PHILLIPS PETROLEUM COMPANY, a Delaware corporation, et al., Petitioners, v. FEDERAL POWER COMMISSION, Respondent, The State of New Mexico, Intervenors.
Nos. 71-1659, 71-1739, 72-1134 and 72-1167.
United States Court of Appeals, Tenth Circuit.
Decided Feb. 20, 1973.
Rehearing Denied April 10, 1973.
475 F.2d 842
Argued and Submitted July 12, 1972.
David L. Norvell, Atty. Gen. of New Mexico, on brief for State of New Mexico.
Joel B. Burr, Jr., and William J. Cooley, Farmington, N. M., on brief for Four Corners Gas Producers Assn.
Donald S. Graham, of Davis, Graham & Stubbs, Denver, Colo., and G. Scott Cuming, El Paso, Tex., for El Paso Natural Gas Co.
William G. Webb, of Turner, Hitchins, McInerney, Webb & Hartnett, Dallas, Tex., for Pubco Petroleum Corp.
Norman J. Provost, K. R. Edsall, and W. H. Owens, Los Angeles, Cal., for Southern California Gas Co.
Barr McClellan, of Clark, Thomas, Harris, Denius & Winters, Austin, Tex., for Aztec Oil & Gas Co.
Thomas G. Johnson and Dan A. Bruce, Houston, Tex., for Shell Oil Co.
Before SETH, MCWILLIAMS and DOYLE, Circuit Judges.
WILLIAM E. DOYLE, Circuit Judge.
The Phillips Petroleum Company, together with the several intervenors, all independent producers of natural gas in the Rocky Mountain area, seek review of an order of the Federal Power Commission promulgating a rulemaking procedure for the fixing of rates of natural gas sales in interstate commerce pursuant to the
The peculiar aspect of this case is that the Commission has drastically changed the procedure from the traditional method involving trial-type adjudicatory proceedings to this rulemaking method. This is an informal hearing which is not conducted on the record and which does not afford an opportunity for cross-examination. It is used so as to enable the Commission to establish area rates without having an individual hearing on each producer. It calls for composition and reconciliation of written submissions of the various producers. The validity of this procedure is the issue which is presented to us.
I. HISTORY OF THE CONTROVERSY
The Commission‘s authority to regulate interstate sales of natural gas derives from the
A brief history of some of the antecedent events is necessary. In 1954 the Supreme Court decided in Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035 (1954), that independent producers of natural gas are natural gas companies within the meaning of § 2(6) of the Act. From this time forward, the Commission has “labored with obvious difficulty to regulate a diverse and growing industry under the terms of an ill-suited statute.” In re Permian Basin Area Rate Cases, 390 U.S. 747, 756, 88 S.Ct. 1344, 1354, 20 L.Ed.2d 312 (1968).
Following the Phillips decision, the Commission undertook the regulation of rates of approximately 2,500 producers selling gas in interstate commerce and did so on a company-by-company basis. The result of all this was somewhat ineffectual. See Permian Basin, supra, at 757 n. 13, 88 S.Ct. 1344. Thus in 1960 the Commission undertook to regulate producers on an area basis, whereby a uniform ceiling price applicable to all producers would be established based upon producers’ actual costs, area data for the flowing gas costs and national data for new gas-well costs. See Phillips Petroleum Co., 24 FPC 537, 540 (1960), aff‘d sub nom. Wisconsin v. FPC, 112 U.S.App.D.C. 369, 303 F.2d 380 (1961), aff‘d, 373 U.S. 294, 83 S.Ct. 1266, 10 L.Ed.2d 357 (1963). The Commission spent five years with its first area rate case which involved the establishing of rates for the Permian Basin.
