Source: http://supreme.nolo.com/us/391/9/case.html
Timestamp: 2019-07-23 17:29:08
Document Index: 180076944

Matched Legal Cases: ['§ 4', '§ 7', '§ 7', '§ 7', '§ 4', '§ 4', '§ 7', '§ 19', '§ 4', '§ 7', '§ 717', '§ 19', '§ 717']

FPC V. SUNRAY DX OIL CO., 391 U. S. 9 - Volume 391 - 1968 - Full Text - US Supreme Court Center - USSC Cases - Nolo
US Supreme Court Center > Volume 391 > FPC V. SUNRAY DX OIL CO., 391 U. S. 9 (1968) > Full Text
The Federal Power Commission (FPC) has decided to rely on area rate proceedings to establish just and reasonable rates for producer sales under §§ 4 and 5 of the Natural Gas Act. Pending completion of those proceedings the FPC has rested interim producer regulation on § 7. Under that section, natural gas may be sold only pursuant to an FPC certificate of public convenience and necessity, which, under § 7(e), may be conditioned "in such manner as the public convenience and necessity may require." In Atlantic Rfg. Co. v. Public Serv. Comm'n (CATCO), 360 U. S. 378, this Court held that the FPC should use its § 7 conditioning power to prevent large initial contract price advances, pending the determination under §§ 4 and 5 of just and reasonable rates, which would become effective only prospectively. The FPC thereafter began to use its conditioning power to determine maximum initial prices at which sales could occur, basing these "in-line" prices upon current prices in the area of the proposed sale but excluding current prices which for various reasons were "suspect." In United Gas Improvement Co. v. Callery Properties, Inc., 382 U. S. 223, this Court generally approved this regulatory approach, holding that the FPC might properly refuse to hear cost evidence in such "in-line" price proceedings, and that,
when issuance of permanent certificates was held erroneous on judicial review, the FPC might, on remand, impose new certificate conditions for refunds of amounts previously collected above the subsequently determined in-line price. On September 28, 1960, the FPC began its post-CATCO regulation of sales in Texas Railroad Commission Districts 2, 3, and 4, the three Texas Gulf Coast districts which are involved in these proceedings, by issuing its General Policy Statement, announcing a guideline ceiling price for new sales in each district of 18� per Mcf. On March 23, 1964, at the conclusion of the District 4 (Amerada) proceeding, the FPC determined an in-line price of 16� per Mcf for sales contracted after the issuance of the Policy Statement. The FPC relied primarily on a comparison of prices in contracts entered into since the Policy Statement and during the preceding two years. The FPC noted that 82% of post-Policy Statement sales were at 16� or more per Mcf. It gave "some measure of weight" to its 18� Policy Statement guideline price. Some weight was also accorded to prices under temporary certificates because only 1.4% of the gas in the
area was moving under permanent certificates, though the FPC was mindful that the temporary prices were "suspect," and took their unreliability into account when it rejected the 17.2� average contract price. The FPC's conditional certification of proposed sales in District 4 was appealed to the Court of Appeals for the Tenth Circuit. That court upheld the FPC's price line against contentions by certain consumers and distributors (the "seaboard interests") that the 16� price was too high and that, in fixing that price, the FPC erred in taking account of prices at which gas had been sold under temporary certificates. On September 22, 1965, the FPC issued its in-line price orders in the District 2 (Sinclair) and District 3 (Hawkins) proceedings reaffirming an earlier established price of 16� for the pre-Policy Statement period in District 3, and for the later period fixing a 16� price in District 2 and 17� in District 3. In fixing the 16� District 2 price the FPC gave full weight to the permanently certificated prices at which about 40% of the gas in the area was then moving; some but "not undue" force to the temporary prices at which 60% of the gas currently flowed; accorded "some weight" to the original, unconditioned prices in the area and to the 16� volumetric median and 15.29� volumetric weighted average prices for post-Policy Statement sales, and recognized that 53% of the gas in the area was moving at prices at or below 16�. In fixing the 16� District 3 price, the FPC gave full force to permanently certificated sales of small volumes of gas below 16� and comparatively large volumes
