Consolidated Gas Supply Corp. v. Federal Energy Regulatory Commission

• Decision Date: 04 December 1979
• Docket Number: Nos. 78-1540,78-1666,s. 78-1540
• Citation: 611 F.2d 951
• Parties: CONSOLIDATED GAS SUPPLY CORPORATION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. CONSOLIDATED GAS SUPPLY CORPORATION, Appellee, v. FEDERAL ENERGY REGULATORY COMMISSION, Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 951

611 F.2d 951

CONSOLIDATED GAS SUPPLY CORPORATION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.

CONSOLIDATED GAS SUPPLY CORPORATION, Appellee, v. FEDERAL ENERGY REGULATORY COMMISSION, Appellant.

Nos. 78-1540, 78-1666.

United States Court of Appeals Fourth Circuit.

Argued Oct. 2, 1979.

Decided Dec. 4, 1979.

Willis O. Shay, Clarksburg, W. Va., Karol Lyn Newman, Washington, D. C. (Steptoe & Johnson, Clarksburg, W. Va., John E. Holtzinger, Jr., Thomas A. Schmutz, Washington, D. C., Henry P. Sullivan, Manchester, N. H., David E. Weatherwax and Philip L. Jones, Clarksburg, W. Va., on brief), for petitioner.

J. Paul Douglas, Federal Energy Regulatory Commission, Washington, D. C. (Robert R. Nordhaus, Gen. Counsel, Howard E. Shapiro, Sol. and McNeill Watkins, II, Federal Energy Regulatory Commission, Washington, D. C., on brief), for respondent.

Otis M. Smith, Gen. Counsel, Julius Jay Hollis, General Motors Corp., Detroit, Mich., Edward J. Grenier, Jr., Richard P. Noland, Earle H. O'Donnell, Christopher A. Dunn, Sutherland, Asbill & Brennan, Washington, D. C., on brief, for Intervenor General Motors Corp.

Before RUSSELL and PHILLIPS, Circuit Judges, and ROSZEL C. THOMSEN, Senior United States District Judge for the District of Maryland, sitting by designation.

DONALD RUSSELL, Circuit Judge:

This is an appeal by the Federal Energy Regulatory Commission (hereinafter Commission) of a district court grant of a conditional injunction against administrative proceedings by it under a rule to show cause issued against the Consolidated Gas Supply Corporation (hereinafter Consolidated) and a petition for review by Consolidated under § 19(b) of the Natural Gas Act, 15 U.S.C. § 717r (1970), of certain orders issued by the Commission in those administrative proceedings. Since both the appeal and the petition to review arise out of the same factual context, they were consolidated for decision.

A brief history of the administrative proceedings giving rise to these appeals is essential to an understanding of the issues posed by the parties. Such administrative proceedings began in the late 60's in connection with a certification petition filed by the petitioner-appellee, Consolidated Gas Supply Corporation, with the Federal Power Commission, now Federal Energy Regulatory Commission, ¹ to authorize the construction and abandonment of certain interstate natural gas facilities under the provision of the Natural Gas Act, 15 U.S.C. §§ 717a-717z. From the outset, a significant issue was whether volumetric limitations on gas sales by Consolidated to its jurisdictional customers should be imposed as a condition of the certificate. The requested certificate was granted in 1968 but "without prejudice to the final outcome of a further proceeding, to be scheduled by subsequent order," to determine whether volumetric limitations on Consolidated's gas deliveries should be imposed. Following later developments in the proceedings, Consolidated submitted a proposed settlement, which included a resolution of the issue of volumetric limitations. This settlement was approved by the Commission in 1970. The pertinent provision of the agreement, so far as volumetric limitations were concerned, was:

Consolidated agrees to accept certificates containing maximum-day sales obligations on wholesale sales to its jurisdictional customers applicable to such sales beginning with the 1971-72 heating season. Such maximum-day volumes shall be based on estimates of customers' requirements, and shall not necessarily be based on the design limit of pipeline capacity at particular delivery locations.

On November 28, 1973, the Commission issued a show cause order in the proceedings, dealing with the reserved issue of volumetric limitations. After referring to the 1970 settlement, the order declared that the earlier settlement "specified, Inter alia, that Con Gas would accept certificates of public convenience and necessity beginning with the 1971-72 heating season, imposing volumetric limitations on the maximum daily quantities of gas which Con Gas could sell to its jurisdictional customers. To date there has been no compliance with this provision of the settlement agreement." It then added:

It is clear that since the date of the settlement agreement the annual sales of Con Gas have continued to rise. In this time of nationwide gas shortages, the public interest requires that we carefully assess any increase in deliveries of gas. To assist us in this endeavor, it is important that maximum volumetric requirements be established for each customer on any given interstate pipeline system.