As a result of the approval given in the Permian Basin case, the Commission instituted a number of other similar proceedings.1 These proceedings were lengthy and cumbersome, and as a result of this experience the Commission undoubtedly considered some of the admonitions given in the Permian Basin opinion which included: the Commission should “continue to examine both the premises of its regulatory methods and the consequences for the industry‘s future of its rate-making orders;”2 Permian is “the first of many steps toward a more expeditious and effective system of regulation.”3 Based on these statements and the ruling in the Permian case, the Commission issued a notice of proposed rulemaking which called for the issuance of rules fixing just and reasonable rates for independent producers in the Appalachian and Illinois Basin Area.4 In less than a year after its notice rates were prescribed for these areas.5
The next step was for the Commission to embark on a nationwide rulemaking proceeding, whereby it sought information on independent producers’ costs of exploring and developing natural gas, gas supply, rate of return and general revenue requirements and prices for new gas sales. 35 Fed.Reg. 11638 (1970). Public hearings of record were held and arguments were heard concerning the Commission‘s attempt to promulgate rates through a rulemaking procedure. See 36 Fed.Reg. 13585 (1971). See also Order No. 435 which established some rates under § 7 of the Gas Act. This case is currently on appeal, American Public Gas Ass‘n v. FPC, D.C.Cir., No. 71-1812.
This led to the issuing of notice of proposed rulemaking and order procedures for the Rocky Mountain area. 36 Fed.Reg. 13621 (1971). This notice provided that just and reasonable rates would be issued for gas contracts dated before October 1, 1968. It provided also for determination as to whether the rates under Order 435 were to apply to contracts dated between October 1, 1968
The petitioners challenged the new rulemaking procedures. These challenges were, however, unsuccessful before the Commission. Motions for rehearing and for reconsideration were made in which the present contentions as to the necessity for evidentiary hearings were made. The Commission rejected the contention that an adjudicatory hearing was required, stating that both the
The Phillips Petroleum Company then filed its petition seeking review in this court. Amerada Hess Corporation on behalf of itself and others filed a petition for review in the Court of Appeals for the District of Columbia. This petition was transferred and consolidated with the Phillips case for the purposes of this review.
The matter submitted for review herein is “Notice Instituting Proposed Rulemaking and Order Prescribing Procedure“, which document was, as previously noted, issued by the Commission on July 15, 1971 in Docket No. R-425. This was called by the Commission a rulemaking procedure having the purpose of more quickly effectuating the Commission‘s task of fixing just and reasonable rates. The Commission ordered:
(1) completion by petitioners and pipelines producing natural gas of questionnaires covering “flowing gas costs and operational data on an individual company 1969 test year basis.”
(2) composition of such data by the Commission‘s staff before October 22, 1971, the results being available to any party on request.
(3) verified written responses to the proposed rulemaking before November 12, 1971.
(4) a conference on August 3, 1971, for “developing the issues and procedures to be followed” in the proceeding, as such “appears to be warranted in the public interest.”
No specific rates were set forth in the notice or release.
It is noteworthy that the Commission has initiated the procedure for setting area rates and by doing so it was engaging in a rulemaking proceeding. However, its notice or release also formulated a procedure to be used in the area rate proceeding. This is also a rulemaking proceeding. Thus the question on the merits which we are called on to review is the validity of the proposed procedure of the Commission which in effect abolishes the traditional trial-type hearing and substitutes for it the informal evaluation of written submissions.
Petitioners assert that there is jurisdiction pursuant to § 19(b) of the
In the proposed rulemaking procedure, specific rates, terms or conditions are not set forth. It is a rule which prescribes standards for the setting of area rates in the Rocky Mountain region and to that end it orders submission of certain data. Thus it is clear that the Commission is presently engaged in an exercise of its rulemaking power, even though it is merely formulating the procedure to be used.
