Hunt v. Federal Power Commission

• Citation: 306 F.2d 334
• Decision Date: 19 July 1962
• Docket Number: 19113,No. 19065,19114,19212-19214.,19153-19156,19065
• Parties: H. L. HUNT; W. H. Hunt, Trustee for Hassie Hunt Trust; Caroline Hunt Sands; J. A. Goodson, Trustee for Caroline Hunt Trust Estate; A. G. Hill, Trustee for Lamar Hunt Trust Estate; Nelson Bunker Hunt, Petitioners, v. FEDERAL POWER COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Fifth Circuit

306 F.2d 334 (1962)

H. L. HUNT; W. H. Hunt, Trustee for Hassie Hunt Trust; Caroline Hunt Sands; J. A. Goodson, Trustee for Caroline Hunt Trust Estate; A. G. Hill, Trustee for Lamar Hunt Trust Estate; Nelson Bunker Hunt, Petitioners, v. FEDERAL POWER COMMISSION, Respondent.

Nos. 19065, 19113, 19114, 19153-19156, 19212-19214.

United States Court of Appeals Fifth Circuit.

July 19, 1962.

Robert E. May, Richard F. Generelly, Washington, D. C., Robert W. Henderson, Thomas G. Crouch, Robert M. Kennedy, Dallas, Tex., May, Shannon & Morley, Washington, D. C., for petitioners.

Howard E. Wahrenbrock, Sol., Milton J. Grossman, Arthur H. Fribourg, Attys., John C. Mason, Ralph S. Spritzer, Gen. Counsel, Robert L. Russell, Asst. Gen. Counsel, F. P. C., Washington, D. C., for Federal Power Commission.

Before BROWN, WISDOM and BELL, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

These cases raise the common question of whether the Federal Power Commission in granting a temporary certificate for the sale of natural gas at a specified initial sales price may lawfully prescribe as a condition that such price may not be increased without express approval of the Commission. The effect of such a condition is to deny to the producer the opportunity of filing a § 4(d) (e) subsequent rate increase. We hold that the Commission may not thus effectually condition-out a statutory right which Congress has prescribed. We therefore sustain the attack of the Producers who petition for review and reverse the Orders of the Commission.

While this question is almost submerged in the seemingly unavoidable flood of papers which consumes another natural resource while adjudicating this one, each of these ten separate petitions for review and the underlying orders, petitions for rehearing, orders on rehearing, and post-certification orders present substantially the same facts. Fortunately, what we can readily identify as the natural gas Bar, shows a commendable cooperation in streamlining into a single consolidated record and consolidated briefs and argument all of the essential materials — but no more — without costly repetition or duplication.¹

While, as we stated, these involve many different dockets concerning rates or sales in the Alvin, Alta Loma and Chenango Fields within the Texas Railroad District No. 3, for all practical purposes the cases are the same and present this one basic question. Moreover, very little factual detail even as to a typical case is needed. Some dates and times are, however, important in showing the sequence and to pinpoint the complaints of the Producer. A brief synopsis of the Alta Loma proceedings will suffice.²

On July 1, 1960, the Commission issued a permanent certificate under § 7(e) to the Producer for the sale of gas to the pipeline purchaser. The rate prescribed was 20¢ Mcf. The 20-year contract as originally proposed called for an initial price of 20¢ with four escalations of 2¢ each every four years. In granting the permanent certificate, the Commission required that this be altered by prescribing a single 3¢ escalation at the end of the first ten years. This was accepted and service commenced. That Order, as such, is not under review in these cases.

Thereafter new production was brought in on this pooled gas unit. On December 15, 1960, the Producer entered into individual gas sales contracts with the Pipeline purchaser for the sale of this additional gas. The price fixed was 20¢ Mcf, but with four 2¢ escalations.³ Thereafter on February 27, 1961, the Producer applied to the Commission for a Certificate of Public Convenience and Necessity to make these sales. It sought also temporary authorization to begin service immediately, alleging the existence of an emergency situation resulting from "the necessity of paying shut-in royalties and the incurrence of drainage through sales by others to pipeline companies other than" the pipeline Purchaser.⁴

It is helpful to digress here to point out two things. First, while the initial price, 20¢ Mcf was the same as the currently effective permanent certificate covering gas from the same field to the same pipeline Purchaser, the escalation provisions were markedly different, and on a total weighted average the price was greater. Second, and of more importance, between the date of the issuance of the permanent certificate covering the sale of gas from this same field to the same pipeline Purchaser, the Commission issued its Statement of General Policy No. 61-1, 18 CFR § 2.56, 24 FPC 818. In this Statement it established area price standards to be used as guides in determining where the proposed initial rates should be certificated without a price condition. The "initial service rate" established for Texas Railroad District No. 3 was 18¢ Mcf. Of course the application of February 27, 1961, was for a new certificate and was a transaction expressly envisaged by 61-1. No reference in the application was made by the Purchaser to Statement 61-1 and, oddly enough, none was made in these terms by the Commission until long after the petition for review machinery had been set in motion by the Producer.

