Mesa Petroleum Co. v. Federal Power Commission
| Citation | 441 F.2d 182 |
| Decision Date | 06 April 1971 |
| Docket Number | No. 28229.,28229. |
| Parties | MESA PETROLEUM CO., Petitioner, v. FEDERAL POWER COMMISSION, Respondent. |
| Court | United States Courts of Appeals. United States Court of Appeals (5th Circuit) |
Wm. Warfield Ross, Stephen M. Truitt, Wald, Harkrader & Rockefeller, Washington, D. C., for petitioner.
Richard A. Solomon, Former General Counsel, F. P. C., Peter H. Schiff, Sol., Washington, D. C., J. Richard Tiano, Asst. Sol., F. P. C., Gordon Gooch, General Counsel, Robert L. Russell, Asst. General Counsel, David F. Stover, Atty., Federal Power Commission, Washington, D. C., for respondent.
Before THORNBERRY, COLEMAN and INGRAHAM, Circuit Judges.
This action was brought by petitioner, Mesa Petroleum Co., successor in interest to Hugoton Production Company, seeking review under 15 U.S.C. § 717r of an order of the respondent, Federal Power Commission, denying Hugoton's application to abandon, nunc pro tunc, deliveries of gas to Panhandle Eastern Pipe Line Company. Petitioner will hereinafter be referred to as "Hugoton".
The congeries of legal problems that have arisen in this action can best be understood by a thorough examination of events dating back to 1948. In that year Hugoton was organized as a subsidiary of Panhandle Eastern Pipe Line Company hereinafter Panhandle, with gas leases in the Kansas Field as assets.
The sequence of events thereafter can be summarized as follows:
(1) In October, 1948, Hugoton contracted with the Kansas Power & Light Company KPL (a public utility regulated by the Kansas State Corporation Commission) for a sale over a fifteen year period calling for 15 million Mcf of gas in the first year to 24 million Mcf of gas in the fourteenth year for intrastate use alone. During these early years Hugoton was able to produce gas much in excess of KPL's requirements.
(2) Thus, on May 1, 1956, Hugoton contracted with Panhandle to sell the latter gas available after KPL's requirements had been met. The contract specified that Panhandle would buy deliveries not to exceed 20,000 Mcf a day at 15¢ per Mcf and for use only in compressor stations within the State of Kansas.1
(3) At the time the Hugoton-Panhandle contract was entered into, the type of sale involved was not within the Federal Power Commission's jurisdiction. However, in 1961 the Commission asserted jurisdiction over such sales in Lo-Vaca Gathering Company, 26 F.P.C. 606 (1961) and was eventually affirmed by the Supreme Court in California v. Lo-Vaca Gathering Company, 379 U.S. 366, 85 S.Ct. 486, 13 L.Ed.2d 357 (1965).2
(4) The Hugoton-Panhandle contract expired in April, 1963, but the sales were continued on a daily basis. In addition, the Hugoton-KPL contract of 1948 was rewritten in 1962 increasing Hugoton's commitment to KPL to a maximum annual volume of 40 million Mcf and a minimum annual volume of 32 million Mcf for the years 1965 to 1982.3
(5) Adding to this burgeoning morass, KPL in 1963 entered a twenty year contract with Anadarko Production Company, a Panhandle affiliate, wherein Anadarko would sell no more than 10.5 million Mcf and no less than 8.4 million Mcf a year, the deliveries to commence sometime in June of 1965.
(6) On February 17, 1965, one month after the Supreme Court affirmed the Commission's Lo-Vaca decision granting jurisdiction over commingled compressor station gas, Hugoton terminated its sales under its contract to Panhandle with the latter's acquiescence.
