Consumer Federation of America v. Federal Power Commission, 73-2009
| Citation | 515 F.2d 347,169 U.S.App.D.C. 116 |
| Decision Date | 13 March 1975 |
| Docket Number | No. 73-2009,73-2009 |
| Parties | CONSUMER FEDERATION OF AMERICA et al., Petitioners, v. FEDERAL POWER COMMISSION, Respondent, The Public Service Commission for the State of New York et al., Intervenors. |
| Court | United States Courts of Appeals. United States Court of Appeals (District of Columbia) |
Charles F. Wheatley, Jr., Washington, D. C., with whom Edward Berlin, Washington, D. C., was on the brief, for petitioners.
William J. Grealis, Atty., Federal Power Commission for respondent. Leo E. Forquer, Gen. Counsel, Federal Power Commission, George W. McHenry, Jr., Solicitor and William M. Sawyer, Atty., Federal Power Commission were on the brief for respondent.
Christopher T. Boland, Washington, D. C., with whom Robert G. Hardy and Thomas F. Ryan, Jr., Washington, D. C., were on the brief for intervenors Texas Gas Transmission Corp. and Transcontinental Gas Pipe Line Corp.
Frederick Moring, Richard G. Morgan and Stephen J. Small, Washington, D. C., were on the brief for intervenor Associated Gas Distributors.
Richard A. Solomon, Washington, D. C., entered an appearance for intervenor Public Service Commission of the State of New York.
Robert A. Jablon entered an appearance for Senators Humphrey, McGovern, Metcalf, Moss, Mondale and Proxmire and Representatives Aspin, George Brown, Eckhardt, Fraser, Moss and Reid as amicus curiae.
Before DANAHER, Senior Circuit Judge, and LEVENTHAL and WILKEY, Circuit Judges.
Petitioners seek review of 1973 Federal Power Commission orders, Order 491 and its supplements, which were based on projected gas shortages during the 1973-74 winter heating season. The challenged orders, for convenience referred to collectively as Order 491, exempted from the certification requirement of section 7 of the Natural Gas Act sales of 180 days duration made to pipelines experiencing or facing threatened curtailment of service. Under the 180 day exemption, producers were permitted to enter into contracts with eligible pipelines at any price and without risk of subsequent refund orders. 1 The FPC proposed to protect the consumer by allowing pipelines to pass on only those purchased gas costs "shown to have been required by the public interest." 2
Petitioners contend that the 180 day exemption constitutes an impermissible deregulation of producer sales in violation of the "just and reasonable" rate requirement of §§ 4 and 5 of the Act and the requirement of § 7 that new sales and service are permitted only under a certificate that they further the public convenience and necessity. 3 The Commission responds that its order is a proper exercise of its power under § 7(c) to exempt "temporary acts or operations" from the § 7 certification requirement. 4 We conclude that the Commission has stretched unduly its narrow § 7 exemption authority and has failed to establish a valid scheme of indirect regulation. Accordingly, we set aside the challenged orders. For the reasons set forth in part IV of the opinion, we remit petitioners' refund request for FPC consideration in the first instance.
