El Paso Natural Gas Co. v. Sun Oil Co., s. 77-1762
| Decision Date | 05 July 1983 |
| Docket Number | 77-2613 and 80-2404,Nos. 77-1762,s. 77-1762 |
| Parties | FORMER FIFTH EL PASO NATURAL GAS COMPANY, et al., Plaintiffs-Appellants, v. SUN OIL COMPANY, et al., Defendants-Appellees. TENNECO OIL CO., et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. TENNECO OIL COMPANY, et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. .(fn*) |
| Court | U.S. Court of Appeals — Fifth Circuit |
Daniel Joseph, Jack W. Hanks, Daniel Watkiss, Washington, D.C., Donald C. Shepler, Salt Lake City, Utah, David K. Watkiss, Jack D. Bachman, Salt Lake City, Utah, for Northwest Pipeline Corp.
Rufus G. Thayer, Jr., Janice E. Kerr, J. Calvin Simpson, San Francisco, Cal., for People of State of Cal. and Public Utilities Com'n of State of California.
Howard V. Golub, Shirley A. Woo, Malcolm H. Furbush, San Francisco, Cal., for Pacific Gas & Elec. Co.
Charles F. Hawkins, Dallas, Tex., for Southern Union Co.
J. Alan Galbraith, Washington, D.C., Arthur R. Formanek, El Paso, Tex., for El Paso Natural Gas Co.
Steven A. Taube, Atty., George H. Williams, Jr., Jerome Nelson, Sol., Washington, D.C., for amicus curiae F.E.R.C.
Leo J. Hoffman, Herf M. Weinert, Julius L. Lybrand, Dallas, Tex., for Sun Oil Co.
George B. Mickum, III, Steven H. Brose, Washington, D.C., Edward J. Kremer, Jr., Dallas, Tex., for Atlantic Richfield Co.
Craig W. Hulvey, Washington, D.C., Robert D. Haworth, Houston, Tex., for Mobil Oil Corp.
Gordon Gooch, Charles M. Darling, IV, Washington, D.C., for Tenneco, Continental, American Petrofina, Crown Central, Delta Drilling, M/MS. Morris Mizel.
Vernon M. Turner, Houston, Tex., for Tenneco.
Michael J. Henke, Washington, D.C., Dee H. Richardson, Midland, Tex., for Union Oil Co. of Cal.
Thomas Burton, Jr., Houston, Tex., for Continental Oil Co.
W.B. Browder, Jr., Midland, Tex., for W. Watson LaForce, et al.
Donald F. Burke, Baltimore, Md., for Crown Central Petroleum.
Terry R. Barrett, Stanley L. Cunningham, Oklahoma City, Okl., for F.H.N., Ltd.
Robert D. Haworth, Houston, Tex., for Mobil Oil Corp.
Craig W. Hulvey, Washington, D.C., for Getty Oil Co.
Sherman S. Poland, Bernard A. Foster, III, Ross, Marsh & Foster, Washington, D.C., for William G. Webb, et al.
J.O. Terrell Couch, Hutcheson & Grundy, Randel R. Young, Houston, Tex., for Robert Beamon, et al.
Steven R. Hunsicker, Gordon Gooch, Charles M. Darling, IV, Baker & Botts, Washington, D.C., Strasburger & Price, Leo J. Hoffman, Dallas, Tex., for Tenneco Oil Co., et al.
Larry Pain, John L. Williford, Bartlesville, Okl., for Phillips Petroleum Co.
John S. Fick, Los Angeles, Cal., for Southern Cal. Gas Co.
William M. Lange, Colorado Springs, Colo., for Colo. Interstate Gas Co.
Robert H. Landt, Denver, Colo., for Amoco Production Co.
J. Alan Galbraith, Washington, D.C., for El Paso Natural Gas Co.
Donald K. Dankner, Washington, D.C., for CP National Corp.
Robert L. Simpson, Spokane, Wash., for Wash. Water Power Co.
G. Thomas Dohn, Yakima, Wash., for City of Ellensburg.
Justin R. Wolf, Washington, D.C., Bruce R. DeBolt, Associate Counsel, Portland, Or., for Northwest Natural Gas Co.
Thomas F. Brosnan, Washington, D.C., for Washington Natural Gas Co.
John H. Socolofsky, Asst. Atty. Gen., Salem, Or., for Public Utility Com'r of Oregon.
Kenneth O. Eikenberry, Atty. Gen., Donald D. Trotter, Asst. Atty. Gen., Olympia, Wash., for Washington Utilities and Transportation Com'n.
John T. Ketcham, Washington, D.C., for Cascade Natural Gas Corp. P. Michael Koenig, William M. Lange, Colorado Springs, Colo., for Colo. Interstate Gas Co.
Lester D. Sitter, Denver, Colo., for Rocky Mountain Natural Gas Co., Inc.
Gary G. Sackett, Associate Gen. Counsel, Salt Lake City, Utah, for Mountain Fuel Supply Co.
Steven R. Shanahan, Sr., Asst. Atty. Gen., Cheyenne, Wyo., for Public Service Com'n of Wyoming.
Zev E. Kaplan, Deputy Atty. Gen., Carson City, Nev., for Public Service Com'n of Nev.