(7) After this abandonment and because Anadarko was unable to develop sufficient reserves to meet its contract with KPL, Hugoton agreed to sell Anadarko a large percentage of KPL's minimal requirements under the Anadarko-KPL contract.4
(8) Without conceding that the Commission had jurisdiction under the Lo-Vaca doctrine, Hugoton, in November of 1966, filed its petition under § 7(b), Natural Gas Act, for the abandonment which is the subject of this appeal. At the time of the Commission's proceedings, Hugoton had the following obligations to KPL:
Maximum Minimum
Annual Annual
Volume Volume
1962 Hugoton-KPL
Contract 40,000,000 Mcf5 32,000,000 Mcf
Anadarko
Contract 10,500,00 Mcf 8,400,000 Mcf
______________ ______________
50,500,000 Mcf 40,400,000 Mcf
It was after filing this application for abandonment that Hugoton purchased Anadarko's gathering system and assumed responsibility for Anadarko's entire obligation to KPL.
The Commission ordered a hearing before an examiner to consider the application for abandonment.6 The examiner, on November 24, 1967, ordered that the application for abandonment be denied,7 and that the sale to Panhandle be reinstituted to the extent gas was available.8 He also found that 13¢ per Mcf was the reasonable "in-line" price for the sale under the 1956 contract, and thus ordered refunds of amounts collected in excess of this price for the entire period of the contract.
Hugoton thereupon came forward with a settlement proposal acquiescing in the decision to reinstate deliveries on a limited basis and accepting the principle of the refunds on the basis of the 13¢ price under the so-called "Mobil" formula. This formula called for refunds of 100% of the excess amount collected since the Supreme Court's Lo-Vaca decision in January of 1965, and 62.5% of the excess collected between the Commission's Lo-Vaca decision in October 1961 and January 1965, and finally no refunds for the period before the Commission's Lo-Vaca opinion.9
The Commission's opinion, issued April 17, 1969, agreed with the examiner that no abandonment should be permitted and that a certificate of public convenience would be issued authorizing delivery to Panhandle when gas was available.10
The Commission rejected Hugoton's settlement offer. It found ample support in the record for the finding of a 13¢ in-line price. However, disagreeing with the examiner, the Commission found that for the pre-1961 period, i. e., prior to the Commission's Lo-Vaca order — the jurisdictional status of commingled gas may have been sufficiently unclear to make a refund covering that period inequitable.
As to the second period from 1961 until the termination in 1965, it found that the company was on notice that its sales might be jurisdictional, and thus the Commission ordered that Hugoton should make a full refund of the 2¢ difference between the contract price and the 13¢ in-line price for this period.11
Finally, as to the period following Hugoton's termination of deliveries in 1965, the Commission found what it considered to be a novel situation:
(Emphasis added.) Joint Appendix at 101-102 (Commission\'s opinion.)
Because the precise volumes of abandoned sales could not be determined, the Commission required Hugoton to report the amount it would have sold to Panhandle but for the abandonment and hold for refund, 3.833¢ per Mcf for these volumes (difference between 16.833 and 13¢ "in-line price"). The Commission estimated that the refund for the period from February 17, 1965, through December 31, 1968, would be about $270,060.00 — making the total refund ordered in the proceedings approximately $830,303.00.
Petitioner has raised three questions which this court will consider in the disposition of this case.
I. Does the Natural Gas Act the Act empower the Commission to make an award of "damages" to a pipeline company or its customers for injuries allegedly resulting from the producer's termination of deliveries to the pipeline?
II. Did the Commission utilize a reasonable method for measure of recovery by ordering refunds for the post-termination period?
III. Did the Commission correctly decline to accept Hugoton's settlement proposal in light of other similar proceedings?
Petitioner Hugoton vigorously asserts that the Commission's order of refunds, especially for the period after the abandonment in 1965, constitutes an award of damages which, though labeled a refund, should in reality be deemed a "penalty". It is argued that the Act, neither explicitly nor by implication, grants authority to the Commission to make such an award. Petitioner contends that this attempt to restore the parties to the status-quo-ante, as required by the Act, is a matter of equity which is within the exclusive province of the court and not the Commission.
We hold, however, that the Commission possesses the authority to require the corrective action which it ordered in this proceeding.
We begin with the premise that:
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