Louisiana Power & Light Co. v. FEDERAL POWER COM'N

• Decision Date: 05 September 1973
• Docket Number: 72-1721,72-1720,72-1724,72-1715,72-2185 and 72-2188.,72-1784,No. 72-1714,72-1714
• Citation: 483 F.2d 623
• Parties: LOUISIANA POWER & LIGHT COMPANY et al., Petitioners, v. FEDERAL POWER COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Fifth Circuit

483 F.2d 623 (1973)

LOUISIANA POWER & LIGHT COMPANY et al., Petitioners, v. FEDERAL POWER COMMISSION, Respondent.^*

Nos. 72-1714, 72-1715, 72-1720, 72-1721, 72-1724, 72-1784, 72-2185 and 72-2188.

United States Court of Appeals, Fifth Circuit.

June 28, 1973.

Rehearing and Rehearing Denied September 5, 1973.

John T. Miller, Jr., Washington, D. C., George W. Hugo, Houston, Tex., W. C. Nelson, New Orleans, La., Nelson Jones, Thomas G. Johnson, Dan A. Bruce, William G. Riddoch, Houston, Tex., E. Burt Harris, New Orleans, La., Martin N. Erck, John R. Rebman, J. Kirby Ellis, Houston, Tex., Daniel F. Collins, Sherman S. Poland, James Douglas Welch, Wm. Warfield Ross, Washington, D. C., Stanley Plettman, Beaumont, Tex., Andrew P. Carter, H. Sloan McCloskey, New Orleans, La., Arnold D. Berkeley, Washington, D. C., Kirk W. Weinert, John M. Young, Houston, Tex., J. Donald Annett, Washington, D. C., R. J. Leithead, Sam Riggs, Jr., Tulsa, Okl., for petitioners.

John J. Keating, Jr., J. Richard Tiano, Deputy Sol., Leo E. Forquer, Gen. Counsel, George W. McHenry, Jr., Acting Sol., Federal Power Commission, Washington, D. C., for respondent.

J. Evans Attwell, W. John Shirley, Jack D. Head, Houston, Tex., Peter H. Schiff, Gen. Counsel, Public Service Com'n, Albany, N. Y., Richard A. Solomon, Jerome Ackerman, James R. McCotter, Howard E. Wahrenbrock, Washington, D. C., John M. Kuykendall, Jr., Jackson, Miss., Leon M. Payne, William B. Cassin, Wm. C. Harvin, Wm. R. Choate, Perry O. Barber, Jr., Jeron L. Stevens, Houston, Tex., Sharon Pierson, Pierson & Semmes, Washington, D. C., Robert F. LeBlanc, Tulsa, Okl., and L. E. Frazier, Jr., Houston, Tex., for intervenors.

Before JOHN R. BROWN, Chief Judge, and BELL and MORGAN, Circuit Judges.

Rehearing and Rehearing En Banc Denied September 5, 1973.

LEWIS R. MORGAN, Circuit Judge:

This case is another in the long-running and seemingly endless saga of "Who Gets The Gas?", starring the major oil companies, the natural gas pipelines, major industrial users of natural gas, and the Federal Power Commission. Also featured, albeit in somewhat of a bit part, is the individual gas consumer, "the little lady at the burner tip". Although possibly suited for short subject treatment, this proceeding has now become a full-length feature of epic proportions. Basically it is this court's task to consider petitions for review of FPC Opinions 610 and 610-A, in which the Commission took jurisdiction over a formerly intrastate pipeline in Eastern Louisiana. There are many parties with numerous underlying themes to present. From this confusion we must review whether or not the FPC correctly handed out the awards.

In Opinion 610, the FPC found that due to the injection of interstate gas, the formerly intrastate pipeline known as the "Green System-East" was now subject to FPC jurisdiction. Despite all the many different methods used by the petitioners in stating the issues, there are basically only two points for us to consider in reviewing the Commission: (1) Was the FPC correct in holding that the Green System-East had become sufficiently interstate to confer exclusive federal jurisdiction? (2) Even if the system would be otherwise an interstate pipeline subject to jurisdiction, had Congress expressly withdrawn federal jurisdiction for a pipeline such as this by enactment of the Hinshaw Amendment to the Natural Gas Act?

Also, in Opinion 610, the FPC found federal jurisdiction over United's Purple System, another formerly intrastate pipeline. While the majority of the petitioners challenge only the existence of federal jurisdiction over the Green System, two petitioners, Cities Service and Gulf States Utilities, challenge the characterization of the Purple System as interstate. The nature of each of these pipelines will be considered separately below.

