Federal Power Com'n v. Panhandle Eastern Pipe Line Co.

• Decision Date: 06 January 1949
• Docket Number: No. 9847.,9847.
• Citation: 172 F.2d 57
• Parties: FEDERAL POWER COMMISSION v. PANHANDLE EASTERN PIPE LINE CO.
• Court: U.S. Court of Appeals — Third Circuit

172 F.2d 57 (1949)

FEDERAL POWER COMMISSION v. PANHANDLE EASTERN PIPE LINE CO.

No. 9847.

United States Court of Appeals Third Circuit.

Argued December 21, 1948.

Decided January 6, 1949.

Writ of Certiorari Granted March 28, 1949.

William S. Tarver, of Washington, D. C., for appellant.

Robert P. Patterson of New York City (E. Ennalls Berl, of Wilmington, Del., Harry S. Littman, of Washington, D. C., and Francis J. Sypher, of New York City, on the brief), for defendant-appellee, Panhandle Eastern Pipe Line Co.

Jeff A. Robertson, of Topeka, Kan., for State Corporation Commission of Kansas.

Arthur G. Connolly, of Wilmington, Del. (Smith & McInerney, of New York City, on the brief), for intervener Smith.

Richards, Layton & Finger, of Wilmington, Del. (Winthrop, Stimson, Putnam & Roberts, of New York City, on the brief), for interveners Clark and others.

Townsend, Elliott & Munson, of Philadelphia, Pa., for Insurance Co. of North America.

Before MARIS, GOODRICH, and KALODNER, Circuit Judges.

Writ of Certiorari Granted March 28, 1949. See 69 S.Ct. 748.

GOODRICH, Circuit Judge.

Dramatis Personae.

1. Federal Power Commission, called "Commission," plaintiff in the court below and appellant here.

2. Panhandle Eastern Pipe Line Company, called "Panhandle," defendant below and appellee here.

3. State Corporation Commission of the State of Kansas.

4. Various Interveners, shareholders of Panhandle.

5. A part with no speaking lines but referred to by all the parties. Hugoton Production Company, called "Hugoton." It is a child of Panhandle, incorporated under the laws of the State of Delaware. Whether the child is legitimate or not is one of the points in this litigation.

Argument.

Panhandle is an interstate pipe line company which transports and sells gas to local distributors from Texas to Michigan. This gas it gets from wells in Texas, Kansas and Oklahoma. It says it has gas properties under lease which will yield some six trillion cubic feet of natural gas. In September, 1948, Panhandle organized Hugoton, transferred to it gas leases on 97,000 acres of land in Kansas, and retained an option to purchase all or part of the gas produced from that land after January 1, 1965. Hugoton, in turn, has made a contract to sell the gas produced to a distributing company in Kansas which in turn has contracted to sell it for consumption wholly within the state of Kansas. Panhandle also paid Hugoton $675,000 in cash and took back from this company all of its outstanding capital stock. Then it declared a dividend to its own shareholders, one share of Hugoton to every two-share ownership of Panhandle. Share certificates were made out, put in envelopes and made ready to mail from the office of the United States Corporation Company in New Jersey. Mailing was held up by a temporary restraining order by the District Court. That court, after hearing, refused a preliminary injunction. Plaintiff appealed. We continued the stay until the case could be heard and decided in this Court.

The Commission took its first action on October 26, 1948, when it issued an order instituting an investigation of the formation and proposed operation of Hugoton, and the transfer to it of the gas leases mentioned above. On November 10, 1948, the Commission issued a supplementary order to Panhandle and Hugoton, setting the matter down for hearing on January 24, 1949, directing the companies to show cause why the transfers of leases and stock should not be set aside, and directing maintenance of the status quo pending such determination.

Legal Points.

The controversy here arises out of the statute known as the Natural Gas Act passed in 1938.¹ That statute by its first section declares that federal regulation in the matters of transportation of natural gas and the sale thereof in interstate and foreign commerce is necessary in the public interest. There is no doubt that Panhandle is transporting and selling natural gas in interstate commerce and that under section 1 of the Act such transportation and sale by the company are subject to its provisions. The last sentence of the first section of the statute, however, carves out from the subject matter to be regulated a very important exception. The words are: "* * * but shall not apply to any other transportation or sale of natural gas or to the local distribution of natural gas or to the facilities used for such distribution or to the production or gathering of natural gas." 15 U.S.C.A. § 717(b).

