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SUNRAY MID-CONTINENT OIL CO. V. FPC, 364 U. S. 137 (1960) - US SUPREME COURT DECISIONS ON-LINE
US Supreme Court Decisions On-Line> Volume 364 > SUNRAY MID-CONTINENT OIL CO. V. FPC, 364 U. S. 137 (1960)
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(d) The conclusion here reached is supported by the consistent administrative practice of the Commission in making a clear distinction between the underlying "service" to the public and the contractual means by which it is implemented. Pp. 364 U. S. 152-154. chanroblesvirtualawlibrary
267 F.2d 471 affirmed.
This case presents an important question under the Natural Gas Act. [Footnote 1] This question central to the case is: when a company, proposing to make, under contract, jurisdictional sales [Footnote 2] of natural gas in interstate commerce, chanroblesvirtualawlibrary
The Commission denied the rehearing application. 19 F.P.C. 1107. chanroblesvirtualawlibrary
Section 7(b) of the Natural Gas Act regulates the abandonment by natural gas companies of their facilities and services subject to the jurisdiction of the Commission. [Footnote 8] The section follows a common pattern in federal chanroblesvirtualawlibrary
If petitioner's contentions, as to the want of authority in the Commission to grant a permanent certificate where one of limited duration has been sought for, were to be sustained, the way would be clear for every independent producer of natural gas to seek certification only for the limited period of its initial contract with the transmission company, and thus automatically be free at a future date, untrammeled by Commission regulation, to reassess whether it desired to continue serving the interstate market. And contracts -- as did the 1947 contract in the companion case to the one at bar, Sun Oil Co. v. Federal Power Comm'n, post, p. 364 U. S. 170, might provide for termination in the event of a rate reduction by the Commission. Petitioner's theory, by tying the term of the certificate to the contract, would mean that such a reduction of rates would under those circumstances enable the producer to cease supplying gas, without obligation to justify its cessation chanroblesvirtualawlibrary
And there are practical consequences, related to rate control, which are even more concrete. The companion case, Sun Oil Co. v. Federal Power Comm'n, post, p. 364 U. S. 170. If petitioner's certificate of public convenience must expire with its first contract with United, service after then -- under a new contract or otherwise -- will require a new certificate. And under that certificate, petitioner may file, pursuant to § 4(c) of the Act, [Footnote 10] its chanroblesvirtualawlibrary
rates for the "new" service. The only power the Commission would have, under the Act, with respect to those rates, would be to bear the burden of proof in an investigation under § 5 of the Act, [Footnote 11] that the rates are unjust or unreasonable, and thereupon order a new rate, solely for prospective application. Last Term, in the so-called Catco case, Atlantic Refining Co. v. Public Service Comm'n, supra, at 360 U. S. 389, we had occasion to remark that "the delay incident to determination in § 5 proceedings through which initial certificated rates are reviewable appears nigh interminable." At oral argument, counsel for the Commission confirmed that no contested major producer's § 5 case had been finally adjudicated by the Commission in the six years since this Court's decision in the Phillips case. In contrast to § 5 are the protections that would be available if at the conclusion of the original contract the producer's certificate remained in full force and effect. Then the rates to be charged under a new contract or otherwise would have to be filed as rate changes under § 4(d) of the Act, with 30 days' chanroblesvirtualawlibrary
notice to the Commission and the public. [Footnote 12] Under § 4(e), the Commission, on complaint of any State, state commission, or municipality, or sua sponte, may order a hearing on the new rate, and suspend the effectiveness of the rate for five months. [Footnote 13] At the hearing, the gas company chanroblesvirtualawlibrary
Thus, it is apparent that petitioner's position would enable it to make what, in practical effect, would be rate chanroblesvirtualawlibrary
First. Petitioner's argument is based primarily on its construction of § 7(e) of the Act. That section provides chanroblesvirtualawlibrary
The argument seems to us unpersuasive even on the face of the statutory language. It depends in the first instance upon freightening the phrase "the whole or any part," obviously intended to give the Commission power to grant less than the whole of an application with a chanroblesvirtualawlibrary
