International Paper Co. v. Federal Power Com'n
| Decision Date | 07 February 1973 |
| Docket Number | No. 71-3531.,71-3531. |
| Citation | 476 F.2d 121 |
| Parties | INTERNATIONAL PAPER COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Jerome Ackerman, James R. McCotter and John W. Douglas, Washington, D. C., for petitioner.
Gordon Gooch, Gen. Counsel, F. P. C., and George W. McHenry, Jr., First Asst. Sol., Washington, D. C., for respondent.
J. Evans Attwell and Jack D. Head, Houston, Tex., for Tex. East. Transmission Corp.
Dan A. Bruce, Houston, Tex., for Shell Oil.
William B. Cassin, Houston, Tex., for United Gas Pipeline.
Leon M. Payne, Houston, Tex., and W. Devier Pierson, Washington, D. C., for United Gas, Inc.
Eaton A. Lang, Jr., Gulfport, Miss., and A. Edward Grashof, New York City, for Miss. Power Co.
Wm. W. Bedwell and John J. Mullally, Washington, D. C., for Miss. River Transmission Corp.
Harry L. Albrecht, Birmingham, Ala., for Southern Natural Gas Co.
Christopher T. Boland, Washington, D. C., and Robert O. Koch, Owensboro, Ky., for Tex. Gas Transmission.
Peter H. Schiff, Gen. Counsel, P. S. C. for N. Y., Albany, N. Y., and Richard A. Solomon, Washington, D. C., for Public Service Comm. for State of N. Y.
Howard E. Wahrenbrock, Washington, D. C., and John M. Kuykendall, Jr., Jackson, Miss., for Miss. Valley Gas Co., and others.
Clarence H. Ross and Raymond J. Petersen, Chicago, Ill., for Nat. Gas Pipeline.
Arnold D. Berkeley, Washington, D. C., and Fred G. Benton, Sr., Baton Rouge, La., for State of Louisiana, and others.
Barbara M. Gunther, Brooklyn, N. Y., for Brooklyn Union Gas.
Richard W. Duesenberg and Dwight W. Miller, St. Louis, Mo., for Monsanto Co.
John T. Miller, Jr., Washington, D. C., for Monsanto Co. and Texas Gulf Sulphur.
George W. Hugo, Houston, Tex., for Texas Gulf Sulphur.
John S. Schmid, New York City, for Boston Gas Co., and others.
Thomas G. Johnson, William G. Riddoch and Dan A. Bruce, Houston, Tex., for Shell Oil Co.
Before JOHN R. BROWN, Chief Judge, and BELL and MORGAN, Circuit Judges.
This case is one of a group arising from the adoption by the Federal Power Commission of "curtailment plans" filed by United Gas Pipe Line Company. These curtailment plans were the outgrowth of an order promulgated by the FPC and were aimed at serving the public interest by establishing a rational scheme of allocation of available natural gas in light of the current, somewhat critical, shortage of this much-used fuel. Due to this shortage, pipeline companies found that they would not be able to meet all of their current contractual obligations for delivery of gas. At present, the FPC has not finally approved any of the curtailment plans in question. It has, however, issued two orders, Opinions 606 and 606A, which are reviewable and are now challenged by numerous parties on several grounds before this court. Each of the contentions raised by this petitioner will be considered separately below.
At the time this action was initially briefed with this court, we had previously held in Louisiana Power & Light Company v. United Gas Pipe Line Company, 5 Cir. 1972, 456 F.2d 326, that the Commission did not have authority under the Natural Gas Act to order curtailment of sales to direct sale customers. In Federal Power Commission v. Louisiana Power & Light Company, 1972, 406 U.S. 621, 92 S.Ct. 1827, 32 L. Ed.2d 369, the United States Supreme Court reversed that determination by this circuit and held that the Commission was authorized to entertain curtailment plans with regard to both direct sales and sales for resale. In this appeal International Paper does not challenge FPC jurisdiction over direct sales but limits its challenge only to certain language contained in Opinions 606 and 606A which relate to possible liability of a pipeline for contractual damages growing out of curtailment.
