United Gas Improvement Company v. Federal Power Commission

UNITED COM GAS IMPROVEMENT PANY, Petitioner,

v. COMMISSION,

FEDERAL POWER Respondent. Holtzing- No. 18112. Mann, Jr., E. J. David John C., er, Jr., Washington, E. D. William Appeals United Court of States Pa., Zeiter, Philadelphia, Morgan, Fifth Circuit. Lewis Pa., Boekius, Philadelphia, and Wash- & Feb. counsel, ington, C., D. United Gas 6, 1961. Rehearings April Denied Improvement Co., petitioner. C., Mason, Counsel, John F. P. C. Gen. Washington, C., E. D. Howard Wahren- Washington, brock, Solicitor, C., F. P. C., Russell, Asst. Coun- D. Robert L. Gen. sel, Attorney, Bardin, David J. Federal Commission, Power Power for Federal Commission, respondent. Brown, Atty.,

Kent H. Public Service Y., Y., Albany, Commission of N. N. Barr, Albany, Y., Martin L. N. Barbara City, counsel, Suchow, M. York New for Public of New Service Commission York, applicant intervention. Counsel, Pipe Crain, W. 0. Gen. United Co., Lewis, Line Huffman John C. M. Madison, Woods, Shreveport, Vernon W. La., Pipe Co., United Gas Line tervenor. Row, Dallas, Tex., Martin A. Joiner Brown, Judge, John R. Circuit dis- Cartwright, Weinert, Beaumont, Herf M.

sented. Tex., Crook, May, Robert E. Omar L. Washington, C., III, Ward, D. A. John .Philadelphia, Pa., Generelly, F. Richard May, Morley, Washington, Shannon & C., Co., D. for Sun Oil intervenor. TUTTLE, Judge, Before Chief Judges. WISDOM, BROWN and Circuit TUTTLE, Judge. Chief presents prob- case the identical lem heretofore resolved the Courts Appeal for the 9th Circuit United Improvement C., Gas Co. F. P. F. 2d and the District of Columbia Cir- cuit Public Service Commission New York v. F. P. 287 F.2d pending argument after in a com- panion case in the 10th Circuit. Peti- tioner here also contends that it has been resolved the United States (see directing a reversal Company Pipe 237) Line The United Gas 4 L.Ed.2d 80 S.Ct. U.S. May application on also filed an United Gas in decision Circuit the 3rd Act, Natural Gas 7 of the 269 under Section Company v. F. P. Improvement seeking public conven- certificate of F.2d authorizing necessity con- it to ience and the Commission The issue whether facilities, esti- operate struct and certain granting a certificate in erred $1,176,175.00, connect to mated cost to necessity without and convenience gas presently natural authorizing Company to Sun Oil dition system, enable transmission which would gas the Belle produced from sell transport purchase, it to and receive at an Louisiana Field in Southern Isle gas pro- natural commerce the interstate Mcf, plus per price of 21 initial base %$ duced Belle Field Sun Isle severance of Louisiana reimbursement Parish, Mary Louisiana. St. Mcf, plus gathering per and tax of 2.3$ im- taxes thereafter new By 5,1959, January an order on issued by a posed. resolved The must be issue permitted interven- the Commission determination whether Improvement tions United pany Com- Gas requiring the the standards observed and Public Commission Service responsible scrutiny careful “most New York. said reaction” which the provided As notice in the Commission given by required the Commis- * * * hearing 26, 1958, dated November price proposals sion to “initial 30, 1958, but, on on convened December Act, Natural Gas 7” of the Section petition Refining account of to intervene Atlantic U.S.C.A. 717f. U.G.I. and notice of intervention of New Co.v. Public Service Commission January 27, PSC-NY, was recessed York, 378, 391, 79 S.Ct. U.S. hearing 1959, on which date a formal 1255, 3 L.Ed.2d 1312. held concluded. the studied due the deference Not conclusions careful gas The source of the natural study Appeals, on our own Courts of produced by United, Sun and sold to Refining Company case Atlantic herein, or certificated is from leases industry throughout (now known other interests in minerals owned conclude, compels case) tous the CATCO Field, controlled Sun in the Belle Isle did, record that the courts as the other Mary Parish, gas St. Louisiana. No support determi- does not us before purchased by par- to be Sun from third public ne- certificate of nation proposed ties to effectuate this sale. The uncondi- cessity should convenience discovery. Belle Field Isle is not a new light tionally of the strictures issue in discovery The well was in 1940. drilled decision. the CATCO sixty-five Since then Sun has drilled some field; developed twenty-one more wells essential facts dry holes. record are: Oil Com- us The Sun shows before record pany May hearing 19,1958, application date of this on Sun filed eight Act, producing gas twenty- wells, field Natural Gas under Section seeking jurisdiction tempo- producing or in wells oil and ten a disclaimer seven rarily public con- abandoned wells are to be re- certificate thereof lieu gas authorizing completed as wells. has There been venience exploration in United Gas continuous field since natural sale of original gas discovery Company (United) from Sun’s Pipe well in Line gas being produced Field, production in the Belle Isle 1940. The in onshore sweet, dehydrated Mary Parish, gas, Field is Louisiana. is a Belle Isle Sun St. major gas. Jersey portion corporation. principal well Its New agreement place the terms of located at Philadel- Under sales of business is dehydrate gas being Pennsylvania. application phia, sold Its was Sun United. numbered G-15122. requires purchase ent offer to Sun customers submitted an United them gas early in Febru- same for the cessity, ne- Belle Field the ary, Isle negotiating purchase 1958. After much therefore order agree- bargaining required a sales several sessions offer May, better, Each price, was Sun the

