# United Gas Improvement Company v. Callery Properties, Inc. (382 U.S. 223)/Concurrence Harlan

* Court Documents
* Case Syllabus
* Opinion of the Court
* Concurring Opinion Harlan
United States Supreme Court
382 U.S. 223
United Gas Improvement Company v. Callery Properties, Inc.
Argued: Oct. 18, 19, 1965. --- Decided: Dec 7, 1965
Mr. Justice HARLAN, concurring in part and dissenting in part.
While the Commission's expansive view of its powers seems to me largely defensible in the abstract, I believe its actual decision reveals error and unfairness in important respects.
The price condition, alone of the three key prongs of the Commission's order, can in my view be wholly sustained. The chief challenge to it stems from the exclusion in the § 7 hearing of a mass of cost and supply-demand evidence tendered by producers. Although the encompassing § 7 standard of public convenience and necessity encourages a broad inquiry, the Commission has given valid reasons for limiting itself to the in-line price for the time being. Area pricing ultimately aims to simplify proceedings under the statute, but the transition to it is said to strain the Commission's present resources for investigation. See State of Wisconsin v. FPC, 373 U.S. 294, 298-300, 313-314, 83 S.Ct. 1266, 1269-1270, 1276-1277, 10 L.Ed.2d 357. The in-line price, comparatively easy to fix, provides a firm basis for producers, helps avoid unrefundable initial overcharges, and exerts a downward pressure on price; at the same time, producers can file increases under § 4 with a six-month delay at most. The Commission has given a fair trial to cost evidence, and nothing in the offer of proof suggests a supply-demand crisis warranting court intervention with this administrative approach.
In locating the in-line price, the Commission has ignored a number of contemporaneous high-price contracts labeled 'suspect' because then under review, disapproved, or deemed influenced by those under review or disapproved. Although the danger of using a crooked measuring rod demands some precaution, this blanket exclusion also chances some distortion in favor of an unduly low in-line price. In the main the producers have chosen not to brief this question, apparently under the misapprehension that the Government has not here sought to sustain the exclusion of these contracts or that the lower court's failure to reach the question precluded this Court from doing so. But while the suspect order rule may by default be abided in this instance, I would not close the door to future arguments for a different solution of the dilemma.
A last troubling aspect of the in-line price derives from a critical and unusual circumstance: it, like the other conditions in this case, was imposed for the first time on remand, several years after an unconditional permanent certificate had issued. Presumably for six months hence, producers will be compelled to sell at a price they might not have accepted when free to refuse; for all that appears, the price may even be below cost, let alone a fair profit. However, in general the producers apparently did not seek an option to cancel future sales if dissatisfied by the newly conditioned certificates, the six-month delay is both brief and familiar, and I cannot say the Commission did not have a legitimate interest in imposing the in-line price at the time it did.
The price-increase moratorium also seems to me a measure not generally beyond the Commission's grasp, but it should not be sustained on the record before us. Recognizing force in the contrary view of the Court of Appeals, I do not believe that § 4 must be read to bestow on producers an invincible right to raise prices subject only to a six-month delay and refund liability. Cf. FPC v. Texaco Inc., 377 U.S. 33, 84 S.Ct. 1105, 12 L.Ed.2d 112; FPC v. Hunt, 376 U.S. 515, 84 S.Ct. 861, 11 L.Ed.2d 878. A freeze until 1967 is not permanent pricefixing, and in this interregnum between individual and area pricing, the hazard of irreversible price increases warrants imposing some brake. A lengthy moratorium coupled with a refusal to consider cost or supply-demand figures in setting prices for duration-might present a real risk of choking off supply, but such a case is not before us.
Nevertheless, a moratorium instituted on remand is a hazardous device at best, and the present one is simply not supported by evidence. Because the producers have no chance to refuse the certificates after commencing delivery, the ceiling may coerce sales at unfairly low prices. Yet while the present moratorium must be endured longer than the in-line price, at least it permits the producers to charge a markedly higher amount; and as the safety valve for a price explosion, the moratorium could be upheld. At this point, however, the Government's argument fails for lack of proof that a price explosion is likely if increases rise above the moratorium figure. The Commission's figure was not considered by its hearing examiner, who made no recommendation for a moratorium. The Commission report itself devotes no more than one conclusory sentence, qualified by a footnote, to the question of what specific price rise will trigger increases at large, 30 F.P.C., at 298; rather than amplifying, the Government brief merely contends that the point has not been adequately preserved under § 19-a contention I do not accept. Several producers state that the Commission's fear of triggering has not been realized although sales are currently being made by them at levels above the intended moratorium price.
While agreeing that the Commission has power to order refunds in the case before us, I believe the measure of repayment it selected is illogical and harsh. On the initial question of power, it must be conceded that nothing in the statute provides for refunds when a sale has been approved without qualification; but approval in the present instances had not become final for want of judicial review, and an equitable power to order refunds may fairly be implied.
The measure of refunds is another matter. The Commission has now directed that the producers repay the difference between the amounts collected over four to six years and the figure it has now established as the original in-line price. Since the in-line price has been fixed without reference to cost evidence and falls below the opening levels set in the negotiated contracts, the producers may well be receiving less than cost, as some of them expressly claim; and this imposed revision downward of prices covers not six months but a period of years.
The obvious refund formula, implicated by the statute itself and adopted by the Court of Appeals, would call for repayment of all amounts collected in excess of the 'just and reasonable' price; that price, measured under §§ 4 and 5, naturally takes due account of costs. The Government retorts that producers have no 'right' to sell their gas for a 'just and reasonable' price under the statute, a proposition perhaps true in the limited sense that the public convenience and necessity might yet exclude fair-profit sales by a uniquely high cost producer or in the face of a glutted market. No attempt is made, however, to class the present facts with such imaginable situations. Nor is advance exclusion from the interstate market so fearsome as an unexpected repricing of a completed sale depriving the seller of profit or costs.
On the present facts the Governement has failed to point to any public interest overrriding the potent claims of the producers to a fair return on their past four to six years of sales. Any triggering caused by the amounts previously charged has already spent its force and cannot be undone. Unconvincingly, the Government implies the producers may be comparatively well off with the present formula because it provides a final figure now and the 'just and reasonable' price might prove to be below the in-line price; however, instant certainty as to past prices is no great gain since taxes and royalties have already been paid, and the chance that producers may get more than they deserve by following the in-line price is not a substitute for assuring them a fair return. About the only concrete advantage cited by the Covernment for the in-line price is that it speeds refunds to consumers. Assuming that a compromise cannot be reached as in other cases, elaborate cost data should become available in the next year or two with the completion of the southern Louisiana area rate proceeding. Consumers, who assuredly expected no refunds when they paid their gas bills as long ago as six years, certainly do not suffer seriously in waiting a bit longer for refunds that individually must be minute in most cases.
The incongruity of the Commission's refund formula is well portrayed by considering what would have happened if the Commission had originally granted the certificates now thought proper by this Court. By accepting certificates conditioning sales at the in-line price, the producers could immediately have filed for increases, suffering at most a sixmonth delay. Even if the Commission's moratorium survived, the ceiling during this four-to-six-year period would have been 23.55 cents rather than the 18.5-cent figure now imposed. Thus, even had the Commission not erred in the first instance in favor of the producers, they still could have collected payments well in excess of 18.5 cents subject only to the ultimate finding of a 'just and reasonable' price now denied them by the Commission.
In line with the foregoing discussion, I would uphold the Commission's decision fixing an in-line price, remand the case for further findings on the triggering price for a moratorium if the Commission wishes to pursue the point, and set aside the refund with leave to order repayments based on the 'just and reasonable' price.