The Green System-East

The Green System-East, a natural gas pipeline owned by United Gas Pipe Line Company, is physically situated entirely within the State of Louisiana in United's New Orleans division. For several years prior to October 1, 1970, when United filed an application for FPC certification for the Green System-East, these facilities had been operated as an intrastate system subject to the jurisdiction of the Louisiana Public Service Commission. At this point it is necessary to note that the Green System-East is connected through systems of valves with other pipelines, including United's Black System which is an interstate pipeline. It appears that all the gas which goes into the Green System-East is produced in Louisiana gas fields, although at some point some of this gas may be carried in pipelines which also carry gas dedicated to the interstate market. There exists a heated debate as to whether any gas once placed in the Green System-East can or does ever leave the State of Louisiana. These factual matters are basic to the holding of jurisdiction and will be considered in detail infra.

Prior Proceedings

The Green System-East has been involved in a significant chain of court opinions. Petitioner, Louisiana Power & Light, previously brought suit in the United States District Court for the Western District of Louisiana seeking a determination of the intrastate character of the Green System-East. The district court, 332 F.Supp. 692 (1971), dismissed the suit, holding that the issue of the nature of the Green System-East was within the primary jurisdiction of the FPC.

On appeal, we reversed the district court, disagreeing that it was necessary to await Commission action. Louisiana Power & Light Co. v. United Gas Pipe Line Co., 5 Cir. 1972, 456 F.2d 326. This court went on to address the issue of the Green System-East's interstate character and held that any interstate gas which had been introduced into the system was so minimal in amount that federal jurisdiction had not attached.

In Federal Power Commission v. Louisiana Power & Light Co., 406 U.S. 621, 92 S.Ct. 1827, 32 L.Ed.2d 369 (1972), the Supreme Court reversed this court and agreed with the result reached by the district court. Noting that the FPC was conducting hearings of its own in this regard, the Court held that while the agency's decision would not be the last word, it must be the first. The FPC has now reached its decision, finding that the Green System-East is sufficiently interstate to be jurisdictional. It is that "first word" of the agency which we now must review and issue, if not the last word, at least the "next word".

I.

Before proceeding to the merits of the controversy, it is helpful to have a firm picture of the various parties engaged in this litigation and their respective interests in its outcome. It is also important to understand the practical effect of FPC jurisdiction on the parties.

The petitioners can be divided into basic groups. The major oil companies have an interest in the outcome both as sellers and purchasers of natural gas. Several smaller distribution companies which purchase gas from United and the Green System are also challenging the Commission decision. Of course, the petitioners include several state regulatory agencies charged with the duty of regulating pipelines which are intrastate in nature. Public utilities which purchase natural gas for resale are involved as parties, as are various towns, parishes and municipalities, both as gas purchasers and representing the public interest. Basically, the effect of federal jurisdiction over the Green System-East will have a similar effect on each of these parties, although not to the same degree.

The petitioners, quite naturally, paint themselves as the heroes of this piece, denominating United as the villain and the FPC as conspiratorial bedfellow or, at the least, stooge of United. In giving depth to this characterization of United, the petitioners seek to show United as a greedy, over-reaching and somewhat callous corporate giant out to gorge itself at everyone's expense. The accuracy of this picture, they say, is made crystal clear by the results which will flow from FPC jurisdiction in this case.

These horrors which petitioners feel will flow from FPC jurisdiction are basically twofold. First, the switch from Louisiana Public Service Commission regulation, which, with regard to direct sales is virtually non-regulation, to FPC regulation will permit United to abrogate numerous long-term contracts which it has entered in the past for deliveries of gas to gas purchasers. The importance of this benefit can be seen immediately. Many of these contracts have several years yet to run. They were negotiated in the days when the supplies of natural gas appeared to be endless and, thus, contracts for extremely long terms, such as 20 years, were considered good business, sewing up a customer for the future. Of course, as we all know, with the rise of environmentalism which stressed the importance of natural gas as an essentially "clean" fuel and the realization that natural gas reserves and availability have been drastically overestimated, this country has been plunged into an "energy crisis". This "crisis" seems especially acute in the natural gas industry, possibly because of the greater demands for the fuel. Thus, what gas is available can be sold and indeed will be sold for substantially higher prices on today's market than a pipeline could realize under the old long-term contracts entered years ago. Even regulated prices would be substantially higher than the old contract rates, and it must be remembered that the FPC does not regulate the price of sales to direct customers such as large industries but only sales where ultimately the gas will be resold.

Secondly, the gas shortage has led to the necessary allocation of priorities and rationing of this limited supply of natural gas. Through what is popularly called "curtailment", pipelines are allowed to file, subject to Commission approval, plans of allocation of the available gas, basically to ensure that gas goes not to the highest...