Florida Power & Light Co. v. Federal Energy Regulatory Commission

• Decision Date: 05 July 1979
• Docket Number: No. 77-2869,77-2869
• Citation: 598 F.2d 370
• Parties: FLORIDA POWER & LIGHT COMPANY and Amoco Production Company, Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 370

598 F.2d 370

FLORIDA POWER & LIGHT COMPANY and Amoco Production Company Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.

No. 77-2869.

United States Court of Appeals Fifth Circuit.

July 5, 1979.

Peyton G. Bowman, III, Washington, D. C., for Florida Power & Light co.

William H. Emerson, Chicago, Ill., Carroll L. Gilliam, Wayne W. Whitney, Jr., Washington, D. C., Percy Sandel, James A. Barton, III, New Orleans, La., for Amoco.

Robert R. Nordhaus, Gen. Counsel, F.E.R.C., Philip Telleen, Atty., F.E.R.C., McNeill Watkins, II, Washington, D. C., for respondent.

Petitions for Review of An Order of the Federal Energy Regulatory Commission.

Before BROWN, Chief Judge, GODBOLD and RONEY, Circuit Judges.

RONEY, Circuit Judge:

Although the number of parties to this natural gas case, and the similarity of names, and the interrelation of each with the other, appear as complicated as a Russian novel, both the facts and the issues can be rather simply stated, even though the decision is difficult. This case involves sections 7(c) and 7(e) of the Natural Gas Act, 15 U.S.C.A. §§ 717f(c) and (e).

Amoco Production Company produced natural gas from new offshore wells. It is desired to use that gas to fulfill two old warranty contracts: one with Florida Power & Light Company, for boiler fuel; and one with Florida Gas Transmission Company, for resale to its customers, some of whom used the gas for boiler fuel. Under the Act a certificate of public convenience and necessity is required from the Federal Energy Regulatory Commission to transport gas. 15 U.S.C.A. § 717f(c). For Amoco to get the offshore gas to Florida Gas terminals on shore, from which it then could be transported by Florida Gas, under existing certificates, to Florida Power & Light and to the customers of Florida Gas, certificates of public convenience and necessity were needed. In response to applications for such certificates, the Commission approved the transportation of the gas from the offshore wells to the onshore terminals, but so conditioned the certificates as to prohibit Amoco from using the gas for the Florida Power & Light boiler fuel contract.

Since the Commission had years ago approved the Florida Power & Light contract, Amoco argues that it could not condition these certificates in such a way as to prevent it from using offshore gas to fulfill the contract. The Commission contends it has the right to condition the certificates as it did under its authority to determine the priority of ultimate users of gas, due to the insufficient supply to meet all needs, and under its stated and approved policy that boiler fuel use has a low priority. Florida Power & Light asserts that even if that is so, the Commission has treated it unfairly because, while prohibiting it from using the gas as boiler fuel, it is permitting the gas to be used for Florida Gas' resale customers to use for boiler fuel.

In view of congressional and judicial decisions that public necessity overrides private concerns in natural gas regulation, we hold first, as a technical matter, that the Commission did not by the action here amend or modify its prior certificates, which it might not have the power to do, and second, that it acted within its authority in imposing the complained of conditions on these new certificates.

Persons having a direct interest in this case are the applicants for the certificates issued by the Commission: Amoco Production Company, a subsidiary of Standard Oil Company of Indiana, Natural Gas Pipeline Company of America, Columbia Gulf Transmission Company, Sea Robin Pipeline Company, Tennessee Gas Pipeline Company, a division of Tenneco, Inc., and Fort Pierce Utilities Authority; and the purchasers of the natural gas covered by the certificates: Florida Power & Light Company (FP&L) and Florida Gas Transmission Company (FGT). Sea Robin Pipeline Company is not a party to this appeal. Another dozen or so parties having a possible interest in the case, but not represented on this review, are listed by counsel. Our reference to Amoco hereafter includes all parties who sought a certificate in this case and in whose interest it might be to reverse the Commission on this review.

Under review is a May 2, 1977 order of the Federal Energy Regulatory Commission imposing conditions on certificates of public convenience and necessity sought by Amoco for the transportation of gas from offshore wells to onshore pipeline terminals. Review is being sought under section 19(b) of the Natural Gas Act, 15 U.S.C.A. § 717r(b). See Transcontinental Gas Pipe Line Corp. v. F.E.R.C., 589 F.2d 186, 188 (5th Cir. 1979).

