Moss v. Federal Power Commission
| Decision Date | 19 September 1974 |
| Docket Number | 72-1846,72-1892,Nos. 72-1837,s. 72-1837 |
| Citation | 502 F.2d 461,164 U.S.App.D.C. 1 |
| Parties | John E. MOSS et al., Petitioners, v. FEDERAL POWER COMMISSION, Respondent, Mobil Oil Corporation et al.,Intervenors. AMERICAN PUBLIC GAS ASSOCIATION et al., Petitioners, v. FEDERAL POWER COMMISSION, Respondent, Mobil Oil Corporation and Associated GasDistributors, City of Chicago, Intervenors. AMOCO PRODUCTION COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Continental Oil Company and Mobil OilCorporation, Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Morton L. Simons, Washington, D.C., with whom Barbara M. Simons, Washington, D.C., was on the brief for petitioners in Nos. 72-1837 and 72-1846.
William H. Emerson, Tulsa, Okl., for petitioner in No. 72-1892.
George W. McHenry, Jr., Acting Sol., Federal Power Commission, with whom Leo E. Forquer, Gen. Counsel, Michael J. Manning and Joan E. Heimbigner, Attys., Federal Power Commission, were on the brief for respondent.
Charles F. Wheatley, Jr., William T. Miller and Edward Berlin, Washington, D.C., were on the brief for petitioners in No. 72-1846.
Tom P. Hamill, Houston, Tex., Carroll L. Gilliam and Philip R. Ehrenkranz, Washington, D.C., were on the brief for intervenor, Mobil Oil Corp.
Peter H. Schuck and Marsha N. Cohen, Washington, D.C., were on the brief for intervenor, Consumers Union of United States, Inc.
Hamilton Treadway filed a brief as amicus curiae urging reversal.
Tom Burton, Houston, Tex., entered an appearance for intervenor, Continental Oil Co.
John E. Holtzinger, Jr., Washington, D.C., entered an appearance for intervenor, Associated Gas Distributors.
Richard A. Solomon, Washington, D.C., entered an appearance for intervenor, Public Service Commission, for the State of New York.
Before TAMM, MacKINNON and ROBB, Circuit Judges.
The petitioners challenge a rule issued by the Federal Power Commission by Orders Nos. 455 and 455-A, pursuant to a rulemaking procedure in Commission Docket No. R-441.
The notice of proposed rulemaking in Docket No. R-441 proposed to amend the Commission's General Rules of Practice and Procedure by inserting a new 'Section 2.75 Optional Procedure for Certificating New Producer Sales of Natural Gas'. In the notice the Commission disclaimed any intention to supersede existing area rate procedures or decisions. The notice referred to the gap between the supply of natural gas and the demand, and the damaging impact of this shortage on the environment, economic growth, and costs to consumers. The proposed amendments to the Commission's rules were then set forth in full.
The proposed new Section 2.75 provided that 'applications for certification of future sales of natural gas produced within the United States may, at the option of the signatory parties to sales contracts, be submitted in accordance with the provision of this Section.' The proposal set up a procedure whereby the Commission would certificate new sales of natural gas under contracts executed on or after April 6, 1972. Under this procedure applications for certification of such new sales might be tendered by parties to a contract, and would 'be considered for permanent certification, either with or without pregranted abandonment, notwithstanding that the contract rate (might) be in excess of an area ceiling rate established in a prior opinion or order of this Commission.' The rates thus established would not be subject to change in later proceedings, and the certification would 'constitute a final determination, under Section 7 of the Natural Gas Act, that the rates and services therein specified are required by the present and future public convenience and necessity'. Deliveries could commence pending review of an application by the Commission and if the Commission had not entered its final order in six months the seller could charge the contract price.
The Commission called for written comments from any interested persons, and ninety-three written submittals were received. These included comments from independent producers, interstate pipeline companies, distribution companies, state regulatory agencies, other federal agencies, United States Senators and Congressmen, and trade and consumer organizations. Our petitioners were among those who submitted comments, objecting on grounds now asserted before us.
