Source: https://law.justia.com/cases/federal/appellate-courts/F2/335/1004/248653/
Timestamp: 2020-07-09 03:08:51
Document Index: 793945336

Matched Legal Cases: ['§ 7', '§ 5', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 5', '§ 7', '§ 4', '§ 4']

Callery Properties, Inc., Petitioner, v. Federal Power Commission, Respondent.the Superior Oil Company, Petitioner, v. Federal Power Commission, Respondent.caroline Hunt Sands and Loyd B. Sands, Petitioners, v. Federal Power Commission, Respondent.placid Oil Company, Petitioner, v. Federal Power Commission, Respondent.margaret Hunt Hill, Trustee for Hassie Hunt Trust, Petitioner, v. Federal Power Commission, Respondent.j. Ray Mcdermott & Co., Inc., Petitioner, v. Federal Power Commission, Respondent.ocean Drilling & Exploration Company, Petitioner, v. Federal Power Commission, Respondent.j. R. Frankel et al., Petitioners, v. Federal Power Commission, Respondent, 335 F.2d 1004 (5th Cir. 1964) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Fifth Circuit › 1964 › Callery Properties, Inc., Petitioner, v. Federal Power Commission, Respondent.the Superior Oil Compa...
Callery Properties, Inc., Petitioner, v. Federal Power Commission, Respondent.the Superior Oil Company, Petitioner, v. Federal Power Commission, Respondent.caroline Hunt Sands and Loyd B. Sands, Petitioners, v. Federal Power Commission, Respondent.placid Oil Company, Petitioner, v. Federal Power Commission, Respondent.margaret Hunt Hill, Trustee for Hassie Hunt Trust, Petitioner, v. Federal Power Commission, Respondent.j. Ray Mcdermott & Co., Inc., Petitioner, v. Federal Power Commission, Respondent.ocean Drilling & Exploration Company, Petitioner, v. Federal Power Commission, Respondent.j. R. Frankel et al., Petitioners, v. Federal Power Commission, Respondent, 335 F.2d 1004 (5th Cir. 1964)
US Court of Appeals for the Fifth Circuit - 335 F.2d 1004 (5th Cir. 1964) August 14, 1964
Rehearings Denied September 22, 1964
COPYRIGHT MATERIAL OMITTED Richard F. Generelly, Gene Perry Bond, May Shannon and Morley, Washington, D. C., for Callery Properties, Inc.
The cases are not new for us, certainly not, as to one case. Their presence here bears out the prediction of the dissenter1 that "this case will be back several years and thousands of pages later."2 Without assaying the balance of the dissenter's prophesy that " [n]o one will know more than is known now," it is ironic that we hold that we do not know enough because the Commission declined to receive and evaluate important evidence. Thus, in their fifth year, these applications must now go back to have the kind of hearing which we, and other Courts of Appeals, directed.
The Supreme Court in Catco forcibly rejected this approach of the Commission. The Court made clear that price was indeed important. It recognized, of course, that "the Act does not require a determination of just and reasonable rates in a § 7 proceeding * * *" or "that a `just and reasonable' rate hearing is a prerequisite to the issuance of producer certificates." And the Court pointed out that it was the delay in processing § 5 proceedings that "requires a most careful scrutiny and responsible reaction to initial price proposals of producers under § 7." But the Court immediately tied price to public convenience and necessity by requiring that the price "proposal must be supported by evidence showing their necessity to `the present or future public convenience and necessity' before permanent certificates are issued." The recent increase in the price levels the Court went on, "does make price a consideration of prime importance" and " [w]here the application on * * * presentation of evidence signals the existence of a situation that probably would not be in the public interest, a permanent certificate should not be issued." After stressing "public convenience and necessity" not less than six times in the space of two paragraphs, 360 U.S. 378, at 390-391, 79 S. Ct. 1246, at 1254-1255, the Supreme Court for the first time articulates the "in-line" concept. "Where the proposed price is not in keeping with the public interest because it is out of line or because its approval might result in a triggering of general price rises or an increase in the applicant's existing rates by reason of `favored nation' clauses or otherwise, the Commission in the exercise of its discretion might attach such conditions as it believes necessary." 360 U.S. 378, at 391, 79 S. Ct. 1246, at 1255.
