International Paper Co. v. Federal Power Com'n
| Decision Date | 02 March 1971 |
| Docket Number | Dockets 34265,34991.,No. 258-9,258-9 |
| Citation | 438 F.2d 1349 |
| Parties | INTERNATIONAL PAPER COMPANY, Plaintiff-Appellant, v. FEDERAL POWER COMMISSION, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Second Circuit |
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Peter H. Schiff, Sol., Washington, D. C. (Gordon Gooch, Gen. Counsel, George Lewnes, Asst. Gen. Counsel, Israel Convisser, Atty., Robert C. McDiarmid, Asst. to the Gen. Counsel, Washington, D. C., on the brief), for defendant-appellee.
Before LUMBARD, Chief Judge, FEINBERG, Circuit Judge, and CLARIE, District Judge.*
This appeal from a decision of the Federal Power Commission (FPC) claims that the Commission unlawfully attempted to extend its jurisdiction beyond its statutory authority; and that in the performance of its duties, it not only had violated "the separation of functions" provisions of the Administrative Procedure Act, 5 U.S.C. § 554(d), but also the Freedom of Information Act, 5 U.S.C. § 552. For purposes of this appellate review, there has been consolidated in the appeal, a related court decision from the Southern District of New York, dismissing the International Paper Company's (International's) separate court action requesting the production of certain Commission records alleged to have been wrongfully withheld (5 U.S.C. § 552(a) (3)).
The case presents for judicial determination: (1) the novel issue of whether a company's "own-use" transportation of natural gas through company-owned pipelines across state lines is within the jurisdiction of the FPC; (2) whether staff memoranda underlying prior Commission orders, and relating to precedent cases, as well as the present proceeding, is required to be disclosed under the Freedom of Information Act; and (3) whether the Commission's order in this proceeding was unlawful, because certain legal staff members had violated 5 U.S.C. § 554(d), by participating in both the investigatorial and prosecutorial functions of the Commission against International and had in addition advised the Commission in reaching its ultimate decision. We affirm both the decision of the Commission and the District Court on all issues.
The stipulation of facts discloses that International operated a paper manufacturing plant at Natchez, Mississippi, which required substantial quantities of natural gas in its manufacturing processes. Initially, it had purchased this fuel under a standard utility service sales arrangement, from a pipeline company which was admittedly subject to the Commission's jurisdiction under the Natural Gas Act. However, in September, 1963, International executed a new agreement with Humble Oil and Refining Co. (Humble), a corporate affiliate of the Standard Oil Company of New Jersey, to purchase gas at the tailgate of Humble's processing plant in Lake St. John Field, Louisiana, which would be transported by International through a pipeline crossing the state line to the Natchez, Mississippi, plant for its own industrial consumption.
This 17.83 miles long pipeline was originally financed and built by Humble, at the latter's sole expense for a total cost of $450,573.10. In February 1964, it conveyed to International title to the pipeline pursuant to a product use agreement. As part of the consideration for this arrangement, International agreed to purchase quantities of gas from Humble through said pipeline at 23¢ per Mcf. The agreement contained a proviso that if the Natchez plant ceased to purchase gas from Humble's Louisiana refinery prior to the agreed termination date, International would be obligated to reimburse Humble for liquidated damages, to the extent of the unamortized remaining balance of the pipeline-cost, as determined by an agreed formula. In 1967, International was purchasing about one-quarter of its supply from its old source (Humble Gas Transmission Co.) and three-quarters of its needs through its newly acquired pipeline.
The new contract between International and Humble first came to the attention of the Commission in mid-1965, when its secretary noticed that the 1963 contract of International with Humble Gas Transmission Co. also referred to the new source of supply. Thereupon, the FPC's Bureau of Natural Gas corresponded with International suggesting that the transaction was within the jurisdiction of the Commission and that it should either apply for a certificate of public convenience or seek a disclaimer of jurisdiction.
When these attempts to resolve the matter were resisted, the Commission issued an order in September 1967, directing International to show cause why its transportation of natural gas should not be subject to the Commission's jurisdiction under § 1(b) of the Natural Gas Act and why International should not be required to apply for and obtain a certificate of public convenience and necessity under § 7(c) and (e) of the Act to operate a transmission line across a state line.
International then requested the Commission's secretary to disclose to International all staff memoranda in three earlier disclaimer cases, which it claimed related to similar rulings affecting other companies. It represented that the Commission's holdings in those cases established legal precedents relevant to sustain its own situation. After a hearing before the Commission on October 9, 1967, the requested disclosure was denied; and thereafter on November 30, 1967, its petition for a rehearing was denied.
After a factual hearing on the merits, the hearing examiner found on December 13, 1968, that the Commission did have jurisdiction over the subject matter and his ruling was later affirmed by the FPC on July 29, 1969. It held that the transportation of natural gas by International was interstate in character and subject to Commission regulation under the authority granted by the Natural Gas Act.
On August 28, 1969, International petitioned for a rehearing, at which time it raised an ancillary issue to the jurisdiction question claiming that the Administrative Procedure Act (APA) provisions 5 U.S.C. § 554(d) had been violated by the Commission, because the staff attorney had acted in cooperation with the Assistant General Counsel and the General Counsel in the processing of the enforcement order. International complained that it had thus engaged in both the investigatorial and prosecutorial functions of the Agency and at the same time had participated in an advisory capacity, when the Commission reviewed the case and prepared its decision.
International appealed the Commission's decision on the jurisdiction issue to this Court on November 21, 1969. That same day, a separate court action was commenced in the Southern District of New York against the FPC requesting an order to obtain all staff memoranda in the Commission's files relating to previously decided cases1 which International claimed established a Commission precedent, which must be followed here. It also asked for a similar staff memoranda relating to its own proceedings before the Commission. However, the latter's Secretary disclosed that this information was non-existent, therefore that request becomes moot. On May 15, 1970, the District Court granted the Commission's motion to dismiss International's action, and from this decision an appeal has been taken. On June 23, 1970, this Court granted a motion to consolidate both the appeal from the Commission's order and the District Court judgment for purposes of hearing and review.
The jurisdiction issue simply stated is whether International's transportation of its own natural gas, under the conditions hereinbefore set forth, is subject to FPC's supervision and control, thus requiring a certificate authorizing such interstate transportation or in the alternative, an order disclaiming Commission jurisdiction. The relevant sections of the Natural Gas Act provide:
The Supreme Court faced a similar issue in Federal Power Commission v. East Ohio Gas Co., 338 U.S. 464, 70 S. Ct. 266, 94 L.Ed. 268 (1950), where the respondents were transporting natural gas solely for public consumption within the State of Ohio. The respondents there contended that the word "transportation" in § 717(b) supra must be "construed as applying only to companies engaged in the business of transporting gas in interstate commerce for hire or for sales to be followed by resales, whereas East Ohio does neither" (at 468, 70 S.Ct. at 268). Justice Black rejected the argument finding that:
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