California Gas Producers Ass'n v. FEDERAL POWER COM'N

• Decision Date: 15 September 1967
• Docket Number: 21313,21314.,No. 21310,21310
• Citation: 383 F.2d 645
• Parties: CALIFORNIA GAS PRODUCERS ASSOCIATION, Independent Oil and Gas Producers of California, and Jade Oil and Gas Company, the State of Texas, Texas Independent Producers & Royalty Owners Association, West Central Texas Oil and Gas Association, and Permian Basin Petroleum Association, Petitioners, v. FEDERAL POWER COMMISSION, Respondent, Pacific Gas Transmission Company, Public Utility Commissioner of Oregon, City and County of San Francisco, and Southern California Gas Company, Southern Counties Gas Company of California, and Pacific Lighting Service and Supply Company, Intervenors.
• Court: U.S. Court of Appeals — Ninth Circuit

383 F.2d 645 (1967)

CALIFORNIA GAS PRODUCERS ASSOCIATION, Independent Oil and Gas Producers of California, and Jade Oil and Gas Company, the State of Texas, Texas Independent Producers & Royalty Owners Association, West Central Texas Oil and Gas Association, and Permian Basin Petroleum Association, Petitioners, v. FEDERAL POWER COMMISSION, Respondent Pacific Gas Transmission Company, Public Utility Commissioner of Oregon, City and County of San Francisco, and Southern California Gas Company, Southern Counties Gas Company of California, and Pacific Lighting Service and Supply Company, Intervenors.

Nos. 21310, 21313, 21314.

United States Court of Appeals Ninth Circuit.

September 15, 1967.

Henry F. Lippitt, II, Los Angeles, Cal., for petitioners, California Gas Producers Assn., Independent Oil & Gas Producers of Cal., and Jade Oil & Gas Co.

Waggoner Carr, Atty. Gen. of Texas, Hawthorne Phillips, First Asst. Atty Gen., T. B. Wright, Executive Asst. Atty. Gen., J. Arthur Sandlin, C. Daniel Jones, Jr., Linward Shivers, Asst. Attys. Gen., Crawford C. Martin, Atty. Gen. of Texas, George M. Cowden, First Asst. Atty. Gen., A. J. Carrubi, Jr., Staff Legal Asst. Atty. Gen., Houghton Brownlee, Jr., Asst. Atty. Gen., Austin, Tex., for petitioner, State of Texas.

John Davenport, Austin, Tex., for petitioners, Texas Independent Producers & Royalty Owners Assn., West Central Texas Oil & Gas Assn., and Permian Basin Petroleum Assn.

Richard A. Solomon, Gen. Counsel, Howard E. Wahrenbrock, Sol., Peter H. Schiff, Deputy Sol., Federal Power Commission, Washington, D. C., for respondent.

Robert Y. Thornton, Atty. Gen., Richard W. Sabin, Asst. Atty. Gen., Salem, Or., for intervenor, Public Utilities Comr. of Or.

Thomas M. O'Connor, City Atty., William F. Bourne, Public Utilities Counsel, William C. Taylor, Deputy City Atty., Robert R. Laughead, San Francisco, Cal., Chief Valuation & Rate Engineer, City & County of San Francisco, for intervenor, City & County of San Francisco.

Malcolm H. Furbush, Richard H. Peterson, John A. Sproul, San Francisco, Cal., Raymond N. Shibley, Washington, D. C., for intervenor, Pacific-Gas Transmission Co.

John Ormasa, Roger J. Nichols, Eric W. Martens, Los Angeles, Cal., for intervenors, Southern California Gas Co., Southern Counties Gas Co., of Cal., and Pacific Lighting Service & Supply Co.

L. Dan Jones, Gen. Counsel, William I. Powell, Asst. Gen. Counsel, Washington, D. C., for amicus curiae, Independent Petroleum Assn. of America.

Before MERRILL and DUNIWAY, Circuit Judges, and MATHES,^* District Judge.

DUNIWAY, Circuit Judge:

These are petitions under the Natural Gas Act, 15 U.S.C. §§ 717-717w, to review an order of the Federal Power Commission. By that order, which was issued June 15, 1966, the Commission authorized Pacific Gas Transmission Company (P.G.T.) a natural gas pipeline company previously authorized, on August 5, 1960, to bring natural gas from Canada to California (see Pacific Gas Transmission Co., 1960, 24 FPC 134), to import an additional 100,000 Mcf (thousand cubic feet) per day beginning November 1, 1966, and a further 100,000 Mcf per day beginning November 1, 1967. The gas is to be imported for transportation and sale to Pacific Gas and Electric Company (P.G. & E.) in California.