at 16� and 16.2�; considered the fact that a little less than half the total volume of gas was sold at 16�. or less; gave "some weight" to permanently certificated sales of very large volumes at 17.5� or above (even though those were regarded as "suspect" prices), and apparently considered the weighted average price of 15.16� for all except the latter suspect sales. In fixing the 17� District 3 price the FPC gave full weight to the permanently certificated sales of moderate volumes of gas at 15� and 16.2�, a small volume at 16.5�, and large volumes at 18�; gave "some weight" to temporary prices; noted that the 17� price reflected the weighted average of 16.17� for permanently certificated sales; accorded some weight to original, unconditioned prices in the area, and considered the fact that 43% of all permanently certificated area sales were at or above 17�. The FPC's orders conditionally certificating the proposed sales in Districts 2 and 3 were appealed together to the Court of Appeals for the District of Columbia Circuit, which sustained the seaboard interests' contention that the post-Policy Statement prices for Districts 2 and 3 were too high and that the FPC erred in considering temporary and unconditioned prices. It rejected Superior Oil Company's contention that the initial prices in District 3 for both pre- and post-Policy Statement periods were too low, Superior having urged that the FPC erroneously excluded from consideration nine large-volume sales at 20� per Mcf when it set the 16� price in District 3; that, in fixing the initial prices, the FPC erroneously excluded a number of 1955-1956 sales at 17.5� to Coastal Transmission Company; that, with respect to both time periods, the FPC erroneously failed to consider prices embodied in settlement orders; that the FPC failed to take enough notice of temporary prices and refused to consider prices of intrastate sales, and that, for both periods, the FPC had incorrectly relied on estimated, rather than actual
volumes of gas sold. The FPC did not expressly consider whether any of the "in-line" prices it fixed were suitable when regarded as refund floors, i.e., a level below which the FPC may not order refunds pursuant to § 4(e) of the Natural Gas Act. Most of the producers in the District 4 proceeding had applied for and been granted temporary certificates under § 7(c) of the Act, those certificates authorizing them to sell gas at or below 18� per Mcf, the then-guideline price. Eight certificates provided for refunds should the eventual in-line price be lower than that charged under the temporary certificate; the other certificates contained only general cautionary language respecting further FPC action. The FPC ultimately ordered the District 4 producers to refund sums collected under the temporary
1. The post-Policy Statement period initial price of 16� per Mcf in District 4 was not based on impermissible factors, and was not unreasonable. Pp. 391 U. S. 28-30.
(b) The 16� price, which was at the lower end of the spectrum of current prices considered by the FPC, was within the "zone of reasonableness" within which the FPC has rate-setting discretion, and satisfied the CATCO mandate against abrupt price rises. Pp. 391 U. S. 29-30.
(b) The 16� and 17� initial prices were within the "zone of reasonableness," and did not breach the CATCO directive. P. 391 U. S. 32.
(c) The FPC properly discounted the force of the 20� sales which were out of line with respect to the post-CATCO price structure and which the FPC had reason to believe would have been set aside on judicial review had it not been for a procedural defect. P. 391 U. S. 34.
(b) The 16� price in the District 4 proceeding was not beyond the FPC's power when viewed as a refund floor, since it was near the lower end of the price range suggested by the price evidence. P. 391 U. S. 38.
(c) The 16� price in the District 2 proceeding and the 17� price in the similar District 3 proceeding (neither of which is likely to exceed the probable Texas Gulf Coast area rate) were within the FPC's authority when viewed as refund floors; despite the weaknesses in the FPC's opinion with respect to these aspects, it is desirable to terminate this protracted and outmoded proceeding. Pp. 391 U. S. 39-40.
(a) Parties, at least those other than the producer itself, may challenge a temporary certificate at the time a permanent certificate is applied for, notwithstanding the time limits on appeal set out in § 19(b) of the Act. Pp. 391 U. S. 43-44.
