*1 TAMM, Before LEVENTHAL ROBB, Judges. Circuit TAMM, Judge: Circuit petition Secretary Army seeks to set aside an order of the rejecting Federal Power Commission Army’s contention that natural military used Vint Farms subject reservation should be to the Com- mission’s under the Natural Gas Act. review Our substan- reveals inadequacies findings tial in the piled by Commission, thus we proceedings. remand further I. THE FACTUAL CONTEXT 3, 1965, Secretary On December Army applied to the Federal Power pursuant section the Natural Gas Act1 for an order di- recting Corpora- the Atlantic Seaboard (hereinafter “Seaboard”) to sell the oper- the natural needed in ating military the Vint Hill Farms res- Virginia. Warrenton, ervation in Sea- engaged corporation board is a Delaware in the transmission natural gas; its main line runs transmission through the Vint Hill reservation boundary connects near the of the facili- * * * (a) (1964) natural-gas 1. 15 U.S.C. 717f : * * Commission, person to, Whenever no- after opportunity hearing, tice finds the local distribu- necessary action tion of natural or artificial desirable * * public public interest, *.

497 conducting hearing on the After metering regulating devices and ty with Army’s application, ruled an examiner Virginia Distribution by Gas operated power Gas”), lacked ("Virginia affili- Commission an Corporation to Act Gas natural section the Natural ate of Seaboard2 any gas Army compel Virginia. to sell Seaboard gas The public in to the gas resold is taken not to be within was Hill station at the Vint used Act; point meaning had of the since the pipeline at that from the Seaboard Army’s supplied amount estimate distribution an to delivered pipe gas required through twenty-two foot destined system ap- regulations,4 Army’s of the Virginia Commission Some Gas. owned plication prejudice. is ad- gas purchased denied without was thus meaning adopted of the the examiner’s mittedly The within Commission resold is in Act, although jurisdictional question, proportion the exact view of gas dispute; proceeding is direct-use remainder to the examiner remanded military operation reopen so the record consumed with directions to opportu- on the facilities base. have an would regu- nity comply applicable to seeking Army’s purpose this The quan- requiring of the lation estimate an was, stated, simply to eliminate gas (J.A. tity of 24a- destined Virginia middleman, The Gas. 33a). Army’s petition for a rehear- Virginia per- position that Gas took the ing denied the Commission compensa- meriting formed no services 39a-42a), (J.A. November 1968 providing the short tion other than petition this resulted. addition, connecting length pipe; that because contended II. AND COMMIS- COMMINGLING being gas Vint Hill was of the used at SION JURISDICTION subject to for resale thus destined regulation, of the does Commission’s decision “juris- commingled would be stream jurisdiction have over all reg- subject federal rate or dictional” rests involved in the instant transactions ulation; Gath- Lo-Vaca California v. cf. plausible argument on the that a con- Co., ering trary conflict result would create a be- (1965). L.Ed.2d Power 7(a) of the Act and the tween section “direct-use” sales reserving provisions (b) state section expressly reserved consumer is ultimate control sales of natural over direct-use 1(b) Nat- section gas: Act,3 the State ural Gas direct Atlantic Were we to does not over assert any make available instrumentalities; result as a resold, that which is more gap, this directing quite plainly in- an tends, $50,000 pay forced to over in- a direct terstate to make per year en- be if the more than it would We rate. dustrial sale at entering tire stream of the Vint that we have need not belabor the fact subject Clearly, system authority Con- to fed- distribution were so to act. distinguish gress between rate-making intended jurisdiction. eral compa- natural-gas use, and to other are Both Seaboard Gas transportation or wholly-owned nies subsidiaries of the Columbia any apply sale, System, but shall Inc. gas or transportation of natural or sale 717(b) (1964): 3. 15 § U.S.C. of natural distribution the local chapter provisions of this shall dis- for such facilities used or to the apply inter- the sale in gather- production or tribution or gas for resale state commerce of natural gas. ing of natural public consumption for do- for ultimate industrial, mestic, commercial, 250.6 4. 