CITY OF FARMINGTON, NEW MEXICO v. FEDERAL ENERGY REGULATORY COMMISSION; Amoco Production Company, Amoco Gas Company, Intervenors.
No. 85-1680
United States Court of Appeals, District of Columbia Circuit.
Decided June 16, 1987.
Argued Nov. 3, 1986.
820 F.2d 1308
Before WALD, Chief Judge, WILLIAMS, Circuit Judge, and WILL, Senior District Judge.
On remand, the District Court should be directed to make further findings on the MPD‘s actions based on a correct statistical comparison. The majority doesn‘t require the District Court to use the relevant labor market for its analysis. Given this inherently faulty comparison basis, I dissent from the majority‘s affirmance of the promotions under the first prong of the Title VII test, and the limited directives given to the District Court regarding findings using the first prong of the test under the Constitution. The present record does not support the Department‘s actions under the scrutiny of either test.
Under the first prong of each test, there must be an adequate factual predicate justifying the use of affirmative action. Ante, at 1302. At a minimum, there must be a “conspicuous ... imbalance in traditionally segregated job categories.” Weber, 443 U.S. at 209, 99 S.Ct. at 2730.
...
It is notable that the MPD‘s plan was designed to place “special emphasis where there is an obvious imbalance in the numbers of females and minorities employed in specific areas.” Defendant‘s Trial Exhibit 9A; ante at 1294. The record reveals that at the time the promotees were recommended, these Detective Grade I positions were composed of three black males and three white males. This 50-50 racial composition does not appear to constitute a “conspicuous imbalance” in this job category. However, such a determination cannot be made without comparison to the relevant qualified labor market. Unless the correct labor market is utilized for comparison, the record also cannot support a conclusion that a manifest imbalance exists in the overall upper echelons of the Department. The Department‘s actions may have been valid if the comparison to the labor market reveals an imbalance in minority representation. However, this conclusion cannot be reached absent more specific findings of the District Court.
Accordingly, I respectfully dissent from the portion of the majority‘s opinion which remands the cases without a requirement of further findings using the qualified labor market.
Andrea Wolfman, Atty., F.E.R.C., with whom Jerome M. Feit, Sol., F.E.R.C., Washington, D.C., was on the brief, for respondent.
J. Paul Douglas, Washington, D.C., for intervenor, Amoco Gas Company. Brian J. Heisler entered an appearance for Amoco Gas Company.
Kevin M. Sweeney was on the brief for intervenor, Amoco Production Company.
Before WALD, Chief Judge, WILLIAMS, Circuit Judge, and WILL,* Senior District Judge.
pursuant to
Opinion concurring in part and dissenting in part filed by Chief Judge WALD.
WILLIAMS, Circuit Judge:
The City of Farmington, New Mexico petitions for review of an order of the Federal Energy Regulatory Commission. Farmington contends that the Commission has jurisdiction, pursuant to
Farmington further argues that a sale of gas from a local distribution company to a consumer is a “first sale” under
I. BACKGROUND
From 1961 to 1981, under a 10-year contract that was later extended, Amoco Gas Company sold natural gas to the City of Farmington solely to fuel its electric generating facilities. To cover the Farmington contract, Amoco Gas contracted with its parent, Amoco Production Company, to purchase gas from the latter‘s Dakota Formation wells in New Mexico. Amoco Gas received the gas from Amoco Production‘s gathering system, dehydrated it, and then transported it a short distance to Farmington‘s pipeline.
For four of the 20 years covered by the Amoco Gas/Farmington contractual relationship (1968-1972), Amoco Production also sold some of the gas from the Dakota Formation wells to the El Paso Natural Gas Company, an interstate pipeline. Pursuant to an “Excess Gas Purchase Agreement,” Amoco Production agreed to sell El Paso gas that was not needed for delivery to others or for lease operations. Amoco Production secured a certificate of public convenience and necessity from the Commission for the El Paso sales. The certificate specified that the sale to El Paso was a sale of excess gas. For purposes of this appeal, the parties stipulated that the gas sold to El Paso was produced from the same wells as, and was commingled in Amoco Production‘s gathering facilities with, the gas sold to Amoco Gas for Farmington.
