Federal Power Commission v. Louisiana Power Light Company United Gas Pipe Line Company v. Louisiana Power Light Co 8212 1016, 71 8212 1040

Decision Date07 June 1972
Docket NumberNos. 71,s. 71
Citation406 U.S. 621,32 L.Ed.2d 369,92 S.Ct. 1827
CourtU.S. Supreme Court

When United Gas Pipe Line Co. (United), a jurisdictional pipeline, experienced temporary shortages of natural gas supply forcing it to reduce deliveries to its contract customers, the Federal Power Commission (FPC) asserted its jurisdiction to effect a reasonable curtailment plan covering deliveries to both direct sales customers and purchasers for resale. While curtailment proceedings were pending before the FPC, Louisiana Power & Light Co. (LP & L), a direct sales customer of United, brought this action in the District Court against United, seeking to enjoin curtailment of deliveries to LP & L's plants pursuant to any FPC-promulgated plans, including any under FPC Order No. 431. LP & L also sought to enjoin United from seeking FPC certification of United's previously intrastate deliveries through its Green System. The FPC intervened, asserting that both matters were pending before it and any decision by the District Court would therefore invade its primary jurisdiction. The District Court dismissed the action, holding that the FPC had jurisdiction of both proceedings and that LP & L had to exhaust its administrative remedies. The Court of Appeals reversed, holding that the FPC lacked jurisdiction to curtail deliveries to direct sales customers, since Section 1(b) of the Natural Gas Act makes the Act applicable only to sales for resale. The Court of Appeals also reversed the District Court's decision on the Green System, holding that the system was wholly intrastate. Held:

1. The FPC has power to regulate curtailment of direct interstate sales of natural gas under the head of its 'transportation' jurisdiction in § 1(b), and the prohibition in the proviso clause of that provision withheld from FPC only rate-setting authority with respect to such sales. Pp. 631—647.

2. The FPC had primary jurisdiction to determine whether the Green System was subject to its authority, and the Court of Ap- peals erred in deciding that question. See Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 58 S.Ct. 459, 82 L.Ed. 638. Pp. 647—648.

456 F.2d 326, reversed.

Gordon Gooch, Washington, D.C., for the Federal Power Comm.

William C. Harvin, Houston, Tex., for United Gas Pipe Line Co. and Pennzoil United, Inc.

Andrew P. Carter, New Orleans, La., for La. Power and Light Co.

Mr. Justice BRENNAN delivered the opinion of the Court.

In April 1971 the Federal Power Commission (FPC) promulgated its Order No. 431 requiring every jurisdictional pipeline to report to the FPC whether curtailment of its deliveries to customers would be necessary because of inadequate supply of natural gas. A pipeline anticipating the necessity for curtailment was required to file a revised tariff to control deliveries to all customers—industrial 'direct sales' customers, purchasing gas for their own consumption, and 'resale' customers, purchasing gas for distribution to ultimate consumers.

The principal question here is whether the proviso to § 1(b) of the Natural Gas Act, 52 Stat. 821, 15 U.S.C. § 717, prohibits the FPC from applying its Order No. 431 to curtail direct-sales deliveries in times of natural gas shortage. Section 1(b) provides:

'The provisions of this Act shall apply to the transportation of natural gas in interstate commerce, to the sale in interstate commerce of natural gas for resale for ultimate public consumption for domestic, commercial, industrial, or any other use, and to natural-gas companies engaged in such transportation or sale, but shall not apply to any other trans- portation 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.' (Emphasis supplied.)

A subsidiary question presented is whether the doctrine of primary jurisdiction obliged the federal courts in this case to refer to the FPC for an initial determination of FPC jurisdiction to certificate a particular pipeline delivery when a certification proceeding to determine that question was pending before the Commission.

The Court of Appeals for the Fifth Circuit held that the proviso of § 1(b) prohibited application of FPC curtailment regulations to direct sales deliveries, and held, further, that neither that court nor the District Court was obliged to defer to the FPC's pending certification proceeding. 456 F.2d 326 (CA5 1972). We granted certiorari, 405 U.S. 973, 92 S.Ct. 1198, 31 L.Ed.2d 247 (1972). We reverse.