The matter before us is a question of law and not of fact. However, it is procedural in its nature, even though it may have profound substantive effects, and we are mindful that mere procedural orders have been held to be not within the scope of the circuit courts of appeal. See FPC v. Metropolitan Edison Co., 304 U.S. 375, 385, 58 S.Ct. 963, 82 L.Ed. 1408 (1938). But this line of cases goes to the proposition that courts will not interfere with the administrative process and will limit themselves to review of an actual order following a hearing. See FPC v. Metropolitan Edison Co., supra; Amerada Petroleum Corp. v. FPC, 285 F.2d 737 (10th Cir. 1960); United Gas Pipe Line Co. v. FPC, 206 F.2d 842 (3d Cir. 1953); Eastern Utilities Associates v. SEC, 162 F.2d 385 (1st Cir. 1947). If the order is as bad as the petitioners claim, it would require a holding that there exists a denial of rights guaranteed by the due process clause of the Fifth Amendment and a holding also that the Commission is acting beyond the law and outside the
The statute in question, § 19(b), provides for judicial review of final agency orders and under such a statute challenges to newly promulgated agency regulations prior to their application against particular individuals have often been entertained. See FCC v. ABC, 347 U.S. 284, 74 S.Ct. 593, 98 L.Ed. 699 (1954); Columbia Broadcasting System v. United States, 316 U.S. 407, 425, 62 S.Ct. 1194, 86 L.Ed. 1563 (1942); Gardner v. Toilet Goods Ass‘n, 387 U.S. 167, 87 S.Ct. 1526, 18 L.Ed.2d 704 (1967); Toilet Goods Ass‘n v. Gardner, 387 U.S. 158, 87 S.Ct. 1520, 18 L.Ed.2d 697 (1967); Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967). In the latter three cases Mr. Justice Harlan, writing for the Court, mentioned two applicable criteria: first, whether the issues tendered are appropriate for judicial resolution, that is to say e. g., whether specific facts were needed in order to decide the case and, secondly, whether the impact on the parties is substantial. In one of the food, drug and cosmetic act cases, Toilet Goods Ass‘n v. Gardner, supra, it was determined that a question existed as to whether the threatened inspection would ever materialize. In the other two cases, Abbott Laboratories v. Gardner, supra, and Gardner v. Toilet Goods Ass‘n, supra, it was held that a pre-enforcement judicial review was justified because the questions were straightforward legal ones not depending on specific facts and, secondly, that the regulations had an immediate substantial impact on the manufacturers involving large expenditures and the risk of serious penalties.
The ultimate test of reviewability is not to be found in an overrefined technique, but in the need of the review to protect from the irreparable injury threatened in the exceptional case by administrative rulings which attach legal consequences to action taken in advance of other hearings and adjudications that may follow, the results of which the regulations purport to control.
Accordingly, we view the present order as one which is appropriate for judicial review and resolution since it tenders a pure question of law and, secondly, the hardship to the petitioners which would result from refusal to review the question would be of great magnitude, and we conclude that the case is a proper one for the exercise of this court‘s jurisdiction.
III. VALIDITY OF THE PROPOSED REGULATION BY RULEMAKING UNDER THE NATURAL GAS ACT
The Act does not expressly authorize the procedure which the Commission has adopted; by the same token, the Act does not prohibit it. Section 5 of the Act gives the Commission the power to fix just and reasonable rates. It does require that a hearing shall be held, and the rules of procedure regarding hearings are found in § 15 of the Act,
[a]ll hearings, investigations, and proceedings . . . shall be governed by rules of practice and procedure to be adopted by the Commission, and in the conduct thereof the technical rules of evidence need not be applied. No informality in any hearing, investigation, or proceeding or in the manner of taking testimony shall invalidate any order, decision, rule, or regulation issued under the authority of this chapter. (Emphasis added.)
The Commission, acting pursuant to § 16 of the Act,
Section 16 is entirely consistent with the particular order adopted. It provides the Commission with the “power to perform any and all acts, and to prescribe, issue, make, amend, and rescind such orders, rules, and regulations as it may find necessary or appropriate. This provision goes on to say, referring to the Commission, that it “may prescribe the form or forms of all statements, declarations, applications, and reports to be filed.” This section thus provides the Commission with a broad authority in prescribing procedures for obtaining information upon which it is to act. As was said by the Court of Appeals for the District of Columbia, a primary objective is the obtaining of information to enable the Commission to carry out effectively the provisions of the
After reading §§ 15 and 16, one is constrained to conclude that the Commission has a very broad discretion indeed in determining the form of its proceedings. The petitioners, on the other hand, maintain that § 5 of the Act in providing for a hearing, necessarily means a formal or adjudicative type of hearing with full right of cross-examination and participation in the preparation of a public record, a record which must be the product of the ratemaking procedure. This, so it is argued, is the method which has been followed throughout the years and the present attempts at innovations are not authorized by the statute.
It is true that the Commission has traditionally conducted individual company-by-company hearings. See, e. g., FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 62 S.Ct. 736, 86 L.Ed. 1037 (1942), which upheld the procedures under the
The petitioners also rely on other regulatory statutes and seek to argue that in order to have a fair hearing it must be a formal proceeding.7 However, we cannot justifiably apply standards which have been laid down in quasi-judicial proceedings.