Prior to 1954, the Commission construed the Natural Gas Act as empowering it to regulate only sales of gas by pipelines, and not sales by producers. This Court held to the contrary in Phillips Petroleum Co. v. Wisconsin, 347 U. S. 672. Since then, the Commission has been engaged in a continuing effort to adapt the provisions of the Act to regulation of producer sales. The method finally resolved upon for determining the "just and reasonable" rate at which § 4 of the Act requires that natural gas be sold was to conduct a number of area rate proceedings, looking to the establishment of maximum producer rates within each producing area. This method of regulation has recently been approved by us in the Permian Basin Area Rate Cases, 390 U. S. 747. Other area rate proceedings are underway, and they will eventually encompass areas accounting for some 90% of all the gas sold in interstate commerce. See id. at 390 U. S. 758, n. 18.
After the CATCO decision, the Commission, under the scrutiny of the courts, began to work out a system for determining the maximum initial prices at which gas should move, pursuant to contracts of sale, during the interval preceding establishment of just and reasonable rates. It based this "in-line" price upon current prices for gas in the area of the proposed sale, taking into account the possibility that the proposed rate might result in other price rises due to most-favored-nation clauses. [Footnote 2] The
This Court generally approved this method of regulation in United Gas Improvement Co. v. Callery Properties, Inc., 382 U. S. 223. There, the Court held that the Commission might properly refuse to hear cost evidence in in-line proceedings, and that the Commission might
We adhere to the dicta in Callery and Sunray Mid-Continent. That outcome comports better with the
Since an initial price and a refund floor conceivably may serve significantly different ends, [Footnote 11] we shall give
In view of the Commission's decision to rely solely upon contemporaneous contract prices in setting initial rates, there can be no assurance that an initial price arrived at by the Commission will bear any particular relationship to the just and reasonable rate. Any such assurance would necessarily be based on a belief that the current contract prices in an area approximate closely the "true" market price -- the just and reasonable rate. Although there is doubtless some relationship, and some economists have argued that it is intimate, [Footnote 13] such a belief would contradict the basic assumption that has caused natural gas production to be subjected to regulation and which must have underlain this Court's CATCO decision
On September 28, 1960, the Commission began its post-CATCO regulation of sales in the districts here
involved by issuing its Statement of General Policy No. 61-1, 24 F.P.C. 818. The Policy Statement announced the ceiling price at which new sales would be certificated in each district. For each of Texas Railroad Commission Districts 2, 3, and 4, the Policy Statement ceiling was 18� per Mcf (thousand cubic feet) of gas. With respect to District 4, the Commission on August 30, 1962, determined an in-line price of 15� per Mcf for sales contracted prior to September 28, 1960, the date of the Policy Statement. 28 F.P.C. 401. That decision is not in issue here. On the same date, the Commission scheduled a proceeding, known as the Amerada proceeding, to determine the in-line price for sales contracted between September 28, 1960, and August 30, 1962. 28 F.P.C. 396.
On March 23, 1964, the Commission terminated the Amerada proceeding by issuing the first of the orders here under review. 31 F.P.C. 623. The Commission determined that the in-line price for the period under study should be 16� per Mcf. In reaching this conclusion, the Commission relied primarily on a comparison of prices in contracts entered into during the two-year life of the Policy Statement and the preceding two years, on the ground that the in-line price should mirror the price at which substantial quantities of gas were currently moving in interstate commerce.
prices at which the great bulk of gas was then moving in commerce. The Commission did take the unreliability of the temporary prices into consideration when it refused to accept the 17.2� average contract price for all sales as the in-line price, relying as well upon its belief that "the teachings of CATCO require that we draw the line at the lowest reasonable level." 31 F.P.C. at 637. The Commission also placed "some measure of weight" on its Policy Statement guideline price promulgated in 1960. The Commission further noted that 82% of the gas sold under post-Policy Statement contracts moved at 16� or more per Mcf, and stated that,
The Commission's District 4 guideline price, though its exact level was admittedly arbitrary, did place a "lid" on contract prices in the area for the period. The guideline price was therefore relevant to the determination of initial prices insofar as contract prices in the area would have been higher but for the guideline price, and to the extent that those higher prices would have represented cost trends and not merely the absence of a free market. The Commission evidently did not give the guideline price great weight, since it set the initial rate some 2� lower. We think that the weight given was justified.