ment party executed in current market or willing agreement per was to hence the 21.5 the sales cents Mcf offer. concluding contract a interested system-wide average United’s cost party but pulsion com- neither was gas in 1957 was estimated to be 11.7 so. This record shows to do per cents Mcf—a United witness testi- affiliation United and between Sun or probably gone it up fied a a cent or companies officers have no common cent per and a half inMcf 1958—and says conducted directors. United it purchase gas Isle Field Belle negotiations, culminated in its agreement, average would increase this less cost objective purchas- with the than per one tenth of one Mcf. The cent gas the Belle Isle from on terms Sun intervenors contend issued certificate pos- suitable to and at the lowest United by the Commission should be conditioned price. sible to a maximum of 17 to -cents cents of, per United shows it has need and a de- Mcf. gas for, mand this Belle to Isle meet previously As we have stated requirements and future Corp. C., Cir., Bel Oil v. F. P. F. customers. United now delivers 548, 553, gas price paid 2d a as the for than one trillion cubic feet of natural length bargaining result arm’s with gas year per to its and the customers producer not, merely because bar gas demand on for natural additional gained highly competitive a mar year. agrees increases to each United ket, “just and reasonable” within the agrees pay, sell, and Sun to Isle Belle Act, intendment of the Natural Gas price Field natural for an initial seq. U.S.C.A. 717 et See also New per psia plus 21.5 cents Mcf at 15.025 C., York Public Service Comm. v. F. P. taxes, state which are 2.3 shown be to D.C.Cir., 287 F.2d 143. This is so be Mcf, per producing cents thus a cost total only justification giving cause the price per to United of 23.8 cents Mcf. regulate duty prices Commission the agreement provides The sales for 2 cents Congress was the determination that price four-year per increase Mcf each producers supply a that sois re period agreement twenty-year un- they stricted in relation to demand that Mcf, per til plus tax, total of 29.5 cents bargain power have the economic says United reached. that injurious prices public. to exceptionally Belle Isle Field is lo- well purpose “The of Natural Gas was Act approximately cated for them since underwrite reasonable rates 12 miles from United 26-inch and 30- gas.” the consumers of natural Atlan pipeline. prox- inch main imity Because of the Refining tic Co. v. P. S. system of this to its main line 388. acquire United was anxious to the total foregoing We consider comment feeling production field be in appropriate at the outset of the discus- adding best interests itsof customers case, sion perceive because we this sizeable reserve. that most of the approach Commission’s agreements sales of United procedures, to the certification until clause, do not “favored contain nation” stopped by CATCO, Court in trig- hence contracts will not subject was same criticism which gered higher prices by into this con- successfully the Commission itself tract. leveling at the in the Section 4 contends, they expected United proceedings: Commission purchase gas, they permitting filing prices maintain the initial they it, upon producers merely need that the demand them fixed on a show- gas supplies by ing, pres- for additional their justification so was far responsible par- bargained This discussion cerned, they had been makes ties who fixed this initial perfectly were length, at arm’s plain part higher substantial else was someone than twelve “nine to of the increase from paying area. then cents” tremendously cents resulted reg- 21% Thus, very threshold at the as con- increased demand contracting ulating newly procedure supply. trasted stating the available charge being permitted to ducers plain from the record that this is prices in some that were for their us, we, before do higher ear- than instances to 50% part a substantial of the increase very time prices lier that were at not costs, to increased also be attributable by being suspended nor we decide that the nine do pro- hearings 4 pending under Section just and twelve cents was rea- inconsistency that con- This cedures. figure. do know that virtual- sonable We largely cededly the sheer because of arose ly every resulting from increase escalator magnitude problem processing of operation “favored clauses from the of any proceedings on the certification provisions in nations” contracts brought basis, Supreme Court the during being subjected, this four was question in in and corrected the hearings year period, to 4 Section decision. reasonableness. United, the This that record discloses Apart from decision of the Su- Sun, purchaser had in this contract from preme Court, reasonable it does not seem purchasing 9 at from been in 1954 with understandable consistent per to 12 in the South cents cents Mcf Congress policy that Commission the testimony territory. C. Louisiana would, illustration, permit fil- as an the Barnett, in President C. Vice of United cents, initial of 20 or charge department, supply resulting in the rate collection of that figure upward move proceeding 5 until set aside a Section significant: (found Court and con- “Q. Well, it simply seems to me parties practically in- ceded all be it can that the stated effectual because of busi- volume high prices do tend to establish new 4) and, ness under Section on the same prices. Well, new floors for A. I day, suspend under an automatic increase you you probably think are— 9 escalation clause from to 15 cents. go in that. I correct way won’t all the dealing problem, In it, with Su- in about 1954 we were Refining preme Court said buying gas in Atlantic at Louisiana South supra Commission, Co. Public Service cents, nine to around twelve 378, U.S. 79 [360 S.Ct. 1254]: Interstate certificated and Gulf they paying the enormous of this “In view framework 20 amount of cents. which the authorized Commission “Q. Field, act, That is Erath initial and directed to cer- tificating proposal 7(e) A. not? the Erath Field. § bought big they required And of course package. of the Act public There was trillion foot convenience be- they they wanted it. field and paid So crucial. This is true because comes delay cents then. incident to determination through proceedings year later, six months or “About in, rates initial certificated are review- Louisiana came and in- American nigh appears Al- able interminable. paying for a trillion 20 cents stead though Phillips Petroleum paid Co. v. 20 cents for field foot Wisconsin, State And there can fields. smaller 98 L.Ed. was de- argument S.Ct. about brought up.” cided cases instituted under ported public fore certificates. What protection of windfall awith reasonable’ requisite price proposals has been require are the sued. This sumers. reasonable ings requires intend. ing interest,’ as it does makes ly in a stage. crucial Commission Commission 5. ^[******] “It 5 are certificated suspend inordinate in the Their responsible permanent Nor we is true convenience consequent it the sale should This a determination proceeding, would Moreover, to the issuance 17 F.P.C. shown do to ‘the still in one under either § processing rates in proposals evidence initial rate is not to long itself a most factor that refund, delay presently exist- unless natural hold that a to be in the certificates reaction hearing is a delay, squall important, as the we do Congress says, careful given bearing of § showing § necessity, necessity’ Act fact investigative without of permanent- proceeding say is that under § that or future provide a producer ‘just and company just and does proceed- scrutiny be possible under did are on the initial power their level ‘this sup- pre- or4 not not be- is- are that is said in the whát or what even chasers are is established either uncontested of line” and “hold are ed and ion, supra, cipal question here is whether Court Columbia plicant’s existing tions as it believes necessity. can ing manent certificate has authorized the discretion the Commission in the exercise of its- sued. posed price as the condition certificates result such a sity may require. ‘favored nation’ clauses or paying paying “There line or because its is the “line” as with arrive parties applicant are rises public situation, in a [283 thus based paying. which under certificates that were is, language might interest Appeals anor unregulated here belabor the is not in by proof F.2d public triggering “suspect,” and the Commission on such rate Congress, the line”? The or were increase attach rates 824]: Ninth Circuit We should method because it necessary.” quoted convenience Where the that is envisaged in such Commission approval turn agree “suspect” keeping of what others the District intrastate or what others available such being and neces- otherwise, in § not be reason above, “out adopted with much manner general question: condi- might is out keep- 7(e), appeal- by the rates, ap- opin- prin- is- of pur- in> line 7(e) requires certificating an order “When an bearing under evaluate all factors on rate is court initial Com- or prices review, possible it interest. fact mission may leaped plateau eventually to the certificate have higher be another, may levels here, or conditions denied be existing opinion does a con- In our dicated make an attached. subject prime importance. rate such a sideration hazard does during reasonably important provide This is the not reliable period upon predicate price formative when which this ground basis regulation producer In event rules of line. ap- later modified are plication evolved. Where conditioned as a pending presenta- proceedings or on on its face result of derived; signals the existence foundation of the tion evidence line probably would of a situation that therefrom undermined. be acceptance public interest, per- Moreover, not be aues- guide supports existing prices aas such line” is the tioned “out of might setting negotiated fact length itself arm’s the line was creating required by effect of intense the anomalous was competition. said, questioned This, standard as we have enough. judged. on clearly not rates would then be It incumbent proponent make a rate of such arewe indicated the reasons “For showing why” (as some “reason that would expressed opinion) in the CATCO Commis- abuse discretion excluding cents, tax, proper is a Yz establishing price line to sion parties initial rate in 1958 when the prices are rely upon producer freely contracting in 1954 at half a cloud. under such figure. express' the go further “We fully We are aware of the criticism num- a substantial where view that any regulatory that has been leveled at prices thus are of certificated ber keeps approach- scheme that sums now review, Commission under court quarters three of a billion dollars though same area prices in the like subject pending to refund deter- final ought currently under review mination of rates. reasonable regarded suspect. However, we take notice of the fact that it would seem circumstances log jam breaking, is now as witness ought prices not to be such similar Phillips the decision in the Petroleum except fixing upon a line relied Company case, Op. 338, and F.P.C. findings upon evidence hoped appropriate formu- subject effect that resolving las the other section which are infirmities the same may forthcoming. eases soon The be proceedings.” pending the test in strong making Commission is at least a argument plain for it think too We publication bid to that end the of its ap- tested and court first court that the proved Area Price Level schedules. State- See price much sale certificated Policy ment 61-1, General No. issued