Decisions of the Supreme Court since the rulings in the Phillips cases have pointed the way to adoption of a more flexible and less formal method for fixing the rates of gas producers. Its first effort was area rate setting, itself a departure from the adjudication process. The Supreme Court approved this early effort in FPC v. Texaco, Inc., 377 U.S. 33, 84 S.Ct. 1105, 12 L.Ed. 112 (1964), a pre-Permian Basin case. The Court, though dealing with § 7 of the Gas Act, held that
the statutory requirement for a hearing under § 7 does not preclude the Commission from particularizing statutory standards through the rulemaking process and barring at the threshold those who neither measure up to them nor show reasons why in the public interest the rule should be waived. . . . To require the Commission to proceed only on a case-by-case basis would require it, so long as its policy outlawed indefinite price-changing provisions, to repeat in hearing after hearing its conclusions that condemn all of them. . . .
The decision of the Supreme Court which we regard as dispositive of the issues raised here is In re Permian Basin Area Rate Cases, 390 U.S. 747, 88 S.Ct. 1344, 20 L.Ed.2d 312 (1968). In that area rate decision Mr. Justice Harlan, writing for the Court, described in detail the difficulties experienced by the Commission in seeking to regulate the producers’ sales. It was described as the “outstanding example in the federal government of the breakdown of the administrative process,” citing Landis, Report on Regulatory Agencies to the President-Elect.
In the Permian Basin case the Supreme Court, utilizing the price regulation analogy, stated that the Constitution does not prohibit the determination of rates through group or class proceedings and that it does not require that the separate financial position of each member of the class be evaluated. Indeed, the only limitation noted was that the prices fixed must be calculated in conformity with the constitutional limitations; that such prices must not be arbitrary, discriminatory or irrelevant to the policy which the legislature had agreed to adopt.
As we view it, the present effort is, to a large degree, the result of the encouragement which the Supreme Court gave to the FPC to innovate. Thus in the Permian case the Court stated that “the breadth and complexity of the Commission‘s responsibilities demand that it be given every reasonable opportunity to formulate methods of regulation appropriate for the solution of its intensely practical difficulties.”9 This message was many times repeated: “the width of administrative authority must be measured in part by the purpose for which it was conferred“;10 “the ultimate achievement of the Commission‘s regulatory purposes may easily depend upon the contrivance of more expeditious administrative methods“;11 “administrative authorities must be permitted, consistently with the obligations of due process, to adapt their rules and policies to the demands of changing circumstances“;12 “[p]rovided only that they do not together produce arbitrary or unreasonable consequences, the Commission may employ any ‘formula or combination of formulas’ it wishes, and is free ‘to make the pragmatic adjustments which may be called for by particular circumstances.‘”13
The final contention of the petitioners is that there can be a valid judicial review only if there is a record. However, we do not agree that this requires that there be a record resulting from a formal evidentiary hearing. The important point is that there shall be a record which will allow an orderly review of the Commission‘s findings and conclusions. Under the rule the record will consist of the written comments submitted by the respondents to the Commission together with questionnaire data filed by producer and pipeline companies and composited by the Commission staff. The submissions of the petitioners would be placed in public files and made available for public inspection. Thus the petitioners are aware of the material which will be considered together with the application of Commission expertise to the information submitted.
Finally, the reviewing court is at liberty to remand the cause to the agency for further delineation, information or expression of views.
In the light of the provisions of the Act, together with the Supreme
IV. THE CONTENTION THAT THE ADMINISTRATIVE PROCEDURE ACT REQUIRES FORMAL PROCEEDINGS
Petitioners read the
The
Two types of rulemaking are recognized under § 4. Informal is that generally used, and § 4 prescribes the procedure in connection with informal rulemaking such as proper notice so that interested persons are given an opportunity to participate “through submission of written data, views, or arguments with or without oral presentation“; the rules adopted must incorporate a statement as to their basis and purpose. Formal rulemaking is the exception which is set forth in § 4(b) which provides:
When rules are required by statute to be made on the record after opportunity for an agency hearing, sections 556 and 557 of this title apply instead of this subsection.
The § 4(b) exception calls for the procedural formalities that are found in adjudication including the right to submit oral evidence and to cross-examine. This approach is a hybrid one which is in part rulemaking and in part adjudication.