Respondent Louisiana Power & Light Co. (LP & L generates electricity at Sterlington-Electric Generating Station in Ouachita Parish, Louisiana, and at Nine-Mile Point Generating Station in Jefferson Parish, Louisiana. The natural gas burned under LP & L's boilers at both stations is purchased from United Gas Pipe Line Company (United), a petitioner in No. 71—1040, under direct-sales contracts of long standing. The sales to Sterlington Station are sales of interstate gas, initially certificated by the FPC. Sales to Nine-Mile Point Station had been wholly intrastate gas delivered from United's intrastate 'Green System' when, in 1970, United diverted 2.6% of the gas from its interstate 'Black System' into the intrastate 'Green System,' after which United sought FPC certification of the 'Green System.' In 1970 also, United, from concern that its gas supply during the 19701971 heating season would fall short of demand, sought a declaratory order from the FPC to approve a proposed program of curtailment of natural gas deliveries to both its direct and resale customers. This proceeding culminated in agreement among affected customers under which FPC allowed United to carry out its program for the 19701971 winter.

When, however, United made a supplemental filing in February 1971, for a proposed curtailment program for the 1971 summer season, LP & L, in March 1971, filed this diversity action in the District Court for the Western District of Louisiana, alleging that the program was a breach of its contracts with United and asking injunctive relief against its implementation. LP & L also asked for a judgment declaring that the 'Green System' was an intrastate system, deliveries from which did not require FPC certification. The FPC and United sought dismissal of the action on the ground that a prior decision by the District Court would be destructive of the FPC's primary jurisdiction since the FPC was, in fact, asserting its jurisdiction over both issues at that time and was promulgating its Order No. 431, and United, in response to Order No. 431, was filing its third curtailment plan.

In opposition to the motions to dismiss in the District Court, LP & L argued that the FPC was without jurisdiction to authorize or approve curtailment programs affecting direct-sales deliveries and was also without jurisdiction to curtail deliveries to Nine-Mile Point Station because they were local and not interstate deliveries. On June 30, 1971, the District Court dismissed the action, holding that the FPC had jurisdiction of both curtailment and certification proceedings and that LP & L had to exhaust its administrative remedies in both, 332 F.Supp. 692 (1971). The Court of Appeals decision reversed this dismissal.


United is a 'jurisdictional' pipeline1 purchasing gas from producers in Texas and Louisiana and supplying wholesalers, direct sales customers, and other pipelines. United supplies ultimate consumers throughout the eastern half of the United States from Texas to Massachusetts with a peak-day commitment in the winter heating months totaling about 6,000,000 thousand cubic feet (Mcf).

In 1970, as part of a pattern of temporary and chronic natural gas shortages throughout the Nation,2 United found itself unable to meet all of its contract commitments during peake demand periods.3 Indeed, on days of greatest use, United expected to fall short by as much as 20% or more.4 In October 1970 United first promulgated a proposed delivery curtailment plan and sought a declaratory order from the FPC that the plan was consistent with United's obligations under its tariff and direct-sales contracts.5 Many of United's contracts with its customers made some provision for curtailment in times of temporary shortage, but these terms were complex and were not identical in all contracts or in United's tariff filings with the Commission. 6 United's proposed curtailment plan established a priority system of three groups, curtailed on the basis of end use. These three groups were, in order of the lowest priority and curtailed first, gas used for industrial purposes, including gas to generate electricity for industrial purposes; gas used to generate electricity consumed by domestic consumers; and gas used by domestic consumers. See United Gas Pipe Line Co., F.P.C. Op. No. 606 Oct. 5, 1971. The plan made no distinction between direct-sales customers and resale customers.

This plan was opposed by LP & L and others, primarily on the ground that the FPC had no jurisdiction to curtail deliveries under direct-sales contracts. While preserving their objections, all but one of United's customers7 agreed to a modified plan to go into effect for the 19701971 winter season while the proceedings continued.

During this same season, many other pipelines reported serious shortages and applied to the FPC for assistance in effecting curtailment plans. In response, the FPC promulgated several emergency provisions for temporary measures to avoid major disruptions of power supplies. Orders Nos. 402, 35 Fed.Reg. 7511, and 402A, 35 Fed.Reg. 8927, authorized short-term purchases by pipelines facing shortages from other jurisdictional pipelines to ensure that storage fields were filled. Order No. 418, 35...

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