Opinion ID: 305796
Heading Depth: 2
Heading Rank: 1

Heading: The Basis for the Action of the Commission

Text: 17 We think that the basis for the action of the Commission is quite clear. It had become well-known by the time of the orders in the case at bar that a dangerous shortage of gas was developing. 22 Although, as we mentioned earlier, it might have been made somewhat more explicit, we think it is quite plain from the words of the Commission in the Notice of Proposed Rulemaking in Docket No. R-380, and in Order 410, that it decided to accord advance payments rate-base treatment because it hoped thereby to encourage development by producers, and thus help alleviate the gas shortage. 23 18 In any case, we agree with the FPC that since the proceeding in the case at bar was pursuant to the FPC's rulemaking authority under the Natural Gas Act, 24 it has satisfied the requirements placed upon it. 25 Such rulemaking is done pursuant to Section 4 of the Administrative Procedure Act, 26 which requires notice of the proposed rulemaking including reference to the legal authority under which the rule is proposed and the substance of the proposed rule. The notice in this case, the Notice of Proposed Rulemaking of 23 January 1970, clearly meets this test. 27 The FPC also met the APA requirement that the agency provide interested persons the opportunity to submit written comments, 28 and, what is most crucial with regard to New York's argument, we find that the FPC met the requirement of Section 4(b) of the APA that there be a concise general statement of the basis and purpose of the rule(s) adopted. 29 19 As Judge McGowan said in Automotive Parts & Accessories Association v. Boyd (1968), 30 what is required here is not specific and detailed findings and conclusions of the kind customarily associated with formal proceedings, but merely a concise general statement of the basis and purpose of the rule(s). 31 We expect that such a concise general statement of    basis and purpose will enable a reviewing court to see what major issues of policy were ventilated by the informal proceedings and why the agency reacted to them as it did. 32 In Automotive Parts & Accessories Association we held that a statement that This standard specifies requirements for head restraints to reduce the frequency and severity of neck injury in rear-end and other collisions, met these tests. Similarly, we find here that the statements made in Order 410, and in the Notice of Proposed Rulemaking, are quite satisfactory in that they explain the FPC's action in light of the gas shortage and the need for additional capital for development by the gas producers. 33 We thus find that there is an adequate basis for the FPC's new rules on advance payments. 20 In addition to the adequacy of basis for the FPC's action under Section 4(b) of the APA, there is another aspect of the present situation that would compel us to uphold the determination of the FPC that certain advance payments by pipelines may be entered into the rate base. We read the three orders, 410, 410-A, and 441, as an on-going effort by the FPC to determine experimentally the proper solution with regard to advance payments to help alleviate the gas shortage. We are impressed with the fact that the FPC has demonstrated a willingness to assimilate criticism from parties such as New York, and adjust its treatment of advance payments to conform with the realities of the natural gas market. This is perhaps best demonstrated by the FPC's comments which accompanied its decision in Order 441 to remove advance payments for exploration and lease acquisition from the rate base: 21 Our review of the various comments and available data has persuaded us that advances for exploration and lease acquisition have not shown to be an effective vehicle for stimulating the widespread participation in natural gas production for which their encouragement was intended. Moreover, there is some indication that the availability of advances for such purposes by creating competition among pipelines to make such advances may be having the effect of increasing the amounts expended on lease acquisition without a proportionate improvement in gas supply. 34 22 It appears to us that what the FPC is attempting to do in this area is to reach an accommodation of conflicting interests, through experimentation, that will result in the proper alleviation of the gas shortage. In doing so we think that the FPC is making policy decisions of the type it was created to make, and we are reluctant to disturb them. 35 In this very difficult area of rate-making, when it is uncertain what will be the ultimate agency determination, and when it is as yet unknown what will be the results and ramifications of the experimental policies adopted by the agency, we feel that the FPC has demonstrated, as adequately as can be expected under the circumstances, the basis for its actions, and we may thus defer to the expertise of the FPC in this matter. 36 B. The Determination that Pipelines May Make Advance Payments to Producers 23 The thrust of New York's argument here is that it is impermissible for the FPC to have authorized the pipelines to make advance payments to producers before it has passed on the two producer-rate cases where the validity of such advance payments is an issue. 