Superior Oil Co. v. Federal Energy Regulatory Commission
| Decision Date | 17 November 1977 |
| Docket Number | Nos. 76-2113,76-2246,s. 76-2113 |
| Citation | 563 F.2d 191 |
| Parties | The SUPERIOR OIL COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. MITCHELL ENERGY CORPORATION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Fifth Circuit |
W. B. Wagner, Jr., Pat F. Timmons, James M. Dunnam, Houston, Tex., for petitioner in No. 76-2113.
Homer J. Penn, Mitchell Energy Corp., Houston, Tex., for petitioner in No. 76-2246.
Allan Abbott Tuttle, Sol., Federal Power Commission, Drexel D. Journey, Gen. Counsel, Washington, D. C., for respondent.
Petitions for Review of Orders of the Federal Power Commission.
Before CLARK, RONEY and TJOFLAT, Circuit Judges.
This case arises out of petitions requesting preenforcement judicial review of two orders issued by the Federal Power Commission (FPC). If sustained, the orders 1 would require all large producers of natural gas and their affiliates to submit detailed information concerning their exploration and development-related expenditures and activities to the FPC on an annual basis. The petitioners, the Superior Oil Company (Superior) and the Mitchell Energy Corporation (Mitchell), are large producers of natural gas and other petroleum products who would be obliged to complete and file a questionnaire known as Form 64 should the orders be upheld. They contend that the orders are invalid for the following reasons: (1) to the extent that they require submission of information from affiliates of natural gas companies who are not themselves natural gas companies, they exceed the bounds of the FPC's powers under the Natural Gas Act; (2) the administrative determination on which they are based that the regulatory need for the data outweighs the burden which compliance would impose on the petitioner is not supported by substantial record evidence; (3) the orders violate the Freedom of Information Act insofar as they authorize the disclosure of the confidential data to be collected on Form 64; (4) the orders violate the Federal Reporting Services Act because the FPC has announced its intention not to comply with the Act and because Form 64 is burdensome and requires the submission of data already available in reports submitted to other federal agencies. With one modification, we reject these contentions.
During the past decade considerable concern has been voiced over the FPC's dependence upon summaries prepared by natural gas producers themselves (through their trade association, the American Gas Association) for the information necessary to effective regulation of their pricing and interstate sale of natural gas. 2 Form 64 was adopted as one of three new data collection instruments designed to furnish the FPC with an independent source of raw data upon which its ratemaking and evaluation of established rates would be based. The first two acts of the scenario, Form 40 3 (information concerning natural gas reserves) and Form 45 4 (information concerning intrastate sales of natural gas) opened to mixed judicial reviews. While we affirmed the FPC's adoption of Form 45 in Continental Oil Co. v. Federal Power Commission, 519 F.2d 31 (5th Cir. 1975), cert. denied sub nom. Superior Oil Co. v. FPC, 425 U.S. 971, 96 S.Ct. 2168, 48 L.Ed.2d 794 (1976), the Ninth Circuit set aside the orders adopting Form 40 in Union Oil Co. of California v. FPC, 542 F.2d 1036 (9th Cir. 1976). Today we review the finale.
On March 21, 1975, the FPC published a "Notice of Proposed Rulemaking," 5 announcing that it was considering the adoption of a new rule that would require every natural-gas company 6 and its affiliates 7 to file Form 64, and invited interested persons to submit written comments concerning the suggested rule. As originally proposed, Form 64 consisted of three schedules: Schedule No. 1 requested total expenditures incurred for exploration and development of oil and gas by type of reservoir; Schedule No. 2 sought information concerning exploration and development activities; and Schedule No. 3 asked for production, revenue, royalty, and non-associated gas reserve data. Each schedule required that the requested information be submitted on both a national and a production-area basis.
Many comments were submitted in response to the Commission's March notice. Many respondents requested additional time for the preparation of more detailed comments and asked that a conference between natural gas producers and the FPC's staff be held immediately. The FPC then issued an order entitled "Notice of Extension of Time for Comments and Denying Motion for Conference" on April 23, 1975. The ruling expanded the period during which comments concerning proposed Form 64 would be received from 30 to 60 days but denied the producers' request for a pre-comment conference on the grounds that holding a conference would substantially alter the announced procedures for adopting Form 64 and would not be "beneficial." By the time the period for the filing of comments had expired, more than 50 natural gas producers had expressed their views on the merits of the proposed Form 64. The comments were overwhelmingly critical. The producers objected to Form 64 on the grounds, among others, that it was duplicative, burdensome, required the submission of unavailable data, and failed to provide that the information submitted would be kept confidential and that both the questionnaire and the directions accompanying it were unclear.