18 C.F.R. consumptive fraught difficulty, resales and direct tional” prerogatives hedged by and to reserve rather artificial distinc- authorities the lat- and local over Much of tions. the confusion surround- question ter. from the need to arises implement Congressional decision (J.A. 29a.) However, is obvious should divided between premise one is the tacit this rationale *3 government the states and the federal in assumption pres that Seaboard does regulating fungible in a transactions ently gas directly Army, sell but the commodity generally in which moves a rather This sells Gas.5 producer continuous stream from to ulti- is characterization the transaction Supreme mate consumer. Court clearly following at lan odds aspect problem dealt one this in guage in the initial decision: examiner’s Gathering Co., California v. Lo-Vaca prima make a [T]he did facie 366, 486, U.S. 13 L.Ed.2d 357 S.Ct. sup- case that the in is issue gathering Lo-Vaca, the plied (Sea- directly by the wholesaler pany contracted to to an board). company distributing pipeline company for direct (Virginia Gas) facili- furnishes minor use; was measured before de- (a pipe) a ties 22-feet and does [sic] livery, commingled by then single billing, Army, perhaps while gas during trans- convenience, performs for its own portation point to the outside the other normal functions of a state, again where was metered. company. Respondent distribution Supreme these circumstances Court allega- failed to rebut said [Seaboard] ruled that fact that a substantial “[t]he contradictory presented tions. part [commingled] re- will be gen- evidence, merely rested on a ** jurisdic- sold invokes federal eral contention that as of law a matter trans- at outset over entire Army just truly cannot be action.” at 85 S.Ct. at 488. business. Yet as a matter distinguished being Lo-Vaca can fact be from the comes close to a case, provided instant Distributor that Seaboard Vint Hill Farms in fact makes no Station. sales to the Army; clearly if this condition were (J.A. 21a-22a.) The Commission’s deci- record, demonstrated in the it would be any sion does not articulate reason for possible to conclude that Seaboard ignoring rejecting description participated voluntarily any trans transactions; yet, seems clear necessarily action which com involves finding a directly mingling jurisdictional juris non could well affect the outcome gas. hand, dictional On if the controversy. finding quoted implies examiner’s above general matter, question As a interposition Gas is whether sham, the Federal Power merely devoid of sub economic regulatory can and designed regu should assert author- stance and federal avoid ity involving over transactions lation,6 commin- it becomes more difficult much gled “jurisdictional” “nonjurisdic- distinguish There would Lo-Vaca.7 See, g., 32a, agreement involving commingling, e. Com- J.A. where the emphasis places great really mission on the fact concluded that it was a bailment fungible commodity (gas) that “there is not even a of a rather relationship repurchase. tractual between than a sale and Seaboard.” suggests opinion 7. The Lo-Vaca several possible Public Service Elec. & Gas Co. distinctions could Cf. which be rele- FPC, (3d 1967), controversy. example, 371 F.2d 4-5 Cir. to this For vant emphasizes where the court examined the economic “[t]he that decision fact legal transportation [commingled] substance a substantial and, favoring regulate given practicably area strong policy reasons also be cannot, then we are find that these circum- impelled federal author- to decide that Sea- said that it could be stances. Since governs. ity placed voluntarily itself had board supply- actually position in which Lo-Vaca extends this closer rationale nonju- commingled jurisdictional controversy, instant the facts Army, the directly risdictional in- there it is indicated that the federal compulsion inherent strong element of asserting jurisdiction terest ab- would higher normal section pass one state can costs when on state incursion failing sent and of other citizens states slight; presumably tory policy question the transactions time, of federal assertion same 486). That U.S. at the “attractive jurisdiction would avoid exactly hap- what contends re- gap” scheme pening at Vint Hill: more that *4 Virginia’s to con- not decision from sults government charged federal charged instrumen- federal trol rates Hill, justification used at Vint the less suggestion moti- that state The talities. Virginia raising Gas will have for given regulating a from vation to abstain charged rates to its in customers state- proper type a of transaction constitutes essence, In tax- sales. ju- premise of federal assertion for the may helping payers subsidize the FPC Trans- in found can be risdiction cost of of services citizens Vir- Corp., Pipe U.S. Line continental Gas ginia. 