J. Richard Tiano, Washington, D.C., for Intermountain Gas Co.
Wm. W. Bedwell, Washington, D.C., for Southwest Gas Corporation.
Michael S. Gilmore, Deputy Atty. Gen., Boise, Idaho, for Idaho Pub. Utilities Comm.
Appeal from the United States District Court for the Western District of Texas.
Petitions for Review of Orders of the Federal Energy Regulatory Commission.
Before BROWN, RONEY and TJOFLAT, Circuit Judges.
The basic question presented by these consolidated appeals is whether a series of lease-sale agreements transferring rights to certain gas-bearing lands in the San Juan Basin of New Mexico are sales of natural gas in interstate commerce within the meaning of section 1(b) of the Natural Gas Act, 15 U.S.C.A. Sec. 717(b). Holding the agreements are not sales as defined by the Act, and are therefore beyond regulatory jurisdiction, we affirm the district court judgment to that effect and reverse the decision of the Federal Energy Regulatory Commission to the contrary.
Before considering a case of this kind, it is necessary to remind ourselves that the Commission's power to regulate the economics of natural gas transactions has been limited by Congress. Although it presumably has the power to regulate every nook and cranny of the natural gas business, Congress chose not to do so. FPC v. Panhandle Eastern Pipe Line Co., 337 U.S. 498, 502, 69 S.Ct. 1251, 1254, 93 L.Ed. 1499 (1949). In this situation, it is important that the courts restrict the regulatory agencies to precisely that authority delivered to them by Congress, and to stop where Congress intended to stop no matter how tempting it might be to hearken to persuasive arguments that more regulation is appropriate. Agencies have a tendency to perceive a need for regulation. Congress is the determinative body in the matter, however, and this case has been considered and decided on that precise premise. If Congress had intended to regulate the transactions here involved, it easily could have done so with simple legislative language. We make no judgment whether it should have done so. We only decide, based upon the leading Supreme Court decision and the prior precedent of this Court, that it did not.
Before reviewing the facts and getting on with the decision, it might be helpful to describe the parties to this litigation while footnoting the names of all litigants, to state briefly the source of these appeals and the lengthy history of the litigation, and in a simplified way to suggest the issues that have been presented for decision.
On one side of this litigation are two pipeline companies, 1 which acquired leasehold rights in gas-bearing lands, and the Federal Energy Regulation Commission. On the other side are numerous oil and gas concerns and a few individuals who transferred the leasehold rights in question. 2 A number of state commissions and interested private entities have been granted permission to intervene or file amicus briefs. 3
During the 1950s, Tenneco Oil, Sun Oil, Continental Oil, Atlantic Richfield, Phillips Petroleum, and several other oil companies entered into gas lease-sale agreements with El Paso Natural Gas Company and Pacific Northwest Pipeline Company, both gas pipeline companies. In return for their working interests in certain leases in the San Juan Basin of New Mexico and Colorado, the oil companies were to receive so-called overriding royalties or production payments. The rates established for these royalties were subject to redetermination at the expiration of the initial term. If at the expiration of the term the parties could not agree on a new rate, the rate was to be fixed by arbitration.
In 1973, Sun Oil and El Paso failed to agree on a new override rate, and the dispute was submitted to arbitration. The arbitration board awarded Sun Oil an override based on the wellhead price of intrastate gas which exceeded the regulated interstate rate. Other oil companies then sought redetermination of their rates, and El Paso thereafter brought four actions in the United States District Court for the District of Columbia seeking a declaratory judgment that the royalty recipients were selling gas in interstate commerce within the meaning of section 1(b) of the Natural Gas Act, 15 U.S.C.A. Sec. 717(b). If in interstate commerce, the lease-sale agreements came within the jurisdiction of the Natural Gas Act, and the royalty recipients could not receive more than the interstate rates established by the Federal Power Commission (now the Federal Energy Regulatory Commission).
The suits were consolidated and transferred to the Western District of Texas. 28 U.S.C.A. Sec. 1406. El Paso sought reference of the case to the Commission, and the district court carried the request with the case. At the same time, El Paso filed a complaint with the Commission seeking a determination as to the status of the leases under the Act. After a protracted trial, the district court held the lease-sale agreements were not sales of gas within the meaning of the Act and dismissed the case for want of jurisdiction, implicitly denying El Paso's motion for reference to the Commission. El Paso Natural Gas Co. v. Sun Oil Co., 426 F.Supp. 963 (W.D.Tex.1977). El Paso appealed, moving this Court to refer the matter to the Commission.
The Commission thereafter issued an order instituting a show cause proceeding directed to the jurisdictional issue. El Paso Natural Gas Co., 58 F.P.C. 2181 (1977). Tenneco Oil, Atlantic Richfield, Sun Oil, and others sought review of the order in this Court. We denied their motions to stay the Commission's show cause proceeding but withheld decision of the appeal from the district court pending receipt of the Commission's opinion. Tenneco Oil Co. v. FERC, 580 F.2d 722 (5th Cir.1978).
A record was fully developed before an administrative law judge. Affirming and adopting the decision of the administrative law judge, the Commission ruled that the lease-sale...
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