In 1981, on the expiration of a 10-year renewal of the Amoco Gas/Farmington contract (plus a few days’ extension by letter agreement), Amoco Gas ceased deliveries as a result of a pricing dispute. Farmington filed suit in the United States District Court for the District of New Mexico, see City of Farmington v. Amoco Gas Co., 568 F.Supp. 1265 (D.N.M.1983), aff‘d, 777 F.2d 554 (10th Cir.1985), alleging that Amoco Gas had overcharged Farmington and that it improperly abandoned service without the approval of the Commission as the NGA required. See
Farmington repaired to the Commission, asking it to order gas service resumed until such time as the Commission might authorize abandonment and to find that the gas sold under the preliminary injunction im
The Commission rejected both of Farmington‘s assertions, City of Farmington v. Amoco Gas Co., 31 F.E.R.C. ¶ 61,290 (1985), and denied Farmington‘s petition for rehearing, Order Denying Rehearing, No. GP84-20-001 (FERC Aug. 21, 1985). Farmington petitioned for review on both grounds.1
II. NGA JURISDICTION
If Amoco Gas‘s sales to Farmington were within the Commission‘s jurisdiction, its termination of sales when the contract expired would require Commission abandonment approval. See
Farmington makes no claim that the transportation of its gas was in interstate commerce. And regardless of any connection with interstate commerce, the sale from Amoco Gas to Farmington was clearly not for resale: it was exclusively for use by Farmington in the generation of electricity. On its face, therefore, the transaction appears unequivocally nonjurisdictional. Farmington‘s assertion to the contrary seems to depend on two links. First, it invokes California v. Lo-Vaca Gathering Co., 379 U.S. 366, 85 S.Ct. 486, 13 L.Ed.2d 357 (1965), for the proposition that the sales of gas from Amoco Production to Amoco Gas were jurisdictional because that gas was commingled in Amoco Production‘s gathering facility with gas that was sold to El Paso for resale in interstate commerce. Second, the sale from Amoco Gas to Farmington was jurisdictional because it followed a jurisdictional sale.
In speaking of Farmington‘s theory, we use the word “seems” advisedly. So far as the second link is concerned, Farmington never really articulates a theory, despite vigorous challenge by the Commission and intervenor. We address the second link first, because its unsoundness is most clear.
In Panhandle Eastern Pipe Line Co. v. Public Service Commission, 332 U.S. 507, 68 S.Ct. 190, 92 L.Ed. 128 (1947), the Supreme Court upheld the power of states to regulate sales by an interstate pipeline to industrial end users, and in so doing made clear that Congress meant exactly what it said in distinguishing in the NGA between sales for resale, on the one hand, and sales for use by the purchaser, on the other:
The omission of any reference to ... direct sales for consumptive use, in the affirmative declaration of coverage was not inadvertent. It was deliberate. For Congress made sure its intent could not be mistaken by adding the explicit prohibition that the Act “shall not apply to any other ... sale....” ... Those words plainly mean that ... [d]irect sales for consumptive use of whatever sort were excluded.
The line of the statute was thus clear and complete. It cut sharply and cleanly between sales for resale and direct sales for consumptive uses. No exceptions
were made in either category for particu
Panhandle‘s holding, of course, was an affirmative finding of state regulatory power. But in City of Hastings v. FPC, 221 F.2d 31, 32-33, 38-39 (D.C.Cir.1954), cert. denied, 349 U.S. 920, 75 S.Ct. 660, 99 L.Ed. 1252 (1955), this court applied Panhandle‘s reasoning and unequivocal language to support the flipside—the absence of Commission authority. As here, the sales in question were to a city exclusively for use in the city‘s power plant.
Thus, even if the commingling by Amoco Production rendered its sales to Amoco Gas jurisdictional, the latter‘s sales to Farmington would not be. Farmington presents nothing in its arguments to support any such extension of Commission jurisdiction.
The first link of Farmington‘s claim is also unsupportable. It relies primarily on California v. Lo-Vaca Gathering Co., 379 U.S. 366, 85 S.Ct. 486, 13 L.Ed.2d 357 (1965). There the Supreme Court considered the jurisdictional status of sales of gas to an interstate pipeline that were earmarked by contract to be used only in the pipeline‘s compressors. The pipeline, however, commingled the compressor gas with gas that it intended to sell for resale in interstate commerce. Consequently, some molecules nominally purchased for pipeline use would in fact be delivered to out-of-state purchasers for resale. The Court found even the earmarked purchases jurisdictional, and in so doing made a remark much stressed by Farmington: “[t]he fact that a substantial part of the gas [from a local producer] will be resold ... invokes federal jurisdiction at the outset over the entire transaction.” 379 U.S. at 369, 85 S.Ct. at 488.