The Court stressed that by certificate conditions under § 7, "the consuming public may be protected while the justness and reasonableness of the price fixed by the parties is being determined under other sections of the Act. Section 7 procedures in such situations thus act to hold the line awaiting adjudication of a just and reasonable rate." 360 U.S. 378, at 392, 79 S. Ct. 1246, at 1255. Of unusual importance here was the Court's statement in the analysis of the deficiencies of that record in which "no effort was made to give the `reason why' * * the proposed price was some 70% higher than the weighted average cost of `existing gas to the purchaser.'"
As though Catco began and ended with "in-line" the Commission and the intervenor-distributors are mesmerized by this catch phrase into supposing that the Commission's responsibility is discharged with that limited inquiry and if unsatisfied on that score, it is free to reject out of hand a producer's application for a new service. Catco did not so hold, and this approach ignores the plain terms of the statute which are no way diminished by Catco. Vast as is the discretion of the Commission, the statute, § 7(e), footnote 13, supra, accords positive rights to natural gas producers desiring to sell gas in interstate commerce. A producer does not, of course, have an absolute right to engage in the sale. It does, however, subject to compliance with reasonable procedural rules and requirements of the Commission16 have an absolute right to a consideration of the application by the Commission and the right to have it granted "if it is found that the applicant is able and willing properly to do the acts and to perform the service * * * and the * * * sale * * * is or will be required by the * * * public convenience and necessity." The Commission does not, therefore, fulfill its statutory duty by the limited inquiry into whether the price is "in-line." Conversely, it has no power to deny the application solely on the ground that the price is not "in-line." To be sure, if the proposed price is not "in-line," this may become the dominant factor in denying the application. But it must be done as a part of the larger element of "public convenience and necessity." The Court makes this clear in FPC v. Transcontinental Gas Pipe Line Corp., 1960, 365 U.S. 1, 8, 17, 22, 81 S. Ct. 435, 439, 444, 5 L. Ed. 2d 377: "In fact in interpreting this very section we said that `§ 7(e) requires the Commission to evaluate all factors bearing on the public interest' * * *." Later, the Court states, "In this connection, it must be realized that the Commission's powers under § 7 are, by definition limited. * * * The Commission cannot order a natural gas company to sell gas to users that it favors; it can only exercise a veto power over proposed transportation and it can only do this when a balance of all the circumstances weighs against certification."17
Rather, the public interest is protected by requiring the Commission to consider price in terms of the whole public convenience and necessity. Indeed, this was recognized by the Ninth Circuit in one of the very cases precipitating the remands now under review.25 That Court rejected as being "without merit" the "contention that the price line must necessarily accord with the pre-Catco line." The Court went on, " [w]e agree with the view expressed by the Commission in Texas Gas Transmission Corporation et al., 22 F.P.C. 378, 388, that factors such as increased production costs since Catco, comparative accessibility of field locations, and comparative depth of sands tend to make pre-Catco prices irrelevant for comparative purposes in other cases." United Gas Improvement Co. v. FPC, 9 Cir., 1960, 283 F.2d 817, 823. Earlier that Court stated that "* * * the Commission properly refers to circumstances under which an unconditional and permanent certificate might be issued notwithstanding the fact that the proposed price is out of line." 283 F.2d 817, 821.
