Gas Co v. Federal Power Commission

• Decision Date: 02 April 1945
• Docket Number: COLORADO-WYOMING,No. 575,575
• Citation: 65 S.Ct. 850,324 U.S. 626,89 L.Ed. 1235
• Parties: GAS CO. v. FEDERAL POWER COMMISSION et al
• Court: U.S. Supreme Court

324 U.S. 626

65 S.Ct. 850

89 L.Ed. 1235

COLORADO-WYOMING GAS CO.

v FEDERAL POWER COMMISSION et al.

No. 575.

Argued Jan. 30, 1945.

Decided April 2, 1945.

Mr. Donald C. McCreery, of Denver, Colo., for petitioner.

Mr. Charles U. Shannon, of Washington, D.C., for respondents.

Mr. Justice DOUGLAS delivered the opinion of the Court.

This case is a companion case to Colorado Interstate Gas Co. v. Federal Power Commission, and Canadian River Gas Co. v. Federal Power Commission, 324 U.S. 581, 65 S.Ct. 829. Petitioner began operations in 1925. Until 1929 petitioner obtained its entire supply from the Wellington Field of the Continental Oil Co., near Ft. Collins, Colorado. Its transmission line ran from that point north to Cheyenne, Wyoming. The Wellington Field began to diminish. So petitioner, in October, 1929, entered into a twenty-year contract with Colorado Interstate to purchase gas from it, the gas to be delivered to petitioner at its metering station near Littleton, Colorado. Accordingly, in 1929 and 1930 petitioner constructed a pipe line between Ft. Collins, Colorado and Littleton, Colorado, where connection was made with Colorado Interstate's transmission system. Between 1929 and 1939 branch lines were constructed to serve various cities, towns, and industrial customers in Colorado. At the present time all but two per cent of its gas is obtained from Colorado Interstate. Petitioner sells gas at the Cheyenne city gate to its affiliate Cheyenne Light, Fuel and Power Co. It also sells directly to industrial consumers in Colorado and to some extent in Wyoming. And it sells gas at various city gates in Colorado for resale.

The investigation and hearings on the interstate wholesale rates of Canadian, Colorado Interstate and petitioner were consolidated. As we have seen the Commission ordered Canadian to reduce its rates by $561,000 per year. That amount made up part of the $2,065,000 annual reduction which the Commission ordered in the rates of Colorado Interstate. In the present case the Commission found that petitioner's revenues were $159,000 in excess of costs and a fair return and that $119,000 of that excess were allocable to petitioner's sales for resale. The Commission ordered petitioner to reduce its wholesale rates by $119,000 a year. 43 P.U.R.,N.S., 205, 234. That does not represent the net decrease in revenue, since the Commission ordered Colorado Interstate to reduce its rates to petitioner by $98,000 a year. Accordingly, the net decrease in revenues of petitioner will be $21,000 if the Commission's order stands. The petition for certiorari which we granted to review the judgment of the Circuit Court of Appeals affirming the order of the Commission (10 Cir., 142 F.2d 943) was limited to the question whether the allocation of cost of service used by the Commission is without support in the record and contrary to law.

The Commission in this case as in Colorado Interstate Gas Co. v. Federal Power Commission and Canadian River Gas Co. v. Federal Power Commission did not make a separation of properties used in the regulated business from those used in the unregulated. It used instead the same method of allocation of costs as it did in those other cases. Peitioner contends that the Commission's method of allocation of costs included in the regulated business a part of its business which Congress has not subjected to regulation by the Commission. As we have noted, petitioner's transmission line commences in Colorado near Littleton where it connects with the pipeline of Colorado Interstate. Peitioner sells some of its gas in Colorado for resale to domestic users in certain towns in Colorado. The Commission held that those wholesale sales were subject to its jurisdiction. Petitioner contends that those sales are made in intrastate commerce and are not subject to the Commission's rate making powers. Its position is that the one and only sale for resale by it in interstate commerce is the sale at the city gate in Cheyenne, since none of the Colorado sales involve interstate commerce so far as petitioner is concerned.

