Sunray DX Oil Company v. Federal Power Commission

• Decision Date: 09 December 1966
• Docket Number: 8362.,No. 7781,8358-8360,8298,8311-8317,7781
• Citation: 370 F.2d 181
• Court: U.S. Court of Appeals — Tenth Circuit
• Parties: SUNRAY DX OIL COMPANY et al., Petitioners, v. FEDERAL POWER COMMISSION, Respondent, Gulf Oil Corporation, Humble Oil & Refining Company, Texaco Inc., and Sun Oil Company, Intervenors in Nos. 8311, 8312, 8313, and 8314.

370 F.2d 181 (1966)

SUNRAY DX OIL COMPANY et al., Petitioners, v. FEDERAL POWER COMMISSION, Respondent,

Gulf Oil Corporation, Humble Oil & Refining Company, Texaco Inc., and Sun Oil Company, Intervenors in Nos. 8311, 8312, 8313, and 8314.

Nos. 7781, 8298, 8311-8317, 8358-8360, 8362.

United States Court of Appeals Tenth Circuit.

December 9, 1966.

William K. Tell, Jr., and William R. Slye, Cleveland, Ohio, for petitioners in Nos. 7781, 8298, 8315, 8316, 8358, 8359, 8360, and 8362, and for intervenors Gulf Oil Corporation, Humble Oil & Refining Co., and Texaco, Inc., in Nos. 8311, 8312, 8313, and 8314. With them on the briefs were:

Homer E. McEwen, Jr., and J. P. Greve, Tulsa, Okl., for Sunray DX Oil Co., petitioner in No. 7781;

Dixon Morgan and McAfee, Hanning, Newcomer, Hazlett & Wheeler, Cleveland, Ohio, and Richard F. Remmers, Oklahoma City, Okl., for Sohio Petroleum Co., petitioner in No. 8298;

James J. Flood, Jr., Houston, Tex., for Texaco, Inc., petitioner in No. 8315 and intervenor in Nos. 8311, 8312, 8313, and 8314;

Warren M. Sparks and Arthur F. Whitt, Tulsa, Okl., for Gulf Oil Corporation, petitioner in No. 8316 and intervenor in Nos. 8311, 8312, 8313, and 8314;

Wilmer D. Masterson, III, and Kilgore & Kilgore, Dallas, Tex., for Edwin L. Cox, petitioner in No. 8358;

Robert W. Henderson, Dallas, Tex., for Lamar Hunt, petitioner in No. 8359;

Carl Illig, Jesse H. Foster, Jr., and James K. Schooler, Houston, Tex., for Humble Oil & Refining Co., petitioner in No. 8360 and intervenor in Nos. 8311, 8312, 8313, and 8314;

Vernon W. Woods, Shreveport, La., for Union Producing Co., petitioner in No. 8362.

Phillip D. Endom, New Orleans, La., for Sun Oil Co., petitioner in No. 8317 and intervenor in Nos. 8311, 8312, 8313, and 8314. With him on the briefs were Robert E. May, Francis H. Caskin, and May, Shannon & Morley, Washington, D. C.,

Morton L. Simons, Washington, D. C., for petitioners in Nos. 8311, 8312, 8313, and 8314. With him on the briefs were:

William T. Coleman, Jr., and Robert W. Maris, Philadelphia, Pa., for United Gas Improvement Co., petitioner in No. 8311;

Samuel Graff Miller and Donald Blanken, Philadelphia, Pa., for Philadelphia Electric Co., petitioner in No. 8311;

Edwin F. Russell, Harry G. Hill, Jr., and Barbara M. Suchow, Brooklyn, N. Y., for Brooklyn Union Gas Co., petitioner in No. 8312;

Kent H. Brown, Albany, N. Y., for Public Service Commission of State of New York, petitioner in No. 8313;

Edward M. Barrett and Bertram D. Moll, Mineola, N. Y., for Long Island Lighting Co., petitioner in No. 8314.

Cyril S. Wofsy, Washington, D. C., for respondent. With him on the brief were Richard A. Solomon, General Counsel, Howard E. Wahrenbrock, Sol., and Joel Yohalem, Attorney, Federal Power Commission.

Before BREITENSTEIN, HILL and SETH, Circuit Judges.

BREITENSTEIN, Circuit Judge.

These petitions seek review of Opinion No. 422¹ of the Federal Power Commission granting permanent certificates of public convenience and necessity under § 7 of the Natural Gas Act² for sales of natural gas produced in Texas Railroad District No. 4 to various interstate pipeline companies. Nine of the petitions are by independent natural gas producers, three are by distributing companies selling gas in the Atlantic Seaboard area, and one is by the Public Service Commission of the State of New York. All of the petitions are brought under § 19(b) of the Act.

The Commission fixed the rate at 16 cents per Mcf. The producers say that the rate is too low and the distributors say that it is too high. The parties are also at odds on the Commission treatment of the refund question. We affirm the 16-cent rate and hold that refunds of collections made in excess of that rate under temporary certificates containing no express refund condition may not be ordered.