higher certificated theretofore than September 28, 1960. by the according found to the standards We conclude that the order here under reviewing to be consonant court attack must be set aside and the unquestionably “the breach will ceedings appro- remanded for further think, Such, the ef- would be line.” we priate action the Commission. approval of certificated fect of our It is so ordered. case. in this BROWN, JOHN Judge. R. Circuit attempt determine do not We I dissent. We “line” is on record. what the in this case the doubt have no BROWN, Judge JOHN R. (dis- Circuit including Mcf, tax per of 23.8 cents senting) . reimbursement,1 out of was line Court. *With score four used now term down and was go1 distinguished on this record that none to and eleven The evidence high and the Commission Commission to be new testified It 2.3 cents tax reimburse United and for the area. found that bargaining. an element ment was * Editorial note: represent Thus, it actual re while opinion dissenting was also filed paid, taxes is an ele imbursement Improvement in United Gas Co. v. Fed- purchaser, in ne cost to the ment Commission, eral Power purchasers gotiating al contracts do not F.2d 147. ways agree reimburse tax the entire agreement pay here 1. Public Service Commission of New The York burden. C„ D.C.Cir.1960, plus v. F. P. full reimbursement for cur 287 F.2d cents taxes, rently Public Commission of was found Service New York collected weight2 against avoirdupois unanimously judges establish what arrayed —to knowledge it now one, indeed knows and on prospect which a dissent Congress de- declared it usual entitled formidable one. To termine likely addi- whether the interest call- ineffectiveness, runs ed pre- marking sale certification of a new author risk of tional ignorant. arrogant But for resale. sumptuous, or dis- with all the deference Running through majority’s deci- tinguished inspire, I judges company of assumptions sion are or conclusions de- cannot down the conviction regard I de- as basic errors. substantially cision, and the others on misapprehends cision it was that wrong. record, than More the same CATCO condemned. The mis- that, claiming duty hold takenly delineates the mission imperative line adminis- because reviewing FPC and hold court as one to sluggish process in- trative creaks with prices. erroneously equates down It re- efficiencies, consequence ac- of this gard protection for the ultimate delay. tion is That to add to that duty consumer with some character of price, suppose, be a small I were some- prohibit price so, doing increases. thing gained. But nature sight it loses of the fact that neither things “thing” here reviewing —and the FPC nor a court —includ- voluntary, non-eompulsory nature of the highest even power one—has gas by producer sale of digress statutory duty first midst of an from the expanding de- insatiable Discussing standards, standard. these mand for offered evidence every —the there is interlaced in conclusion per- on remand to the Commission will confusion of the and reasonable” haps making have formal attributes test for rates under 4 and 5 with the §§ imposing, actuality but in it will requirement certificating a new serv- proved. be what is known and ice required by “is will be or future Commission will not in convenience and fact better * * 7(e). merely *§ formed on fact. It length, probably stupendous staggering It is this administrative record — problem3 in size and number exhibits and us in should itself make D.C.Cir.1960, 143; C., v. F. P. 287 F.2d The FPC celebrated Improvement Company Phillips Compa- v. United Gas 338 Petroleum C., Cir.1960, 817; ny [September 28, 1960], F.2d F. P. 283 rate case Company Improvement FPC-, United Gas Par. 10075 Law Utilities CCH Cir.1961, Reporter, F.2d an F. P. took candid note of With this. subsequent preparation independent 3,372 producers nounced to with rates plus majority opinion; finally 15,435 non-filing co-owners, and the two on file this Court. the Commission had cases of then to deal with 33,231 11,091 sup- rate schedules with delay target plements. 3,278 for criticism of and At 2. The time rate lumbering inefficiency quasi filings as recent crease of 570 un- were reports suspension awaiting publie reflect, generally hearing. der Unless agency. judges budget granted, relief is administrative But staff it will protesting years dispose hearkening to unto advocates take 13 of these 2313 “proof” cases. In the meantime another absence record responsibility. must bear problem would of the eases have been filed. This some led Commission national concern. is attest- summarize it is of way. “Thus, by our action staff the President’s on the rec- ed immediately tripled, Judicial and if all new of the Conference em- ommendation competent ployes would be as as creation of Permanent Confer- those for the have, Many Administrative Procedure. we now we not reach a cur- on ence Pretty- independent producer hope Judge status our that Chief rent share the eighty-two man, formulation rate work until active A.D.— years course, conference, help from half from now. Of will lead us such expect improve sometime-judge-made could our tech- wilderness. wo niques and thus shorten the time re- 140' may unwittingly prove it. He not use the other rates add lest we cautious means, cases, the course, increased “line.” That hold in we these What by static, others, note remain line will our sister Circuits drop in it never increase. If CATCO supra, infinitesimal is but the accurately purports necessary perhaps to forecast that as more

