United Gas Pipe Line Co. v. F.E.R.C.
| Decision Date | 18 August 1987 |
| Docket Number | No. 86-4424,86-4424 |
| Citation | 824 F.2d 417 |
| Parties | UNITED GAS PIPE LINE CO., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Petition for Review of an Order of the Federal Energy Regulatory commission.
Peter J. Levin, Pierson, Semmes & Finley, W. DeVier Pierson, Washington, D.C., George Frazier, C. Murphy Moss, Jr., New Orleans, La., John R. Hutcherson, Brunini, Grantham, Gower & Hewes, Jackson, Miss., for United Gas Pipe Line Co.
Joel M. Cockrell, Jerome M. Feit, Sol. F.E.R.C., Washington, D.C., for F.E.R.C.
James R. Lacey, Gen. Sol., Newark, N.J., for Public Service Elec. & Gas Co.
Clayton L. Orn, Houston, Tex., Joseph P. Wise, Jackson, Miss., for New Orleans Public Service Inc. and Mississippi Power & Light Co.
Wayne J. Lee, Michael R. Fontham, New Orleans, La., for Louisiana Public Service Comn.
Margaret Fabic, Brooklyn, N.Y., Alvin Adelman, for Brooklyn Union Gas Co. and Elizabethtown Gas Co.
Andrew P. Carter, New Orleans, La., Terrence O'Brien, for Louisiana Power & Light Co.
Stephen M. Hackerman, Houston, Tex., for Pennzoil Co.
John F. Harrington, Washington, D.C., for Texas Gas Transmission Corp.
Constance Charles Willems, New Orleans, La., Ellis Baker Murov, for City of New Orleans. Donna J. Bailey, Birmingham, Ala., for Southern Natural Gas Co.
Before THORNBERRY, HIGGINBOTHAM, and DAVIS, Circuit Judges.
Once again we review a facet of the administrative proceedings, begun sixteen years ago before the Federal Power Commission, involving United Gas Pipe Line Company's curtailment of natural gas to its customers during the nation-wide natural gas shortages of the 1970's. We review Opinions Nos. 237 and 237-A, in which the Federal Energy Regulatory Commission approved tariffs stating that United is not liable for contract damages arising from deliveries of natural gas curtailed in compliance with a filed curtailment plan unless United, through negligence, bad faith, fault, or willful misconduct, caused the need for curtailments. United seeks greater protection from liability by a standard greater than negligence and would also have us require the Commission to determine whether United in fact was culpable. Several intervenors challenge the Commission's jurisdiction to approve the tariffs for direct sales customers and challenge whether the tariffs are in the public interest. We vacate the portion of the Commission's orders determining that force majeure did not apply on the facts, then conclude that the remainder of the decisions are reasonable exercises of Commission power and are supported by substantial evidence, and affirm.
The petitioner, United Gas Pipe Line Co., is among the largest of the nation's interstate natural gas pipeline companies that sell natural gas in direct sales and in sales for resale. United owns and operates a pipeline system that extends throughout Texas, Louisiana, Mississippi, Alabama and Florida. Its major pipeline customers distribute natural gas throughout the eastern half of the United States. United also sells gas to industries, power plants, and local distribution systems.
Six intervenors, New Orleans Public Services, Inc., Mississippi Power & Light Co., City of New Orleans, Louisiana Power & Light Co., Brooklyn Union Gas Co., and Elizabethtown Gas Co., are direct sales customers of United. The seventh intervenor, the Louisiana Public Service Commission, is a state public regulatory body with statutory authority to regulate public utilities in Louisiana and to assert the interests of Louisiana's consumers of electricity.
In 1952, during temporary natural gas shortages caused by the Korean War, the Federal Power Commission approved United's tariff section 12.1, which stated, "In the event a shortage of gas renders Seller unable to supply the full gas requirements of all of its consumers, then, Seller, may, without liability to Buyer prorate its gas supply in the manner hereinafter set forth...."