And this same theme was echoed by each of the other remanding Courts. "It is conceivable" said the Tenth Circuit, "that in some circumstances public convenience and necessity may require certificating of a sale when the price is `out of line.'"26 The D. C. Circuit pointed out alternative courses for the Commission where the "prices * * * are suspiciously higher." One course was to impose interim conditions. As to the other, it offered this solution. "On the other hand, it [the Commission] may grant unconditional certification upon evidence sufficient to `support a finding of public convenience and necessity.'"27 We spoke in terms of burden making " [i]t * * * clearly incumbent on the proponent of [the proposed] rate to make some showing of the `reason why' (as it was expressed in the CATCO opinion) * * *," the proposed rate was a proper initial rate in view of rates half that high just a few years before.28
Although the Supreme Court stated that the "extent of [the] power [to condition price changes] in permanent certification is not before us now," we think the full import of its recent decision, reversing this Court, Federal Power Commission v. Hunt, 1964, 376 U.S. 515, 84 S. Ct. 861, 11 L. Ed. 2d 878, 886, compels a holding that the Natural Gas Act forbids a moratorium on price increases as a condition to the issuance of a permanent certificate.
Of course the statute gives the Commission the power to attach "such reasonable terms and conditions" to the issuance of the certificate "as the public convenience and necessity may require." See footnote 13, supra. Literally, no distinction is made between temporary and permanent certificates. And undoubtedly there are a number of conditions which lawfully may be attached to the issuance of a permanent certificate.35 But as the Court did there, when we examine the interplay between § 7 on certification and §§ 4 and 5 on "just and reasonable" rates and rate changes, we think that Congress did not intend that the Commission have the power by a certificate condition to supersede the working of § 4. By § 4 Congress established a statutory scheme in which rates are prescribed and become effective by contractual provision. United Gas Pipeline Co. v. Mobile Gas Service Corp., 1956, 350 U.S. 332, 76 S. Ct. 373, 100 L. Ed. 373; United Gas Pipeline Co. v. Memphis Light, Gas & Water Division, 1958, 358 U.S. 103, 79 S. Ct. 194, 3 L. Ed. 2d 153.
There is no real question about the operative process or effect of § 4(e). Subject only to suspension for a limited brief period of time and the obligation to refund on final determination, the rates prescribed in the contract become effective when filed. The only real problem is the point at which the rights of a producer and the powers of the Commission under § 4 become applicable. This the Court answers squarely in Hunt. "Under the procedures of the Act, it is at the point of permanent or unconditional temporary certification that the provisions of § 4 become applicable." 376 U.S. 515, 84 S. Ct. 861, at 866, 11 L. Ed. 2d 878, at 884. It is at that point that " [t]he gas has been permanently certificated into interestate commerce * * *" and, the Court continues, at that point "the independent producer is then free to pursue the rate filing procedure of that section."
Other parts of the opinion make clear that the critical distinction is between the temporary, conditional certificate, on the one hand, and a permanent certificate on the other. Thus the Court points out, " [o]nce a permanent certificate is granted, the Commission can correct an improper rate only under § 5 of the Act * * *," 376 U.S. 515, 84 S. Ct. 861, 865, 11 L. Ed. 2d 878, 883. In view of the necessity for some character of certificate before the gas "can move into interstate commerce" and the statutory right to apply "for temporary authorization" the Court recognizes that "* * * the Commission must have the authority to condition a temporary certificate so as to avoid irreparable injury to affected parties." But, the Court goes on, this "* * * condition, once imposed, continues only during the pendency of the producer's application for a permanent certificate." 376 U.S. 515, 84 S. Ct. 861, 866, 11 L. Ed. 2d 878, 884. And some of the more sweeping statements made in Catco36 where reference was made to conditional certificates without indication as to permanent or temporary must now be read as conditional temporary certificates. For the Court, immediately preceding an extensive quotation from Catco, put its own characterization on the nature of the certificates being dealt with in Catco when it said, " [t]his Court previously discussed the use of the temporary certificate procedure in" Catco. (Emphasis supplied.) 376 U.S. 515, 84 S. Ct. 861, 866, 11 L. Ed. 2d 878, 884.
