Texaco, Inc. v. Federal Power Commission, 6947

Citation317 F.2d 796
Decision Date20 May 1963
Docket Number7179.,7303,6973,7217,7002,No. 6947,7135,6947
PartiesTEXACO, INC., Petitioner, v. FEDERAL POWER COMMISSION, Respondent. PAN AMERICAN PETROLEUM CORPORATION, Petitioner, v. FEDERAL POWER COMMISSION, Respondent. SUN OIL COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)

COPYRIGHT MATERIAL OMITTED

Alfred C. DeCrane, Jr., Houston, Tex., and James J. Flood, Jr., Houston, Tex. (P. F. Schlicher, New York City, and P. R. Wimbish, Tulsa, Okl., on the briefs), for petitioner, Texaco, Inc., in Nos. 6947, 7135, and 7217.

William H. Emerson, Tulsa, Okl., and Carroll L. Gilliam, Washington, D. C. (J. P. Hammond, Tulsa, Okl., Thomas J. Files, Casper, Wyo., Harold H. Young, Jr., Tulsa, Okl., and William J. Grove, and Dow, Lohnes & Albertson, Washington, D. C., of counsel, on the briefs), for petitioner, Pan American Petroleum Corporation, in Nos. 6973, 7002, and 7303.

John A. Ward, III, Philadelphia, Pa. Phillip D. Endom, New Orleans, La., Joiner Cartwright, Herf M. Weinert, Charles F. Heidrick, Beaumont, Tex., J. Colbert Peurifoy, Dallas, Tex., Robert E. May, Louis Flax, John T. Ketcham and May, Shannon & Morley, Washington, D. C., and Martin A. Row, Dallas, Tex., of counsel, on the brief), for petitioner, Sun Oil Co., in No. 7179.

Peter H. Schiff, Attorney, Washington, D. C. (Richard A. Solomon, General Counsel, Howard E. Wahrenbrock, Solicitor, and Milton J. Grossman and Arthur H. Fribourg, Attorneys, Federal Power Commission, on the briefs), for respondent, Federal Power Commission.

Before MURRAH, Chief Judge, and BREITENSTEIN and HILL, Circuit Judges.

BREITENSTEIN, Circuit Judge.

These seven cases present another episode in the history of the regulation by the Federal Power Commission of independent producers of natural gas subject to its jurisdiction. Basically the issue is the right of the Commission to reject summarily and without a hearing a gas-purchase contract between a producer and a pipeline company on the ground that the contract contains indefinite price-changing clauses forbidden by Commission regulations.

At the outset we are faced, in all but one of the cases, No. 7303, with the Commission's procedural objections to the right of the producers to maintain petitions for review in this court. The insistence of the parties on their procedural rights impels us to resist the temptation to go directly to the heart of the controversy.

The struggles of the Commission to administer the Natural Gas Act so as to regulate producers have been described many times in Commission reports and decisions and in court decisions. We shall review the situation only to the extent necessary for a background to the phase of the problem with which we are concerned.

In United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332, 338, 341, 76 S.Ct. 373, 377-378, 379, 100 L. Ed. 373, the Supreme Court said that the Natural Gas Act1 did not "abrogate private rate contracts as such" and construed §§ 4 and 5 of the Act2 as parts of a statutory scheme under which "all rates are established initially by the natural gas companies." The gas is ordinarily sold in the field by a producer to a pipeline company which transports the gas to the area of use and there sells it to a retailer who makes distribution to the ultimate consumers. The pipelines must have a committed source of gas supply sufficient to justify financing, construction, and operation. That supply is ordinarily obtained by long-term contracts of 20 years or more. The negotiation of a long-term contract presents problems of the continued fairness and adequacy of the original selling price.3 These problems have given rise to price escalation provisions.4 We have recognized contractual provisions for price escalation as unabrogated by the Act.5

Within three months after the Mobile decision, the Commission gave notice in Docket No. R-1536 of a proposed regulation to prohibit the filing of producers' contracts containing either pricing clauses tied to buyers' rates and pricing indices, or favored-nation clauses. This docket lay dormant until March 3, 1961, when the Commission issued its Order No. 2327 declaring provisions for adjustment in price denoted as "indefinite escalation" clauses to be "inoperative and of no effect at law" in contracts tendered for filing after April 2, 1961. This order was superseded by Order No. 232-A8 which added the following to the definition of "rate schedule" as contained in § 154.93 of the regulations:

"Provided, That in contracts executed on or after April 3, 1961, for the sale or transportation of natural gas subject to the jurisdiction of the Commission, any provision for a change of price other than the following provisions shall be inoperative and of no effect at law; the permissible provisions for a change in price are:
"(1) provisions that change a price in order to reimburse the seller for all or any part of the changes in production, severance, or gathering taxes levied upon the seller;
"(2) provisions that change a price to a specific amount at a definite date; and
"(3) provisions that, once in five-year contract periods during which there is no provision for a change in price to a specific amount paragraph (2), change a price at a definite date by a price-redetermination based upon and not higher than a producer rate or producer rates which are subject to the jurisdiction of the Commission, are not in issue in suspension or certificate proceedings, and are in the area of the price in question."

Hereafter we shall refer to contract provisions permissible under Order No. 232-A as definite price-changing clauses and to those impermissible under that order as indefinite price-changing clauses.