Consideration of the temporary prices was also warranted because they pointed to cost trends, especially in light of the fact that 98.6% of the gas was then flowing under temporary certificates. Their use had an additional justification. In District 4, the seaboard interests evidently challenged almost all applications for permanent certificates at prices above 15� per Mcf, thereby greatly delaying the issuance of permanent certificates at higher levels. [Footnote 15] Had the Commission refused to consider any but permanently certificated prices in setting the initial price, it would, in effect, have allowed the seaboard interests to determine that price. We consider that the Commission did not abuse its discretion in giving the temporary prices some weight.
Finally, we hold that the ceiling price of 16� was within the "zone of reasonableness" within which the courts may not set aside rates adopted by the Commission, see, e.g., FPC v. Natural Gas Pipeline Co., 315 U. S. 575, 315 U. S. 585-586, and that it fulfilled the CATCO mandate not to allow abrupt price rises. The 16� price was at the lower end of the spectrum of current prices
considered by the Commission, and it embodied only a 1� price rise.
To determine the in-line prices in Texas Railroad Commission Districts 2 and 3, for which the Policy Statement had also set a ceiling price of 18� per Mcf for sales after September 28, 1960, the Commission set two separate proceedings. The District 2 or Sinclair proceeding, scheduled on March 25, 1964, involved the establishment of in-line prices for sales under contracts executed between May 12, 1958, and January 1, 1964. [Footnote 16] The District 3 or Hawkins proceeding, initiated on March 30, 1964, involved sales under contracts executed between September 16, 1958, and October 1, 1963. See 31 F.P.C. 725. In both proceedings, the Commission began by dividing all of the sales in question into two groups, those contracted prior to the date of the Policy Statement and those contracted afterward. The two proceedings were terminated by two Commission orders of September 22, 1965, determining in-line prices for each area during each period. 34 F.P.C. 897, 930.
In the District 2 or Sinclair proceeding, the Commission set an initial price of 15� per Mcf for the pre-Policy Statement period and 16� for the later period. The 15� price is not here in issue. The seaboard interests contend that the 16� price was too high. In fixing the 16� price, the Commission took into account five factors. First, it apparently gave full weight to the permanently certificated prices at which about 40% of the gas in the area was currently moving. Second, it gave some, but "not undue," force to the temporary prices at which 60% of the gas currently flowed. Third, it assigned "some weight" to the original, unconditioned contract prices in the area, on the ground that those prices "do show economic trends in the area." 34 F.P.C. at
937. Fourth, the Commission took into consideration the 16� volumetric median price and the 15.29� volumetric weighted average price of all permanently and temporarily certificated sales in the area after the date of the Policy Statement. Fifth, it took into account the fact that 53% of the gas in the area was presently moving at prices at or below 16�.
In the District 3 or Hawkins proceeding, the Commission fixed an initial price of 17� per Mcf for the post-Policy Statement period and reaffirmed an earlier-established 16� initial price for previous sales. The seaboard interests attack the 17� price as too high. Superior Oil Company asserts that both prices are too low. We confine ourselves at present to the contention of the seaboard interests. In arriving at the 17� price, the Commission considered five factors. First, it gave full weight to the permanently certificated sales of moderate volumes of gas at 15� and 16.2�, a small volume at 16.5�, and large volumes at 18�. Second, it accorded "some weight" to temporary prices. Third, it noted that the 17� price "[reflects] the weighted average price of 16.17 cents" for permanently certificated sales. 34 F.P.C. at 903. Fourth, it gave "some weight" to original, unconditioned contract prices, for exactly the same reason as in Sinclair. See 34 F.P.C. at 902. Fifth, the Commission took into consideration the fact that 43% of all permanently certificated sales in the area were at prices at or above 17�.
Nor do we find any error in the Commission's selection of the 16� and 17� initial prices from the information before it. Although these prices, and particularly the 17� price in Hawkins, ranged nearer the high end of the price spectrum than did the District 4 price, we cannot say that either was so high as to fall outside the "zone of reasonableness" within which the Commission has rate-setting discretion. See supra at 391 U. S. 29. And since the initial prices decided upon were only 1 above those previously prevailing, they did not breach the CATCO directive to avoid excessively large price increases.
