F.E.R.C. v. Triton Oil & Gas Corp., 82-2157

• Decision Date: 19 July 1983
• Docket Number: No. 82-2157,82-2157
• Citation: 712 F.2d 1450
• Parties: FEDERAL ENERGY REGULATORY COMMISSION, Appellant, v. TRITON OIL & GAS CORPORATION.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1450

712 F.2d 1450

229 U.S.App.D.C. 418

FEDERAL ENERGY REGULATORY COMMISSION, Appellant, v. TRITON OIL & GAS CORPORATION.

No. 82-2157.

United States Court of Appeals District of Columbia Circuit.

Argued June 2, 1983.

Decided July 19, 1983.

Appeal from the United States District Court for the District of Columbia (D.C. Civil Action No. 79-1004).

Joel M. Cockrell, Atty., F.E.R.C., Washington, D.C., with whom Charles A. Moore, Gen. Counsel, and Jerome M. Feit, Sol., F.E.R.C., Washington, D.C., were on brief, for appellant.

Bernard A. Foster, III, Washington, D.C., with whom Jacob Goldberg, Washington, D.C., was on brief, for appellee.

Before ROBINSON, Chief Judge, and WRIGHT and WALD, Circuit Judges.

Opinion for the Court filed by Circuit Judge WALD.

WALD, Circuit Judge:

Appellant Federal Energy Regulatory Commission ¹ (FERC or Commission) appeals from a decision of the district court summarily dismissing its claim for injunctive relief against appellee Triton Oil and Gas Corporation (Triton) for failure to make certain refunds to purchasers of its natural gas and to report those refunds as required by several prior Commission orders. The district court held that Triton did not have a legal duty to make such refunds and reports. The court interpreted the prior Commission orders to impose refund and reporting duties only on those producers of natural gas that had been charging and collecting rates subject to the explicit refund obligations of § 4(e) of the Natural Gas Act of 1938 (Act), 15 U.S.C. § 717 et seq., a category that does not include Triton. Because we believe that the Commission orders in question are not so restricted and that Triton has an obligation under those orders to make refunds and file reports with the Commission, we reverse the order of the district court and remand for further proceedings.

I. BACKGROUND

Under the Natural Gas Act of 1938, the FERC has the authority to regulate interstate sales of natural gas by setting "just and reasonable" rates, § 5(a), 15 U.S.C. § 717d(a), for the "sale in interstate commerce of natural gas for resale for ultimate public consumption ...," § 1(b), 15 U.S.C. § 717(b). Because the Act's provisions do not specifically cover producers or wellhead sales of natural gas, the Commission initially declined to regulate sales by independent producers ² to interstate pipelines. Public Service Commission v. Mid-Louisiana Gas Co., --- U.S. ----, ----, 103 S.Ct. 3024, 3030-3031, 75 L.Ed.2d ---- (1983); Mobil Oil Corp. v. FPC, 417 U.S. 283, 302, 94 S.Ct. 2328, 2342, 41 L.Ed.2d 72 (1974); Permian Basin Area Rate Cases, 390 U.S. 747, 755-56, 88 S.Ct. 1344, 1353-54, 20 L.Ed.2d 312 (1968). In 1954, however, the Supreme Court held that independent producers are "[n]atural-gas compan[ies]" within the meaning of § 2(6) of the Act, 15 U.S.C. § 717a(6), ³ and therefore are subject to regulation by the Commission. Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035 (1954).

Following this decision, the Commission attempted to determine whether the rates of independent producers were "just and reasonable" by applying a traditional regulatory approach, using individualized costs of service as a basis for determining price. It quickly found this approach, however, impossible to administer because of the sheer numbers of independent producers engaged in natural-gas sales. Public Service Commission v. Mid-Louisiana Gas Co., --- U.S. at ----, 103 S.Ct. at 3030; Mobil Oil Corp. v. FPC, 417 U.S. at 303-04, 94 S.Ct. at 2343-44; Permian Basin Area Rate Cases, 390 U.S. at 756-57, 88 S.Ct. at 1354-55. As a result, in the early 1960's the Commission decided to set rates by area. It established several discrete geographical areas within which it believed that costs and general operating conditions were reasonably similar and set out to determine, through hearings and compilation of data, uniform rate schedules that would govern all producers within each area. Public Service Commission v. Mid-Louisiana Gas Co., --- U.S. at ----, 103 S.Ct. at 3030; Mobil Oil Corp. v. FPC, 417 U.S. at 304, 94 S.Ct. at 2343. In Permian Basin Area Rate Cases, 390 U.S. 747, 88 S.Ct. 1344, 20 L.Ed.2d 312 the Supreme Court sustained the constitutional and statutory authority of the Commission to adopt this system of area regulation in the discharge of its responsibilities under the Natural Gas Act to determine whether producers' rates are just and reasonable.

