Source: https://law.justia.com/cases/federal/appellate-courts/F2/712/1450/415139/
Timestamp: 2020-08-11 11:00:50
Document Index: 124319047

Matched Legal Cases: ['§ 5', '§ 717', '§ 1', '§ 717', '§ 2', '§ 717', '§ 4', '§ 4', '§ 19', '§ 7172']

Federal Energy Regulatory Commission, Appellant, v. Triton Oil & Gas Corporation, 712 F.2d 1450 (D.C. Cir. 1983) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › D.C. Circuit › 1983 › Federal Energy Regulatory Commission, Appellant, v. Triton Oil & Gas Corporation
Federal Energy Regulatory Commission, Appellant, v. Triton Oil & Gas Corporation, 712 F.2d 1450 (D.C. Cir. 1983)
U.S. Court of Appeals for the District of Columbia Circuit - 712 F.2d 1450 (D.C. Cir. 1983) Argued June 2, 1983. Decided July 19, 1983
Under the Natural Gas Act of 1938, the FERC has the authority to regulate interstate sales of natural gas by setting "just and reasonable" rates, § 5(a), 15 U.S.C. § 717d(a), for the "sale in interstate commerce of natural gas for resale for ultimate public consumption ...," § 1(b), 15 U.S.C. § 717(b). Because the Act's provisions do not specifically cover producers or wellhead sales of natural gas, the Commission initially declined to regulate sales by independent producers2 to interstate pipelines. Public Service Commission v. Mid-Louisiana Gas Co., --- U.S. ----, ----, 103 S. Ct. 3024, 3030-3031, 75 L. Ed. 2d ---- (1983); Mobil Oil Corp. v. FPC, 417 U.S. 283, 302, 94 S. Ct. 2328, 2342, 41 L. Ed. 2d 72 (1974); Permian Basin Area Rate Cases, 390 U.S. 747, 755-56, 88 S. Ct. 1344, 1353-54, 20 L. Ed. 2d 312 (1968). In 1954, however, the Supreme Court held that independent producers are " [n]atural-gas compan [ies]" within the meaning of § 2(6) of the Act, 15 U.S.C. § 717a(6),3 and therefore are subject to regulation by the Commission. Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 74 S. Ct. 794, 98 L. Ed. 1035 (1954).
Following this decision, the Commission attempted to determine whether the rates of independent producers were "just and reasonable" by applying a traditional regulatory approach, using individualized costs of service as a basis for determining price. It quickly found this approach, however, impossible to administer because of the sheer numbers of independent producers engaged in natural-gas sales. Public Service Commission v. Mid-Louisiana Gas Co., --- U.S. at ----, 103 S. Ct. at 3030; Mobil Oil Corp. v. FPC, 417 U.S. at 303-04, 94 S. Ct. at 2343-44; Permian Basin Area Rate Cases, 390 U.S. at 756-57, 88 S. Ct. at 1354-55. As a result, in the early 1960's the Commission decided to set rates by area. It established several discrete geographical areas within which it believed that costs and general operating conditions were reasonably similar and set out to determine, through hearings and compilation of data, uniform rate schedules that would govern all producers within each area. Public Service Commission v. Mid-Louisiana Gas Co., --- U.S. at ----, 103 S. Ct. at 3030; Mobil Oil Corp. v. FPC, 417 U.S. at 304, 94 S. Ct. at 2343. In Permian Basin Area Rate Cases, 390 U.S. 747, 88 S. Ct. 1344, 20 L. Ed. 2d 312 the Supreme Court sustained the constitutional and statutory authority of the Commission to adopt this system of area regulation in the discharge of its responsibilities under the Natural Gas Act to determine whether producers' rates are just and reasonable.
The initial hearing on rates for the Southern Louisiana Area ended in 1965, and the Presiding Examiner issued his decision in 1966. Southern Louisiana Area Rate Cases v. FPC, 428 F.2d 407, 418-19 (5th Cir. 1970) (SoLa I) . The Commission rendered its decision in 1968, Opinion No. 546, 40 F.P.C. 530 (1968), which it modified on rehearing in 1969, Opinion No. 546-A, 41 F.P.C. 301 (1969). In Opinion No. 546 and 546-A the Commission (1) established a multi-tiered rate structure for sales of natural gas (the more recent the contracts for interstate sale of gas, the higher the price); (2) ordered the producers whose § 4(e) proceedings it had consolidated with the main case to make refunds (totaling approximately $375 million) on the basis of the difference between the pre-October 1, 1968, rates established in Opinion No. 546 and the actual rates collected; and (3) imposed a five-year moratorium on rate increases above those set in the new rate structure. 40 F.P.C. 530. Although Opinions No. 546 and 546-A did not require producers whose rates were not subject to § 4(e) to make refunds for payments collected under pre-October 1, 1968, contracts, they did set new maximum rates for gas contracted for after October 1, 1968, binding on all producers of natural gas in the Southern Louisiana area.