## Notes

* ↑ Section citations herein are all to the Natural Gas Act, 52 Stat. 821, as amended, 15 U.S.C. §§ 717-717w (1964 ed.).
* ↑ See the majority's note 3, ante, p. 228.
* ↑ See Petition of the FPC for Certiorari, p. 15, n. 14.
* ↑ This precise ground of attack upon the moratorium was set forth by at least one producer. See ODECO Application for Rehearing Before the FPC. R. 603. Applications of other producers argued instead that any moratorium was plainly illegal under the Fifth Circuit's decision in Hunt v. FPC, 5 Cir., 306 F.2d 334, which had not then been reversed by this Court. 376 U.S. 515, 84 S.Ct. 861, 11 L.Ed.2d 878. See Petition of Placid Oil et al. for Rehearing Before the FPC, p. 35. Under these circumstances, § 19 does not seem to me to preclude allowing all producers the benefit of the error pinpointed by ODECO.
* ↑ Deliveries commenced under all or nearly all the contracts in 1959 at prices exceeding 18.5 cents. The Commission's order directing the in-line price, refunds, and the moratorium issued four years later in 1963, and it has been under judicial review for the past two years. The record does not clearly indicate what rate increases the producers may already have filed with the Commission.
* ↑ On several occasions, the Commission has approved agreements by producers to refund a fixed fraction of the difference between the amounts collected and the settlement price. See Texaco Inc., 28 F.P.C. 247 (other producers severed from the instant case); Continental Oil Co., 28 F.P.C. 1090 (on remand from CATCO).
This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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