The core of the Court‘s reasoning was that if the purchase of gas for pipeline use were nonjurisdictional,
[t]here would be created ... an “attractive gap” in the federal regulatory scheme ... which the producing States might have little incentive to close, since the gap would often involve either [1] lower costs to intrastate customers or else [2] merely higher pipeline costs which ultimately would be reflected in rates paid by consumers in other States.
379 U.S. at 370, 85 S.Ct. at 489. The case itself quite clearly involved the second type of gap. The cost of compressor gas would be passed on to interstate consumers as part of the pipeline‘s sales rates, and, as the Court pointed out, those costs were far from trivial: they amounted then to $85,000,000 per year and 4% of the major interstate pipelines’ total gas costs. Id. at 370 n. 2, 85 S.Ct. at 488 n. 2.
The facts of Lo-Vaca shed no light on the first type of gap, and the Court gave no example. Recently, however, in Consolidated Oil & Gas Inc. v. FERC, 806 F.2d 275 (D.C.Cir.1986), we addressed the situation of a gathering system that bought from multiple producers, reselling some gas in-state and the rest out-of-state. Some of the producers, invoking contract clauses purporting to earmark their gas for intrastate use, claimed their sales were nonjurisdictional. We observed:
New Mexico [the producer state] has no authority to regulate the initial producer-to-gathering company sales since the end-users are not definably local, and the gathering company possesses the same theoretical potential to favor intrastate over interstate channels in designating the destination of particular sources of
gas that the Court seemed concerned about in Lo-Vaca.
806 F.2d at 278. In such a situation, it seems likely that thorough monitoring of all pipeline suppliers and complex attribution rules (of which there might be multiple, potentially conflicting sets, due to the presence of multiple jurisdictions) would be essential if the Commission were to assure itself that the aggregate purchases of gas deemed nonjurisdictional did not impermissibly exceed the amounts actually used in-state. See also FPC v. Amerada Petroleum Corp., 379 U.S. 687, 690-91, 85 S.Ct. 632, 634, 13 L.Ed.2d 605 (1965) (Goldberg, J., concurring) (Court‘s holding, that earmarking of commingled gas for in-state use does not immunize it from Commission jurisdiction, based partially on fact that sellers claiming nonjurisdictional status had “attributed to themselves a greater percentage of so called nonjurisdictional gas than their proportionate share of the gas in the commingled stream“).
In Consolidated, moreover, we explicitly addressed the Commission‘s decision in this case, noting that extension of the commingling doctrine back to the producer‘s operations was at issue in the Commission‘s Farmington decision but not in Consolidated. 806 F.2d at 278. We even went further and observed that where, as is true in this case, “the producer chooses how much gas to dedicate to the interstate market and sells it separately from the gas it sells intrastate[,] ... [t]he intrastate portions of [the] ... sales are, of course, nonjurisdictional.” Id.
We see no reason to retreat from that position. The Commission has long approved of the “commonplace” practice by which producers make only partial dedications to interstate commerce, Amoco Production Co., 23 F.E.R.C. ¶ 61,211, at 61,434 (1983); see El Paso Natural Gas Co., 54 F.P.C. 917, 918 (1975), rev‘d on other grounds sub nom. Southland Royalty Co. v. FPC, 543 F.2d 1134 (5th Cir.1976), rev‘d sub nom. California v. Southland Royalty Co., 436 U.S. 519, 98 S.Ct. 1955, 56 L.Ed.2d 505 (1978), and the Fifth Circuit has expressed its approval of the practice, Columbia Gas Transmission Corp. v. Allied Chemical Corp., 652 F.2d 503, 516 n. 11 (5th Cir.1981); cf. Harrison v. FERC, 567 F.2d 308, 309-10 (5th Cir.1978) (producer can dedicate to interstate commerce gas produced from certain parcels without dedicating its contiguous parcels). Such partial dedications moreover, closely resemble a standard split-stream sale in which each of several owners of a production unit decides whether to commit its portion of unit production to interstate commerce. See H. WILLIAMS & C. MEYERS, OIL AND GAS TERMS 716-17 (5th ed. 1981). Application of the commingling doctrine to such sales would upset untold thousands of transactions.