435, 445, 1, 19-20, 5 L.Ed.2d 81 S.Ct. true, It well be as Mr. Justice original): (1961) (emphasis in Harlan in concluded dissent his to Lo- Vaca, jurisdictional complex prob- that Congress the Natural When enacted lems of satisfactorily this kind can be re- Act, a desire motivated Gas was only by legislation solved or administra- against exploita- protect “to consumers rule-making. (See tive at 371- U.S. of the natural tion at the hands * * * 486.) event, end, In S.Ct. if the companies.” To that Commission continues to evolve stand- Congress compre- “meant to create a through ards in of this area ad- effective hensive * * * judicatory process, provide course, must re- true, It is scheme.” viewing courts awith record which ade- Congress compre- not that did desire quately legal, complex treats regulation; au- much hensive federal factual, policy issues involved. thority was reserved States. remedy in the deficiencies Congress But, equally it is clear above, record outlined the Commission’s aspect important did not desire that an ** order must and the be reversed cause unregulated. left this field be proceedings further in- remanded for Therefore, dispute over when arises a opinion. consistent with this given is within whether a transaction scope of federal or state Reversed and remanded. tory authority, not inclined we are negatively, problem thus approach the Judge LEVENTHAL, (dis- Circuit possibility raising a man’s “no senting). ** * That land” will be created. remanding errs, think, say, in case where I in a borderline court gressional explicit authority supposed insufficiency is not a because possibility can must in ask whether record Obviously, at is difficult will be resold” are in issue. argument 488; emphasis added), review thus this with- evaluate raising possibility is a out the benefit of a Commission discus- exception practicability ramifica- tie minimis to Lo-Vaca when sion very jurisdictional small amounts tions distinction. Corp. the sales Atlantic seeks to obtain the (“Seaboard”) Seaboard, buy affiliate to its from but to (“Virginia Corporation applies same Distribution tariff schedule as to Sea- Gas”) merely idea Gas, “is That sham.” board’s sales to i. e. Sea- support urged by was board’s CDS-1 schedule. urged peti- application, nor its The Commission found that Seaboard rehearing, tion for defines separate makes no direct sales and has no review, subsequent judicial area tariff for such sales. reason for reconsideration.1 Section of the Act authorizes the natural-gas applica- Commission to my “direct view case calls pres- sell natural tion of the doctrine that where any person record, engaged municipality or entation issues legally engage agency’s authorized to basis of determination local * * * gas them, distribution of public reasonable can discerned with clarity, its order should be affirmed ^[*] ^[*] ” disposition accordance with held, contrary to var- applicable ious adminis- contentions of statute rules Seaboard and the Staff, Secretary procedure.2 trative person eligible 7(a). was a to invoke § The order denial before us is held applicátion *5 the an filed “public,” distribution to the albeit a lim- Act, under of the Natural Gas 15 § public, ited gas as to the sold the 717f(a). application The sets ILS.C. Army § tenants, concessionaries or so- following: Army (1) groups forth is the The cial located on the reservation. The “engaged Commission in the and sale held that distribution would be entitled to an gas § within the boundaries 7(a) directing supply Seaboard (Vint military reservation Farms gas Army, and to do so at its re- Station).” purchases (2) “presently sale rate.3 Gas,” gas all of its from The Commission reached a different engaged gas wholly is