Source: https://supreme.justia.com/cases/federal/us/424/494/
Timestamp: 2019-04-25 13:57:43+00:00

Document:
The Federal Power Commission (FPC), for the purpose of "stimulat[ing] and accelerat[ing] domestic exploration and development of natural gas reserves," by order established an "optional procedure for certificating new producer sales of natural gas." Under the order, producers may tender for FPC approval contracts for the sale of new natural gas at rates exceeding the maximum authorized by the applicable rate order; the FPC will determine in a single proceeding whether the "public convenience and necessity" under § 7(c) of the Natural Gas Act (Act) warrants the issuance of a certificate authorizing the sale and whether the contract rates are "just and reasonable" under § 4(a); and a permanent certificate issued by the FPC and accepted by the producer is not subject to change in later proceedings under § 4, and the rates may be collected without risk of refund obligations. At the time it issues the certificate, the FPC may also authorize the producer to abandon the sale at the end of the contract term if such abandonment is warranted by the "public convenience or necessity" under § 7(b), and the producer, when the contract expires, is then free to discontinue deliveries to the original purchaser without having to demonstrate again that abandonment comports with the public convenience or necessity. Petitions for review were filed attacking the entire optional procedure, but the Court of Appeals upheld the order except for the pre-granted abandonment authority, which the court held contravened § 7(b) of the Act. Under that provision, no natural gas company shall abandon its facilities or service subject to the FPC's jurisdiction without FPC approval, based upon a finding by the FPC that "the present or future public convenience or necessity permit such abandonment."
Held: An optional procedure encompassing pre-granted abandonment authority intended to draw new gas supplies to the interstate market is clearly within the FPC's authority under § 7(b) to permit abandonments justified by present or future public convenience or necessity, the timing of the abandonment approval being within the FPC's discretion.
The order, which does not authorize specific abandonments, merely establishes an optional procedure under which pre-granted abandonments, subject to judicial review, may be granted in appropriate cases, and the question whether particular abandonment authorizations are beyond the FPC's expertise should await resolution in concrete cases. In both the case of the limited-time certificate (which the Court of Appeals, by an erroneous construction of Sunray Mid-Continent Oil Co. v. FPC, 364 U. S. 137, thought was barred by the Act) and the case of the permanent certificate with pre-granted abandonment, the FPC properly can determine at the time of certification that he present or future public convenience or necessity justifies the issuance of the certificate allowing discontinuance of service at a future date without need for further proceedings. Pp. 424 U. S. 499-504.
164 U.S.App.D.C. 1, 502 F.2d 461, reversed in part and remanded.
BRENNAN, J., delivered the opinion of the Court, in which WHITE, MARSHALL, BLACKMUN, and REHNQUIST, JJ., joined. BURGER, C.J., filed an opinion concurring in the judgment, post, p. 424 U. S. 505. STEWART, POWELL, and STEVENS, JJ., took no part in the consideration or decision of the case.
or any portion of its facilities subject to the jurisdiction of the [Federal Power] Commission, or any service rendered by means of such facilities, without the permission and approval of the Commission first had and obtained, after due hearing, and a finding by the Commission . . . that the present or future public convenience or necessity permit such abandonment. [Footnote 1]"
The question presented in this case is whether the FPC may, upon a proper finding of public convenience or necessity, simultaneously authorize both the sale of natural gas in interstate commerce by a producer and the abandonment of the sale at a future date certain. The Court of Appeals for the District of Columbia Circuit construed § 7(b) to empower the FPC to authorize abandonment only when and if proposed at the end of the contract term, thus precluding power to authorize abandonment simultaneously with certificating new producer sales. Accordingly, the Court of Appeals set aside the FPC order involved in this case insofar as it permits the Commission, at the time it issues a certificate of public convenience and necessity, to authorize the producer to terminate the sale at the end of the contract term. 164 U.S.App.D.C. 1, 502 F.2d 461 (1974). We granted certiorari. 422 U.S. 1006 (1975). We reverse.