load of negative meaning which nothing in the legislative history indicates that it was to bear. Even without the illumination of the purpose of the Act, it could be argued with equal force that all that was meant was that the certificate to be granted be one sufficient to authorize the specific "sale" proposed; which an unlimited certificate clearly is, in any case. But, apart from this, petitioner's contention depends on the assumption that the provisions relied upon speak only in terms of the specific "sale" contemplated by the parties and not in terms of a "service" in the movement of gas in interstate commerce, of which "service" the initial "sale" is the commencement. For, under § 7(e), the Commission is authorized to issue a certificate authorizing the "service" covered by the application, as well as a "sale"; and since § 7(c), [Footnote 15] which details chanroblesvirtualawlibrary
Furthermore, within § 7(e) itself, there is found the further requirement to which petitioner itself points -- that with respect to an application for a certificate of any nature, a two-part finding must be made: that the applicant is willing and able "to do the acts and to perform the service proposed." Thus, it is evident that all matters for which a certificate is required -- the construction of facilities or their extension, as well as the making of jurisdictional sales -- must be justified in terms of a "service" to which they relate. Accordingly, § 7(e) chanroblesvirtualawlibrary
It is urged that if it is in the public interest to award only an unlimited certificate, the Commission might attain this end by refusing all applications for a limited one, intimating that an unlimited application would be favorably regarded. But the action of the Commission is refusing the certificate as originally applied for would chanroblesvirtualawlibrary
The Commission's practice supports its authority here in the terms of § 7(e). It has long drawn a distinction between the underlying service to the public a natural gas company performs and the specific manifestation -- the contractual relationship -- which that service takes at a given moment. For example, an independent producer may file as its rate schedule its contract of sale with a chanroblesvirtualawlibrary
Further, the Power Commission has from an early date taken the view that there is a continuing obligation to perform "service" imposed by the Act which outlasts the term of a seller's original contract of sale. As early as 1942, it held that an abandonment of service after the expiry of such a contract had to have Commission approval under § 7(b). United Gas Pipe Line Co., chanroblesvirtualawlibrary
The petitioner states accurately enough the principle that Mobile establishes. See 350 U.S. at 350 U. S. 338, 350 U. S. 344. But the conclusion petitioner asserts does not follow. In Mobile, this Court held that, where a seller of gas had entered into a contract for the sale, it could not, by virtue of the provision in § 4 for rate changes, file an increase in rates that violated the terms of the contract. This was because the scheme of the Act was one which built the regulatory system on a foundation of private contracts. chanroblesvirtualawlibrary
The short of the matter is that Mobile recognized that there were two sources of price and supply stability inherent in the regulatory system established by the Natural Gas Act -- the provisions of private contracts and the public regulatory power. See 350 U.S. at 350 U. S. 344. Petitioner now urges an application of that decision that could chanroblesvirtualawlibrary
Once the power of the Commission to issue the certificate without time limitation is established, the other objections of the petitioner fall readily. It is contended that the Commission's order, by requiring the petitioner to supply gas beyond the term of its contract, may, by requiring petitioner to produce more gas than it has contemplated, offend the provision of § 1(b) of the Act that the Act does not apply "to the production or gathering chanroblesvirtualawlibrary
Other objections seem primarily directed to the point that the Commission imposed the burden of proof on the petitioner to show that the certificate should be limited, in the public interest, rather than itself taking on the burden of supporting its issuance of an unlimited certificate. There is no contention that the Commission was again indulging in the erroneous notion that it had no power to issue a limited certificate. Cf. Sunray Mid-Continent Oil Co. v. Federal Power Comm'n, 239 F.2d 97, reversed on other grounds, 353 U.S. 944. This procedural formulation seems to us well within the Commission's discretion as an implementation of the Act's protective provisions which we have discussed. And, though much urged by petitioner, the fact that the Commission has certificated pipeline operations despite their showing of gas resources of a shorter duration than petitioner's contract term is not inconsistent with the Commission's approach chanroblesvirtualawlibrary