Around 1970, the nation experienced severe shortages of natural gas. United lacked sufficient supplies to meet its customers' needs for the winter of 1970-71 and proposed to curtail deliveries according to the priorities in its 1952 tariff. On October 26, 1970, United sought an order from the FPC declaring that United's curtailment plan complied with its tariffs and that, given section 12.1, United incurred no liability for curtailments to any customer, including direct sales customers. See United Gas Pipe Line Co., FPC Docket No. RP71-29. After two days of hearings on the order, United reached an agreement with its customers, except Monsanto Co., permitting curtailments through March 31, 1971. 1
In February 1971, United made a supplemental filing for a curtailment plan through October 31, 1971. In March, Louisiana Power & Light Co. sued United, alleging that the curtailment breached its contract with United and challenging FPC jurisdiction to curtail gas to direct sales customers. The district court dismissed the suit, holding that the FPC had jurisdiction of both curtailment and certification proceedings for direct sales and that Louisiana Power & Light Co. had to exhaust its administrative remedies in both. Louisiana Power & Light Co. v. United Gas Pipe Line Co., 332 F.Supp. 692, 698 (W.D.La.1971). We reversed, holding that the FPC lacked authority to curtail gas to direct sales customers. Louisiana Power & Light Co. v. United Gas Pipe Line Co., 456 F.2d 326, 333-38 (5th Cir.1972). The Supreme Court in turn reversed, holding that the FPC under its power to regulate transportation can order curtailment plans involving both direct sales and sales for resale. FPC v. Louisiana Power & Light Co., 406 U.S. 621, 647, 92 S.Ct. 1827, 1842, 32 L.Ed.2d 369 (1972).
With the winter of 1970-71, other pipelines experienced shortages. Responding to a growing fuel crisis, the FPC on April 15, 1971, by Order No. 431, required all interstate pipelines either to file new tariffs containing end-use curtailment 2 plans or to establish that existing curtailment tariffs conformed to FPC policy. The FPC asserted that the tariffs would control over inconsistent provisions in all sales contracts, jurisdictional and nonjurisdictional. Order No. 431, 18 C.F.R. Sec. 270 (1971).
On May 17, 1971, in response to Order No. 431, United proposed a five-category, end-use curtailment plan to replace the plan it already had. Second, United proposed to modify tariff section 12.1 to make clear that it could curtail both direct sales and sales for resale without liability. United also proposed a new tariff section 12.3 intended to eliminate United's potential liability under a substitute fuels provision 3 in some of its direct sales contracts. 4 Finally, United requested the FPC to construe narrowly the substitute fuel clauses.
In Opinion No. 606, 46 FPC 786 (1971), the FPC granted interim approval to proposed section 12.1 with one change in its curtailment priorities, effective November 14, 1971. A Hearing Examiner was ordered to assess the justness and reasonableness of the curtailment scheme before final approval. The FPC rejected proposed tariff 12.3 and declined to interpret the substitute fuel clauses, reasoning those actions were unnecessary because "[i]mplementation of the curtailment plan itself, pursuant to our procedures, would be an absolute defense for United against all claims for specific performance, damages, or other requests for relief ... that may be initiated in the courts." 46 FPC at 805. United's customers objected to this language and sought rehearing.
The FPC denied rehearing in Opinion No. 606-A, 46 FPC 1290 (1971), explaining, "[T]he pipeline companies cannot be faced with the dilemma of providing nondiscriminatory service as ordered by the Commission and at the same time incur liability for breach of contracts which grant discriminatory preferences, directly or indirectly." Id. at 1293.
In International Paper Co. v. FPC, 476 F.2d 121 (5th Cir.1973), we reviewed Opinions Nos. 606 and 606-A and rejected the FPC's conclusion that implementation of a curtailment plan is an absolute defense against contract claims, saying the conclusion was "mere dicta and has no force other than to reflect a position taken by the FPC which lacks support in the record before it." Id. at 125. We also suggested "that a court which has the actual damage suit before it, and also the final FPC action, is best suited to determine the applicability of a defense recognized in contract law." Id. at 126 (footnote omitted). We then remanded for the FPC to state clearly its justification for its rule and to develop the necessary record to provide meaningful review. Id. at 129.
In a concurring opinion that greatly influenced the Commission's later rulings, Judge Brown observed that a pipeline's immunity from liability for curtailments in compliance with a federal plan is not based solely on the defense of impossibility because of an intervening government order, but is based on federal preemption. Id. at 131. Judge Brown suggested that a pipeline should not be liable for its compliance with a federal curtailment plan, for such liability "would seriously impair the orderly administration of the regulatory scheme." Id. However, were the customers to establish that the need for curtailment was "precipitated by the pipeline's own failure to heed the signs of an impending crisis," then the analysis "might " be different enough to warrant imposing liability on the pipeline. Id. at 131-32.
In July 1972, the Presiding Examiner made findings on the justness and reasonableness of United's curtailment plan, as Opinion No. 606 directed. In January 1973, before International Paper Co., the FPC reviewed the Presiding Examiner's decision, approved some interim and permanent changes in the curtailment priorities in section 12.1, restated its...
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