"there is no assurance at the present time that a producer may not ultimately have to refund some of an initial rate . . . upon which the producer relied when it dedicated a new gas supply to the interstate market."
"[T]he producer does not know . . . how much it will get if it develops and sells new gas to the interstate market. The producer knows for sure only that, once it sells in interstate commerce it cannot stop deliveries."
Id. at 223. "This uncertainty," the Commission found, "has impeded domestic exploration and development." Ibid.
findings by the FPC of public convenience or necessity, as required by § 7(b). Order No. 455-A, 48 F.P.C. 477, 481 (1972).
The importance to the producer of the pre-granted abandonment provision is obvious. Pre-granted abandonment gives the producer assurance that his present sale will not indefinitely commit the gas to what may be a lower priced interstate market: he will be free on the contract expiration date to discontinue deliveries to the purchaser without having to demonstrate again that abandonment is consistent with the public convenience or necessity.
"Pre-granted abandonment would leave a producer free to discontinue service to the interstate market, perhaps years after the original certification, with no contemporaneous obligation on the producer to justify withdrawal of service as consistent with the public convenience and necessity. We think Section 7(b) does not contemplate or authorize such procedure."
requires more clairvoyance than even the Commission's expertise reasonably encompasses."
We find nothing on the face of § 7(b) to support the holding that the section "does not contemplate or authorize such procedure." There is no express provision prescribing the timing of the finding of public convenience or necessity that is prerequisite to FPC authority to allow the producer to abandon a sale. In the absence of an explicit direction, the inference may reasonably be made that Congress left the timing of the finding within the general discretionary power granted the FPC "to regulate the abandonment of service," S.Rep. No. 1162, 75th Cong., 1st Sess., 2 (1937); H.R.Rep. No. 709, 75th Cong., 1st Sess., 2 (1937). "[T]he Commission's broad responsibilities . . . demand a generous construction of its statutory authority," Permian Basin Area Rate Cases, 390 U. S. 747, 390 U. S. 776 (1968) (footnote omitted), and that inference is plainly consistent with Congress' regulatory goals.
interest lies necessarily involves deductions based on the expert knowledge of the agency." Similarly, as to another agency, we have stated our unwillingness to let "uncertainties as to the future . . . paralyze the [Interstate Commerce] Commission into inaction." United States v. Detroit & Cleveland Nav. Co., 326 U. S. 236, 326 U. S. 241 (1945). Thus, to the extent that exercising the pre-granted abandonment authority entails forecasting future developments affecting supply and demand, we cannot say that requiring this degree of "clairvoyance" renders the provision beyond FPC authority.
fact, indicated that the FPC is authorized to issue limited-term certificates. The Court of Appeals for the Tenth Circuit had addressed that question at an earlier stage of the litigation and had held that the FPC was authorized to issue such certificates. Sunray Mid-Continent Oil Co. v. FPC, 239 F.2d 97 (1956), rev'd on other grounds, 353 U.S. 944 (1957) (Sunray I). [Footnote 11] Sunray II implicitly approved this holding in stating, 364 U.S. at 364 U. S. 157: "There is no contention that the Commission was again indulging in the erroneous notion that it had no power to issue a limited certificate."
Thus, rather than imply that the Act forbids the issuance of a limited-term certificate, Sunray II approved the holding of the Court of Appeals for the Tenth Circuit that the Act permits the issuance of such a certificate. [Footnote 12] Sunray II therefore supports the conclusion we have reached and does not fortify the Court of Appeals' construction of § 7(b). In both the case of the limited-term certificate and the case of the permanent certificate with pre-granted abandonment, the FPC determines at the time of certification that the present or future public convenience or necessity justifies the issuance of a certificate that allows discontinuance of service at a future date certain without need for further proceedings.
The judgment of the Court of Appeals is reversed insofar as it set aside the pre-granted abandonment provision of Order No. 455, and the case is remanded for further proceedings consistent with this opinion.
The optional procedure is available for sales of gas produced from wells commenced after April 6, 1972, and gas that has not previously been sold in the interstate market. 18 CFR § 2.75(b)(5) (1975).
