State of North Dakota v. Federal Power Commission

• Decision Date: 06 August 1957
• Docket Number: No. 15669.,15669.
• Citation: 247 F.2d 173
• Parties: STATE OF NORTH DAKOTA and Public Service Commission of North Dakota, Petitioners, v. FEDERAL POWER COMMISSION, Amerada Petroleum Corporation, Signal Oil and Gas Company and Montana-Dakota Utilities Company, Respondents.
• Court: U.S. Court of Appeals — Eighth Circuit

247 F.2d 173 (1957)

STATE OF NORTH DAKOTA and Public Service Commission of North Dakota, Petitioners, v. FEDERAL POWER COMMISSION, Amerada Petroleum Corporation, Signal Oil and Gas Company and Montana-Dakota Utilities Company, Respondents.

No. 15669.

United States Court of Appeals Eighth Circuit.

August 6, 1957.

Charles L. Murphy, Bismarck, N. D. (Francis Murphy, Fargo, N. D., was with him on the brief), for petitioners.

Robert L. Russell, Atty., F. P. C., Washington, D. C. (Willard W. Gatchell, Gen. Counsel, Howard E. Wahrenbrock, Asst. Gen. Counsel, and William L. Ellis, Atty., F. P. C., Washington, D. C., were with him on the brief), for respondent Federal Power Commission.

Robert E. May, Washington, D. C. (Robert J. Stanton and James C. McWilliams, Tulsa, Okl., and Wheat, May & Shannon, Washington, D. C., were with him on the brief for Amerada Petroleum Corp. and Justin R. Wolf and Charles A. Case, Jr., Washington, D. C., and A. E. Stebbings, Los Angeles, Cal., submitted brief for Signal Oil & Gas Co.), for respondents Amerada Petroleum Corp. and Signal Oil & Gas Co.

Earl H. A. Isensee, Minneapolis, Minn., for respondent Montana-Dakota Utilities Co.

Before GARDNER, Chief Judge, and VOGEL and VAN OOSTERHOUT, Circuit Judges.

VOGEL, Circuit Judge.

The State of North Dakota and the Public Service Commission of North Dakota, petitioners herein, ask, pursuant to 15 U.S.C.A. § 717r, that this court review and modify or set aside in whole or in part an order of the Federal Power Commission, hereinafter referred to as the FPC, dated July 2, 1956, on which rehearing was denied August 20, 1956, wherein certain certificates of public convenience and necessity were issued to Montana-Dakota Utilities Company, Signal Oil and Gas Company and Amerada Petroleum Corporation and certain others were refused for lack of jurisdiction. Montana-Dakota Utilities is a natural gas company owning and operating a gas pipeline system in the States of Wyoming, Montana and North and South Dakota. On June 24, 1955, and July 18, 1955, Montana-Dakota entered into "firm gas" contracts with Amerada and Signal respectively for 20-year terms at a beginning price of 16¢ per MCF delivered at Tioga, North Dakota. No federal permit was requested for these contracts as the "firm gas" was to supply the Tioga-Minot, North Dakota, line and the North Dakota communities of Ray, Wheelock, Epping and Springbrook and were therefore regarded as intrastate. On June 25, 1955, Montana-Dakota and Amerada entered into a 7-year contract whereby Amerada sold its "dump gas" to Montana-Dakota at 9¢ per MCF. "Dump gas" contracts are not for a definite or fixed amount of gas. They cover the remaining gas which would otherwise be flared or vented. The difference between "firm gas" and "dump gas" is, of course, reflected in the price. On July 19, 1955, Montana-Dakota and Signal entered into a similar contract for "dump gas" at a similar price. The "dump gas" under this contract, as under the June 25, 1955, contract with Amerada, was to be delivered at Tioga, North Dakota. The "dump gas" sold under both contracts was admittedly for resale in interstate commerce and accordingly such contracts were within the jurisdiction of the FPC.

In the original proceedings before the FPC three applications for certificates of public convenience and necessity were involved, two covering the contracts for the sale of "dump gas" by Amerada and Signal to Montana-Dakota and the third covering Montana-Dakota's request for authority to construct and operate the facilities required to transport the "dump gas" purchased from Amerada and Signal at Tioga, North Dakota, to its integrated facilities at Williston, North Dakota, for further transportation into Montana. In the latter petition certification was sought for four laterals off the line to service the North Dakota towns of Ray, Wheelock, Epping and Springbrook. The only reason certification of these laterals was sought was because of the possibility of a breakdown or failure in the Tioga, North Dakota, plant which might require the use of interstate gas from Montana in order to continue service to the four North Dakota communities during such an emergency period. As stated, no application was filed covering the "firm gas" contracts between Montana-Dakota and Amerada and Signal.