The third, and serious, attack made by all is that the operative effect of the refund is that of a reparation order.52 Under the structure of the Act, it has long been recognized, and never questioned, that "* * * under the Act the Commission has no power to make reparation orders. And its power to fix rates admittedly is limited to those `to be thereafter observed and in force.'" FPC v. Hope Natural Gas Co., 1944, 320 U.S. 591, 618, 64 S. Ct. 281, 295, 88 L. Ed. 333.53
Under the peculiarities of this case with service having long ago been commenced and with no suggestion on the part of anyone that they wish to terminate it, we agree with the D.C. Circuit in its holding that this phase of the order does not presently present a reviewable matter. Public Service Corp. of New York v. FPC, D.C. Cir., 1964, 329 F.2d 242, 248; see also Humble Oil & Refining Co. v. FPC, 5 Cir., 1956, 236 F.2d 819, cert. denied, 1957, 352 U.S. 967, 77 S. Ct. 354, 1 L. Ed. 2d 321.
Atlantic Refining Company v. Public Service Commission of New York, 1959, 360 U.S. 378, 79 S. Ct. 1246, 3 L. Ed. 2d 1312
Sub nom. Public Service Commission of New York v. FPC, December 14, 1959, 361 U.S. 195, 80 S. Ct. 292, 4 L. Ed. 2d 237
(1) Transcontinental Gas Pipe Line Co., Op. 315, 1958, 20 FPC 264, aff'd sub nom. United Gas Improvement Co. v. FPC, 3 Cir., 1959, 269 F.2d 865, reversed mem. sub nom. Public Service Comm. of New York v. FPC, 1959, 361 U.S. 195, 80 S. Ct. 292, 4 L. Ed. 2d 237 (Placid in No. 20891, Hill in No. 20892, and Frankel in No. 21028).
(2) Texas Gas Transmission Corp., Op. 327, 1959, 22 FPC 378, reversed, Public Service Comm. of New York v. FPC, 1960, 109 U.S.App.D.C. 292, 287 F.2d 146, cert. denied, 1961, Shell Oil Co. v. Public Serv. Comm. of N. Y., 365 U.S. 880, 882, 81 S. Ct. 1030, 1031, 6 L. Ed. 2d 192 (Callery in No. 20872, Sands in No. 20890, McDermott in No. 20967, and Ocean Drilling in No. 20989).
(3) California Co., 1959, 22 FPC 252, reversed, United Gas Improvement Co. v. FPC, 9 Cir., 1960, 283 F.2d 817, cert. denied, 1961, Superior Oil Co. v. United Gas Imp. Co., 365 U.S. 879, 881, 81 S. Ct. 1030, 6 L. Ed. 2d 191, 192 (Superior in No. 20885).
(4) Sun Oil Co., 1959, 22 FPC 351, reversed, United Gas Improvement Co. v. FPC, 5 Cir., 1961, 290 F.2d 133, cert. denied, 1961, Sun Oil Co. v. United Gas Imp. Co., 368 U.S. 823, 82 S. Ct. 41, 7 L. Ed. 2d 27.
(6) Superior Oil Co., 1959, 22 FPC 369, reversed, United Gas Improvement Co. v. FPC, 5 Cir., 1961, 290 F.2d 147, cert. denied, 1961, Superior Oil Co. v. United Gas Imp. Co., 366 U.S. 965, 81 S. Ct. 1926, 6 L. Ed. 2d 1255 (Superior in No. 20885).
Refunds by Superior for collections under one temporary certificate prior to August 10, 1959, were excused based on the FPC's decision Skelly Oil Co. Op. 362, 1962, 28 FPC 401, subsequently reversed in Public Service Commission of New York v. FPC, D.C. Cir., 1964, 329 F.2d 242
The FPC rejected Staff's contentions on refund or take-or-pay prepayments, but it conditioned the certificates upon the ultimate outcome of a pending rule-making proceeding, R-199, review of which was recently held to be premature by the D.C. Cir., 1964, 329 F.2d 242, 248
FPC v. Texaco, Inc., 1964, 377 U.S. 33, 84 S. Ct. 1105, 12 L. Ed. 2d 112
Rejecting the Respondent's claim that the Commission had used its power to prevent a levering upward of field prices to bar direct sales of gas, it said: "Certainly such action would be contrary to our previous statements that the term `public convenience and necessity,' connotes a flexible balancing process, in the course of which all the factors are weighed prior to final determination. United States v. Detroit & Cleveland Navigation Co., supra, 326 U.S. 236, 66 S. Ct. 75, 90 L. Ed. 3819 * * * as the Commission stated, `countervailing factors suffice to tip the balance against the grant of the authority requested by Transco.'"