The petitioners in No. 21,310 are California Gas Producers Association, Independent Oil and Gas Producers Association of California and Jade Oil and Gas Company (the California Producers). The members of the Associations, like Jade, produce and sell natural gas in California. The petitioner in No. 21,313 is the State of Texas. We think it fair to say that that state is here acting in what it believes to be the interest of Texas natural gas producers. The petitioners in No. 21,314 are Texas Independent Producers and Royalty Owners Association, West Central Texas Oil & Gas Association and Permian Basin Petroleum Association (collectively TIPRO). They represent approximately 7500 producers and royalty owners of crude oil and natural gas, primarily in Texas. All of the petitioners are supported by the Independent Petroleum Association of America as amicus curiae. It is an Oklahoma corporation, a national trade association representing independent oil and natural gas producers.

Opposing the petitions, in addition to the Commission itself and P.G.T., are Southern California Gas Company, Southern Counties Gas Company and Pacific Lighting Service and Supply Company (collectively, the Southern California Companies), public utilities buying and distributing natural gas in Southern California. The territory they serve is contiguous to that of P.G. & E., which serves Northern California. They have interconnections of their pipeline systems with that of P.G. & E. and one of them is buying some gas from P.G. & E. Also opposing are the Public Utilities Commissioner of Oregon and the City and County of San Francisco, on behalf of natural gas consumers in their respective areas.

The order of August 5, 1960, authorized P.G.T. to construct and operate a 614 mile 36-inch pipeline from British Columbia to the California border. That line is part of a 1400 mile line bringing gas from the producing fields of Alberta to Northern California and the Northwest. The effect of the order was to permit P.G.T. to deliver 415,000 Mcf of gas per day to P.G. & E. and 100,000 Mcf per day to El Paso Natural Gas Company (El Paso) for delivery to customers in the Northwest. The order now under review authorizes the bringing in of more gas via that line.

We find the situation here somewhat unusual. Attacking the order, primarily on the ground that it does not sufficiently protect California consumers, are three groups of producers and a producing state; supporting it are California utilities that serve California consumers and two public bodies appearing on behalf of consumers. One could hardly fault the Commission if it took some of the petitioners' contentions with a small grain of salt.

We consider the three petitions together; many of the contentions are made by several petitioners. In doing so, we have in mind two basic rules. The first, appearing in the Act itself, is that "the finding of the Commission as to the facts, if supported by substantial evidence, shall be conclusive." (§ 19(b), 15 U.S.C. § 717r(b)). The second is that we owe the Commission "the same deference to its expertise that courts generally owe to the specialized boards and commissions created by the Congress to deal with complex and difficult problems in the field of economic regulation." (People of State of California v. FPC, 9 Cir., 1965, 353 F.2d 16, 23). This is particularly true here, where the Commission was deciding, first, whether to issue a certificate of public convenience and necessity under section 7(c) (15 U.S.C. § 717f(c)) and second, whether the proposed importation of gas "will not be consistent with the public interest," under section 3 (15 U.S.C. § 717b). It has been said that "the granting or denial of a certificate of public convenience and necessity is a matter peculiarly within the discretion of the Commission." (Oklahoma Natural Gas. Co. v. FPC, 1958, 103 U.S.App.D.C. 256, 257 F.2d 634, 639; see also the remarks of Judge Hutcheson in CIA Mexicana De Gas, S.A. v. FPC, 5 Cir., 1948, 167 F.2d 804, 806). Congress has vested considerable discretion in the Commission; the burden is upon petitioners to show that it has been abused.

Texas, supported by TIPRO, urges that the Commission erred in treating this case, which deals with an application to make fuller use of an already certificated and constructed facility, in a manner somewhat different from the way in which it might treat an application relating to a new facility. The Hearing Examiner, whose decision was approved by the Commission, observed:

"The various regulatory agencies recognized, when they authorized the construction and operation of this 36-inch line, that it was oversized for the throughput of the initially certificated volumes of 415,000 Mcf per day. However, PGT there indicated that future authorizations would be sought to import additional volumes of natural gas to utilize the full capacity of the line."

The Commission said.

"We are concerned here with already existing pipeline facilities which are not yet being utilized to their fullest capacity. The increased use of the existing pipeline facilities will reduce the unit cost of the gas supplied to California and will also reduce the unit cost of transportation of gas transported for El Paso and destined for the consumers in Washington, Oregon and Idaho. To refuse to issue certificates authorizing the importation, transportation, and sale of this additional gas would mean that some of the capacity of presently existing facilities would remain unused with resultant higher costs to the consumers in four states."

We see nothing arbitrary or capricious, no abuse of discretion, in such an approach to the present problem. The Commission, in the 1960 proceeding, found that the construction of the facility was consistent with public convenience and necessity, and that the importation of the gas then permitted was consistent with the public interest. The facility has been built; the gas is being imported. These are facts, and they are among the most important facts underlying this proceeding. If the quantity needed has increased by 50% and if that additional quantity can be brought in at comparatively little additional capital cost (about $13,000,000 compared to $116,000,000 cost of the facility), and if doing so will reduce the unit cost of the total amount of gas flowing through the facility, what possible reason is there for not considering these results to be of great importance here? Much of Texas' attack is really on the 1960 order, which it did not then oppose, and cannot now attack.¹

The California Producers and TIPRO argue that the Commission's finding that a market exists for the additional gas to be...