The Southern Louisiana area ⁴ is one of the seven geographical areas defined by the Commission for the purpose of prescribing areawide price ceilings. ⁵ The Commission first instituted proceedings to establish an area rate structure for the Southern Louisiana area on May 10, 1961. Area Rate Proceeding, Docket No. AR61-2 ..., "Order Instituting Rate Proceeding for the Southern Louisiana Area, Consolidating Proceedings and Prescribing Preliminary Procedure," 25 F.P.C. 942 (1961). All producers of natural gas in the area, including Triton, through its predecessors-in-interest, see FERC Brief, Appendix B, were named respondents to the proceedings. In addition, in the order instituting the proceedings, the Commission consolidated a number of filings by area producers for rate increases under § 4(e) of the Act, 15 U.S.C. § 717c(e), ⁶ because those producers might have been charging and collecting rates that would be declared "unjust, unreasonable, unduly discriminating or preferential" in the main proceedings. 25 F.P.C. at 943.

The initial hearing on rates for the Southern Louisiana Area ended in 1965, and the Presiding Examiner issued his decision in 1966. Southern Louisiana Area Rate Cases v. FPC, 428 F.2d 407, 418-19 (5th Cir.1970) (SoLa I ). The Commission rendered its decision in 1968, Opinion No. 546, 40 F.P.C. 530 (1968), which it modified on rehearing in 1969, Opinion No. 546-A, 41 F.P.C. 301 (1969). In Opinion No. 546 and 546-A the Commission (1) established a multi-tiered rate structure for sales of natural gas (the more recent the contracts for interstate sale of gas, the higher the price); (2) ordered the producers whose § 4(e) proceedings it had consolidated with the main case to make refunds (totaling approximately $375 million) on the basis of the difference between the pre-October 1, 1968, rates established in Opinion No. 546 and the actual rates collected; and (3) imposed a five-year moratorium on rate increases above those set in the new rate structure. 40 F.P.C. 530. Although Opinions No. 546 and 546-A did not require producers whose rates were not subject to § 4(e) to make refunds for payments collected under pre-October 1, 1968, contracts, they did set new maximum rates for gas contracted for after October 1, 1968, binding on all producers of natural gas in the Southern Louisiana area.

Opinions No. 546 and 546-A were appealed to the Fifth Circuit Court of Appeals. In May 1969, pending that court's decision, both the Fifth Circuit and the Commission stayed the rates promulgated in the opinions. ⁷ Area Rate Proceeding ..., "Order Staying Rate Reductions," 41 F.P.C. 675 (1969). On December 15, 1969, shortly before oral argument in the Fifth Circuit case, the Commission instituted new proceedings (Docket No. AR69-1) to reconsider all major actions it had taken in Opinions No. 546 and 546-A because of the possibility of a nationwide natural-gas shortage. SoLa I, 428 F.2d at 421. Determining that the new proceedings should have no effect upon its review, the Fifth Circuit affirmed Opinions No. 546 and 546-A. It also specifically declared, however, that its affirmance should not "be interpreted to interfere with Commission action that would change the rates we have approved here." Id. at 444-45.

Following the issuance of SoLa I, various petitions for rehearing were filed. In the course of its deliberations on those petitions, the court directed certain questions to the Commission by letter. The Commission filed its response in May 1970, advising the Court of Appeals that, among other things, the Commission believed it has "no authority to prescribe or permit retroactive rate changes ... unless the reviewing Court otherwise directs." Opinion No. 598, 46 F.P.C. 86, 99-100 (1971).

In its opinion denying rehearing, the Fifth Circuit stated unequivocally that it had "otherwise directed," writing that the Commission had the authority "to reopen any part of its order that circumstances require be reopened." Southern Louisiana Area Rate Cases, 444 F.2d 125, 126-27 (5th Cir.1970) (per curiam) (emphasis in original). The Commission thereupon formally reopened the 1961 area rate proceedings (Docket No. AR61-2), consolidated them with the new proceedings (Docket No. AR69-1), and continued the stay of Opinions No. 546 and 546-A. ⁸ Area Rate Proceeding ..., "Order Reopening and Consolidating Area Rate Proceedings and Establishing Procedures," 44 F.P.C. 1638 (1970). In addition, a settlement proposal agreed to by the majority of the consumer, pipeline, and producer interests involved in the proceedings was made a part of the record in the newly consolidated proceedings. Id. at 1639.

In Opinion No. 598, issued on July 16, 1971, the Commission adopted the proposed settlement, concluding that its terms were just and reasonable and supported by substantial evidence in the record. Opinion No. 598, 46 F.P.C. at 110, 131, 137-38, 142. As a consequence, effective August 1, 1971, the Commission changed the three-tier rate schedule established in Opinions No. 546 and 546-A to two tiers (for contracts dated prior to October 1, 1968, and for those dated on or after that date) and raised the maximum rates above the rates set out in those opinions. The Commission also accepted the agreement's stipulated refund obligation of $150 million, a sizable reduction from the approximately $375 million that the Commission had calculated would be due under Opinions No. 546 and 546-A. In addition, the approved settlement refund formula,...