Amerada Petroleum Corp. v. Federal Power Com'n
| Decision Date | 15 July 1964 |
| Docket Number | No. 17445,17492.,17445 |
| Parties | AMERADA PETROLEUM CORPORATION, Petitioner, v. FEDERAL POWER COMMISSION, Respondent. SIGNAL OIL AND GAS COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Joseph W. Morris, Associate Gen. Counsel, Amerada Petroleum Corp., made argument for petitioner Amerada Petroleum Corp. and filed brief with Robert E. Sloan, Tulsa, Okl., William H. Webster, of Armstrong, Teasdale, Roos, Kramer & Vaughan, St. Louis, Mo., and Cecil E. Munn, of Cantey, Hanger Gooch, Cravens & Scarborough, Fort Worth, Tex.
Cecil E. Munn, of Cantey, Hanger, Gooch, Cravens & Scarborough, Fort Worth, Tex., made argument for petitioner Signal Oil & Gas Co., and filed brief with William R. Allen and Roger J. Edwards, Los Angeles, Cal.
Howard E. Wahrenbrock, Sol., F. P. C., Washington, D. C., made argument for respondent and filed brief with Richard A. Solomon, Gen. Counsel, Robert L. Russell, Asst. Gen. Counsel, and Leonard Poryles, Atty., F. P. C., Washington, D. C.
Before VAN OOSTERHOUT, RIDGE and MEHAFFY, Circuit Judges.
Petitioners, Amerada Petroleum Corporation and Signal Oil and Gas Company, have perfected this appeal from an unfavorable decision and order of the Federal Power Commission (30 FPC 200) holding that its jurisdiction and attendant regulation extended over certain of Petitioners' contracts for the sale of natural gas to the Montana-Dakota Utilities Co. (MDU) under the provisions of the Natural Gas Act, 15 U.S.C.A. §§ 717-717w, which embraces generally the transportation or sale in interstate commerce of natural gas for resale.1
The present litigation represents Petitioners' second contest of the Commission's right to regulate those sales of gas produced, sold, transported, and consumed in the State of North Dakota which, during its journey, is commingled in the same pipeline with other gas admittedly sold and transmitted across state lines for resale in interstate commerce.
We passed upon the first jurisdictional confrontation in State of North Dakota v. Federal Power Commission, 247 F.2d 173 (8th Cir. 1957), in which Petitioners and the Commission opposed the sovereign State of North Dakota's claim of federal regulation. In that case, the Commission found that Amerada and Signal in 1955 contracted separately with MDU for the sale of two classifications of oil-well gas processed at Signal's hydrocarbon extraction plant in Tioga, North Dakota. Under one set of separate, but similar contracts, Amerada and Signal agreed to sell MDU "firm gas" at a fixed term and escalating price per thousand cubic feet (Mcf.) for intrastate resale, while selling by different contracts at a lower price and shorter term "dump gas", destined for interstate resale, and described as that portion of the residue gas produced that would be flared except for the sale. Pursuant to Petitioners' four separate contracts with MDU, two gas streams were measured and delivered into MDU's pipeline connecting with the tailgate of the Tioga plant. One stream carrying only firm gas for intrastate consumption proceeded eastward terminating at Minot, North Dakota and serving the communities en route. The controverted stream containing a mixture of both firm and dump gas ran west to Williston, North Dakota, traversing the state line and flowing into a storage field located in Montana for eventual redistribution in several states. In accordance with the firm gas contracts for intrastate sales, all of that gas was withdrawn from the western commingled stream at the intervening town gates before reaching the state line, measured, and resold exclusively to North Dakota consumers. We upheld the Commission's refusal to assert jurisdiction over the firm gas contracts on grounds that:
Subsequent to the execution of the 1955 contracts, Amerada discovered additional deposits of oil and gas-well gas in North Dakota. Since all of the gas heretofore produced to fulfill the intrastate firm gas commitments was required to service the communities along the Williston-Minot line and the dump gas contracts dedicated no reserves to MDU for its expanding markets, MDU, Amerada and Signal negotiated new contracts to supply the increased demands on MDU to service other North Dakota communities. Accordingly, MDU has extended its eastern pipeline from Minot 106 miles south to Bismarck, North Dakota, connecting with an existing pipeline which runs westward across the state line into the Montana storage field. (See map below.)