the bucket— result, no cubic I find trillions basis the Natural Gas called molecule out of gas. ad- Act for unindicated it. For if this feet of these, so required in ditional evidence is This Court as much as declares that everyone hundreds be in must it required. key opin- this is For the to its increasing de- follow if the soon to ever likely ion is found in these words: more and of consumers for mand argu- plain think “We too alternative, of to be met. The ment that the first court tested impose sort some approved court certificated sale at a every But that certificate. condition on higher any much than thereto- That under law. is not administration according fore certificated to the application an arbi- mechanical is the reviewing standards found easy way trary practice out. as the court consonant with CATCO any unquestionably do not such breach ‘the I think CATCO line.’ Such, think, consequences we would be the effect mind. approval of our of the certificated creating than this administra- Worse price in this case.” stalk, require- tive Jack the Bean adopting That majority, especial- disturbing implications. has ments of ly Circuit, Does it mean that those voiced Ninth see we have some mission supra, brings capable decide an adminis- a case note about lest it be distributing subsequent impasse. higher use as trative company A local evidence of a If, PSC, puts “line”? it, as whether as UGI “the possessing opportunity reviewing found standards to intervene court not, to be right,” forbid, consonant “as a matter have CATCO” majority power prevent hold, their within these other cases upon reliance considered the FPC increased until they such may court-approved, certification of an “line.” evidence If how intervene, higher they may appeal ever there are allowed than pre-CATCO ? certification done FPC Pending appeal, here. decision of The fundamental all of this error purchase is somehow —because on is that pertise is a court intrusion ex “suspect” under a cloud Congress —has to the committed legal If existence as evidence. interven- Nothing 19(b) FPC. reason, say, denied is for the tion nullity while it Act makes FPC action likely impact of rate on the challenged in record is court. The remote, such distributor is too then that denying applications for this Court in of stay may not be used evidence of the that we re in rate orders shows challenging simply one line because the gard as of continu Commission decisions right the instant rate was the denied strong ing vitality unless some circum prior rate offered to attack the as evi- holding abeyance. compels them in stance the line. dence of It is no answer to Co. P. Gas Transmission v. F. Tennessee infirmity terminates that this when the C., Cir., 729. Just 283 F.2d process appellate is in such instances about this which withholds what is there meantime, completed. judge imprimatur In the the current the of law until the get nothing. spoken? applicant can the whole machine has Does certificate years process eight quired to cases. If we tenths these 196S— ” * * * ,our efficiency per- thousand now. creased one cent, current status in we achieve permanent public interest, appeal the certificate stop is taken? when an meantime, happens should not the Commis- be issued.” 360 U.S. what to im- duty the 79 S.Ct. 1255. consider to serious sion’s obtaining an public perative interest certainly But this was no declaration satisfy insatiable supply the assured as the law of the Meads Persians gas ? and more for more demand not, ostensibly price altereth higher “sig- ignore ipso may em- than the the last not one facto I Of * * * nals the at- existence of importance situation phatic which CATCO * * * public not case price. But the what interest tributes * * * purpose in isNor reflects no to be found deal with pub- these the later the to make comments of Court. was there said merely proposed keep- price “Where is convenience standard lic price public inquiry: with simple this is interest it arithmetical because might higher? approval out that if the line it intended or because its Nor was general triggering result “yes” price in a automatical- that that answer were applicant’s contrary rises or an ly increase in made setting thereby automati- na- reason of ‘favored and cally otherwise, tion’ price clauses in train condition. Commis- sion in the of its exercise discretion up rec- bones CATCO came on bare might attach such conditions as it be- implications. ord with some macabre-like necessary.” page lieves at proof was whatsoever There 79 S.Ct. 1255. gas, that it the likelihood need yet higher quite market price would be lost to interstate A certificated, or riot “in line” it does if the sale were If thus “in line.” proposed category relation of 21.4c mcf condemned come within that, keeping others. Worse than showed one “not Court as so dis- twice it is at this the Commission interest.” And imposed a point turbed about that it administra- nature of the ju- its final condition. This followed nature tive function distinguished. which, carefully coercive eco- order under the dicial function pressures primarily nomic which the nature line” What is “out gives non-jurisdictional agency producers, judgment Act the administrative regard capitulated presumably charged out total with the effectuation of.the impera- Congress. policy what it considered was now re- large gas supply. responsible inquiry quires tive need for made does not un- FPC. But CATCO legal apparent It was this indifference spell what the dertake out line as an element which was con- go or how about majority demned what the calls the determining it. term “out of line” “strictures” of The element CATCO. Natural Act —nowhere found Gas must be taken account into “re- handy colloquialism which, —is a quires scrutiny a most careful and re- anything all, convey means sponsible price pro- reaction to initial familiar connotation of term posals of 7.” U. e., discretion”—i. “abuse of page page S. at 79 S.Ct. at great posed increase as to indicate so only While rates factor under arbitrary sup- without action reasonable 7(e), the historic increase the cost regulated practicalities port in of the gas price of “does make a consideration gas industry? prime importance.” page of at U.S. 391, page Obviously at S.Ct. 1255. This the Court could leads the be, law, appli- term to to conclude “Where the meant the as matter of any price any degree presentation cation on its face or on which exceeds signals highest evidence last For existence of a situa- one. that would probably ignore unique tion that would not in the have been to average Act which cost mechanism the Natural Gas mcf 11.7$ gas producer. purchasing fixing United had been in 1954 to the commits rate price Pipe Mobile at a Gas from 9 to mcf. so United Line Co. v. With Gas 12$ 332, Corp., 1956, 1954, 76 S. much water I 350 U.S. over the Service dam since Pipe 373; year 373, am at a Ct. 100 L.Ed. United Gas loss understand how that Light anything Memphis has Actually, Line Gas to do “line” in 1958. Co. v. with a Div., 1958, opinion 79 S.Ct. as Water reflects in the quoted testimony in 3 L.Ed.2d 153. While from United’s Vice President, begin- subject suspension year crease is to limited marked the ning 4 and collection under bond under under certifications 20$ always subject huge new to review sales of volumes.4 stepped up increas automatic escalation While I have some trouble in discern- legally es rate. The become the effective ing just majority it is the con- “going rate” is therefore more than cludes, likely it does not seem it con- last and most recent certification of 7§ siders this difference of between 20$ 1%-$ a new sale. It must take into account as itself “out of line.” Some- 21.5$ geographically currently relevant col ignore how the Court wants to fact of those actual- long existing lectible rates under certifi certifications, significant This, cates or rate schedules. obviously had an influence sub- judgments calls for the nicest of delicate sequent price levels.5 It concludes that running gamut the whole in go we says: back to 1954 when it dustry type gas, on the or kind of “The evidence on this record area, field, production problems, volumes supports such ‘out of line’ and the like. negotiated is the fact that it was at '' inescapable always length It is that there will arm’s required by and was day be some difference—if competition. not on the This, intense we- certification, then said, enough. some future time have clearly is not It was. complex of thousands of rates proponent incumbent on the undergoes its automatic undulations. of such showing a rate to make some question The then is: who why’ is to measure (as ‘reason it was ex- important, pressed difference? More iswho opinion) cents, excluding determine whether the tax, difference is proper is a ini- too much ? tial rate in parties 1958 when the freely contracting in 1954 at teaching Commission, with the figure.” half that it, considered that these CATCO before questions immediately Two r arise required sales were first, lega! how did Court reach this and when con- venience Second, conclusion? ing what sort hear- comparable sales, trasted with contemplated e.,. remand, on the i. majority was not out of line. Now what kind evidence will constitute the- sup- holds that there is evidence to ” “showing why’ the ‘reason ? port it and remands the case either imposition readily first more evidence or the of some is the more answered.. Running throughout opinion conditions. unindicated The Court the Court’s vague proof. confusion of the infirmities of and reason- system-wide points standard for It out that United’s able” rates under 4 and §§ acknowledge 4. This refers to the certificates issued in 5. UGI and PSO and 1954 in the In level increased to at Matter Gulf least 17$ Company, they sug- 17$ terstate Gas Docket G- it is rate of 18$ No. They 116, May 20, gest not, 12 FPC as a condition. do 1953; therefore, rolling and the Matter of Lou American insist on it back to Pipe Company, isiana Line Docket opinion G-2306, 276, 476, 6 PUR 3d Oc 1, tober 1954.

