. Administrative agencies do not make a determination as to whether or when to apply the doctrine. It is initiated and invoked in the first instance by the courts. The invocation of the doctrine by a court does not terminate the court's jurisdiction. The Court may retain jurisdiction while awaiting a decision by the administrative agency.

An example of the application of the doctrine of primary jurisdiction by judicial deferral of an adjudication awaiting initial decision by the Federal Power Commission is found in J. M. Huber Corp. v. Denman, 367 F.2d 104, 108 (5th Cir.).

We therefore hold that Ashland's contentions based on the doctrine of primary jurisdiction are without merit.

II.

At least to a certain extent this case presents a question of concurrent jurisdiction, not primary jurisdiction. The Commission has jurisdiction over rates, filing and notice as to both Ashland and Phillips. The District Court has jurisdiction in an action based upon asserted breach of contract.

Under the Natural Gas Act matters of rate regulation, filing and notice procedures are within the express statutory authority of the Commission. 15 U.S.C. § 717c. This is an area in which the Commission, pursuant to Congressional authorization, has promulgated regulations. 18 C.F.R. Chapter 1, Subchap. E, §§ 154.91, 154.94. Under this act and regulations, as construed by the Commission, a change in rate levels cannot become effective without the filing of a rate change with the Commission. The order of the Commission in the present case is confined to matters relating to rates, filing and notice. The Commission did not undertake to interpret the contracts between the parties.

The Commission has statutory authority to issue declaratory orders. 15 U.S.C. § 717o, 5 U.S.C. § 554(e). Ashland contends that since the District Court action was filed first, the Commission should have refrained from issuing its declaratory order pending final disposition of the court proceedings.

In a case wherein an in personam action first had been filed in a State...