Monsanto Company v. Federal Power Commission

• Decision Date: 19 April 1972
• Docket Number: 72-1093 and 72-1094.,No. 71-1306,71-1306
• Citation: 463 F.2d 799
• Parties: MONSANTO COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, United Gas Pipe Line Company, Intervenor. MONSANTO COMPANY, a corporation, Appellant, v. UNITED GAS PIPE LINE COMPANY, a corporation, et al. TEXAS GULF SULPHUR COMPANY, a corporation, Appellant, v. UNITED GAS PIPE LINE COMPANY, a corporation, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

463 F.2d 799 (1972)

MONSANTO COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, United Gas Pipe Line Company, Intervenor.

MONSANTO COMPANY, a corporation, Appellant, v. UNITED GAS PIPE LINE COMPANY, a corporation, et al.

TEXAS GULF SULPHUR COMPANY, a corporation, Appellant, v. UNITED GAS PIPE LINE COMPANY, a corporation, et al.

Nos. 71-1306, 72-1093 and 72-1094.

United States Court of Appeals, District of Columbia Circuit.

Argued March 13, 1972.

Decided April 19, 1972.

Mr. John T. Miller, Jr., Washington, D. C., with whom Mr. James J. Bierbower, Washington, D. C., was on the brief, for petitioner in No. 71-1306 and appellants in Nos. 72-1093 and 72-1094.

Mr. George W. McHenry, Atty., F. P. C., of the bar of the Supreme Court of Tenn., pro hac vice, by special leave of court, with whom Messrs. Gordon Gooch, Gen. Counsel, Leo E. Forquer, Solicitor, J. Richard Tiano, First Asst. Sol., and George P. Lewnes, Asst. Gen. Counsel, F. P. C., were on the brief, for respondent in No. 71-1306 and intervenor-appellee Federal Power Commission in Nos. 72-1093 and 72-1094.

Mr. W. DeVier Pierson, with whom Mr. Peter J. Levin, Washington, D. C., and William B. Cassin, Houston, Tex., were on the brief, for appellee United Gas Pipe Line Co. in Nos. 72-1093 and 72-1094 and intervenor in No. 71-1306.

Mr. Christopher T. Boland, Washington, D. C., for intervenor-appellee Texas Gas Transmission Corp. in Nos. 72-1093 and 72-1094.

Before LEVENTHAL and ROBB, Circuit Judges, and MATTHEWS,^* U. S. Senior District Judge for the District of Columbia.

LEVENTHAL, Circuit Judge:

This court has before it consolidated appeals: A petition by Monsanto Company (No. 71-1306) to review an action of the Federal Power Commission, and appeals by both Monsanto (No. 72-1093) and Texas Gulf Sulphur Company (No. 72-1094) from a judgment of the District Court dismissing their contract actions brought against United Gas Pipe Line Company, on the ground that the matter involved is within the jurisdiction not of the court but of the Commission, which had intervened in the civil actions.

I. BACKGROUND

A. Underlying Facts

What has precipitated these controversies is the current shortage of field natural gas supply. While the shortage is general¹ we focus particularly on the fact that while United, a "natural gas company" under the Natural Gas Act (Act)², operates an interstate natural gas transmission pipeline, it does not—at least as of the present and recent past—have a supply of natural gas sufficient to meet the requirements of its customers. Monsanto and Texas Gulf Sulphur are industrial customers of United, buying for use, and not for resale. United's direct sales to these industrial customers are not subject to rate regulation under the Act, but sales of gas in interstate commerce to direct sales customers purchasing for use are subject to certificate regulation under § 7 of the Act.

Monsanto buys natural gas from United under a long-term requirements contract, up to 65,000 Mcf per day, for use as both raw material and as boiler fuel in its Pensacola plant, alleged to be the largest unified nylon yarn plant in the world. The Commission issued an order pursuant to § 7(c) of the Act, authorizing United to deliver up to 75,000 Mcf of gas daily to Monsanto, upon a finding that this was necessary and appropriate under the Act and required by the public convenience and necessity.³ In the parlance of the industry, Monsanto has a "firm" contract rather than one of the "interruptible" contracts which essentially provide that the pipeline company may terminate delivery on short notice. The electric utility or other buyer in such interruptible contracts usually pays a lower price but is under the obvious necessity of installing alternative arrangements, permitting a ready conversion to say, residual fuel oil, as a source of boiler fuel. However, Article IX of the Monsanto-United contract,⁴ like United's contracts with other direct industrial customers, makes certain provision for curtailment of supply in time of gas shortage, and an underlying controversy is whether United's actions are in accord with its contract obligations. Copies of United's contracts with its industrial customers are filed with the Commission pursuant to its regulations.⁵