An FPC staff survey revealed in 1970 that adequate gas supplies might not be available for the 1970-71 winter heating season. 5 In response to the anticipated shortfall, the Commission adopted Order 402, May 6, 1970, authorizing intrastate distribution companies to make 60 day resales of gas to jurisdictional pipelines without FPC approval or risk of becoming a "natural gas company" subject to Commission regulation. 6 Subsequently, the Commission issued Order 418 which modified regulations to permit 60 day purchases from independent producers "where an emergency exists on the pipeline's system." 7 The FPC noted in April, 1971, that despite "these emergency measures" a number of pipelines were unable to meet their firm demands. 8 In order to forestall emergencies during the next winter the Commission in Order 431 extended the 60 day exemption and decided to "consider limited-term certificates with pre-grant abandonment, if the pipeline demonstrates emergency need." 9 None of these early measures were challenged in the courts. 10
Another staff study of gas supplies, released July 16, 1973, projected "net curtailments of firm requirement customers of the major interstate pipelines" of 1.2 trillion cubic feet (tcf) during the April, 1973, to March, 1974, period with a .5 tcf shortfall during the 1973-74 winter. 11 The study found "reliable and adequate gas service even more jeopardized than at the juncture when (the Commission) initiated emergency measures" in 1970. 12 Concluding that further steps were necessary to prevent "severe economic and environmental consequences," the Commission, without notice or opportunity for comment, issued Order 491 on September 14, 1973. 13 The order exempted from § 7's certification requirement emergency sales, if deliveries commenced before March 15, 1974, even though they ran for a period as long as 180 days. Order 491 also suspended the limited-term certificate procedure of Order 431 "pending further study and order of the Commission." 14
On September 20, petitioners Consumer Federation of America, American Public Gas Association and National League of Cities-United States Conference of Mayors 15 sought leave to intervene and moved for rehearing and a stay of Order 491. Next day they filed a motion for stay in this court, claiming that the Commission's order had been adopted in violation of the Administrative Procedure Act and the Natural Gas Act. 16 The FPC denied petitioners' stay application in Order 491-A, September 25, 1973. 17 This order presented a more detailed picture of the projected curtailments and explained that the 180 day period was necessary "to obtain sufficient commitments for this winter heating season." 18 In addition, the Commission announced that it would allow interested parties to file comments. This court heard oral argument on petitioners' motion and, on October 3, 1973, stayed Order 491 pending Commission reconsideration after receipt of comments. 19
The FPC's Order on Reconsideration, Order 491-B, November 2, 1973, reaffirmed its decision to expand the emergency sales exemption to 180 days and reinstituted the limited-term certificate procedure. Petitioners applied to the FPC for a rehearing and stay of Order 491-B and moved in this court for an extension of the October 3 stay pending resolution of their petition for review. The Commission denied the rehearing and stay requests in Order 491-C, November 21, 1973. We then granted a stay of Order 491-B pending judicial review. Ten days later, on December 20, 1973, the Supreme Court granted the Solicitor General's application to vacate our stay.
Although all sales under Order 491 have been completed, the present controversy remains alive. Following the Supreme Court's action, the Order 491 procedures were available for sales to pipelines facing curtailment until terminated by Order 491-D on March 15, 1974. Between September 1973 and September 1974 over 500 sales, involving more than 172 billion cubic feet (172,000,000 mcf) of natural gas were exempted under the challenged orders. 20 Petitioners not only request that we set aside the expired orders but also seek refunds of rates paid producers in excess of the just and reasonable rate. 21 The limited duration of the orders combined with the continuing gas shortage make this controversy one "capable of repetition, yet evading review." 22 Indeed, while this case was pending the Commission advised that it was considering reinstating the 180 day exemption for the 1974-75 season. 23
Section 7 of the Natural Gas Act 24 requires that a natural gas company obtain a certificate of public convenience and necessity prior to engaging in the transportation or sale of natural gas in interstate commerce. Application for a certificate "shall be denied" unless the Commission after notice and hearing finds that the proposed sale or service "is or will be required by the present or future public convenience and necessity." 25 The FPC premised its decision "to exempt emergency purchases from regulation for 180 days" on a proviso in § 7(c) containing an exception to the general certification requirement. 26 The proviso states:
Provided, however, That the Commission may issue a temporary certificate in cases of emergency, to assure maintenance of adequate service or to serve particular customers, without notice or hearing, pending the determination of an application for a certificate, and may by regulation exempt from the requirements of this section temporary acts or operations for which the issuance of a certificate will not be required in the public interest.
The Commission puts it that "there is nothing in the legislative history . . . which is helpful to the interpretation of the Commission's exemption authority," and that "the clear language of Section 7(c) and the overall purposes of the Act" supports its reliance on the proviso. 27 Our analysis of the legislative history and statutory framework leads to a contrary conclusion.
In our view, the legislative history lends considerable insight into the intended scope of the proviso. It was designed as a narrow exception to enable the companies and the Commission to grapple with temporary emergencies and minor acts or operations, like emergency interconnections to cope with breakdowns or sporadic excess demand for gas.
The proviso was adopted as part of an amendment to § 7 passed in 1942. 28 An amendment was sought to remedy deficiencies in § 7(c) as enacted in 1938. 29 The 1938 law required certificates of public convenience and necessity only when natural gas companies proposed to enter "a market in which natural gas is already being served by another natural-gas company." 30 That provision, the FPC concluded, "has proved unsatisfactory and ineffective...
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