37 In other words, it appears that New York argues that the FPC may not say that it is permissible for the payor to make the payment before it holds that the payee may receive it. This argument has a certain amount of logical appeal, but the argument ignores the realities of the situation. 24 We think that the three orders, 410, 410-A, and 441, do indeed show that the FPC has arrived at the conclusion that in principle it is legal for both the payor to pay and the payee to receive. This does not necessarily affect the determination in the two pending producer-rate cases, which may finally turn on considerations unique to those two companies. Further, for reasons which are elaborated infra, we do not accept New York's argument that there is not another opportunity available for a challenge to the advance payments in the conventional pipeline rate proceedings which must take place for each particular advance payment arrangement under 15 U.S.C. Secs. 717c and 717d (1963). 25 We regard the three orders as the fashioning of policies, remedies, and sanctions, . . . in order to arrive at maximum effectuation of Congressional objectives, and in such activity the breadth of agency discretion is at its zenith. 38 It appears that the statutory scheme of the Natural Gas Act is set up in such a way that challenges to the determinations of the FPC in a rulemaking proceeding such as the case at bar stand much less of a chance, when faced with the breadth of the agency's discretion, than they would in an individual rate proceeding where the scope of the agency's discretion is much more limited. 26 Similarly, it appears clear that if the FPC wishes to proceed with separate regulatory proceedings and determinations for pipelines and producers, there is authority for such a scheme. We take this to be the meaning of the comment of the Supreme Court in the Permian Basin Area Rate Cases (1968), that the Commission is empowered, for purposes of its rules and regulations, to 'classify persons and matters within its jurisdiction and prescribe different requirements for different classes of persons or matters. . . . 39 27 New York has argued that even if it retains the right to challenge individual pipeline certificate proceedings, it will do the New York consumers no good once that the horse has got out of the barn, and advance payments have been declared permissive in principle. 40 New York maintains that even if it succeeds in defeating advance payments in certificate proceedings in its area, the gas of the producers will then be sold to pipelines in other areas, where the producers will be able to secure the advance payments which they are now permitted, in principle, to receive. 28 At this stage this argument is speculative, but even if it were not, though we might feel sympathy for the plight of the New York consumers who would be forced to condone advance payments or survive without gas, this alone would not be grounds to overrule the determination of the FPC that advance payments may be allowed. As we have stressed, by determining that advance payments may be made and entered into the rate base by the pipelines the FPC has made an allocation between competing interests (here the interests of the consumers in keeping the rates low and the interests of the producers-and, indeed, ultimately the consumers-in having more capital available for development of gas production capabilities) which we may not disturb unless there has been an abuse of agency discretion. 29 We can find no authority cited by New York that shows the FPC to have engaged in such illegal conduct. New York appears to place great reliance on the CATCO case, Atlantic Refining Co. v. Public Service Commission (1959), 41 which it cites for the proposition that sterile contentions will not be upheld. 42 Whatever the authority of CATCO, it does not apply here. In CATCO the Supreme Court announced that Our examination of the record . . . indicates that there was insufficient evidence to support a finding of public convenience and necessity prerequisite to the issuance of the permanent certificates, and further nor do we find any support whatever in the record for the conclusory finding on which the order was based that 'the public served through the Tennessee Gas system is greatly in need of increased supplies of natural gas.' 43 In the case at bar we do not have a certificate proceeding, we have a rulemaking proceeding, and far from the situation in CATCO, where it was uncertain whether the gas in question was really needed, we have here a demonstrated crisis in the gas supply. 30 We thus uphold the FPC's determination in the orders that are here under attack that, in principle, advance payments, under certain circumstances, may be made by pipelines to producers, and that decision necessarily assumes the right of a recipient to receive it under proper circumstances. We do not, of course, reach any determination of the propriety of any particular advance payment which may be challenged in a conventional pipeline rate proceeding under 15 U.S.C. Sec. 717.