United Gas Pipeline Co. v. Mobile Gas Service Corp., 1956, 350 U.S. 332, 76 S. Ct. 373, 100 L. Ed. 373
FPC v. Hunt, 1964, 376 U.S. 515, 84 S. Ct. 861, 11 L. Ed. 2d 878, 883
Several factors were mentioned just this term in FPC v. Hunt, 1964, 376 U.S. 515, 84 S. Ct. 861, 11 L. Ed. 2d 878. The Court there concluded that the purpose as revealed by the legislative history was to give the FPC "an opportunity to scrutinize the financial set-up, the adequacy of the gas reserves, the feasibility and adequacy of the proposed services, and the characteristics of the rate structure."
The Commission forecasts that the area proceedings will result in just and reasonable rates. But it recognizes that " [to hold the line] does not mean that irrespective of evidence to the contrary an absolute price freeze is to be imposed until some future date when area proceedings ultimately establish `just and reasonable' rates."
Indeed, the very nature of present and future public convenience and necessity forbids a look-back to 1956-57 only. The inquiry must include the time of the award. FCC v. Pottsville Broadcasting Co., 1940, 309 U.S. 134, 145, 60 S. Ct. 437, 84 L. Ed. 656; Easton Publishing Co. v. FCC, 1950, 87 U.S.App.D.C. 344, 185 F.2d 987, 991
The argument that to receive evidence of this nature is to allow a producer a fair rate of return on excessive costs is a non sequitur. We agree with Judge Wright that " [T]he Commission is not required to subsidize high cost producers with consumers' money." Atlantic Refining Co. v. FPC, 1963, 115 U.S.App. D.C. 26, 316 F.2d 677, 680. But whether costs are "too high" or even "high" are comparative factual matters calling for evidence and evaluation
Following the Supreme Court's lead in its admonition that the Commission must find ways to expedite proceedings, we there pointed out that much delay flows from an overuse of motions to dismiss instead of an evaluation of evidence for its intrinsic worth in the light of the Commission's expertise. The instant cases graphically illustrate that a motion to strike evidence relating to complex activities is an equally awkward procedural device of limited utility. For all we know, had the Commission received the proffered evidence, it would have held it to be wanting, and that might well have been the end of the matter. Now the case must go back and proceed through lengthy hearings, rehearings, exceptions, arguments before the Commission, rehearings and reargument to receive and evaluate this very evidence. In terms of time and the public interest, the apparent time-saving device of striking this evidence as irrelevant has proved again that the shortest way through is often the longest way around. Determining the utter and irretrievable irrelevance of a large body of evidence under the nuances of a concept as elusive as public convenience and necessity is indeed a summary procedure. And we have many times pointed out that summary procedures "present a treacherous record for deciding issues of far-flung import, on which * * * [Courts] should draw inferences with caution from complicated courses of legislation * * * and practice." Kennedy v. Silas Mason Co., 1948, 334 U.S. 249, 257, 68 S. Ct. 1031, 1034, 92 L. Ed. 1347; Chapman v. Hawthorne Flying Service, 5 Cir., 1961, 287 F.2d 539, 541
The evidence relating to cash outflow and replacement cost proffered and rejected in Public Service Commission of New York v. FPC, D.C. Cir., 1964, 329 F.2d 242, was much more limited than that here. Nor do we regard California Oil Co. v. FPC, 10 Cir., 1963, 315 F.2d 652 (inquiry as to what the line was); Atlantic Refining Co. v. FPC, 1963, 115 U.S.App.D.C. 26, 316 F.2d 677 (question of in-lineness stipulated to be sole issue), as holding contrary to our decision