The fact, as previously noted, that the Gas Act does not contain the words “on the record” furnishes a strong argument in support of the Commission‘s contention that informal rulemaking satisfies the requirements of the
The scope and depth of the § 4(b) exception are not apparent from a reading of the Committee reports and the debates. Moreover, a study of the research materials such as the Final Report of the Attorney General‘s Committee, the Committee Monograph on the FPC and the Attorney General‘s Manual on the
Comments in the Attorney General‘s Manual at page 33 take for granted that rate setting hearings under the Gas Act will be on the record and thus will be
Accordingly, from the legislative history of the
As we have seen the present proposed rulemaking stems from the suggestions of the Supreme Court in the Permian Basin case. There is no assurance, however, that this will be successful and the procedures may have to be modified or discontinued. But such flexibility was within the contemplation of the Congress when it enacted the
Finally, as we have noted earlier, the hearings here involve quasi-legislative rather than quasi-judicial activities. Where this is the situation, informal proceedings are generally held to be sufficient. See Norwegian Nitrogen Prod. Co. v. United States, 288 U.S. 294, 53 S.Ct. 350, 77 L.Ed. 796 (1933); I. C. C. v. Louisville & Nashville R. R. Co., 227 U.S. 88, 33 S.Ct. 185, 57 L.Ed. 431 (1913) (dictum).
In summary, we are of the opinion that the proposed rulemaking is in harmony with the comments of the Supreme Court contained in Permian Basin and in harmony also with the
The petition for review should be and the same is hereby denied.
SETH, Circuit Judge (dissenting):
I must dissent from the majority opinion filed herein as to the procedure required to be followed by the Federal Power Commission. It does not appear that the issue has been settled by the Permian Basin Area Rate Case, 390 U.S. 747, 88 S.Ct. 1344, 20 L.Ed.2d 312, as the opinion states. Also the specific method here sought to be used by the FPC as evidenced by its rulings and orders in this record has not been considered in reference to the doctrine of confiscation which provides the constitutional base for court review of proceedings of this nature. The specifics of ratemaking include the resolution of disputed facts and a consideration of the constitutional problems attendant to the fixing of just and reasonable rates.
The issue is the method of setting rates for the gas producers, and although the Supreme Court has indicated that some substantial departures from traditional methods are permitted, the complete conversion to rulemaking under the orders here concerned does not ap
Some further examination of the decisions appears to be necessary before considering some practical problems of the record, the required review by the courts, and some specific matters relative to the method here sought to be used by the FPC.
In FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 62 S.Ct. 736, 86 L.Ed. 1037 (1942), the Court considered the ratemaking function of the FPC under section 5 of the
The Supreme Court, prior to FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 62 S.Ct. 736, 86 L.Ed. 1037, had decided Morgan v. United States, 298 U.S. 468, 56 S.Ct. 906, 80 L.Ed. 1288 (see also 304 U.S. 1, 58 S.Ct. 999, 82 L.Ed. 1129). One of the principal issues there raised and considered by the Court was the nature of the hearing required to be held under the
There have been several decisions by the United States Courts of Appeals which directly concerned summary proceedings under the
FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 62 S.Ct. 736, 86 L.Ed. 1037, must be regarded as a significant case as to the issues before us. It is apparent that the nature of the proof required and the method of the Commission is now much different in the area rate cases such as the Permian Basin Area Rate Cases, 390 U.S. 747, 88 S.Ct. 1344, 20 L.Ed.2d 312, but this should not bring about a different result as to the fundamental nature of the hearings. The practices of the Commission have changed during the many years it has been in existence, but a present feeling of urgency, as indicated in the Commission‘s brief, should not overcome the statutory or constitutional requirements for a full hearing.
The relation of the
On the requirements of the
“Because the proceedings under review were an exercise of legislative rulemaking power rather than adjudicatory hearings as in Wong Yang Sung v. McGrath, 339 U.S. 33, 70 S.Ct. 445, 94 L.Ed. 616 (1950), and Ohio Bell Telephone Co. v. Public Utilities Comm‘n, 301 U.S. 292, 57 S.Ct. 724, 81 L.Ed. 1093 (1937); and because
49 U.S.C. § 1 (14)(a) does not require a determination ‘on the record’ the provisions of5 U.S.C. §§ 556 ,557 , were inapplicable.”
