Superior Oil Co. v. Transco Energy Co.

• Citation: 616 F. Supp. 98
• Decision Date: 25 March 1985
• Docket Number: Civ. A. No. 84-2138 L.
• Parties: The SUPERIOR OIL COMPANY v. TRANSCO ENERGY COMPANY, et al.
• Court: U.S. District Court — Western District of Louisiana

616 F. Supp. 98

The SUPERIOR OIL COMPANY v. TRANSCO ENERGY COMPANY, et al.

Civ. A. No. 84-2138 L.

United States District Court, W.D. Louisiana, Lafayette-Opelousas Division.

February 11, 1985.

On Rehearing March 25, 1985.

COPYRIGHT MATERIAL OMITTED

Dan A. Spencer, Houston, Tex., for plaintiff.

Lawrence E. Donohoe, Jr., Edward C. Abell, Jr., Lafayette, La.; Alfred H. Ebert, Taylor M. Hicks, Houston, Tex., for defendants.

MEMORANDUM RULING

DUHE, District Judge.

This matter involves an action by plaintiff, Superior Oil Company ("Superior"), against defendants Transcontinental Gas Pipe Line Corporation ("Pipe Line"), Transco Exploration Company ("TXC"), TXP Operating Company ("TXPO"), Transco Exploration Partners, Ltd. ("Partners"), and the Transco Energy Company ("TEC"), for injunctive relief and damages for alleged violations of the Natural Gas Policy Act of 1978 (NGPA), 15 U.S.C. 3301 et seq., and the Sherman Anti-Trust Act, 15 U.S.C. § 1 et seq. In addition, through § 1349 of the Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. § 1331 et seq., and the pendent jurisdiction of this Court, there are state law claims for damages and specific performance for the alleged breach of six contracts for the sale of natural gas from onshore and offshore fields of Louisiana and Texas. Presently before the Court are various motions:

(1) A motion by the defendants to stay certain elements of this action and refer them to the Federal Energy Regulatory Commission (FERC);

(2) A motion by defendant Pipe Line to stay certain elements of this action pending arbitration;

(3) A motion by plaintiff for partial summary judgment;

Each of these will be considered in turn. As a preliminary inquiry, however, this Court will review its jurisdiction over this matter.

JURISDICTION

Superior is seeking relief for the breach of six contracts for the sale of natural gas. Four of these contracts — the Eugene Island, West Cameron, Brazos and Vermilion — are for production fields on the Outer Continental Shelf (OCS) of Louisiana and Texas. The two remaining contracts — the Schwarz and Raccourci Island — are for onshore fields in Texas and Louisiana, respectively.

43 U.S.C. § 1349(b)(1) provides, in pertinent part, that:

(1) ... The district courts of the United States shall have jurisdiction of cases and controversies arising out of, or in connection with (A) any operation conducted on the Outer Continental Shelf which involves exploration, development, or production of minerals, of the subsoil and seabed of the Outer Continental Shelf ... (emphasis added).

This Court has little difficulty in concluding that a contract for the sale of natural gas produced on the OCS arises out of and is connected with the "exploration, development, or production of the minerals" of the Outer Continental Shelf. Hence this Court has original jurisdiction over the four OCS contacts at issue in this matter.

This Court has no such independent jurisdiction over plaintiff's claims arising out of the two onshore contracts. However, Superior has also alleged in its amended complaint that defendants' breach of these two contracts is part of a larger violation of the Federal antitrust laws, 15 U.S.C. § 1 and 2 (Sherman Act), and 15 U.S.C. § 14 (Clayton Act). Since Superior's state-law claims for breach of the two onshore contracts derive from a common nucleus of operative fact with its federal anti-trust claims, this Court has pendent jurisdiction over the former. Transource International, Inc., v. Trinity Industries, Inc., 725 F.2d 274 (5th Cir.1984). In the interests of judicial economy, this Court will exercise its discretionary pendent jurisdiction over the Schwarz and Raccourci Island contract claims in this matter.

I. DEFENDANTS' MOTION TO STAY AND REFER TO FERC

The defendants have moved on the grounds of the "primary jurisdiction" doctrine that certain issues in this matter be stayed and referred to FERC. Those issues are:

(a) Whether any of the defendants have violated § 315 of NGPA, 15 U.S.C. § 3375, 18 C.F.R. § 277.101, by participating in short-term sales of new or high cost natural gas from the Outer Continental Shelf temporarily released from long-term contracts; and

(b) Whether maximum lawful price ceilings established under Title I of the NGPA would be exceeded if Superior were to receive "take or pay" payments for natural gas, whether or not such payments may be recouped or made up by Pipe Line.

In weighing this motion, this Court is guided by the principles enunciated by the Fifth Circuit in Mississippi Power and Light Co. v. United Gas Pipe Line Co., 532 F.2d 412 (5th Cir.1976).