Pursuant to notice given on October 10, 1961, in Docket No. R-203,9 the Commission, on February 8, 1962, issued its Order No. 24210 which made three amendments to the regulations. Section 154.93, defining producers' rate schedules, was amended to prescribe automatic rejection of contracts containing indefinite price-changing clauses. The amendment reads:

"Provided further, That any contract executed on or after April 2, 1962, containing price-changing provisions other than the permissible provisions set forth in the proviso next above Order No. 232-A shall be rejected."

Order No. 242 also amended §§ 157.14 and 157.25 of the regulations so as to prohibit the consideration of contracts containing the forbidden clauses in support of a pipeline's application for a certificate of convenience and necessity.

The cases now before us attack the validity of Orders Nos. 232, 232-A, and 242. With this background we turn to the procedural questions.

Court review of Commission orders is governed by § 19(b) of the Act,11 which provides that a party to a proceeding "aggrieved" by a Commission order may obtain a review in the court of appeals "for any circuit wherein the natural-gas company to which the order relates is located or has its principal place of business," or in the Court of Appeals for the District of Columbia Circuit. The Commission asserts that venue does not lie in the Tenth Circuit for consideration of the three petitions of Texaco, Inc., Nos. 6947, 7135, and 7217, because the petitioner is not located in, and does not have its principal place of business in, that circuit. Texaco is incorporated under Delaware law and allegedly has its principal place of business in Texas. Venue in the Tenth Circuit depends on the meaning to be given the word "located."

Texaco's petitions for review allege that its Tulsa Division has responsibility for Texaco's producing activities and operations in an area including Oklahoma and Kansas.12 The Tulsa Division operations include "the negotiation of leases and exploration permits; geological and geophysical activities; the drilling of exploratory wells, and the development of productive areas; the payment of royalties and production taxes; the filing of state reports and the disposition of the production." In each case personnel of the Tulsa Division negotiated the contracts with the pipelines. That division supervises the performance of the contracts by Texaco, maintains records pertaining thereto, and receives payment for the gas sold. The certificate applications were made by the Tulsa Division.

The Commission asserts that the word "located" as used in § 19(b) means the same as "resides" and refers to the state of incorporation. Oddly enough, the extensive litigation over the Natural Gas Act has not produced an answer to this simple question. Perhaps the reason is that the point concerns venue rather than jurisdiction.13 The Commission asserts a "long-established understanding" of the Commission and the natural-gas companies that "located" refers to the state of incorporation, and cites an impressive list of cases brought in the Third Circuit on the basis of the incorporation of the natural-gas companies, which were parties thereto, in one of the states of the Third Circuit. Texaco counters with an equally impressive list of cases wherein review was had in a circuit in which the natural-gas company was not incorporated and did not have its principal place of business. As venue may be waived, we are not impressed with this approach.

In a long line of decisions, beginning with Shaw v. Quincy Mining Company, 145 U.S. 444, 450, 12 S.Ct. 935, 36 L.Ed. 768, the Supreme Court has held that the residence of a corporation within the meaning of venue statutes is only the state of incorporation. In Suttle, Administratrix, v. Reich Bros. Construction Co., 333 U.S. 163, 166-167, 68 S.Ct. 587, 92 L.Ed. 614, the Supreme Court reviewed these cases and said that Congress has revealed a similar understanding in the enactment of special venue statutes. The presumption is that Congress was aware of the applicable decisions, and its recognition of them, when it enacted the Natural Gas Act.14

The parties agree that the...

To continue reading

Request your trial
13 cases
  • Superior Oil Company v. Federal Power Commission
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • September 25, 1963
    ...mindful of the fact that the Tenth Circuit has recently held Order No. 242 void and without effect. Texaco, Inc. (Pan American Petroleum Corp.) v. Federal Power Comm., 10 Cir., 317 F.2d 796, decided May 20, 1963.30 That court appears to have reached this conclusion at least partly on the gr......
  • Pennzoil Co. v. F.E.R.C.
    • United States
    • U.S. Court of Appeals — Fifth Circuit
    • May 20, 1981
    ...154.93, since area rate clauses were expressly permitted under FPC regulation of interstate contracts. See also Texaco, Inc. v. FPC, 317 F.2d 796, 800 (10th Cir. 1963), rev'd, 377 U.S. 33, 84 S.Ct. 1105, 12 L.Ed.2d 112 (1964) (expressly referring to permissible provisions as definite price-......
  • Superior Oil Co. v. Western Slope Gas Co.
    • United States
    • U.S. Court of Appeals — Tenth Circuit
    • September 27, 1979
    ...Commission, 400 U.S. 950, 91 S.Ct. 241, 27 L.Ed.2d 257 (1970); Order No. 242, 27 F.P.C. 339 (1962), Rev'd. Texaco v. Federal Power Commission, 317 F.2d 796 (10th Cir. 1963), Rev'd. Federal Power Commission v. Texaco, Inc., 377 U.S. 33, 84 S.Ct. 1105, 12 L.Ed.2d 112 (1964); Order No. 232-A, ......
  • Federal Power Commission v. Texaco, Inc
    • United States
    • U.S. Supreme Court
    • April 20, 1964
    ...F.P.C. 551; 29 F.P.C. 378. Petitions for review were filed with the Court of Appeals, which set aside the orders of the Commission. 10 Cir., 317 F.2d 796. It held that while the regulations are valid as a statement of Commission policy, they cannot be used to deprive an applicant of the sta......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT