Union Oil Co. of California v. Federal Power Commission, s. 75-2891
| Citation | 542 F.2d 1036 |
| Decision Date | 02 June 1976 |
| Docket Number | 75-3301,75-3235,75-3127,75-3236,75-3366,75-3174,75-3365,75-3311,75-3302,75-3126,75-3110,75-3227,75-3226,75-3374 and 75-3413,Nos. 75-2891,75-3150,75-3291,75-3292,75-3151,s. 75-2891 |
| Parties | UNION OIL COMPANY OF CALIFORNIA et al., Petitioners, v. FEDERAL POWER COMMISSION, Respondent. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
Platt Davis, III (argued), Vinson, Elkins, Searls, Connally & Smith, Washington, D.C., Patrick F. Timmons and Michael B. Silva (argued), Houston, Tex., Craig W Hulvey (argued), Washington, D.C., and Homer J. Penn (argued), Houston, Tex., for petitioners.
Robert Perdue (argued), and Allan Abbot Tuttle, Sol. (argued), Federal Power Commission, Washington, D.C., for respondent.
Before DUNIWAY, GOODWIN and WALLACE, Circuit Judges.
These are petitions for review of Orders Nos. 526 and 526-A of the Federal Power Commission which would require all large natural gas producers to submit, on a new form, Form 40, detailed information about their natural gas reserves. Petitioners are producers of natural gas and other petroleum products who would be required to file Form 40 annually, and they challenge the validity of these orders on the grounds that (1) the Natural Gas Act does not provide authority for the collection of intrastate reserve data; and (2) the Commission acted arbitrarily and capriciously in making the orders. The producers also claim that the Commission's stated policy with respect to the confidentiality of data submitted on Form 40 does not adequately protect their proprietary interest in that data. While we reject the producers' first contention, we are not able to determine from the record now before us that the factual findings of the Commission are supported by evidence. In addition, we find the Commission's rule as to the public status of information to be submitted on Form 40 to be arbitrary and capricious. Consequently, we set the orders aside and remand the cases to the Commission for further proceedings.
On April 15, 1974, the Commission issued a "Notice of Proposed Rulemaking," published at 39 Fed.Reg. 14233 (1974), stating that the Commission proposed to amend its General Rules by creating a requirement of an annual data filing on new Form 40 by every "natural gas company" and its regulated subsidiaries and affiliates. As originally proposed, Form 40 consisted of four schedules: schedule A required data related to proved reserves of natural gas for the reporting company; schedules B and B-1 required estimates of proved reserves on a "by field and by reservoir" basis; schedule C required data on the annual changes in proved reserves. Schedule B-1, which asked for data under hypothesized conditions, was subsequently withdrawn. The Commission stated that schedule A data would be placed in public files, while all other data would "be given confidential status . . . and left in the Commission files until further ordered by the Commission." (R. 404) However, it also ruled that all data would be available to Congress and other federal agencies through authorized procedures.
Pursuant to 5 U.S.C. § 553, the Commission accepted written comments from over 60 natural gas producers who unanimously objected to Form 40 on the ground that it would impose a severe economic burden on them to produce and furnish the required data because data on a reservoir basis were not readily available, and they did not keep records on that basis. A large number also objected on the other grounds upon which these petitions for review are based. Subsequently, at the request of the responding producers, the Commission conducted an oral hearing, called a "conference," to receive additional comments. Over 120 persons representing a cross-section of the natural gas industry attended and expressed objections to the proposed Form 40. The written comments, the transcript of the oral statements made at the hearing, and the majority and dissenting positions of the Commission comprise the full record before us.
