People of State of California v. Federal Power Commission

• Decision Date: 09 November 1965
• Docket Number: 19664.,No. 19647,19647
• Parties: PEOPLE OF the STATE OF CALIFORNIA and Public Utilities Commission of the State of California, Petitioners, v. FEDERAL POWER COMMISSION, Respondent. SOUTHERN CALIFORNIA GAS COMPANY and Southern Counties Gas Company of California, Petitioners, v. FEDERAL POWER COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

353 F.2d 16 (1965)

PEOPLE OF the STATE OF CALIFORNIA and Public Utilities Commission of the State of California, Petitioners, v. FEDERAL POWER COMMISSION, Respondent.

SOUTHERN CALIFORNIA GAS COMPANY and Southern Counties Gas Company of California, Petitioners, v. FEDERAL POWER COMMISSION, Respondent.

Nos. 19647, 19664.

United States Court of Appeals Ninth Circuit.

November 9, 1965.

Richard E. Tuttle, Chief Counsel, J. Calvin Simpson, Senior Counsel, John T. Murphy, Associate Counsel, San Francisco, Cal., for petitioners State of California and P. U. C. of California.

Richard A. Solomon, Gen. Counsel, Howard E. Wahrenbrock, Solicitor, Robert L. Russell, Asst. Gen. Counsel, Leonard Poryles, atty., all with Fed. Power Comm., Washington, D. C., for respondent Federal Power Comm.

Homer J. Penn, Houston, Tex., W. T. Kilbourne, II, Washington, D. C., for intervenor Superior Oil Co.

Oliver L. Stone, Thomas G. Johnson, New York City, for intervenor Shell Oil Co.

Jessee H. Foster, Jr., Albert C. McClain, Houston, Tex., for intervenor Humble Oil & Refining Co.

John Ormasa, Richmond, Cal., K. R. Edsall, Milford Springer, Robert M. Olson, Los Angeles, Cal., J. David Mann, Jr., John E. Holtzinger, Jr., Frederick Moring, Morgan, Lewis & Bockius, Washington, D. C., for petitioners Southern California Gas Co. and Southern Counties Gas Co. of California.

Before MERRILL and DUNIWAY, Circuit Judges, and MATHES, District Judge.

DUNIWAY, Circuit Judge:

This case arises from the grant by the Federal Power Commission of a certificate of public convenience and necessity to certain producers of natural gas, pursuant to section 7(e) of the Natural Gas Act, 15 U.S.C. § 717f(e), which provides in pertinent part:

A certificate shall be issued to any qualified applicant therefor * * if it is found that * * * the proposed * * * sale * * * is or will be required by the present or future public convenience and necessity; otherwise such application shall be denied. The Commission shall have the power to attach to the issuance of the certificate and to the exercise of the rights granted thereunder such reasonable terms and conditions as the public convenience and necessity may require.

The essential facts, summarily stated, follow. Three gas producers — Humble Oil & Ref. Co., Shell Oil Co., and Superior Oil Co. — brought gas wells into production in a formerly undeveloped portion of the "Four Corners" producing area, a region encompassing contiguous portions of northeast Arizona, northwest New Mexico, southwest Colorado, and southeast Utah. They applied for permanent certificates of public convenience and necessity under section 7(e), which would allow them to sell the gas in interstate commerce at their contract rate of 17.7 cents per thousand cubic feet (Mcf.); this price is identical with that approved for a nearby field in the prior separate "Aneth" certification proceeding. (El Paso Natural Gas Co., 1960, 23 F.P.C. 370, aff'd sub nom. Texaco, Inc. v. FPC, 5 Cir., 1961, 290 F.2d 149.)

The Trial Examiner found that the certificate should be issued on condition that the price not exceed 13 cents per Mcf., which he found to be the prevailing price in the San Juan Basin of New Mexico, an older producing area about 75 miles away which had served as the point of reference for the certificated price in Aneth. The Commission reversed in a 3-2 decision, finding that the gas subject to the instant sale was more similar to Aneth gas than to San Juan gas and that the price line to be observed was that of Aneth rather than that of San Juan. The State of California and two California gas distributing companies (Southern California Gas Company and Southern Counties Gas Company of California), intervenors in the original proceeding, now petition this court to review and set aside the Commission's resulting order which granted the certificate without price condition.

The principal argument seems to be that the Commission erred in granting an unconditioned certificate because the certificated price was established by reference to a prior "isolated and insignificant" sale at a now "discredited" price. Two of the producers, Superior and Humble, assert that this court has no jurisdiction to hear a petition for review by the intervenors because (1) respondents failed to present their objections in their Applications for Rehearing and consequently are barred from asserting them here, and (2) they were not "aggrieved" within the meaning of section 19 of the Act (15 U.S.C. § 717r).