B. Federal Power Commission Curtailment Proceeding

On October 26, 1970, United filed with the Commission a petition for declaratory order, concerning its curtailment program, described in the petition, to be initiated November 1, 1970, stating in substance: Because of the national gas shortage United will be obliged to curtail deliveries during the 1970-71 winter season, and to implement section 12 of its filed Tariff on curtailment of deliveries. Most customers have been understanding and cooperative, recognizing the shortage is national in scope and not a matter subject to United's control, that United's program is the most equitable under the circumstances, and also the program United is obliged to implement under the tariff provision and like provisions contained in all United's direct sales contracts. However, certain customers have expressed objections, which United deems without merit, "but the possible gravity of leaving these disputes unresolved has forced United to request that the Commission declare the curtailment plan described herein to be in keeping with the provisions of its filed tariff."

The final section of the petition went beyond the tariff (at least if that is taken to govern sales subject to rate regulation to reach industrial users). It recited that the orderly implementation of United's curtailment program "obviously requires the cooperation, voluntary or otherwise, of United's direct industrial customers." However, some customers say they do not intend to cooperate, and are not required to do so, under their contracts. United asked that the Commission's order also declare that its curtailment program "is in accordance with the provisions of its contracts for the sale of gas in interstate commerce with direct sales customers." United anticipated curtailment of deliveries only to customers in the industrial category.⁶

This petition of United was made the subject of FPC Docket No. RP71-29. The Commission gave public notice, and Monsanto timely intervened in opposition to the proposed curtailment program. It relied on its contract rights, challenged the claim that the curtailment program was equitable, and asserted, inter alia, that United's shortage, if any, may be due to its attachment of additional service obligations interfering with its obligation to serve its older, firm customers. On December 10, the Commission set the matter for public hearing on December 21, stating that the hearing was to resolve the question, inter alia, of whether it would constitute undue discrimination if United's curtailment program "did not apply equally to the jurisdictional and direct sales customers of United." The order pointed out that United had already placed its curtailment plan in effect and prompt hearings were necessary, and specified that United would present its entire case orally, followed by immediate cross-examination of United's witnesses.

At the hearing, before witnesses were presented, a recess was suggested to attempt to devise for the current winter a curtailment program satisfactory to all. After United put in its direct case orally, United's counsel read into the record an interim curtailment arrangement to which all of the parties ultimately agreed, with the exception of Monsanto. Essentially the arrangement was to accept United's plan, with these modifications—that United would attempt to purchase up to 300,000 Mcfd on an emergency basis from non-jurisdictional sellers,⁷ and that the customers would not seek injunctive relief or damages for any gas curtailments made prior to March 31, 1971.

The Examiner stated he would certify the proposal to the Commission for its consideration and recessed the hearing to resume January 12, 1971. On December 29, 1970, the Commission issued an order providing: "The interim compromise settlement as reflected in the record of December 22, 1970, is approved." Monsanto's petition to review, filed April 26, 1971, attacks that order, and also the order of February 26, 1971, denying Monsanto's application for rehearing. The Commission's motion to dismiss the petition for review or, alternatively, for summary affirmance, was denied by our order dated June 23, 1971.

C. Action In District Court

Actions against United were filed in the U.S. District Court for the District of Columbia by Monsanto, October 8, 1971, and a month later by Texas Gulf Sulphur Company, also a direct sale industrial customer.

Allegations of complaints

Plaintiffs brought these as contract actions, seeking damages and injunctive relief. They claimed their contract rights were impaired as to the past by United's curtailment program, put into effect November 1, 1970, both prior and subsequent to the FPC's approval of the settlement agreement.

They sought injunctive relief against future breaches of contract rights.

Plaintiffs' claims on the merits— which are only contentions, for there has been no proof—run in substance as follows:

The continued supply of United's gas service under their firm contracts is vital to plaintiffs.⁸ While the contracts contain a force majeure curtailment provision, and a similar provision was inserted by United into its Tariff, for the case of "shortage of gas," this is inapplicable to excuse United's actions as consistent with the contracts because the so-called "shortage of gas" on United's system is due to "improvident attachment by United of additional markets." When pipeline companies undertake, as they have, to sell gas from general systems reserves to industrial customers contracting for a full-requirements firm gas supply, and making large investments in reliance thereon, the pipeline company is under the obligation of a...