Source: https://openjurist.org/750/f2d/105/columbia-gas-transmission-corporation-v-federal-energy-regulatory-commission
Timestamp: 2019-04-20 18:38:29+00:00

Document:
United Gas Pipe Line Company, Intervenor.
Stephen J. Small, Charleston, W. Va., with whom Amos W. Perrine and Giles D.H. Snyder, Charleston, W. Va., were on the brief, for petitioner.
John H. Conway, Atty., F.E.R.C., Washington, D.C., with whom Jerome M. Feit, Sol., and Joshua Z. Rokach, Atty., F.E.R.C., Washington, D.C., were on the brief, for respondent.
Irving Jacob Golub, Houston, Tex., with whom Phillip D. Endom, Houston, Tex., was on the brief, for intervenor, United Gas Pipe Line Co.
Before GINSBURG and STARR, Circuit Judges, and JACKSON,* District Judge.
Opinion for the Court filed by Circuit Judge STARR.
This case raises questions with respect to the authority of the Federal Energy Regulatory Commission (Commission) to fashion remedies in the setting of "paybacks" of natural gas by one interstate pipeline to another.
* The history of this case is complex and detailed, going back to 1958 when United Gas Pipe Line Company (United), the intervenor in this proceeding, contracted with two producers-marketers, namely Humble Oil & Refining Company (now Exxon Corporation) and the Cullen family, to purchase natural gas in the Garden City, Louisiana Field. The background is amply set forth in this court's opinion at an earlier stage of these proceedings, Columbia Gas Transmission Corp. v. FPC, 530 F.2d 1056, 1058-59 (D.C.Cir.1976), and will therefore not be described in detail here. Suffice it to say that a dispute arose between United and Columbia Gas Transmission Corporation (Columbia), another interstate natural gas pipeline company subject to the Commission's jurisdiction and the petitioner in this proceeding, over the right to certain gas produced by three gas companies in the Garden City Field.1 Columbia's position was that the volumes of gas proposed to be sold to United by the three companies should be included in United's contractually specified maximum volume limitation (120,000 Mcf) as set forth in the original 1958 contract, as amended in 1963.
(6) The issuance of this temporary authorization is without prejudice to the rights and interests of any of the parties in any Commission proceedings or any other legal proceeding in a court of competent jurisdiction involving the rights of United and Columbia to purchase gas produced from the Garden City Field.
Record (R.) at 1392-93, Appendix (App.) at 45-46. Critically, the Commission's letter order certificating the sale did not establish the price of payback gas, if the payback obligation were to mature.
The Commission eventually determined, pursuant to a request by United for a declaratory order interpreting its contractual rights, that United, and not Columbia, was entitled to the gas under the contract: "There is no contractual basis for deducting from United's entitlement under [the 1958 contract between United and Humble-Cullen] the volumes of gas that the applicant companies [Texas, Gulf, and Southern] now seek to furnish directly to United ...." Texas Gas Exploration Corp., 52 F.P.C. 940, 950, reh'g denied, 52 F.P.C. 1807 (1974), aff'd sub nom. Columbia Gas Transmission Corp. v. FPC, 530 F.2d 1056 (D.C.Cir.1976). This court affirmed, stating that "[t]he FPC's interpretation of the contract is in accordance with its literal terms, and is supported by a plausible explanation of the intendment of the parties." 530 F.2d at 1059.
Columbia's contractual right to the disputed volumes of gas was not merely inferior to United's; it was nonexistent. Humble breached its contract with United and sold United's gas to Columbia. By agreeing to the conditions built into the temporary certificates ... Columbia, in essence, stepped into Humble's shoes. Columbia assumed the risk of an adverse ruling on the contract question.
R. 105, App. 20. Referring to its broad discretion to fashion equitable remedies, the Commission expressly considered the following factors: (1) Columbia's customers received the gas at a time of deep curtailment; (2) United and its customers were injured by the reduction of United's gas supply during this period, and (3) United was in no wise accountable for the fact that gas prices had risen dramatically by the time the payback obligation was fulfilled. R. 113-14, App. 28-29. Columbia does not dispute the accuracy of these three points; rather it asserts that other factors, such as the Commission's precedents, should have compelled the Commission to decide differently than it did. The Commission, however, concluded that Columbia would be unjustly enriched if it were allowed to receive more than the original contract price for the payback gas, and therefore ruled in favor of United.6 R. 114-15, App. 29-30. Following the Commission's denial of rehearing, R. 128, Columbia petitioned this court for review. We affirm the Commission's decision.
