Southern Louisiana Area Rate Cases v. Federal Pow. Com'n
| Decision Date | 19 March 1970 |
| Docket Number | No. 27492 et al.,27492 et al. |
| Citation | 428 F.2d 407 |
| Parties | SOUTHERN LOUISIANA AREA RATE CASES, Austral Oil Co., et al., Petitioners, v. FEDERAL POWER COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Fifth Circuit |
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Joseph W. Morris, Edwin S. Nail, Tulsa, Okl., for Amerada Hess Corporation.
Carroll L. Gilliam, Philip R. Ehrenkranz, Grove, Jaskiewicz and Gilliam, Washington, D. C., for Alco Oil and Gas Corporation.
Edward J. Kremer, Dallas, Tex., Sherman S. Poland, Ross, Marsh & Foster, Washington, D. C., Charles E. McGee, Washington, D. C., for Atlantic Richfield Company.
J. Evans Attwell, Vinson, Elkins, Searls & Connally, Houston, Tex., for Austral Oil Company, Inc.
Homer D. Johnson, William C. Charlton, Pampa, Tex., for Cabot Corporation.
C. C. Cammack, Tulsa, Okl., R. J. Leithead, Bartlesville, Okl., Sherman S. Poland, Ross, Marsh & Foster, Washington, D. C., for Cities Service Company.
C. C. Cammack, Tulsa, Okl., R. J. Leithead, Bartlesville, Okl., for Cities Service Oil Co.
Thomas H. Burton, Jr., Houston, Tex., for Continental Oil Company.
Morris Wright, Cobb & Wright, New Orleans, La., for Estate of William G. Helis, a Partnership.
H. H. Hillyer, Jr., Milling, Saal, Saunders, Benson & Woodward, New Orleans, La., for J. R. Frankel.
E. A. Courtney, Hammond, La., for Gas Gathering Corporation.
Cecil E. Munn, Cantey, Hanger, Gooch, Cravens & Munn, Fort Worth, Tex., for General American Oil Company of Texas.
W. McIver Streetman, Andrews, Kurth, Campbell & Jones, Houston, Tex., for General Crude Oil Co.
Clyde E. Willbern, Houston, Tex., for Getty Oil Co.
Warren M. Sparks, B. James McGraw, Tulsa, Okl., for Gulf Oil Corp.
Martin N. Erck, Robert L. Norris, Kirby Ellis, Sherman S. Poland, James D. McKinney, Jr., Ross, Marsh & Foster, Washington, D. C., for Humble Oil & Refining Company, Humble Gas Transmission Company.
Willard P. Scott, Lynn Adams, Oklahoma City, Okl., James E. Bye and Barkley Clark, Denver, Colo., for Kerr-McGee Corp.
Kenneth Heady, John R. Rebman, Bartlesville, Okl., for Phillips Petroleum Co.
James E. Thompson, Ardmore, Okl., Richard L. Schrepferman, Denver, Colo., Philip R. Ehrenkranz, Grove, Jaskiewicz and Gilliam, Washington, D. C., for Samedan Oil Corporation.
Oliver L. Stone, Thomas G. Johnson, New York City, for Shell Oil Company.
Richard F. Remmers, Oklahoma City, Okl., for Sohio Petroleum Co.
John E. Watson, Houston, Tex., for Tenneco Oil Company.
James D. Annett, Robert E. Newey, Houston, Tex., William K. Tell, Jr., New York City, for Texaco Inc.
Douglas C. Gregg, George C. Bond, Los Angeles, Cal., John C. Snodgrass, Vinson, Elkins, Searls & Connally, Houston, Tex., for Union Oil Company of California.
Joseph F. Diver, Jack Fariss, Morton Taylor, Findlay, Ohio, for Marathon Oil Co.
J. Evans Attwell, Vinson, Elkins, Searls & Connally, Houston, Tex., for J. Ray McDermott & Company, Inc.
James E. Bye, Holme, Roberts & Owen, Denver, Colo., for Midwest Oil Corp.
Tom P. Hamill, Robert D. Haworth, Houston, Tex., William H. Tabb, Dallas, Tex., Carroll L. Gilliam, Philip R. Ehrenkranz, Grove, Jaskiewicz and Gilliam, Washington, D. C., for Mobil Oil Corp.
Frank Johnson, Houston, Tex., for Newmont Oil Company.
H. Y. Rowe, El Dorado, Ark., for Ocean Drilling & Exploration Company.
J. P. Hammond, T. C. McCorkle, Tulsa, Okl., Carroll L. Gilliam, Grove, Jaskiewicz and Gilliam, Washington, D. C., for Pan American Petroleum Corp.
Reuben Goldberg, Washington, D. C., George E. Morrow, Memphis, Tenn., Charles F. Wheatley, Jr., Washington, D. C., for petitioner, Municipal Distributors Group.
Murray Christian, Herbert W. Varner, Houston, Tex., Frank P. Saponaro, Jr., Washington, D. C., for petitioner Superior Oil Co.