After adoption of the optional procedure, the FPC established a national ceiling rate for some sales of natural gas. Opinion No. 699, 51 F.P.C. 2212 (1974). The optional procedure was then amended to permit producers to tender contracts for certification, including rates exceeding the national ceiling, as well as area rates. Order No. 455-B, 52 F.P.C. 1416 (1974).
The procedure does not, however, limit the applicability of § 5, 15 U.S.C. § 717d. See 18 CFR § 2.75(d) (1975). The Commission noted in Order No. 455 that it was unable to "bind a future Commission not to invoke the prospective operation of Section 5"; the Commissioners further stated that, "[t]o the extent that this Commission can grant certainty of rates, we do so." 48 F.P.C. 218, 223 (1972).
"Applications presented hereunder will be considered for permanent certification, either with or without pre-granted abandonment, notwithstanding that the contract rate may be in excess of an area ceiling rate established in a prior opinion or order of this Commission."
Respondents' cross-petition seeking review of the Court of Appeals' decision to the extent that it adversely resolved their contentions was denied. 422 U. S. 1020 (1975).
The FPC has disclaimed any reliance on the ground, permitted under § 7(b), that "the available supply of natural gas is depleted to the extent that the continuance of service is unwarranted." We therefore have no occasion to address the question whether pre-granted abandonment on that ground would exceed FPC authority.
"We cannot say as an abstract proposition of law that it is impossible for the Commission to make an advance determination of 'reasonableness' in proceedings under Section 4. Although, as a practical matter, one may be skeptical about the ability of the Commission to succeed in this endeavor, we think it may make the attempt. Whether it succeeds will depend upon the evidentiary basis for the escalations proposed in a given contract and the reasonableness of Commission findings and projections supporting and approving such escalations. The question is one of proof which can be answered only on a record setting out a particular proposal and the evidence supporting it."
164 U.S.App.D.C. at 8, 502 F.2d at 468.
Respondents claim that the pre-granted abandonment provision amounts to deregulation akin to that condemned in FPC v. Texaco, Inc., 417 U. S. 380, 417 U. S. 400 (1974). But, unlike the small-producer exemption involved there, the FPC in the optional procedure retains full control over its regulatory jurisdiction.
The Court of Appeals found that pre-granted abandonment has "the same potentiality of prejudice to consumers" that this Court was concerned about in Sunray II. 164 U.S.App.D.C. at 12, 502 F.2d at 472. In that case, however, Sunray's position would have removed FPC discretion not to issue limited-term certificates whenever a producer sought a limited certificate. Both Sunray II and today's decision maintain FPC discretion in this regard, while the Court of Appeals' conclusion reduces the FPC's ability to exercise its regulatory responsibility.
The first decision of the Court of Appeals for the Tenth Circuit was reversed in Sunray I on the ground that the Court had itself decided whether the FPC should have issued a limited-term certificate, rather than remanding to the Commission to resolve this question in the first instance, 353 U.S. 944. Sunray II sustained the Court of Appeals' later affirmance of the FPC's issuance of an unlimited certificate, 267 F.2d 471 (1959).
Moreover, if issuance of limited-term certificates were barred by the Act, there would have been no need to decide Sunray II. In that circumstance, the producer could hardly have complained that the FPC failed to recognize its request for only a limited certificate, since such a reading of the Act requires the FPC in all cases to issue unlimited-term certificates.
I concur in the judgment of the Court, but, with respect, I cannot agree that the holding in Sunray Mid-Continent Oil Co. v. FPC, 364 U. S. 137 (1960) (Sunray II), is as categorical as the Court suggests. I therefore do not agree that the Court of Appeals' reading of Sunray II is "patently erroneous." Ante at 424 U. S. 503.
unless both the producer and the Commission decide that the supply should continue.
"[E]very independent producer of natural gas . . . [would] be free at a future date, untrammeled by Commission regulation, to reassess whether it desired to continue serving the interstate market."
364 U.S. at 364 U. S. 142.
However, the Court accepts Sunray II as affording broad discretion to the Commission in such matters, and stare decisis compels me to accept the result.

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