The answer turns on the meaning of § 1(b) of the Act (52 Stat. 821, 15 U.S.C. § 717, 15 U.S.C.A. § 717(b) which provides:

'(b) The provisions of this chapter 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 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.'

The Commission relied on Illinois Natural Gas Co. v. Central Illinois Public Service Co., 314 U.S. 498, 62 S.Ct. 384, 86 L.Ed. 371, in concluding that it had jurisdiction over the wholesale sales in Colorado. That case presented the question whether the Illinois Commission or the Federal Power Commission had authority to authorize a pipeline extension wholly within Illinois. The company proposing the extension (Illinois Gas Co.) owned a pipeline system wholly in Illinois which was connected at various points in that State with the pipeline of its parent company, Panhandle Eastern Pipe Line Co., which owned and operated a natural gas pipeline system from gas fields in Texas, Kansas and Oklahoma across Illinois and into Indiana. The Illinois company purchased its gas under a long term contract from Panhandle Eastern and transported it through its own lines to local gas distributing utilities in Illinois to which it sold the gas for distribution to consumers in various Illinois cities. We held that the Illinois company by virtue of § 7(c) of the Act, 15 U.S.C.A. § 717f(c),¹ could build an extension to connect with the facilities of a company distributing gas to consumers in Illinois only after obtaining a certificate of public convenience and necessity from the Federal Power Commission. We held that the Illinois company and Panhandle Eastern were engaged 'in interstate commerce in the purchase and sale of the natural gas which moves in a continuous stream from points without the state' into the pipes of the Illinois company; and that 'the particular point at which the title and custody of the gas passes to the purchaser without arresting its movement to the intended destination does not affect the essential interstate nature of the business.' 314 U.S. at pages 503, 504, 62 S.Ct. at page 386, 86 L.Ed. 371. We pointed out that the purpose of the Act was to provide 'an agency for regulating the wholesale distribution to public service companies of natural gas moving interstate, which this Court had declared to be interstate commerce not subject to certain types of state regulation.' Id., 314 U.S. at page 506, 62 S.Ct. at page 387, 86 L.Ed. 371. We reviewed the earlier decisions of the Court which adopted the mechanical test for determining when interstate commerce ends and intrastate commerce begins, viz., when the gas is introduced into the service pipes of the local distributor. We noted that it was to fit the pattern of state regulation reflected in those decisions that the Natural Gas Act was passed.

Accordingly, we conclude that if petitioner's pipeline were to be constructed today from Littleton, Colorado to the city gates of the Colorado towns where petitioner's gas is resold, § 7(c) would require that a certificate of public convenience and necessity be obtained from the Commission. For in this case as in Illinois Natural Gas Co. v. Central Illinois Public Service Co., supra, the gas which petitioner purchases from Colorado Interstate moves in a continuous stream across state lines to local distributing companies in Colorado as well as Wyoming. If petitioner is engaged in 'the transportation of natural gas in interstate com- merce' to those Colorado towns within the meaning of § 1(b), its wholesale sales in Colorado are also sales 'in interstate commerce of natural gas for resale for ultimate public consumption' as those words are used in § 1(b). That commerce does not end until the gas enters the service pipes of the distributing companies.

Most of the other objections which petitioner raises to the Commission's method of allocation of costs have been considered in the cases of Colorado Interstate Gas Co. v. Federal Power Commission and Canadian River Gas Co. v. Federal Power Commission. We need not repeat what we said there. But there are a few distinct phases of this case which must be separately stated.

Petitioner says that the Commission treated it along with Canadian and Colorado Interstate as an integrated unit for purposes of the allocation of costs. The inference is that the Commission combined petitioner's costs with those of the other two companies and allocated the combined costs three ways. That is not the fact. Petitioner is independent in management and control from the other two. Its system was not construed as part of Canadian's and Colorado Interstate's system but was...