In Order No. 543, the FPC responded to many, but not all, of the objections raised in the comments submitted by producers. While rejecting or not discussing some suggestions, the FPC did modify Form 64 in several significant ways that will be discussed in detail later. Petitions for rehearing followed. The FPC considered the additional objections raised on rehearing and altered its previously announced policy concerning the confidentiality of the data to be collected by Form 64. Order No. 543-A denied the petitions for rehearing and directed all natural gas companies and their affiliates to file Form 64 by June 11, 1976. The petitioners appealed, and we stayed enforcement of Orders Nos. 543 and 543-A pending judicial review.
Since Congress has expressly delegated rule making authority to the FPC, 8 the rules which it issues are legislative in nature. See 1 K. Davis, Administrative Law Treatise § 5.03, at 299 (1958). 9 Therefore, they possess the force and effect of law if they are "(a) within the granted power, (b) issued pursuant to proper procedure, and (c) reasonable." Continental Equities, Inc. v. Commissioner of Internal Revenue, 551 F.2d 74, 82 (5th Cir. 1977), quoting 1 K. Davis, Administrative Law Treatise § 5.03, at 299 (1958), and K. Davis, Administrative Law of the Seventies § 29.01-1, at 654 (1976) (supplementing 1958 Treatise); cf. Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 415-17, 91 S.Ct. 814, 823, 28 L.Ed.2d 136, 153-54 (1971) (non-formalized decision making). This principle supplies the structure for our discussion of the validity of the reporting requirements imposed by Orders 543 & 543-A.
The petitioners do not challenge the FPC's authority to promulgate rules requiring them to furnish it with information concerning their production, transportation, and disposition of natural gas. The existence of that general power is conclusively established by the Act. 10 Instead, they contend that the FPC exceeded its statutory power in issuing the orders under attack to the extent that they require entities that are "affiliated producers" of natural gas company gas that term is defined in 18 C.F.R. § 157.40(a)(2) (1977), but not themselves "natural gas companies" as that term is defined by Section 2 of the Natural Gas Act, 15 U.S.C.A. § 717a(6) (1976), to complete Form 64. In Continental Oil, we held that the FPC could compel entities that were natural gas companies within the meaning of the Act to report information concerning their non-regulatable intrastate sales. See 519 F.2d at 33-34; see also Union Oil Co. of California v. FPC, supra, 542 F.2d at 1038-39. The question here is whether the FPC may go further and (a) require statutory natural gas companies to report information concerning the expenditures of affiliates whom they control, or (b) require the affiliates themselves to complete and file Form 64. 11
As the Supreme Court stated in Panhandle Eastern Pipe Line Co. v. Public Service Commission of Indiana, 332 U.S. 507, 516, 68 S.Ct. 190, 195, 92 L.Ed. 128, 137 (1947):
Three things and three only Congress drew within its own regulatory power delegated by the Act to its agent, the Federal Power Commission. These were: (1) the transportation of natural gas in interstate commerce; (2) its sale in interstate commerce for resale; and (3) natural gas companies engaged in such transportation or sale.
See also FPC v. Louisiana Power & Light Co., 406 U.S. 621, 636, 92 S.Ct. 1827, 1836, 32 L.Ed.2d 369, 382 (1972). In addition to whatever power may be derived from category (3), category (2) grants the FPC jurisdiction to require submission of expenditure data pertaining to the operations of affiliates controlled by statutory natural gas companies whether it seeks such data from the statutory natural gas companies or from the affiliates themselves.
The congressional delegation of power to regulate the interstate sale of natural gas for resale has long been held to encompass the power to fix the price at which such sales shall be made. 12 For effective and meaningful price regulation, the FPC must be able to insure the integrity of its information about producer expenditures for exploration and development which are critical components of cost and essential for determining a just and reasonable rate. The FPC argues that without exploration and development expenditure data of...
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