Although the majority decision of the Commission gives detailed reasons supporting its authority to gather intrastate data and its right to follow the suggested guidelines on confidentiality, the various factual claims of the producers concerning the burden that Form 40 would impose upon them and the Commission's regulatory need for the data are treated cursorily. The majority opinion claims that the required data are available because the same information must be submitted to the Internal Revenue Service under existing tax regulations. In addition, the majority claims that the Commission is not obligated to consider the burden on the industry because Congress has delegated that job to the General Accounting Office. The Commission additionally rejects the producers' argument that necessary data could be obtained from other federal agencies on the ground that the producers did not show that the information possessed by the other agencies would be useful for the Commission's purposes, that such data would be obtainable by the Commission, or that such data were not protected by confidentiality. Finally, the majority opinion asserts that the Commission does need the data in order to conduct company audits necessary to determine appropriate interstate natural gas rates. No evidence other than these assertions appears in the record to support the factual findings to which the producers now object.
Thus, by a three to two vote, the Commission issued Order No. 526 on February 25, 1974, adopting Form 40 substantially as proposed. Form 40 was then forwarded to the General Accounting Office for review as required by 44 U.S.C. § 3512. On April 11, 1974, the GAO informed the Commission that it was suspending review because it was not able to conclude that Form 40 did not place undue burden on the industry or involve unnecessary duplication. Despite additional efforts by the Commission to persuade the GAO otherwise, on July 1, GAO sent a letter to the Commission withholding certification of Form 40 unless duplication between Form 40 and Commission Forms 15 and 64 were eliminated. It also recommended that the Commission make further studies of the extent of the burden that Form 40 would impose on the industry in general and on small producers in particular.
After a number of ex parte meetings between Commission and GAO staff members, the Commission agreed to exempt from the requirements of Form 40 all producers of less than 250,000 million cubic feet of natural gas per annum, all owners of less than 20 billion cubic feet of natural gas reserves, and all natural gas companies currently required to file Commission Form 15. The GAO then granted temporary certification by letter dated August 11, 1975, but it still expressed concern about duplication, industry burden, and the Commission's need for and use of the data required by Form 40. It therefore asked the Commission to resubmit Form 40 after another year with additional information on these concerns.
Armed with this certification, the FPC issued Order No. 526-A, making Form 40 effective and denying a rehearing. The producers then filed petitions for review in numerous Courts of Appeals, all of which have been consolidated before us. Pending our decision, we have issued a partial stay of Orders 526 and 526-A, limiting the Commission to requiring information in the form currently held by the producers, and also requiring that any data submitted be treated as confidential and not released without further order of this court.
Although only natural gas companies which engage in some interstate activities are required to file Form 40, they are required to disclose therein data relating to intrastate as well as interstate activity. This demand for intrastate data the producers claim to be outside the Commission's jurisdiction which is limited in the Natural Gas Act, (the Act) § 1, 15 U.S.C. § 717, to interstate commerce in natural gas. This claim is without merit.
Although the Commission's authority to regulate and set rates is limited to interstate transportation of natural gas, § 14(a) of the Act, 15 U.S.C. § 717m(a) authorizes the Commission to
investigate any facts, conditions, practices, or matters which it may find necessary or proper in order to determine whether any person has violated or is about to violate any provision of this chapter or any rule, regulation, or order thereunder, or to aid in the enforcement of the provisions of this chapter or in prescribing rules or regulations thereunder, or in obtaining information to serve as a basis for recommending further legislation to the Congress.
Thus, while the regulatory and rate setting jurisdiction of the Commission is narrowly defined, Congress has given it broad authority to gather data which would in any rational way aid it in the performance of its statutory function.
The Commission argues that intrastate data are necessary for its determination of proper policies and rates with respect to interstate commerce in natural gas. We agree. As the Fifth Circuit has noted:
Interstate rates must be fixed with a clear view of the prices and terms prevailing in the intrastate market. The two markets compete for natural gas which is in short supply. Those regulating the public interstate market must know the private intrastate price structure if their regulations are to function effectively.
Continental Oil Co. v. FPC, 5 Cir., 1975, 519 F.2d 31, 33;
See also section 5(b) of the Act, 15 U.S.C. § 717d(b).
We find that requiring intrastate data from companies whose activities place them under the jurisdiction of the Commission is well within the authority granted by § 717m(a) to gather relevant data.
The producers, however, argue that because the Commission suggested to Congress that it expand the Commission's investigatory powers under § 717m...
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