The applications for certificates of public convenience and necessity filed with the Commission in late 1972 and 1976 were a part of Amoco's continuing program to deliver gas under two warranty contracts with FGT and FP&L approved by the Commission in 1965 and 1967. Underlying these applications are exchange and transportation agreements executed by Amoco and four interstate pipeline companies. ¹ These agreements were designed to move gas from Amoco's offshore leases to delivery points on FGT's pipeline in south Louisiana, where the gas is taken by FGT and transported to Florida for release to FGT's customers and for use by FP&L.

After evidentiary hearings on the applications and the submission of briefs the Commission issued its May 2, 1977 order granting certificates of public convenience and necessity, but imposing certain conditions on the certificates. Concluding that it would be against the public interest to authorize the use of Federal Domain offshore gas for boiler fuel at a time of natural gas shortage, the Commission's conditions prohibited Amoco from supplying gas for transportation by FGT to FP&L for boiler fuel. Specifically Amoco challenges the following portions of the order:

1. Paragraph H which provides that gas produced from offshore Federal Domain sources "shall be delivered to FGT only in satisfaction of the FGT warranty sale, and none of such gas shall be transported to FPL."

2. Paragraph D which requires Amoco to apply to the Commission for authorization before disconnecting the sources of supply used in the performance of the two warranty contracts.

3. Paragraph E which imposed delivery conditions in terms of field capacity instead of warranty volumes.

The other conditions imposed in the order are not before this Court on this appeal.

It seems clear at the outset that, were it not for the existing Commission-approved warranty sales contracts of Amoco with FP&L and FGT, the conditions on the certificates would have to be approved on this review. Although Amoco argues that the imposition of the conditions is not supported by substantial evidence, and FP&L argues that it is being treated unfairly vis-a-vis FGT, two issues which are treated later in this opinion, the central argument made on this petition for review is that the Commission's prior approval of the warranty contracts with FP&L and FGT prohibits it from conditioning these certificates so that offshore gas cannot be transported to FP&L for use as boiler fuel in satisfaction of the contracts.

Amoco argues that the action has the legal and practical effect of modifying the final certificates issued in 1965 and 1967 under section 7(c) of the Natural Gas Act. It contends such modification of a final certificate is beyond the statutory authority of the Commission under United States v. Seatrain Lines, Inc., 329 U.S. 424, 67 S.Ct. 435, 91 L.Ed. 396 (1947), and its progeny, and an unlawful attempt to modify a settlement agreement approved by the Commission in 1967 and relied upon by the parties in planning performance of the contracts involved, citing Texas Eastern Transmission Corp. v. F.P.C., 306 F.2d 345 (5th Cir. 1962), Cert. denied, 375 U.S. 941, 84 S.Ct. 347, 11 L.Ed.2d 273 (1963).

The Commission, on the other hand, contends that the prior certificates have not been amended or modified so as to bring the case within the contours of Seatrain, and that in any event, the Natural Gas Act provides and the Commission has long interpreted the Act to allow for amendment of final certificates where required by the public interest. We do not reach the second contention because, in our view, the action of the Commission did not amount to amendment or modification of prior final certificates.

We discuss the case in these terms: the Commission action was not an amendment or modification of the prior certificates; the Commission's prior actions did not otherwise prevent it from imposing restrictive conditions on the certificates; and the certificate conditions were within its lawful authority.

DID THE COMMISSION ACTION MODIFY FINAL SECTION 7 CERTIFICATES?

The two warranty contracts which obligate Amoco to supply gas to FGT and FP&L were entered into in November 1964 and March 1965. The FP&L contract was modified in 1967. In June 1965 the Commission granted a certificate to FGT to construct and operate facilities into Florida necessary to transport gas supplied by Amoco to FP&L. In September 1965 the Commission granted a certificate to the predecessor of Amoco, then the Pan American Petroleum Corporation, to sell gas to FGT to perform the two warranty contracts. In reliance on the two warranty contracts, FGT invested 135 million dollars in facilities and construction. By another certificate order issued in May 1967 the Commission approved a settlement ² respecting modifications of conditions imposed on the use of offshore Federal Domain gas by Amoco in performance of the warranty contract with FP&L. The 1967 modifications agreed to by the parties to the warranty contracts and others and approved by the Commission permitted Amoco to add or withdraw offshore gas supplies, with the limitation that no more than 82% of the gas sold by Amoco to FP&L was to be produced from offshore fields. This provision was applicable to a 10-year period ending in June 1978. The 19...