In its opinion denying rehearing, the Fifth Circuit stated unequivocally that it had "otherwise directed," writing that the Commission had the authority "to reopen any part of its order that circumstances require be reopened." Southern Louisiana Area Rate Cases, 444 F.2d 125, 126-27 (5th Cir. 1970) (per curiam) (emphasis in original). The Commission thereupon formally reopened the 1961 area rate proceedings (Docket No. AR61-2), consolidated them [229 U.S.App.D.C. 422] with the new proceedings (Docket No. AR69-1), and continued the stay of Opinions No. 546 and 546-A.8 Area Rate Proceeding ..., "Order Reopening and Consolidating Area Rate Proceedings and Establishing Procedures," 44 F.P.C. 1638 (1970). In addition, a settlement proposal agreed to by the majority of the consumer, pipeline, and producer interests involved in the proceedings was made a part of the record in the newly consolidated proceedings. Id. at 1639.
Like their predecessors, Opinions No. 598 and 598-A (which modified Opinion No. 598 on rehearing, 46 F.P.C. 633 (1971)), were appealed to the Fifth Circuit Court of Appeals, which affirmed their validity. Placid Oil Co. v. FPC, 483 F.2d 880 (5th Cir. 1973) (SoLa II) . In turn, the Supreme Court affirmed SoLa II, finding, inter alia, that the Commission had the authority to change the rates and refund obligations set out in Opinions No. 546 and 546-A even though those opinions had been affirmed by the Fifth Circuit. Mobil Oil Corp. v. FPC, 417 U.S. 283, 94 S. Ct. 2328, 41 L. Ed. 2d 72.
As we noted above, the district court held that Triton was not subject to refund obligations under Opinions No. 598 and 598-A because (1) prior to the issuance of those opinions, Triton had collected rates pursuant to permanent certificates of public convenience and necessity not subject to refund conditions, and (2) the Commission can order refunds only when the producer has been collecting payments for gas subject to such refund conditions. J.A. at 151. The Commission contends that this ruling is erroneous and must be reversed because both the Fifth Circuit Court of Appeals in SoLa I, 428 F.2d 407, and SoLa II, 483 F.2d 880, and the Supreme Court in Mobil Oil Corp. v. FPC, 417 U.S. 283, 94 S. Ct. 2328, 41 L. Ed. 2d 72, held that the Commission had clear authority to prescribe a rate schedule for the Southern Louisiana area different from those rates found to be just and reasonable in Opinions No. 546 and 546-A. The Commission also argues that these decisions held that it could make the new rate scheme effective as of October 1, 1968, the date Opinion No. 546 was originally scheduled to become effective.
SoLa II was then appealed to the Supreme Court. Two of the petitioners--groups representing major consumer interests--again argued that the Commission had no authority to change rates and refund obligations fixed in Opinion No. 546 after that opinion was affirmed in SoLa I. The Court rejected that argument, stating that the Fifth Circuit did not exceed its powers "under § 19(b) 'to affirm, modify, or set aside [an] order in whole or in part' " when it held that the Commission was fully [229 U.S.App.D.C. 425] authorized to reopen any part of Opinions No. 546 and 546-A that seemed appropriate and necessary in light of new evidence as to a future natural-gas supply problem. Mobil Oil Corp. v. FPC, 417 U.S. at 311, 94 S. Ct. at 2347. Section 19(b), the Court wrote, "provides that the Court of Appeals may authorize the Commission in proper cases to take new evidence, upon which the Commission may modify its findings of fact and make recommendations concerning the disposition of its original order. Under the Court of Appeals disposition, the 1968 order was therefore not final and thus it was within the power of the Commission to reconsider and change it." Id. at 311-12, 94 S. Ct. at 2347-48.
