Mobil Oil Corporation v. Federal Power Commission
Decision Date | 06 October 1972 |
Docket Number | No. 71-1260,71-1261 and 71-1721.,71-1260 |
Citation | 152 US App. DC 119,469 F.2d 130 |
Parties | MOBIL OIL CORPORATION, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Associated Gas Distributors, Intervenor. MOBIL OIL CORPORATION, Petitioner, v. FEDERAL POWER COMMISSION, Respondent. |
Court | U.S. Court of Appeals — District of Columbia Circuit |
Mr. Carroll L. Gilliam, Washington, D. C., with whom Messrs. Tom P. Hamill, Houston, Tex., and Philip R. Ehrenkranz, Washington, D. C, were on the brief, for petitioner.
Mr. Leo E. Forquer, Sol., F. P. C., with whom Messrs. Gordon Gooch, Gen. Counsel, and J. Richard Tiano, First Asst. Sol., F. P. C., were on the brief, for respondent.
Messrs. John E. Holtzinger, Jr., and Frederick Moring, Washington, D. C., were on the brief for intervenor in No. 71-1260.
Before MacKINNON and ROBB, Circuit Judges, and RONALD N. DAVIES,* Senior District Judge for the District of North Dakota.
These consolidated cases come to us under section 19(b) of the Natural Gas Act, 15 U.S.C. § 717r(b) (1970). The controversy had its origin in the Commission's area rate proceedings in the Southern Louisiana Area.1 Petitioner Mobil Oil Corporation, an independent producer in that area, sells natural gas to interstate pipeline transmission companies under contracts for terms of twenty years or more. The sales are subject to Federal Power Commission jurisdiction and rate regulatory authority. 15 U.S.C. § 717(c).
Mobil seeks review of a series of Commission orders prescribing rate levels in the Southern Louisiana Area. The effect of these orders is to deny to Mobil rate increases above a certain level. Mobil challenges the orders on the grounds that the rates established are (1) unduly preferential and discriminatory, (2) unsupported by evidence in the record or sufficient grounds stated by the Commission, and (3) unaccompanied by adequate procedural safeguards such as a hearing or the taking of evidence. In Nos. 71-1260 and 71-1261 the Associated Gas Distributors have intervened on the side of the Commission seeking affirmance. For the reasons stated below we affirm.
Prior to 1954, the Commission declined to regulate sales of natural gas by independent producers to interstate pipelines. In 1954 the Supreme Court held that independent producers are "natural gas companies" within the meaning of that term as defined in the Natural Gas Act, 15 U.S.C. § 717 et seq. Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035 (1954). In the succeeding six years the Commission ". . . labored with obvious difficulty to regulate a diverse and growing industry under the terms of an ill-suited statute . . ." which was thought to require the establishment of just and reasonable rates through an examination of each individual producer's costs of service. Permian Basin Area Rate Cases, 390 U.S. 747, 756, 88 S.Ct. 1344, 20 L.Ed.2d 312 (1968). "The number both of independent producers and of jurisdictional sales was large, and the administrative burdens placed upon the Commission by an individual company costs-of-service standard were therefore extremely heavy." 390 U.S. at 757, 88 S.Ct. at 1355 (footnotes omitted).
In response to this heavy administrative burden the Commission on September 28, 1960 established rate standards or "guidelines" for independent producers of natural gas in the Southern Louisiana Area. The Commission stated that these standards were intended to serve as a guide in determining whether proposed rate changes should be accepted or suspended. Statement of General Policy No. 61-1, 24 F.P.C. 818 (1960). The guidelines were to remain in effect until the completion of area rate proceedings then in progress. Thus, between September 28, 1960 and September 25, 1968, the date on which the final area rates (effective October 1, 1968) were established by the Commission, if a rate filing were made by a producer at a level above the guideline rates, the increased rate would be suspended by the Commission under section 4(e) of the Act, 15 U.S.C. § 717c(e). At the expiration of the suspension period the increased amounts would be collected by the producer subject to refund under terms and conditions which would be set at the time area rate ceilings were established.