The data considered by the Commission in setting the 17� District 3 post-Policy Statement price have already been described. See supra at 391 U. S. 31. In establishing the 16� pre-Policy Statement price, the Commission took into account four factors. First, it gave full force to permanently certificated sales of small volumes of gas at prices below 16� and of comparatively large volumes at 16� and 16.2�. Second, it took into consideration the fact that 72% of all sales, comprising "a little more than half" the total volume of gas, occurred at prices of 16� or less. Third, the Commission gave "some weight" to permanently certificated sales of very large volumes of gas at 17.5� or above, even though it regarded those prices as suspect. Fourth, the Commission apparently took into account the weighted average price of 15.16� for all sales except the suspect sales at 17.5� and above.
Superior's most strongly pressed contention is that the Commission erred in allegedly failing to consider nine large-volume sales at 20� per Mcf when it set the 16� initial price for the pre-Policy Statement period. The Commission recognized in its opinion that the inclusion of these sales at full strength would have a "strong [upward] effect" upon the average of all prices for the period. However, it concluded that the impact of the price should be "discounted." The Commission noted that
The Commission went on to point out that two of the three remaining 20� sales also had been certificated in proceedings from which the exclusion of the New York Commission had been upheld on the same procedural ground. [Footnote 18]
We think that the Commission acted within its discretion in discounting the force of these 20� sales. Those sales were out of line with respect to the price structure which emerged after CATCO, and the Commission had reason to believe that they would have been set aside on judicial review had it not been for a procedural defect. We do not think that the Commission was compelled to give full weight to these prices.
Superior also contends that the initial prices established for the pre-Policy Statement period were too low because the Commission excluded from consideration a number of 1955-1956 sales at 17.5� to Coastal Transmission Company. In justification for giving discounted effect to these prices, the Commission again cited its Texaco Seaboard decision, 29 F.P.C. 593, in which it also discounted those sales. Among the justifications put forward in Texaco Seaboard was the fact that Coastal was, at the time of the sales, a new pipeline company, which neither had a certificate nor was yet in operation, so that the prices may have included a higher than normal allowance for risk. We think that this factor
Finally, Superior asserts that the Commission acted incorrectly in relying on estimated, rather than actual, volumes of gas sold during both periods. We find acceptable the Commission's justification, which was that actual volumes were not known for the years 1962 and 1963. Moreover, use of actual volumes would have made no significant difference, since Superior agrees [Footnote 20]
that the only result would have been to give enhanced force to the 20� sales, which properly were given only slight weight. [Footnote 21]
In view of the fact that an initial price and a refund floor might be used to achieve distinct regulatory goals, see supra, n 11, it seems regrettable that the Commission and courts apparently have never entertained the possibility of separating these two aspects of an "in-line price" in particular cases. However, we think that, in light of Callery and the other precedents ,the Commission was not obliged in this instance to give explicit consideration to the establishment of a distinct refund floor. The same factors are present here as in Callery. The need to speed refunds to consumers and to assure producers of a firm price are identical. We cannot say, therefore, that the Commission breached any duty in failing expressly to consider whether the prices it fixed were suitable when regarded as refund floors.
Although we have approved the in-line prices in these cases when looked at as initial prices, we have yet to examine them in their role as refund floors. Viewing them in that way, we hold that they were not impermissibly high. In the District 4 or Amerada proceeding, the only disputed price is the 16� price for the post-Policy Statement period. The Commission fixed that price at a point near the lower end of the price range suggested by the price evidence before it, stating:
31 F.P.C. at 637. We consider that the 16� price was not beyond the Commission's power, when regarded as a refund floor.
In the District 2 or Sinclair proceeding, the only price assailed as too high is the 16� price for the post-Policy Statement period. That price was nearer the high end of the spectrum of suggested prices than was the price established in District 4. The Commission did not enunciate the general principle which motivated it in selecting the 16� price level. [Footnote 23] Although it would have been preferable for the Commission to have explained its reasoning, we believe that the price was permissible when regarded as a refund floor. The 16� price embodied an increase of only 1� per Mcf over the previously prevailing price. Such evidence as is now available
indicates that the 16� price probably will not exceed the just and reasonable price which will be established for the Texas Gulf Coast in a pending area rate proceeding. [Footnote 24] In addition, we are not unmoved by the obvious desirability of bringing to a close this already prolonged proceeding, which belongs to an era of regulation apparently now ended. [Footnote 25] We therefore hold that, despite the weaknesses in the Commission's opinion, the price established was within the Commission's authority when seen as a refund floor.
