Source: https://openjurist.org/642/f2d/780/falcon-petroleum-v-federal-energy-regulatory-commission
Timestamp: 2017-08-23 03:31:27
Document Index: 682051517

Matched Legal Cases: ['§ 2', '§ 104', '§ 3314', '§ 271', '§ 109', '§ 3319', '§ 109', '§ 3319', '§ 2', '§ 3301', '§ 2', '§ 3301', '§ 2', '§ 3301', '§ 104', '§ 109', '§ 104', '§ 109', '§ 601', '§ 3431']

642 F2d 780 Falcon Petroleum v. Federal Energy Regulatory Commission | OpenJurist
642 F. 2d 780 - Falcon Petroleum v. Federal Energy Regulatory Commission
642 F2d 780 Falcon Petroleum v. Federal Energy Regulatory Commission
642 F.2d 780
FALCON PETROLEUM, Petitioner,
No. 79-3648.
Falcon Petroleum Company challenges an order of the Federal Energy Regulatory Commission (hereinafter "the FERC" or "the Commission"1) setting the price of natural gas from Falcon's well. The FERC correctly applied its regulations and the Natural Gas Policy Act of 1978 (hereinafter "the NGPA"). Hence, we affirm its decision and deny the petition for review.
Sales of natural gas from (a) completion operation into a different reservoir on or after January 1, 1973, in a well commenced prior to January 1, 1973, do ( ) not qualify for (the rate for new wells). With respect to when a well is commenced, the date of commencement of the initial drilling or 'spudding' of a well is the controlling factor in determining whether sales from any producible reservoir qualify for the new rates.
Slip op. at 2. This rule was codified at 18 C.F.R. § 2.56a(a)(5)(iii).2
The petition was pending before the Commission when the NGPA was enacted, and the parties made supplemental arguments on the question of the proper price under that Act. The FERC correctly concluded that the gas was subject to the ceiling price established by NGPA § 104, 15 U.S.C.A. § 3314 (1980 Supp.), and the Commission's regulations, 18 C.F.R. § 271.402(b)(4)(iv). Section 104 applies to "natural gas committed or dedicated to interstate commerce on November 8, 1978, and for which a just and reasonable rate under the Natural Gas Act was in effect on such date for the first sale of such natural gas ..."
Falcon insists that it is entitled to the ceiling price established by NGPA § 109(b), 15 U.S.C.A. § 3319(b) (1980 Supp.). Specifically, Falcon maintains that it qualifies under § 109(a)(2), 15 U.S.C.A. § 3319(a)(2) (1980 Supp.), which covers "natural gas committed or dedicated to interstate commerce on November 8, 1978, and for which a just and reasonable rate under the Natural Gas Act was not in effect on such date for the first sale of such gas." Without explanation, Falcon argues that by virtue of the "Southland exclusion," NGPA § 2(18)(B)(iii), 15 U.S.C.A. § 3301(18)(B)(iii), its gas was not "committed or dedicated to interstate commerce." Falcon is wide of the mark, but in view of the confusion which has ensued, a brief analysis of the relevant sections of the Act is appropriate.