On August 3, 1972 the Commission issued Order No. 455, entitled 'Statement of Policy Relating to Optional Procedure for Certificating New Producer Sales of Natural Gas'. In its Statement the Commission reviewed 'data available to the Commission (that) indicates a worsening of the gap between natural gas demand and supply.' 'The assurance of adequate supplies of natural gas', said the Commission, 'can mitigate the damage being done to the nation's environment', and 'further aggravation of the gas supply problem also portends grave implications for the nation's economic objectives.' In light of these considerations the Commission concluded that:
Our responsibility to the consumers of natural gas, to assure reliable and adequate supplies at the lowest reasonable cost, impels us to that course of action best calculated to spur domestic exploration and development. To this end, we seek to provide two incentives to domestic production, both fully congruous with consumer protection. First, we will certificate sales of gas not previously deliverable to the interstate market at prices which are shown to be in the public interest. Second, to the extent possible, we will lessen rate uncertainty which has prevailed since the early 1960's.
The Commission emphasized that its policy statement and the optional procedures established were 'directed at supplies of gas not available to the interstate market prior to April 6, 1972': that 'consumers will not pay higher rates except for new supplies, and then only to that extent that the contracting parties establish on the record that the price to be paid is required by the public interest.' The Commission said that domestic gas exploration and development were impeded by rate uncertainty, since 'there is no assurance at the present time that a producer may not ultimately have to refund some of an initial rate based on a just an reasonable determination and upon which the producer relied when it dedicated a new gas supply to the interstate market.' Recognizing 'the supremacy of Section 5' of the Natural Gas Act, 'that Section 5 . . . prevents the Commission from granting sanctity of contract' and that it could not 'bind a future Commission not to invoke the prospective operation of Section 5' the Commission announced its 'policy to examine the justness and reasonableness of proposed rates in Section 7 proceedings instituted under this Section, thus avoiding the uncertainty of reserving rate determinations for subsequent Section 4 or Section 5 action.' With this preface the Commission promulgated the new Section 2.75 of its Rules of Practice and Procedure, General Policy and Interpretations. We reproduce the Rule in full in the appendix, and we shall examine in particular the provisions on which the petitioners center their attack.
On applications for rehearing and a motion for stay of its Order No. 455 the Commission on September 8, 1972 issued Order No. 455-A entitled 'Order Clarifying Order, and Denying Applications for Rehearing and Stay'.
In this court the petitioners, except for the petitioner Amoco Production Company, contend that the optional procedure of Section 2.75 is a method of deregulating natural gas by certifying contract rates, without regard to the standards of Sections 4 and 5 of the Act. They attack the findings of the Commission that the shortage of natural gas requires the new program and justifies its estimated costs; and they argue that they were entitled to an evidentiary hearing on this matter. They challenge the provision of the new rule that the Commission may review and by on decision at the outset approve both an initial price and fixed rate escalations provided in the sales contract for future periods. They also challenge as 'contrary to the consumer-protection objectives of the Natural Gas Act' the provision of the new rule that if the Commission has not acted on an application within six months a producer may collect contract rates without liability to refund. Finally, they contend that the Natural Gas Act prohibits pregrnated abandonment, which the new rule would authorize.
Amoco Production Corporation (Amoco) argues that the Commission by its Orders Nos. 455 and 455-A has established rates without an adequate record or an opportunity for hearing. In addition, Amoco challenges the requirements that producers waive contingent escalations and that indefinite pricing clauses be excluded from their contracts.
The intervenor Mobil Oil Corporation supports the Commission's orders and urges that the petitions for review be denied. 1
The Commission's order is premised on its finding of a shortage of available domestic gas reserves. Although the petitioners question this premise we cannot reject the Commission's finding. The existence of a shortage of natural gas has been recognized by the Supreme Court and by this court. See F.P.C. v. Louisiana Power & Light Co., 406 U.S. 621, 626, 92 S.Ct. 1827, 32 L.Ed.2d 369 (1972); City of Chicago v. F.P.C., 147 U.S.App.D.C. 312, 458 F.2d 731 (1971), cert. denied, 405 U.S. 1074, 92 S.Ct. 1495, 31 L.Ed.2d 808 (1972); Public Service Commission of N.Y. v. F.P.C., 151 U.S.App.D.C. 307, 467 F.2d 361 (1972). As the Commission said in Order No. 455-A the petitioners' argument ignores ...
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