The Commission‘s refusal to extend Lo-Vaca to partial dedications makes sense. First, unlike those of Lo-Vaca and Consolidated, such transactions are generally structured (as here) so that regulators in the state of consumption can regulate the wellhead price. Thus there is simply no regulatory gap. Such cases, then, are not significantly different from ones where an end user buys gas from a producer at the wellhead and arranges for commingled transportation. And the nonjurisdictional treatment of such sales, despite commingling, is well established. See Sebring Utilities Commission v. FERC, 591 F.2d 1003, 1017 (5th Cir.), cert. denied, 444 U.S. 879, 100 S.Ct. 167, 62 L.Ed.2d 109 (1979); American Public Gas Association v. FERC, 587 F.2d 1089, 1097 n. 9 (D.C.Cir.1978) (per curiam).
Second, such arrangements obviously have no direct effect on the cost of service to out-of-state customers, as in Lo-Vaca. Indeed, it seems likely that assertion of jurisdiction would lead to a reduction in the gas available to the interstate market—or at any rate would have done so until the NGPA sharply reduced the Commission‘s jurisdiction over wellhead sales. See
In support of its effort to extend Lo-Vaca, Farmington quotes some broad language in Public Service Commission v. FERC, 610 F.2d 439 (6th Cir.1979):
The ultimate sale in other states of a substantial part of a producer‘s natural gas output invokes federal jurisdiction over the entire volume of production. The natural gas here at issue begins its journey in interstate commerce at the wellhead.
Id. at 444 (citing Lo-Vaca) (footnote omitted). The case is inapposite. The court there confronted a state‘s attempt to give intrastate purchasers a statutory preference in the purchase of certain interstate gas, and thereby to divert gas from preexisting interstate sales—over which the Commission clearly had jurisdiction—to serve local consumers. See also Backus v. Panhandle Eastern Pipe Line Co., 558 F.2d 1373 (10th Cir.1977).
To conclude: neither of the two links essential to Farmington‘s claim is sound. Lo-Vaca, its mainstay, explicitly deferred the question “[w]hether cases could be conjured up where in spite of original commingling there might be a separate so-called nonjurisdictional transaction of a precise amount of gas not-for-resale within the meaning of the Act....” 379 U.S. at 370, 85 S.Ct. at 489 (footnotes omitted). At that juncture it pointed to City of Hastings v. FPC, 221 F.2d 31 (D.C.Cir.1954), cert. denied, 349 U.S. 920, 75 S.Ct. 660, 99 L.Ed. 1252 (1955), in which, as we have noted, this court refused to find Commission jurisdiction over a sale to an end user of gas that had once been commingled. Each proposed link in the Farmington theory would require extension of Lo-Vaca in conflict with the holding and reasoning of Hastings. As the Fifth Circuit has observed, “[t]he Court has never extended [the Lo-Vaca] holding beyond [its] facts....” Sebring Utilities Commission v. FERC, 591 F.2d 1003, 1017 (5th Cir.), cert. denied, 444 U.S. 879, 100 S.Ct. 167, 62 L.Ed.2d 109 (1979). Farmington has suggested no persuasive reason why we should do so now.
Accordingly, we uphold the Commission‘s decision not to assert NGA jurisdiction over the sales in question.
III. NGPA FIRST-SALE ISSUE
Farmington contests the Commission‘s finding that the sales from Amoco Gas to Farmington in 1982 pursuant to the preliminary injunction were not “first sales,” within the meaning of
The NGPA imposes price ceilings only on “first sales.” As relevant here,
the sale of any volume of natural gas by any interstate pipeline, intrastate pipeline, or local distribution company, or any affiliate thereof, unless such sale is attributable to volumes of natural gas produced by such interstate pipeline, intrastate pipeline, or local distribution company, or any affiliate thereof.
The Supreme Court‘s decision in Public Service Commission v. Mid-Louisiana Gas Co., 463 U.S. 319, 103 S.Ct. 3024, 77 L.Ed.2d 668 (1983), presupposes this construction of
The Commission, ignoring the Supreme Court‘s assumption, contends that the qualification operates only if the source of gas (referred to in the qualification) is the same corporation as the seller, referred to in the exclusion itself, not where the source of gas is merely an affiliate of the selling company. See City of Farmington v. Amoco Gas Co., 31 F.E.R.C. ¶ 61,290, at 61,601 (1985). This appears to rewrite the qualifying language to read either “unless such sale is attributable to volumes of its own natural gas production,” or (equivalently) “unless such sale is attributable to such interstate pipeline, intrastate pipeline, local distribution company, or affiliate.”