143 neces- mission’s criticism of 4 increases rate 5 the with by showing emphasizes only by this sity substantiated length of arm’s of 7. It test Corp. bargaining competitive Bel Oil field stating in our decision a 548, price. statement, Cir., 1958, It C., F.2d this follows with the v. P. 5 price F. “Thus, regu- re- paid very as the at 553, for threshold of the “A lating procedure length bargaining newly contracting with the pro- arm’s sult of charge not, merely permitted bar- ducers producer because were prices highly competitive mar- gained their a in some in were higher instances ket, ‘just within and reasonable’ than ear- 30% 50% prices Act.” Pre- lier very Gas that were time the Natural tendment of sumably the Court being suspended is on this the Commission undisputed hearings evidence pending out the knocks under Section ” * * * categorical finding Commis- That, turn, leads cedures. in consum- “Apart that these contracts from sion this it to any main conclusion: genuine arm’s vigorous, Court, Supreme after mated length decision of the bargaining. must be Bel Oil But does seem reasonable or consistent light subsequent opin- any of our policy read in of Con- understandable Cir., C., Corp. gress F. P. would, in Forest Oil ion an as the Commission recognizes 622, 625, filing 263 F.2d illustration, permit initial proceeding resulting in rate cents, that the a Commission in of 20 or 20% field fac- area to consider entitled rate until aside collection of that set * * * questions And, and, tors.6 proceeding a Section 5 here is area day, involved suspend on the same an automatic price. from increase under an escalation clause 9 to 15 cents.” apart standard from intrinsic But majority Presumably “Apart majori- states to ty test reasonable” decision Court” problem as treats the certification surely purposefully. hearing. does For CATCO though It does it were a rate not warrant such On conclusion. plainest It likens of words. this sought contrary, that decision make the Com- FPC to criticism of regulation, Regulations, 2.56 FPC see 6. Commission There we said: “If F.R. a rate reasonable finds opinion reject consuming Our decision in that case it need strongly being just influenced the Commission and reason- rate as not such Phillips Company par- merely yield Petroleum decision because will able 3, supra, very producer note in which No. than ticular required it abandons the effort to determine constitutional minimum point yield by way on the fair rate of return of de- net or more standards City parture theory producer F. Detroit v. to another is returned than U.S.App.D.C. 260, field, especially P. well or same this, said, F.2d 810. As to “If follows from a considered deci- result correct, then, practical contention is aas that a uniform sion adequate regulation single matter, producers all appears impossible single to be reason- field is not well or highly law. also desirable able “Nowhere the Natural This is Gas Act of administration. venience as one word there much did in Order No. 310 Commission indi- Corporation cates Commission must use a American Petroleum [Pan determining base al.].” rea- et sonable rates. The correct idea of or area construction field question, of the Natural Gas Act on bear in the Area fruition Price seems practical legal both matter Schedules set forth the state- Levels Septem- Appeals Policy has been made the Court General 61-1 ment 28, 1960, include of the Fifth Circuit Forest Cor- amended to South Oil ber ** poration October and now v. F. P. C. Louisiana promulgated form official 144 consider, .problems price just