On March 30, 1964 Mobil, rather than collect rates above the guideline levels subject to refund, filed a company-wide rate settlement proposal with the Commission. Mobil's proposed settlement, which the Commission approved on May 6, 1964, established rates, with minor exceptions, at levels equal to or less than the applicable area guidelines then in effect, and provided that Mobil would refund amounts previously collected in excess of settlement rates and waive its rights to file for contractually authorized increased rates until January 1, 1967.2 Socony Mobil Oil Co., Inc., 31 F. P.C. 1101, 1101-1102 (1964).
On September 25, 1968 the Commission completed the Southern Louisiana Area Rate Proceedings and issued Opinion No. 546, 40 F.P.C. 530 (1968), which prohibited increased rate filings in the Southern Louisiana Area above the ceilings set on that date. These ceilings were to become effective on October 1, 1968 and extend to 1974 for one class of sales and indefinitely for another class.
Mobil did not file for increased rates between January 1, 1967 (the date when its waiver of increases expired) and September 25, 1968; and by Opinion No. 546 Mobil was thereafter prohibited from filing for increases in the Southern Louisiana Area above the new ceilings. The opinion ordered the reduction of rates established by producers between 1960 and 1968 above the new ceilings and the refund of amounts collected in excess of the ceilings. Opinion No. 546, 40 F.P.C. 530 (1968); Opinion No. 546-A, 41 F.P.C. 301, 340-42 (1969).
By Opinion 546-A issued March 20, 1969, the Commission modified the moratorium on rate increases which was established in Opinion No. 546. 41 F.P.C. 301 (1969). The modifications are not material to this case. Concurrently with the issuance of Opinion 546-A the Commission began a new area rate proceeding for the Southern Louisiana Area, 41 F.P.C. 378 (1969). This proceeding initially involved only one type of offshore sales, but on December 15, 1969 it was enlarged to encompass sales of all vintages of gas produced in the entire Southern Louisiana Area. 42 F.P.C. 1110 (1969). The proceeding was styled Docket No. AR69-1, and was consolidated with the reopening of Docket Nos. AR61-2 et al., in which opinions 546 and 546-A had been issued.
During this period judicial review of Opinions 546 and 546-A was taking place in the United States Court of Appeals for the Fifth Circuit. Pending completion of the court's review, Commission orders requiring the reduction in rates above the ceilings established in Opinions 546 and 546-A and refunds of charges in excess of those ceilings were stayed. The moratorium on new filings of rates above the ceilings set by Opinions 546 and 546-A was not stayed. On March 19, 1970 the United States Court of Appeals for the Fifth Circuit affirmed the Commission's Opinions 546 and 546-A, stated that the Commission had full authority to modify or set aside its action in those cases, and reserved to the Commission the disposition of the stay entered during the course of judicial review. Southern Louisiana Area Rate Cases v. FPC, 428 F.2d 407 (5th Cir. 1970). Certiorari was denied by the Supreme Court on December 7, 1970. Public Service Commission of New York v. Amerada Hess Corp., 400 U.S. 950, 91 S.Ct. 241, 27 L.Ed.2d 257 (1970).
On July 30, 1970, in Docket No. R-394, the Commission issued a Notice of Proposed Rule Making. 35 Fed.Reg. 12559. The Notice stated that the Commission proposed to terminate the moratorium established by Opinions 546 and 546-A. All interested persons were invited to submit data, views, comments and suggestions concerning the proposed termination. In response, comments were filed by a number of independent producers and pipeline purchasers operating in Southern Louisiana, including Mobil, by the Independent Natural Gas Association of America, by Associated Gas Distributors (AGD), by the Municipal Distributors Group (MDG) and by the Wisconsin Public Service Commission (Wisconsin). All the producers and pipelines favored the lifting of the moratorium. In its comments Mobil stated in part:
MDG, AGD and Wisconsin opposed the proposed action. MDG and Wisconsin contended that the moratorium should not be lifted on the basis of data which had not been tested in an evidentiary hearing.
Upon the basis of the record in Docket No. R-394 the Commission on October 27, 1970 issued Opinion No. 413, lifting the moratorium. The Commission stated that the reasons for its action were that:
In the July 30 notice we noted that there are positive indications of a worsening supply situation with new findings of gas falling below production in two successive years, that there are also indications of a sharp drop in the level of gas exploration during 1968 and 1969 which has an adverse impact on...
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