In the District 3 or Hawkins case, the only price challenged as excessive is the 17� price for the post-Policy Statement period. The District 3 proceeding was similar to that, in District 2 (Sinclair). The price decided upon was again nearer the high end of the suggested range than that in District 4; again, the Commission did not articulate the general principles which motivated it. [Footnote 26] The District 3 price is even more vulnerable to attack than that in District 2, because it is 1� higher, and therefore more likely to be above the just and reasonable
rate for the Texas Gulf Coast. Yet similar considerations lead us to approve it as being within the Commission's broad discretion. The 17� price represented only a 1� increase over the previous District 3 price. The fragmentary evidence now available about the forthcoming just and reasonable rate indicates that it will be only slightly, if at all, below 17�. [Footnote 27] It is again desirable that a prolonged and outmoded proceeding be brought finally to a close. Hence, we are constrained to hold that the 17� District 3 price was not excessive as a matter of law, when looked at as a refund floor.
Most of the producers involved in the Amerada proceeding applied for and were granted such temporary certificates, authorizing them to sell gas at or below the then-guideline price of 18� per Mcf. The "emergency" which most of these producers cited to justify the issuance of the certificates was an economic emergency which threatened them with loss of all or part of their gas supply unless deliveries
28 F.P.C. 1065, 1069. While Skelly was pending on appeal in the District of Columbia Circuit, the seaboard interests moved the Commission to insert prospective refund conditions in the temporary certificates of producers in the Amerada proceeding now before us. In denying that request, the Commission stated that, because the producers
The Court of Appeals for the District of Columbia Circuit held on appeal in Skelly, 117 U.S.App.D.C. 287, 329 F.2d 242, not only that the Commission had power to order retroactive refunds but that, in the Skelly proceeding itself, it should subject the question to "a broader and more penetrating analysis." 117 U.S.App.D.C. at 295, 329 F.2d at 250. In its subsequent in-line price decision in Amerada, the Commission noted that, in Skelly, the Court of Appeals had made it clear that the refund power did not depend upon the presence of express refund conditions, but upon equitable considerations. Since the hearings before the Commission in Amerada had taken place prior to the decision on appeal in Skelly, the Commission deferred decision of the refund question in Amerada, so that the parties might submit further briefs. See 31 F.P.C. at 638-639. After full briefing of the refund issue, the Commission ordered the Amerada producers to refund all sums collected under the temporary certificates in excess of the in-line rate, with the exception of amounts expended for royalties and production taxes prior to the date of the decision on appeal in Skelly and in reasonable reliance upon the Commission's orders. 36 F.P.C. 309.
On appeal of the Commission's Amerada order setting the in-line price and deferring the refund question, the Court of Appeals for the Tenth Circuit noted the issuance of the subsequent Commission order compelling refunds and held that the refund issue was ripe for judicial review. Relying in part upon its earlier decision in Sunray Mid-Continent Oil Co. v. FPC, 270 F.2d 404,
The producers' third contention, which coincides with the rationale of the Tenth Circuit below and in its previous decision in Sunray Mid-Continent, supra, is that temporary certificates must be retroactively unmodifiable in order that producers may be assured of a firm price at which to operate. We cannot accept this reasoning. When a producer has requested permission to begin delivery of gas prior to completion of normal certification procedures, due to an emergency, we think it not unfair that, in return for that permission, it accept the risk that, at the termination of those procedures the terms proposed
It remains to be considered whether the Commission was precluded from exercising its refund power in the particular circumstances of the Amerada proceeding. [Footnote 35] The background and nature of the Amerada refund
The producers further contend that the Commission's repeated indications that it would not order refunds, see supra at 391 U. S. 41-42, made the ordering of refunds inequitable in this instance, in that the Commission's pronouncements caused the producers to place unusual reliance upon the prices authorized by the temporary certificates. However, this kind of reliance is precisely what the Commission gave the producers an opportunity to prove on re-briefing. We cannot say that the Commission exceeded its discretion in finding that the producers did not show such reliance as to deprive the Commission entirely of refund power in this case. We note further that the Commission did give consideration to individual pleas for relief from the refund obligation, due to alleged hardship, [Footnote 36] and that, in other proceedings the Commission has
