The Pure Oil Company v. Federal Power Commission

• Decision Date: 11 August 1961
• Docket Number: No. 13243.,13243.
• Citation: 292 F.2d 350
• Parties: THE PURE OIL COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Seventh Circuit

292 F.2d 350 (1961)

THE PURE OIL COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent.

No. 13243.

United States Court of Appeals Seventh Circuit.

July 7, 1961.

Rehearing Denied August 11, 1961.

John C. Snodgrass, Palatine, Ill., Ben A. Harper, Chicago, Ill., Vinson, Elkins, Weems & Searls, Houston, Tex., of counsel, for petitioner.

John C. Mason, Gen. Counsel, John D. Lane, Atty., Howard E. Wahrenbrock, Sol., Robert L. Russell, Asst. Gen. Counsel, Arthur H. Fribourg, Atty., F.P.C., Washington, D. C., for respondent.

Before DUFFY and SCHNACKENBERG, Circuit Judges, and GRUBB, District Judge.

GRUBB, District Judge.

This is a petition to review an order of the Federal Power Commission pursuant to Section 19(b) of the Natural Gas Act, 15 U.S.C.A. § 717r(b).

The order complained of, entered on November 14, 1960, grants petitioner, The Pure Oil Company, temporary authority to sell natural gas to Michigan Wisconsin Pipe Line Company (hereafter referred to as "Michigan Wisconsin") subject to the condition that the upward BTU adjustment clause of the sales contract be eliminated.

Petitioner, an independent producer selling natural gas in interstate commerce for resale for ultimate public consumption, has been engaged in the production of such gas in the Laverne Field located in the Oklahoma Panhandle area. It executed a contract to sell gas to Michigan Wisconsin on May 26, 1959, at a price of 17 cents per thousand cubic feet, plus BTU adjustment for gas which varied from standard 1000 BTU content. On July 13, 1959, the Commission granted petitioner temporary authority of sale pursuant to said contract which was filed with the Commission as The Pure Oil Company's Federal Power Commission Rate Schedule No. 48.

Following further discoveries of gas in the Laverne Field, petitioner amended its sales contract with Michigan Wisconsin, dedicating additional gas-producing acreage thereto. On March 2, 1960, the Commission approved amendment of temporary authorization granted July 13, 1959, to cover sales from the newly-dedicated acreage. The temporary certificate covering both the original and additional sales was made permanent on August 10, 1960.

Following further gas discoveries in the Laverne Field which petitioner dedicated to its original sales contract with Michigan Wisconsin, petitioner filed application to amend the permanent certificate of August 10, 1960, by addition of the most recently dedicated gas-producing acreage. Concurrently it requested temporary authorization for the sale of the newly-discovered gas pending determination of the application for permanent certification because of imminent loss of leases and drainage by offsetting wells. The review sought here is of the order entered on the application for temporary authority.

Petitioner contends that there is no reasonable basis for the Commission's action in reducing the contract price agreed upon by the parties by elimination of the upward BTU adjustment. It is the position of the Commission that the order in issue is not reviewable and, further, that its issuance was proper in that it was consistent with the Commission's promulgated policy.

Considering first the question of jurisdiction, the court holds that the order in issue is reviewable. Petitioner is adversely affected by the imposition of a condition reducing its proposed contract sales price pending evidentiary proceedings determining this question on the application for permanent certification. In the event that the upward BTU adjustments should be approved in a subsequent appropriate proceeding, petitioner would be without recourse to recover revenues of which it is deprived under the present temporary authorization order. Under these circumstances, petitioner is an aggrieved party within the provisions of Section 19(b) of the Act governing judicial review of Commission orders. See Sunray Mid-Continent Oil Co. v. Federal Power Commission, 10 Cir., 1959, 270 F.2d 404, 407, and Texaco, Inc. v. Federal Power Commission, 5 Cir., 1961, 290 F.2d 149. Absence of an evidentiary record may have relevancy in determining the validity of the Commission's action; such absence does not deprive the court of jurisdiction to inquire into the regularity of the action.

The Commission claims that the elimination of the upward BTU adjustment from the sales price of gas is in conformance with its policy of establishing area ceiling prices as promulgated in its Statement of General Policy, No. 61-1, on September 28, 1960, approximately one month before petitioner's application in the instant proceeding was filed. The ceiling price there set forth for the area in question is 17 cents per thousand cubic feet. The Statement, issued on the Commission's own motion, purports to set standards for initial and increased rate filings by producers of natural gas to bring about effective, fair, and administratively feasible fulfillment of the Commission's regulatory duties.

The Commission has authority under Section 7(e) of the Act, 15 U.S. C.A. §...