very that is the clear the will be price producer, not quite reasonable to distinct and consumer public “just and rea- the alike. be measured in terms of states, is true “It sonable.” The Court it bears What a different function require a the not deter- Act does per- proposed a A new new sale. just mination and reasonable overriding comes haps now consideration proceeding it does in one 7 § gas. play. is the demand into That 4 do hold either 5. Nor we § or § longer relatively “sim- it is Here no the hearing ‘just is and reasonable’ rate drawing ple” task the line of prerequisite to the issuance how question the is reasonable. Now pages ducer certificates.” U.S. at 360 badly pay, is much to but how 390-391, page 79 S.Ct. at 1254. point not for is needed? At may ap- judges law. This to rewrite the Apart from the CATCO decision give pear an economic statute itself differ- bears evidence that way law was things ax. But that is the 4, ent 5 and involved certificated, written. the sale is Congress Until say 7. It is not for us to illegal “nothing [pro- there is ought to all have made of the elements price rejection of the alternative ducers’] these three sections and balance proposed by their the Commission Act consistent. The standard standing at firm their own.” U.S. on a new service or a new sale is not page 388, page at 1253. S.Ct. “just proposed is and reason- proposed able” but that service Of now teaches that proposed price “is or will be re- may overriden not be quired public or future “overriding” completely by this consider- necessity.” convenience and can That upon one ation. If the insisted is quite account for dissimilar actions as which the Commission after careful application between an for a certifi- new wrong sideration thinks will work a real request cate and a a rate increase public interest, on the minimum it under an old one. In the one the stand- do certificate. is issue conditional public necessity. ard is convenience and But there is in this a risk to the vital public that, only As to bearing rates are not “the factor on a interest. Insistence public on the in a condition borderline case result necessity, 7(e) requires for § the Com- producer withdrawing applica- bearing mission to evaluate all factors altogether. easy It is tion that if on page interest.’"’ 360 atU.S. happens, good, all well and because 391, page 79 S.Ct. at 1255. In given power should be that much inquiry is what rate is and rea- precious over control natural re- sonable” ? badly sources so needed. But what thing surely industry exploding One makes American vital and its metropolitan-based population distinction the difference between needs is power and the function of politico-economic platitudes. the Commis compared gas. initially sion in one as itWhat needs is And As to a sale under other. in the hands of the Commission to deter- juris gas tentatively certificate the proffered dedicated to mine whether finally life use for the dictional the reserves. to be delivered. The risk C., 1960, F. P. possible Oil Co. v. Sun interest in the withdrawal 1639; 1388, proposed 4 L.Ed.2d S.Ct. Sun sales becomes ray Mid-Continent Oil if, urge, Co. v. F. P. acute UGI PSC and U.S. 137, holds, S.Ct. 4 L.Ed. Commission should automatically imposé 2d 1623. Commission need not con condition availability itself with price proposed cern of that if a gas. supply What, greater and all it need than truly Surely place it will where be an affectation to was a If there ever proof imperative further on the this called need it could be said gas. in United and expert judgment skilled Transco for this of those most only proof was no problem, one. Not CATCO record. Here the must be abundantly balancing de- shows extent of their a nice does it call for against supply satisfy possible needs and the those need mand and necessarily needs. impact, calls the Sun case the are reserves prescience United calculated to future. cubic feet. as to the be billion Navigation dedicating 10,259 per- Sun is acres to the & Cleveland States v. Detroit Company, 1945, agreement 236, formance of 66 S.Ct. 325 U.S. with United. dealing majority repeats ap- The 75, 90 L.Ed. are verbatim with 38. We parent approval long long term find- term Commission’s contracts which of, not, that “United whether so pany Oil Com- shows has need written Sun for, C., 1960, a demand this Belle Isle F. P. meet require- faced S.Ct. 4 L.Ed.2d 1639. When future securing ments problem of its customers. with the in 1961 of United de- regulated livers more than re- one trillion the interstate market feet cubic gas per year of natural feet that serves the trillions of cubic to its customers producing year 1980,.and will be conceivably in the and the demand on it for additional nat- year 2000, when our ural year.” increases each As population 272,557,000 by Superior be and over will Transco, sale supports the evidence million, seriously I doubt without serious attack all Supreme Court declare all meant to of the Commission’sconclusion. “Trans- currently time that a cent or two cents difference co approximately uses one-half proffered price between the the most gas per trillion cubic feet of natural one, compel recent the Commission year. Superior reserves will meet urgently to risk the loss of system needed supply Transco’s months, thereby assisting for about six gas. company system gas inventory maintain of its saying is that this must What I am supply heavy in the face of annual de- Judg- judgment for the Commission. ever-increasing pletion and annual de- simple more than a arithmetical ment is Super- mands Transco’s customers.” comparison prices. of two A consider- approximately percent ior “owns granted able latitude must be the Com- dedicated reserves in” this off shore safely mission. This done for acquisition field reserves twilight if, case, in a zone the Commis- acquire has “Transco been able to interest sion determines company probably by securing perpetual is best served largest single reserve ever contracted gas reserves, dedication of the it still by Transco.” “facts disclose that hearing. remedy potent has the of a 5§ Louisiana Southern is the area in occupied If the Commission is not acquire which Transco has been able to hearings preoccupied with useless substantial volumes of uncommitted re- order, kind we now I am confident that during past years. serves It has could, help it Congress with some needed sought unsuccessfully acquire addi- adequate staff, proceed for an tional reserves at an initial expeditious decision on the issue of obliged, and is if it is to continue to “just and reasonable” rates. requirements meet the customer it has come, notes, meet, pay producers we as beginning. So field undertaken place to the hearing What sort of Louisiana a Southern which will gas.” is to on remand ? induce them to sell the Projections 7. Statistical Popu- Abstract the United States of the Total lation, p. ! exact As it sort what the traffic will bear. ? What then about What entirely voluntary thing be, whether and what there of evidence “showing person subject and his teach, of reality wishes to himself will * * * gas regulation, specific public cents why’ reserves to the ‘reason * * * normally 1958 that proper decision initial rate determined is a contracting price. Third, prospective freely parties as between when the were purchasers, long figure” especially line ? in 1954 at half that systems, transmission authority no there is good deploring There basis to determine shall who wishing it, come it had not right gas procure prospec- from a why pass, doubt as there can be but no producer-seller. tive that to means That agreed upon price in 21%$ resulting increasing meet the demand of ever- 1958. was the result That expanded (factor from their facilities gas increasing and relative demand for above), public utility buyers one now an supply. of lack interplay This is the result obtaining compete with another in factors, all of which of several agent producer from the free —the The known the Commission. Finally, compulsion under no to sell. post-war invest- first is tremendous users, competition by there is intrastate system. long ment line transmission non-jurisdictional industrial users. spent to Billions of dollars have been Pipe F. P. C. v. Transcontinental Gas bring gas metropolitan indus- Corp., 1961, Line 81 S.Ct. 5 L.Ed.2d which, trial war, markets.8 Gas before [January 23, 1961, Nos. 45 & 46]. value, has little economic proof creasingly subject been the of an ever- The was uneontradicted that growing earnestly pipelines United and demand. The Transco had tried built, consuming major supplies areas have to obtain more the these needed gas. greater price. They at a converted to version, lower were unsuc- cessful