Opinions No. 546 and 546-A, as we pointed out above, were subject to several judicial and administrative stays and never took effect. In at least one of those stays, the Commission stated that " [e]ach respondent to these proceedings shall, upon order of the Commission after any dissolution of this stay or any extension thereof, be obligated to pay or cause to be paid to the persons adjudged to be entitled thereto the amounts representing the aggregate reduction in rates and charges which would result from making the prescribed area rates effective as of October 1, 1968." Area Rate Proceeding, "Order Staying Rate Reductions," 41 F.P.C. at 676. Thus, the rates set by Opinions No. 546 and 546-A, which had already been judicially affirmed in SoLa I, were merely held in abeyance while the Commission decided whether or not to modify them. Had it decided not to modify those rates, the rates would have been effective as of October 1, 1968. Triton would then clearly have been required to adjust its rates downward and make refunds from that date. See SoLa I, 428 F.2d 421 n. 27 (" [t]he maximum rates that the Commission has set [in Opinions No. 546 and 546-A] ... are to remain in effect throughout the new proceeding, which may last for years"). Instead, the Commission did modify the rates upward in its Opinions No. 598 and 598-A, as both the Fifth Circuit and the Supreme Court explicitly allowed it to do. As a consequence of the refund provisions of Opinions No. 598 and 598-A, producers of natural gas in the Southern Louisiana area will receive greater revenues for the period from October 1, 1968, to January 1, 1971, than if Opinions No. 546 and 546-A had actually been put into effect. We see nothing inequitable in this case in asking those producers, who have been on notice since 1968 that their rates could be readjusted downward to the rates set in Opinions No. 546 and 546-A as of October 1, 1968, to pay refunds on the revenues received by charging higher rates. This is particularly true since they clearly benefited from the reconsideration. Any other conclusion would mean that no Commission-approved rate formula could have been implemented as of 1968, even if the Commission had finally determined not to revise the rates set out in Opinions No. 546 and 546-A. We are convinced that that result could not possibly have been the Fifth Circuit's intent in SoLa I and II or the Supreme Court's in Mobil Oil Corp. v. FPC.
This situation is far different from one in which the Commission reopens and changes retroactively the rates set in a permanent certificate. See, e.g., FPC v. Sunray DX Oil Co., 391 U.S. 9, 24, 88 S. Ct. 1526, 1534, 20 L. Ed. 2d 388 (1968) (" [i]t seems incontestable that if a producer consistently sells gas at the price specified in a final, permanent certificate, and does not attempt to increase its price, the Commission may not order it to make refunds simply because the just and reasonable rate for its area turns out to be below the in-line price"). Opinions No. 546 and 546-A, rather than issuing permanent certificates, set rates that applied to all producers of natural gas in the Southern Louisiana area, regardless of the type of certificate under which they were operating. Despite the stay of those opinions, they were affirmed in SoLa I, and the producers were liable for those rates as of October 1, 1968.
Neither do we agree with Triton's argument that it cannot be forced to pay refunds for 1968-71 because it was not a party to the settlement agreement adopted in Opinions No. 598 and 598-A. Both the [229 U.S.App.D.C. 426] Fifth Circuit in SoLa II, 483 F.2d at 893, and the Supreme Court in Mobil Oil Corp. v. FPC, 417 U.S. at 312-14, 94 S. Ct. at 2347-49, have foreclosed this argument, holding that the Commission was entitled to adopt the terms of the proposed settlement as a decision on the merits because it made an independent finding supported by substantial evidence on the record as a whole that the proposal would establish just and reasonable rates for the area. Regarding this issue, the Supreme Court wrote:
Mobil Oil Corp. v. FPC, 417 U.S. at 312-14, 94 S. Ct. at 2347-49. See also Pennsylvania Gas & Water Co. v. FPC, 463 F.2d 1242, 1246 (D.C. Cir. 1972) ("in agency proceedings, settlements are frequently suggested by some, but not necessarily all, of the parties; if on examination they are found equitable by the regulatory agency, then the terms of the settlement form the substance of an order binding on all the parties, even though not all are in accord as to the result"). Thus, the Fifth Circuit and the Supreme Court concluded that all producers of natural gas in the Southern Louisiana area were bound by the settlement agreement adopted in Opinions No. 598 and 598-A.9
(d) For deliveries on or after January 1, 1971, the base area rates prescribed in (A) (c).
There is agreement that, at a minimum, paragraph (B) explains how to calculate refund obligations for four time periods prior to August 1, 1971. The Commission asserts, however, that paragraph (B) also states which parties have refund obligations because it directs that " [r]efunds due" under various proceedings must be paid by respondents to those proceedings according to the paragraph's refund scheme. Triton's predecessors are listed as respondents in two of those proceedings, Docket No. AR61-2, the proceedings that culminated in Opinion No. 546, and Docket No. AR69-1, the proceedings that the Commission commenced while the courts were reviewing Opinions No. 546 and 546-A, that it ultimately [229 U.S.App.D.C. 428] consolidated with AR61-2, and that resulted in Opinion No. 598. Thus, the Commission concludes, Triton is clearly obligated under the plain language of paragraph (B) to make refunds for the 1968-71 period.