distribution result, however, gas purchased by as to being Virginia. gas (3) within is The government for use and Seaboard, delivered from the main of for resale. The concedes that engaged company in interstate transmis- gas purchased “some of the used di- gas, through sion line of natural a small rectly Army facilities,” (Br. 3). for (some pipeline). of 2-inch 20-odd feet apparently applies This concession (4) delivery “Applicant seeks Army’s requirements. more than half Applicant and at an sale dispute proper There is a as to classi- Applicant’s distribu- interconnection of require- fication of some of its 40% system.” proper tion ments.4 The resolution of the nothing App.D.C. 317, 1153; add, passing, . 1. I I see 418 F.2d Pikes Peak large system organizing Broadcasting U.S.App. FCC, offensive in a Co. 137 v. separate companies, 671, 24, one or more itself F.2d 1969. D.C. 422 March sepa- transmission, for and a interstate aspect requires 3. This case rate one distribution in each state. for filings by Army. pletion certain corporation con- A devotes application The its Examiner decided that compliance with siderable time to prejudice should be denied without organization tory requirements, renewal. The Commission remanded jurisdiction, regulatory each man- so that reopen permit directions the record agement particular specializes set of in a satisfy regulatory re- requirements, seems sensible. quirements. FPC, 4. The contends v. 324 Colorado Interstate Co. reselling gas Intelligence 581, 595, 65 L.Ed. 1206 U.S. S.Ct. 89 Defense Agency (1945) ; FCC, (which on has facilities the sta- WAIT Radio U.S. v. ity. per- is that where a dis- contention of those sales classification delivery receiving gas note son takes majority, I will cussed gas commingles by the discussion, both covered briefly, without (the resale) purchased for Act disposition seems reason- me the FPC’s (gas directly pur- general outside the Act doc- reflects able at least jurisdic- by consumer), Federal chased trine, for con- an affiliate a sale to involved. extends to all the sumption sale resale. Lo- on California v. relies gas purchased by As Gathering Co., 366, 85 Vaca U.S. Commission use rather 486, 13 On L.Ed.2d 357 1(b) his- of the Act and relies pipeline’s purchase an interstate distinction between toric and reiterated Texas, jurisdiction was Commission for direct use.5 for resale and sales sales in other states. conceded as to resold 1(b) the Commission’s Section defines It was contended that where contract transporta- authority in terms of either producer iden- between commerce, “the sale tion in interstate disposed of within tified certain gas for of natural commerce state, producing at all or not resold In Panhandle resale.” U.S.C. § (used itself), the Com- Pipe Line Public Service Eastern Co. v. jurisdiction. mission could not exercise Indiana, U.S. 369-370, The Court stated 516-517, 190, 195, 92 L.Ed. 68 S.Ct. 488-489): 85 S.Ct. Rutledge (1947), said that Justice state commerce. consumers,-were federal Act of sales history, provisions sales cluded sumptive tion even sumptive sion,” The Court statute, for resale *6 by “cut withdrawal to [from an interstate though uses.” consumers has held that sharply “unusual and direct sales whatever application of the act].” subject “Direct from the sales interstate policy of the carrier direct legislative preci- cleanly to state given were sort were scope light of the in inter- between carriers rise of Act, con- ex- to to tomers tractive close, L.Ed.2d federal contrary scheme the entire transaction. Transcontinental Gas conjured up will fact since the might gap” in (Federal lower result would 377) resold, in our ^[*] * 28, a substantial have little incentive gap where costs Whether cases Power Comm’n at the to Pipe Line create] intrastate spite view, often involve 435, outset over producing an invokes 449, Corp., could orig- cus- “at- [A to 5 commingling might temptations problems, be a notwithstand- inal there regulation. availability separate jurisdictional non so-called expressed precise The Commission has view transaction amount jurisdic- meaning Congress should extend its that not-for-resale within the change sales,6 question not those but no the Act is a to reach need been made. reach. has gap” cross-cutting Army Army “attractive invokes as a invokes stating commingling