In view of this, we will hereby order Con Gas to show cause why maximum annual and daily volumetric requirements should not be established for each customer on Con Gas' system for deliveries of gas based on 1971-72 requirements and, if appropriate, what requirements should be established for each such customer . . . .

Any person wishing to become a party to the show cause proceeding hereinafter ordered may do so by filing a petition to intervene on or before December 19, 1973.

After a number of hearings on this show cause order, Consolidated and other interested parties submitted on May 7, 1974, a proposed settlement which included this provision:

(a)lthough none of the parties presenting testimony proposed the imposition of volumetric limitations, it was recognized in the settlement conferences that the possible adoption by the Federal Power Commission of such limitations, after a contested proceeding, would entail prolonged litigation, resulting in highly undesirable and unnecessary uncertainty as to the natural gas service that would be available in the market area served by Consolidated. Accordingly, . . . the parties agreed to supplement the evidence submitted to the end that maximum daily and annual limitations, derived on a uniform basis, would be developed and proposed for incorporation in Consolidated's tariff. . . .

On February 27, 1978, almost four years later, the Commission rejected the settlement, giving as its reasons Since the 1976-1977 winter heating season, Consolidated's market has also undergone certain changes. As a result, the data before us, which is projected calendar year 1974 data, may be outdated.

We find that the settlement agreement in these proceedings is based upon data which have become unreliable by the passage of time since May 7, 1974. The Commission will reject the agreement and will also terminate Docket No. CP74-149, since the record in that proceeding is comprised of data no longer useful to this Commission in reaching a decision in the show cause proceeding.

As an incident to that rejection, the Commission issued on February 27, 1978, the show cause order that is the subject matter of this appeal. That order required Consolidated to show cause why daily and annual volumetric limitations on its gas deliveries to its customers, based on data for the most recent twelve-month period, should not be established.

The Commission later directed that an initial prehearing conference (on the show cause proceedings) be held on March 23, 1978, before the administrative law judge assigned to the hearing. On the day before the date set, the Commission's Staff requested that Consolidated be required to produce certain designated materials described later by the Commission in its order sustaining the request as:

1. The maximum annual volumetric limitations which correspond to Pro forma Original Sheet No. 70 Data, attached to the May 2, 1974, Settlement Proposal in Docket No. CP74-149, using calendar year 1977 base data rather than calendar year 1974. Provide all supporting calculations in the same format as Appendix B to the May 2, 1974 Settlement Proposal.

The prehearing conference was later rescheduled for April 6, 1978, at which time Consolidated objected to the Staff's discovery request on the grounds of relevancy and privilege. The administrative law judge overruled the objection and directed Consolidated to produce the material by May 5, 1978. From this order of the administrative law judge Consolidated appealed to the Commission.

In the meantime, on March 29, 1978, Consolidated had moved for rehearing of the Commission's order to show cause as issued on February 27, 1978. In its petition, it set forth three grounds. These were:

1. The order to show cause was inconsistent with the 1970 settlement and was therefore inappropriately issued;

2. The order was unsupported and violated the Commission's regulation. ²

3. The Commission has been fatally deficient and vague in the statements in the rule to show cause so that "Consolidated . . . (does) not understand either the legal or the factual basis underlying the order. They do not know what the Commission believes volumetric limitations should achieve, or how the Commission believes they can or should be structured."

Significantly, it did not assert as a ground for rehearing a claim of a violation of the Administrative Procedure Act, 5 U.S.C. §§ 551-559, 701-703, or a claim that the order to show cause was defective for failure to specify whether the proceedings under the order to show cause were to be investigatory or adjudicatory.

In a consolidated order issued June 27, 1978, the Commission disposed of both the petition for rehearing and the appeal from the administrative law judge's overruling of its objections to the Commission Staff's discovery motion. In dismissing the petition for rehearing, the Commission responded to Consolidated's argument that the proceedings were inconsistent with Commission regulations by declaring:

Section 1.6(d) does not require the Commission to outline the "statutory or other authority" which empowers the Commission to proceed with a show cause order, as alleged by the company. Section 2.70, referred to on page 5 of the February 27 order, does support our action. This statement of policy was not relied upon as law, as...