In response, Triton advances several theories as to why it is not liable for refunds under paragraph (B). First, it contends, as the district court found, that paragraph (B) does not create a duty to make refunds, but merely sets a basis for determining how much certain producers must pay back to meet refund obligations imposed upon them as a consequence of their participation in the various proceedings listed in the paragraph. The second sentence of paragraph (B), Triton argues, does not state that respondents in any of the various proceedings listed in the sentence must make refunds, but instead simply states that " [r]efunds due " under those proceedings "shall be based" upon a schedule specified in the remainder of paragraph (B). Because it does not owe refunds under any of the listed proceedings (even though it did participate in them), Triton concludes that it has no refund obligations.
Third, we do not agree with the district court that the final sentence of ordering paragraph (B) exempts Triton from any refund obligations. A close examination of the entire sentence reveals that it is intended to ensure that producers operating pursuant to permanent certificates could not be held liable for refunds prior to 1968, not to exempt such producers from all refund duties. Without the ellipses in the district court's quotation, the sentence states that " [a]mounts collected by the respondent, even though in excess of the prices in (a) and (b), shall not be subject to refund, to the extent they were collected pursuant to a prior settlement agreement approved by this Commission, or were not in excess of a price set out in a permanent certificate issued by the Commission, or were not in excess of the refund floor provided in an applicable temporary authorization." 46 F.P.C. at 145 (emphasis added). We read this sentence to mean that if a producer had [229 U.S.App.D.C. 430] been charging rates pursuant to a permanent certificate prior to 1968, as Triton had, it did not have to refund payments collected under rates in excess of those listed in subparagraphs (a) and (b). Since those two subparagraphs set rates (and thus refund obligations) for the years prior to 1965 and for January 1, 1965, to October 1, 1968, Triton owes no refunds for those periods. The sentence does not apply to obligations for the years after October 1, 1968, the time periods described in subparagraphs (c) and (d), and does not exempt respondents who were collecting rates subject to permanent authorization from the refund obligations set out in those latter two subparagraphs. In sum, the sentence limits Triton's refund obligations to the time periods covered by subparagraphs (c) and (d), an outcome in line with the obligations imposed by Opinions No. 546 and 546-A.
Id. at 982. While it is true, as Triton points out, that this subsequent order is not itself determinative of the proper interpretation to be given to Opinion No. 598, it does carry some weight. Issued shortly after Opinions No. 598 and 598-A, it affords a reasonably contemporaneous view of what the Commission actually intended to accomplish in those opinions. Certainly, we are entitled to give deference to an agency's construction of its own opinions and orders--especially in the complex area of ratemaking. See, e.g., Florida East Coast Railway Co. v. United States, 259 F. Supp. 993, 997 (M.D. Fla .1966), aff'd per curiam, 386 U.S. 544, 87 S. Ct. 1299, 18 L. Ed. 2d 285 (1967). We do so here and conclude that Triton is subject to the refund obligations of subparagraph (c) of paragraph (B) of Opinion 598.
The jurisdiction of the Federal Power Commission over wholesale electric power rates was transferred to the Federal Energy Regulatory Commission by the Department of Energy Organization Act, Pub. L. No. 95-91, 91 Stat. 565 (Aug. 4, 1977), 42 U.S.C. § 7172(a) (1) (B), and Executive Order No. 12009, 42 Fed.Reg. 46,267 (1977)
Independent producers are producers who do "not engage in the interstate transmission of gas from the producing fields to consumer markets and [are] not affiliated with any interstate natural-gas pipeline company." Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 675, 74 S. Ct. 794, 795, 98 L. Ed. 1035 (1954)
The FPC defined this area to include all parts of Louisiana south of the thirty-first parallel, together with all offshore territory in the federal domain that would be bounded by the Louisiana borders extended into the Gulf. Southern Louisiana Area Rate Cases v. FPC, 428 F.2d 407, 418 (5th Cir. 1970) (SoLa I)
The other six areas are the Permian Basin, Texas Gulf Coast, Hugoton-Anadarko, Other Southwest, Appalachian and Illinois Basin, and Rocky Mountain areas. See Mobil Oil Corp. v. FPC, 417 U.S. 283, 289-90 n. 3, 94 S. Ct. 2328, 2336-2337 n. 3, 41 L. Ed. 2d 72 (1974)