[T]he breadth of agency discretion is, if anything, at [its] zenith when the action assailed relates primarily not to the issue of ascertaining whether conduct violates the statute, or regulations, but rather to the fashioning of policies, remedies and sanctions ... in order to arrive at maximum effectuation of Congressional objectives.
The difficult problem of balancing competing equities and interests has been given by Congress to the Commission with full knowledge that this judgment requires a great deal of discretion. Accordingly, it is not the role of the courts to second guess the Commission's judgment because we think we could devise a better solution than that which the agency has adopted so long as the agency's determination has a rational basis.
AEPCO, 631 F.2d at 809. Therefore, unless its determination lacks a rational basis, the Commission's order must be affirmed.
This appears to be the first time the Commission has been called upon to set a price for payback gas where the parties contractually created the payback obligation. It has nonetheless been clear for some time that the Commission has broad authority to fashion equitable remedies in a variety of settings. See, e.g., United Gas Improvement Co. v. Callery Properties, Inc., 382 U.S. 223, 86 S.Ct. 360, 15 L.Ed.2d 284 (1965) (approving FPC orders of refunds with interest of amounts collected in excess of just and reasonable rates); Mesa Petroleum Co. v. FPC, 441 F.2d 182, 186-87 (5th Cir.1971). Specifically, the Commission's authority to order payback of gas instead of money refunds has been confirmed by this court in AEPCO and by the Fifth Circuit in Cox v. FERC, 581 F.2d 449 (5th Cir.1978).
The principle fairly drawn from prior cases is that the Commission has broad authority to fashion remedies so as to do equity consistent with the public interest. Obviously, what is appropriate varies according to the circumstances before the Commission. In the instant case, the Commission made its decision with full knowledge and consideration of the cases cited above and the broad equitable principle they represent.
Columbia now maintains that the Commission erred in several respects. First, Columbia asserts that the Commission's certificate authorizing the sale of gas to Columbia instead of to United overrides any contract obligations with which the certificate may have interfered. The argument is simple: a certificate supersedes any contract to the contrary.
We do not disagree with the principle advanced by Columbia, but we cannot agree that the principle is properly applicable here. Columbia overlooks the important fact that the temporary certificate issued by the Commission specifically referred to the controversy between the parties and expressly provided a remedy if the contract interpretation turned out to favor United, which in fact happened. As we saw previously, the certificate explicitly carved out all rights and interests of the parties in proceedings involving "the rights of United and Columbia to purchase gas produced from the Garden City Field." See supra p. 107. The certificate thus authorized Columbia to take delivery of the disputed volumes of gas, but it did not give Columbia the right, in effect, to rise above the legal consequences flowing from the ultimate resolution of the contract dispute.
Second, Columbia asserts as error the Commission's use of the word "illegal" in the first page of its opinion, arguing that this characterization permeates the Commission's opinion and renders it irrational.7 The argument is that Columbia's receipt of the gas occurred under the umbrella of the temporary certificate and was therefore legal.
In a real sense, Columbia is correct: its taking of the gas was in no wise illegal because it was expressly authorized by the Commission certificate. But the Commission's ill-advised use of the term "illegal" does not invalidate its entire remedial exercise. To the contrary, the Commission expressly recognized in its opinion that the legality vel non of Columbia's original taking was not at issue here. As the Commission's order itself stated: "Of course, Columbia's argument that it did nothing illegal by taking the gas pursuant to an FPC letter order is correct, in a sense. The legality of Columbia's temporary taking of the gas is not the issue." R. 104, App. 19. The Commission may have used ill-advised language, but its opinion as a whole demonstrates that it did not misconceive the bona fides of Columbia's original taking.
Columbia further argues, however, that the Commission was analytically incorrect by applying the principle of restitution, when there was, again, no unlawful conduct on Columbia's part. This contention also fails. In fashioning a remedy, the Commission is not bound to apply hornbook restitutionary analysis traditionally applied to private contracts. Even assuming arguendo the validity of Columbia's understanding of the law of restitution, such a Procrustean requirement would, in our view, unduly circumscribe the Commission's broad discretion to frame appropriate remedies suitable for this particular industry. Moreover, Columbia's view, wedded as it is to its conception of the precise elements of hornbook law, fails to take into account the Commission's bedrock duty in fashioning remedies to consider the public interest, particularly the interests of consumers of the regulated gas. The public interest is, of course, not a factor in traditional applications of the doctrine of restitution, inasmuch as that doctrine evolved at equity in order to achieve justice between the parties before the chancellor. The Commission properly based its determination more broadly on "equitable principles," repeatedly emphasizing its desire to achieve equity and fairness to all concerned, with due regard for the public interest. E.g., R. 105, 113; App. 20, 28.