The basic issue presented by these two cases is essentially this: when an independent producer of natural gas enters into a contract for the sale of his gas in interstate commerce for resale, and seeks a certificate from the Federal Power Commission to carry out that contract, chanroblesvirtualawlibrary
The operative provisions of the Act consistently reflect their more limited reach as regards independent producers chanroblesvirtualawlibrary
The word "sale," in its ordinary sense, signifies a transaction limited in duration and amount. Section 7(c) requires certification of a sale, and there is nothing in the Act which suggests that the certification is to be broader than the jurisdictional act which it authorizes. On the contrary, § 7(e), infra, p. 364 U. S. 163, directs the Commission to issue a certificate authorizing "the . . . sale . . . covered by the application." The Court suggests that a perpetual certificate does in fact authorize the specific sale proposed, and that to say that the Commission can authorize no more than that is to "load" the statutory language with a negative implication which was never intended. However, authorizing a producer to sell in perpetuity is certainly something different from authorizing him to make a specific sale. It could hardly be contended that a statutory direction to the Commission to authorize "the . . . sale . . . covered by the application" permits it to authorize some different sale. chanroblesvirtualawlibrary
(Emphasis added.) It would appear plain from the face of the very language quoted that, while the word "service" is used, it is used disjunctively with "sale" and several other words, so that a sale and a service are simply two different, and not chanroblesvirtualawlibrary
The Court further says that the provisions of § § 4 (c) [Footnote 2/1] and 7(b) [Footnote 2/2] present the same feature. In § 4 (c), the word "service" again appears as part of an omnibus definition which refers to a number of antecedents. Even assuming, as the Court does, that the only antecedent is "transportation or sale," there is no reason to suppose that chanroblesvirtualawlibrary
I must conclude that there is nothing in the statute which makes "sale" the equivalent of "service." On the contrary, the terms are always used disjunctively. A sale, as a jurisdictional ground distinct from either transportation or the maintenance of jurisdictional facilities (§ 1(b) ante, p. 364 U. S. 160) is a limited transaction. A certificate authorizing a sale authorizes no more and, in my view, must be regarded as expiring when the underlying sale terminates, except in a situation where the Commission has properly conditioned issuance on continuance of the certificate for a longer period. See post, p. 364 U. S. 167. It is suggested that the Commission has consistently held that the obligation to provide service persists even after a particular contract terminates. See United Gas Pipe Line Co., 3 F.P.C. 3; Cabot Gas Corp., id., 357; Godfrey L. Cabot, Inc., id., 582; Panhandle Eastern Pipe Line Co., 11 F.P.C. 167, 172. All those cases, however, involved pipeline companies chanroblesvirtualawlibrary
As to abandonment, the Court's view again rests on the erroneous notion that the Commission is charged with assuring continuity of "service" on the part of independent producers. However, § 7(b), by its own terms, prohibits abandonment of only two things: jurisdictional facilities, and any service "rendered by means of" such facilities. The Court does not suggest that petitioners have any jurisdictional facilities. And there can be no chanroblesvirtualawlibrary
Furthermore, the Commission can tender a perpetual certificate under its § 7(e) power to attach reasonable terms and conditions. [Footnote 2/3] But in such a case, it would have to bear the burden of showing that the public convenience and necessity require such a condition. What the Court in effect permits the Commission to do here is simply to attach the condition without such a showing. If, as the Commission stoutly maintains, a limited certificate would constitute a serious threat to the public interest then surely it is not too much to ask it to show that fact before tendering a producer a certificate different from the one he has requested. And where the Commission has fairly made such a showing, I cannot believe with all deference chanroblesvirtualawlibrary