The above decision is significant here, but as the quotation indicates the Esch Act gives specifically to the ICC the authority to make “rules, regulations, and practices with respect to car service.” With this specific authority for rules for the limited subject before it in an Act which applies only to the ICC and its powers, it is not difficult to see how authority was found for the rulemaking type of hearing under the
The Supreme Court then in United States v. Florida East Coast Ry., 410 U.S. 224, 93 S.Ct. 810, 35 L.Ed.2d 223, considered essentially the same issue as in United States v. Allegheny-Ludlum Steel Corp., 406 U.S. 742, 92 S.Ct. 1941, 32 L.Ed.2d 453. Again it is a matter arising under the Esch Act with its limited scope of car service rules and with specific authority for rules relating to the subject. The Court there holds that evidentiary hearings are not required under the Esch Act with reference to the imposition of charges on carriers using cars of others. It also holds that the term, “hearing,” in section 1(14)(a) of the
It would appear also that the hearing provisions in the
“. . . The ‘hearing’ is designed to afford the safeguard that the one who decides shall be bound in good conscience to consider the evidence, to be guided by that alone, and to reach his conclusion uninfluenced by extraneous considerations which in other fields might have play in determining purely executive action. The ‘hearing’ is the hearing of evidence and argument. If the one who determines the facts which underlie the order has not considered evidence or argument, it is manifest that the hearing has not been given.”
See also I. C. C. v. Louisville & Nashville R. R., 227 U.S. 88, 33 S.Ct. 185, 57 L.Ed. 431.
By order of the FPC which instituted the rulemaking procedure, certain producers were named therein and made parties whether they wanted to be or not. Furthermore, they were “ordered and directed” to complete, “verify,” and file certain cost data within a specified time. The proceedings were directed to them specifically. Statements and “submittals” were required to be under oath. This procedure has to be unusual in a rulemaking proceeding where generally those interested may submit information if they wish. However, as to those named they are “hereby made respondents to this rulemaking proceeding,” and then ordered to respond. Thus it commences with all the compulsion used at any ratemaking hearing, but then provides for “submittals” and “responses” and “statements” which the staff “shall composite and reconcile.” After this, the Commission will “consider” the material and reach a decision, but from the record and brief references it also expects to rely on its “expertise” and the files which have been accumulated from the nationwide “hearings” previously conducted and from other sources. As indicated the FPC in its Order Denying Motion for Cross-Examination in Docket R-425, issued December 16, 1971, said:
“In a rulemaking proceeding, such as the instant one, our primary objective is the acquisition of information which will enable us, inter alia, to determine just and reasonable producer rates for jurisdictional sales in the Rocky Mountain area for contracts dated prior to October 1, 1968. The purpose is not to allow interested parties to define the issues or narrow the scope of the proceedings. On the contrary, in soliciting comments from interested parties, and in relying upon the experience gained through previous area rate proceedings, we are building a record from which we can make a determination of said producer rates. We need not, as Amerada would require us to do, lose ourselves in an excursion into detail which would obscure, rather than clarify, the issues before us.”
The above quotation in the first sentence states that only one of the purposes of the hearing is to determine just and reasonable rates. If this is only one of the purposes and since “comments” are also “solicited” from other interested parties, and experience from other hearings is used, it is difficult to determine what “the record” of the “hearing” will be. It is also apparent that those ordered to be made parties will have no part in the making of the record of the proceedings, that is, through the introduction of exhibits or testimony with the right to object to or test the validity of the material. There is thus assembled material which cannot be considered a “public record,” and which is not really identifiable as having been assembled during the course of public proceedings.
In the proceedings here contemplated only the staff members or the Commission know what material has been submitted. The parties have no knowledge as to what will be considered as part of the record and have no part in the development of the record as such during the course of the proceedings. This applies both to the record for decisional purposes and for review.
Further, with reference to the record for decision, the Commission has not stated that its determination will be based on the record alone, but has stated that it will “consider” the material submitted by the parties. It has also said it will use its experience to resolve disputed facts. Thus the problem relates to the decisional process, the matter of review, and the preparation of a “public” record. The general method of submitting all material in writing and having the Commission staff “composite and reconcile” such data leads to a question as to whether or not the procedure is really a “hearing.” Under the Act, the Commission must determine whether rates are just and reasonable and the Act provides that if the rates are not “reasonable,” they are “unlawful.” It is apparent from the orders entered by the Commission and from the Commission‘s brief that it intends to rely on much more than the submittals and responses filed by the parties in its proceedings. In the Commission‘s order of December 16, 1971, denying the motion for cross-examination, the Commission stated that it was “soliciting comments” and “in relying upon the experience gained through previous area rate proceedings, we will build a record upon which we can make a determination of said producers’ rates.” The Commission further states that the rulemaking method was chosen because of “the advantages of determining rates in a more expeditious manner, based on the informed judgment and expertise of the Commission through ten years of producer regulation,” etc.