In California v. Southland Royalty Co., 436 U.S. 519, 98 S.Ct. 1955, 56 L.Ed.2d 505 (1978), the Supreme Court held that the owners of a reversionary interest in a gas well were bound by their lessee's earlier dedication of the gas to interstate commerce. In order to limit the effect of Southland Royalty on producers who could not have anticipated the Supreme Court's decision, see H.R.Rep.No.95-1752, at 71-72, reprinted in (1978) U.S.Code Cong. & Ad.News, 8983, 8987-88; Columbia Gas Transmission Corp. v. Allied Chemical Corp., 470 F.Supp. 532, 548-51 (E.D.La.1979), the NGPA excludes certain gas from the category of that "committed or dedicated to interstate commerce" (thus "the Southland exclusion"). NGPA § 2(18)(B)(iii), 15 U.S.C.A. § 3301(18)(B)(iii) (1980 Supp.) provides that the term "committed or dedicated to interstate commerce"
does not apply with respect to natural gas which, but for this clause would be committed or dedicated to interstate commerce under subparagraph (A)(ii) (i. e. gas which, if sold, would be required to be sold in interstate commerce (within the meaning of the Natural Gas Act) under the terms of any contract, any certificate under the Natural Gas Act, or any provision of such Act") by reason of the action of any person ..., if on May 31, 1978
A reversion occurred prior to May 31, 1978; no gas was being sold on that date; and Amoco, who had dedicated the gas, no longer had any interest in the well, so that it had no right to explore, develope produce or sell the gas on that date. The gas would thus qualify for the Southland exclusion in the hands of the reversioner and any subsequent grantee of the reversioner such as Falcon. H.R.Rep.No.1752, at 71, reprinted in (1978) U.S.Code Cong. & Ad.News at 8988; 124 Cong.Rec. H13116 (daily ed. Oct. 14, 1978) (statement of Rep. Dingell). The exclusion, however, protects only the reversioner and his subsequent grantees from the dedication of the predecessor in interest, and does not protect them from their own actions that commit or dedicate the gas to interstate commerce. Note, The Meaning of the Southland Exclusion Complexity and Ambiguity in the Natural Gas Policy Act, 58 Tex.L.Rev. 435, 457 n.86 (1980).
Falcon therefore fails to qualify for the Southland exclusion with respect to that half of the Purdum well gas subject to the contract of March 17, 1978, with Transwestern. A contract to sell gas into interstate commerce is sufficient to commit gas within the meaning of the NGPA. NGPA § 2(18)(A)(ii), 15 U.S.C.A. § 3301(18)(A)(ii).4 By virtue of the Transwestern contract, Falcon became a dedicator who, on May 31, 1978, had the right to explore, develop, produce, or sell the gas on that date. Thus, the Southland exclusion is inapplicable to that gas.
That all of Falcon's Purdum well gas is committed or dedicated within the meaning of the NGPA, however, does not resolve the pricing issue: both § 104 and § 109(a)(2) require that the gas be committed or dedicated within the meaning of the NGPA on November 8, 1978. Therefore, it is not enough to say that Falcon's gas was committed or dedicated within the meaning of the NGPA because of the Transwestern and Northern contracts. Pricing under § 104, rather than § 109(a)(2), additionally requires that on November 8th, the gas was subject to a Natural Gas Act ceiling price. Dedication under the Natural Gas Act requires not just a contract, but actual sales, unlike the NGPA's broader definition of committed or dedicated. See Conoco, Inc. v. FERC, 622 F.2d 796, 797 (5th Cir. 1980); Cox v. FERC, 581 F.2d 449, 450-51 (5th Cir. 1978). In this case, on November 8, 1978, Falcon's gas was not just committed or dedicated under the NGPA, but was also dedicated under the Natural Gas Act, and therefore subject to the applicable rates in Opinion No. 770 and its progeny. Two reasons support this conclusion.
The Southland exclusion is an exclusion from the NGPA definition of committed or dedicated, and has no operative effect itself. Note, supra, 456-58. If gas is dedicated under the Natural Gas Act, meeting the Southland exclusion tests on May 31, 1978, does not extinguish that dedication obligation. It is only when gas qualifies for the exclusion, and is not subsequently brought back within the NGPA's definition on or before November 8th, that the gas is removed from Natural Gas Act jurisdiction on December 1, 1978, which then terminates the dedication obligation. NGPA § 601(a)(1)(A), 15 U.S.C.A. § 3431(a)(1)(A).
We accord great weight to the Commission's construction of the statutes, Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 381, 89 S.Ct. 1794, 1802, 23 L.Ed.2d 371, 384 (1969); Ecee, Inc. v. FERC, 611 F.2d 554, 563 (5th Cir. 1980), and its own regulations, Shell Oil Co. v. FPC, 491 F.2d 82, 88 (5th Cir. 1974). The FERC contends that Falcon is estopped from challenging the Commission-set price by its agreement to "accept ( ) whatever price the Commission determines that Falcon is entitled to ...." Since we find that the Commission's determination is consistent with the statutes and regulations, we need not decide this question