In M P & L the Court declared:

"No fixed formula exists for applying the doctrine of primary jurisdiction. In every case the question is whether the reasons for the existence of the doctrine are present and whether the purposes it serves will be aided by its application in the particular litigation." Id. at 419.

However,

"there are a few general situations in which referral is often unwarranted ... when the agency's position is sufficiently clear or nontechnical or when the issue is peripheral to the main litigation, Court should be very reluctant to refer citations omitted. Finally, the Court must always balance the benefits of seeking the agency's aid with the need to resolve disputes fairly yet as expeditiously as possible citations omitted." Id.

There are two questions that defendants seek to refer to FERC. The first — whether or not the short-term special marketing programs of defendants violate the NGPA of 1978 — is peripheral to the central litigation, that is, the question of defendants' non-performance of their obligations. Hence, this Court has little difficulty in denying the defendants' motion as to this issue.

The second candidate for referral is the defendants' affirmative defense that the price ceilings of the NGPA of 1978 void their obligation to pay in the absence of taking, regardless of whether those payments are ultimately recoupable. Defendants contend that the technical nature of this question, and the fact that its resolution has industry-wide implications, augurs in favor of referral.

Various other district courts have wrestled with this question, and while at least one court has referred the issue to FERC — see Post v. Perry Gas Transmission, Inc., 616 F.Supp. 1 (N.D.Tex.1983) — the weight of authority stands for the proposition that denial of the referral motion is proper. Cf. Exxon Corp. v. Tenneco, Inc. # 83-1640 (W.D.La.1983); Southport Exploration, Inc. v. Producers Gas Co., # 83-C-550-BT (N.D.Okl.1983); Sampson Resources v. Northern Natural Gas Company, # 83-C-1214E (N.D.Okl.1982).

The FERC has taken the position that questions of this nature should not be referred to it. See the Amicus Curiae brief of the FERC, dated June 18, 1984, to the U.S. Court of Appeals for the Fifth Circuit, Koch Industries, Inc. v. Columbia Gas Transmission Corp., # 83-990 (M.D.La. 1983). The FERC has failed to initiate proceedings on this question, even though some Courts have referred the question to it. Indeed, the FERC is unwilling to commit itself to taking action at some point in the future.

When this Court weighs "the benefits of seeking the agency's aid with the need to resolve disputes fairly yet as expeditiously as possible," the scales are tipped in favor of denying referral by the simple fact that FERC is unable and unwilling to offer any assistance for the foreseeable future. It is perhaps true that in the long run the FERC might eventually initiate proceedings and decide the question. But, in the apt words of Professor Keynes, "in the long run, we're all dead." The fact that FERC has shown a disinclination to even have this question referred to it, much less initiate proceedings, destroys the raison d'etre of the primary jurisdiction doctrine in this instance.

Accordingly, this Court hereby denies defendants' motion to stay and refer the above mentioned issues to the FERC.

II. DEFENDANT PIPE LINE'S MOTION TO STAY PENDING ARBITRATION

All six contracts in this matter contain arbitration clauses. The two onshore contracts — the Raccourci Island Field (Louisiana) and the Schwarz Field (Texas) contain identical arbitration clauses with sweeping language:

"1. Any controversy between the parties hereto arising under this agreement and not resolved by agreement shall be determined by a board of arbitration ...

2. The decision of the arbitrators, or the majority thereof, made in writing shall be final and binding upon the parties ..." (emphasis added)

The four remaining contracts (all offshore) at issue — the Brazos (Texas), the Vermilion 58 (Louisiana), the Eugene Island 105 (Louisiana), and the West Cameron 494/498 (Louisiana) fields — contain arbitration clauses much narrower in scope.

The Brazos contract provides:

"Any controversy between the parties hereto arising under Article XI `Price', of this agreement and not resolved by agreement shall be determined by a board of arbitration ..."

The Louisiana contracts all provide:

"Any controversy between the parties hereto arising under Section 5 of Article XI, `Price', of this agreement and not resolved by agreement shall be determined by a board of arbitration ..."

There is no dispute between the parties arising under Section 5 of Article XI, "Price", of the offshore Louisiana contracts. However, Count IV of plaintiff's complaint does arise under the price provisions of the Brazos contract.

On the basis of the arbitration clauses in question, defendant Pipe Line has moved pursuant to 9 U.S.C. § 3 that this Court stay:

(1) All claims arising out of the Schwarz Field contract (with the exception of the issue of whether "take or pay" payments would violate the NGPA, which it contends should be referred to FERC);

(2) All claims arising out of the Raccouri Island Field contract; and

(3) Count IV of Superior's complaint regarding the price to be paid under the Brazos Field contract.

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