the more because the demand. this was market. now the sincerity No one doubts the or truthful- pub operated a traditional Had ness of these witnesses. No one has even regulation utility field, lic faintly suggested that there will found impact de have restrained would any witness where who will play supply. comes into Here mand on gas in those volumes under these condi- really are not We second factor. the dealing tions will be obtainable in Southern Lou- “independent An service. with a figure suggested by isiana at the pointed producer,” Harlan Mr. Justice UGI and PSC mcf. 17-180 among objects pub out, unique “is good What then regulation en lic-utility it is not to be because served hearing? pub gaged rendering How can to the there be a service explanation why” gas of the “reason that con sense of can- in the conventional lic purchased not be selling simply prices a com 1958 at 1954 cept, ? rather ” * * * Is the need for a modity record to it owns. Sun substantiate legal administrative action ray so much v. F. P. Oil Co. compel formalism that we an (dis overworked 1392, 1405, 4 L.Ed.2d 1639 80 S.Ct. agency and understaffed to hold a hear- regu senting). producer is free gild lilly ? and is certificated. until he sells lation may compel He has him to sell. No one Things be different had the duty to sell at a reasonable” Commission, CATCO, capitu- it did Indeed, operator an vis-a-vis his co-rate. price. element of on the Here lated legal probably duty against known, judgment owners has the informed suggest producers’ price, 8. I do not for the moment these fair whether on a expenditures constitute element of rate base or otherwise. knowledge long experience and UNITED COM born of GAS IMPROVEMENT PANY, Petitioner, neigh- general price levels the conclusion borhood of it reached 20$, was consistent COMMISSION, FEDERAL POWER necessity. All Respondent. convenience and evidence, ex- the elaborate charts No. 18113. hibits, studies, estimates economic Appeals, United States Court of reserves, possibly and the like cannot Fifth Circuit. change picture at the knew which it Feb. and which time these orders entered Rehearing April Denied 1961 along. it has known all 19, 1961. Denied June Certiorari sitting though I look at this as I were 81 See S.Ct. 1926. Faced with Commission’s seat. appro-