The Commission regulates pipelines in a number of different ways. When a pipeline must expand its facilities significantly in order to take on new supplies of gas, it is required by § 7(c) of the Natural Gas Act, 15 U.S.C. § 717f(c), to obtain a certificate of public convenience and necessity, which may be issued only after notice and hearing. In these certification proceedings, the Commission considers many matters, including the needs of the pipeline's customers and its gas supply. [Footnote 40] The Commission also grants pipelines so-called "budget" authority to spend limited amounts on gas-purchasing facilities on an annual basis, without further Commission approval. [Footnote 41] This authority is granted only after notice and opportunity for objection. [Footnote 42] In addition, the Commission requires periodic reports from all pipelines, [Footnote 43] and collects and publishes material on the supply of gas, including data on the pipelines' "take or pay" positions. [Footnote 44]
We think that the Commission did not abuse its discretion in deciding that the need issue, in both its "take or pay" and end use [Footnote 45] aspects, can be better dealt with in such pipeline proceedings than in producer proceedings. In the first place, the requisite information is more readily available in pipeline proceedings. To resolve the "take or pay" issue, it is necessary to have information about the total gas supply of the purchasing pipeline, its outstanding sales contracts, and its "take or pay" situation under those contracts. These data normally will be in the possession of the pipeline, but not of the producer. Decision of the end use question must be based on information not only about the customers of the purchasing pipeline, but about the alternative uses to which the gas might be put by other pipelines which might buy it. This information will be known collectively by a number of pipelines; an individual producer cannot even know what customer of the purchasing pipeline will receive the gas it supplies. [Footnote 46] Although it might be possible for the Commission to require the relevant pipeline or pipelines to furnish all this information in each producer certification proceeding, [Footnote 47] that procedure would be cumbersome, and would
Thus, the Commission itself has taken steps to alleviate "take or pay" problems. Persons who want the Commission to take additional action have adequate opportunity to present their views during the Commission's rulemaking [Footnote 52] or pipeline proceedings. If a pipeline must build substantial new facilities to handle the gas in question,
The seaboard interest.s apparently followed the same course in Districts 2 and 3 as in District 4, challenging all applications for permanent certificates at prices above 15� per Mcf. See Brief for Shell Oil Company et al. 8, 19-21.
Superior also claims that the Commission abused its discretion by considering sales at prices below 14� in fixing the initial rates for both periods, even though it had excluded such sales in previous District 3 in-line proceedings. Superior did not mention this point in its petition for rehearing before the Commission. See 3 Joint Appendix 314(i); Exceptions of the Superior Oil Company to the Decision of the Hearing Examiner, In the Matter of H.L. Hawkins & H.L. Hawkins, Jr. (Operator), F.P.C. Docket No. G-18077. Hence, the question is not properly before us. See Natural Gas Act § 19(b), 15 U.S.C. § 717r(b).
The Hearing Examiner, who also arrived at a 16� price, apparently relied upon a general standard different from that used by the Commission in the District 4 or Amerada proceedings, supra. Quoting from the Commission's opinions in Texaco-Seaboard Inc., 27 F.P.C. 482, 485, and Hassie Hunt Trust (Operator), 30 F.P.C. 1438, 1445, the Examiner said:
The Commission staff has recommended a just and reasonable rate of 16.8� per Mcf for new gas well gas sold in the Texas Gulf Coast under contracts dated after December 31, 1960, and delivered at a central point. See 2 Joint Initial Staff Brief, Hugoton-Anadarko-Texas Gulf Coast Area Rate Proceedings, F.P.C. Docket Nos. AR 64-1 and AR 64-2, at 375. The suggested just and reasonable rate for post-1960 new gas well gas delivered at the wellhead is 16.4� per Mcf. Ibid. About 90% of Texas Gulf Coast gas is centrally delivered. See id. at 390-391.
See supra, n. 24
Powered by Justia US Supreme Court Center: FPC V. SUNRAY DX OIL CO., 391 U. S. 9 (1968)