AEPCO involved several orders of the Commission "issued in response to the continuing shortage of natural gas," 631 F.2d at 805, which obtained during the last decade. The background of that case is, briefly, as follows: El Paso Natural Gas Company, like United and Columbia an interstate natural gas transmission company, served customers in California and in five southwestern States east of California. Anticipating impending shortages of natural gas, the Federal Power Commission in 1971 ordered El Paso, as well as other pipelines, to establish curtailment plans. El Paso did so, establishing a priority plan for five separate categories of uses. But the Commission did not stop there. It also ordered El Paso to develop a plan for husbanding gas during the low-demand summer months for use in the high-demand winter months by "temperature sensitive high priority customers." Id. at 806. El Paso again did so, but it accomplished this mandated result in a plan that had, the Commission subsequently found, a geographically discriminatory feature--under the plan, El Paso curtailed only low-priority customers east of California to husband the gas for the cold winter months; customers in California were not so curtailed. The upshot of all this was that El Paso, pursuant to Commission approval, "paid back" the gas to the east-of-California customers in 1978; those customers, however, were required to pay the then-current prices for the gas, not the lower price prevailing earlier at the time of the curtailment. This caused no small consternation among the east-of-California customers who argued, as did United in this proceeding, that the pipeline was entitled to be paid only the old price prevailing at the time the gas was discriminatorily diverted from them. The Commission was unpersuaded, and this court affirmed in a rationale that is of considerable relevance to the case before us.
First, the court began by noting, as we already have, the "narrow scope of review over decisions such as the Commission has had to make in this case." Id. at 809. The natural gas shortage existed, the court emphasized, and the unavoidable consequence of that exigency was that "some measure of sacrifice [was required] by the companies involved in the distribution and use of natural gas." Id. Embracing the apt description of the Third Circuit in this respect, the court observed that not all parties injured in consequence of the crisis could be made whole. AEPCO, 631 F.2d at 809 (quoting Hercules, Inc. v. FPC, 552 F.2d 74, 89 (3d Cir.1977)). Then, in language which we have already quoted and which obtains just as powerfully here as it did in the case before it, the court held: "it is not the role of the courts to second guess the Commission's judgment because we think we could devise a better solution than that which the agency has adopted so long as the agency's determination has a rational basis." AEPCO, 631 F.2d at 809.
In upholding the Commission's order there, the court observed that broader public interests were at stake, not only private interests, and that the Commission had reasonably concluded that El Paso's plan, despite its discriminatory impact on the eastof-California low priority customers, had " 'served a valuable public service' by assuring adequate winter gas supplies to [east-of-California] high priority customers ...." Id. If El Paso were paid only old prices for its restitutionary gas, the Commission concluded and the court agreed, then it would suffer a penalty for providing the valuable protection which its plan, albeit discriminatory, afforded. Under those circumstances, the impact of any such penalty would be inequitable and, importantly, would serve as an industry-wide deterrent against pipelines taking emergency actions to protect service, a result which this court found would be "contrary to the public interest." Id. This court went on to note, approvingly, the Commission's consideration of the east-of-California customers' claim that undue hardship would be visited on them if they had to pay today's prices for yesterday's gas. That claim was, the court concluded, properly rejected by the Commission. Certain benefits had accrued to those customers because of El Paso's plan, including a surplus of natural gas during the restitutionary period resulting in savings occasioned by their not having to resort to expensive alternative fuels. Columbia has pointed to no similar benefits for United's customers in this case.
In our view, AEPCO 's essential teaching is that, as an expert agency, the Commission is vested with wide discretion to balance competing equities against the backdrop of the public interest, and that the exercise of that discretion will not be overturned unless the Commission's action lacks a rational basis. AEPCO clearly does not commit the Commission to a rigid rule of requiring paybacks at current prices nor carve into stone any particular kind of remedy. The AEPCO court's careful canvassing of the various factors present in the El Paso curtailment situation underscores the highly fact-specific sifting and weighing of factors that the Commission is, at bottom, to carry out in determining wherein the equities lie. No judicially imposed automatic rules or talismanic tests will do; it is, in the tradition of equity, a matter of an expert Commission's doing justice in the particular case.

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