Presumably in the usual form and without the statement of any reasons, the Commission by letter order of April 7, 1961,⁵ issued the temporary authority to sell the gas as proposed in that docket, but "subject to the following conditions" which for ease of reference we identify in brackets 1, 2 and 3:

1 That the total initial price not exceed 18 cents per Mcf at 14.65 psia;

2 that there be filed within 20 days a supplement to the rate schedule consistent with 1 above and a revised billing statement;

3 that the temporary authorization be accepted in writing by a responsible official of the company.

On May 5, 1961, the Producer filed its acceptance of this temporary authority but without prejudice to a claimed right to seek removal of conditions 1, 2 and 3 and to seek an increased rate in accordance with terms of the amended rate schedule filed contemporaneously. Filed presumably in compliance with Condition 2 was a contract amendment stating that the initial price would be 18¢ Mcf for the first thirty (30) days following commencement of deliveries and thereafter 20¢. Deliveries had, in the meantime, commenced under the temporary authorization on April 19, 1961. Contemporaneously with the filing of its acceptance, the Producer also formally sought rehearing of the Order of April 7 imposing conditions 1, 2 and 3.

Again we digress to point out that the Commission did more than deny the petition for rehearing. It changed its Order of April 7 substantially. This action forms an additional complaint of the Producer here. That action was taken on May 31, 1961. That Order (a) denied the application for rehearing, and (b) rejected the amended rate schedule on the ground it appeared to authorize an increase from the 18¢ rate during the continuance of temporary authorization. Then, to remove doubt it (c) expressly modified the language of the authorization to provide explicitly that no change from the 18¢ rate could be made during its term.⁶ And, finally, because of (b) and (c), the Order (d) rejected a proposed filing of a 20¢ rate made in accordance with the amended contract.⁷

The Producer filed a timely application for rehearing of the Order of May 31 and shortly thereafter formally retendered its acceptance of the temporary authorization and also the increased-rate filing to 20¢. On July 26, 1961, the Commission denied the application for rehearing and rejected the retendered increased-rate filing.⁸ Timely petitions to review the Commission Order issuing temporary authorization subject to conditions and the Commission Order rejecting the Producer's purported acceptance, its filing of an amended rate schedule, and its filing of increased rates were thereafter filed.

While that ordinarily would be the cutoff date, the record as certified shows that subsequent action was taken by the Commission. On November 2, 1961, the Commission sent the Producer a Letter Order which amplified its previous orders and modified them on one respect. This letter undertook to state reasons for the prior action generally in terms that the imposition of the 18¢ price condition was taken in keeping with policy Statement No. 61-1. It further stated that upon reconsideration, the Commission had determined that it should permit the filing of the contract amendment which it had rejected earlier. This was, the Commission explained, merely to afford a contract basis for the collection of the authorized 18¢ rate. It was made clear, however, that this was "for the express purpose of permitting there to be on file the contractual agreement between you and the pipeline Purchaser under which you will be receiving 18¢ per Mcf." And it sounded the warning that "this should not be construed as permission for you to file for an increased rate pursuant to section 4(d) of the * * * Act during the pendency of the temporary authorization." The Commission thus made plain that in the new condition of the Order of May 31, 1961,⁹ it was speaking precisely in terms of the use of the statutory right to file rate increases under § 4(d) of the Act.¹⁰

The Producer asserts three principal complaints, the first two of which we think have no merit.

There is, first, the contention that after the grant of temporary authorization by the Order of April 7, 1961, imposing its Conditions 1, 2 and 3, the Commission could not make these conditions more onerous by its Order of May 31. It emphasizes two things, one of which is that condition 1 spoke precisely in terms of the "initial price" not exceeding 18¢, the other being that it commenced deliveries on April 19, 1961. The suggestion seems to be that this is too much changing of the rules in the middle of the game. There is nothing to this. The Producer sought a change in the rules. The Producer was unhappy with the Order of April 7 and — by its conditional acceptance with express...