principle concept principle “does as that to author- the sale for extension of Federal basis tion) Family Housing accounting for the con- transactions and to Defense ment military. (which quarters occupied by indi- venience of the has cooking, who viduals use the for Serv- in Cities the discussion It relied on space heating). and water The Com- (1966). Co., F.P.C. 571 ice Gas mission were “sales” concluded these jurisdictional Reports 1961-1965. 6. See FPC Annual for to sense sales public, Depart- but rather intra-Defense corpo- municipal or to instrumentalities Army relationship But here the rations.” It Seaboard. to wants establish says extent com- one.9 Whether and to what The Commission can mingling principle applies to Lo-Vaca authority exercise to re- § pipelines'may involve quire Seaboard to deliver interesting questions some that must be Army wants whether Sea- point faced in another case. The was left However, board wants to or not. open Lo-Vaca, as noted the last continues, has the Seaboard quoted sentence of the extract above. discretion to decline to enter into rela- possible issue could come tionship supply “separateness” turn on the desired its con- own terms A more molecular.8 sumption, Commission does commingling realistic forecast authority require have such a new principle prevent will be extended relationship.10 separation realistically undercuts ef- gas, jurisdictional fective This view does not Com- mean that and that can therefore be described as mission is bound arid law to an taking advantage gap” of an “attractive rigidity. gone already congressional It has contrary least as intent. far, case, in its Bushnell its as assert any event, assume, ready I am compel a sale under § present purposes, least (a), apply jurisdictional and to resale mingling principle may have substantial tariffs, in order to dis- a sale to a cover purchas- reach where a to a (for consumption purposes er for both tribution needed resale). peak days, though off-peak even 7. Br. 3. It cites Ann. it, Va.Code 56-265.1 extent in turn resells (b) (a), require we have no Sea- make board to a direct sale to the Lo-Vaca the Court offered a “cf.” can, for its own use. citation to United States v. Public Utili- obligations sistent its under Sec- Commission, ties 706, 345 U.S. 73 S.Ct. separately (a), tion 7 contract (1953), 97 L.Ed. 1020 where did which the Appeals opinion not follow a Court of resells, turn and continue to sell separation impossible, that such remainder through Virginia Seaboard sees fit either might indicated that be a record Gas or to the identify separate “sales,” that would one directly, pursuant sepa- newa consumptive for resale and one for rate contract. That Seaboard’s 706). U.S. at 73 S.Ct. contract with Gas involves Army’s needs, *7 of the Vint for both 9. is not clear what the Examiner had consumption resale, and the and that saying in mind in “the did make with Gas contract the prima gas a case facie that the in issue equally unitary irrelevant; is is arewe supplied directly by is the wholesaler legal not here concerned with the con- (Seaboard).” The context was in the sequences present sit- contractual establishing course of qualified that the uation but that which would be 7(a) gas under a as distribu- subsequent effect of to an invocation to the extent that ob- powers 7(a) our under Section the of gas tained for resale. event, Act. any pleadings, evidence, the Army, To that the hold which has predicate and Commission are clear power separate within its to these trans- enough to the as salient facts and issues. actions, by so, its refusal can to do n Commission said: transform for a direct sale into a sale present resale, Here is not even a be a would unconscionable as relationship equity tractual between the matter of be in di- can, and Seaboard. We under Section rect contravention of the Natural Gas 7(a) require juris- prohibition of the Act to Act’s of Commission (cid:127) gas directly to the the diction over direct —to sales. regulation gas resale of for resale. Neither periods needed for sales the any commingling might by doctrine nor other itself.11 be consumed protecting purpose for of is available however, ease, is what In the purchases not-for-resale, and that is attempt by to is an involved principal purpose appeal.13 of That require interstate an invoke § protection provided was not desired or merely pipeline a to make sale by Congress, pointedly worded its merely of purchased and not for statute that Com- so as make clear might swept be somehow some that legitimate mission no concern with necessary along accom an as incident pipeline sales to There are consumers. purchased res paniment for some who advocate Commission author- greater ale,12 equal and even of an but ity consumptive over direct sales as nec- by applicant purchased for amount essary, global terms, for balanced consumption. meaningful regulation pipelines who attempt Federal That is obtain an distributors, approach sell to but that is an involvement sales not available under statute as consumption, pipeline is for that unavail- legiti- stands. The Commission has no the Act it stands. able as regulating mate interest sales not-for- per- some overall me conclude Let such, as does not need to Lo-Vaca’s spective, repetition. at risk regulate provide pro- them in undercutting prevents commingling rule tection resale. legitimate scope effectiveness invoking regulation. There is no That was warrant Federal gap” case, principle. Su- There “attractive as the Commission advised gap line, Court, purchase by pipeline only preme here with effective regulation producers; line if of these Federal on one side of the from some seg- could, contract, (conceptually) on the full the States single Congress regated has left from a stream of side. through (jurisdictional) sales to indus- States the effectively simply consumers, trial and withdrawn remainder could not be might way “gap” to sales in a fulfilled that have existed as statutory such consumers in interstate standards fairness calling purpose merce. The consumer. commingling principle to re- would be pipeline, Commis- As protec- regulatory quire then extend power statutory sion has full (by pipeline to tion to sale industrial by compelling sales to distributors —both Congress consumer) left wanted point sales, requir- such even Virginia’s regulating extensions, States. line although “gap,” scheme there be a price. commingling principle is record,14 by no on the clear means available, needed, to effectuate purchased portion major Co., Op. Pipe 11. American Louisiana Line consumption— 698; nom., for direct FPC aff’d sub No. deciding, assuming Compan without even Service Illinois Public Central y delivery to, say, purchased (7th Defense FPC, 1964). F.2d Cir. Agency Intelligence is for “resale.” justified might 12. This as a kind de of point theory, minimis says blended g., nothing, Vir- e. I see *8 meaningful ap- would frustrate lawfully charge may ginia (a) plication if the Commission were §of a different on it consumes bog proceed- required itself down with charges, say, industrial basis than concerning ings devoid amounts of appears the record All sumers. significance. practical par. “gap” state on stating: application, “Under case that 13. The Commission ruled Corporation Virginia Law, appropriate steps the State will as to this take over sales pipeline’s has no order them will agencies by public Fed- utilities for sales made and at standard tariff Accordingly, state eral Government. to distributors. may well be that relief is available lodged by in court in an action