our order of remand “for further

priate action,” what action should be hearing develop

taken? Hold a hearing already known? Hold really determine that the inevitable is so, and that offer are free to or not offer current for sale at the market mere- ? Or is this intended

ly impose as an invitation to automatical- so, ly kind some condition? If where be fixed? does Where figure proposed and PSC UGI Brown, Judge, John R. Circuit dis- 17-18^ Finally, come from ? sented. ask, well can how are we ever to catch dissenting opinion For see 290 F.2d up staggering with the load 4 and of § proceedings to that burden we must now add two others —a dress full hearing every

rehearsal certification equivalent suspension pro-

or the of a § ceeding through guise of a dition? thing:

I am confident of years

case will be back several and thou- pages

sands of later. No one will know

more than now. is known respectfully

I therefore dissent. Rehearings denied; BROWN, John R.

J., dissented. protection ceedings. During 9. To be effective as a fiscal for the 1959 the Com- suspended 1,091 and at consumer the same time mission year rates. At that assure filings suspended ultimate the seller of collection end totaled Thirty-Ninth 2,323. FPC, and reasonable” rate from Annual the time Re- port, p. (1959). of commencement of the service the The FPC’s brief probably rep- conditional certificate would tells us that resenting the revenue increments specified the form of the difference between the con- take right tingent prior to file for an immediate increase rates exceeded suspen- Forty per- $110 with or without the five-months’ millions fiscal 1959. gross un- sion under 4. This then take cent of revenues collected are place suspensions. with all of the der §

Case Details

Case Name: United Gas Improvement Company v. Federal Power Commission

Court Name: Court of Appeals for the Fifth Circuit

Date Published: Apr 6, 1961

Citation: 290 F.2d 133

Docket Number: 18112_1

Court Abbreviation: 5th Cir.