Compliance with an FPC curtailment order, when and if such an order is ultimately adopted will mean that a pipeline cannot deliver to each customer all of the gas it has contracted to deliver. This, of course, follows from curtailment since curtailment is itself only a response to a shortage of gas. An issue of major concern is whether or not an FPC curtailment order alone will serve to insulate a pipeline unable to meet contractual commitments from liability for this failure. This issue may arise in two closely related legal actions: first, a customer may simply bring an action in contract for breach, and secondly, some of United's contracts contain "substitute fuel clauses"1 which may also serve as a basis for breach of contract suits.
The FPC has attempted to address this issue in Opinions 606 and 606A. International Paper, and other petitioners in the related cases decided today, object to the result the FPC reaches on these matters.
When United first presented its proposed curtailment plan to the Federal Power Commission, section 12.3 of the proposed tariff included the language:
. . . nor shall Seller United be obligated to pay or credit such customers any sums with respect to substitute fuels burned by such customers during such a period of proration or interruption.
Instead of acting directly on this proposed section, the FPC made the following rather enigmatic statement in its Opinion 606:
The customers of United, while agreeing to the deletion of section 12.3 from the proposed curtailment plan, strenuously objected to this additional language inserted into the opinion by the FPC. Subsequently the FPC issued opinion 606A in which it sought to clarify the above language from Opinion 606:
In clarification, this Commission has the responsibility and the authority to protect all consumers from efforts by pipelines to grant preferences in service to particular customers or classes of customers in times when gas shortage precludes fulfillment of all contracts for delivery of gas. A claim of preference in service directly or, in the case of substitute fuel clauses, indirectly, cannot operate to deprive this Commission of authority to assure fair and equitable curtailment plans. The pipeline companies cannot be faced with the dilemma of providing nondiscriminatory service as ordered by the Commission and at the same time incur liability for breach of contracts which grant discriminatory preferences, directly or indirectly. Thus, the Commission\'s authority to preclude undue preferences and discriminations in service operates to preempt any contract provisions inconsistent with the exercise of that authority as not being in the public interest.
Both on brief and at oral argument, the FPC maintained that no final action had yet been taken on either suits for damages or substitute fuel clauses because there has been no final adoption of United's curtailment plan.2 It also appears to be the position of the Commission that mere adoption of a curtailment plan, without specific reference to either damage suits or substitute fuel clauses, will be an absolute defense to damage actions. If that is indeed the position of the FPC, we do not agree. We have decided that it would be helpful to all concerned for this court to attempt to set out its understanding of the FPC's position and its opinion on that position.
This court has been faced with the difficult task of determining just what was intended by the above language in Opinions 606 and 606A. After due study, we have determined that this language is mere dicta and has no force other than to reflect a position taken by the FPC which lacks support in the record before it. We undertake to give lengthy comment on this language so that no court in the future will be misled as to the import of this language because it was in an order upheld by this circuit. We also feel that by commenting on this language at this time we will give the FPC opportunity to further act on the matter if it so desires.
It seems to this court that the FPC is trying to use either of two general lines of argument to support its claim that mere adoption of a curtailment order alone, without more, will serve as an absolute defense to private contract actions. The first approach is gleaned from the language of the FPC in Opinion 606. That opinion seems to suggest that the FPC takes the position that its curtailment order alone will in all cases justify an absolute defense based on the contract theory of "impossibility of performance due to intervening governmental order." We note that in the very curtailment cases relied on by the FPC for establishing this "rule of law" the governmental entity which decided the effect of the FPC order on the private contract action was not the FPC itself but rather the court in which the private action was brought.3 We feel that this is the proper way for deciding the effect of the FPC order where the only claim is a defense of impossibility due to the action of the FPC. We feel that a court which has the actual damage suit before it, and also the final FPC action, is best suited to determine the applicability...
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