The Commission effectively concedes on appeal that its reading requires quite a stretch of the language. See Brief for Respondent at 25 (“Farmington insists ... that this provision must be given a literal reading.“). “Where the language is plain and admits of no more than one meaning the duty of interpretation does not arise and the rules which are to aid doubtful meanings need no discussion.” Caminetti v. United States, 242 U.S. 470, 485, 37 S.Ct. 192, 194, 61 L.Ed. 442 (1917), quoted in United States v. Dickson, 816 F.2d 751, 752 (D.C.Cir.1987).
Nor did the Commission proffer any compelling reason for abandoning the literal statutory language. The Commission‘s sole justification was that:
[t]he purpose of [§ 2(21)(B)] was to avoid having a local distribution company involved in two first sales, first as a purchaser from the producer and then as a seller to its customer. Otherwise, even though the local distribution company paid the producer the applicable NGPA
maximum lawful price for gas, it gener
31 F.E.R.C. at 61,601 (footnotes omitted).
Both arguments seem to us to have been authoritatively rejected by the Supreme Court in Mid-Louisiana. First, the Court found that under
Second, the Court made clear that the Commission need not give “first sale’ treatment” to every first sale. Id. at 327, 103 S.Ct. at 3029. In the context in which an interstate pipeline company produced gas and then transferred it to its pipeline, the Court stated:
(1) It would be reasonable for the Commission not to give first sale treatment to the intracorporate transfer, as long as such treatment is given to the downstream transfer. (2) Similarly, it would be reasonable for the Commission not to give first sale treatment to the downstream transfer, as long as such treatment is given to the intracorporate transfer.
Id. at 343 n. 24, 103 S.Ct. at 3037 n. 24 (emphasis in original). But the Court gave the Commission the option only after having found that both transfers were first sales. Id. at 327, 103 S.Ct. at 3029. Thus classification of the Amoco Gas/Farmington sale as a first sale by no means would require the Commission to subject it to NGPA pricing. That decision would turn on an analysis of the purposes of the NGPA. Id.
At least one purpose apparent in the NGPA‘s extending price ceilings to the intrastate market was to prevent high intrastate prices from luring production away from the then shortage-ridden interstate market. See Mid-Louisiana, 463 U.S. at 330-31, 103 S.Ct. at 3031. Two propositions seem to follow. First, where an intrastate pipeline or a local distribution company markets its own gas in the state of production, the intrastate market forces would normally tend to generate such a luring effect unless either (a) the Commission imposed first-sale treatment on the firm‘s selling price or (b) the Commission subjected the well-head transfer to first-sale treatment and state regulatory authority prevented the firm from selling the gas for more than the NGPA ceiling plus a cost-based increment. Second, this economic effect is every bit as likely when the producer and intrastate pipeline or distributor are affiliates as when they are parts of the same corporate entity. Cf. Mid-Louisiana, 463 U.S. at 327-28, 337, 103 S.Ct. at 3029-30, 3034. Assuming the truth of those propositions generally, however, the matter might be different here: the sales in question arose not from the operation of market forces at all but through the edict of a federal district court. See supra p. 1310.
As the Commission based its decision here on the view that the sale was not a first sale at all, it had no occasion to address the issue of first-sale treatment.5
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The petition for review is granted and the case is remanded for proceedings consistent with this opinion.
So ordered.
WALD, Chief Judge, concurring in part, dissenting in part:
While I concur in Part I of the panel opinion dealing with FERC jurisdiction over the split sale, I have grave doubts about the panel‘s decision that the sale from the local distribution company to Farmington is a “first sale” under
It is also quite clear that even if the statute were to be interpreted to include the sale to Farmington as a “first sale,” the FERC in its regulations has definitely made its choice as to where “first sale” treatment in a situation like this occurs,
Even if the Commission has elected not to treat the down-stream transaction as a first sale generally, its decision below did not rely on or make any such election. Rather, the Commission maintained simply that the Farmington sale was not a first sale.