Montana-Dakota Utilities Co. v. FEDERAL POWER COM'N

• Decision Date: 25 October 1948
• Docket Number: No. 13396.,13396.
• Citation: 169 F.2d 392
• Parties: MONTANA-DAKOTA UTILITIES CO. v. FEDERAL POWER COMMISSION et al.
• Court: U.S. Court of Appeals — Eighth Circuit

169 F.2d 392 (1948)

MONTANA-DAKOTA UTILITIES CO. v. FEDERAL POWER COMMISSION et al.

No. 13396.

Circuit Court of Appeals. Eighth Circuit.

August 4, 1948.

Writ of Certiorari Denied October 25, 1948.

COPYRIGHT MATERIAL OMITTED

Armin M. Johnson, of Minneapolis, Minn (John C. Benson and Faegre & Benson, all of Minneapolis, Minn., on the brief), for petitioner.

Lambert McAllister, Sp. Counsel, Federal Power Commission, of Washington, D. C. (Bradford Ross, Gen. Counsel, Federal Power Commission, of Washington, D. C., and S. W. Jensch, Atty., Federal Power Commission, of St. Paul, Minn., on the brief), for respondent Federal Power Commission.

L. E. Melrin, of Minneapolis, Minn. (Melrin & Nieman, of Minneapolis, Minn., on the brief), for respondent Mondakota Gas Co.

Before THOMAS, JOHNSEN and RIDDICK, Circuit Judges.

Writ of Certiorari Denied October 25, 1948. See 69 S.Ct. 82.

THOMAS, Circuit Judge.

Pursuant to the provisions of § 19(b), 15 U.S.C.A. § 717r(b), of the Natural Gas Act of June 21, 1938, the Montana-Dakota Utilities Co. has petitioned this court to review, vacate and set aside two orders of the Federal Power Commission. The first order dated March 22, 1946, requires the petitioner to file, for the common carrier transportation of natural gas in interstate commerce, a new rate schedule reflecting the rates and charges set forth in an exhibit appended to the order. The second order, entered on rehearing and dated January 29, 1947, affirms the first.

Montana-Dakota Utilities Co. organized under the laws of Delaware with its principal place of business at Minneapolis, Minnesota, is a natural gas company within the meaning of the Natural Gas Act, § 2(6), 15 U.S.C.A. § 717a(6), in that it is "engaged in the transportation of natural gas in interstate commerce." As such natural-gas company it has a Certificate of Convenience and Necessity issued by the Federal Power Commission on April 6, 1943.

It owns and operates an integrated interconnected pipeline system located in the states of Montana, North Dakota and South Dakota. Natural gas transported in this system comes from the Bowdoin field in Montana and the Baker field situated partly in Montana and partly in North Dakota. The pipe lines extend from near Malta, Montana, and Williston, North Dakota, on the north to Rapid City in the Black Hills of South Dakota, on the south; and from Miles City, Montana, on the west to Bismarck, North Dakota, on the east. The natural gas transported through its lines is distributed for public consumption to communities in the three states named for industrial, commercial and domestic purposes.

The original complainant, Mondakota Development Company, was a Montana corporation owning leases and operating agreements covering approximately 40,000 acres of oil and gas lands in the Baker and Bowdoin fields. Its successor, Mondakota Gas Company, was organized under the laws of Nevada in 1942 and took over and acquired all of the assets of the Development Company.

Among the assets acquired by the Gas Company from Mondakato Development Company are two producing wells known as the Becker Wells. One of these wells is on state school land and the other on privately owned fee land, five and seven miles, respectively, distant from petitioner's Little Beaver compressor station in the Baker gas field. These wells have never been connected with any pipe line but since their completion have been shut in and have produced no gas.

With the exception of petitioner's pipe line extending in an easterly direction from its Cabin Creek compressor station in Montana to Bismarck, North Dakota, the pipe lines involved in this case were constructed in part upon rights-of-way across government-owned lands under permits granted by the Secretary of the Interior pursuant to the provisions of the Leasing Act of February 25, 1920, as amended by the Act of August 21, 1935, 41 Stat. 437, 449, § 28 et seq., 49 Stat. 678, 30 U.S.C.A. § 185 et seq., and regulations thereunder.

Pursuant to certain provisions of the Leasing Act, supra, the Secretary of the Interior approved unit plan agreements covering the production and marketing of natural gas in both the Bowdoin and Baker fields in which petitioner was designated the "Unit Operator." All the natural gas transported over its pipe lines is either produced by the petitioner or purchased by it from others under these agreements.