Robert W. Henderson, Donald K. Young, Paul W. Hicks, Dallas, Tex., for petitioners Hunt Oil Company, and others.
Cecil N. Cook, Neal Powers, Jr., Butler, Binion, Rice, Cook & Knapp, Houston, Tex., for John W. Mecom, Lake Washington Inc., U. S. Oil of Louisiana Inc., U. S. Oil of Louisiana, Ltd., Bradco Properties, Inc. and Freeport Sulphur Co.
Raymond N. Shibley, Patterson, Belknap, Farmer & Shibley, Washington, D. C., for petitioners.
Donald R. Arnett, Tulsa, Okl., Stanley M. Morley, Francis H. Caskin, Louis Flax, Shannon and Morley, Washington, D. C., for Sun Oil Co.
Justin R. Wolf, Joel Yohalem, Washington, D. C., for The California Co., a Division of Chevron Oil Co., petitioner; Wolf & Case, Washington, D. C., Woollen H. Walshe, New Orleans, La., of counsel.
Richard A. Solomon, Gen. Counsel, David J. Bardin, Deputy Gen. Counsel, Peter H. Schiff, Sol., Leo E. Forquer, Asst. Gen. Counsel, Reuben Lozner, Robert C. McDiarmid, David F. Stover, Washington, D. C., for respondent, Federal Power Commission; Lloyd E. Dietrich, Robert A. Jablon, Richard V. Mattingly, Jr., Attys., of counsel.
Morton L. Simons, Washington, D. C., Kent H. Brown, Albany, New York, for Public Service Commission of the State of New York.
W. J. Stark, San Antonio, Tex., Richard F. Generelly, Shannon and Morley, Washington, D. C., for Forest Oil Corp.
C. R. Eyster, San Antonio, Tex., for Forest.
John E. Holtzinger, Jr., Morgan, Lewis & Bockius, Washington, D. C., for Associate Gas Dist.
Jerome J. McGrath, Harry L. Albrecht, Washington, D. C., for Independent Natural Gas Association of America.
Elliott G. Flowers, Houston, Tex., for Union Tex.
William R. Slye, Houston, Tex., for Texaco Inc.
Before THORNBERRY, COLEMAN and MORGAN, Circuit Judges.
This is a proceeding to review orders of the Federal Power Commission setting maximum rates for wellhead sales of natural gas produced in the Southern Louisiana area. Thirty-seven producer petitioners challenge the rates as too low.1 Eight pipeline companies are also involved in the proceedings, and they concur with the producers that the rates are too low.2 On the other hand, certain consumer interests have intervened and attack the rates as too high.3 The Federal Power Commission presents a third position by arguing that its orders should be sustained in full.4 The result of this trichotomy of conflicting positions — producers, consumers, and the Commission — is a case as complex as it is important.
We have determined that the orders of the Commission should be sustained in full. We add, however, that this affirmance does not reflect full satisfaction with the performance that the Commission has turned in, but rather a recognition that the process of producer regulation is a difficult one that the Commission must have latitude to adapt to changing conditions. In the section of this opinion that immediately follows, we describe this process, together with the legal events that have led to its development, and set out the Commission's actions in the cases before us. In a second section, we deal with the consumer arguments that the rates are too high. The third section takes up the producer arguments that the rates are too low. Herein, we discuss what we believe is the most serious problem presented by these cases: The possibility that the Commission has not adequately considered the problem of new gas supply in relation to demand. There is evidence of a serious supply deficiency. Fourthly, we summarize our conclusions and indicate improvements that should be expected in the regulatory process. In this final section, we also consider the stay that has prevented the Commission's orders from going into effect through this stage of review.
The beginnings of producer area regulation were inauspicious. Ever since the enactment of the Natural Gas Act in 1938,5 the FPC has had the responsibility of regulating sales by interstate pipeline companies, but it was not until 1954 that the Supreme Court held, in Phillips Petroleum Co. v. Wisconsin,6 that the Act also gave the Commission power to regulate sales by independent producers at the wellhead. The Commission was convinced that producer regulation would be impractical and consequently was reluctant to assume its new role.7 Congress was willing to amend the Act to exclude producers. But the aftermath of the Phillips decision, as one commentator has described it, included an accident of history that left the Commission still faced with its difficult new duty:8
Both economists and lawyers have questioned the soundness of direct producer price regulation,9 but there is also support for the need for producer regulation of some type,10 and whatever its merits, the law since 1954 has imposed the duty of regulation upon the FPC.
From 1954 to 1960, the Commission attempted to discharge its new responsibility in the same way that it regulates pipelines, on a company-by-company basis, setting the rates of each producer according to his costs of service. This method, however, required the Commission to repeat lengthy hearing procedures for each independent operator in the nation. It consequently led to a breakdown in the administrative process,11 a result that is easy to understand in view of the cumbersome...
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