The first petition for review was filed in the Tenth Circuit by Sunray DX Oil Company and other producers. After procedural skirmishes,³ petitions for review of Opinion No. 422 pending in other circuits were transferred to the Tenth Circuit pursuant to 28 U.S.C. § 2112(a). The producers filed motions for leave to adduce additional evidence. These motions were deferred to the hearing of the petitions on the merits. The proceedings were held in abeyance for a time in anticipation of the decision in United Gas Improvement Co. v. Callery Properties, Inc., 382 U.S. 223, 86 S.Ct. 360, 15 L.Ed.2d 284.

An understanding of the issues will be helped by a brief recitation of the Commission actions and the court decisions which make up the background. The decision in Atlantic Refining Co. v. Public Service Commission of New York, 360 U.S. 378, 79 S.Ct. 1246, 3 L.Ed.2d 1312, (CATCO) directed the Commission in certificate cases to keep initial prices in line. Thereafter, on September 28, 1960, the Commission promulgated its Statement of General Policy No. 61-1.⁴ This was issued concurrently with Opinion No. 338 in Phillips Petroleum Company.⁵ The Policy Statement established 23 rate areas, including District No. 4 involved herein, and with unimportant exceptions announced maximum rates for each area. In Phillips, the Commission held that the regulation of independent producers under the Act could be accomplished more appropriately by the establishment of area rates than by the establishment of producer rates on individual cost-of-service findings.⁶ The Policy Statement established a guideline initial rate for District No. 4 of 18 cents per Mcf.

On August 30, 1962, the Commission issued Opinion No. 362 in Skelly Oil Co., 28 F.P.C 401. That proceeding involved applications under § 7 for permanent certificates covering sales of gas produced in District No. 4. Therein the Commission disposed of all applications under contracts executed prior to September 28, 1960, the date of the Policy Statement, by the imposition of a 15-cent initial price condition and deferred decision on sales under four contracts bearing a later date. On the same day as the Skelly decision, the Commission promulgated its Fifth Amendment to the Statement of General Policy No. 61-1, 28 FPC 441, reducing the guideline initial rate in District No. 4 from 18 cents to 16 cents effective the same date. The four applications which had been severed from Skelly were then consolidated with a number of applications covering District No. 4 sales under contracts made between September 30, 1960, the date of the Policy Statement, and August 30, 1962, the date of the Skelly decision and the Fifth Amendment. The consolidated proceedings went forward under the style Amerada Petroleum Corporation, et al., Docket Nos. C162 etc.

In its order for the consolidated hearing the Commission stated:

"In such a hearing all of the applicants will have an opportunity to show whether the appropriate price at which they should be permanently certificated should be limited to the 15-cent per MCF price which we found to be the in-line price as of September 28, 1960, the 16-cent price which is being adopted as the future area ceiling price for this area, or the 18-cent per Mcf price established on September 28, 1960."

The applications covered initial contract-based rates ranging from 15.9 cents to 19.8 cents.⁷ During the pendency of their applications for permanent certificates, numerous producers requested and received temporary authorizations under § 7(c) of the Act and § 157.28 of the Commission regulations thereunder.⁸ These were issued ex parte and without notice or hearing. Many of the temporary certificates did not contain an express refund condition.

The Amerada proceedings before the Examiner went forward contemporaneously with the judicial review of the Skelly decision, Opinion No. 362. In Amerada the producers offered, and the Examiner declined to receive, testimony and exhibits covering economic and financial requirements. Texaco Inc. sought to obtain the disclosure and production of Commission records pertaining to the establishment of the guideline initial prices in the Policy Statement and the Fifth Amendment. This was denied. Review of the Commission actions upholding the Examiner on these two evidentiary issues was sought and denied in Texaco Inc. v. Federal Power Commission, 117 U.S.App.D.C. 268, 329 F.2d 223, certiorari denied 375 U.S. 941, 84 S.Ct. 346, 11 L.Ed.2d 272, on the ground that under § 19 the petitions for review were premature.

A Commission staff economist presented, and the Examiner received in evidence, Exhibit 16. This exhibit is a summary of price and other information for all District No. 4 contracts dated 1955 or later, filed as rate schedules with the Commission, and calling for a price of at least 14 cents.⁹

The Examiner's decision, issued July 23, 1963, recommended the grant of permanent certificates of public convenience and necessity to all producer applicants on specified conditions, two of which are pertinent here. The initial price was to be no greater than 15 cents per Mcf and no refunds were required of producers selling gas under temporary authorizations which did not contain any specific refund condition. Both the producers and the distributors filed exceptions to the Examiner's decision.

While the matter was pending before the Commission, the District of Columbia Circuit decided the Skelly case.¹⁰ That decision affirmed the 15 cent in-line price established by Opinion No. 362 for District No. 4 sales under contracts made before September 28, 1960, and reversed the Commission holding that refunds could not be required when the temporary authorization contained no express refund condition.

By its Opinion No. 422, here under review, the Commission upset the Examiner on both the price and refund issues. It fixed the in-line price at 16 cents per Mcf and deferred the question of refunds under contracts having no express refund conditions.

With this background we first consider the rejection of the proffered evidence. Several producers jointly tendered testimony and exhibits...