1. JURISDICTION.¹

A. Waiver of objection by failure to urge it in application for rehearing.

Superior asserts that "the actual contentions on review" are "charges of abuse of discretion, arbitrary and capricious action and unreasonableness by the Commission in its decision making process" and that the petitioners failed to raise these contentions in its Application for Rehearing, and concludes that they therefore cannot be raised in this petition for review. In support it cites many cases and section 19 of the Natural Gas Act, which provides in pertinent part that:

"§ 19(a) Any person * * * aggrieved by an order issued by the Commission * * * may apply for a rehearing * * *. The application for rehearing shall set forth specifically the ground or grounds upon which such application is based. * * * No proceeding to review any order of the Commission shall be brought by any person unless such person shall have made application to the Commission for a rehearing thereon. * * *"

"§ 19(b) Any party * * * aggrieved * * * may obtain a review of such order in the circuit court of appeals of the United States * * *. No objection to the order of the Commission shall be considered by the court unless such objection shall have been urged before the Commission in the application for rehearing unless there is reasonable ground for failure so to do. * * *"

The argument sacrifices substance to form, and to a form created by respondents rather than by the statute. The errors asserted here were urged in the application for rehearing. The Commission was not misled; its order denying rehearing is responsive to the errors petitioners assert. Hence the purpose of the rule is satisfied. Cf. City of Pittsburgh v. FPC, 1956, 99 U.S.App.D.C. 113, 237 F.2d 741. Respondents term those allegations of error "charges of abuse of discretion, arbitrary and capricious action and unreasonableness" and then claim that because petitioners did not, by proper phrasing, anticipate this magical conversion they are raising new objections which, under section 19, are inadmissible. This is a bootstrap argument supported neither by analysis of the actual language in the applications for rehearing nor by the facts or holdings of decisional law.²

B. Are petitioners "aggrieved" under section 19?

Superior makes a de minimis argument here, claiming that the sale in question is so small compared with the total volume sold to either California consumers or Southern Counties' and Southern California's customers that neither sustained the "present immediate legal economic injury" which it claims is necessary to constitute "aggrievement." A subsidiary argument is that the level of possible future sales cannot be considered — indeed, respondent asserts that "the amount of gas involved * * * is small and will have no present effect and probably no future effect on * * consumers of gas in California." It concludes that, even assuming an abuse of discretion by the Commission, petitioners here are not sufficiently aggrieved to have standing to object.

This contention is utterly without merit. To the extent that it raises a de minimis argument, the facts of the decided cases are squarely against it. E. g., Lynchburg Gas Co. v. FPC, 1964, 119 U.S.App.D.C. 23, 336 F.2d 942; Public Serv. Comm'n v. FPC, 3 Cir., 1958, 257 F.2d 717, aff'd on other grounds sub nom. Atlantic Ref. Co. v. Public Serv. Comm'n, 1959, 360 U.S. 378, 79 S.Ct. 1246, 3 L.Ed.2d 1312; City of Pittsburgh v. FPC, 1956, 99 U.S.App.D.C. 113, 237 F.2d 741; cf. FCC v. Sanders Bros. Radio Station, 1940, 309 U.S. 470, 60 S.Ct. 693, 84 L.Ed. 869; Associated Indus. v. Ickes, 2 Cir., 1943, 134 F.2d 694, vacated as moot, 1943, 320 U.S. 707, 64 S.Ct. 74, 88 L.Ed. 414. Other cases holding parties not aggrieved are distinguishable as involving no present injury and no established probability of future injury, see Eccles v. Peoples Bank, 1948, 333 U.S. 426, 68 S.Ct. 641, 92 L.Ed. 784; Cincinnati Gas & Elec. Co. v. FPC, 1957, 101 U.S.App.D.C. 1, 246 F.2d 688, or no factual showing of aggrievement, Panhandle Eastern Pipe Line Co. v. FPC, 3 Cir., 1955, 219 F.2d 729. In citing Helvering v. Gowran, 1937, 302 U.S. 238, 58 S.Ct. 154, 82 L.Ed. 224 and SEC v. Chenery Corp., 1943, 318 U.S. 80, 63 S.Ct. 454, 87 L.Ed. 626, for the proposition that, even assuming an abuse of discretion, the FPC's decision should be affirmed because it reached the correct result, respondent Superior begs the very question to be decided on the merits.

The petitioners are "aggrieved" within the meaning of section 19. Not only is there a real and present impact, however slight, but the probable future impact of expanded production and sales from this area is substantial. This is the first jurisdictional sale from Arizona to come before the Commission in a permanent certification proceeding, exploration in the area has been increasing and the Commission itself noted that "while the volumes here involved are small, the case has an importance beyond its present circumstances in its effect on the development of a new and emerging gas supply area." Opinion No. 434, 32 F.P.C. 41 (1964). And while the Commission claims that the price line established in this case will not necessarily establish a precedent for future sales within the area, the dissenting Commissioners remind us that "the pattern is universal — in every producing area of the country. When the Commission determines a ceiling price for an area, that...