against of- or the state distributor regulating gap If is a ficials.15 to a consumer and

a distributor’s sales abuse, remedy lies in seek-

it leads to

ing change legislature. from the NESTOR,Appellant,

James R. al.

Lewis HERSHEY et B.

No. 23314. Appeals,

United Court of District Columbia Circuit.

Argued Aug. 19, 1969.

Decided Dec. certificate is needed and acquire none has been obtain a certificate in order applied for.” In context im- “gap” this follows or facilities render service mediately par. 7, saying help that no other would seem be a to the instru- application need filed or franchise ob- mentalities rather hindrance. permit tained sought service may that, assuming 15. It even the state required 7(a). to be under § commission no direct au- cites Va.Stat.Ann. 56- thority over a distributor’s Fed- utility” “public 265.1. This defines a agencies, they eral can have recourse to “company” alia, aas inter continuing duty utility common-law of a heat, light power. or It defines “com- to serve all consumers without unreason- pany” including municipal as not “a able discrimination. Discrimination corporation county.” or This section is against agency, municipal a Federal 10.1, Utility Act, of ch. Facilities may authority, be the more invidious and requires a certificate conven- policy public vulnerable because of consid- necessity ience and from the erations, applicable gov- both those to all public may utility mission before a ac- ernment, supremacy doctrines which quire public facilities or furnish safeguard the Federal in its Government service. appearances various within the State. instrumentality, If Federal like a These factors even have constitution- municipal corporation, required is not al reenforcement.