Belco Petroleum Corp. v. Federal Energy Regulatory Commission
| Decision Date | 14 December 1978 |
| Docket Number | No. 77-1416,77-1416 |
| Citation | 191 U.S.App.D.C. 157,589 F.2d 680 |
| Parties | BELCO PETROLEUM CORPORATION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. District of Columbia Circuit |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Judy M. Johnson, Oakland, Cal., with whom J. Evans Attwell, Houston, Tex., was on the brief, for petitioner.
Steven A. Taube, Atty., Federal Energy Regulatory Commission, Washington, D. C., with whom Philip R. Telleen, Atty., Federal Energy Regulatory Commission, Washington, D. C., on the brief, for respondent.
Before LUMBARD, * Senior Circuit Judge for the United States Court of Appeals for the Second Circuit, and MacKINNON and WILKEY, Circuit Judges.
Opinion for the court filed by MacKINNON, Circuit Judge.
Section 4(e) of the Natural Gas Act, 15 U.S.C. § 717(c)(e) (1976), gives the Federal Energy Regulatory Commission (Commission) discretionary power over the suspension of rates and the ordering of refunds:
Whenever (a new rate) is filed the Commission shall have authority . . . to enter upon a hearing concerning the lawfulness of such rate, . . . and, pending such hearing and the decision thereon, the Commission . . . may suspend the operation of such schedule and defer the use of such rate, . . . but not for a longer period than five months beyond the time when it would otherwise go into effect . . .. If the proceeding has not been concluded and an order made at the expiration of the suspension period, on motion of the natural-gas company making the filing, the proposed change of rate . . . shall go into effect. Where increased rates . . . are thus made effective, the Commission may . . . require the natural-gas company . . . to refund, with interest, the portion of such increased rates or charges by its decision found not justified.
It is well established that a natural gas company cannot recoup income denied to it when the Commission exercises the five-month suspension power under section 4(e). FPC v. Tennessee Gas Transmission Co., 371 U.S. 145, 152, 83 S.Ct. 211, 9 L.Ed.2d 199 (1962); Hope Natural Gas Co. v. FPC,196 F.2d 803, 805-06 (4th Cir. 1952). It is equally well settled that, notwithstanding the mutual agreement of the parties, a rate increase may not be made retroactively effective to cover the period of suspension. Shell Oil Co. v. FPC, 334 F.2d 1002, 1009 (3d Cir. 1964); Hope Natural Gas Co. v. FPC,supra at 807. It is in this background that we consider the issue presented in this case, namely, whether the petitioner should be permitted to offset the amount of increase income denied to it (when the Commission suspended the rate increase pursuant to section 4(e)) against its refund liability arising from the collection of the excessive rates following the expiration of the suspension period and before the legality of the rate was determined by the Commission.
Petitioner Belco Petroleum Corporation (Belco) makes interstate sales of natural gas obtained from its leasehold interests in the Big Piney Area of Wyoming. These sales are made to Northwest Pipeline Corporation (Northwest) pursuant to five separate contracts negotiated in the late 1950's and on file with the Commission as Belco's Gas Rate Schedule Nos. 1, 2, 3, 5, and 6. On August 6, 1974, Belco and Northwest agreed to amend these contracts to increase the applicable prices to forty cents (40cents) per Mcf. 1 The next day, Belco tendered the proposed rate increases for filing with the Commission. On September 6, 1974, the Commission accepted Belco's filings and, invoking its power under section 4(e), suspended the effectiveness of the proposed rates for five months until February 7, 1975. Under the provisions of section 4(e), if the Commission has not passed on the lawfulness of the rates, the higher rate goes into effect at the end of the suspension period.
Approximately fifteen months before the negotiation and filing of the Belco-Northwest rate increase, the Commission had issued notice of a proposed rulemaking to establish nationwide rates for natural gas obtained from wells commenced prior to January 1, 1973. 2 This rulemaking would affect most of the gas sold under the Belco-Northwest contracts. The rulemaking proceedings did not culminate in a final determination until December 31, 1975, over ten months after Belco's increases went into effect. On that date, the Commission issued Opinion No. 749, setting the just and reasonable rate for natural gas from the subject wells. 3 Opinion No. 749 also provided that for sales (such as Belco's) being made subject to refund, the newly established rate "shall be the applicable just and reasonable rate as of the date of suspension" and that "all amounts collected in excess of that rate shall be refunded." The Commission later revised the refund procedure, however, in Opinion No. 749-C, issued July 19, 1976. This second opinion provided that the newly established rates would apply from the date such rates were collected subject to refund.