Some of the proffered but rejected evidence, see Part II, supra, actually touched on the factual basis, or lack thereof, of the Catco assumption that " [n]ew price plateaus will * * * be created." 360 U.S. 378, at 390, 79 S. Ct. 1246, at 1254. We assume however, that there was a factual basis for the Commission's finding
376 U.S. 515, 84 S. Ct. 861, 11 L. Ed. 2d 878, 885, n. 3
360 U.S. 378, 79 S. Ct. 1246, 3 L. Ed. 2d 1312
The moratorium runs until July 1, 1967, or until any earlier final decision in AR61-2. AR61-2 is still going strong. Its earlier counterpart, the Permian Basin hearing, AR61-1, is pending for decision before the Examiner. The briefs inform us that Chairman Swidler has stated that it will be March of 1965 before 61-1 is decided by the Examiner and the end of 1965 before 61-2 is forthcoming. Oil & Gas Journal 62 (March 16, 1964). A minimum of two years more will be required before they grind through Commission review to land in some Court of Appeals for judicial review. See Wisconsin v. FPC, 1963, 373 U.S. 294, 83 S. Ct. 1266, 10 L. Ed. 2d 357; FPC v. Texaco, 1964, 377 U.S. 33, 84 S. Ct. 1105, 12 L. Ed. 2d 112, 119, n. 13
Commission Br. 39. The cases referred to are: Catco, 360 U.S. 378, 79 S. Ct. 1246, 3 L. Ed. 2d 1312; Texaco, Inc. v. FPC, 5 Cir., 1961, 290 F.2d 149, 156; Atlantic Refining Co. v. FPC, 1963, 115 U.S.App.D.C. 26, 316 F.2d 677; California Oil Co. v. FPC, 10 Cir., 1963, 315 F.2d 652, 660; see also Willmut Gas & Oil Co. v. FPC, 1961, 111 U.S.App.D.C. 49, 294 F.2d 245
361 U.S. 195, 80 S. Ct. 292, 4 L. Ed. 2d 237
Montana-Dakota Util. Co. v. Northwestern Pub. Serv. Co., 1951, 341 U.S. 246, 71 S. Ct. 692, 95 L. Ed. 912; Panhandle Eastern Pipe Line Co. v. FPC, 3 Cir., 1956, 236 F.2d 289, 292. The Supreme Court in T.I.M.E. v. United States, 1959, 359 U.S. 464, 469-470, 79 S. Ct. 904, 908, 3 L. Ed. 2d 952, has recently said of Montana-Dakota: " [I]t was held that the Federal Power Act, which like the Motor Carrier Act expressly declares unreasonable rates to be `unlawful,' does not create a cause of action for the recovery of allegedly unreasonable past rates. * * *"
If, as the Commission contends, our ruling requires a § 7 hearing bordering on a § 4, 5 rate case, there is no reason why the Commission as to these particular cases does not consolidate with the remanded certification proceedings a § 4 or 5 rate case. Consolidation has been ordered before, see, e. g., Texas Eastern Gas & Transmission Co. v. FPC, 5 Cir., 1962, 306 F.2d 345, 349, cert. denied, Manufacturers Light & Heat Co. v. Texas Eastern Transmission Corp., 1963, 375 U.S. 941, 84 S. Ct. 347, 11 L. Ed. 2d 273. Where these cases started out with 69 producer applicants, settlements have washed out all except these petitioners. As a precedent, our ruling is something less than the specter supposed, since the Commission, and many others including this Court, look with hope to the day when the area pricing procedure will supply most of the answers. Hunt v. FPC, 5 Cir., 1962, 306 F.2d 334, 343; Hill v. FPC, 5 Cir., 1964, 335 F.2d 355 [July 23, 1964]; Wisconsin v. FPC, 1963, 373 U.S. 294, 83 S. Ct. 1266, 10 L. Ed. 2d 357
As to Superior's petition, except for the Commission allowing a grace period up to August 10, 1959, for sales under one temporary certificate, not here challenged, though similar action was disapproved in Public Service Co. of New York v. FPC, D.C. Cir., 1964, 329 F.2d 242, 250, there appears to be no substantial difference between this record and the others.
Public Service Corp. of New York v. FPC, D.C. Cir., 1964, 329 F.2d 242