In 1960, Amerada executed two new contracts with MDU for additional supplies of gas to be produced from certain of its North Dakota fields and delivered at the Tioga plant tailgate. The first of these agreements, designated as the "North Dakota Contract", superseded the earlier firm gas contract. It provided for a twenty year term, and an initial price of 17 cents per Mcf. Intended to fill MDU's needs in North Dakota, this contract specified that all gas purchased thereunder "shall be transported, used and consumed entirely within the State of North Dakota" and "shall not, at any time, cover the sale or delivery by Amerada of any gas which is transported beyond the boundaries of the State of North Dakota". The parties did not regard the Commission as having jurisdiction over this avowed intrastate transaction, and therefore no application was made for federal approval. Shortly thereafter, Amerada entered into a so-called "Interstate Contract" with MDU of like duration and beginning price under which it was obliged to drill not more than four gas wells and make available to MDU 25,000 Mcf. of gas-well gas per day. This agreement stipulated that "all gas produced in the Contract Area which is sold and delivered by Amerada to Buyer and which is transported outside of the State of North Dakota and resold shall be sold by Amerada and purchased by Buyer under this agreement". Acknowledging this contract's interstate character, Amerada obtained Commission approval in the form of a certificate of public convenience and necessity.
Accordingly, Signal and MDU executed similar, but separate, "North Dakota" and "Interstate" contracts, but neither Amerada nor Signal applied to the Commission for abandonment of their heretofore interstate "dump gas" contracts which were continued in effect for the sale of "flare gas" when available. By this time Amerada had acquired a one-half ownership interest in the Tioga plant where, as always, Amerada's gas, obtained from its own fields, and Signal's gas, acquired from other producers, were processed before delivery into MDU's pipelines.
In addition to the four Amerada and Signal contracts, MDU subsequently contracted with two other companies, Hunt-Herbert and TXL Oil Corporation (now Texaco, Inc.) for the sale of gas produced at their respective plants, both located less than 50 miles northeast of the Tioga plant. (Map ante.) To receive these added deliveries of gas in its system, MDU extended its transmission line from the Tioga plant to connect with the tailgate of Hunt-Herbert's plant and TXL, with its plant farther northeast, constructed a pipeline south meeting the terminus of MDU's extended Hunt-Herbert line. MDU's single contract with both Hunt-Herbert and TXL admittedly covers sales of gas for resale in interstate commerce for which the requisite certificates have already been issued by the Commission. None of the gas from Hunt-Herbert and TXL is transported on MDU's line east from Tioga to Minot, but their entire supply flows westward from Tioga towards Williston and the storage field in Montana. Thus, only Amerada and Signal's gas travels eastward from Tioga while a small portion of Petitioners' gas, commingled with Hunt-Herbert and TXL gas, is transported west from Tioga for consumption by towns along the Williston line. By MDU's utilization of an elaborate metering system at its pipeline's points of input and output, the accuracy of which is unchallenged, all gas produced and sold for consumption in North Dakota is accounted for and purchased pursuant to the rates and terms of Petitioners' contested "North Dakota Contracts". All the remaining gas traveling outside the state for resale in interstate commerce is measured and sold under Hunt-Herbert, TXL and Petitioners' interstate contracts concededly subject to Commission jurisdiction.
Distinguishing in the instant case its position of lack of jurisdiction in the former case over Petitioners' prior firm gas contracts (intrastate sales), a majority of the Commission in a three-to-two split decision affirmed its examiner's finding here of jurisdiction over the "North Dakota Contracts" primarily because of the added fact that:
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