Belco duly filed its refund reports on November 16, 1976, but in so doing, it reduced the amounts it had collected in excess of the applicable just and reasonable rate by the difference between the amounts it had been able to collect during the suspension period and the amounts it could have collected under the newly established rates had there been no suspension. By letter order dated January 11, 1977, the Commission rejected Belco's proposed offset procedure, declaring it to be "improper and inconsistent with Commission precedent." On March 10, 1977, the Commission issued an order denying Belco's application for rehearing and reaffirming its rejection of the offset procedure, but it subsequently granted Belco's request for a stay pending appeal. Belco's petition before this court seeks review of the orders of January 11 and March 10, 1977.
As a preliminary issue, the Commission contests Belco's standing in this court. Section 19(b) of the Natural Gas Act, 15 U.S.C. § 717r(b) (1976), requires a reviewing court to consider only objections that have been urged before the Commission in an application for rehearing. The Commission asserts that the application for rehearing did not contain an objection to the Commission's order based on Belco's interpretation of Opinion No. 749, and that consequently this court should not address that issue.
Belco's application for rehearing set forth arguments in support of its contention that the Commission abused its discretion in rejecting Belco's requested offset procedure, which had been based on Opinion No. 749. Section 19 does not preclude appellate consideration of an argument in support of a properly preserved ground of error. Read in the entirety, Belco's application gave notice to the Commission with sufficient clarity regarding the grounds on which it urged reconsideration. This fulfills the statutory requirement. See Rhode Island Consumers' Council v. FPC, 164 U.S.App.D.C. 134, 143, 504 F.2d 203, 212 (1974). Accordingly, we find standing.
The language of Opinion No. 749 relevant to refund obligations provided:
For those sales which are presently being made subject to refund, we find that the rate established in this Opinion or the higher applicable rate, Shall be the applicable just and reasonable rate as of the date of suspension and All amounts Collected in excess of that rate, as adjusted pursuant to the regulations adopted herein, or the higher applicable area rate shall be refunded . . ..
(Emphasis added).
Belco argues that this language authorized it to offset its refund obligations by the income denied during the period of suspension when it could not collect a just and reasonable rate. Belco emphasizes that it was Contractually entitled to collect the just and reasonable rate from the date of suspension but could not do solely because the Commission exercised its valid authority under section 4(e). 4
Although Belco's argument has some facial validity, the language of Opinion No. 749, read in its entirety, is not unequivocal in support of Belco's position. Instead, the language is quite ambiguous with respect to the manner of computing the refund. For example, another explanation for the above-quoted language and in our view the more plausible one is that the Commission, in stating that the "applicable just and reasonable rate" shall exist "as of the date of suspension," was simply acknowledging that the filed rate had been investigated and found to be just and reasonable as of the time the investigation began or as of the date the rate would have become effective absent suspension. The separate and distinct character of the two considerations involved in Opinion No. 749 what is the just and reasonable rate, and the manner in which the refund is to be computed is apparent from the text of the preceding paragraph of the Opinion:
At the present time, there are a number of jurisdictional sales, which will be subject to the rate prescribed herein, that are being made subject to refund. By this decision, we ((1)) determine a just and reasonable rate for those sales and ((2)) require refunds of amounts collected which are in excess of the applicable rate.
Thus, the just and reasonable rate was first determined as of the date of suspension (which is the usual reference point from which such a determination is made), And then a statement was made concerning the refunds. The reference to the "date of suspension," a phrase modifying the "applicable just and reasonable rate," has, in logic, nothing to do with the Commission's statement about the computation of refunds.
In stating that "all amounts collected in excess of that rate . . . shall be refunded," therefore, the Commission was embarking on the discussion of a new subject. In so stating, the Commission could well have meant that All monies Collected as a result of the higher, excessive rate that is, the rate charged during...
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