The State of North Dakota and the Public Service Commission of North Dakota intervened in the proceedings before the FPC. The intervention in the original proceedings was aimed primarily at getting the FPC to assume jurisdiction over the June 24, 1955, and July 18, 1955, "firm gas" contracts for 20-year terms at 16¢ per MCF which covered the gas servicing the communities of Ray, Wheelock, Epping and Springbrook, North Dakota, and the Tioga-Minot, North Dakota, intrastate line, the latter of which uses approximately 97% of the "firm gas". The petitioners desired the FPC to issue certificates conditioned upon rate regulation. They claim that the price agreed to was "excessive, exorbitant, unreasonable and prejudicial to the interests of North Dakota citizens". The FPC held that it has no jurisdiction over the sales made by Signal and Amerada under the "firm gas" contracts. The holding was, of course, based on the finding that the "firm gas" contracts were clearly intrastate in nature and accordingly outside the jurisdiction of the FPC. The Examiner's decision, approved by the FPC, further held that:

"The instant applications by Signal and Amerada request authority only to make sales to Montana-Dakota under the 9¢ `dump gas\' contracts, and the 16¢ `firm gas\' contracts are not relevant to those applications in any way. There is accordingly no discernible basis for including a rate condition directed to the 16¢ contracts in any certificate to be issued to Signal and Amerada authorizing deliveries under the 9¢ contracts."

The decision also held:

"The situation is in no way changed by the fact that Montana-Dakota is here seeking certification of the 4 laterals off the Williston-Tioga line, through which gas purchased under the 16¢ contracts will be fed to the North Dakota towns of Ray, Wheelock, Epping and Springbrook. Certification of those laterals is required only because of the possibility that in the event of an emergency breakdown of the Tioga plant, gas might be brought into the Williston-Tioga line and into the 4 laterals from the west, with the result that during such emergency period gas would be transported in interstate commerce over those laterals. The fact still remains, however, that the gas which would be transported in interstate commerce in such a situation would obviously not be gas purchased under the intant 16¢ contracts, and the record is clear that the gas delivered under the 16¢ contracts would never, under any circumstances, be transported in interstate commerce."

While the petitioners here ask this court to review the entire order of the FPC, it is obvious that the main complaint and the only question of any substance has to do with the FPC's refusal to accept jurisdiction over the 16¢ per MCF "firm gas" contracts. The facts are not in dispute. Amerada and Signal have separate "firm gas" contracts with Montana-Dakota for 20-year terms beginning at 16¢ per MCF. Amerada and Signal have additional "dump gas" contracts with Montana-Dakota, such contracts running for 7 years at 9¢ per MCF. As the Examiner stated:

"Signal and Amerada do not request certification of the sales to be made under these `firm gas\' contracts. They take the position that the `firm gas\' contracts are intrastate contracts not subject to the jurisdiction of this Commission, since they involve the sale in North Dakota of gas produced in North Dakota.

"The residue gas received by Montana-Dakota at the tailgate of the Tioga plant is broken into two streams at the point of delivery for measurement purposes. One stream moves eastward in Montana-Dakota\'s Tioga-Minot intrastate line. The other stream moves westward in the Tioga-Williston interstate line, with a small portion of that stream going off into the laterals for the four North Dakota towns of Ray, Wheelock, Epping and Springbrook, and the balance of such stream continuing on into Montana-Dakota\'s integrated system, as described above.

"The gas delivered by Montana-Dakota over its Tioga-Minot intrastate line (with an annual volume estimated for 1956 at 369,290 Mcf), and the gas delivered by it into the four laterals for Ray, Wheelock, Epping and Springbrook (with an annual volume estimated for 1956 at 11,120 Mcf), is purchased and paid for by Montana-Dakota under the 16¢ `firm gas\' contracts previously referred to. The remainder of the gas moving westward in the Tioga-Williston interstate line, disposed of ultimately in Williston and East Fairview, North Dakota, along

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