By the terms of the unit plan agreements the petitioner is given certain exclusive rights relating to prospecting for, producing and disposing of the natural gas from the lands described in the agreements. The Commission found that as a result of the operation of such unit plan and its own production from wells in these fields the petitioner acquired and exercises complete control of the production, transportation and sale of all gas produced from both fields and that it provides the exclusive market for such gas.

Gas produced on government-owned lands is transported through all parts of its system of lines. Petitioner has never transported any natural gas for others; nor does it sell natural gas at wholesale for resale to any gas distributing company.

This proceeding was instituted when the Mondakota Development Company filed its complaint against the petitioner herein on December 6, 1941. Thereafter, its successor, Mondakota Gas Company, was substituted as party complainant.

The original complaint alleged that the rates and charges specified in schedules filed with the Commission by the petitioner, as common carrier for the transportation of natural gas in interstate commerce, were excessive, unreasonable and discriminatory, and asked that the Commission fix fair, reasonable and non-discriminatory rates for such services.

In its answer the petitioner denied that it had any rates for the transportation of natural gas and alleged that the complainant had not tendered any gas to it for shipment and never had any gas to ship.

On its own motion the Commission commenced a separate proceeding on July 7, 1942, by an order instituting an investigation to determine whether petitioner is a natural gas company within the meaning of the Natural Gas Act and "whether in connection with any transportation or sale of natural gas, subject to the jurisdiction of the Commission, any rates, charges or classifications demanded, observed, charged or collected, or any rules, regulations, practices, or contracts affecting such rates, charges, or classifications, are unjust, unreasonable, unduly discriminatory or preferential"; and, if found to be so, to fix just and reasonable rates.

The orders complained of were entered in a consolidation of these two proceedings for purposes of hearing before the Commission.

Long prior to the commencement of these proceedings, in October, 1933, the petitioner had filed in the Department of the Interior a rate schedule for the interstate transportation of natural gas through that part of its pipe line extending from its Baker Compressor Station in Montana south to Rapid City, South Dakota. A second schedule of rates for the same line was filed in 1936; and on August 24, 1938, both these schedules were filed with the Federal Power Commission. These are the schedules assailed in the complaint as unreasonable and discriminatory. Further facts relating to them will be set out in connection with the discussion of the points relied upon by the petitioner.

The petitioner contends: 1. That the orders under review are invalid and void because the Federal Power Commission is without power or jurisdiction to determine the issues presented; and 2. That the rates prescribed by the Commission's order of March 22, 1946, and affirmed on rehearing, are arbitrary, inadequate and confiscatory.

Since petitioner's first contention, urged here persuasively and emphatically, is that the Federal Power Commission is without power to determine the issues presented it will be conducive to clarity and brevity alike to inquire what are the Commission's powers applicable to the issues decided and now to be reviewed.

Section 1 of the Natural Gas Act, supra, 15 U.S.C.A. 717, provides:

"(a) * * * it is hereby declared that the business of transporting and selling natural gas for ultimate distribution to the public is affected with a public interest, and that Federal regulation in matters relating to the transportation of natural gas and the sale thereof in interstate and foreign commerce is necessary in the public interest.

"(b) The provisions of this chapter shall apply to the transportation of natural gas in interstate commerce * * * and to natural-gas companies engaged in such transportation * * *."

Sections 4(c) and 5(a), 15 U.S.C.A. §§ 717c(c) and 717d(a), of the Natural Gas Act, copied in the margin,¹ define the Commission's general powers.

Petitioner first urges that, even though it be a natural-gas company within the meaning of the Act, it is not a common carrier of natural gas unless it be as a common law common carrier; that it is only a public utility company transporting natural gas in interstate commerce to supply its own customers; and that it discharges its common carrier duty by purchasing natural gas under the unit plan. We think it is a statutory common carrier obligated to the public pursuant to its commitments under the Leasing Act, supra. Except the extension to Bismarck, North Dakota, all of petitioner's pipe lines traverse government owned lands under permits issued by the Secretary of the Interior pursuant to the Leasing Act and regulations thereunder.

Section 28 of the Leasing Act, 30 U.S. C.A. § 185, provides that "Rights-of-way through the public lands * * * may be granted by the Secretary of the Interior for pipe line purposes for the transportation of oil or natural gas to any applicant possessing the qualifications provided in section 181 of this title, to the extent of the ground occupied by the said pipe line and twenty-five feet on each side of the...