It would certainly seem from the first half dozen readings of these exclusionary words in the statute that Congress has pretty clearly taken out from its operation and left to state regulation² the subject matter of the Panhandle-Hugoton transaction. That subject matter was a parcel of gas leases on land in Kansas. It is pretty hard to see why such leases are not facilities used in the production of natural gas. The word "facilities" has a pretty wide meaning as one looks it up in the dictionary and a glance at the use of the term in court decisions indicates no narrowing of the breadth of the term.³ We have no reason to think that Congress meant it to be narrowly applied here.

One is, therefore, immediately confronted with the question: Why, if matters concerning local gas leases are excluded from the scope of the statute, does the Commission charged with its administration have anything to do with the transaction between Panhandle and Hugoton? It is true that under section 14 of the Act, 15 U.S.C.A. § 717m, the Commission has wide investigatory powers, much wider than any subject matter regulated by the statute. It is, for instance, authorized to conduct investigations to obtain information to serve as a basis for recommendation for further legislation to Congress. It was as a matter of investigation that the Commission first started to work upon this Panhandle transfer. But no one in the argument before this Court challenges the scope of the Commission's investigatory power. And such power does not, as to this litigation, require any action from a court of equity.

The first answer the Commission makes to the contention that regulation of this transaction is beyond the authority which the Congress granted it, is to say that it is now an established principle of administrative law that the administrative body or agency is, in the first instance, its own judge of the scope of its jurisdiction. Several Supreme Court decisions are cited to us in support of this suggested principle.⁴ This Court is not unfamiliar with the decisions cited nor the problems they present, and it quite realizes the risks of making sweeping generalizations in a developing field of the law. We think the one suggested to us is too sweeping. The instances cited were cases where courts came in between the litigant and the agency and blocked, or refused to assist, the carrying out of duties imposed by the lawmaking body upon the agency. The Wages and Hours Administrator cannot, of course, determine whether a given operation in a particular factory is subject to the statute until he finds out what the operation is and then finds out if the provisions of the law are being obeyed by the factory owner.⁵ But in this case no court is stepping between the Commission and the performance of its job. The Commission is, on the other hand, seeking court help, which it admits is discretionary, in a situation where its investigatory powers have been unopposed.⁶ When a party plaintiff seeks court help, it must show that it is entitled to such help. In determining whether a plaintiff is entitled to the relief asked, the court cannot escape the responsibility of deciding whether plaintiff has been given rights or powers for which court sanction is now sought.

On the question of an administrative agency's determination of its own jurisdiction, moreover, we find that with regard to this Commission and this subject matter, the agency has pretty well defined its own position. It has been found as a fact that "It has been the practice in the natural gas industry for companies to trade freely in gas leases, and the Commission has never heretofore asserted the right to regulate transfers of such leases." Furthermore, the Commission itself has stated officially: "The Federal Power Commission is of the opinion that it was the intent of Congress that the control of production or gathering of natural gas should remain a function of the States and that the Natural Gas Act should not provide for regulation of those subjects." 18 Code Fed.Regs. § 03.79, p. 2903 (Supp.1947). And the same point has been stated in Supreme Court opinions, although the statements are doubtless obiter and the court's attention was directed to some other point.⁷

Our conclusion as to the argument on this part of the case is that it is our obligation to go ahead and decide the instant appeal on what we believe to be its merits without waiting for further action by the Commission.

The Commissioner's argument for foundation of jurisdiction makes three points. In the first place it says that Panhandle in a previous matter in which the Commission undoubtedly had jurisdiction, represented most of the leases included in the Panhandle-Hugoton transaction to be used and useful in the operation of its then existing pipe line facilities. (2) On the basis of this and, of course, other representations and facts the Commission permitted such leases to be included in Panhandle's rate base. (3) Panhandle in an application for certificates of public convenience and necessity under section 7 of the Act, 15 U.S.C.A. § 717f, made representations to the Commission on the basis of acreage of gas leases it held, some of which are being disposed of in this transaction with Hugoton. These three points, it is said, bring the alienation of gas leases within the scope of Commission activity and form the basis for asking that...