The matter of cross-examination was also raised by the petitioners and expressly ruled upon by the Commission. It stated that there was no such procedure contemplated in rulemaking proceedings, and if there was it was “permissive” and could be denied entirely (as distinct from being limited).
Cross-examination in the situation here considered has several well recognized purposes, all of which relate to the matter of a fair hearing and the traditional “hearing” in judicial and administrative proceedings. The first purpose of cross-examination usually considered is to test the accuracy of the matters or facts presented by a party. This purpose needs no further description.
Another purpose of significance here is to test the knowledge of the witness as to the matters whereof he speaks; thus to show whether or not he is qualified or has the knowledge to so speak and thus to permit an evaluation of his testimony. The order of the Commission which sets out the procedure re
Another purpose served by cross-examination is to develop the rest of a story partly told. The things which are omitted upon the direct examination are usually the most interesting and most revealing. Again with ex parte “submittals” the omitted details, when no further examination is expected, can be significant. Who better knows these things than the parties in the same or a related business?
As to bare conflicts in the facts which may result from the “submittals,” the Commission says in its Order Denying Cross-Examination of December 16, 1971, that: “The existence of disagreements among the several submissions does not preclude the Commission from making a reasonable determination in light of the record before it and based on its own experience.” Ratemaking after all deals with specifics, not generalities, as it can be the confiscation of the property of the regulated parties, and at the least constitutes a statutory imposition of restrictions on their earnings not so imposed on businesses in other fields.
In my opinion the proceeding here concerned is well within ratemaking. It is to resolve disputed facts, to determine rates retroactively to some extent, and to decide whether within the constitutional justification for court review the rates are just and reasonable or whether they are “unlawful.” This cannot properly be done by resorting to rulemaking powers, and deciding the facts on the basis of “submittals” by anyone and which cannot be tested for accuracy or completeness, and which in turn the Commission staff will “composite and reconcile,” whatever that may be. The Commission will then “consider” the submittals and whatever else is in their files and in their “experience.” This may then be reviewed by the court.
This method does not appear to be within the proper construction of the
The Commission has argued that there is a matter of urgency in view of an impending shortage of natural gas and abbreviated hearings are necessary. Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035, was decided in 1954 and the Act itself was passed in 1938. The area rate method was announced by the FPC in 1960. Congress has set up the regulatory machinery, and decided on the fact of regulation. We should act within this framework, and requests for substantial variations should be directed to Congress.
The orders relative to the nature of the hearing should be set aside and the matter remanded to the Commission.
Notes
44 FPC at 1119.our action here is not one based on a nugatory record. We fully considered the staff report, and accepted it as evidence. We received lengthy and well-considered comments from many parties, and answers to said comments made by other parties. And, we considered the staff‘s minutes of the conference of June 2, 1970, and the comments of such minutes filed by Cities Service on July 24, 1970. Added to our consideration of all of this rather extensive record, we have applied the expertise gained by us in determining previous area rate proceedings, and our long experience gained from dealing with the problems of these areas.
we cannot determine how Amerada has been, or will be, prejudiced by the adoption of the procedures in Docket No. R-425. Amerada has not pointed to specifics on which it needs to cross-examine or present live rebuttal testimony. Instead, Amerada refers to general subjects to which it, and other interested parties have filed written submissions, and states as reasons for its requests, “apparent disputes.” The existence of disagreements among the several submissions does not preclude the Commission from making a reasonable determination in light of the record before it and based on its own experience.
Petitioners also misplace reliance on I.C.C. v. Louisville & Nashville R.R. Co., 227 U.S. 88, 33 S.Ct. 185, 57 L.Ed. 431 (1913). Not only does that case deal with the Interstate Commerce Act, but it is also a pre-Administrative Procedure Act case which is fully out of harmony with that statute.